Nos. 7 and 8 may be taken together, the Ways and Means Resolution and the Money Resolution for the Cement Bill.
Committee on Finance. - Cement (Amendment) Bill, 1938—Financial and Money Resolutions.
I move Nos. 7 and 8:—
(1) That there shall be charged, levied, and paid in respect of every licence to import cement issued under statutory authority a fee calculated by reference to the number of tons of cement authorised by such licence to be imported, and at such rate per ton as the Minister for Industry and Commerce may, with the concurrence of the Minister for Finance, fix in respect of such licence.
(2) That the fee mentioned in this resolution shall be paid to the Minister for Industry and Commerce and shall be collected and accounted for in such manner as shall be provided by statute.
(3) That in this resolution the word "cement" means Roman cement, Portland cement, or any other hydraulic cement.
That it is expedient to authorise the payment out of moneys provided by the Oireachtas of any expenses incurred in carrying into effect any Act of the present session to amend Part IV of the Cement Act, 1933, to make other provisions for regulating and controlling the importation of cement, to provide for the payment of fees in respect of licences to import cement and to make provision for other matters connected with the matters aforesaid.
I just want to raise a net point with the Minister on this. I want to discuss this matter in the most detached and objective way.
A welcome change!
The Minister is a very sensitive man. This amending Bill moves a step beyond the principal measure. The Principal Act contained in it the decision to establish a cement industry in this country, and therefore that question does not arise for discussion now. The amending Bill and this Financial Resolution were introduced by the Minister with the announcement that he intended to confer upon Cement Limited a monopoly of the cement trade in this country. That is the point which I want to discuss with the Minister, objectively, so that we may make up our minds in this House and in the country what the Government's view is on the issue thus raised. I believe in the system of individual liberty, individual enterprise and capitalism, and it appears to me that certain industrialists in this country——
Might I suggest to the Deputy that he appears to be going to deal with a matter which would arise more appropriately upon the Estimate for the Department, rather than on a Ways and Means Resolution under this Bill?
I want to relate it particularly to the cement industry. It appears to me that certain industrialists in this country are in the position of those whom the gods wished to destroy and first made mad, because they are co-operating with the Minister in the cement industry — and in others, but particularly in the cement industry — in establishing a monopoly in private hands for the supply of a commodity which is of virtual necessity to the consuming public in this country. That thing may be done to-day, but my submission is that that interpretation of the doctrine of private property is calculated to make the doctrine of private property disreputable in the eyes of the people. I would deplore it, but the difficulty in which I find myself is that, when there is a proposal for a monopoly of this character, and convinced socialists like Deputy O'Brien and Deputy Heron make the case that a monopoly of this kind should be in the hands of the Government, I have no answer. They make the case that, if you have a monopoly, any profits derived from it should go to the Government, and be used by the Government either for the relief of taxation, if they believe in one type of socialism, or for the relief of the consumer by the reduction of the price of the commodity to a point which will yield no profit, if they believe in another type of State socialism. I should say that the first alternative represents State capitalism, and that the second represents State socialism.
On a point of order, I do not want to prevent Deputy Dillon from discussing the subject, but I think he should discuss it at an appropriate time. There is nothing raised on this motion but the question of whether there should or should not be a licence fee charged on cement licences.
With regard to the Minister's submission, the whole question of the Government policy on monopolies would, as suggested by the Minister, be more appropriately debated on one of the Estimates, particularly the Estimate for the office of the Minister for Industry and Commerce. The principle of this Bill was approved on Second Reading, as the Deputy is aware. We are taking Nos. 7 and 8 together. No. 8 does raise a rather wide question, the question of whether money should be granted for administering this Bill. The Deputy is entitled to give reasons for or against, but his arguments should be directed to this Bill and not to the general question of Government policy on industrialisation.
I will direct my remarks exclusively to Cement Limited, which puts me in rather an invidious position, because I am then referring to one particular industry, which is really in a position analogous to other industries.
