I move: "That the Bill be now read a Second Time."
I am very pleased in my new role as Minister for Energy to pick up where my predecessor left off and to advance this wide-ranging legislation relating to Bord na Móna.
This Bill should be seen as a major step to provide the board and management of Bord na Móna with some of the main tools they need to restructure and revitalise the operations of the board, in order to deal with their present great difficulties. The Bill's main purpose is to provide greater flexibility in the ways the board may adopt to reorganise and restore their core peat business to a sound financial basis, to enable them to engage in other activities in which they have acquired particular expertise; to enable the board to promote, form, take part in or acquire companies and to enter into joint ventures, to exploit cutaway bogs and other bogs not required for peat production; to undertake engineering and building works not related to peat; and to engage in consultancy, advisory and training activities.
All this is to lay a sound basis to preserve jobs and long-term viable employment and to contribute to regional and national prosperity. At the same time the opportunity is being taken to effect a number of other minor amendments relating to pensions, accounting procedure and pay policy in the board.
When Bord na Móna were first set up in 1946 their functions were restricted essentially to the extraction, production, marketing and sale of turf and turf products and all ancillary requirements necessary for this purpose. The board have, therefore, no power at present to engage in any activity not strictly related to peat. In this new Bill, an opportunity is being afforded to the board to extend themselves further into peat-related developments, and into areas which, though not peat-related, are areas where the board have acquired or are likely by the nature of their operations to have potential expertise. The Government's commitment to the future of Bord na Mona is clearly in evidence. The board believe they can exploit their opportunities. This Bill is designed to enable them to do so.
In our Programme for National Recovery, this Government have sought with outstanding success to regenerate the economy by creating a climate conducive to economic growth. Central to efforts to achieve our full economic and social potential is the better utilisation of our resources, human and natural, and the fullest application of science and technology. To further that aim State-sponsored bodies are being actively encouraged and facilitated to develop and diversify their economic activities in the interest of job creation. Where new legislation is required to achieve this the Government undertook to bring such legislation forward. This Bill is a measure to do that and indeed, specifically, a number of development proposals submitted as part of the board's contribution to the Programme for National Recovery require legislative changes to make them possible.
Under this Bill the board will be permitted to promote, form, take part in or acquire companies, either within the State or abroad. The power of State-sponsored bodies to form or take part in subsidiary companies is nothing new. Earlier this year my predecessor gave the necessary statutory power to the ESB to set up companies. With this Bill I am now giving similar powers to Bord na Móna. The board will, therefore, have flexibility to develop new emphasis, particularly in marketing, which I see as a vital ingredient in securing the future of the board. These new powers will be of major assistance in the exploitation of new business opportunities, not only at home but abroad.
As I have already said, the remit of Bord na Móna up to this time was restricted. Through this new Bill positive encouragement is given to the board to expand their activities and to take advantage both at home and abroad of the expertise they have acquired as one of the world's leading peat producing companies. Now, with this extension of commercial freedom the board can broaden the scope of their activities and take advantage of their expertise in production engineering, mechanical and civil engineering, in horticultural products marketing, resource management, operations management, project management, personnel management and training.
With reference to horticultural markets in particular, of which the board's peat moss is an outstanding success, I note that this is seen as one of the more promising areas for development by the board under the new powers. I am pleased to see that horticultural peat products are currently the most dynamic and encouraging component in the company's product range. Indeed, I understand that Bord na Móna are the international brand leader in this market with sales of £22 million, 90 per cent of which is for export. This clearly therefore is an area with great potential in which future success will demand flexibility in strategy, pricing and organisation as is provided under this Bill.
This Bill will also permit Bord na Móna to engage in joint ventures in relation to their business as extended and defined in this Bill both here and abroad. Obviously it is intended that the board should participate only in companies or joint ventures which will be able to pay their way and in this regard participation in joint venture is subject to the approval of the Minister for Energy and of the Minister for Finance.
In order to optimise the potential benefits of this new remit, clearly the current position of Bord na Móna with their adverse financial position must be improved. Improvement of their core business and diversification into profitable new ventures are the keystones and the latter should not occur at the expense of the former. The board themselves have accepted that in order to address their strategic weaknesses a change in corporate culture is required. Bord na Móna must be transformed from a production-oriented organisation, their traditional role, to one which is market led. They must face the increased challenge of hydrocarbon fuels greatly reduced in price, and likely to remain so. They must cut costs and become more competitive. They must cope with their heavy indebtedness and high interest charges.
As part of the fairly far-reaching transformation seen as necessary, this Bill will allow Bord na Móna, subject to my approval, to delegate certain of their functions to sub-boards. The powers of Bord na Mona can, under the 1946 Act, only be exercised through the main board, but this Bill provides the main board with power to adopt another route by permitting the establishment of sub-boards and authorising the exercise of some of their powers through them. The drafting of this section of the Bill, however, reflects my belief that these sub-boards should only have powers as defined for them, and conferred on them, by written delegation of the main board. These sub-boards will be appointed by the board themselves, and the members will be drawn from the membership of the board.
