I move: "That the Bill be now read a Second Time".
Industrial Credit (Amendment) Bill, 1990: Second Stage.
This Bill provides for an increase in the amount of borrowing which may be undertaken by the Industrial Credit Corporation plc., and in the State guarantee of such borrowing. The current limit on ICC's borrowing and the State guarantee is £800 million and the Bill provides that this figure be increased to £1,000 million. The Bill also provides that the company amend its Articles of Association to take account of the increase in its borrowing powers.
The ICC's current borrowing limit of £800 million has almost been reached. This limit was introduced under the terms of the Industrial Credit (Amendment) Act, 1983, the previous limit being £400 million. I should point out that, in the case of the ICC, borrowing includes deposits with the company from the public as well as what might be termed ordinary borrowing — mainly on the interbank market. All such borrowing is covered by State guarantee.
Since the present limit was introduced in 1983 the business of the company has expanded considerably. Its assets have grown from £476 million to £841 million, an increase of 77 per cent. The company has experienced a very successful period of growth, despite some difficult years. The past few years in particular have, in line with the upturn in the economy, been very successful, culminating in its most profitable year ever in 1989, when profits after tax reached over £10 million, including an exceptional item of £5.5 million. The company is developing its core businesses, and has expanded into new areas such as trade finance, and fund management.
It ceased to be dependent on borrowed funds from the Exchequer in 1980, though it has had considerable benefit from Exchequer-backed schemes which are now, however, in the process of being phased out. The increase in its borrowing powers and in the related State guarantee now proposed is essential in order that the ongoing activities of the company may proceed without interruption. The new limit should be sufficient to meet the ICC's requirements over the next few years.
The outlook of the company is, I am happy to say, very positive. Its profitability in the current year will be very good again, based on the first six months of trading. While its loan book is expanding rapidly, it is nevertheless adopting a prudent approach to its business which, in the long term, will stand to its credit. This company has shown a profit in every year since its establishment in 1933 and has paid a dividend to its shareholders in most years, including every year since 1969. This is a proud record and I have every reason to believe that it will continue to be increasingly profitable in the future. Its contribution to the well-being and development of the industrial, tourism and services sector of our economy has been immense and is a tribute to its board, management and staff over the years.
The main strengths of ICC lie in the high regard in which the institution is held by Irish business and its range of small and medium-sized business client firms. These firms provide good scope for profitable further expansion by ICC in the years ahead. In order to meet the demand for new services from its clients and to generate increased income, ICC has diversified into new areas. It now provides a wide range of financial services, comparable to private sector financial institutions, such as:—
Notice taken that 20 Members were not present; House counted and 20 Members being present,
I was dealing with the range of financial services being provided by ICC. These include a full range of trade finance services, deposit and loan facilities, hire purchase and leasing facilities, including leasing business in the Financial Services Centre. The company have already established themselves as a successful and innovative financial services group and their transition from being primarily a development bank to a commercially orientated entity is well under way.
Deputies will be aware of the Fóir Teoranta (Dissolution) Bill, 1990, which is before this House. That Bill proposes that on the dissolution of Fóir Teoranta their portfolio of loans and investments will be transferred to the ICC to administer. There is, however, no connection between this Bill and the Fóir Teoranta Bill. The present Bill is necessary, as I have said, so that the normal ongoing business of the ICC may proceed without interruption and is urgent because the existing borrowing and guarantee limits have almost been reached.
Deputies will also be aware of the statement the Minister for Finance issued on 17 May 1990 in which he said he had invited proposals from a number of financial advisory bodies on the terms on which they would advise him in relation to the future development and capital requirements of ICC. He is seeking this independent advice because, for a number of years now, ICC have been making the case that the present statutory restrictions on their lending activities should be removed, and that more capital should be put into the company by the State as their main shareholder in order to strengthen their capital base and enable them to develop to their full potential. The Government are anxious that the company should not be impeded in their development, particularly as the State-backed schemes for higher risk categories of borrower and for currency exchange risk schemes are now being phased out. However, new EC banking directives which are due to come into operation in 1992 will require the company to substantially increase their capital ratio. Any shortfall will be required to be made good by way of additional equity or subordinated loans or a combination of both.
It is, therefore, timely to employ consultants to look at the various options which exist in order to ensure the sustained future growth and development of ICC and to advise the Minister on the best course to follow in relation to those options. As I said earlier, the increased borrowing and guarantee limits proposed in this Bill should be sufficient to meet ICC's requirements over the next few years, by which time decisions will have been taken in relation to the future development of ICC.
I will now deal with the sections of the Bill. Section 1 provides that the company may borrow up to £1,000 million less any amount which has been paid by the Minister for Finance in respect of State guaranteed funds borrowed by the company. No such moneys have had to be paid by the Minister to date. Section 2 provides that the Minister may guarantee the borrowings of the company up to £1,000 million less the amount, if any, which the Minister may have previously paid under a guarantee given in respect of ICC borrowings. No such amounts have had to be paid to date. Section 3 requires the company to alter their memorandum and articles of association to take account of the higher borrowing limit provided for in this Bill. Section 4 deals with the short title, collective citation and construction. I commend the Bill to the House.
