Dáil Éireann díospóireacht -
Wednesday, 12 Nov 1947

Vol. 108 No. 12

Committee on Finance. - Irish Shipping Limited Bill, 1947—Second Stage.

Minister for Industry and Commerce (Mr. Lemass)

I move that the Bill be read a Second Time. Its main provisions involve no change in the present law. The primary purpose of the Bill is to give permanent effect to temporary provisions with regard to Irish Shipping Limited, as contained in Emergency Powers Orders. The Department of Industry and Commerce prepared this Bill and the following Merchant Shipping Bill as one measure, but it was considered by the legal officers of the Government that there were reasons why these various provisions should be contained in two measures rather than in one.

During the war foreign shipping companies which operated regularly to Irish ports suspended their services, and the problem of obtaining ships for essential commodities became a constant source of anxiety. It was considered unlikely that private enterprise would undertake a job of the magnitude involved and Irish Shipping Limited was formed with the backing of the Government. The company, as everybody knows, rendered invaluable service during the war and was one of the principal factors which saved us from economic collapse during that period.

The company has at present a liner service to Montreal, St. John's (New Brunswick), New York and neighbouring ports, as well as Gothenburg and Oslo, and in addition operates tramp services mainly from Canada, North Africa and the Baltic. It undertakes chartering of vessels for Irish importers and provides agency services for foreign ships trading to Irish ports.

The company undertook war risk insurance in 1941 and subsequently extended the insurance business to cater for ordinary marine and aviation risks. The entry of Irish Shipping Limited into the field of insurance was in a sense an accident dictated by circumstances arising out of the war when coverage against certain war risks could not be obtained through the usual channels and it was never intended that Irish Shipping Limited should retain the insurance business as a permanent feature.

Under normal conditions, the specialised business of marine insurance, which would be the main business left after war risk insurance ceased to be necessary, could more appropriately be carried on by concerns already engaged in other forms of insurance business. An arrangement was made therefore, after negotiations with the Insurance Corporation of Ireland Limited, that the marine underwriting business of Irish Shipping Limited should be transferred to the insurance corporation in January of last year.

It is, however, to the credit of Irish Shipping Limited, that they established in Dublin a marine underwriting market and I understand that in consequence of its enterprise there has been built up already a substantial premium income from abroad.

The maintenance of efficient and economic ship repairing facilities is essential to the operation of a separate merchant marine. In 1941 Irish Shipping Limited, established the Cork Dockyard Company to acquire the Haulbowline dockyard. The Dublin dockyards were fully occupied and were unable to cope with the additional work following the expansion of the Irish merchant fleet. The Cork Dockyard Company played an important part during the war in keeping our vessels in commission and the part which our ship-repairing industry must play in the future is no less important.

The only important new provision in the Bill provides for an increase of the capital of the company, which is at present out of proportion to the company's assets. It has a present authorised capital of £200,000 and all the shares are held by the Minister for Finance except for the qualifying shares of the five directors. Provision is being made in this legislation for increased capital, so that, if necessary, the company can call upon it to implement fully their plans for the establishment of a worth-while merchant fleet composed of modern ships.

The Government has decided as a matter of policy that the size of the fleet to be maintained is to be determined, on the one hand by the minimum tonnage required to bring in essential imports at all times, and on the other hand, by the possibility of obtaining profitable employment for the ships. At present the company has seven new ships under construction with a total dead weight tonnage of 46,000 tons. Three of them are 9,000 dead weight, two are 7,500 tons, and two are 2,000 tons and the total cost of the vessels is approximately £1,900,000.

The cost is being defrayed out of the company's reserve funds. The vessels, when completed, will be used to inaugurate a new service to South America and to improve the existing services for which the present tonnage is inadequate. The vessels are being built in Great Britain. The possibility of having them built in our own shipyards was explored, and that possibility is still being explored, but so far it has not been found possible to place an order with an Irish firm. Apart from the British firms who secured the orders, shipbuilders in Norway, Sweden, Denmark, Holland and Italy were asked to quote for these vessels. Arising out of a suggestion which I saw made at one time in a newspaper, I should perhaps mention that Messrs. Harland and Wolff, of Belfast, were also asked to quote, but stated that they were unable to do so, because of their present heavy commitments.

The Bill proposes to give the company power to increase its capital to £5,000,000, but no issue of shares can be made without the authority of the Minister for Finance, given after consultation with the Minister for Industry and Commerce. The Minister for Finance has also certain controlling power over the company by virtue of provisions in the company's articles of association and these powers are being preserved in the Bill. The memorandum and articles of association of the company may not be altered without the approval of the Minister for Finance.

