As the Minister knows, most ports are under-funded, or not funded, for pension purposes. There is a wide variation in the circumstances of different ports as far as this matter is concerned, not only having regard to the size, numbers employed and provision. Various unfunded superannuation schemes which are normally subject to the sanction of the Minister have been established down through the years. The last one we had was in 1990. These schemes permitted contributions to be deducted from staff without the necessity to form a pension fund. In most cases, the moneys were obviously invested in development and pensions paid from the current account. Needless to say that happens in a wide spectrum of cases and is far from satisfactory. In the normal way, the temptation here would be to have an amendment for certain elements of State funding but clearly, from the point of view of equity and an additional call on the Exchequer, that is not permissible. So, I would like to hear how the Minister envisages these funds being provided. Dublin Port probably has the worst circumstance of all. I could not access the asset value of various ports or whether they can dispose of assets, what time period is likely to be given to them after vesting day to make these provisions and how all staff, past and present, will be covered. This part of the Bill is important and will create difficulties for some port companies, particularly small ones who may wish to make their own arrangements in this regard. If staff and management are satisfied that these arrangements are adequate, some freedom or choice should be provided. I am anxious to hear from the Minister how he envisages provisions being made and the period of time which will be allowed to companies to make up considerable lost ground and to ensure that their liabilities are covered and their staff adequately protected.
SECTION 40.
Approximately 400 staff of Dublin Port receive pensions. This is a considerable number considering there is a workforce of 550. Staff contribute 6.25 per cent of their salary on a weekly basis. The Minister should seek a report from the actuary dealing with the pension schemes to see if they are viable and, if they are not, what provision will have to be made to underwrite them when they are transferred to the new harbour company. I do not know what rules with regard to investments apply to the schemes to ensure they are viable. Will the employer have to pay the difference, which in many cases could be as much as 12 per cent, to ensure their viability? We do not want a situation arising over the next few years in which the schemes, particularly the contributory ones, are not viable and the tab will have to be picked up by somebody. Now is the time to deal with this. How does the Minister intend to protect the schemes in the event of them not being viable?
As Deputy Smith said, there are different arrangements in different ports for the provision of pensions. Even within ports there are different schemes. The Government, in the context of this Bill, was conscious of the need to address long standing pension difficulties in certain ports. The difficulties arose because many harbour authorities operated a "pay-as-you-go" system for pensions instead of a specific pension fund. This system no longer accords with acceptable standards and I have initiated action to tackle the issue.
It is essential that thorough preparations be made before the new companies are established. In this context the economic consultants, Davy Kelleher McCarthy, have been engaged to undertake a comprehensive study of the status of the harbour authorities. A report from them is expected shortly with recommendations on long term funding needs of the harbours. I will then consider, in consultation with the Minister for Finance and the harbour authorities, how to ensure that the harbours can meet their pension schemes requirements.
The Minister for the Marine, Deputy Barrett, has written to the pensions board advising it of the measures being taken to ensure harbour authority pension schemes are secure. I hope by Report Stage to be in a position, with Government approval, to bring forward an amendment which will provide some form of Exchequer cover of pre-vesting day pension liabilities of harbour authority pension schemes.
I may propose an amendment to section 40 at a later stage, possibly on Report Stage. This section requires the new port companies to prepare and submit to the Minister for approval superannuation schemes for members of their staff. Section 41 (1) provides that some approved schemes already in existence may continue in operation after the vesting day of the new port companies. Such approved schemes are mainly in operation at present in the ports of Cork, Dublin, Limerick and Waterford. This, in effect, means that most of the other port companies will be statutorily required to submit superannuation schemes for approval and also to establish superannuation funds from which benefits will be payable.
However, a number of ports, for example Galway, Foynes, New Ross and Drogheda, have insurance type pension schemes in operation at present. Annual premia are paid to insurance companies for the purpose of ensuring that employees on retirement will receive the normal retirement benefits, lump sums and pensions. To require these harbours to abandon their insurance type schemes and introduce superannuation schemes under section 40 would be unreasonable. I am considering the introduction of an amendment which will empower the Minister by order to exempt companies, the employees of which are 30 or less in number, from the requirements of section 40 (1). In the event that companies are so exempted, it will be necessary to ensure that insurance type schemes, which provide for benefits in line with public sector norms, are and will continue to be in place.
