This Bill involves a sum of £15 million which is not at all dissimilar to the previous Bill we discussed here today. People might be inclined to say that this is just another mickey mouse Bill where we pass more money for State-sponsored bodies. However, this is far from the case. I have studied the 1978 annual report of B & I, the annual report for the other State-sponsored shipping company, Irish Shipping Limited and also the report of the Joint Committee of the House of the Oireachtas which examined the affairs of B & I some months ago. I am very perturbed at the performance of B & I, not just for 1978 but for many years past. I have also consulted many people who are involved in the shipping industry. I am sorry to say they support the poor impression I have formed of the performance of B & I for many years past.
There is a growing tendency in this country to shout "nationalise" when an industry is seen to be in financial difficulties and when employment is jeopardised. There is a certain amount of merit in a demand like that but it does not mean we should support it at any cost. I have been told that the share capital being demanded by B & I is in excess of that for Aer Lingus, a far greater concern which has far greater assets and far greater commitments and does far greater work for the State at large. I have been told that this is a case of pouring good money after bad down the drain. I would like the Minister to state if he has had expert independent opinion about the performance of B & I since their formation in 1965 when they were purchased from Coast Line Limited, the shipping company which were the original British and Irish Steam Packet Company.
The State at that time allowed the company a share capital of £1.6 million and we have come from that figure up to the present level of £35 million if this Bill is passed. I would like to quote from the original motivation which led to the formation of this semi-State body, as stated in the Joint Committee on State-Sponsored Bodies, Second Report, page 11:
The company was taken into public ownership to secure a greater measure of Irish participation in the cross-Channel trade .... continue to be operated on strictly commercial lines.
That is very important because the company do not seem to have been operated on strictly commercial lines. I also want to refer to page 15 of the same report where one of the objectives of the company is outlined as follows:
To provide and develop a modern, efficient, profitable national and comprehensive surface transport system to and from Ireland.
The company have not been profitable, despite the fact that the share capital was increased from £1.6 million in 1965 to £4.6 million in 1971, to £20 million in 1976 and now we are being asked to increase that share capital to £35 million. I have spoken to many people involved in the shipping world and those involved in other semi-state bodies about this company. The company are operating on a small scale, internationally speaking, but, nationally speaking, they may not be operating on a small scale. It is incomprehensible that a company operating on such a scale should be demanding this kind of money year after year. When the board was formed in 1955, the word "profitability" was used as one of the objectives but the operation has been anything but profitable. In this report there were put forward a number of ideas to the joint committee but I venture to suggest that that committee did not carry out their job properly. In saying that it is not my intention to criticise any one party or to criticise the Minister or the Government. All parties are represented on that committee though unfortunately it was not a healthy sign that on the occasion in question only half the members attended the meeting. At two such inquiries I note that only six of the 11 members were present while at a third inquiry there were only five present. This indicates a lack of interest on the part of the members concerned.
I understand that the board we are concerned with here were the subject of the first such inquiry into the working of any State-sponsored body. But I do not think that the committee succeeded in eliciting the relevant facts. That is not to say that they were told why or that they were misled but it is doubtful that they used their terms of reference in a manner that would have enabled them to examine the affairs of the company as they should have been examined.
The committee's terms of reference provided that, subject to the consent of the Minister for the Public Service, the committee may engage the services of persons with technical or specialist knowledge to assist in inquiries. In other words, the committee have the authority to engage specialists who would be in a position to offer a third-party opinion. Obviously, it is very difficult for ordinary laymen like ourselves to understand the detailed workings of a major national company such as the B & I. So far as the committee were concerned they were dependent on the information supplied by members of the board of that company. I am sure that the board members were forthcoming in their answering but no doubt they could have been asked much more searching questions in which case we would have been in a much better position today to adjudicate as to whether the company was being run in a proper manner, on sound commercial lines. From the inquiries I have made in the meantime it would appear that the company is not operating effectively and that this House should have cause for concern in that regard. Perhaps the Minister would tell us whether he has made any independent inquiry into the situation. I am not an advocate of the nationalisation of industry because I do not believe that such nationalisation leads to maximum efficiency. Quite often it leads to inefficiency.
Last week while debating a private notice question we discussed these matters and made the point that if some of our semi-State industries, such as the Department of Posts and Telegraphs, were handed over to private enterprise they would probably become big profit-making bodies rather than being big loss-making bodies as they are now. It is unfortunate that State-sponsored bodies should be losing so much money. My opinion is that any time it is possible for us to transfer a State-sponsored operation to private enterprise, we should seriously consider such a move. Further nationalisation can only result in an increased burden on the taxpayer and on the Exchequer if our experience so far in this area is to continue to be the norm. The B & I represent a glowing example of a company which should be operated on a profit and which could justifiably be handed back to private enterprise. That possibility should be considered. A deficit of £35 million is a heavy burden on the taxpayers.