There is provision in the Bill for the payment of subsidies to the company and for the guaranteeing of loans. These provisions are already contained in an Emergency Powers Order. I should perhaps say that it is not contemplated, in any circumstances we foresee in the immediate future, that subsidies will be necessary. Everybody knows, however, that shipping is a most competitive trade, and that, during the period between the wars, freight-cutting and other unfair practices were adopted by powerful shipping organisations in order to drive out smaller organisations and take their business from them. I think it is desirable to have this provision for subsidy in the Bill, if for no other reason than to give notice to anybody who may be thinking of smashing our small merchant marine service that we are not going to allow that to happen, that, if necessary, we will utilise the resources of the State to keep it in existence as an essential safeguard for our security.

At the present time, of course, shipping can be carried on profitably and the ships of Irish Shipping Limited are trading on all routes at competitive freights and securing ample cargoes which yield profit, but if circumstances should arise in which competition became intensified and unfair practices were adopted by shipping organisations or other Governments adopted a policy of subsidy in order to obtain an undue proportion of the trade for their merchant service, we would have to give support to our organisation also. I do not think that anybody would contemplate with equanimity a repetition of the situation in which we found our selves at the beginning of the war, without adequate shipping under our own control. It is, of course, inevitable that there will be an increase in the total amount of shipping in the world. The report on maritime transport which was prepared in Paris in connection with the Marshall Plan estimates that, by 1951, the tonnage of vessels available to the countries participating in the plan will be approximately 16 per cent. above their prewar tonnage. Our country's proposals are modest in perspective. The extension of this merchant fleet may be a big undertaking for us, but I think it is necessary to keep in mind that, even when we have carried out the development programme in contemplation, our merchant fleet will still be amongst the smallest in Europe, even by comparison with the other small nations of Europe. The Belgian, Danish and Portuguese fleets will all be substantially larger than ours.

I mentioned that the power to guarantee borrowings is also being retained. No guarantee for a loan raised by the company has in fact been in force since August, 1942, but, because of the matters to which I have referred and which justify the retention in the Bill of the provision for a subsidy, it is regarded as desirable to retain also the power to guarantee a loan which would enable the company to secure credit, if it required it, readily and on reasonable terms. Sections 3 to 7 of the Bill deal with the holding of shares in the company by the Minister for Finance and I should perhaps say that it is not intended, at any rate at present, that any new issues of capital will be offered to the public. The accounts of the company are published annually and they are audited by the Comptroller and Auditor-General. That arrangement to have the accounts audited by the Comptroller and Auditor-General is not required by any legislation-it is an arrangement made on the initiative of the company. It may be a matter of interest to Deputies to be informed that, since it was established in March, 1941, the company has paid a total of £2,078,000 in taxation to the State.

The Bill must be viewed as part of a general scheme to achieve a reasonable degree of self-sufficiency in time of emergency. Apart from that security aspect, however, the establishment of a merchant marine service must be regarded as a useful factor, in that it may lead to a growth of trade, and, what is of special importance at present, a conservation of dollar supplies. It will not suffice merely to have a sufficiency of tonnage on the Irish register. The shipping must be Irish-owned and must carry the Irish national flag. We must have Irish crews available to man these vessels and Irish ship-repairing facilities available to overhaul and repair them when necessary. At the present time, Irish Shipping Limited and the Cork Dockyard Company, its subsidiary, find employment for over 700 persons.

A good augury for the future is the provision of the new graving dock at Dublin, towards the cost of which a Government grant of two-thirds of the total cost, to a maximum of £500,000, has been made. When completed, the new dock will be capable of accommodating vessels up to 18,000 tons gross. At present, the graving dock facilities are not adequate to take vessels of the size now in use and the larger vessels of Irish Shipping Limited could not be dry-docked in Dublin or any Irish port, if that course became necessary. The provision of the new graving dock at Dublin is therefore also a necessary step to ensure that, in time of international difficulty or emergency, we will have not merely an adequate merchant marine but the facilities to keep it on the sea. A great deal of the work for which this Bill makes legal provision has already been done. It has been done under the authority of emergency powers Orders which it is desirable should cease to operate and should be replaced by permanent legislation. That is the main purpose of the measure which I recommend to the Dáil.

Mr. Cosgrave

Nobody will object to giving permanent effect to emergency legislation under which the State had, during the emergency, a shipping service of its own. The people generally realise the great benefit which they derived from Irish Shipping Limited, at a very difficult time and during periods when we might, otherwise, have been deprived of certain essential commodities from abroad. It has always been difficult to ascertain the full facts about Irish Shipping Limited. It is true that they publish a balance sheet but, at best, a balance sheet gives only a limited amount of information which a company is bound to disclose under statute. The fact that the Comptroller and Auditor-General audits the accounts of the company, under an arrangement with it, does not make available to members of the House full financial information regarding Irish Shipping Limited. I have always held the view that a State company of this kind should be compelled by statute to have its accounts placed before the Comptroller and Auditor-General and that these accounts should come up in the ordinary way for examination by the Committee of Public Accounts.

