SECTION 8.

Debate resumed on amendment No. 8:
In page 8, subsection (1), line 17, to delete "buy".
—(Deputy Molloy)

We are dealing with section 8, amendments Nos. 8, 9, 10, 11 and 12. In the discussion on those amendments a number of questions were raised and it was agreed I would request the Minister of State to provide the necessary information at this session. I call on the Minister to address the queries raised by Deputy Brennan and Deputy Molloy in particular.

During the debate last Wednesday two issues requiring clarification came to my attention. First, there was uncertainty as to when Report Stage would be taken in the Dáil. I confirm that Report Stage will be taken on Wednesday, 6 November.

The second matter raised was the Telecom Éireann strategic alliance process. A number of Deputies sought information on certain aspects of the alliance process. I am happy to oblige the committee by providing a brief account of that process.

The alliance process began formally in July 1995 with the issue of the Mandate for Strategic Alliance Negotiations by the Government. The mandate set out the overall national policy objective for the telecommunications sector and the Government's requirements of a strategic partner for Telecom Éireann. In addition the mandate detailed Government policy on the liberalisation of the sector up to the year 2000 and the Government plans for the establishment of an appropriate regulatory regime.

The preparations for the launch of the formal alliance process were completed in January this year when the Government approved a number of measures to facilitate the next stages of the process. The first milestone was reached with the issue of an invitation for proposals from the prospective strategic partners with a confidential information memorandum which set out detailed information on the company, its performance and future prospects and the Government's policy and regulatory proposals for the future development of the sector.

Preliminary proposals were received from two parties on 15 March. The parties concerned were Teledanmark and a consortium of KPN and Telia. The bids were evaluated in accordance with predetermined criteria by representatives of the Department of Transport, Energy and Communications, the Department of Finance, Telecom Éireann and the advisers to the strategic alliance process.

On the basis of this evaluation, the Government decided that both the proposals should be admitted to the second stage of the process. The second phase involved extensive discussions with both bidders and a thorough disclosure and due diligence process.

On 24 June final proposals were received from both bidders. On 26 June, following an intensive evaluation process, the Government approved the commencement of exclusive negotiations with the KPN and Telia consortium. This negotiation period was to take 30 days.

Following this period, a final set of transaction documents was agreed between the parties and submitted for Government approval. The share purchase agreement was signed on 26 July 1996. The alliance transaction is subject to the standard competition clearance procedures of the EU. This process is ongoing. I re-emphasise that the alliance process was open, competitive and conducted on a scrupulously fair basis.

I wish to clarify a minor matter raised at the meeting last week, the statement attributed to me in The Examiner that a commercial quantity of oil had been discovered in the basin off Belmullet. In fact, the editorial in the newspaper had the correct story. In deference to the serious point made by Deputy Molloy, I have since written to The Examiner outlining the facts of the case.

The Minister of State said the share purchase agreement was signed on 26 July 1996. Is it proposed to place that agreement in the Dáil Library or to release its contents?

My advice is that this is a confidential document. It is commercially very sensitive and, therefore, will not be published.

Therefore, the public is not to know the details of the contract.

I am advised its contents are commercially sensitive and that it would put the company at a disadvantage if the details were published.

What about the taxpayers who gave it away for nothing? The Minister said an exclusive negotiation period of 30 days was given to the successful consortium. I thought the Government was committed to tendering State assets in a proper open market system. An exclusive negotiating deal for 30 days with one company is hardly the open tender system to which the Minister of State and the Minister, Deputy Lowry, seemed very committed last summer.

I understand bids were received in advance and those two bids were evaluated. The procedure was proper and open and is subject to EU approval. The EU stringently ensures that such procedures are proper and open.

This was a negotiated sale with one company after an exclusive period of 30 days. It was not a sealed tender bid where the envelopes were opened, as would happen in the normal sale of a State asset.

The tendering system was as I have described it and is subject to approval by the EU. That process is ongoing and is the acid test of whether it was a proper tendering system. I am confident the EU will approve the decisions made.

Surely it has nothing to do with whether the EU approves it.

The EU has very stringent regulations and requirements.

We do as well.

I do not want to go down the line of argument rather than debate. I had to say that the last day as well. This is not the kind of debate I will tolerate.

I just want to make the point under amendment 9 to section 8 that this derisory price — one third its value — was achieved by negotiating with one partner in a secret share document which will not be released to the public. It is news to me if that supports developing State companies.

The Deputies opposite and I simply have a different attitude to the public sector. We want to support and develop the public sector.

The Minister of State is selling it cheaply to foreigners.

The chairman said we should not argue but should debate the issue. I am prepared to debate the issue for as long as necessary. The Government's position concerning State enterprises is quite different from that of the Deputy's party. It wants to sell them all off.

Very much so.

I am glad the Deputy is confirming they want to sell them all off.

I did not say that. I said our attitude is different from that of the Minister of State.

His party leader said it.

The Government has privatised 20 per cent——

It is time we moved on; we have had a fair exchange.

We should recognise there is a difference between us——

Yes, the Minister of State sells to foreigners.

——and that we will not convert one another in this room.

The Minister of State sells to foreigners for nothing.

That is not true.

He has just done it in this Bill.

On a point of information——

Will Fine Gael say something in this debate?

It is ironic to see Deputy Brennan attacking the method in which semi-State bodies have been sold off, considering the manner in which he dealt with the B & I which was sold to a foreign company, and not only for nothing, £38 million was contributed by the State——

That is not correct. On a point of information, it was sold to a company on the Irish Stock Exchange.

His whole approach is ironic.

I stand over that sale. It saved the taxpayer £30 million. It was sold to an Irish company.

He paid a company £38 million——

The Deputy's party did not oppose the sale in the Dáil. Why did his party back it in the Dáil?

My party did not back it in the Dáil.

It did not oppose it.

If Deputies persist with this I will have no hesitation in adjourning the business.

Let us get some facts.

I have not done it before but I will.

The Deputy's party did not oppose it in the Dáil.

Is Deputy Molloy pressing amendment No. 8?

I have not spoken yet but I will be pressing the amendment. I thank the Minister of State for clarifying the position in regard to the alleged commercial find and for withdrawing the inaccurate report in The Examiner.

I can give the Deputy up-to-date information on it if he wishes.

I would be delighted to have it. I would also be delighted to have up-to-date information on the details of the sale of Telecom Éireann which the Minister of State is refusing to give the select committee and is, therefore, refusing to give to the Oireachtas. I wonder what the basis is for his decision.

I have a copy here of an article in The Irish Times which goes into great detail and quotes its source as Mr. Ron Bolger, the chairman of Telecom Éireann, and Mr. Alfie Kane its chief executive. Will the Minister of State confirm if the details in that article are correct and whether the chairman and chief executive are authorised to brief the media on the details of the strategic alliance? Why is the Minister of State claiming that the matter is confidential and cannot be disclosed? Are we to take it that the information in the media is not correct?

What arrangement did the Government enter into when it agreed to sell off 20 per cent of Telecom Éireann for much less than its market value with an option to buy another 15 per cent? The House should be made aware of the details in regard to this. This Bill is a mechanism to authorise the Minister to undertake commercial decisions in regard to the sale and purchase of share capital. In this case the Minister is selling to a foreign consortium at a price which most commentators have heavily criticised.

The main terms and features of the strategic alliance agreement were made public when it was signed at the end of July. The detailed alliance agreement is confidential to the Government, Telecom Éireann and KPN-Telia. This is normal commercial practice in such arrangements.

It is a public company and the details should be public.

The company is being told it must be commercial. The Deputy wants to denude it by giving all its commercial information to its competitors.

The deal should be public.

It has no competitors. The Minister has decided to sell it to one company and that is it.

Competitors are lining up for more of its business.

What is the arrangement in relation to the phased payment of the amounts?

It may be useful to remind members of the main financial terms of the strategic alliance deal agreed with the KPN-Telia consortium. The price paid for the initial 20 per cent stake in the company provides the strategic partner with an entry ticket to the full provision of the deal. The financial structure is in three parts; first, initial proceeds from the sale of 20 per cent will be £183 million. Second, the partners have committed to an option to purchase a further 15 per cent within three years which, when exercised, will yield a further £200 million, bringing the total by then to £383 million.

The final payment will come from establishing the market value of the company, based on the public offering or other agreed valuation in three years time and applying that valuation to the full stake, whether 35 per cent or 20 per cent, purchased by the partner. The increase in value above a threshold based on an agreed rate of return on the purchaser's initial investment of the 20 per cent stake and the option price on the 15 per cent stake is shared 60:40 between the State and KPN-Telia. The overall proceeds from this calculation depend on the success of the strategic alliance in increasing company value. Total proceeds, based on a 35 per cent sale, are expected to amount to approximately £550 million.

Will virtually all the initial payment of £183 million go into Telecom Éireann?

If that is the case, the consortium which will buy 20 per cent of the company for £183 million will in effect get back 20 per cent of £183 million as an immediate gift because it will now own 20 per cent of the £183 million. It will hand over £183 million and get back 20 per cent because the money will go into the company.

The Deputy is playing with figures. The consortium will pay over the money and how it is reinvested is a matter——

Regarding my amendment relating to the price of the company, I understand the Minister to say that £183 million will be handed over and will go into the company, but the consortium will get back 20 per cent of that, which amounts to approximately £30 million. In effect, the price is £153 million and not £183 million. By putting the money into the company, it is automatically returned to the shareholder. I am not arguing the point with the Minister but the derisory price of £183 million is less; it is £153 million.

