This latest example in the basket of Coalition announcements is no more or less than a measure to keep the Coalition together for a little longer. It is well known to all commentators that the Government are disintegrating and are grasping at straws irrespective of the cost to the taxpayers. This latest example of Coalition blundering and mismanagement can be seen for what it is, namely, an election strategy. Every single attempt by the Government to address the unemployment problem, the basic fundamental problem affecting the people has failed. This is because their basic economic philosophy is wrong and faulty. They have depressed the economy by squeezing the money market. They have failed to tackle personal and corporate taxation levels. They have not created the climate necessary to attract investment from the private sector and thus create job development.
How else could it be when we had a reluctant sponsor in the Minister for Industry, Trade, Commerce and Tourism introducing this measure? We are all well aware of the series of internal arguments, some of them carried on in public in the past six months, that heralded the introduction of the National Development Corporation. We have seen the ideological split, with the Labour Party threatening to introduce this measure and the reluctant sponsoring Minister seeking by every means available to him to thwart the efforts of the Coalition partners. We saw diametrically opposed ideologies flaunted before the public and finally we got the outturn which is before us today.
The outturn is a document that is over-politicised. It is more responsive to political influence than to commercial viability. There is ministerial over-involvement at every stage of the investments proposed in this measure. It is impossible to isolate the proposal from the charge of power politics involvement by the Ministers concerned and by the Government parties.
As this measure is framed it cannot be insulated from the political environment. It seems to me that it runs contrary to everything the Government have been preaching in the past three years. The Minister, Deputy Bruton, does not concede easily on any measure. If his consent had to be dragged from him for this measure, we can be quite sure that inherent in this Bill is the means to prevent his deeply-held principles being entirely eroded. Every section of the Bill shows the involvement of the Minister to guarantee that the philosophy which he failed to hold sway with at the Cabinet table will, in practice, be inherent in this measure.
The public agency introduced here will be concerned with matters other than that of straight commercial viability. The agency will have to take on board the social aspects and the sectional aggrandisement of some parts of the community. In addition, geographical considerations will have to be entertained. It is obvious from the wording of the document that there will be a trade-off between the social and economic benefits hoped for as a result of this measure. We have seen in certain circumstances where it has not been prudent for banks and private investors to get involved. However, it will now be prudent for the Government to expend reasonably large sums of money on measures that will not be taken purely on grounds of commercial viability. We hear people like Deputy Prendergast pontificating, as is his wont, telling us that this is a Labour Party Bill. It certainly is such. He has identified what everybody outside this House knows to be true. This is not a Coalition measure. It is not a measure of the Minister. The Deputy has admitted that this is a Labour Party measure. They are providing nothing in this Bill except the witness that Fine Gael in the interest of survival will concede anything to their reluctant partners in Government.
How can any entrepreneur guarantee success in advance? The banks themselves cannot do that. We hear of bank losses every year in write-offs. The multinationals have failed in several well-known instances in the past 12 months, not least the Travenol Laboratories in Castlebar and also Mostek. We hear of factory closures, of banks, industrialists, financial institutions and major private investors failing and making bad decisions. Now it is suggested that this new Bill will be the panacea to cure all the ills of the Irish economy, will only be involved in commercially sound and viable projects and that nothing but that will be entertained by the NDC. That is the greatest joke of the lot because there is an element of risk even with enterpreneurs who are familiar with and expert in dealing with these matters. The Government see this as a means of trying to get an election platform in place somehow to convince the unsuspecting public that hundreds of millions of pounds are being made available for job creation when anybody who reads the document closely will recognise fully that there is no money being made available. There is the promise that if some investors offer themselves and they are found suitable at some future date they may get a reluctant go-ahead from a reluctant Minister and get a little investment by way of State support. But that is all that is promised, and I guarantee that before this Coalition Government leave office not one single productive job will be in place because of this measure.