Quite, but the main question would properly arise on the Estimate.
I see the difficulty, but I want to be taken not as making a categorical assault upon Cement Limited qua Cement Limited. I am invoking the case of Cement Limited as typical of a series of other cases of industries established on a certain basis with the approval and even the encouragement of the Government of the day. If an individual entrepreneur asks for a limited tariff and announces his readiness to produce cement in this country in competition with foreign cement that has paid the tariff, or in competition with anybody else who chooses to establish the industry here, that man is giving the public the guarantee that he must produce cement of a quality and at a price which will represent better value than anything that was brought in from outside or that is manufactured here, and that if he fails to do that, the public can simply abstain from buying his commodity. Now that man is practising individual enterprise under a reasonably controlled capitalist system. If, however, a man comes forward and says: “I will produce cement in Ireland on condition that nobody is allowed to bring in cement at all except me and that, in effect, nobody will be allowed to compete with me in the manufacture of cement,” I cannot see what public service that man is giving.
The State is conferring on that group of individuals a most valuable concession for no consideration at all. The shareholders, the board of directors, of that company, are all eminently respectable men, all men who deserve well of the country by a long and honourable reputation in the country's commercial life, but their ordinary method of approach to this problem will be, as it has been, to issue capital which has been underwritten by the Government Industrial Trust Corporation. Having issued the capital, the board of directors is appointed, and they employ technicians, a general manager, and labourers to build their factories and to manufacture the commodity, and they then exercise a general supervision over the enterprise thereafter, subject, according to the Minister, to the restrictions that will be put upon them by the Prices Controller. What are they doing for the profits that they are going to make out of the industry? As far as I can see, they are doing nothing at all. They are not competing with anybody else. They are not holding out their product in competition with anybody else's product. What are they doing that the Government itself could not do? As far as I can see, nothing. If, instead of calling in this body of shareholders and this body of directors the Government employed the general manager and the technicians, built the factories and made the cement and sold it to the public authorities and the other consumers in this country, the Government would get the entire profit of the enterprise, which would run into a very substantial sum, being the profit on the sale of some 370,000 tons of cement per annum, and that could go to the relief of taxation or else to a reduction in the price of cement.
I think that a plan whereunder the Government would engage in the industry is a bad plan, because I think the inevitable result of it is that, operating under those terms, the industry is going to run down in efficiency and competitiveness, and the commodity is going to go down in quality and probably to rise in price. Assuming, however, that, even with all these evils, any benefits that accrue would go to the Treasury, if you are going to put a group of private capitalists in that position of absolute independence, with no competition of any kind, I apprehend that very similar evils will manifest themselves, but the community will not have the compensating result that any profits that may turn up will go to the Treasury. They will not. If the enterprise is in the hands of private capitalists, any profits that accrue will go into their pockets. So that the system of granting a monopoly for the production of an essential commodity such as cement to a group of private capitalists secures for us all the evils of both systems — all the evils of the capitalist system and all the evils of the socialist system — and deprives us of all the benefits of both systems, the capitalist system and the socialist system. I just want the Minister to tell us quite objectively, why does he resort to that method. The Minister will say, of course, that, while it is true that the enterprise is being left in the hands of a group of private capitalists, the Prices Controller and the Prices Commission will exercise a very careful watch over the whole enterprise; but I particularly ask the Minister to direct his attention to this point. It is physically impossible for the Prices Controller to exercise the necessary control. It is quite easy to regulate prices. You can always tell a man to charge 40s. instead of 45s., and you can make him charge it, but you cannot control quality. You cannot control quality, for two reasons. The first reason is that the technical information requisite to arrive at certainty about any product is extremely difficult to get. That is the first difficulty. Assuming, however, that you do get it and that you require the monopolist to raise his quality, he has got this reply. He can come in to the Minister and say: "To raise the quality of my product and to charge the price which you have forced me down to by a Prices Order means that I must close down the three cement factories, because we cannot carry on"; whereupon the Minister is immediately in the dilemma that he has either got to abandon his whole plan of producing cement in Ireland, which would be very damaging to his prestige, or else to expropriate the monopolist, compensate him, and raise the price, which would also be damaging to his prestige. What happens, in effect, is that the Minister reads, as he did in the case of the flour millers, the Prices Controller's report, where the Controller said that excess profits were certainly being made. He heard the case of the millers and the dilemma which they propounded to him, and he simply sat back and said: "For the time being in any case, that is an insoluble problem." I wonder would the Minister tell us now, quite frankly, does he really mean to go in for State Socialism? Has he really in the back of his head the belief that, if this monopoly system will not work, it is his intention to take over all these enterprises and have them run by the Government....