Every independent financial adviser said this was a good deal.

That is not the case.

I have a stack of newspaper cuttings and although some or most said it was a good deal, not every one did so.

I am satisfied this is a good deal and that it was done properly. Good value was received for the share being disposed.

That is a different statement.

Is the amendment being pressed?

Amendment put and declared lost.

I move amendment No. 9:

In page 8, subsection (1), between lines 18 and 19, to insert the following:

"(c) The initial 20 per cent. shareholding of the Minister in the company shall not be disposed of by sale, transfer, exchange or otherwise for any sum less than the sum of £300,000,000.".

Amendment No. 9 was discussed with amendment No. 8. Is the amendment being pressed?

Is the Chairman putting amendments Nos. 9, 10, 11 and 12 now?

Yes. I am obliged under Standing Orders to proceed to take the vote on all the amendments in the group and the section. Is the Deputy pressing amendment No. 9?

Yes. I must do so, given the price.

Amendment put.
The Select Committee divided: Tá, 8; Níl, 12.

Ahern, Dermot.

Kitt, Tom.

Brennan, Séamus.

Molloy, Robert.

Cowen, Brian.

Nolan, M. J.

Foley, Denis.

O'Keeffe, Ned.

Níl

Bell, Michael.

Dukes, Alan.

Boylan, Andrew.

Finucane, Michael

Broughan, Thomas.

Fitzgerald, Brian.

Byrne, Eric.

McGrath, Paul.

Costello, Joe.

Sheehan, P. J.

Crawford, Seymour.

Stagg, Emmet.

Amendment declared lost.

I move amendment No 10:

In page 8, subsection (1), between lines 18 and 19 to insert the following:

"(d) The minimum price at which the Minister may dispose of shares in the company by sale, transfer, exchange or otherwise shall be the market value of such shares as determined by a panel of independent experts comprised of stockbrokers and shall take account of the value of any offer made for such shares in the three years immediately preceding such intended disposal.".

Amendment put and declared lost.

I move amendment No. 11:

In page 8, lines 19 to 29, to delete subsection (2).

Amendment put and declared lost.

I move amendment No. 12:

In page 8, subsection (2), between lines 21 and 22, to insert the following:

"(b) The Minister may not dispose of any shares in the company other than as provided for in subsection (3) (a) without the terms of such sale being laid before and approved by Dáil Éireann.".

Amendment put.
The Select Committee divided: Tá, 8; Níl, 12.

Ahern, Dermot.

Kitt, Tom.

Brennan, Séamus.

Molloy, Robert.

Cowen, Brian.

Nolan, M. J.

Foley, Denis.

O'Keeffe, Ned.

Níl

Bell, Michael.

Finucane, Michael

Boylan, Andrew.

Fitzgerald, Brian.

Byrne, Eric.

McGrath, Paul.

Costello, Joe.

Ryan, Seán.

Crawford, Seymour.

Sheehan, P. J.

Dukes, Alan.

Stagg, Emmet.

Amendment declared lost.

I move amendment No. 13:

In page 8, subsection (3), between lines 38 and 39, to insert the following:

"(c) Shares representing not less than 15 per cent. of the total shareholding in the company shall be made available, by issue, transfer or otherwise, to one or more employee shareholding scheme, subject to such terms and conditions as may be approved by a majority of the shareholders in the company.".

This proposal seeks to give the staff of Telecom Éireann 15 per cent of the shares of the company. The Government provides for 5 per cent in its proposals although I understand that is not definite. What is the present position on the workers' shares? Is the 5 per cent proposal agreed? What is the status of that decision? Will the Chair allow a debate on this?

The amendment is in the Deputy's name and he is free to speak on it.

It is clearly our intention to engage in good faith with employee representatives with a view to charting the best structure for the future participation of employees in the ownership of the company. Any further comment would prejudge the negotiating process and I will not engage in megaphone negotiations.

Both Deputy Lowry and I enjoy excellent relations with the employee representatives and we have no need for megaphone negotiations.

This is another secret, like the document of 26 July which is the share agreement the Minister of State refused to give to the committee. The Minister of State is now saying there are confidential talks between him and the unions. He is unwilling to tell the public what percentage of the Telecom Éireann shares he will keep for the workers.

It is not yet decided and is a matter for negotiation.

We are being asked to pass legislation disposing of shares in a company without being told who will own the shares. If we on this side of the House proposed it the Minister of State would be the first to protest in the strongest possible terms. He wants a blank cheque to sell what percentage shares he likes to workers and will not tell us the percentage, the price or the terms for those shares. Will they be individually held by workers or in trust? Where is the information?

I will give the information shortly.

If that is so, I will withdraw those statements.

On amendment 13, section 8(3) provides that the company can issue and the Minister or Minister for Finance may sell or otherwise transfer shares "to one or more employee shareholding scheme, subject to such terms and conditions as may be approved by a majority of the company's shareholders". It is an enabling clause.

The mandate given to Telecom Éireann for the negotiation of the alliance provided that subject to certain conditions, up to 5 per cent of the issued share capital could be made available to the employees as one of the elements of the strategic alliance. Recently the Minister indicated that the Government is open to practical and feasible proposals by the staff to purchase shares in excess of 5 per cent at full value when it is satisfied this will assist the future development of the company. The political conversion here to a minimum employee shareholding figure of 15 per cent is rather opportunistic and it stands in stark contrast to the reticence applied to share disposal in the case of the alliance transaction. If this amendment was accepted, it would oblige the employees of Telecom Éireann to purchase the shares. Given Deputy Brennan's evaluation of the 20 per cent share, this would cost each employee £16,000. Where does the Deputy suggest they get the money?

Is the Minister of State proposing to give the shares away free?

No. We are providing enabling legislation to have employee shareholding schemes put in place. Normal negotiations are ongoing. They are not secret. They are between the shareholder and employee representatives.

The Minister of State has charged me with wanting to sell the shares to the employees. I have no intention of giving them free shares. Does the Minister of State intend to give them free shares?

We have been accused repeatedly of selling the company short to various people——

Foreigners.

Anyone not from Ireland could be so described. The Deputy is, I assume, not suggesting we should confine sales, if they are desirable, to Irish nationals only. The Deputy is saying we did not get enough for the shares we sold and that now we should give a tranche of shares away for nothing.

I am not saying that. The Minister of State said my amendment says shares should be sold. He cannot now say he wants to give them away for nothing if my amendment says they should be sold. He cannot have it both ways.

The Minister of State has not given any information on the Government's intentions as to the percentage of shares in Telecom Éireann that they intend to make available to the employees of the company. Yet a communication from the Communication Workers' Union by David Beck which was sent to the Minister on 24 September, a copy of which was circulated to all Members of the House, argued a case for worker representation at a higher level than is proposed in the Bill. He refers to the inequitable situation that would arise if an employee benefit trust "holding 14 per cent of the shares had no representation on the board". The strategic partner would have three directors. The Minister of State refers to 14 per cent of the shares. Has the Government discussed that figure with the CWU in regard to the Government's intention once this section is passed? Where has the figure 14 per cent come from if not in discussion between the workers and the Government?

The make up of the board is dealt with in section 10. It is Government policy that the Government should hold 51 per cent of the shares. Telia has an option on 35 per cent. That leaves 14 per cent. There is no magic in guessing that figure because that is what is left.

The concept of share options for workers should be encouraged. I welcome it. In Aer Lingus it was welcomed by the staff as they had a greater input into the running of the company. In the Bill's context, Deputy Brennan refers to the strategic partner who will have available to it up to 35 per cent. In the Joint Oireachtas Committee on Semi-State Bodies, Deputy Brennan gave the impression that selling shares to a strategic alliance was part of Fianna Fáil policy. From this Bill, there is a minimum 5 per cent share for the workers and a commitment to enabling legislation allowing the workers, the Minister or the Department of Transport, Energy and Communications officials to negotiate meaningfully. This is an alliance of everyone to ensure Telecom Éireann can compete, the maximum number of jobs can be maintained and that we get into activities to provide extra jobs. These can be provided in the context of the 5 per cent. My understanding of the document and the remarks Minister of State is that there will be more than 5 per cent for the workers although that will be subject to negotiation. It is mind-boggling to hear Deputy Brennan questioning the concept of negotiations between the parties to arrive at a suitable ratio of shares to enable the future of Telecom Éireann to be assured.

My amendment seeks to give the workers 15 per cent. The record will show that Deputy Ryan, if he votes, is voting against that and supporting the Government's intention to commit 5 per cent.

That is not my reading of it. It could be more than 5 per cent.

The Deputy should vote for the amendment.

I am not haggling about the figures. I accept that negotiations must take place with workers about whether it is 5 per cent or 15 per cent. However, I do not understand the secrecy——

There is no secrecy.

—— and the retrospective blank cheque the Minister of State seeks. He wants the Bill to be passed and signed by the President without telling the Legislature exactly what is involved. This is Ireland's largest State company and 1 per cent of it is gold dust; it is enormously valuable. It includes Cablelink, Eircell and Kelly Communications. Irish taxpayers have put £2 billion into this company, yet the Government values it at £800 million.

The Deputy has already put those figures on the record. He did so eloquently last week.