That Irish Shipping Limited, has paid so large a sum in taxation over the past six years—£2,078,000—is news to most Deputies and shows that the company must be making a substantial profit. During the course of the emergency, a number of persons using the services of Irish Shipping Limited, complained of its high rates. There may have been contributory factors over which the company had no control but it was significant that they did, on two occasions, reduce the freights they were charging. It was equally noteworthy that the premiums payable on marine insurance carried on by the company were higher——

Mr. Lemass

Nobody was compelled to insure with the company.

Mr. Cosgrave

——its marine insurance rates were higher than similar rates elsewhere. I admit that shippers were free to insure elsewhere. I should like to get from the Minister a picture of the financial strength of the company. He mentioned that it was proposed that the company should pay out of its reserve funds for the new ships. It is satisfactory that the company's position is so strong; that it is able to pay out of profits for the ships now required. It is, however, important that the Dáil should get an adequate idea of the present financial position of the company. I suggest that the Minister might consider, on the Committee Stage, an amendment, now that the company is being established under permanent legislation, that the Comptroller and Auditor-General be responsible under statute for auditing the accounts of the company and that these accounts be laid before the Dáil. It is possible to get a copy of the balance sheet but information is not made available in the same way as it is when accounts are, under statute, furnished and made available to Deputies. The proposal to expand the capital is, no doubt, necessary in view of the fact that the company will continue as a permanent feature of our economic life. Before, however, the House is called upon to pass the Bill, we should get a clearer indication of the financial position of the company.

Mr. Coburn

In so far as this Bill ensures that the State will have ships of its own, I think it will be welcomed by all Parties and by the people generally. The Minister referred to the work done by the few ships we had during the war in taking necessary materials here, but he also mentioned that, in between wars, there is a period of keen competition between shipping interests. He visualised foreign combines buying up or putting out of business our little shipping companies here. I hope these ships will be worked on a competitive basis—that they will not be dependent upon subsidies just because they belong to the State. The Minister knows that freight charges have a very important reaction upon industry. If we have to pay higher freights to have our goods carried in Irish bottoms than would be payable if they were carried in foreign bottoms, that may be all right so far as keeping the ships going is concerned but it may be all wrong in its effect on our internal economy. I should like to sound a note of warning that advantage should not be taken to run up costs simply because subsidies may be available which the country will have to pay. I am glad the Minister is conscious of that. I trust that those whose interest it is to keep these ships going will realise that it is also in their interest and the interest of the country that the ships should be worked at a cost which the country can afford to pay and a cost which will react favourably on the price of materials which have to be imported in order to keep our industries going. So long as that aspect of the matter is kept in view by the Minister, I think all Parties will have a hearty welcome for this Bill and wish it all the success it deserves. I do not think that the Minister mentioned the number of ships which it is proposed to have at sea. Perhaps he would do so in his reply. It is good to hear that, in addition to the setting up of these shipping services, there is to be an extension of our dockyards, especially the yard in Dublin. The Minister mentioned that it would be so extended as to accommodate ships with a tonnage up to 18,000. That will be a welcome extension because it will enable the authorities there to engage in building and repair work which could not previously be done because of the restricted area.

Mr. Lemass

The accounts of the company are, of course, published. It is a public company and it complies fully with the requirements of the Companies Acts. I have no desire whatever to withhold information from the Dáil regarding the finances of the company but I do not think that it would be practicable to have those accounts considered by the Public Accounts Committee. They are not public accounts. They are the accounts of a commercial organisation—a commercial organisation which could not reasonably be expected to keep all the data which a Government Department must keep so that every possible transaction of the Department is fully documented and all information concerning it capable of production at a moment's notice either to enable a reply to be given to a Dáil question or to answer some query by the Public Accounts Committee. To impose on a commercial organisation the burden which the keeping of records in that form would involve would be greatly to handicap its operations. This commercial organisation is getting whatever business it gets in competition with the rest of the world in the most competitive trade in the world. There is no protection here. There is no Government assistance of any kind and there is no statutory obligation on any Irish importer or exporter to avail of the services of Irish Shipping Limited. He can avail of American, British, Dutch, Spanish, Portuguese ships to bring cargoes in and out of this country if he can get service from them cheaper. We think it is good business for Irish shippers to support Irish Shipping, Limited, even if they can get an occasional cut freight from someone else because, in the long run, it is in their interests that the company should be kept in existence but there is no question of any legal obligation on them to do so. If we are to maintain that position, to keep this company in the position that it can get business in competition, clearly, we must not impose on it any obligations involving overhead expenses or charges which its competitors have not to meet. That, I think, answers fully Deputy Coburn's point. This company is thoroughly competitive.