The Fianna Fáil Party had an organisation in place called the National Enterprise Agency who were set up in 1984. Is it not interesting that that agency had 444 applications to date and that they have made 16 worth while investments with a total investment of about £2 million? The NEA were capable of doing that amount of work and it must be remembered that for the past six months they have been working with a temporary staff and in a political limbo because the Coalition had to arrange that they would not be overactive because that would have cut the floor from under the proposal to introduce the NDC. If the NEA were doing the job to an efficient standard acceptable to all, people might ask what was the purpose of the new agency. To justify the introduction of this measure, the NEA had to be sabotaged by the Coalition. Despite that, they made 16 worth while investments in the national resource development, the import substitution programmes and in commercialisation of research and development. Those 16 ventures are working satisfactorily. I am putting it to the Coalition that if they had shown the same enthusiasm for the NEA that some of the Labour members are showing for the NDC, there would be no need for this extra expense to be put on the taxpayers by introducing this new measure.
We hear that innovation is to be the key role so far as venture capital expenditure is concerned and that it can play a major role in national development and employment. There is not a single sentence in this document to suggest that innovation will be promoted by the NDC. But the National Enterprise Agency did promote innovation at company and sectoral level and the central theme for that agency was investment programmes in product and process innovation, in marketing structures and in new technology-based enterprises. That is precisely what the new document before us professes to support. I put it to the Government that that document bears no relation to what is required as far as development is concerned, but the NEA had it set down clearly and specifically what they were about. There was no ambiguity in the terminology. Why did the Government take the opportunity to cast aside an agency who were working well and producing the goods? The only answer is that it was necessary to satisfy the whims and desires of the minor party in Government and to provide them with some type of electoral platform for the forthcoming general election.
The NEA were very involved in investing risk capital and they did so in the areas I have mentioned, such as natural resources. That is specifically mentioned in this document as well. They were also involved in importation substitution programmes, also mentioned in the NDC document. They were involved in export opportunities development, research and development and providing capital at the very early high risk stage for these ventures. What more are the NDC going to do? Nothing. We are saying there is no need for this Government document because agencies already exist which are capable and could carry out these functions if they had been given the opportunity. But the NEA have been strangled over the past six months to accommodate the Coalition desire to give a political sop to the Labour Party at a time immediately prior to the next general election test.
The question has to be asked: if the Minister, reluctant as he is with his over-politicised document, is going to press ahead, how much is it going to cost and who is going to pay for these investments if and when they come to pass? We are told there may be £300 million authorised share capital made available. Anybody who understands these matters will readily recognise that not a single shilling had to be put forward at this time. It is not issued capital, it is authorised capital, and unless it is called upon at some future date then no money is available for the ventures being suggested in the document. We all know that eventually it is the taxpayers who must pay for any bills that accrue because of this document and that borrowing for low return projects is a very dicey operation and will end up in an economic upset and higher unemployment levels.
Who will be the directors of the board of the NDC? From where will they be drawn? There are only two places — the Civil Service or the private sector, and more than likely they will be drawn from well-known industrialists, some banking people or people from the financial institutions, but all will have Fine Gael tags attached to them or, perhaps because this is a Labour document, they will have the Labour tag on this occasion, but they will be members of the board before the next general election. I would like to know where they will come from. More than likely they will come from the private sector. If the banks can lose money, if multinationals can close down, if financial institutions have to be taken over and administered by the Government, will these people be able to pick and choose only winners? We must take it that there will be failures attached to this operation, that is in the order of things. The Minister, Deputy Bruton, admits that high risk ventures will be involved and this means there will be a reasonably high proportion of failures. We are not talking about £5,000 projects. Not on your life. We have something much grander in store for the people. We will be talking in tens of millions of pounds and, if experience is anything to go by, then with departmental involvement we are going to have a number of failures and over the years substantial losses will have to be entertained by one section of the community, namely, the taxpayers.