I thank the Minister for his response. To enable certain port companies which have already made provision in different ways to continue to do so would be a good exercise. We have to await the Minister's amendment in connection with the powers he has in relation to Exchequer funding. The position of certain ports is such that to meet the obligations of this Bill would risk their commercial capacity or the security of pensions for their staff. Some funds will be needed and we look forward to those provisions when they are brought before us on Report Stage.
I thank the Minister for his positive reply and I await the report which may have Exchequer implications. It is important that schemes, particularly contributory ones, are put on a firm financial footing. Otherwise, there will be serious difficulties down the road. The Minister's approach is positive and welcome.
This matter is extremely important and affects the future financial viability of the companies and the financial security of employees. I have been informed that Dublin Port is paying in excess of £3 million per annum on pensions from current revenue. This represents about 30 per cent of the port's charges. A document submitted to members of the committee by Dublin Chamber of Commerce recommends that, when the new port management companies are being vested, the Government should fund the ports' pensions funds sufficiently to meet the accumulated pension liability. The total finance required could amount to in excess of £50 million. Would the Minister agree that the figure could be as high as £50 million?
I wish to dispel any notion that the pension entitlements of existing pensioners or employees are at risk. These entitlements will be met. I also want to dispel the idea that there will be great largesse from the Exchequer to magically resolve the problem. Deputy Molloy is right; the amounts involved are quite substantial. As I informed the committee, DKM is conducting a study but I will outline the information available at present. The port of Cork has a pension fund amounting to £13.6 million, which needs to be built up to about £18.9 million. Dublin port does not have a pension fund and one of approximately £50 million is needed, £32 million to fulfil past liability and £18 million for future liability. Limerick port has a fund of £1.3 million which needs to be built up to about £2 million. Waterford port does not have a fund and one of about £3.9 million should be created. These are substantially sized funds. DKM will submit recommendations and options to us which may be exercised to address the problem.
The Minister mentioned a number of ports which have particular difficulties but clearly a great number do not have them because they made provision. They may see themselves as at a disadvantage in that they could have carried out works if they had not met their full obligations in this regard. In consideration of what may be the appropriate amendment concerning additional Exchequer demands — which the Minister has the freedom to do but we do not — cognisance should be taken of the totality and associated history of this problem. Emergencies should be dealt with but the broader spectrum of what has happened in the past should be taken into account when addressing the matter.
The Minister has taken the most sensible step in having the matter properly studied by an outside agency. This is an issue of extreme importance for the future financial viability of these new companies. Can he indicate when the report will be ready and if he will make it available to Members of this committee so we will have the benefit of it prior to the conclusion of this Bill?
In response to Deputy Smith, there are two ways of looking at the position when ports have or have not established pension schemes up to now. One view is that a port which has established a pension scheme has foregone opportunities to invest in its infrastructure in so doing. The other is that ports have invested their employees' and past employees' pension entitlements in the infrastructure of the port which has justified operating on a "pay as you go" basis. That is why the pension problem must be examined in the context of the overall financial and asset position of the companies concerned, which is being addressed by the consultants.
I expect we will have the report at the end of this month or the beginning of the next — that is the time-scale towards which the consultants have been working. The purpose of the study is to inform the Minister and the Government on the options open to us in this matter. It was not intended to publish the report; I am sure Deputy Molloy will appreciate that many issues addressed in the study, dealing with the financial and commercial asset position of the company, may involve some confidential financial information.
I move amendment No. 28:
In page 35, subsection (1) (d), line 20, after "revoke" to insert ", or, if directed by the Minister to do so, shall, in the manner specified in the direction, amend or revoke,".
Section 41 (1) (a) provides that approved pension schemes which were in operation prior to vesting day may continue in operation after that date. Section 41 (1) (d) empowers port companies to amend and revoke these continued schemes with the Minister's approval. However, some of the existing approved schemes provide for the payment of superannuation benefits which are more favourable than those payable in accordance with public sector norms. This amendment empowers the Minister to seek the revocation or amendment of such schemes.
In order to achieve the desired outcome it will be necessary for the Department to review all existing superannuation schemes to ascertain whether this provision should be invoked in particular cases. I emphasise that this amendment will not affect the pension entitlements of existing members of those schemes. It may, however, affect new employees; for example, people recruited after the amending superannuation scheme has been approved. I commend the amendment to the committee.