It is not a matter of just discussing with workers whether it is 5 per cent or 15 per cent. If one accepts the £2 billion value of the company it means the 10 per cent, about which the Minister wishes to negotiate after the Bill is passed, is worth £200 million. The Minister wants a blank cheque for £200 million in negotiations without saying what percentage of it he will give away. My amendment proposes that the workers get the shares and pay for them. However, I object to the fact that the Minister wants to do that in secret.

They do not have to pay for them.

They do pay for them.

The word "secret" has been used a number of times and I have twice asked the Minister of State to respond to it. The Deputy should desist from repetition. The committee has work to do and calling on the Minister of State to reply to the same question a number of times is a negative way to proceed.

The allegation of repetition could equally apply to the Minister of State. I do not know why the Chairman applies it to us.

I appeal to both sides. I will not accept repetition. We are having a rehash of many of the statements made last week.

It is a different amendment.

Section 8(3)(b) proposes to give the Minister the power to sell or otherwise transfer shares as part of one or more employee shareholding schemes. That could be interpreted to mean that the Minister could transfer the shares free to the employees.

This is enabling legislation; the provision is required.

Will the Minister of State give the committee more information about the Government's intentions?

The amendment would have the effect of concluding negotiations before they start. That cannot be done and nobody would seriously expect us to do it. Without a legislative framework, which we are seeking in this Bill, negotiations would be impossible. We are asking for a framework to be provided so that negotiations can take place. We should not pre-empt in the Bill the outcome of the negotiations.

Will acceptance of this amendment mean the arrangement with the consortia would have to be reduced from a possible 35 per cent to 34 per cent?

Amendment put and declared lost.
Section 8 agreed to.
Section 9 agreed to.
NEW SECTION.

Amendments Nos. 15, 16 and 17 are alternatives to amendment No. 14. It is proposed that amendments Nos. 14 to 17, inclusive, will be discussed together. Deputies will have an opportunity to speak on each amendment. Is that agreed?

Amendment No. 17 is a technical amendment. The group of amendments should comprise amendments Nos. 14 to 16, inclusive.

That is fine. I will take it separately.

On a point of procedure, I agree with the amendment of the Minister of State. However, I wish to deal with amendment No. 14 alone.

The Deputy is entitled to do that.

I am not trying to be awkward but it is an important amendment.

I have no problem with that under Standing Orders. Grouping amendments is a means of avoiding repetition. When amendments are similar or related it avoids a rehash of the same debate under each amendment. We will take amendment No. 14 alone. Is it agreed that amendments Nos. 15 and 16 be taken together followed by amendment No. 17?

There was agreement that we would take amendments Nos. 14 to 16, inclusive, together and I have prepared myself to respond to them collectively.

Where was that agreement?

If they are taken as a group the Deputies can speak to each amendment. It means that each amendment would have to be put to the committee separately. There is nothing to stop Deputy Brennan from addressing amendments Nos. 14, 15, 16 and 17.

I am not trying to be difficult. I wish to debate amendment No. 14 fully and vote on it alone.

You have proposed the amendment so I am obliged to allow you to do that.

That makes life difficult for this side of the House.

That is my job.

It was indicated to the Department that the amendments would be taken together because they are related. It is a matter for the committee to decide whether they should be taken together.

If there is disagreement I will have to put the proposal and call a division on it.

Is that the procedure under Standing Orders?

I would have no alternative if there is disagreement. The Minister of State says that as the amendments are related they should be taken together. The Deputy has the right to move each amendment in his name, to speak on each of them and have them voted on if necessary. However, if the Deputy insists on putting amendment No. 14 separately and the Minister of State disagrees on the basis that they are related, I must put the question to the committee. It would be better if we got agreement on it. I will allow, within reason, the maximum scope for discussion on each of the amendments.

I understood the Chairman's earlier ruling to mean that I had the right to insist on speaking on each amendment separately.

That is the Deputy's right.

I now understand it is my right, subject to a vote of the committee.

I have never had a disagreement on that. I would have to refer to Standing Orders.

My response to amendment No. 14 covers amendments Nos. 15 and 16 also because it is the same argument. I have no difficulty in giving the response three separate times.

As the amendments in the group are interrelated it is normal practice for the Minister to reply to the amendments together. However, Deputy Brennan has the right to insist on putting amendment No. 14. Does the Deputy agree to the grouping on the basis that he deals with each one and puts them separately?

I will only agree to that if the alternative is that the Chairman calls a vote. I do not want to hold up the committee with a vote I will not win.

This is an unusual procedure. Normally we do not disagree on groupings because I allow full debate and discussion on each amendment and each one is put separately in accordance with Standing Orders.

The difference is I want the right to comment on amendments Nos. 15 and 16 after we have voted on amendment No. 14. If the Chairman adopts the usual procedure, I will not be able to speak on amendments Nos. 15 and 16 after I know the result on amendment No. 14.

Deputy Séamas Brennan has that right and I have to rule accordingly and ask the Minister to reply to the motions individually.

This amendment is unique in the sense that the Opposition parties were asked to support it by the Communication Workers' Union. The motion I read in Deputy Séamas Brennan's name is identical to the amendment proposed by the CWU. Deputy Séamas Brennan should be allowed exercise his discretion to have this matter debated separately from amendments Nos. 15 and 16.

I propose to take amendment No. 14 separately, amendment Nos. 15 and 16 together and amendment No. 17 separately because it is a technical amendment put down by the Minister. Is that agreed? Agreed.

What time does the Chairman intend to adjourn?

I suggest we adjourn not later than 1 o'clock, resume at 2.30 p.m., proceed to 5 o'clock and then examine the situation.

Would it be possible for the committee to resume at 3 o'clock?

I have no problem if the committee wishes to resume at 3 o'clock and continue to 5.30 p.m. Agreed? Agreed.

I move amendment No. 14:

In page 9, before section 10, to insert the following new section:

"11.—(1) Notwithstanding anything contained in the Worker Participation (State Enterprises) Acts, 1977 and 1988, or any other Act, where an order is made under section 23(1) of the Worker Participation (State Enterprises) Act, 1977, fixing the appropriate number, within the meaning of section 23(2) of that Act, in relation to the company, the appropriate number specified in any such order shall not exceed one third of the number that the Minister is otherwise entitled to appoint under the articles of association of the company plus one substitute who will be entitled to attend and participate at Board meetings but not to vote except in the absence of one of the Employee Directors.

(2) Notwithstanding anything contained in the Worker Participation (State Enterprises) Acts, 1977 and 1988, or any order or warrant made thereunder, or any other Act, the 1996 election as regards the company shall be deferred by one year or such shorter period as may be specified by the Minister by order and subsequent elections shall be held each fourth year thereafter. Candidates nominated by trade unions need not necessarily be employees of the Company.

(3) Not later than the holding of an election pursuant to subsection (2) and notwithstanding anything contained in the Worker Participation (State Enterprises) Acts, 1977 and 1988, or any order or warrant made thereunder, or any other Act, the term of office of such directors of the Company appointed under the Worker Participation (State Enterprises) Acts, 1977 and 1988, shall expire on such date as the Minister may by order specify so as to ensure that the number of directors remaining appointed under those Acts shall be the number specified in order made under section 23(1) of the Worker Participation (State Enterprises) Act, 1977.

(4) Where an Employee Benefit Trust is established pursuant to section 8 (3)(A) of this Act the Minister will appoint an additional director to represent the employee shareholders on the nomination of the Trust.".

I thank the Chairman and Minister for agreeing to the procedure on which I insisted as this is a central amendment. As Deputy Molloy said, this is the amendment that mirrors the proposed amendment from the CWU. It is important for the company both politically and commercially that the Government makes a clear statement and decision on this section. The trade unions in Telecom Éireann are concerned by the wording of this section which will have the effect of reducing the number of worker representatives on the board from four to two. The ability of the workforce to influence the strategic direction of their company would be seriously weakened by section 10.

A change in circumstances whereby the representation of workers on the board is altered from being one third of the total board to one third of the Minister's nominees, has serious implications in the event of any further dilution of the State's shareholdings in the future. This restructuring of the board runs contrary to commitments in the Programme for Competitiveness and Workand the programme for Government, which extend social partnership arrangements in industry. Such a serious reduction in worker representation is not essential to the protection of the strategic interests of either shareholder in the new company. These interests can and are adequately protected by the corporate governance arrangements in the shareholder’s agreement.

Section 10 does not make any provision for the representation of employee shareholders, in the event of an employee benefit trust being established under section 8. It would be inequitable to have the employee benefit trust holding, for example, 14 per cent of the shares with no representative on the board, while the strategic partner will have three directors.

Under current arrangements, the normal expectation in an election is that the nominees of the CWU would win three seats and the candidate nominated by the other five unions would secure the fourth seat. In the event of a reduction in the number of seats, the five unions would not have a quota between them. Therefore, the effect of the proposed restructuring of the board will be to permanently disenfranchise members of these unions. Cutting the worker representatives of the board in half to accommodate the strategic partner will be seen in a bad light by the staff and will undermine the capacity of the trade unions to secure support for the strategic alliance and the transformation of Telecom Éireann in an emerging competitive marketplace.

This amendment fully reflects the CWU's requirement. The statement I have made is a paraphrase of a letter sent to the Minister for Transport, Energy and Communications by the CWU general secretary, David Beggs, on 24 September 1996, which I am sure members of the committee have received. I would like to hear the Minister's view on this amendment.

