Notwithstanding anything in Standing Orders, the speakers shall be called in Private Members' time this evening as follows: 7 p.m. to 7.8 p.m. Opposition speaker; 7.8 p.m. to 7.28 p.m. Government speaker; 7.28 p.m. to 7.38 p.m. Government speaker; 7.38 p.m. to 8.8 p.m. Opposition speaker; 8.8 p.m. to 8.13 p.m. Government speaker and 8.13 p.m. to 8.30 p.m. Opposition speaker.
Private Members' Business. - Irish Life Assurance Company Privatisation: Motion (Resumed).
The following motion was moved by Deputy Noonan(Limerick East) on 1 March 1988:
That Dáil Éireann calls on the Government to make an early decision regarding the privatisation of Irish Life Assurance PLC.
Acting Chairman
Is that agreed? Agreed. Deputy McDowell is in possession and has eight minutes left.
When I moved the Adjournment I was indicating that the ambit of this motion, with the greatest respect and with no acrimony towards Deputy Noonan, was a wee bit pussyfooted, and that while some of his colleagues had accused members of my party of throwing rubbish on the pitch, I thought this motion was so tame as to be seen as kicking the ball in your own penalty area.
(Limerick East): It is not a religion with us, it is just pragmatism.
I also indicated the strong view I and my party have that there should be privatisation as an option in virtually every area of public commercial enterprise. That view is not a religious one or one of religious fervour, it is based on an openness of mind and a flexibility of approach. I reiterate the call I made last night to the Minister for Finance that the Government should abandon the rigid position taken by the Taoiseach coming up to the last general election when he indicated a total opposition to the concept of privatisation. It was not warranted then and is most unsuitable now.
I want to use my time this evening to call on the Government to issue a White Paper which goes through the entirety of the public sector, not simply the semi-State commercial area but the public service itself and local government services and local government itself to see what activities in those sectors might better be carried out by others and, in particular, by those in the private sector. I indicated yesterday, and I reiterate it today, that there are a vast number of things done by the State to which Government resources are allocated where commercial criteria should hold sway in respect of the allocation of those resources but at the moment do no such thing.
I have in mind such services as the Ordnance Survey. There is an arm of the State engaged in the business of producing, printing and updating maps of this country. I do not profess to be an expert on cartography or on the ins-and-outs of that organisation but it strikes me there are good grounds for suspecting those activities could be carried out with more commercial criteria in mind. This is not a case where I say on some kind of a priori principle it must be privatised, but it is an institution which could do with examination with a view to seeing whether some or all of its functions might better be carried out by others.
It is not necessary for the State in this day and age to carry on the business of cartography as if we were an imperial power preparing the country for war. It is not necessary that those involved in producing maps for public and private purposes should necessarily be part of the public sector. It is not necessarily the case that they should not either. What I am asking is that the Government should commit themselves at least to a programme of examining all these issues.
If there was a White Paper on privatisation which was not simply confined to a discussion of the immediate prospects or difficulties which Irish Life would present as a project for privatisation but which was wider in its ambit, I have no doubt many people in the public service would make available to the State in the course of the preparation of that White Paper and in the course of advertising for submissions which I hope would precede it, a great deal of useful advice and would mention areas where there could be privatisation.
I reiterate that there is no reason to confine the notion of privatisation to the placement of shares with the public in semi-State commercial enterprises which are now limited liability companies. There are many services carried on by bodies which are not companies but semi-State agencies. There are other services which are carried out by offices within the public service, such as the Office of Public Works. There is a host of areas where different forms of privatisation could take place.
One only has to look at the broadcasting arm of the State to see that certain portions of their activities can easily be carried out by others. For instance, is it necessary that RTE should own Cablelink? Is it necessary that the State should retain publication of the RTE Guide as a monopoly of RTE? That is an issue which has never been examined critically by this House. There is not a body or a commission in this House whose job is to look at all these activities to see if they are worthwhile activities for the State to commit its capital, its supervisory and governmental resources, or if these activities could be carried out more profitably, sensibly, efficiently and better by other people.
I am asking the Government to look afresh at the concept of privatisation, not to see it as an opportunity to place shares but to see it as a way of getting the State to concentrate on what it is imperative for the State to do, that is, to govern the country. I am asking the Government not to simply dwell on the precise ambit of Deputy Noonan's motion but, on this occasion, to abandon the rigid position adopted by the Taoiseach and to say that every part of the State is a potential area for privatisation. I am asking them to say there is nothing which, in principle, is excluded, that the Government have an open mind in respect of every sector of the State's activities in order to reduce the size of public indebtedness, to reduce the obligation of the State to finance, fund and supervise various commercial activities and to free the commercial forces of enterprise and competition which are latent in our economy and which at the moment are not being given an opportunity to show themselves.
It is in that spirit that my party fully support Deputy Noonan's motion but regret it does not go far enough. Although we will support this motion by our votes this evening if necessary, it is a pity that Private Members' Time should not be used in a more open-minded and constructive way than simply to deal with one narrow issue.
With the permission of the Chair, I intend to share my time with my colleague, Deputy Ahern.
Is that agreed? Agreed.
As chairman of the committee which produced the report on Irish Life and launched it last week, I wish to pay a compliment to my colleagues on all sides of the House for their input and dedicated service to the committee when producing this report. I want to put on the record our appreciation of the work done by Cooney Corrigan. That committee inherited the investigation into Irish Life after the last general election. We went back over some of the ground already covered and decided that we should give all the parties concerned adequate opportunity to update and express their view in order to endeavour to reach conclusions regarding Irish Life which would have a broad consensus of support within the House.
We met, for the second time — based on the work of the previous committee — the chairman, chief executive and senior management of Irish Life, questioned them on their updated views and policies. We also extended an invitation to staff representatives who came before the committee and gave a very comprehensive analysis of their views in regard to the debate that has since arisen and which forms the very core of this report on which everybody is focusing, namely, pages 45 to 53, inclusive. I would suggest that they formed the basis on which Deputy Michael Noonan tabled his motion in Private Members' time regarding privatisation, the Minister for Finance accepting the intent of the motion on behalf of this side of the House.