Does this mean that in all cases existing pensions, although they may be somewhat more favourable than the norm, will continue; and that the norm will apply to people retiring from now on?
Yes, all existing members of those schemes, either existing pensioners or employees who have not yet reached pension age who are part of those schemes, will continue to enjoy the benefits of those schemes.
To what extent are superannuation schemes currently in place more favourable than the norm? Is it worthwhile getting involved in the detail of this matter?
I understand some schemes provide for more favourable lump sums on retirement that the norm and others provide for pensions through a formula based on sixtieths rather than eightieths, which is the normal public service provision. I anticipate this amendment may be required in the context of the larger arrangement for pension schemes we discussed earlier but it will not affect either existing pensioners or employees who enjoy those benefits under their existing pension schemes.
I realise this is essential in circumstances where the Exchequer is involved in such schemes. To decide whether it is necessary in all cases for smaller companies one would have to know the differences. They seem to be reasonably significant, as the Minister has indicated a 25 per cent difference.
This is an enabling provision and cases would be looked at on a case by case basis. It is not a blanket provision, it will simply enable the Minister to address those aspects of the pension schemes if that is required.
Amendments Nos. 29 and 29a. are related and may be discussed together.
I move amendment No. 29:
In page 36, subsection (3) (d) (i), line 24, after "paragraph" to insert "(a) or".
These are technical amendments. The requirement in section 41 (3) (d) is intended to apply to superannuation funds in respect of superannuation schemes introduced in accordance with section 41 (3) (a). In respect of superannuation schemes continued in force under section 41 (1) and for which no superannuation funds have been established, and also for superannuation funds continued in force by virtue of subsection (1) (c) (ii), the requirement in question is that port companies must take all reasonable steps to ensure that fully funded superannuation funds are in place as quickly as possible.
I move amendment No. 29a.:
In page 36, subsection (3) (d) (i), line 24, after "paragraph (c)", to insert "or continued in existence in relation to it by virtue of subsection (1) (c) (ii)".
Amendments Nos. 30 and 31 are related and may be taken together.
I move amendment No. 30a.:
In page 40, subsection (1), lines 9 to 11, to delete all words from and including ", or" in line 9 down to and including line 11.
My basic fear about this type of provision is that it is all embracing. Section 44 (1) states:
The Minister may, after consultation with the company, give a direction in writing to a company requiring it to comply with policy decisions of a general kind made by the Minister in relation to—
(a) the development of harbours.
(b) the safety of ships, navigation and operations generally in harbours,
(c) the levels of harbour charges imposed by a company or companies, or
(d) any other matters affecting the functions of a company or companies.
The Minister could have left out "other", cancelled paragraphs (a), (b) and (c) and put down everything else. No one can visualise every circumstance in which it may be necessary for a Minister to become involved, but in the context of the earlier debates and the commercial freedom we are trying to provide for ports, having a finger in every pie in this all embracing way, sends out the wrong signal. While I am not altogether certain that the deletion of paragraph (d) is the best vehicle, I am certain that the all embracing nature of the section is equally unacceptable. On Report Stage I would be quite prepared to look at an approach that would give some freedom to the Minister but not to the extent that this provision appears to give.
I am concerned about another aspect of this. We are establishing 12 commercial ports and are appointing new boards of directors which, presumably, will operate according to the Companies Act memorandum of association. We will give them a certain amount of power and the Minister will act as an overlord. Section 44 (1) specifies "the development of harbours, the safety of ships, navigation and operations generally in harbours" and "the levels of harbour charges imposed by a company or companies". In what context are the levels of harbour charges to be determined? I anticipate that when the ports become commercial semi-State companies in their own right they will compete for business and the levels of harbour charges will dictate the success of a given port. The market place will dictate the constraints there. To what degree will the Minister be involved in the level of harbour charges?
I am concerned that, on the one hand, we will appoint boards of directors to do a job, yet on the other we will have the Minister acting almost as a director behind the scenes. Perhaps the Minister can help qualify these reservations regarding harbour changes.
On the same point, presumably things like safety are covered either by law or regulation and, therefore, a harbour authority will be obliged to comply with regulations on the safety of ships, navigation and operations generally in harbours. As the previous two Deputies have said, this section is superfluous.
As regards charges, the reality is that harbours have to make a profit. No one presumes they will overcharge because if they did, normal commercial criteria would apply and another harbour would quote a more reasonable price.