I do not have major concerns about the first section of Deputy Séamas Brennan's amendment. I do not know what stage are the negotiations between the unions and the Minister. I have serious reservations with subsection (2) of his amendment where he says candidates nominated by trade unions need not necessarily be employees of the company. This would be a major shift in what I and others believe about worker participation. It does not say who should nominate that person or persons. Is it the national executives of the various unions? It is right that whoever is on the board of any State company as a worker representative should be nominated and voted for by the workers of that company. That person must be a member of that company. I would have serious reservations about changing that.

There is some overlap and inconsistency between amendment No. 14 and amendments Nos. 15 and 16. Amendments Nos. 15 and 16 provide for the maintenance of the status quoregarding employee directors on the board of the company. On the other hand, amendment No. 14 sets out a different arrangement for employee representation on the board. This amendment, coincidentally, corresponds to proposals made by the Telecom Éireann trade unions as their opening position in our discussions with them. Matters have moved on considerably since then.

Section 10 modifies the Worker Participation (State Enterprises) Acts of 1977 and 1988 in relation to Telecom Éireann to provide that the number of employee-directors to be appointed under these Acts shall not exceed one third of the number that the Minister is otherwise entitled to appoint under the articles of association of the company. These Acts currently provide that the number of employee directors which the Minister may appoint under these Acts is one third of the total number of the directors of the company. The purpose of this provision is to accommodate the appointment of directors to the board of Telecom Éireann by a shareholder pursuant to any share transaction agreement entered into by the Minister and the company.

This section also provides that the Minister may, by order, postpone for up to one year the Telecom Éireann employee-director elections to be held in 1996 pursuant to the worker participation Acts. The purpose of this provision is to allow for the establishment of a new board structure of the company following a strategic alliance before the next worker director elections take place. This section further enables the Minister to specify a date on which the terms of office of a number of existing employee directors expire before the next worker director elections in order to ensure that the number of employee directors remaining matches the number provided for in the new board structure.

The section provides, therefore, for the changes in the board's structure that are necessary for the strategic partner to be represented at board level. It does so while maintaining a strong employee presence at board level and maintaining the State's voting majority. The Minister's position was set out in his Second Stage speech on the Bill. He said:

. . . this solution was driven by the need to preserve effective control of the State's majority shareholding, the representational interests of the strategic partner, the objective of maintaining a small to medium sized board for the purpose of effective governance and the need to have meaningful employee representation at the key decision making forum in respect of company operations.

The Minister also stated:

I am, however, open to any suggestions, proposals or amendments that may emerge from consultations with the trade unions involved and interested parties as to how the employee issue could evolve. If agreement is reached and if such agreement requires changes to the text of the Bill, new proposals could be introduced on Committee Stage or, if some form of agreement could not be reached quickly, the matter could be dealt with in subsequent legislative proposals during 1997.

These discussions are proceeding and I hope a solution acceptable to all sides can be achieved. I am confident that the use of the alternate or substitute director concept will be acceptable to all parties. It is my intention to table amendments on Report Stage to reflect the agreements which I am confident will be reached and which will exceed the proposals made by Deputy Séamus Brennan in his amendment.

Is the Minister of State effectively accepting section 2?

For the reasons I have outlined I oppose the amendments.

On Second Stage I raised the unions' concerns about the number of workers' representatives. I felt there was a need for further negotiations. I accepted to an extent the Minister's points about the need to have an efficient board and that the interests of the shareholders and the staff would be represented properly. I took on board the Minister's view that he was prepared to have further negotiations with the unions to reach a compromise on the matter. On the basis of the Minister of State's indication that the negotiations are ongoing there may be further scope on Report Stage to deal with the issue and there is no need at this stage for Deputy Séamus Brennan's proposed amendments.

I am annoyed at the tenor of this legislation. We are asked to agree to section 10 on the basis that the Minister will deal with certain matters later. The section provides that the number of worker directors shall not exceed one third of the number the Minister is otherwise entitled to appoint. At present one third of the directors of Telecom Éireann are worker directors and this section proposes to reduce that to one sixth.

The Minister of State indicates that he will have some proposals on Report Stage to alter that but in the meantime he wants agreement to section 10. This puts the committee in a difficult situation. This is the third occasion today we have been asked to leave the matter to the Government while it gets on with the negotiations. In the meantime, however, it wants us to pass the legislation. That is the attitude adopted with regard to price, the shareholding and the worker participation. I protest at this manner of passing legislation. It is clearly designed to get Government backbenchers on board on the basis that the legislation does not really mean what it says and matters will be fixed up later. It has clearly worked because Deputy Seán Ryan has come on board on the basis that the matter will be dealt with on Report Stage.

I can only deal with the business on the basis of what is before me. If a Minister or Minister of State indicates something may or may not be done on Report Stage that is a matter for the Minister or Minister of State. It is not a matter for me.

Sitting suspended at 1 p.m. and resumed at 3 p.m.

The Minister of State referred to amendments on Report Stage but did not give us any information on their content that might help with my amendment. He indicated that discussions are taking places with the trade unions and the committee should be privy to those discussions before this amendment is dealt with. As that is probably not possible I will have to press the amendment.

The amendment seeks to ensure the worker-directors of Telecom Éireann are not reduced in number. If the Government wants to vote against that suggestion we will have to wait to see what is proposed on Report Stage. This amendment is similar to a Communications Workers' Union proposal and my arguments for this amendment were the views sent to me in a letter from the CWU of 24 September. I do not see why the workers should be pushed aside at board level to make way for Dutch and Swedish interests which bring nothing to this arrangement.

Over lunch I had the opportunity to read The Financial Times which indicated that the sale of 20 per cent to the German telecom company is being launched today. As I understand it it is getting a multiple of profits of 15 to 20 times. The Government has managed to get three or four times profits from our foreign investors. This relates directly to the number of worker directors on the board because workers are being pushed off the board to allow the Dutch and Swedish interests to take their places. I do not understand why a German telecom company can obtain three times for its shares what Telecom Éireann is receiving for its shares. This is one of the Government’s great financial scandals.

The Government should accept this amendment. If it is having talks with the CWU and can accede to its requests the Minister of State should accept the amendment rather than force his own backbenchers to vote down an amendment seeking to protect workers' rights. Such a vote would receive attention. The Minister of State should accept the amendment and do what needs to be done to improve matters on Report Stage. It would be a turning point in the history of the Minister of State's party to force his backbenchers to vote to reduce the number of worker-directors.

Deputy Brennan's amendment reflects the opening negotiating position of the union, no more and no less. Matters have advanced since then. I am responding positively to the suggestions made by the Deputy and the union. I am confident that not alone will we meet the original case made by the union in the amendments I will table on Report Stage, but in some instances we will go beyond that position. We are not opposing the Deputy's amendment because we do not agree with the content. It is premature because the negotiations have not been completed and we will table amendments on Report Stage on foot of completed negotiations which will reflect agreement with the representatives of the workers in Telecom Éireann. There is no question of our pushing aside workers' rights in this matter.

It is Government policy that it will retain a majority shareholding in the company. It will have seven out of 12 places on the board; the new partner will have three places leaving two places. We are looking at how we can enhance that number to make it more meaningful. I am confident the Deputy will accept the amendments tabled on Report Stage arising from the negotiations taking place.

The Minister of State considers Deputy Brennan's amendment premature. Perhaps the legislation itself is premature if negotiations are still taking place. This Bill is on Committee Stage yet there are ongoing talks. I accept there will be a Report Stage but the procedure is strange.

How was the figure of two places arrived at? If outside interests are getting three places I could understand that the number of worker-directors could be reduced to three.

Deputy Brennan's amendment originates from the union side and I presume it reflects what is taking place in the negotiations. I am glad negotiations are taking place. The amendment suggests that in future worker-directors would not necessarily have to be workers. The Minister of State has discussed this matter with the union and I accept its inclusion in Deputy Brennan's amendment. Could the Minister of State clarify the position because it is unnerving that the union is sending out such a signal? It will make many employees in semi-State bodies and trade union officials very nervous. They will wonder about the basis for this suggestion. The fact that a trade union secretary is satisfied does not mean the workers are satisfied. The position of worker-director is sacred to workers and, reading between the lines, I suspect that they are being sold down the river. Perhaps the payback to union officials for agreeing to partial privatisation is that they will replace the workers who will be removed from the board. From my experience, that represents a serious and fundamental change for the workers.

The fact that this suggestion was included in the amendment and originated from the union means that it was not plucked out of thin air. Will the Minister of State inform the committee regarding whether it is under discussion?

The purpose of this enabling legislation is to allow for the agreement and the director of regulatory affairs to be put in place. The amendment to which Deputy Ahern referred was tabled by his party colleague. I did not place this matter on the agenda. Deputy Brennan tabled the amendment and he argued the case for it.

Deputy Brennan also stated the origin of the amendment.

Deputy Brennan and his party put forward the amendment and I am not arguing the case in question. The matter has not been discussed to date and we are negotiating with the principal union involved.

The other unions were squeezed out.

Approximately 16 per cent of the workers are represented by five other unions and there is a necessity to accommodate their interests within the worker representative system. This is important and will form part of the negotiations. I have not declared any intention that people other than employees should be worker-directors. The Deputy's party is putting forward that proposal, I cannot be blamed for it. Perhaps he should inquire why that is the case.