The nine favoured sons or daughters of Ireland who will sit on this board will have an unenviable task and they will have a mandate from the Minister. "Direction" is the word used in the document which has connotations which will have to be looked at very closely. They will be charged with the responsibility of picking the commercial successes. That is outlined in section 10 of the Bill. It is well worth taking a closer look at the terminology in section 10. To protect his good monetaristic principles the Minister has made sure that he has framed section 10 in such a way as to give him an escape if he requires it later on. The NDC will get involved in enterprises that are capable of becoming profitable and that have reasonable prospects for profitability. The words "capable of" and "reasonable prospects" are the words of flexibility and compromise. This is an escape from public accountability. If they fund any project or investment they can always fall back on section 10 and say it had been capable of profitability. There is no guarantee in that section that it will be profitable or that it will generate employment. Section 10 is a two-way release so far as the Government are concerned.
Management will take policy directions from the Government through the Minister. That is catered for in another section well distanced from section 10. The Government will evolve policy dictated by sectional and geographical interests. Therein lies the fundamental weakness in this document. The Minister knows that there is no guarantee of success in any venture in this document and it will always be available to the board of directors to say that they were authorised under section 10 to take on high risk ventures. When the Government take on a high risk and one adds in the social dimension as against the commercially viable dimension there is sure to be a plethora of disasters in the foreseeable future. Those disasters will have to be paid for eventually by the taxpayer.
It is interesting to note that the corporation will be entitled to depart from the conventional risk return consideration. They are being given flexibility to allow them to take on board elements that would not normally be a part of the criteria used by the private sector or highly commercial interests. They are being given discretion outside the normal commercial yardstick. That is an inherent weakness in this corporation. It is the way out for the NDC in politically sensitive areas. I refer the House to section 31 in support of my argument. It says that the Minister will be empowered to issue policy directives to the corporation. That suggests that there is no cut off point in relation to anything the Minister might like to suggest by way of policy to the corporation. The Minister could direct them to any location to take on any type of investment, viable or otherwise, as long as the social dimension is enough to warrant the investment. The social dimension in Irish political life means the political dimension. If it is politically advisable, the Minister has given himself the power under section 31 to enable him to direct the corporation to do anything that he desires on his behalf. If that is not politicising the corporation I do not know what is. It should be political anathema to the Minister who has been preaching the separation of the private sector and Government agencies. The Government have been divesting themselves of some of their lame ducks, some of the corporations and institutions which were not paying their way, and here the Minister is getting back into the arena of creating further bodies so that eventually the same fate will befall them as has befallen so many in the past and the tab will have to be picked up by the taxpayer.
This provision applied to all other State investment companies in other countries. The power to direct the corporation to do what the Minister or the Government of the day wanted existed in all other jurisdictions investigated and those State investment companies failed for that reason. But as in the good Irish tradition we are taking on board again the weaknesses that should have been evident to us from a careful scrutiny of similar State investment bodies abroad.
The Government may have good intentions in relation to creating the right climate for investment and in relation to providing venture capital to certain institutions but those good intentions will not prevent the Minister utilising his discretionary power to back non-commercial enterprises if political expediency is the order of the day for that project. That is the basic weakness in this document. Section 10 has the ambiguity to allow the board to get involved in dubious ventures and section 31 gives power to enable the Minister to direct them to get involved in non-commercial ventures and projects that will be undertaken for reasons other then commercial viability. The looseness in the wording makes a nonsense of the stated aims of the NDC as outlined in section 10.
The question of accountability is worth pursuing because we have heard quite a bit about public accountability for money spent on behalf of the taxpayer. There is so much flexibility built into this corporation that everyone will find it easy to use the escape clause in section 10. To justify the introduction of this Bill one would have thought the Minister would have been charged with the responsibility to show that there was a deficiency in the existing capital. The Minister should also have been expected to show how this public agency could remedy that shortfall in capital supply.