I wish to stress also that these sub-boards will not, of course, be empowered to do anything which is not within the power of the board at present. Their purpose is to ease the plenary board's workload, to reduce the time necessary to get through the business, to enable the sub-boards to give more concentrated attention to particular areas of problems and to facilitate a speeding up of the decision making process. I accordingly propose to supply the required power, which is rather similar to that commonly found in the rules of management of private sector companies. Furthermore, this particular provision is not intended to indicate my approval of any particular restructuring plan for the activities of Bord na Móna. The Bill enables routes to be adopted if that is what is finally decided as in the best interests of the board. I would not be prepared to consider sanctioning changes until the consultants, who have been commissioned by the Minister for Energy to undertake a review of the board's operations, have reported to me next March. I will refer in more detail to that consultancy study later.
At present the board may only exercise certain of its powers within the State. This was unduly restrictive in the effort to develop new markets abroad. Section 4 of this Bill allows the board subject to ministerial approval to exercise the necessary powers abroad and to enable them to exploit foreign market opportunities.
In considering the options for the board's future one obvious question is the future uses of bogs from which the commercial quantities of turf have already been extracted and which are not suitable for forestry purposes. In July 1987 the Government decided that the Bord na Móna cutaway bogs which were suitable for forestry were to be transferred to the Forestry Service of the Department of Energy. This decision applies to those cutaway lands at present available for planting and to those areas of cutaway which will become available in the future. The acreage involved to date is 3,770 hectares of which 2,824 hectares has been transferred to the Forestry Service. This area will rise in the future as more and more bogs are depleted in so far as commercial exploitation by Bord na Móna is concerned. That decision was taken primarily out of the Government's concern to ensure a measure of alternative employment in these areas.
At present, the board's own activities on cutaway bogs are largely for research purposes. The board have no statutory power to use cutaway bogs to establish any activity unrelated to peat production for which there may be a commercial opportunity. This Bill provides the board with such power but, I must emphasise, that as far as cutaway bog is concerned, the power applies ony to cutaway which is not required for forestry purposes and there will be no departure from the earlier Government decision or from the administrative arrangement set up thereunder.
In this context I wish to draw the attention of this House to the fact that the Bill provides that all cutaway bog no longer commercially viable for the exploitation and extraction of turf must first be offered to Coillte Teoranta. Only when that body have indicated that such cutaway is not required for their purposes, may Bord na Móna engage in developing its potential in other areas. Such other cutaway and bogland other than cutaway which Bord na Móna might also wish to develop commercially, and not likely for any valid reason to be used for peat fuel development, if a viable opportunity presents itself, is open to such use by the board under the Bill's provisions. Among possible options under consideration by Bord na Móna are the development of wetlands and lakes that would have considerable tourism and recreational possibilities. Such developments which might combine peatland resource and interpretative centres for specialist study and targeted tourism packages, could have useful employment content and could add significantly to the tourism potential of the Midlands region.
One of Bord na Móna traditional areas of expertise relates to the development of engineering. Since their inception the board have had the power to manufacture plant and machinery in the preformance of their functions. They did this with competence and great technical ingenuity. They pioneered many machines. Clearly they have potential in this field for machinery development generally. We, as a country, have a huge import bill under this heading. Part of it must be capable of home production. The Government's Programme for National Recovery specifically sees the development of a strong indigenous component to the mechanical engineering industry as essential to the development of the manufacturing sector generally because of the industrial support services it provides. The particular expertise and specialist knowledge of Bord na Móna in this sector is acknowledged in the programme. The board have already submitted initial proposals for development and diversification under the Programme for National Recovery. Some of these potential projects are dependent on the new powers provided in this legislation if they are to proceed.
This Bill also provides the board with the power to undertake consultancy work. The board have often received inquiries on this subject from abroad but could respond only by way of secondment of Bord na Móna staff to the Department of Foreign Affairs. A threefold expansion of consultancy work abroad by State agencies is foreseen in the Government's Programme for National Recovery. The provision will enable Bord na Móna to play their part in that programme. It would be my wish that the board should export services in that form, on a commercial basis.
I believe the board should concentrate their activities on their area of proven expertise. It has never been my intention that their diversification should be pursued to an extent which would downgrade their peat business, but through their involvement in peat development, the board have accumulated a great deal of expertise in other areas. The board believe they can build on this; the Bill provides for that. The board are one of the leading peat producing companies in the world and have led the way in peat technology. Other companies, including the Finnish Peat Board, have used many of the board's techniques in establishing their own operations. As I have already indicated, it is in these technical and engineering areas and new product development where the board have gained a particular expertise, that I wish to give the board the necessary latitude in this Bill to pursue business opportunities. However, these new powers will be subject to ministerial control.