It appears that the consensus beginning to emerge in regard to Irish Life is reflected in the general thrust of economic policy throughout the country, that a mixed economy with the State sector where it should be, the private sector where it has a more dynamic role to play, or a combination of both, is the way matters should progress.
I should like to think that we would look back on this debate as the starting point of a recognition of the achievements of a number of our very successful semi-State companies. Failures are always adequately highlighted but successes tend not to make the same headlines.
The reality in regard to Irish Life is that, as a company, it is very much at the crossroads. The Minister and Deputy Noonan last evening highlighted the crunch issue for Irish Life. It has virtually outgrown and monopolised the Irish market. By reason of that success there is very little room for their further expansion or growth in the Irish market. They are successful within the existing limitations in the United Kingdom market. They have a very ambitious investment programme in the United States market subject to their having the necessary liquidity and working capital. Therefore it will be readily seen that privatisation is at the very core of the company's future strategic plans.
I was impressed by the Minister's remarks last evening about the "Golden Share" option or that other dangerous sounding poison pill type of share arrangement which effectively gives the Government of the day arms length "hands on" control but which would still allow Irish Life to raise the necessary equity to allow them to expand, allowing them particularly to enter the lucrative market in the United States where there is grave reservation about Governmentowned companies operating from abroad.
Those are the major possibilities open to Irish Life which must be addressed. While I accept some points made by Deputy McDowell about the publication of a White Paper and so on, it is my opinion that the business in hand is too urgent and that there is a slight contradiction in what he had to say. He went on to say decisions needed to be taken. He said we needed to put all of these semi-State companies up for consideration to the private sector in order to ascertain whether they could be made more efficient, yielding a better return to the taxpayer and the public at large. Rather than await the publication of a White Paper we should remember that Irish Life is unique in its success and is therefore a very obvious candidate for consideration for part-privatisation. I would not for one moment suggest that this House should consider favourably the total privatisation of Irish Life. It is my belief that the Minister for Finance should retain a substantial shareholding in the company. Nonetheless the company is now hamstrung, its growth and expansion curtailed. If it is to continue operating in its present structure it will be unable to create much further employment, which it has the potential to do.
There are a couple of very complex legal matters that must first be clarified. First there is the original shareholding structure with the "with profits" policy issue referred to in the report to which I have referred in some detail. It is said that it may become a test case in the High Court or Supreme Court before the Minister can take any definitive decision on the company. Nonetheless it is my belief that Irish Life is an ideal candidate company for consideration.
I would hope that the debate would not become bogged down on ideology — on the question of whether the company should be private or State or whatever. One would assume that, with control in regard to the issue of the shareholding, the Minister would endeavour to ensure that the Irish public can invest in the company. Whether it be by way of a vote of the Oireachtas that taxpayers' funds are invested in Irish Life or through a shareholding issue — with people investing in that manner — surely there is great similarity between the public investing in a public company and the State, by way of votes of the Oireachtas, taking public funds, through taxation and borrowings, and investing in State ventures?
The whole matter of State companies warrants detailed study. I disagree with Deputy McDowell when he got hung up repeatedly on the Taoiseach's comments when Leader of the Opposition. The Minister dealt with that matter very clearly in the course of his remarks last evening. It may be an updating of the party's approach, now that we are in Government. Indeed we are quite broadminded in adopting that stance. The Minister said last evening that the Taoiseach, in an address to an Irish Life function last October, set out candidly what was happening, when he indicated that the proposals advanced by Irish Life were being examined and that the Government would take a decision on the basis of what was best in the public interest. Those are the parameters within which such an important decision must be taken. The House is being kept fully informed, which is what the Minister said he was doing last evening in the course of his remarks.
The kernel of the issue in regard to Irish Life is its lack of flexibility to expand and invest abroad. If we in this House are content to accept the successes and growth of the company to date and put a semi-freeze on the company's potential, that will be the result of not giving fair, open-minded consideration to the question of privatisation.
A number of commentators referred to the committee's report, contending that we had not actually recommended privatisation. I should like to place on the record that that is correct. That is the responsibility of the Minister for Finance and the Cabinet of the day. But, as an indication of the drift of our thinking in the committee debate I should say we analysed in detail the very complex steps that needed to be pursued. They are dealt with under the heading "Privatisation" in the report on pages 45 through to 53.
There is a very complex series of questions to be asked and answered before any company can be considered for privatisation. I would accept Deputy McDowell's suggestion last evening that the State merchant bank, ICC, should be given the task of collating the documents that would be required to be considered to allow Irish Life to be privatised. That would allow the Minister for Finance to analyse the submission from the company at present before the Cabinet and recommending favourable consideration of privatisation. The ICC would be in a position to carry out that in-depth analysis which our committee was not. We did not embark on any decision as to whether we would recommend privatisation or otherwise; we did not have the necessary resources or back-up information available to us to do so. If a company is to go to the Stock Exchange and ask the public to participate there must be many safeguards built in and many difficulties that would have to be overcome regarding the structure of the shareholding in Irish Life as at present constituted.
The other point that would have to be addressed is whether having regard to the smallness of the Irish Stock Exchange and the Dublin financial market it would be capable of coping with a 49 per cent flotation for a company the size of Irish Life, which could be in the region of £100 million to £150 million. It would have to be ascertained how that would affect the liquidity of the market. For example, would it have a medium or long-term effect? What would be the position should the London market be available for such a flotation? Those are the issues that must be addressed in any consideration of privatisation. Either the Minister for Finance and his officials are analysing those issues or they are asking Irish Life. It would be helpful if a State merchant bank, such as ICC, were asked to analyse them.
Continuing from there, there is the whole concept of what I should like to think would be the role of the Oireachtas Joint Committee on State-Sponsored Bodies — that we would serve as an ongoing forum for debate, perhaps filling the void to which Deputy McDowell referred when he advocated the publication of a White Paper.
Out of the 20 or so semi-State companies the committee have responsibility for, there are probably five or six who could do with having the shackles of Government control or ministerial approval for very many of the forward plans they may have stymied. For that reason, I think it is worthwhile that those companies in the State sector who would benefit from additional funding and liquidity should be favourably considered for raising funds from the Stock Exchange on the understanding that the important services many of them provide are guaranteed without diluting their potential for private venture investment and their opportunity to operate as a commercial body. The recent success of Aer Rianta in the Soviet Union is another example of the potential that is there when you have State investment. There are new markets available which cannot be overlooked and the Eastern bloc and the Soviet Union are new areas which are opening up for this country. We are a neutral country and very acceptable and Aer Rianta have proven that there is business to be done in those areas, there is employment potential for Irish people and there is a plethora of opportunities that will arise if we pursue them on a State venture basis. That is a contradiction to privatisation. I believe that if the mix is right the Government should probably retain control where practical.