That is obviously a wide question of policy.
Well, the cement industry.
An occasional reference to the Cement Bill does not operate to bring the Deputy's argument down from the general to the particular. He is aware that the principle of establishing cement factories has been already approved. The question he has now put to the Minister is precisely of the type that would arise on the Vote for the Minister's Department.
Well, Sir, I do not press that point, but I do think it is vital, when we are actually voting money to bring this cement plan to its completion, that the Minister should tell us what contingencies he foresees in connection with this enterprise and what he proposes to do in certain eventualities. Suppose a time comes when the Minister is told that the prices will have to be fixed higher than he ever anticipated if the quality is to be maintained. What will he do in those circumstances? Will he say, "I am going to open the ports. I do not believe you; I do not believe you are playing square with me. I will open the ports and, if it means closing your factories, close them." Perhaps he will say, "If you cannot do what I am advised it is possible for you to do, I will take over the factories and do it myself." Which do you intend to do? I think that is the whole kernel of this question. Are we prudent or right in advancing money for the promotion of this business without having those issues clearly before our minds? I am affording the Minister an opportunity in relation to this Portland cement industry, which is typical, of stating his view on the question of granting a monopoly to a group of individuals and indicating what measures he contemplates taking in the event of the maximum prices that his advisers consider reasonable proving unacceptable to the monopolists in this particular industry.
I see here that the word "cement" means Roman cement. I suppose Medina cement would also be included under that category. Apparently the cement industry is going to be established for the manufacture of ordinary cement. There are certain cements outside that category and the Minister stated the other day that they would continue to pay the 5/- licence fee. I suppose if they are manufactured in England they would pay a further 10 per cent. ad valorum duty. I think the Minister ought to recognise that these other duties are frankly revenue-producing items; that under no possible stretch of the imagination can they be considered as protecting the industry. I take it those connected with the cement industry have very properly stated what they are going to manufacture and what they are not going to manufacture.
Of course, it does not make a huge lot of difference, because these special cements are a very small item in comparison with ordinary cement. At the same time, I do not think the Minister should tax every single item connected with the provision of houses, every item which has to be brought into the country. Ordinary cement is in a different category. There are some specialised items which the cement company do not wish to manufacture, and I wish to register a protest at ordinary revenue being put on these items, for instance, on such an important item as the provision of houses, in which the cost bulks so large, especially considering that it has to be paid, in the case of a lot of houses, over a great series of years; in fact, going down to what we might describe as posterity.
Deputy Dillon used, in relation to the proposals in this Bill, the term monopoly. Most people instinctively react against that word. It conveys a condition of affairs which the public instinctively regard as bad. You can always arouse against any proposal a certain amount of opposition by attaching that word to it. That instinctive reaction is a carryover from an earlier period when the idea was prevalent that the greater amount of competition that prevailed in any business, the fewer the restrictions upon trade, and the larger the advantages which consumers and the public generally secured. That is no longer true. In quite a number of industries nothing like free competition exists. It does not exist in the cement industry. The choice which the Government had to take, and which the Dáil must take, is not between a monopoly for cement in the hands of Irish Cement Limited and free trade cement; it is a choice between one form of monopoly and another.