It is said that anything can be proved by way of statistics but the statistics as outlined in the B & I report for 1978 are identical with the statistics given to the committee. They emanate from the same source and I have no reason to doubt their authenticity. They show that the company carried in 1978 one-and-a-half million tons of freight, 760,000 passengers and 154,000 cars. To illustrate the point I am making we might compare this company with Irish Shipping who are involved in the same type of operation but who have not been registering losses for many years. Indeed, Irish Shipping have not received a subvention from any Government since the late fifties or early sixties, and I expect that the scale of their operations is far in excess of those of the B & I line. In these circumstances we are entitled to ask why B & I cannot also show a profit. If it is not the intention to hand the B & I back to private enterprise we should at least amalgamate the company with Irish Shipping, since there can hardly be justification for having two semi-State bodies when one is registering severe losses and the other registering high profits. Irish Shipping have been so successful that they have been able to underwrite their own capital expenditure, whereas the other concern continue to look for increasing subventions. Subvention of £15 million in present circumstances is not something that we should regard lightly.
The shipping industry in general is going through a bad patch, but even at the best of times it is a dicey business. A huge oil tanker may cost millions of £s but even in the Harland and Wolff yard in Belfast a couple of new tankers have had to be left there because of buyers refusing to accept them, there not being any business for them. In the Irish Shipping report for 1978 the chairman said the best way to go broke in shipping nowadays is to own an oil tanker. But it is unpredictable business. It is not a business in which you will make a fortune but Irish Shipping have shown that by astute management and by coupling up with other firms in the shipping business, it can be a viable proposition.
At the moment Irish Shipping have eight large cargo tramp vessels ranging in weight from 26,000 tons to something like 40,000 tons, together with two car ferries, the St. Killian and the St. Patrick. B & I operate nine ships. Four of those are car ferries. The others are involved in the freight business but their involvement is not as great as that of Irish Shipping. They own one of the five freight vessels. Two of them are on long-term lease, although managed by their own personnel, and one is jointly operated by the company and the P & O line on a long-term charter, and the ninth vessel involved is on short-term charter. At a time when there is great instability in the shipping industry, and when profits are low if not non-existent, Irish Shipping with a far greater liability and a far greater amount of tonnage are making money, and B & I are a heavy loser.
To illustrate my point I will quote briefly from press reports about the recent AGM of Irish Shipping. The Irish Independent says: “Profits Top £3 million at Irish Shipping.” The Cork Examiner states: “Irish Shipping on the Crest of a Wave.” The Irish Press says: “Irish Shipping rides out of the recession.” That illustrates the point I am making that shipping generally has gone through a very tough period. The Irish Times says: “Sparkling Profits from Irish Shipping.” Their profits for 1978 were in excess of £3 million net.
B & I made a profit for 1978. It was not a very big profit but it was a profit, which contrasts rather starkly with the fact that they have been making losses year in year out, and some of them pretty heavy losses. Therefore they asked for other handouts from the Exchequer, in this case £15 million. The Minister should ask B & I a very pertinent question: "Why do you have to come cap in hand time after time looking for subventions to buy new boats when Irish Shipping can do it from their own profits?" If Irish Shipping can do it from their profits, why cannot B & I?
In 1978 B & I carried 760,000 passengers and, in the same period, Irish Shipping a mere 161,000 passengers. The imbalance can hardly be blamed upon the carrying capacity of the two companies. Irish Shipping carry far less, and their capacity to carry is far less. B & I have the major portion of the market. That market may not be as lucrative as that operated by Irish Shipping. For the benefit of Members of the House, B & I operate two passenger services, one from Dublin to Liverpool and one from Cork to Swansea, or more latterly from Cork to Pembroke Dock. They are not as long as the runs operated by Irish Shipping who ply between Rosslare Harbour and Le Harve, and Rosslare Harbour and Cherbourg. There is not a major difference, and surely the numbers involved more than make up for the imbalance in the length of the runs.
We are entitled to ask for, and the Minister should demand, a definite explanation as to why one company can make money and the other company can lose money hand over fist. The taxpayer is entitled to ask that question. The question does not seem to have been asked. As representatives of the taxpayer, we are entitled to an explanation. If a reasonably good explanation is not forthcoming, it is time for the Minister and the Government to do something about it. I have put the options in front of the Minister: either to amalgamate the two companies and use the superior management and expertise at his disposal or hand it back to private enterprise.