As regard the issue of the debate, I think that as a party Fianna Fáil have always had an open-minded policy of participation. The late Seán Lemass was probably the architect of State investment where the private sector failed the economy and where it was necessary for the State to move in. I do not think we should be hung up on that indefinitely. Today, Seán Lemass might well have a different view of State involvement in particular areas of the economy. This is really a value for money time. If the taxpayers are going to have the burden of tax lifted from their shoulders there is going to have to be either a cutback in Government spending or a raising of funds. To release funds that are locked up in the profitable semi-State companies and to allow central Government to invest it, possibly in the areas of education and health, is surely prudent management of this economy. Irish Life may be a very worthwhile vehicle for this on the understanding that the funds raised will be used in very important areas where there have been cutbacks and about which there has been much criticism from various sides of the House.
There is one other point I should like to put on the record of the House. Because of the way we have operated our State companies, stifled and penalised them very severely and consecutive Ministers for Finance have issued letters of comfort and bank facilities to these companies, they have been crippled by borrowing at high interest rates instead of having share capital and working capital. There is an opportunity now to identify those companies who have potential so that some of them with very heavy burdens and debts could be relieved and could benefit greatly from having working capital and liquidity to expand. Far too many of our State commercial companies and other State agencies are very heavily overborrowed. This is one area that needs to be addressed and privatisation is the vehicle for considering this direction of policy.
Irish Life are the ideal candidate for consideration as one of the first companies to be assessed by the Cabinet for privatisation. I have been informed by the management representatives that it would not in any way create any complications, employment-wise which would be the consideration of all Members of this House, if a central Government policy decision was to be taken. If anything, it would give Irish Life the opportunity, as outlined by their management in their hearings, to create additional employment. It would give very many qualified capable young Irish people the opportunity of working for a company based in Ireland and operating abroad. Surely that is a direction in which people on all sides of the House would like to see progress.
I would like to think that we would analyse the other companies we are presently investigating, some of which are in a very sad state and a far cry from consideration for privatisation. This House has very soon to devote something like £11 million of taxpayers money to the B & I while the private venture, Sealink operate on the same route and do not take any taxpayers' funds on board. Would we not be better using that £11 million for some of the other needy areas of Government investment? These are the questions that arise when we start considering privatising the State sector and, in particular, the semi-State companies. We are also looking at the Irish Sugar Company, Irish Steel, An Post and Telecom Éireann. Some of those companies have excellent potential for raising funds to provide a better service. They are looking towards this report and the debate in this House as an indication of the way the Government are going to go regarding their policy towards the semi-State companies.
The Minister for Finance, in accepting the principle of the motion, has given a fair indication of Government thinking. I believe it is the right policy but one that needs to be carefully monitored and considered and that the "Golden Share" option is the way forward and is the way in which the House and the Minister for Finance should look at this issue. The whole drift of Government policy in the area of home ownership, which was announced today, and of allowing the public to invest in State companies through public flotations is very worthwhile. Privatisation also gives a great sense of belonging and there is support from the public and the employees who set an equity holding in the company because not alone are they operating and working for the company but they have an actual investment in it. I urge that in any decision, whether for part privatisation or otherwise, there should be a very attractive staff share option scheme so that those people who have given a lifetime of service to the company should get the opportunity to take some equity on a very preferential basis. The company is big enough and the need to raise funds is adequate and for that reason the employees should be given a fair and equitable opportunity to partake and benefit from the prosperity and growth of the company. I compliment the Minister on accepting the Fine Gael motion. I hope that he will make a decision quickly on the report and the issue of privatisation of Irish Life.
First, I thank my colleague, Deputy Lawlor, for giving me the opportunity to come in on this important debate. Like him, I was a member of the Oireachtas Joint Committee on State-Sponsored Bodies who examined the whole issue of Irish Life. Quite a lot of the debate included deliberation on whether Irish Life should be privatised. We took statements and evidence from both the management and the union and I have to compliment both sides on that. I must compliment also the other members of the committee in that the exercise was very interesting and rewarding. It is helpful to all of us and to this debate that we have this report before us. I understood that the report was to be tabled before the House for debate and perhaps this motion is somewhat premature in that it is basically saying what we concluded in the report.
As Deputy Lawlor has said, we came in for some criticism when we gave a press briefing in relation to whether we had made a recommendation. We did say that going on the facts that were before us we would like the Minister for Finance and the Cabinet to make a decision as quickly as possible on the submission made by Irish Life management. I made the point at that press briefing that we were just a committee meeting every fortnight, that we had a number of meetings in relation to this company but that they were not detailed meetings. We did not have before us the knowledge of the taxation experts, actuaries, stockbrokers and legal people in relation to this whole aspect. We did not even have the submission from Irish Life before us. In effect, it would have been very difficult for us to make a decision one way or the other.
A number of members of that committee came out and gave their own personal views and I give my view here tonight — as I did at that press meeting — that, based on the information that was put before the committee, I think that in the interest of all concerned, of the State and the people of Ireland who ultimately are those who will benefit, this company should be privatised, or the capital base should be restructured in such a way as to facilitate expansion of the company. Someone has referred to the company as being the jewel in the crown of the State — that is not an exaggeration. The company have performed excellently over the past number of years. They are in their 50th year, I understand. Having said that, the dividend or return to the State has been very small. The State had to become involved with the predecessors of the Irish Life Company in order to bolster them up with State finance. That is how the State at this stage has such a large shareholding. Yet, its dividend over the past 30 odd years is only, I think, a net figure of £1.8 million while the value of the assets over that 30 year period has increased to £2.6 billion. We call it a State company but, in effect, it is the most private of the State companies.
