Deputy Higgins has been given permission to raise on the Adjournment the alleged uncertainties attaching to hotel groups in his area.
Adjournment Debate. - Great Southern Hotels Group.
I thank you, a Leas-Cheann Comhairle, and the office of the Ceann Comhairle, for facilitating me in raising the uncertainties created among the workforce of what was known as the Great Southern Hotels Group, but now known as the Ostlanna Iompair Éireann, by recent press reports that the hotels group was going to be privatised in one form or another. The reports vary, but one suggested that the hotels group was looking for a 25 per cent equity partner. This was later elaborated on in another report which suggested that a 49 per cent equity partner was being sought. However, in a later report it was suggested that a majority shareholder would be required. It was also reported that members of the Cabinet were of the view that the group should be sold off altogether.
This matter raises a number of issues, some of which are very important, not only in relation to the hotels group in question but also in relation to the Programme for National Recovery. For example, a commitment was expressed in that programme that there would be no extension of privatisation generally. Unusually, there was a specific reference to the Ostlanna Iompair Éireann on page 32, paragraph 2, of that document which states “the continued investment in existing properties will be from own resources”. If there is any substance to the reports, it would seem that this would be in violation of the general principle of the Programme for National Recovery on the extension of privatisation. It would also be a specific breach of the undertaking given by the Taoiseach when he met the workers of the Great Southern Hotels Group that they would be left in public ownership.
In the time available to me, all I want to say is that the Ostlanna Iompair Éireann is one of the successes of recent times. From reports, its profit for last year were of the order of £1.3 million out of which a considerable payment was made to the Exchequer. The profits resulted from a restructuring of the group. We should remember that the minority Fine Gael Government of 1987 made a decision to allow the sale of the group, but I understand this decision was later rescinded. It is important that that be publicly clarified now. That decision having been rescinded by a Fianna Fáil Government, a commitment having been given by the Taoiseach and a specific reference having been made to the future of the group on page 32, paragraph 2, of the Programme for National Recovery, it is extraordinary to have to read about the selling off of the group.
The group was turned into a profit making one following a restructuring of management and a paring back of staff. The unions involved accepted a particularly difficult package to enable the hotels group to return to profitability, but let me say that the losses which accrued before that reorganisation took place had nothing to do with reasons of commerce but rather with a political decision of a previous Government that the hotels group own a hotel in Belfast. This was a massive loss-making venture which had a sad history towards the end of its relationship with the Great Southern Hotels Group. It is equally true in relation to the sell-off of assets of the hotels group that they were sold below market values. Given their present market values, it would probably be unkind to say that the people involved made a killing, but they certainly got a very good bargain.
The hotels group employ between 180 and 200 permanent workers and in high season they employ between 450 and 500 workers. These are the people who have run the hotels and provided a service. These are also the people — I notice that one of the leading spokespersons for the Irish Hotels Federation addressed this issue very honestly recently — who took on the training function on behalf of the hotels industry. We would find in hotels in the private sector today people, be they chefs, commis-chefs, head waiters, waiters or managers, who received their fundamental training in the State led hotel system. It was they who provided the infrastructure for the hotel industry and some of the best trained personnel who are today managing their own hotels. That training function will be put at peril if the hotels are privatised. Linked in with this question is the question of standards.
When it was proposed to sell the Great Southern Hotel in Eyre Square, Galway, it was suggested at that time that the value of the site was worth more than the hotel. We could have ended up with an office development on the second and top floors and it not being run as an hotel. In relation to the sweeteners to the private sector and the offers which have been made, what guarantee is there that any of these private groups would accept the training function and why should they take on something that the State built up and which the people own? At the end of the day, privatisation amounts to robbery from the public who paid, through their taxes, for the development of this group.
We have heard much criticism of State bodies but here is one which is successful. Why now should another group be allowed to come in? Would they accept training functions and maintain the same standards? Furthermore, given the commitment in the Programme for National Recovery why is it that the group is not allowed to raise funds from its own resources, as was guaranteed, for expansion and why is it not being allowed to borrow in a favourable capital market? Why it it not being allowed to borrow the money which is available or give away shares?
A commitment was given to the social partners by the Taoiseach that when the group returned to profit it would be left to fly along on its own, to raise money from its own resources and surpluses, borrow just like anybody else to expand, and not sold off to the six or seven creditor interests who are showing an interest in it at present. Will the morale of the workers be restored if certain answers are given to these questions? They are the people who turned around the group which is now making a profit. I asked the Minister to end the uncertainty by saying that there will be no sell-off of the Ostlanna Iompair Éireann.