Does the Minister of State oppose the proposal I put forward?

I am asking that the committee vote down the proposal.

Therefore, the Minister of State opposes the proposal put forward by the Telecommunication Workers' Union on this point?

That terminology was already used on two occasions. I must inform the committee that the Telecommunication Workers' Union and any other union or body outside is not entitled to table an amendment. They are entitled to put suggestions to Members regarding formats to deal with specific issues. It must be clearly recorded that this is not a union amendment. The amendment was put down in the name of Deputy Brennan on his party's behalf.

I do not wish to be in conflict with the Chairman but his statement is hardly necessary. The amendment was tabled in my name and I stand over it.

The Deputy should defend it.

The Minister of State is grasping at straws. I remind him that Deputy Brian Fitzgerald asked the same question during the morning session.

Deputy Fitzgerald was attacking the amendment.

He stated that he was unhappy and wanted clarification on the Government's position. What is the position of the Minister of State on the amendment?

We are at present involved in negotiation with the union. I am confident that we will arrive at an agreement and I will table amendments on Report Stage which will reflect much of the content of the amendment and, in some cases, go beyond it.

I am aware that the amendment was tabled in Deputy Brennan's name. Everyone received correspondence from the union and we are aware of its ideas. There is no disagreement between Deputy Brennan and myself.

I would not seek to encourage such disagreement.

The Minister of State should not worry in that regard.

The Minister of State has to satisfy three parties, we have only one.

At present Fianna Fáil is actively seeking other parties.

It is obvious that if the union is putting this issue forward through correspondence to all Members, it is one of the items under negotiation with the Minister of State. The amendment was tabled for the purpose of discussion and probably reflects the direction the negotiations are taking at present.

Not necessarily.

We are merely trying to tease out the issue. I previously worked for a semi-State body and many people would raise serious objections about this matter. I am trying to advise the Minister of State that the view of full-time union representatives might not reflect that of the worker-directors and I urge him to be cautious. There might be give and take at the negotiating table but that may not necessarily reflect the opinion of the majority. The fact that this matter was the subject of correspondence from the union means it was discussed during the negotiations. The Minister of State should make his own independent checks because many workers would feel differently about this issue from their union representatives.

The introduction of any reduction will lead to a situation where might is right and the major union will take over all responsibilities. Members are aware that, in all semi-State bodies which have worker directors, the last seat on the board is usually given to the coalition of the smaller unions. The Minister of State will be obliged to introduce an innovative solution to protect their position. It is not a case of making a deal with the major player and throwing everyone else to the wolves.

The Minister of State will make a brief reply because the discussion is becoming repetitive. The matter was already discussed before during the morning session.

I take Deputy Ahern's advice regarding the concerns that may exist outside union officialdom. I met representatives of the worker-director group at the congress committee and we discussed the entire gamut of issues. I reiterate that the amendment reflects an opening position by the union in the area of negotiations on this issue.

Those points have been made. The amendment was discussed during the morning session and the debate is becoming repetitive.

Deputy Ahern's point about this matter being premature mirrors what I stated this morning. The negotiations should have been concluded so that the country could be informed of the position. During the morning session, we discovered a long litany of matters which must remain secret. This discussion is premature and we should not have reached this stage before the negotiations were completed.

Is it the opinion of the Minister of State that, subject to the outcome of the negotiations, his Report Stage amendment will be better than amendment No. 14? Can he assure the committee that the proportion of worker directors on the board of Telecom Éireann will not be diluted? Is there any question of a dilution of the current proportion of directors? If he can assure the committee that no such dilution is envisaged, we can proceed to consider the amendment.

I would be pre-empting the negotiations, which were welcomed by the other side of the House, if I were to attempt to provide such details. It is not a question of the legislation being premature; it is quite in order to continue negotiations during the legislative process and table amendments on the various Stages. If Deputy Brennan withdraws the amendment, he will have an opportunity, if he is not satisfied with the amendments I table, to re-enter it on Report Stage. I suggest he will be happy with the amendment I intend to put down.

Amendment put and declared lost.

Amendments Nos. 15 and 16 may be taken by agreement. Is that agreed? Agreed.

I move amendment No. 15:

In page 9, between lines 21 and 22, to insert the following subsection:

"(1) In the event of the sale or transfer of shares in the company, the proportion of employee directors in relation to the total number of directors on the Board shall remain fixed at not less than the proportion of employee directors at the date of the passing of this Act.".

The Minister quite properly made a request that I withdraw the previous amendment. I appreciate that his request was genuine but I was unable to accede to it because I could not obtain a commitment similar to that reflected by amendment No. 15, which concerns the proportion of worker directors on the board. If I had received such a commitment, I would not have pressed the amendment to a vote.

Amendment No. 15 states: "In the event of the sale or transfer of shares in the company, the proportion of employee directors in relation to the total number of directors on the Board shall remain fixed at not less than the proportion of employee directors at the date of the passing of this Act." The amendment represents a line in the sand. If the Minister of State has no agenda to reduce or dilute the proportion of worker directors on the board, he should have no difficulty in agreeing to the amendment. I will press the amendment to a vote because it goes to the nub of the issue. Diluting worker representation on the new board at the expense of Swedish and Danish interests is the wrong route to take. I will not restate the reasons the dilution is unfortunate. However, with the Programme for Competitiveness and Work, the social partnership and our method of managing change in State companies, there must be change in State companies. Such change can be managed between unions, management and the Government.

The Minister of State is aware that substantial changes were made in the ESB. While I criticised the price of those changes, I did not criticise the methodology employed which involved a tripartite arrangement for negotiations between the workers, management and the Government. Changes were managed without the loss of a single day's supply of electricity. I see no reason for breaking that social partnership approach at this juncture. If this proposal had originated with a Fine Gael Minister, I would have understood his motivation. However, it originates with a Labour Party Minister of State and I find it inexplicable that he will not accept an amendment to ensure a dilution will not occur. That will not damage the negotiations. If such negotiations began from that position, the Minister of State could accept the amendment. Otherwise, the workers will conclude, before the Report Stage debate, that it is his intention to give way and permit a dilution. If there is a hidden agenda that he may dilute their stake, he will reject the amendment and that agenda will become clear during the negotiations.

Will the Minister of State reply to amendments Nos. 15 and 16 as they are being taken together?

It is almost impossible to separate amendments Nos. 14, 15 and 16. I dealt with this matter during my earlier contribution and I will briefly repeat my arguments. Before doing so, I reassure the committee that the Labour Party and the Government have a clear policy to allow for the protection and development of State companies. This Bill forms part of that strategy. I am adamant that that continues to be the case, as are my senior colleague Deputy Lowry, the Minister for Transport, Energy and Communications, and the Government. There is no question that there is a policy of doing less than protecting and developing the companies. Other parties who expressed an opinion on this subject stated that they want to sell the companies to whoever wishes to buy them.

That is not so.

Other parties have stated as much.

Fianna Fáil did not do so.

The party leader recently said something very close to that. I know there was confusion about what was stated. We have an agreement with a company which proposes to purchase a 25 per cent share in Telecom Éireann. As part of the agreement the company will receive three seats on the board. The Government is adamant that it will retain a majority shareholding — seven seats — which leaves two further places on the board.

What are the numbers involved?

Seven, two and three.

Will the Minister of State explain the arithmetical formula used to arrive at that position?

Three seats will go to the company and the two remaining places will go to worker directors. This is contained in the Bill as it now stands but amendments will be tabled at a later stage. It is very hard to separate the amendments.

The amendments are so closely related that will end up discussing amendment No. 14 again.

It was suggested that additional members could be added to the board to solve the problem. However, a large number of additional places would have to be made available to achieve the same proportionality. I understand that, in such a scenario, the smallest number of seats on the board would be 19 or 20. Such a large body would make effective governance of the company by the board impossible. It would be broken down into various committees where the worker directors or representatives would have less input or may not be represented at all. There would be effective governance of the company by its executive which is not desirable. For that reason, the size of the board will remain at its current level. As far as I am concerned, this answers the argument and I am not prepared to accept the amendment.

Is amendment No. 15 being pressed?

We are involved with the Committee Stage debate on the Telecommunications Bill but the Minister of State made a statement on behalf of the Labour Party to the effect that it is committed to the protection and development of State companies. That is fine but a company is being partially privatised. Other companies under the remit of the Minister of State, such as CIE, are also being privatised. I understand the Minister of State recently made a public statement to the effect that he had not been informed by his senior colleague, the Minister for Transport, Energy and Communications, that part of CIE is being privatised.

I was not informed by CIE.

That is even more frightening.

We are not discussing CIE.

The Minister stated that the policy of the Labour Party is to protect State companies and on Sunday he stated that he was not told that CIE was privatising a section of its company. If things are happening without the Minister's knowledge these statements do not count for much. There is validity in laying down a minimum number of four worker-directors on the grounds that it is usually the last position that goes to the coalition of smaller trade unions and if it is not four, the bigger unions are inclined to come in and take the main positions. Their position must be protected. It is important that all employees can claim ownership of the worker directors and see that there is potentially a major problem there. I want the Minister to agree to the amendment and accept it as a statement of fact that the numbers will be——

The Minister has already made this clear.

I am confused by the arguments. Amendment No. 14 advises me to have two worker-directors while amendment No. 16 advises me to have four. The Deputy has to make up his mind about what he wants.