I put it to the Minister and to the Government that any weakness that exists in the Irish equity base is due to our tax regime. That is why the private sector and the people who control the money market are encouraged to expend their finances into property and services rather than into the manufacturing sector. This was recognised in the Government's White Paper. Enormous amounts of money are available in the private sector for certain kinds of venture. We had a good example of that when it was suggested that the oil boom had reached the shores of Ireland. Then £1,000 million was available from under the mattresses to invest in high risk ventures in oil exploration. How come then, that this tremendous amount of risk capital available in the economy was not readily available for the manufacturing sector? The equity base is weak because of the taxation regime we have, and nothing has been done by the Minister or the Government since coming into office to redress that. It is a Government's job to create the conditions which will allow growth in the productive sector and to create a climate and environment which will give a decent return for risk taking and risk takers. Is that not the inherent weakness that we find in the whole question of venture capital usage that the burden of personal taxation is a major disincentive to risk taking? The Minister, the national plan, Building on Reality 1985-1987, last week's package and the NDC hold out no hope whatsoever for a change in the taxation regime in the foreseeable future. That is the major reason why we have such an enormous black economy.
It might come as a surprise to the Minister that people in industry, highly paid executives, are at this time unwilling to accept promotion in their place of work. People are unwilling to do overtime or give anything extra because of the level of personal taxation attached to their incomes. It might come as a surprise to the Government and the Minister that it is becoming increasingly more difficult in the private sector to recruit suitably qualified executives to man our industrial sector. However difficult it is to recruit them, we have been losing our best trained and most experienced executives to other jurisdications in the past six months, again because of the frustrations attached to the taxation regime. That is the basic reason for the shortage of venture capital in this economy, but the NDC are not going to redress that, and no measure as yet outlined or suggested by the Government is going to redress the inherent weakness that presses the Minister to have to introduce this measure.
The NEA were the venture capital risk taker and were expending the money. They were in place and were not overladen with enormous powers as outlined in sections 10, 14 and 31 of the Bill where we get a real insight into the Minister's demand for power control over this organisation. He will have to be given the closest details in writing before the corporation can do anything. We expect that at least they will be able to set up house before they have to give in detail what they propose to do, but the consent of the Minister will have to be sought and obtained at every stage along the way. Taking sections 14, 15 and 31 in tandem you see the everyday involvement of the Minister in this proposed corporation. Why does he bother to encumber us with another layer of bureaucracy when he is to be involved in the day-to-day running of the thing anyway? He could have set himself up in a nice new office in Kildare Street and done the job himself, but that is exactly what the Minister wanted to do and, if I might put it to the Labour Party Member present, that is where the Minister has codded the Labour Party in this. They wanted it to be somewhat different. They thought they were getting something grandiose, but in effect the Minister, Deputy Bruton, a leading member of the Fine Gael Party, is the controlling influence, the directing influence, and his consent must be had before any project, any investment, any venture or risk are undertaken by this corporation. They have been sold a political pup and before too long they will recognise that. We are expected here to sit idly and quietly by and give recognition to something that has no chance or hope because the Minister is determined that his basic fundamental philosophy, in so far as money control is concerned, is not to be taken away from him to satisfy the whims of the Labour Party.
The Government had a glorious opportunity to do something about the Irish equity base, about generating the climate that would make it possible to attract in the risk capital. They are not going to do it. If they had shown a little imagination and perhaps a little courage in this area of personal and corporate taxation they would have released plenty of venture capital in the private sector. There has always been an abundance of venture capital available from the private sector when the climate or investment environment was right, when the risk was worth taking and when the prospect of benefit was in proportion to the element of risk taken. Now all the money is being put into services and into property because the risk takers see that while the return might be small on their investment at least it is secure. If they undertake any other type of investment they are penalised and crucified by the most penal taxation code in western Europe. I suggest that the Labour Party would have done better to press the Minister for Finance to do something on that level than to press the Minister, Deputy Bruton, to introduce the NDC when in effect he has brought it in but has codded them up to the two eyes in the wording and the ambiguity he has written in for his own purposes.