There is a monopoly in cement, a monopoly which existed for some time past and which is completely watertight. If Deputy Dillon wants to buy some cement at the moment before Irish cement is available, he will have to buy it from a monopoly and pay a monopoly price, whatever that monopoly dictates. He cannot go from one country to another and bargain off his order for the purpose of getting a reduced price, and buying it wherever he would get it cheapest. Even if he did get it cheaper, he would not be allowed to purchase it.
Who will stop me?
There are certain small cement producers outside the combine, but their imports are negligible. A small quantity came from Spain and Poland, but that was not normal trade; it represented cement sent here for the purpose of establishing sterling credits. There was no continuing business available, nor is it available. The cement at the moment sent into this country is supplied by the cement cartel. The distribution is effected by a body called the Irish committee of the cement cartel and if anyone wants to do any business in relation to the importation of cement it is with that body he has to do it. Let us consider the situation in the light of that fact. There are only two alternatives open. Either the Government, as such, sets out to establish a nationally owned and governmentally controlled cement manufacturing enterprise, or we get some private company to do the production for us. In theory, there is something to be said for the Government owned and Government controlled business, but it is only in theory. In practice it is not possible except under exceptional circumstances and in relation to an enterprise of a certain kind.
We established here the sugar manufacturing industry as a semi-Government industry. We could not have done it were it not for the fact that there was available an individual who was brought into the country by a private company, an individual who had acquired expert knowledge of the circumstances of this country, which he added to the expert knowledge he already possessed, and whose services were available to us. When we established the sugar company and authorised and financed them to proceed with the establishment of additional factories, we were banking everything on our faith in that individual and the persons associated with him. If we were to try to establish a cement or any other industry on that basis we would first have to find an individual concerning whom we would not have and could not have such personal knowledge as we had in the case of the individual to whom I have referred.
It is a possible way of doing things. I have often considered it, but I have always considered it as a last resort, when no other way of establishing an industry which I wanted to see set up here was available to me, that is, going out and hiring a management and trusting that management to spend your money properly and to give the results which you think it should be possible to secure. I do not think that is a good way of doing it, and I do not think that if we had followed that course in relation to a number of industries, we would ever have succeeded in getting them established properly.
We went, therefore, on the alternative line, and Deputy Dillon must not misunderstand what that alternative line is, because in the case of cement it is clearly set out in a special Act relating to the cement industry. We let it be known that there was available to any person who satisfied us that he was entitled to get it a licence to manufacture cement, but a licence subject to very definite conditions which specified, not merely that the cement should conform to a definite standard of quality, but that it should be available at a certain fixed price and in certain fixed quantities. This cement company is undoubtedly going to handle all the cement required by our people, but they are going to produce, and must produce, that cement subject to these conditions. It must conform to a standard specification prepared by us which I have stated is higher than the British national standard; and it must be sold at a fixed price, a price which is fixed in relation to certain known factors—in this particular case, the cost of electricity, the price of coal and the standard wage fixed for the industry. If any of these charges vary, if labour costs, electricity costs, or coal costs go up or down, the price of cement will go up or down; but not otherwise.
The company must produce stated quantities, and no more and no less than the stated quantities; it must produce, furthermore, and sell that cement subject to the over-riding regulation that the amount to be distributed in dividends to its shareholders shall not exceed certain limits on the average. In these circumstances, we think we have got all the safeguards necessary to secure the efficiency of the enterprise, and we have these safeguards while, at the same time, the stimulus to improvement which exists in the case of private industry, and less in the case of Governmental enterprise, exists. The company which is undertaking the manufacture of cement is an Irish company. There are certain external expert interests associated with it, but the bulk of its capital has been raised in Ireland. It was raised by public subscription through an issue of shares underwritten by the Industrial Credit Corporation. However, all that matter was discussed and decided by the Dáil long before this.