I have given enough scope on this. I know Deputy Ahern's keen interest in this but he will appreciate that we had a lengthy discussion on this subject earlier and I will not allow repetition. Is Deputy Brennan pressing his amendment?

This is major legislation and it needs to be teased out. Why is the company getting three out of 12 seats? That is 25 per cent of the seats but it is only buying 20 per cent of the shares. Is that yet another sweetener for the foreigners?

That was the agreement arrived at and the company has an option on a further 15 per cent with 25 per cent of the shares.

Will the board representation change if it takes up the additional 15 per cent?

The Minister is still sticking to his guns by saying that talks are going on, but in section 10 of the Bill he proposes to halve the number of the worker-directors.

So does the Deputy in his amendment.

I do not accept that the proposal I put forward which mirrors what the unions put forward has the effect of two.

It has, the Deputy can read it any way he likes, it means two.

The Minister of State can argue that with the unions.

I do not need to. They agreed on that.

Is the Minister of State saying the trade unions have agreed to two?

The effect of the Deputy's amendment is two worker directors.

We have debated this and I do not want to——

I do not know how the Minister of State can read that into amendment No. 14.

Divide six by three.

It is a mystery to me.

I will put the question.

The Minister of State said that if the company take up this option and buys the additional 15 per cent, it will not get an extra place on the board. If the workers take up the option and these negotiations work out where they get extra when they buy shares will they get an extra position based on their shareholding? If they get it, who do they take it from?

The level, if any, of representation arising from shareholding by trust on behalf of the workers is subject to negotiation.

They will all be negotiated after the Bill is passed.

We have had enough. The position is clear and I will put the question.

It is a sell out. Go to Germany and see what they got for their company.

The Deputy should do his sums on that again. We got a good deal on that basis.

They got three times what the Government is getting for this company.

They did not.

To be eligible for election as a worker-director does that worker have to be a shareholder?

I simply do not understand the question. Is the Deputy talking about the potential of the trust which will be the holding body for the workers' shareholding having a right to have a director or is he talking about the ordinary worker-directors?

Ordinary worker directors.

There is no question of a requirement to be a shareholder. At present a 5 per cent shareholding is spread among all company employees. This is in the Bill and may well be enhanced so I assume that all workers are shareholders. I have made no proposal that anybody other than workers would be shareholders but the Deputy's colleague has come forward with a proposal that people who are not employees of the company or even shareholders could become worker-directors.

I am not referring to that.

Has the Minister of State a problem with trade union officials?

That was a proposal from the Communication Workers' Union which Deputy Brennan put before the Minister of State to establish his views on it.

Is Deputy Brennan pressing the amendment?

The Minister obviously has problems with trade union officials being directors.

Amendment put.
The Select Committee divided: Tá, 9; Níl, 12.

Ahern, Noel.

Keaveney, Cecilia.

Brennan, Séamus.

Kitt, Tom.

Foley, Denis.

Leonard, Jimmy.

Fox, Mildred.

Nolan, M. J.

Power, Seán.

Níl

Bell, Michael.

Finucane, Michael

Boylan, Andrew.

Fitzgerald, Brian.

Broughan, Thomas.

Flaherty, Mary.

Byrne, Seán.

Kenny, Seán.

Connaughton, Paul.

Sheehan, P. J.

Crawford, Seymour.

Stagg, Emmet.

Amendment declared lost.

I note Deputy Molloy did not vote. Deputy Brennan, do you wish to press amendment No. 16?

Yes. I move amendment No. 16:

In page 9, between lines 21 and 22, to insert the following subsection:

"(2) Notwithstanding the provisions of subsection 1 the number of employee directors shall not be reduced below 4.".

The Select Committee divided: Tá, 10; Níl, 12.

Ahern, Noel.

Kitt, Tom.

Brennan, Séamus.

Leonard, Jimmy.

Foley, Denis.

Molloy, Robert.

Fox, Mildred.

Nolan, M. J.

Keaveney, Cecilia.

Power, Seán.

Níl

Bell, Michael.

Finucane, Michael

Boylan, Andrew.

Fitzgerald, Brian.

Broughan, Thomas.

Flaherty, Mary.

Byrne, Eric.

Kenny, Seán.

Connaughton, Paul.

Sheehan, P. J.

Crawford, Seymour.

Stagg, Emmet.

Amendment declared lost.

I move amendment No. 17:

In page 9, subsection (2), lines 33 and 34, to delete "or such shorter period as may be specified by the Minister by order" and substitute "(or such shorter period as may be specified by the Minister by order)".

This is a technical amendment. Section 10(2) provides for the deferment of the 1996 elections for Telecom Éireann employee directors by one year or such shorter period as may be specified by the Minister by order. The intention is that the elections should be deferred by one year unless the Minister makes an order specifying a shorter period. However, the current text could be read as requiring the Minister to make an order even if a one year deferment was planned. The amendment will make clear the intention outlined.

Have the employees given any opinion on the deferral?

They have been consulted and there is no problem with it as far as I am aware.

Amendment agreed to.
Section 10, as amended, agreed to.
Sections 11 to 17, inclusive, agreed to.
FIRST SCHEDULE.

Amendments Nos. 19 to 22, inclusive, are related to amendment No. 18 and they may be taken together, Is that agreed? Agreed.

I move amendment No. 18:

In page 13, paragraph 1, lines 3 and 4, to delete "a position in the Civil Service and shall be".

The purpose of my amendment is to ensure that the person appointed as a regulator does not have to be a civil servant before his or her appointment. A member of the Civil Service could by all means apply for the post and there is no reason to suggest he or she would not do an excellent job. Once appointed the job should be independent under statute. The purpose of amendment No. 21 is to ensure that established civil servants will be eligible for appointment and, in the event of such appointment, their pensions, benefits and entitlements will be as if they were members of the Civil Service. However, they should not be full members of the Civil Service on being appointed regulator.

To have a regulator who is a full member of the Civil Service responsible to a Minister of the day would not lend itself to the regulatory system we are trying to put in place. There are many public servants who would make excellent regulators but they should be in a statutory position out of the Civil Service.

IBEC and other groups have made the point that the Bill is weak in the independence it seeks to give the regulator. The regulator should be in a more independent and stronger position. In correspondence to members of the committee, IBEC points out that the task of the regulator should include determining interconnection arrangements; commercial and technical arrangements between operators; the agreement of tariff policies, particularly in the case of a dominant operator; the establishment of numbering plans and developing a system of number portability; administering licences for providers and users of telecommunications services; a role in ensuring fair competition and management of radio frequencies allocated for public telecommunications purposes. I share IBEC's view that there are serious omissions in the Bill, particularly on the issue of interconnections, in regard to the regulator's strength.

It is possible the regulator would be a civil servant with limited powers according to IBEC's analysis with which I agree. The regulator would be a toothless wonder. My amendments will ensure that the regulator, once appointed, will be independent of the Civil Service and the Government.

On Second Stage the Minister gave a brief outline of the current position on telecommunications and the main features of the Government's programme for the achievement of their objectives in the sector. He referred to

. . . the further development of Telecom Éireann as a major player providing high quality telecommunications services in both monopoly services and emerging competitive markets; the establishment of an independent regulator for the telecommunications sector; and the liberalisation of the market to allow full competition.

He further stated: "With the emergence of competition in the Irish telecommunications market, it is appropriate that the regulation of the sector be seen to be independent from the Minister's shareholding and sectoral development functions". One can infer that the Minister indicated the necessity that the regulator would be independent. However, this section of the First Schedule states that the director shall be a position in the Civil Service and shall be appointed by the Minister with the consent of the Minister for Finance. Obviously, the appointment can be made by the Minister with the consent of the Minister for Finance but why is there a stipulation that the director would have to be a position in the Civil Service? This seems to run contrary to the Minister's objective that the person who holds the office will be independent of the Minister and the industry and would be seen to be in a position to act independently.

It is difficult to understand why this requirement was included in the Schedule. My amendment, in addition to a similar amendment tabled by Deputy Brennan, suggests that the first paragraph of the First Schedule should be removed. I will be interested to hear the explanation of the Minister of State of how the director, whose position will be in the Civil Service, will achieve the independence sought by the Minister, which everyone agrees is absolutely necessary.

Amendments Nos. 18 and 19 propose that the office of director will not be a civil servant and that the provisions of the 1956 and 1958 Acts will not apply to the officer of Director of Telecommunications Regulation. The Bill does not provide that a civil servant must be appointed to the position of director but merely that the position is one within the Civil Service. Civil servants and others are equally eligible to be appointed and will receive the same consideration. The functions being transferred are those which were hitherto performed within the Department and are purely regulatory in nature. Only the price capping function is new. In that regard, I remind the committee that under the Act the Minister for Transport, Energy and Communications will make a price capping order, the effect of which will be that prices for telecommunications services will be reduced by 6 per cent for the entire range of services provided by Telecom Éireann which are not subject to competition. Those services include line leasing and——

Is the Minister of State allowed to petition while Members are not?

There are working analogues — for example, the Director of Consumer Affairs, the Valuation Commissioner and the Registrar of Titles where, either in law or in practice, the position is within the Civil Service.