The management made the point that their progress in the future would be stunted because their present capital structure is such that they cannot expand properly. The major problem is expansion into the US market. They made the point — and I think it is a valid one — that 31 of the 50-odd states in the United States had objections to State-owned companies becoming involved in those states. Irish Life have, accordingly, been looking at alternatives as to how to get into the American market. They have tried a number of alternatives but I do not think these have been particularly successful. They tried to take over the Mid-Western United Life Assurance Company, but that fell by the wayside for one reason or another. It is not exactly clear why. Perhaps it had something to do with the fact that this was a State-owned company. I feel — and stress that it is a personal feeling — that Irish Life should be privatised in such a way that they can get into the very lucrative US market.
Another reason for saying that their progress has been stunted is that the Irish Life Company are experiencing much greater opposition and competition both on the home and European markets. The fact that the EC is in play and doing away with all sorts of barriers, trade and other kinds, will lead ultimately to a situation in which companies from Europe will be able to deal freely in the Irish market. Obviously this will have a detrimental effect on a company who are orientated, because of their structure, to the Irish and the UK market. To allow that to happen and, at the same time, not allow the Irish company to expand their horizons would be harmful. If the company were privatised in some shape or form that would lead to quite substantial funds for further expansion. This is an aspect which cannot be overlooked.
The State share at the moment is 90 per cent and yet, as I said, the dividend is minimal. This has happened over a number of years because of circumstances. I feel that if the company were privatised it would not cause the State a major problem in that even though the State has a major share the dividend is very small. We have put a lot of money in over the past number of years but that has helped to build up this company into probably one of the best of the State companies. I have the benefit of a very detailed and good submission from the ASTMS, and we had the benefit of their evidence before the committee, to which we listened in great detail. They have problems in relation to possible loss of jobs. There may be an argument for that, but I believe that expansion can only lead to more jobs. Mr. Kingston, in his submission, told us that there are 150 jobs already available in Dublin arising out of the UK involvement. If we are to get into the United States and the Spanish and French markets, obviously more jobs will be created in Dublin and in Ireland. This cannot be overlooked. In their submission, the ASTMS seem to feel that this company would be in a position to get into the US market, that the argument being put up by the Irish Life management in favour of privatisation because they could not get into the US market was not correct and that this was being used as a lever towards privatisation. I do not accept that. I believe that what the company say is true, that these US states make it difficult for any company which is State-owned to become involved in their economies.
Deputy Lawlor mentioned the "Golden Share" and the whole idea of retaining some State involvement. All those options should be examined and the Minister for Finance is looking at these because he adverted to them in his submission. There is also in France the possibility of restriction on foreign-owned companies or foreign holdings in those companies. That is also something that should be looked at. The ASTMS made the point that Dublin might become a sub-office if there was a takeover. I do not particularly accept that. The company are an Irish one and if the proper restrictions and guidelines are put in by the Minister for Finance we will be able to ensure that they will remain a wholly Irish company.
I again compliment all involved in the Oireachtas joint committee and I hope that a decision will be made sooner rather than later. The ASTMS made the point that a delay in making a decision would be detrimental. That was also the opinion of the management. I ask that a decision be made coolly and calmly, but as quickly as possible.
Irish Life, as we know, are the largest life assurance company in the country and one of our largest financial institutions. They have funds under general management of nearly £3.4 billion and had investments of about £2.5 million at the end of 1986. They have a major annual premium income of about £600 million per year and employ some 1,700 people. They dominate the insurance market and hold one-third of the market on a premium income basis and their very size raises a fundamental question in the contest of privatisation.
Is it wise, proper and appropriate that the State should lose, in effect, control over such a major financial sector? The 700,000 policyholders in this country — of whom I am a very minor one in terms of a life and house mortgage protection policy — are entitled to be protected by the State, the Government and the Minister for Finance and not see this company drift over a period of years into foreign control and into the hands of other financial institutions whose concern for the 700,000 policyholders and the 3,000 group pension and life assurance arrangements would be put in jeopardy or their entitlements diminished. The Minister for Finance did not answer those questions in his contribution to the House last evening.
I submit that Irish Life and the Minister for Finance, as the major shareholder, have a statutory responsibility to their policy members for their life and pension funds. One would get the impression at times, listening to some of the senior management of Irish Life, that the funds were their property. They are not. The moneys belong to the policyholders and the shareholders in the persona of the Minister for Finance who is responsible to the Dáil.
The Labour Party are convinced that this responsibility can be best discharged — and continue to be discharged — as a normal State company rather than as a private entity subject to fluctutating share ownership over the years and to Stock Exchange fluctuations. It is also subject, inevitably, as a private entity to very short-term insurance profits criteria. It is argued that if you privatise a company it will become more efficient. Irish Life and their management would hotly dispute that criteria. Is anybody suggesting that Irish Life are wholly inefficient? Is anybody suggesting that it is another ICI or Irish Shipping? I was not sorry to see the end of Irish Shipping because it was an appalling drain on State funds. Irish Life would be the first to dispute that they are lacking in competitiveness and that they do not have good access to share capital in the future. They have plenty of share capital and, therefore, the argument that they must be privatised to bring more market discipline into their operations does not stand up.
It is also argued that privatisation would extend the narrow range of Irish equities available for investment. In the context of Irish Life that is a load of nonsense because, as we know, Irish Life are the single largest individual investor in AIB and the Bank of Ireland. The company are a major holder of Government securities and they are one of the largest individual investors in the commercial banking world. To privatise the company would not provide a greater base for Irish equities available for investment. That argument can be disposed of in this regard.
Another argument advanced is that privatisation would, inevitably, eliminate any prospect of contingent demand on the Exchequer if companies got into difficulties. We have sufficient faith in the report of the Oireachtas Joint Committee on State-Sponsored Bodies and in the reports from Irish Life to know that they are not in financial difficulties. In fact, they have about £300 million more than they disclosed, because it is only recently they have been obliged to disclose the hidden reserves in their accounts. Indeed, I have good reason to believe that there is substantially more available in the company than has been disclosed to date. The documentation is available to the Minister for Finance.
Why are we, therefore, seeking to privatise Irish Life? We are doing so because it is now a political good thing to do. The British are doing it so why should we not? British Telecom and BP have been privatised so we must follow the fashion. It is largely that ideological attitude that privatisation is the "in" thing which caused the senior management of Irish Life to feel somewhat old-fashioned because they happened to be a State-sponsored company. They say, for example, that they want to invest in the United States. I will draw a simple parallel.
