I move that the Bill be now read a Second Time.
The purpose of this Bill is to increase the limit imposed by the Irish Steel Holdings Limited Act, 1960 on the acquisition of shares in the company by the Minister for Finance from £4 million to £6 million, and on the guarantee by the Minister for Industry and Commerce of the repayment of moneys borrowed by the Company from £500,000 to £1 million.
The history and the development proposals of Irish Steel Holdings, Limited are, no doubt, known to the House, having been fully discussed during the debate leading to the enactment of the Irish Steel Holdings Limited Act, 1960. During that debate, I said it was expected that the total cost of the work necessary for the implementation of the company's development and expansion programme would be of the order of £3½ million. During the course of the work, however, unforeseen circumstances arose which vitiated the estimate on which that expectation was founded, and, while the development plans have not yet been completed, and are not scheduled for completion until towards the end of 1963, the final completion figure for the full programme, including a margin for contingencies, is now estimated by the Company at £5,020,000, of which they will provide £131,268 from their own resources.
The factors contributing to the increase can be broadly classified as follows:
(i) As the works progressed, it was discovered that the subterranean conditions were very bad and more and deeper excavation was found to be necessary, and the foundations had to be greater and more complex than originally foreseen;
(ii) wage increases granted to the building and allied trades since 1959 increased civil engineering costs;
(iii) certain additions and extensions were found necessary to provide for improved efficiency and economy of operation;
(iv) despite extensive advertisement, both in this country and in Great Britain, the company were unable to recruit the number of skilled Irish tradesmen required, and in consequence they were forced to utilise the services of a considerably greater number of foreign technicians at increased cost; and
(v) the revaluation of the Deut-schmark in March, 1961, further increased the cost of certain subcontracts.
In addition to this revised expenditure on the actual development project, it is necessary that a further £250,000 be provided for working capital in the exceptional period between the installation of the plant and its coming into full commercial operation. Certain parts of the new plant are undergoing protracted tests, and this will occur as each unit of the new mills is installed. In addition, certain teething troubles are to be envisaged. The cost of material and labour on this unproductive but necessary development work is accepted as a commissioning cost which should properly be provided out of capital.
The sum of £6 million includes provision of a reserve of £750,000. This provision is being made in case the advance of free trade should lead to proposals for adaptation of the works to fit into an economic framework wider than, and different from, that at present envisaged. This money is not committed to any purpose, and none of it can be used until a fully detailed plan involving its use has prior examination and approval by the Government.
It is also proposed that the limit of £500,000 imposed by the 1960 Act on guaranteed borrowings by the company should be increased to £1 million. When the figure of £500,000 was fixed in the earlier Act, it was in mind that this figure would be additional to the then existing limit of £300,000, guaranteed under the State Guarantees Act. The legal position is, however, that the total guaranteed borrowings under the 1960 Act are limited to £500,000, which is insufficient to provide working capital for the extended operations of the company. A margin is also required to cover, temporarily, further plant extensions, if such should prove necessary, in the event of free trade conditions arising, either by reason of our joining the European Coal and Steel Community or otherwise.
It is of course a matter of concern to me that the original Estimate should have been so far short of eventual requirements and I can assure the House that every possibility of confining expenditure to the original Estimate has been thoroughly explored. I have gone even to the extent of considering the possibility of curtailment of the development scheme. I was satisfied, however, that this course was not practicable. It is clear that Irish Steel Holdings Limited are in business in a highly competitive field and the viability of the company, and the security of the employment of their labour force of some 700 workers, can be assured only if their operations can be carried on at the highest level of efficiency. The development works now in progress are designed to bring about this position.
I have also satisfied myself that all reasonable steps were taken by the company throughout to obtain the best advice available and to endeavour to keep expenditure as close as possible to the estimate. It has proved that they were exceptionally, and unforeseeably, unlucky in regard to foundation conditions which could not be examined beforehand. This is a hazard of large-scale foundation work, particularly in conditions, as here, where the site concerned was occupied by existing heavy plant which had to be maintained in operation to the latest possible moment, in order to minimise interruption of output. The other factors of wage increases, labour shortage and currency revaluation were equally unforeseeable.
As regards the modifications of the original plans, these arose under various heads: it was hoped to use certain existing electrical equipment, but this proved to be impossible; the steel-making department buildings were strengthened to make them suitable for handling hot metal, as the future availability of this material has come to be considered possible; some additional electrical equipment was provided to cope with extra mechanisation which was considered desirable. The company's basic plans, as approved by the Government and described to the House, are unchanged.
While the House, like the Government, will be concerned at the large increases in the cost of these works, I am sure it will be agreed that there is no practical alternative to providing the money to complete the developments as planned.
I recommend the Bill to the approval of the House.