I consider these ministerial controls to be necessary not to inhibit entrepreneurial spirit and drive within the board but to ensure concentration on the core business of Bord na Móna, the exploitation of Irish bogs.
While I have concentrated so far on the main elements of this Bill, there are, of course, other amendments of a more routine nature provided for in relation to superannuation, pay, and the format of the board's accounts. Under sections 5 and 6 of the Turf Development Act, 1953 Bord na Móna are empowered to operate superannuation schemes within the approval of the Minister for Energy and the concurrence of the Minister for Finance. At present the Act provides that benefits under the superannuation schemes can only be paid to full-time members of the board and their permanent employees. This excludes benefits for spouses and children. However, a non-statutory widows' and children's pension scheme for employees has been operated by Bord na Móna since 1970 with ministerial approval. The Comptroller and Auditor General has been concerned for some time at the non-statutory basis of the existing widows' and children's pension scheme. As auditor of the Bord na Móna superannuation schemes, he has reported to the effect that an amendment to the Turf Development Act, 1953 is required to enable formal ministerial approval to be given to the scheme. Section 6 of the new Bill provides for this.
The section of the 1946 Act which deals with the accounts and audits of Bord na Móna provides that the board should keep, inter alia, a capital account and revenue account. Such accounts are no longer common in conventional accounting practices. In this Bill section 3 provides for the necessary amendments in order to permit a change in the format of the board's accounts in line with the more conventional practice.
In regard to section 9 relating to pay, this will formalise the controls relating to the remuneration of the employees of Bord na Móna and is in line with Government policy in regard to the public sector.
In order to ensure that all aspects of Bord na Móna would at this important juncture be taken under full review, my predecessor, Minister Ray Burke, commissioned a wide ranging consultancy study. The study will review the existing operations of Bord na Móna and will recommend such changes as may be necessary. The consultants are due to complete their report early next year. Their report and the board's own task force report will assist me in deciding on the measures to be taken in all necessary spheres.
I believe that this House is well aware of the contribution by Bord na Móna to the economic life of this country and to the Midlands in particular, since their creation in the mid-forties. Indeed, in the wider context they have contributed to the national economy through oil import substitution, diversification of fuel sources, and optimisation of indigenous resources.
Because of their wide economic and social role in the Midlands and the implication of their activities for the community there, I have no doubt that the board will make every effort for the reconstruction and improvement of their position and so secure their future. This indigenous resource must be developed to the benefit of our economy but that must be done in the changing and increasingly competitive market place.
The past few years in particular have been difficult ones for the board. Problems will not be solved even if one could assure improved harvesting seasons. Work methods to improve output and to reduce poor weather impact, are factors which merit increased attention and I can assure the House that the board and the consultants which my predecessor appointed, will rigorously examine all possible approaches.
Another major influence on commercial performance is the high cost of servicing the loan capital by which the board are financed. In the last year I understand that this amounted to about 15 per cent of revenue. This is one of the matters being addressed by the consultants in their study.
The implications for jobs of the board's financial difficulties is obviously of great concern. Given the large share of annual expenditure accounted for by manpower, the board's cost reduction programme means that reduction of the workforce, on a voluntary basis, is unavoidable. A voluntary early retirement scheme has been agreed which will greatly facilitate the reduction of costs and overheads. It is to the credit of the board, and their staff, that despite changes and some unpopular measures being taken, the dedication of the staff to the commercial success of the board has never been in question. I believe that all parties are to be commended for this and I hope and trust that the future can be faced with the same dedication and forbearance.
EC assistance, through the Valoren scheme, is being provided to Bord na Móna for the development of more than 8,600 hectares of additional bogland over five years at a cost of £22 million. The employment provided under this programme, when new jobs and jobs which would otherwise disappear are taken into consideration, accounts for almost 500 jobs. I am happy to say that the development is on target and is one of the board's contributions to the Programme for National Recovery.
On a wider plane, I will be pursuing vigorously the possibilities under the economic and social objectives, and indeed the R&D objective of the European Regional Development Fund, to see what financial assistance will be forthcoming to assist this major industry with its significant economic and social implications. I believe that the peat industry, employing thousands of people, affecting a notable percentage of our national product and touching the lives of people in an extensive region of central Ireland, merits the greatest possible support.
In conclusion I should mention that I have just now received from Bord na Móna some proposals for the amendment of this Bill. I will be looking at these sympathetically and I may have something further to say on these matters on Committee Stage. I will, of course, be very pleased to listen carefully to contributions from Members of this House and to consider any amendments they may wish to put forward. I commend the Bill to the House.