I do not see why we should increase the number of State-sponsored bodies. We should be getting out of nationalised industry. The EMS situation has not helped. It is not so easy nowadays to go abroad and invest money, with our pound in such a shaky state. It is a far better proposition for an Irish investor with money in hand to keep it at home if a good business proposition is put to him. That is all the more reason why we should be endeavouring to coax and encourage people with large amounts of finance to invest in companies which are capable of making major profits in private hands, but which are losing millions in public ownership.
I have never seen so many red herrings as there are in the Report of the Joint Committee on State-sponsored Bodies. There are wonderful new ideas as to how B & I will improve their situation although, if you read their 1978 report, you will note from the chairman's comments at the end of the report that, while they made a profit in 1978, things look very gloomy for 1979, and he lists about three different reasons. We are going back to the old position where B & I will be a liability next year and probably for a long number of years to come. I hope what I say is not true but, on past performance, it is the likelihood for the future. There is a possibility that some of the major undertakings which they propose entering into will be disastrous. I will illustrate the likelihood of such ventures being uneconomic.
In the report the chairman is not too optimistic. They are looking for £15 million, £10 million of which is to go to buy a new car ferry. It is very strange, and certainly would not encourage a businessman to invest his money in such a company, to see such a quick change of mind. Last September, B & I approached the Government for £5 million to purchase a new roll-on roll-off freight carrier. You might say it seemed like a sensible idea at the time. Less than six months later they changed their minds and came back to the Government with a completely different proposal for £10 million for a new car ferry. They scrapped the original proposal for the roll-on/roll-off vessel.
I should like to know has the Minister questioned the board of B & I on this quick turnabout. Surely that overnight change in thinking must cause some doubts in his mind as to the capabilities of the people involved. We know there has been a major change in the type of freight transportation on the Irish Sea and on the continental runs. Whereas containerisation was all the go up to seven or eight years ago, and B & I invested heavily in that mode of sea transport, nowadays roll-on roll-off has taken over almost exclusively. Containerisation is no longer a paying proposition. B & I are left with a major part of their operations in that form. They are anxious to get out of the container trade and to confine themselves exclusively to roll-on-roll-off. They have suddenly decided not to build a roll-on roll-off type of ship but to lease one. However, they want to buy a car ferry. They have not been using one of their existing four car ferries for some time. As late as last week the car ferry in question, the m.v. Munster, was leased to a firm plying the car ferry trade in the British Channel. Why do they want to buy a new vessel for £10 million when they have not been using one of their four existing vessels? The vessel may be a bit old but it cannot be said that it is obsolete. If it has been accepted on the British Channel run it must be capable of doing quite a bit of work. Its capacity is twice that of two of the other vessels, if my information is correct. It is still capable of carrying 250 cars, which is the capacity of two of the other three ferries in operation, the m.v. Leinster and the m.v. Innisfallen.
The company paid in the region of £10 million for a new car ferry in 1976. It came into operation during the winter. I had the pleasure of travelling on it and thought it was a fine ship. However, I am told that it may not be such a fine ship. As this is only hearsay, I should like the Minister to ask some experts in the business to either verify or deny what I am saying. I am told that it is wrong for the type of business for which it is used. The fault does not lie with the builders; it lies with the people who designed it, a British team of architects. It has also been alleged that there are some major defects in the design which were not discovered until the ship was partly built. Expensive modifications had to be made to the ship to the exclusion of a great deal of its capacity. I should like the Minister to look into this matter.
The Joint Committee were not capable of examining the affairs of the company without expert advice. The committee failed because they did not utilise their powers of calling in independent experts to advise them. They were given only one side of the story. The setting up of the Committee was a good idea, but if they are to be of any use independent expert knowledge must be available to them. The report reads like the old pals act. Everybody was being clapped on the back and told that they were doing a great job. They are not doing a great job and I hope I have managed to illustrate some of the deficiencies.
One of the good things about the B & I in recent years is that they were the first company to elect employees to their board of directors. The new board has twelve directors, four of them elected by the employees of the company. That is industrial democracy in action and I hope it will work satisfactorily. I have every confidence that it will work well. I am sure that the four directors concerned, who would have an intimate knowledge of the company and of shipping, will help to improve the lack of expert knowledge which has been so evident.
The cattle exporting section of the farming industry was very annoyed with B & I. To try to curtail their losses they discontinued the livestock export section of their business. The decision to do so was a great disservice to our cattle exporters who have problems, especially when there are outbreaks of foot and mouth disease in Britain and they can only export to a limited number of ports. The decision to discontinue the service may have cut losses but it eradicated one of their social obligations.