Mr. Coburn

I am glad to hear that.

Mr. Lemass

It is getting all the business which it is now getting in competition with any other shipping company operating on the same routes. It made substantial profits during the war. In the main these profits derived from its marine insurance business. They got that business, again, in competition with Lloyds and other insurance agencies. They had a fortunate experience. I think, during the whole of the war, they had not to pay out on any of its own ships lost through. belligerent action. Two ships were lost which were in the service of the company but they were both chartered from the United States Maritime Authority under a contract which required them to be insured in the United States. The substantial profits of the company derived largely from that business and again I want to emphasise that they got that business in free competition with other marine insurers in this country and elsewhere.

They got into the business mainly because other marine insurers would not undertake the risk which it was necessary for certain importers to incur in bringing goods to this country via Lisbon. At a certain stage of the war, when it seemed possible that the Germans would extend their activities into the Iberian Peninsula and occupy Lisbon, ordinary insurance companiesin England and elsewhere refused to insure Irish firms importing goods through Lisbon against war risk attaching to these goods while in store in Lisbon beyond a certain period of time. It looked as if the inability of these firms to get that cover would close that channel of importation. In order to keep it open, Irish Shipping Limited, went into the business of giving insurance against that risk and then found it was a business they could extend. Their extension into it cut down the insurance premiums which were being demanded by outside marine insurers. Its intervention in the business effected very substantial saving for all people interested in shipping goods here because insurance rates were cut by all insurers, but it continued to get business on merit and on that business it made substantial profits.

According to the balance sheet of the company on the 30th June, 1946, its tonnage replacement reserve stands at £2,700,000. It will be remembered that the company had to buy ships during the war. It bought anything that would sail and that it could get, irrespective of price. It was, therefore, necessary that the company should, not merely wipe out of its accounts the heavy initial cost of buying these ships and keeping them in service during the war, but also build up a reserve fund from which the ships could be replaced when orders for new ships could be placed with shipbuilding firms. The balance sheet of the company is in fact quite healthy and it indicates that it will not be necessary, arising out of its immediate programme, to avail of the additional borrowing powers for which this Bill makes provision or to avail of Government guarantee for loans.

It is necessary, however, to keep in mind that there are fields of activity for Irish Shipping Limited, which have not yet been touched. I refer to the cross-Channel business as indicating a very important field to which, it seems to me, we will have to give attention. If the company is to enter that field it must enter it with proper equipment and in a proper manner, which will involve utilisation of the larger capital resources for which this Bill makes provision. At the present time the company, I understand, has nine ships in service and has seven ships building.

It is perfectly true that the company made high profits during the war. It is not true that it made these high profits by charging excessive rates for its services. It is true that during the war years no other ships would come to this country and the company could in fact charge what they chose. They did, however, fix charges on a provisional basis. When they found that those charges were yielding substantial revenue, they cut them again and again until, finally, competitive conditions were restored and since then they have been working on competitive rates. In the main, however, the high profits which they made accrued to them from the insurance business and that business was of immense value to this country. Not merely did it yield these profits to this company but it brought down the cost of insurance through Lloyds' agents or other channels very, very substantially, which was of benefit to everybody who had to insure against war risk or ordinary marine risk or any risk associated with the movement of ships or goods on ships.

I think these are the only points that it is necessary to refer to now. There is, as I have said, every desire to give the Dáil the fullest possible information of the company provided the company is not required to do more than an ordinary commercial undertaking would be required to do in the matter of publishing details of its business or in the keeping of records which would be the means of answering inquiries concerning its business. It is in a highly competitive trade and it cannot remain in that trade unless it is given full commercial freedom of operation.

Mr. Cosgrave

It should have full freedom but the fact that we vote the money should entitle the Dáil to information.

Mr. Lemass

It is necessary to remember that there is no money being voted. If occasion should arise in which the Dáil was being asked to vote any money for this company then, of course, all the information necessary to justify that course would have to be given to the Dáil. At the present time there is no question of voting any money at all. The Minister for Finance orignally subscribed £200,000, which is the present capital of the company. I mentioned the taxation figure to indicate that he got back that £200,000 ten times.

Question put and agreed to.

Committee Stage ordered for Wednesday, 19th November.