Has anything ever inhibited Aer Rianta from investing in the United States? They have been able to set up subsidiary companies to buy hotels and to engage as a State company in profitable undertakings in the United States and they are still a State company. The manageing director of Irish Life said that some of the states in the United States do not permit national companies. He forgot to mention that 19 states in the United States have no such prohibition. He also forgot to mention in his various statements that the French have had successful entry to the United States in regard to insurance and industry. This was achieved by national companies who have not suffered any grave inhibitions in terms of new market penetration. The argument that we must privatise Irish Life to get into the United States is a load of hogwash. It does not stand up to examination because if that were so there is a counter-argument that Irish Life should not go near America, as the United States, because of their protectionist attitude, would prevent them from getting in. That argument does not stand up. We know that Irish Life have staff and an operation in America. The company are receiving favourable reaction but I do not think that is a substantial reason in favour of the argument for privatisation. That argument does not hold water.
I submit that it would be profoundly unwise for the State to divest itself of such a fundamental holding particularly at a time when we anticipate substantial penetration of the Irish market by EC insurance conglomerates. For example, we know that when the administration of the Insurance Corporation of Ireland concludes it will attract substantial interest from a German company. We know that EC insurance companies have great interest in and concern about penetration into the Irish market. For those reasons it is essential that we retain Irish Life, to ensure that a strong Irish insurance entity is retained. We must do that in the national interest.
There is nothing to stop Irish Life making substantial investments in the European market. I read in today's newspaper that through their European property subsidiary Irish Life have invested £5.5 million in a 46,000 square feet development in Brussels. Did the company have to be privatised in order to do that? They did not. I commend the ambition of the company in that regard. Why is it that we have this hoo-ha around? We have it because if Irish Life is privatised it will be worth at least £280 million and probably between £380 million and £400 million. Who will benefit from that? Will it be the policyholders, and I am one of them? That is highly unlikely, although I know that a substantial body of policyholders will be quick to take legal action to protect what they rightly regard as their savings and their accumulated moneys which over the years built up the reserves of Irish Life. What will happen if the Government decide to sell off Irish Life? The Minister for Finance will collect between £280 million and £380 million. There was great confusion in the documentation which I examined when in Government as to the precise value of the hidden reserves of the company. We will learn of their value when a search for documents is sought in a High Court case.
Who would benefit from the sale of Irish Life? The Government would have between £200 million and £300 million available but for what? In my view it would be used for a once-off tax reduction. The Minister for Finance made no reference last night to using the money for job creation. Would the money be invested in Irish industry? We did not get any indication of that last night. Would the money be spent on restoring the major reductions in the public service, in environmental services, health services and social services? We did not get any indication of that last night. In my view it would be used as a once-off tax reduction. The tax reduction in this year's budget will cost £154 million in a full year and in the 1989 budget we will learn that as a result of the privatisation of Irish Life there will be a once-off tax reduction.
In the event of a decision to sell Irish Life who will take over the company? In my view the multi-national insurance conglomerates will move in despite all the posturing by the Minister for Finance about the criteria of protection he will lay down such as golden shares and so on. Two-thirds of what the Minister said last night is contrary to EC competition rules. I have no doubt that if he attempted to impose such restrictions on the flotation of shares of the company it would be fought bitterly in the courts. We are all aware of what has happened in Britain when such a move was attempted, despite the heroic efforts of Margaret Thatcher to protect shares on a general flotation. She did not succeed and it is highly unlikely that our Minister for Finance will succeed in protecting the greatest State-sponsored company we have. The company is about the only thing we have in the State sector that is worth selling. I am not suggesting that Aer Lingus is not worth selling but such a move would cause considerable problems because two-thirds of the company is owned by Boeing while half of the hotel side of the business is owned by the Dunfey Corporation of America.
I am at a loss to understand why the company, if it is so badly off for capital investment, is unable to get capital moneys. I have not been over-impressed by some of the pension portfolio decisions of Irish Life but I would prefer to keep my views on them to myself. However, I am impressed by the growth of the company and their general competence. I do not intend to cast any reflection on the senior personnel of the company. No rational argument of any great consequence has been advanced to convince us that we should privatise the company. The Labour Party will not support a move by Irish Life, in consort with the reformed Taoiseach smelling of Irish Life roses, with tacit support of Fine Gael and the Progressive Democrats, to privatise the company. We are not sure why the latter parties are in favour of such a move but I am sure they would privatise CIE if they thought it could be sold despite the £112 million subsidy that is put into the company annually to keep a public transport system in operation. We will not support a decision to withdraw annual profits from policy holders.
I have supported this company down the years and there is no way that I will agree to selling off the profits to private shareholders who do not have any connection with the company. In fact, most of the purchasers would not have any connection with the country. In my view there is no obstacle to Irish Life expanding their operations in the UK. Just five years ago the company's general share of the market in the UK was miniscule but today they have close on 3 per cent of the market and are performing very successfully. The company have not had to be privatised to operate effectively in the UK. There is no obstacle in the way of the company operating in America or in any part of the EC.
The Labour Party feel that the Department of Finance could be better engaged doing work which is long overdue. For example, for the past eight or nine years I have been waiting for a Bill from the Department to control the commercial banks here. I saw sight of the draft heads of a Bill in 1981 to deal with the public accountability of the financial institutions here but I have not heard anything since. It is unwise that the limited legal expertise and actuarial ability of the Department should be involved in the privatisation of Irish Life. They should produce the Bill we have all been waiting for to ensure that the financial institutions operate in a responsible, publicly accountable way. The Department of Finance would be better engaged in that exercise.
Fianna Fáil have great difficulty internally because in their history they have not particularly favoured privatisation and by instinct they are suspicious of this exercise and do not want to make a mess of it if they go ahead. They are aware of the reports of the Tillinghast Nelson and Warren international consultancy group and I challenge the Minister for Finance to put those reports on the Table of the House. I will gladly take a copy from him, but I may have to get it elsewhere.
The Deputy probably brought it with him.
The Government and the Minister for Finance would be very wise to have those reports laid before the Oireachtas before any irate group of policy holders or shareholders other than the Minister decide to take him to court on a search of documents before any privatisation proposition develops further. There is nothing which should prevent the Minister from making that information available.