In the report there is the suggestion by the executives of B & I that they enter the continental car ferry business. The suggestion is that it be a joint venture with Irish Shipping who have made such a success of that business since they went into it in conjunction with Normandy Ferries. Normandy Ferries, as the Minister probably knows, pulled out of that business in 1973 and Irish Shipping have run the business on their own ever since. I believe that they own 99.96 per cent of the shares in the business and that CIE own the remainder. B & I want to get into that business because Irish Shipping have made a success of it. I can tell the Minister that Irish Shipping do not want to know anything about it. The suggestions in the report that there might be agreement or that plans are being discussed are a lot of eyewash. The venture has been successful and has earned a great deal of money for Irish Shipping, so why should they share their profit with B & I. It has been suggested in the report that some of the ferries being operated by B & I would be suitable for the Le Havre-Cherbourg run. Shipping experts tell me that the B & I ferries would be most unsuitable for this run because of severe weather conditions and the length of time at sea, which requires a vessel of greater capacity than any of those presently owned by B & I.
The other red herring in the report is that B & I hope to introduce a jetfoil service between Dublin and Liverpool in April 1980. My information is that this idea is very risky. It sounds like desperation on the part of B & I that they are going to try something which has never been tried before. It is going to be the longest sea run by jetfoil yet attempted. That venture should be treated with caution.
I wish to refer back to the section of the report which deals with that jetfoil innovation, if I may call it that. That report refers to European Ferries. They are a shipping firm who have been making heavy profits in the car ferry business. They operate at a 15 per cent profit margin according to this report and that is extremely high in shipping circles. It is by emulating that type of performance that Irish Shipping have made their profits on the continental run and it would seem that B & I want to attempt a bit of the same action.
In the report Senator Cooney asked if they ran the jetfoil on the English Channel. Mr. Mulligan of B & I replied that was not so, that that was the P & O line. Senator Cooney then asked if that was profitable. Mr. Mulligan replied that he did not know at the moment because it was experimental. That speaks for itself. Is the Irish taxpayer obliged to be a guinea pig? There is a further run through where we are told that it will run for 11 months of the year but, with weather conditions in the Irish Sea, can anybody here visualise with certainty for how long in the year a jetfoil service will run? We know that a jetfoil service is influenced by climatic conditions and I would not like to bet too heavily on such a venture. If the admission here in the report is that it is experimental it must give rise to concern and in view of the performance of B & I in the past I am expressing that concern here this evening.
Another very important issue that runs right through this report and keeps arising is the social obligation of B & I to the Irish shipbuilding industry. We know that B & I had their last car ferry, the Connacht, built by the Verolme Cork Dockyard. We all laud the idea of having Irish ships built in Irish shipyards, but I would hate to think that B & I were using Verolme as an excuse for the uneconomic running of their company. It surely should be possible to differentiate between the excess cost of building at Verolme and the cost of building elsewhere. We should be able to differentiate between that portion of the losses incurred by B & I through that activity and losses incurred elsewhere. We have no means at present of determining how much the losses of B & I can be attributed to this social obligation of having their ships built here. I would hate to think that they could get away with the excuse that a major portion of their losses could be explained in that manner because I believe that would be blatantly untrue. I am not asserting that but some people would read that into the situation.
In fact their earlier ferries were all built abroad, some of them in Germany and one in Yugoslavia, so that argument would not hold water. In that inquiry the question was asked by Senator Cooney if the level of profitability and B & I's return on capital were as big as they might be or than they would otherwise be if they had not that constraint, that is, to build their ships in Ireland. Mr. Mulligan replied that a major example would be the car ferries. He said that in relation to the three car ferries that were bought in 1968 and 1969, Verolme's price was only marginally greater than the German prices and that those were built abroad. So it is no good blaming the Verolme dockyard for B & I's losses. There is a tendency to do that and I would ask the Minister to try to divorce the finance involved so that we would know exactly what was being lost due to the shipping activities and separate that from the excess being spent in building the ships in Verolme. I know we should subsidise Verolme and we are all prepared to do it to maintain employment. We know that other countries throughout Europe are subsidising their shipyards in order to keep employment going and to keep their shipbuilding industry going, but we would like to see the cost of the social obligation as it is referred to. Can the Minister put a price on that because it is valuable information and as far as I can see from this report no attempt has been made to figure it out.
It is obvious from the report that the profitability of this shipbuilding business is largely with the passenger carrying and car-carrying content, that freight is a more difficult thing to assess and that it probably runs at a loss most years. I do not know if the Minister has any views on that or if he has any suggestions as to whether the whole operation of B & I might be switched from freight to passenger carrying only.
In finalising my statement here this evening I would reiterate that it seems alarming that a shipping company with such a lucrative run, who are carrying in excees of three quarters of a million passengers annually, should in most years lose money, at the very best make a tiny profit, and at all times when they need capital come back to the Government for millions and millions of pounds. Any such company in private hands would no doubt operate at a profit and not at a loss.