The question that arises on this Bill is whether in the very peculiar circumstances that will exist from now until the end of next year a certain arrangement for the importation of limited quantities of cement should or should not be made. From next month, Irish cement will be available. From the end of May, the two factories established by this company will be in full production and, consequently, the quantity of cement that must be imported will be a comparatively small part of our total requirements. At the end of next year, even that importation will have disappeared, and all our cement will be produced here. The only question which arises at the moment, the only thing with which this Bill is designed to deal, is the arrangement for the importation of that limited quantity of cement from now until the end of next year, an arrangement which will in fact cease to have any significance after the end of next year.
There were two courses open to us. One was to take a number of cement importers and to say to them: "We are going to reduce the quantity which each of you will import pro rata to the total reduction of imports which is necessary." That course is quite feasible. It is a course which in fact was adopted in relation to a number of other industries in respect of which quantitative regulation imports was applied, but in relation to some industries — the sugar industry is one and this is another — everybody is prepared to agree that that is not the best course. In relation to the cement industry, it is obviously not the best course because we can arrange, under this system of giving a sole licence to a cement company, that we can buy that imported cement at a lower price than that at which any other person can get it. The arrangement which is contemplated involves the selling of all the cement to be imported at the same price as that at which Irish cement will be sold. The price of Irish cement, as I have said, is fixed by the formula which relates to the particular charges I have referred to and the imported cement will be sold at that price. It will be sold at that price irrespective of whether there is a licence fee, irrespective of whether various items that might affect the price of imported cement vary or not.
The licence fee has been criticised in the past as an undesirable method of raising revenue for the Government and there was something to be said for that point of view, at least since the cartel closed in upon this market and the price of cement jumped up. It jumped up considerably, not merely because the members of the cartel were in a position to regulate the price they were going to get for their cement, but also because the agents for these importers were able to regulate the commission which they got on the imports, and in fact increased that commission very considerably. That disappears from now on. So far as imported cement is concerned, it is going to be sold at a fixed price, namely, the price at which Irish cement will be sold by Cement Limited. In so far as we are retaining the licence fee, it does not alter the price of cement. It does secure revenue for the Government, but if we abolish the licence fee, it will not reduce the price of cement, but it will mean profits for the agents, for the cement company as the importers and for the cartel of manufacturers. It would mean no difference in the price of cement because, clearly, the limited quantity of imported cement that will come in must be sold, and will be sold inevitably at the same price as that fixed for Irish cement.
Therefore, the arrangement which we contemplate ensures, firstly, an immediate reduction in the price of cement and as soon as this arrangement comes into operation the price of cement will come down because Irish cement will be available at a price lower than that now charged for imported cement on which this licence fee is payable; secondly, it ensures the least possible dislocation in existing trading organisations because the whole of the cement required by users in this country will continue to be distributed to these users through the existing channels, the channels through which they got imported cement in the past; and thirdly, it means that we can regulate, without any difficulty and without need for any elaborate machinery, the actual quantity of cement to come in. If we were to try to regulate that quantity independently of the cement manufacturing company, we would obviously have considerable difficulty, because it is very difficult to determine accurately the total amount required in the whole country, and much more difficult to determine accurately the total amount required at particular centres.
The original scheme, as Deputies are aware, contemplated the regulation not merely in the country as a whole but in particular districts, a much better system of achieving the same result as that which the Bill contemplates. We have adequate safeguards to ensure that that licence cannot be abused and that the importing company cannot make 1d. profit out of handling that cement. If we decide in the interval to abolish that system and inaugurate a new system which would permit of the importing company to make a profit then that profit would go to effect an all-over reduction in price. We do not contemplate that this circumstance will arise because the position has been carefully examined by all parties who are very definitely interested in this matter and it is possible to give a reasonable assurance that the position will develop on the lines I have set out and that cement will be sold at a fixed price without profit and the State shall continue to get this 5/- licence fee from cement without any additional expense to Irish consumers.
Will the Minister answer the question as to whether the fee will apply to hydraulic cement?
I do not purport to be a technical expert but this licence fee will apply to all hydraulic cement.
The test will be whether it is hydraulic cement or not.
Yes.
Motions agreed to.
Resolutions reported and agreed to.