Irish people at home and abroad have invested their savings and their life's money in Irish Life. They have done so because it is a State company and has a degree of State backing. That is as it should be and we are intensely proud of it. I see no reason for a privatisation enterprise whereby the auditors, the sponsors, the stockbrokers, the accountants and the taxation and legal advisers will stand to collect anything up to £12 million or £14 million on a floatation. I would have no desire to see that exercise take place at the loss of Irish Life money. For what? Capital? There is no shortage for Irish Life. Pentration into the United States? By and large there is no problem in that regard and in any case they would need to be very careful about such an exercise because it is a costly operation at the best of times. I am all in favour of the expansion of the company.
Those who feel they should be freed from the Gleeson constraints in terms of the salaries of the top echelons can get additional emoluments from their subsidiaries. The Minister for Finance has never turned a cold eye towards such additional emoluments. I leave that between the Minister and these concerned.
I would ask the Minister to clarify the true valuation of the secret reserves of this company. Without that information we cannot come to a real assessment of the company's value. Some of that information is available but much of it is not.
I support the views of the trade unions concerned in Irish Life. There are 1,700 people employed there and I do not want to see Irish Life in Abbey Street as a branch office of a multi-national insurance conglomarate worked by computer.
Deputy Desmond has five minutes left.
I want to give that time to my colleague, Deputy MacGiolla, who will move an amendment which the Labour Party will support. We do not support the Fine Gael motion. I have examined the proposition with my Labour Party colleagues and have come to the conclusion that is not a wise proposition at this time. We shall not support it, despite all the hype and pressure which has been put on Deputies, on committees of the House and on the Government of the day to favour this exercise for transient political advantage.
I might advise Deputy Desmond that he is eating into his magnanimity. There are only three minutes left now.
My apologies.
I thank Deputy Desmond and the Fine Gael Whip, Deputy O'Brien, for giving me some time. I am naturally opposing the motion and I will be putting forward an amendment opposing the privatisation of Irish Life.
Every area of economic activity is open to private enterprise to develop. There are huge areas which are practically untapped. Fishing, fish farming, fish processing are industries which are only in their infancy compared with other countries in western Europe such as Iceland, Norway and Spain. Why not put money there and develop these industries? Why does the private sector not develop the food processing industry, which is also in its infancy? Private enterprise could process the produce of the State forests. They could produce timber for use in construction and make chipboard, hardboard and paper. Nobody is stopping them but they are not doing it. They could build a smelter for our raw ore but they are not interested. They wait until the State has built up strong, profitable enterprises and then they whinge and cry and say "give me that" like a spoiled child. They want everything handed to them on a plate, ready and running. Then when it is run into the ground they call on the State to bail them out. This occurred in the famous case of the Insurance Corporation of Ireland, an example of private enterprise failure where the State had to step in and bail them out with taxpayers' money. Now that this company is viable again they want it back. This I find very difficult to understand. Why do they want to use the companies the State has built up when it is open to them to build up any companies they want?
Dublin Gas Company is another example of the danger of letting private enterprise loose on essential services. The record of Dublin Gas has been disastrous from an economic and safety point of view. The legacy of bungling private enterprise has been seen over the past few years in a thousand holes all over Dublin. If this had been a State company there would have been howls for its privatisation from the Progressive Democrats, Fine Gael, Deputy Liam Lawlor and the privateers in Fianna Fáil. They would say that private enterprise could do it much more efficiently. All the people in favour of private enterprise got together and suddenly became socialists, calling for the nationalisation of the gas company. So we nationalised the gas company. Why? Because the State could do it better. That is why these essential services have to be nationalised and it is highly dangerous to give them back to private enterprise.
The pressure for privatisation has been coming mainly from speculators who wish to make a killing on the Stock Exchange or from senior management in Irish Life who stand to benefit financially from privatisation. This has been proved in Britain and, as Deputy Desmond pointed out, we have to do the same as them. An article in the Financial Times indicated that privatisation leads to great financial rewards for those at the top. For instance, it gave the example of the boss of British Telecom who gave himself a £60,000 rise in 1985-86. Of course, the great advantage of privatisation is that once privatised you can give yourself a rise as David Kingston well knows. The boss of Cable Wireless was paid £11,291 when his company was in public ownership but when it went into private ownership his salary was increased five times to £56,000 and by 1986 his salary had soared to £238,000. You can name your own sum. The salary of the boss of Britoil went up from £65,000 to £106,000. I could give many other examples. Those in management in Irish Life who are calling for privatisation should not be listened to as naturally it is in their great interest to be privatised. It is personal interest that is making them shout “privatise, privatise”.
The last point I would like to make is that Deputy Lawlor's contribution makes it clear this is just the beginning of massive take-overs of State assets, which are the people's assets, by privateers. His speech was straight from Maggie Thatcher, even to the point where he lauded the great times ahead when everybody will be a shareholder. He also made the point that there would be no loss of jobs. In fact, privatisation in Britain has shown a loss of jobs in many cases.
Will the Deputy now formally move his amendment?
I move:
To delete all words after "decision" and substitute the following:
"on whatever changes may be necessary in the structure of Irish Life Assurance plc to ensure that it makes a better return to the Irish economy while being retained in public ownership."
I am now calling on the Minister of State at the Department of Industry and Commerce, Deputy Brennan. I would like to indicate to him that because of the co-operation of Deputy Enright he has got until 8.20 p.m.
My colleague the Minister for Finance referred last night to the contribution of Irish Life to the economy since its foundation and I want to join with him in expressing our congratulations and admiration to them for that period of success and growth. The company has continued to increase its share of the domestic life assurance market and it is well worth mentioning that by the end of 1986 the company had 43 per cent of the life assurance market here. The company has also demonstrated, as the House will agree, its ability to compete and grow by keeping pace with developments in the market over the years.
At the end of 1986 Irish Life policyholders' funds amounted to over £2 billion out of total Irish funds of almost £4.5 billion. That is clear testimony to the expansion of the company and the size of the market overall. We should not forget either that it has a payroll of in excess of 1,400 people and, as such, the company is a very successful employer. There is a further 200 people employed in the company's overseas operations. I join with the Minister for Finance in congratulating the company on its excellent success down through the years.