Apart from it being the Government's business to create the conditions necessary for the productive sector of the economy, they have a responsibility in regard to the national attitude to risk. I have preached about this here before now and it is worth reiterating. Those who take the risk must be rewarded. We must have the proper attitude from the general public that it is not a mortal sin in Ireland in 1985 to make money, and the only way to get job creation and create new avenues for the generating of new employment is by allowing business to make money. That is a good, capitalist idea. I am sure it pains the heart of the Leas-Cheann Comhairle and his friends in the Labour benches but be that as it may, it is still a capitalist idea and, let me say without using a pun, it is a capital idea also to allow businessmen to make money. One reason that the people in the private sector with capital are not willing to invest is that they are not satisfied that the socialist wing of the Government are not engineering ways of taking it from them.
The Government are putting in place something that will not and cannot work. The corporation will be only a duplication of other agencies who are doing the job quite well and who would do it much better if given a little Government support. The Government should have undertaken to do something about the competitiveness of our manufacturing productive sector. Such a step might have enticed a little extra venture capital into the arena. It is worth noting that since 1978 unit costs of production here have increased by about 15 per cent more than was the case of our competitors in Europe. Ours are the highest essential service costs in Europe, whether in the areas of telecommunications, internal postal charges, electricity supply or the tax inclusive price of petroleum products used in industry. We are out of line in all those areas. If the Government had applied themselves to bringing our essential costs into line with the European average, we would not have experienced such an enormous number of factory closures and the putting out of work of tens of thousands of our people. Would that not have been a much better response than what the Government are doing now? Would it not have been much better to protect our indigenous industries that were already in place and to which the capital allocations had been made? Instead, those industries were allowed die because of the Government's lack of interest in protecting our competitive base. What we have got is a silly, over-politicised document which is no more than an effort at salvaging the Coalition for another quarter at most.
One would have thought that the NDC would have been opposed totally to stated Government pseudo policies to the extent that for sometime the Government have been talking about reducing bureaucracy. In this context I must take Deputy Prendergast to task. He has told us that bureaucracy must be kept to a minimum. At least the Deputy is sensible enough to admit that we are creating another layer of bureaucracy but he is begging us to keep that to a minimum. Has it not been the tradition to keep bureaucracy to a minimun? One would not think so in the light of the path indicated in this Bill.
Has not Parkinson's law run riot for half a centruy with organisations feeding on themselves, generating the need for extra staff, the need to protect themselves and to expand? Is the new corporation not a formula for the creation, not only of another layer of bureaucracy, but of a conglomeration of a whole range of subsidiaries and bureaucracies?
Deputy Naughten seems to accept that some nine people will be responsible for the operations of the NDC. He seems to think that the nine political hacks who will be appointed by the Coalition before they leave office will be responsible for the work of the corporation. That is nonsense. They are the people who will be appointed for the purpose of ensuring that the ministerial directions are complied with as set out in section 31 but what about the hundreds of people who will be put into good, permanent and pensionable employment for the purpose of carrying out those ministerial directions? That is the layer of bureaucracy I am talking about. There is no need for it. The Minister, who is a very capable man, has conned Labour in the way he has framed the ambiguity in sections 10, 14, 15 and 31 but he would have been better advised to have used his considerable talents to co-ordinate the existing agencies. There are a number of substantial, well-established and effective agencies among which are the IDA and Fóir Teoranta, a company I am deliberately putting second because they will have to be expanded and given much more resources if and when the NDC get off the ground. I say this because of the rescue operations they will have to engage in and which will have to be paid for by the taxpayer. Then there are the other agencies such as CTT, the National Enterprise Agency, the IIRS and the NBSC as well as Bord na Móna and so on. These are all referred to in one way or another in this document to the extent that the NDC will become involved in areas of activity that were formerly the responsibility of these agencies.