The beauty of what is happening here is that, by setting up 12 authorities and allowing them the freedom to compete, we will get the kind of competition that, unfortunately, for a long time did not operate, for example, in our airports. Until recently, the airports were under one authority and, therefore, landing charges, etc. were all standard. Anything that affects the ability of these companies to sink or swim is a pity. Basically, they should be obliged to comply with regulations and laws, after which they should be allowed to do the job for which the Minister is setting them up.
Under the powers we discussed in other sections, the Minister will appoint people whom he believes will act responsibly. Having done that there is no need to inhibit them by general policy directions which could mean anything, If they are not contained in regulation or law, what are they?
Amendment No. 31 is directly relevant to the issue we are discussing and might address the concerns that have been raised by Deputies.
You make a fair point and I agree with it. Amendment No. 31 to section 44 might answer some of the questions.
On amendment No. 31, strong objections to the powers conferred on the Minister under section 44 (1) have been received from the Irish Port Authorities Association and individual harbours, and have been repeated here today. The objections state, inter alia, that these ministerial powers will restrict the new port companies from acting in a commercial manner and that the new companies will be in a less favourable position than the present harbour commissioners in relation to ministerial control as, by virtue of the provisions of this section, the Minister will have additional powers to interfere in the affairs of the companies.
The desirability of preserving to the maximum extent the autonomy of the new bodies in day to day operational matters is recognised in the section. The ministerial power to issue directions is confined to general policy decisions. Its purpose is to provide a legislative framework within which the Minister can fulfil his responsibility to ensure that the country has efficient, cost effective port facilities and services, and that the new companies' development plans are consistent with national development plans generally, while at the same time ensuring that safety will be of paramount importance. It is in these areas of general development and safety policy, rather than in day to day operational matters, that directions by the Minister would ordinarily arise. To put this beyond any doubt, I propose amendment No. 31 which draws that distinction and I recommend it to the Committee.
I am sure the Minister's amendment meets fully what I had in mind. I am not certain a deletion was the solution. I would like to reflect on that for Report Stage to see whether a formula could be devised to accommodate the needs which I envisage.
I move amendment No. 31:
In page 40 between lines 13 and 14, to insert the following subsection:
"(3) Subsection (1) shall not be construed as enabling the Minister to exercise any power or control in relation to the performance in particular circumstances by a company of a function conferred on it by or under this Act.".
Amendment No. 32 is out of order.
Amendments Nos. 32a., 32b., 32d. and 32e. are related and may be taken together by agreement.
I move amendment No. 32a.:
In page 41, lines 22 and 23, to delete subsection (5).
On amendments Nos. 32a., 32b. and 32d., following publication of the Harbours Bill, 1995, a number of harbour authorities and the Irish Port Authorities Association objected to these provisions. They pointed out that all ships in the port should be required to abide by the rules, regulations, by-laws etc. relating to safety and the efficient operation of the port. In the interests of public safety, they requested that these subsections be deleted where they referred to safety matters such as navigation rules, regulations and by-laws. The point was made that the existence of these subsections was akin to exempting the Army, Garda, ambulance drivers, fire tender drivers etc. from the provisions of the road traffic Acts. I accept the views put forward and I am, accordingly, recommending that these subsections be deleted.
In amendment No. 32e., I propose to delete the existing subsection (5) which fully exempts vessels engaged exclusively in the service of the State from the provisions of section 49 following representations by a number of the harbour authorities and the Irish Port Authorities Association. However, circumstances may arise where, in the interests of security and for operational reasons, it might not be appropriate that the harbour master should have the right to board certain State vessels. For this reason the Minister should have the right to exempt by order from the requirements of this section certain specified vessels engaged exclusively in the service of the State. That is the purpose of paragraph (a) of the amendment.
Section 3 (4) empowers the Minister to amend or revoke an order made under this Bill. Paragraph (b) of the amendment is a standard provision and provides that an order under paragraph (a) that is amended in accordance with section 3 (4), shall be construed as a reference to the first order as amended. This means that an order under paragraph (a) may be amended later by the Minister by further order. I recommend the amendments to the Committee.
It is clear there may be circumstances where the State charters vessels which should be subject to the criteria laid down for every other vessel, although there may be exceptional circumstances. I accept the amendment.