Given Irish Life's present dominant position in the Irish Market and the strides made in developing a base in the UK, I think the House will agree it is a natural step for the company to seek to expand its activities into other foreign markets. However, in order to do this the company requires additional capital and the general conclusion appears to be that the availability of share capital is perhaps the best way of supporting such expansion plans. State involvement in this case can act as an impediment particularly in relation to the lucrative American market. These two factors more than any others give rise to the question of privatisation. However, I feel that this issue was dealt with very well by the Minister for Finance last night and I will not dwell on it in the few moments available to me.
The Department of Industry and Commerce have overall responsibility as the supervisory authority for monitoring the activities of life assurance companies and the insurance industry generally. Let me make very clear this evening that the Department would have to be satisfied that the interests of policyholders are treated with paramount importance in any restructuring plans. In this regard let me assure the House tonight that any reorganisation or restructuring of the company would only be carried out in the context of existing insurance legislation which is effectively designed to ensure that the interests of these policyholders are adequately and fully protected.
Let me spell it out even more clearly. This position of overseeing the industry remains regardless of whether the company is privatised or not. Despite the very high proportion of shares held by the Minister for Finance, all Deputies are aware that it has been the policy down through the years not to interfere with the day-to-day management of the company. Therefore, given the position in regard to dividends, the company have effectively operated as a private company. That is an important point to remember.
Let me now respond to points which have been raised. Deputy Desmond expressed concern about overseas take-overs in the medium term. I want to make it clear that Irish Life and all life assurance companies are required under the supervision rules to maintain within the State not less than 80 per cent of the assets representing liabilities to Irish policyholders and, as such, that is a large element of protection in this area. Deputy Desmond also spoke about the danger of policyholders no longer having a guarantee in the event of the Government taking a decision to go in a particular direction, a decision which they have not yet made. The State, in a commercial sense, does not formally give a guarantee to the policyholders of Irish Life. It is a company to that extent.
I do not dispute that.
Therefore, there is no formal, legal guarantee given in that regard. The company is supervised, as are other companies, and it is required to maintain the same solvency ratios. My main reason for taking part in this debate is simply to reassure this House and the public that very stringent rules and regulations in regard to solvency margins, the operation and the general conduct of the insurance industry are operating in this State. I want to assure the House that the Department of Industry and Commerce will do their job in that regard whether a particular company is privately owned or State-owned. Those rules and regulations are very stringent and tough and we will be applying them. The Minister for Finance referred to that point last evening but it is important——
The Minister of State is on borrowed time.
The whole Government are.
I will conclude by saying that the privatisation of Irish Life is a complex issue, that the House can be assured that the Government will examine all aspects of the proposal and that we will take a very pragmatic and not an ideological decision in the interests of the nation. To repeat my own commitment to the House, that irrespective of whether the company is private or public the Department of Industry and Commerce will make sure that the very stringent solvency margins and other regulations are very strictly applied to whatever insurance company, and whoever owns it, operates in this State.
The Chair wishes to acknowledge the co-operation of Deputy Enright, Deputy Desmond and the Minister in respect of giving others who, under Standing Orders, might not have had an opportunity of contributing, an opportunity for so doing. I call on Deputy Enright now to conclude.
This motion, as is obvious from the debate so far, has the support of a very sizeable majority of this House. Irish Life are also anxious to privatise. In the interests of Irish Life and in the interests of the shareholders they should be allowed to privatise. This House must recognise the support of the shareholders for this company since its foundation. The shareholders must be uppermost in the minds of everybody contributing to this debate.
It is the accepted view that this company should expand as it has done since its foundation. The management, the directors and staff and a majority of the shareholders are anxious that the company expand. Any delay at this stage will inhibit expansion and it would be wrong to delay a firm decision. In his address last night, the Minister accepted the tenor of our motion and said that he accepted the motion that the Government should make an early decision on this issue. The Minister explained that the Government are considering the best advice available on where the balance of advantage lies and are considering what practical steps are necessary to resolve the complex issues. The Minister of State, Deputy Brennan, said tonight that the privatisation of Irish Life is an extremely complex issue which cannot be taken lightly. Our party do not take this decision lightly. We have considered it deeply over a long period. It is in the best interests of everybody that privatisation is proceeded with immediately and not at some future date. We cannot sit on the fence any longer on this issue. I know there are complex issues involved but further prevarication on the part of the Government can be dangerous.
It is recognised that this company is the jewel in the crown of our semi-State bodies. That was not an accident. The reason this company was so successful is because of the dedicated work of its staff since its foundation. The staff have shown by their work that companies of this nature can be successful. If there are further delays on this issue the company could lose some of its most capable, top class personnel who have brought this company to its present position. If the House decides to wait, the company will also have to wait. Firms like Smurfits, Crean and Company, and Cement Road-stone Holdings would not have been so successful if they had not tackled and resolved complex issues. We are very proud of the success of those Irish companies. There is a challenge here to resolve complex issues in the interests of Ireland. If the companies I have already mentioned had sat on the fence their expansion would have been curtailed and the country and the shareholders would have been the losers.
Deputy Desmond mentioned that this company can work in the US, but there are problems. There are many states in America where Irish Life could not set up because they are a State company. Admittedly they could set up and operate trust companies but this is only a device and it would prevent and curtail the company from expanding into the US.
It is good enough for the French.
We must recognise the merits of the company. A huge amount of talent is involved in that company. Instead of inhibiting that company we should encourage them to expand into every available market. We are a small country and we need to take opportunities to expand. If people hold firmly to narrow views it will be to the detriment of this country. We must be enlightened in our approach. We must take our courage in our hands and pass the necessary legislation to allow this company to privatise and expand in the best interests of the company, the shareholders and the country.
Items No. 33, Private Members' Business, motion in the name of Deputy Noonan and amendment in the name of Deputy Mac Giolla.
Amendment put.
The Dáil divided: Tá, 17; Níl, 49.
Tá
- Bell, Michael.
- De Rossa, Proinsias.
- Desmond, Barry.
- Gregory, Tony.
- Higgins, Michael D.
- Howlin, Brendan.
- Kavanagh, Liam.
- Kemmy, Jim.