It is not merely a dislocation or a dissolving of the NEA that is involved. All the other areas are mentioned specifically in the document as being suitable avenues for investment by way of venture capital through the NDC. I am satisfied that this is a vote of no confidence in all these other agencies but I doubt if such a vote would stand up to scrutiny. These agencies may have had their weaknesses; they may have made bad decisions or may have involved the country in the expenditure of large sums of money by way of rescue packages, but at least they have reasonably good track records. Now we are to add another layer that will be expected in some way to superimpose itself, be gifted enough to make the right decisions and not to be involved in failures. It is the lie in that document that somehow new expertise or experience will flow from the private and public sectors and be co-ordinated in a way that will allow only the right choices to be made. There will be an element of failure and that factor must be faced here.
It is suggested in the document that at some time the good projects will be sold off. The Minister did not get his own way there but in the later part of section 10 he got his way to the extent that he will be entitled under section 31 to sell off any project by way of ministerial direction. There is no provision for any such sale to be at the discretion of the board of the NDC. They will not be in a position to say no to the Minister. He will direct them and his political appointees will put that direction into effect. The Minister will sell off the good projects, as he indicated publicly six months ago. It will be necessary to sell off these projects in order to accommodate the roll over funding because there will be no other money available for that purpose. In other words, that fund will be accommodated by the sale of the successful projects, if there are any, while we will keep on board the herd of white elephants because of political pressure to back uncommercial ventures and hopeless cases. It has never been the tradition to make an immediate decision to sell off a white elephant. Such decisions became a protracted business but the reason for that was that initially the venture was established to accommodate sectional interests or a geographical or political interest.
How will it be possible for the Minister of the day to divest himself of the nonviable project when the political toing and froing will provide the pressure to hold on a little longer in the hope of the venture becoming profitable, as is provided for in section 10? These are words of flexibility and compromise, words inserted deliberately to avoid having to pull out of the weak project, to avoid closing down, selling off or liquidating. Liquidation to a Minister or any other politician is the last straw. There is always the prospect that things will change, that the exchange rate might improve. Maybe fishes might fly. That will be the attitude of the Minister when the time comes to divest himself of the uncommercial projects. It is a pity, when so much work has been put into this document for the purpose of creating that type of scenario to accommodate the political outturn of a number of years hence.
I confidentally predict that before this unfortunate Government go to the next electoral test not a single productive job will have been created in the life of the Dáil that brings about this National Development Corporation. How could it be? All the corporation are going to get involved in over the next 12 months — if the Government are there that long, which they will not be — is outlined in section 21 where the administrative expenses are forecast as £2 million a year. It is a pity that Deputy Prendergast is not present to hear that. It was obvious that he did not read the document. He would have had his answer as far as bureaucracy is concerned. Therein lies the first step in the bureaucratic layer. They will get £2 million a year for as long as they like and after that with the Minister's consent as much as they like. Then you come to section 33 where the corporation will be allowed to lease or purchase premises They will have to get the Minister's consent for sums over £250,000. That is not to suggest that the amount will not be another couple of million pounds. For the first 12 months there will be a search around town for suitably spacious and luxurious office accommodation which will, no doubt, be given the Minister's sanction and consent. He will have to consent, to keep the Labour Party in office with them.
Surely this must be regarded as the greatest waste of public money in the last 12 months. They are putting in place a tier of bureaucracy at considerable expense, despite the fact that there is already a plethora of investment, grant-aiding and capital agencies in existence here. To make it worse, it was responsibly suggested recently by a Government spokesman that perhaps Bula might be a suitable natural resource for National Development Corporation involvement. Are we creating this corporation to take over existing lame ducks, not to mention creating new white elephants when we have already expended £9 million of the taxpayers' money and put it into the pockets of certain capitalists and we have not even got a hole in the ground? It is now suggested that we provide authorised share capital, if and when called upon, up to £300 million to support projects as ill-fated as that.
Take a look at the inconsistency in the Minister's thinking in this matter. I am delighted that Deputy Skelly is in the House. If he follows through on some of his comments in this House for the past 12 months he will give an awful scorching to this Bill.