I thank Deputy Higgins for giving me the opportunity to answer some of the questions he has raised. First, let me say that one of the decisions I made shortly after I was appointed Minister for Labour was to change the name Ostlanna Iompair Éireann back to Great Southern Hotels, because I did not believe Ostlanna Iompair Éireann represented what people traditionally want.
After years of serious losses the group has been turned around and is now a profitable enterprise. The profits in 1989 are expected to be well over £1 million, as the Deputy said. The group's innovation and refurbishment programme, financed from internal sources, is well advanced. All those involved, board, management and staff, can be justifiably proud. Great Southern Hotels have now reached the stage where a substantial capital injection is necessary to maintain their commercial momentum to make their full contribution to tourist development, to maintain and increase employment and to provide the basis for further growth. Failure to invest would not be in the best interests of the staff and could not provide conditions for sustaining job security in the longer term. I am particularly concerned that the company do not find themselves trapped in a funding limbo with consequent knock-on effects on job security, promotion prospects, motivation and staff morale. With this in mind all avenues of raising the necessary capital for expansion purposes have to be explored and assessed against such important considerations as safeguarding employment, protecting and promoting the interests of the company and the group's contribution to development of tourism and the economy in general.
Over the past year as a direct result of their improved performance several tentative approaches were made to the board for the purchase of an interest in the group. On my advice the board requested firm proposals from the interested parties. I am currently considering these proposals and other possibilities of raising funds and I hope to be in a position to submit a recommendation to the Government shortly.
Since I became Minister for Labour I have taken an active interest in the performance of the group and have had regular consultations with the board the management and representatives of the workers, both trade union officials and shop stewards. I have had several meetings with the shop stewards and trade union officials, the most recent of which was last Thursday, a week ago today, when I had a full and frank exchange of views with them. Because of those regular contacts, both by me directly, my officials, the executive and the board members, I do not believe there is another State company in existence who have such comprehensive information and data. I imagine Deputy Higgins has got most of the data he referred to from members of the staff, to whom I have given the information, so that we can all have a clear understanding.
Of interests.
It is three years since I persuaded the Government to rescind the previous Government's decision to sell the hotels. In the interim the company have invested about £3 million from their profits to improve their facilities. Further such investment is under way or planned. Although highly successful, this type of development is constrained by the level of retained profits available to the company. It would be short-sighted to continue to limit development of what can be achieved on this basis and it is not a realistic option in the context of the amount of capital required for the longer-term objective.
The Programme for Government defined clearly the Government's policy in relation to commercial State enterprises. The Government then stated that they were committed to the maintenance of a viable and profitable commercial semi-State sector and that any changes in the ownership structure of particular State companies will take place only if it is in the public interest and the interests of the company and their employees. In accordance with that policy I am committed to working with management and staff towards that objective. I assure the House and Deputy Higgins who has raised this matter that any proposals for the further development of the group will be framed with regard to protection of employment not just for 1990 but for many years ahead. My plans for the group will be entirely in accordance with the Programme for National Recovery and the Programme for Government.
In reply to the questions Deputy M. Higgins asked, a number of people have expressed interest in buying or taking over the entire group. I am not and have not in recent years been in support of Great Southern Hotels selling out their entire option to outside interests. I still remain of that view. I agree that because the taxpayer put in £16 million, the kind of figures for selling them off of £4.5 million in 1987, later £6 million, and later again £8 million would not have been acceptable. For that reason I rejected an offer of £8 million from Aer Lingus a little over 12 months ago. However, if Great Southern Hotels are not in a position to raise capital somewhere because the taxpayer has no more money to give them, they will go into decline again and the major type of capital programme they wish to start in 1990, which will cost about £10 million, will not go ahead.
I am in favour of seeking and finding an appropriate joint venture. If that cannot be found in the State area I would seek that the State would hold on to the majority control but would seek outside investment whether by way of flotation, shareholding or some other option. That is the way I hope to proceed. I explained this at great length to staff members and other people concerned about this directly in recent years. If we do not raise money somewhere Great Southern Hotels will have problems. Deputy Higgins would be aware that there are plans for a £6 million development at the Corrib quite near his home and if that money is not there it has to be raised.
I assure the House that we will do all we possibly can to hold Great Southern Hotels in a majority State ownership but to raise money by equity or in some other way.