- McCartan, Pat.
- Mac Giolla, Tomás.
- O'Sullivan, Toddy.
- Pattison, Séamus.
- Quinn, Ruairí.
- Sherlock, Joe.
- Spring, Dick.
- Stagg, Emmet.
- Taylor, Mervyn.
Níl
- Barnes, Monica.
- Barrett, Seán.
- Begley, Michael.
- Birmingham, George.
- Boland, John.
- Boylan, Andrew.
- Bruton, Richard.
- Burke, Liam.
- Carey, Donal.
- Colley, Anne.
- Connaughton, Paul.
- Fitzpatrick, Tom.
- Flaherty, Mary.
- Flanagan, Charles.
- Griffin, Brendan.
- Harney, Mary.
- Harte, Paddy.
- Hegarty, Paddy.
- Higgins, Jim.
- Hussey, Gemma.
- Kenny, Enda.
- Lowry, Michael.
- McCoy, John S.
- McDowell, Michael.
- McGahon, Brendan.
- Cooney, Patrick Mark.
- Cosgrave, Michael Joe.
- Creed, Donal.
- Crowley, Frank.
- Cullen, Martin.
- Deasy, Austin.
- Deenihan, Jimmy.
- Doyle, Avril.
- Dukes, Alan.
- Durkan, Bernard.
- Enright, Thomas.
- McGinley, Dinny.
- Mitchell, Jim.
- Naughten, Liam.
- Nealon, Ted.
- Noonan, Michael.
- (Limerick East).
- O'Brien, Fergus.
- O'Malley, Desmond J.
- O'Malley, Pat.
- Quill, Máirín.
- Shatter, Alan.
- Sheehan, P.J.
- Taylor-Quinn, Madeline
- Yates, Ivan.
Tellers: Tá, Deputies De Rossa and Sherlock; Níl, Deputies O'Brien and Flanagan.
Amendment declared lost.
Question put: "That the motion be agreed to."
The Dáil divided: Tá, 121; Níl, 17.
Tá
- Abbott, Henry.
- Ahern, Dermot.
- Ahern, Michael.
- Andrews, David.
- Aylward, Liam.
- Barnes, Monica.
- Barrett, Michael.
- Barrett, Seán.
- Begley, Michael.
- Birmingham, George.
- Boland, John.
- Boylan, Andrew.
- Brady, Gerard.
- Brady, Vincent.
- Brennan, Matthew.
- Brennan, Séamus.
- Briscoe, Ben.
- Browne, John.
- Bruton, Richard.
- Burke, Liam.
- Burke, Ray.
- Byrne, Hugh.
- Carey, Donal.
- Clohessy, Peadar.
- Colley, Anne.
- Conaghan, Hugh.
- Connaughton, Paul.
- Connolly, Ger.
- Cooney, Patrick Mark.
- Cosgrave, Michael Joe.
- Coughlan, Mary T.
- Cowen, Brian.
- Creed, Donal.
- Crowley, Frank.
- Cullen, Martin.
- Davern, Noel.
- Deasy, Austin.
- McCarthy, Seán.
- McCoy, John S.
- McCreevy, Charlie.
- McDowell, Michael.
- McGahon, Brendan.
- McGinley, Dinny.
- MacSharry, Ray.
- Mitchell, Jim.
- Molloy, Robert.
- Mooney, Mary.
- Morley, P. J.
- Moynihan, Donal.
- Naughten, Liam.
- Nealon, Ted.
- Nolan, M. J.
- Noonan, Michael (Limerick East).
- Noonan, Michael J. (Limerick West).
- O'Brien, Fergus.
- O'Dea, William Gerard.
- O'Donoghue, John.
- O'Hanlon, Rory.
- O'Keeffe, Batt.
- Deenihan, Jimmy.
- Dempsey, Noel.
- Dennehy, John.
- de Valera, Síle.
- Doherty, Seán.
- Doyle, Avril.
- Dukes, Alan.
- Durkan, Bernard.
- Ellis, John.
- Enright, Thomas.
- Fitzgerald, Liam.
- Fitzpatrick, Dermot.
- Fitzpatrick, Tom.
- Flaherty, Mary.
- Flanagan, Charles.
- Flood, Chris.
- Foley, Denis.
- Gallagher, Denis.
- Gallagher, Pat the Cope.
- Gibbons, Martin Patrick.
- Griffin, Brendan.
- Harney, Mary.
- Harte, Paddy.
- Hegarty, Paddy.
- Higgins, Jim.
- Hilliard, Colm Michael.
- Hussey, Gemma.
- Hyland, Liam.
- Jacob, Joe.
- Kenny, Enda.
- Kirk, Séamus.
- Kitt, Michael P.
- Kitt, Tom.
- Lawlor, Liam.
- Leonard, Jimmy.
- Leyden, Terry.
- Lowry, Michael.
- Lyons, Denis.
- O'Keeffe, Ned.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Malley, Desmond J.
- O'Malley, Pat.
- O'Rourke, Mary.
- Power, Paddy.
- Quill, Máirín.
- Reynolds, Albert.
- Roche, Dick.
- Shatter, Alan.
- Sheehan, P. J.
- Smith, Michael.
- Stafford, John.
- Swift, Brian.
- Taylor-Quinn, Madeline.
- Treacy, Noel.
- Tunney, Jim.
- Wallace, Dan.
- Walsh, Joe.
- Walsh, Seán.
- Woods, Michael.
- Wright, G. V.
- Yates, Ivan.
Níl
- Bell, Michael.
- De Rossa, Proinsias.
- Desmond, Barry.
- Gregory, Tony.
- Higgins, Michael D.
- Howlin, Brendan.
- Kavanagh, Liam.
- Kemmy, Jim.
- McCartan, Pat.
- Mac Giolla, Tomás.
- O'Sullivan, Toddy.
- Pattison, Séamus.
- Quinn, Ruairí.
- Sherlock, Joe.
- Spring, Dick.
- Stagg, Emmet.
- Taylor, Mervyn.
Tellers: Tá, Deputies O'Brien and Flanagan; Níl, Deputies De Rossa and Howlin.
Question declared carried.
The Dáil adjourned at 9 p.m. until 10.30 a.m. on Thursday, 3 March 1988.