In respect of the application of the Acts of 1956 and 1958 to the office of director, the provisions of the First Schedule, taken in their entirety, including the appointment and removal provisions relating to the director are designed to ensure the appropriate balance is achieved between independence on the one hand and accountability on the other. An important vehicle in ensuring that balance is transparency and fairness in any competition for the post of director. By maintaining the office within the scope of the Civil Service Commissioners Act, 1956, in particular, the Minister is in a position to request the Civil Service Commission to arrange a competitive process to identify the person to be appointed. This will be an important safeguard in ensuring that the best person is appointed to do the job and that there are no grounds for allegations of bias towards any particular interest group. I can give an assurance that the Members of this House will have the capacity to review the operations of the office of the Director of Telecommunication Regulation.

Virtually all parliamentary questions asked in relation to director's functions can be taken by the Minister. Additionally there is no reason that the director cannot be made answerable to a committee of this House — this is simply a matter for the organisation of the House. Telecom Éireann will remain accountable to the Oireachtas Joint Committee on State-Sponsored Bodies. Therefore, I oppose the proposed amendments.

Amendment No. 20 proposes that there should be no provision for reappointment of the director, as provided for in paragraph 2 of the First Schedule. There are obvious reasons for the Minister, with the Minister for Finance, wishing to retain the power to reappoint the director. The provision is permissive rather than mandatory and its removal makes no sense in practical terms. There should not be a bar on anyone having a second contract, particularly if they have done a good job. The proposed amendment would be a disincentive to attracting persons of the right calibre. Accordingly, I oppose the proposed amendment.

Amendment No. 21 proposes that established civil servants shall be eligible for appointment to the office of director and deals with the preservation of benefits and entitlements in such circumstances. While the sentiment is welcome, this provision is unnecessary. It would not be the intention of Government to bar established civil servants from applying for and being appointed to the post. It would be most undesirable and unconstitutional to have such a discriminatory recruitment procedure in place. As stated already, civil servants and outsiders are equally eligible to be appointed and will receive the same consideration. With respect to the staffing of the office itself, the Government has decided that staff will be seconded from the Department to meet the immediate requirements of the office. I confirm that the appointment procedure for the regulator will be as follows: it will be open to both civil servants and candidates from the private sector; it will be undertaken by either the Civil Service Commission or the Top Level Appointments Commission and is likely to take place before the end of the year. Accordingly, I oppose the proposed amendment.

Amendment No. 22 proposes that paragraph 9 be deleted. This paragraph should be read in conjunction with paragraph 8 of the First Schedule which provides that a person who has held the position of director is prohibited from taking up a position, where he or she may use information acquired as director, for 18 months following the termination of his or her position as director. This provision is based on the fact that the position of director will be a commercially sensitive one. The incumbent will have access to commercially sensitive information on service providers. If a person who held the post of director took up a position within the sector shortly after leaving the post, such information could be of commercial value and its use could affect the competitive position of companies in the sector. However, there is a balance to be struck here between the right of a former director to pursue a career in an area of his or her choice and the concerns already outlined. The advice I received is that a period of 18 months during which the former director is prohibited from taking up a post in the industry is reasonable.

Paragraph 9 sets out an exemption from the provisions of paragraph 8 by allowing a former director to take up a post in the Civil Service or act as a consultant to any Minister within 18 months of leaving the post of director. In this way, the expertise and experience of the director could be used without detriment to the commercial interests of any participant in the sector. Therefore, amendment No. 22 essentially prevents a former Director of Telecommunications Regulation from holding office or engaging in any employment in the Civil Service or acting as a consultant to the Minister. The impact of this provision would be to deprive the Minister of the accumulated expertise of the director if this is was what the Minister wished to employ. It would also substantially increase the impact of the bar on employment contained in paragraph 8 of the Second Schedule.

The amendment would effectively achieve nothing at the cost of a diminution in both the attractiveness of the position of director and the potential cooperation and understanding between the policy role of the Minister and the regulatory role of the director. The position of the State is different in that it represents the public interest which encompasses the entire sector, private and public. Therefore, the same conflict of interest cannot arise. There is also the consideration that it will be difficult to attract someone of the right calibre to this position if he or she cannot work in the industry after their contract expires, without a further bar on employment in the Civil Service. If the director was a civil servant before taking office, it would be especially perverse if he or she could not then return to the wider Civil Service when the contract ended. Accordingly, I oppose the proposed amendment.

On the question of the independence of the director, the most important guarantors in this regard contained in the Bill are: a statutory requirement to act in an independent manner, paragraph 10 of the First Schedule; a provision for independent exercise of virtually all regulatory functions, sections 3 and 4; a provision for the right on the part of the director to specify and receive resource requirements, section 5; a provision for funding of the regulatory office by the industry, section 6 and a capacity for the director to appoint staff to the office of the director, paragraph 12 of the First Schedule.

As I understand it, civil servants and non civil servants are eligible to apply for the post and I have no problem with that. The person appointed by the Minister will then become a civil servant in the event that the person appointed was not already one. Is that the position?

That is not the right way to do it. The independence of the office should be established under statute with proper pension and retirement facilities. The Minister of State should rethink this issue before Report Stage. It is better for the person if he is a civil servant to retire from there and take up the new statutory post under proper legislation which gives him protection. A certain loyalty to the Civil Service and one to the new office is not needed to confuse the mind of the person in charge of that office.

The Minister of State said the Minister will answer questions in the Dáil for this regulator. Is it his intention that the Minister of the day will answer in the Dáil for the regulator or will the regulator be independent of the Minister? If the Minister is to answer for him in the Dáil how can the person be independent?

The Minister of State said the Civil Service Commission will conduct the interviews. I do not follow that reasoning. The commission quite rightly interviews people for admission to the Civil Service. Why involve them with a post which should be a separate statutory post outside the service? The new director should have all the benefits and security of a civil servant.

I detailed how the Bill provides for the independence of the director. On the issue of Parliamentary Questions, I am worried about us, as public representatives and legislators, removing from the ambit of the House the possibility of information being sought by elected Members of the House on the operations of the director or any other such person where authority is now being shifted from the Minister to another independent person and that Deputies would be unable to ask questions in the House. It is not that the director has to report to the Minister or that the Minister has to report to the House on behalf of the director but that the Minister should be enabled to bring information to the House which he will receive from the director.

Without being responsible for it.

That is a new animal.

We are creating new animals. As a public representative, I want to have the right to raise questions in the House about the functioning of this office.

The Civil Service Commission with a long record for its transparent manner of appointing people is a good vehicle, not necessarily to do the interviews, but to arrange for the competition if the Minister so requires and this is the intention.

The Minister of State has not given a satisfactory explanation for seeking to ensure that the director when appointed shall hold a position in the Civil Service. We understand, as politicians and former Ministers, the traditional relationship that exists between the civil servant and his Minister and vice versa. It is stretching the imagination to expect one to accept that the Minister is transferring regulatory functions and the new function of capping with regard to prices which had been his up to now to a director-regulator of the telecommunications industry and at the same time requiring this new person to hold a position in the Civil Service. It is also stretching the imagination to expect us to accept that that person would be a free agent in the exercise of his functions. Human nature and other factors which come into play with regard to future career prospects lead one to the conclusion that it is wrong to retain this position within the Civil Service. If we are seeking independence for the person who will have to perform these functions, he should be seen to be completely free from influence, direction and suggestion of the Minister in charge of telecommunications policy. I reject the Minister’s suggestion that anybody who holds this office will be 100 per cent independent of influence from the political head of the Department if we retain this system.

The suggestion that the person who held the post is eligible for reappointment suggests that could have an influence. We have to put in as many safeguards as possible. It is dangerous to structure the position in the way suggested, and also in section 9 to suggest that the person who has held the office may gain employment in the Civil Service afterwards and could even act as a consultant to the Minister. That suggests the person can have close political association with the Minister after he has completed his term as a director of telecommunications. This person will be appointed to a position which is independent in name only and will not be independent in practice unless the person is perfect or is a saint where ordinary pressures will not have an influence on him.

I reject the Minister of State's arguments as does Deputy Brennan and IBEC which has taken a particular interest in telecommunications developments and legislation in this area. The content of this Bill and the way in which it is structured is not widely known to the general public. The general public, having carefully considered the proposals from the Minister of State, would agree with us that it should not be retained as a position in the Civil Service or that a person should be eligible for reappointment to the position. The job should be carried out independently and the person should move on when his time expires. He should not be qualified to move to a position as a consultant to the Minister immediately after completing his work. It reduces one's belief in the independence of the person holding the office. I appeal to the Minister of State to accept the amendment.

I have not heard new arguments. It is the same argument again. The First Schedule, paragraph 10 says that the position is legally independent. It is no less than that. It is clear and it will be the law when the Bill is passed by the House. I think it is widely accepted that successive Directors of Consumer Affairs have been independent in the exercise of their duties. The Director is a civil servant, independent and seen to be so.

Could I ask the Minister on that point——

I have already dealt with the Deputy's points and he is now making them again.

Just to tease it out.

I can repeat the arguments if you want, Chairman.

It is on the point of the conflict of interest.

If this person comes from the Civil Service, or comes from outside and becomes a full-fledged civil servant, he or she has certain constitutional loyalties, duties and responsibilities to the Government of the day — not to the political Government but the State. This institutional rather than political loyalty to the Minister of the day could come into conflict with the person's independence as regulator, should he or she want to do something contrary to what the relevant Minister, to whom that civil servant reports, wants. Does the Minister not envisage such circumstances?

As with the Director of Consumer Affairs, this person is not a civil servant reporting to a particular Minister. He is a civil servant of the State within that system, which is good. I reject the implications, perhaps not intended, that civil servants are not capable of doing this independent job while remaining civil servants.

The Minister knows I am not saying that. I have worked with the public service for too long.

People are quite capable of being civil servants within the Civil Service system without reporting directly to and responsible for a Minister in this area. That is not the case here — it would be outrageous if it were — and it is not the intention.

Pardon my ignorance — I was in the Cabinet for four years and I should know this. Are there full-fledged, established civil servants who do not report to any Minister?

I understand that is the case, yes.

Is that what the Minister is putting on the record? I would like to hear a view on this.

They would be required to make an annual report and there would be other requirements to report.

There are established civil servants who do not report to any Minister?

It depends on the context in which the Deputy means "reporting to a Minister". They certainly do not take instructions from a Minister.

No, but are they responsible to a Minister?

I presume the Minister's office would be the conduit used by the director in reporting back to Government but such civil servants do not take instructions from Ministers and it is legally stated that they are independent.

The Minister seems to be of the view that we have established civil servants——

Who are independent.

——who do not report to a Minister. This is a constitutional debate.

In the Oireachtas, civil servants such as those who service this committee do not report to a Minister.

I think I have given enough scope to these questions, which are becoming hypothetical. I will put the question.

Excuse me, Chairman, I have questions for the Minister. We are taking a number of amendments together. This legislation would not be before us but for the fact that EU Directives require us to put these procedures in place to prepare the Irish economy for the fulfilment of Union objectives to liberalise the telecommunications market——

The Deputy means "privatisation".

——and to introduce competition. I never mentioned privatisation. To ensure competition, an independent regulator should preside over this industry, rather than a political figure such as a Minister. The Minister of State has access to this information and attends European Council meetings. How many EU member countries have so far established a director or regulator for their telecommunications industry? How many have appointed persons who are and remain civil servants while holding the position of director of telecommunications? As the British Civil Service system is the one to which we are most closely linked, is the British regulator a civil servant?

I understand that few countries have done what we are doing now. We are blazing a trail in this matter and taking charge rather than waiting for examples.

What of the ones who have? It is all on the way.

Under Lady Thatcher's Government, the British appointed a regulator who was, of course, from outside the Civil Service.

Very sensible.

I thought the Deputy would approve of that but I do not.

In the only precedent the Minister has quoted from another member country, the regulator was from outside the Civil Service.

I do not propose, to this committee or to anyone else, that we follow Lady Thatcher's example in this regard or any other. I am sure the vast majority in the House will agree with me. The Deputy might be isolated on this point and I am sorry for his trouble. He will not make me say that Lady Thatcher did the right thing in Britain — she made a mess of the economy and her party is suffering for it now. She sold the refuse service to the French, never mind British Telecom.

I think we should let Lady Thatcher rest in peace and not resurrect her here. She has nothing to do with this legislation.

Excuse me, Chairman, I do not want to raise my voice — I am capable of doing so if I must — but I would rather use the microphone.

I thought all questions raised had been duly answered.

The Minister made a statement and I take it we are allowed to respond to it. Historically speaking, one would must accept that in this matter — the introduction of competition to what hitherto was a monopoly service in most country — Europe is following what Lady Thatcher introduced in Britain.

They are slow in following Britain.

The Minister is introducing legislation to implement a Thatcherite philosophy in the Irish telecommunications industry.

Poor Lady Thatcher is being criticised for something for which she is not responsible, Committee Stage of this Bill. I propose that we now put the question.

Amendment put.
The Select Committee divided: Tá, 7; Níl, 12.

Brennan, Séamus.

Leonard, Jimmy.

Haughey, Seán.

Molloy, Robert.

Fitzgerald, Liam.

Power, Seán.

Fox, Mildred.

Níl

Bell, Michael.

Finucane, Michael

Boylan, Andrew.

Fitzgerald, Brian,

Broughan, Thomas.

Fitzgerald, Frances.

Byrne, Eric.

Ring, Michael.

Costello, Joe.

Sheehan, P. J.

Crawford, Seymour.

Stagg, Emmet.

Amendment declared lost.
Amendment No. 19 not moved.

I move amendment No. 20:

In page 13, paragraph 2, lines 9 and 10, to delete "and he or she shall be eligible for reappointment".

Amendment put and declared lost.
Amendment No. 21 not moved.

I move amendment No. 22:

In page 13, lines 34 to 37, to delete paragraph 9.

Amendment put and declared lost.
Question proposed: "That the First Schedule be the First Schedule to the Bill."

We have discussed the independence of the proposed director. Paragraph 17 of the First Schedule states that where the director is nominated as a Member of the Seanad or elected to either House of the Oireachtas, he shall cease to be the director. Can I take it that, where the director is selected or nominated as a candidate in a General Election, he can retain his position while a candidate and only ceases to be director if he is elected? That flies in the face of the independence we wish to see attached to the person holding this post. Will the Minister give his thoughts on that?

We have followed the language used in other Bills but I take a strong view on the point made by the Deputy. We will look at that and see if it is necessary to amend the Bill to ensure it is not possible for the circumstances mentioned by the Deputy to occur.

We will return to that on Report Stage. That is the content of paragraph 17(a). Paragraph 17(b) says the same thing in a different way. Why is it necessary to repeat it? There must be some reason and perhaps the Minister could explain.

Paragraph 17(a) applies if this happens while the person is director while (b) provides that one cannot be the director if anything listed in the paragraph has happened.

Civil servants can get the job but TDs and Senators cannot.

One could resign and apply.

Question put and agreed to.
Second Schedule agreed to.
THIRD SCHEDULE.
Question proposed: "That the Third Schedule be the Third Schedule to the Bill."

It is not really agreed but we accept the inevitable.

Question put and agreed to.
TITLE.
Question proposed: "That the Title be the Title to the Bill."

My party is not happy with the Bill. I wish to record my opposition to the Bill going forward in its present form.

You are duly recorded as having made that statement.

My party totally objects to this Bill, particularly to the price of the shares offered to the two overseas companies and the fact that this Bill, as it now stands, reduces the number of worker directors. I also wish to clarify an earlier comment I made. I said that 20 per cent of the German telecommunications company had been floated on the stock market. Having checked the point since, the multiple achieved there was 11.4 — in other words, the sale of the company's shares realised 12 times its profits. The Minister has received less than 4 times the profits for the sale of these shares in Telecom Éireann, which bears out my point that this is a total sell out at a knockdown price. I predict that within a few years, if not months, German and Swedish investors will make a killing on this abysmal price of £183 million. For that reason among others I am trenchantly opposed to this legislation as a sell out of 20 per cent of this valuable company at one third its worth.

We know what will happen when Deputy Brennan returns to power.

I will get the correct price for it, if it is sold.

Greencore is an example of that.

We are dealing with the Title to the Bill and it is not normal to allow a debate on it. We have already debated that subject matter in a number of amendments and Deputies have had ample opportunity to raise those points.

If we are opposing the Title we are entitled to give our reasons.

You are, if you are opposing the Title. Points have been made, do you wish to reply, Minister?

Before he does, I concur with Deputy Brennan. My party sees this as a scandalous sell out at a low price of a valuable national asset which has the capacity to make huge profits for the State or the owners of the telecommunications company. In the future, the greatest industrial opportunities will lie in the telecommunications area and we are handing over a substantial section of our national telecommunications company at a price which is grossly below the proper value. We have no confidence in the outcome of the negotiations which took place and the sale agreement entered into by this Government.

I must allow the Minister to reply. It is not normal to have a a summing up debate but having allowed two such contributions I must allow the response.

It was my intention to thank the Deputies opposite for their interest and co-operation in getting the Bill through Committee Stage. I reject the political cases made by the two Deputies, which are inappropriate to the Title. I am happy to stand over the deal we have made on behalf of Telecom, which will guarantee the company's future and the employment within it and will make it capable of dealing with the wolves to whom the Deputies opposite would throw Telecom and its workers, given half a chance.

It is clear from this discussion that the Minister is not even familiar with the terms of the deal. He does not understand the sell out which has taken place.

There is no question of a sell out, we have got a good deal —£530 million will be available to the company and the State arising from it. It is a good deal for the workers and the State.

Members can now see why I do not normally allow a debate on the Title.

Question put and agreed to.
Report of Select Committee.

I propose the following draft report:

The Select Committee has considered the Bill and made amendments thereto. The Bill, as amended, is reported to the Dáil.

Report agreed to.

Ordered to report to the Dáil accordingly.

I thank the two spokespersons, Deputy Brennan of Fianna Fáil and Deputy Molloy of the Progressive Democrats. We had a good debate over two days and I think I gave them every opportunity to express their views in detail. I thank the Minister and his officials for the manner in which his office has dealt with the Bill. I thank the convenors, my colleagues, the Clerk to the Committee and her colleagues on the staff of the House. I do not know when our next meeting will be; I had provided for a meeting tomorrow on this Bill but we have finished it more quickly than anticipated and I thank Deputies for their co-operation in that regard. I also thank colleagues who individually and collectively made excellent contributions.

There were no contributions from Fine Gael.

The Deputy wants us to exonerate him.

The Select Committee adjourned at 4.50 p.m.