Deputy J. Bruton rose.
On a point of order, I think the House is entitled to have a proper quorum in attendance for Deputy Bruton's speech.
A quorum is being called for.
I hope my speech does not have the same effect as my last speech had on the Deputy when he was reputed to have risen one foot from the ground.
It was uplifting.
Intellectual, entirely.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
I would like to thank Deputy Higgins for having such a willing audience come into the House for this address.
Let the Deputy not look behind him or he will only get depressed.
All I have to do is to look at Deputy Briscoe with his naturally sunny disposition and I immediately acquire an all over happy feeling. I wish to refer to the origins of the Industrial Credit Corporation. The company was founded in 1933 as part of the series of measures introduced following the introduction by the incoming Fianna Fáil Government of industrial protection and high tariff barriers. They were founded in a completely different environment and with a completely different set of purposes from those which now exist. It is strange that the State should desire to continue using this instrument, an institution created for a protectionist environment as part of the armoury of an industrially protected economy, in an economy where the accent is on open boundaries and the complete absence of protection, indeed the complete standardisation of products so that goods and services can flow from one part of Europe to another. It is strange that a body founded as part of protectionism should continue as a State-run company. In these completely different circumstances, it is a tribute to the inertia of the State sector that once you set up an enterprise you never contemplate changing or getting rid of it. It is there regardless of whether or not the purposes for which it was originally established continue to be relevant.
The Industrial Credit Corporation are owned by the State — a State-owned bank. This might well have made sense in the thirties when the banking sector was largely owned from outside this country, was considered to be unduly conservative and not prepared to lend to manufacturing. Manufacturing was highly unpopular as a source of investment. In the thirties the only thing that was considered worth investing in were agricultural endeavours which had a specific asset backing. In order to introduce the availability of funds, both investment and loan capital, for the fledgling industries that were to be established behind the newly established protective walls, the Government of the day decided to establish the Industrial Credit Corporation. That was a very reasonable move in the context of the policies being pursued at that time but one must ask why the State needs to continue to operate the Industrial Credit Corporation in these circumstances. That is not to say that one cannot necessarily come up with an affirmative answer. As I have said, the fact that we have continued without even asking the question is a tribute to the political and administrative inertia that protects existing agencies, regardless of whether their original purposes continue to subsist.
It is interesting to look at the principal objectives of the Industrial Credit Corporation when established and compare them with what the company are doing now. About £609 million is out on loan as against a mere £10 million in the form of equity investments in companies. In essence, we are talking about a huge difference in terms of there being far more emphasis on loans than on equity investments. Yet it is interesting to note that in the 1933 Act the objectives of the Industrial Credit Corporation are defined as the acquisition, underwriting, holding and selling of shares. It then states that they shall also include the lending of money. In other words, the lending of money was originally to be merely a subsidiary function of the Industrial Credit Corporation. The main purpose of the company, as established by this House in 1933, was to become a shareholder in companies. Ancillary to that, they were given the power to make loans. What has happened is that the ancillary purpose, the making of loans, has become virtually the only role fulfilled by the Industrial Credit Corporation and the taking of shares has become an entirely unimportant activity in terms of the amount of shares they have at present, a mere £10.7 million.
In the context of the environment we are now living in, the ICC are pursuing the wrong priority as stated in their original objectives. There might well be a reasonable case for the ICC to return to their statutory purpose, that is to make selective investments, although not from the point of view of some grand industrial project designed by some planner sitting in Merrion Street or Kildare Street, some civil servant who is able to see everything in the world and decide what is a good investment, but in terms of making strategic investments here and there, with an increasingly overall amount of venture capital availablity to industry.
It seems that at present we do not need a State bank to lend money. There are more than enough banks available to lend money to people, admittedly sometimes on onerous terms. With the banking directives coming into force in the European Community, in the future people will not have to rely even on the Irish clearing banks as a source of finance; they will have a choice of virtually all the banks in Europe from which to borrow money. To say we need an Industrial Credit Corporation as a bank lending money, 99 per cent owned by the State, is not justified in the present context.
The Minister's speech is a rather lame one. I regret that it does not contain any reference to, nor does it give any evidence of the Department of Finance or the Minister having carried out a fundamental re-examination of the current purposes of the Industrial Credit Corporation. We are simply told the company need more money and their statutory limits have to be raised. If they are such a profitable company and if the borrowings they are undertaking are not guaranteed by the State, why should there be any limit on the amount they can borrow? Why should the Dáil interfere at all?
Section 1 of this Bill should state that henceforth there shall be no limit on the amount the ICC shall borrow. Section 2, which gives the State the power to guarantee borrowings undertaken by the ICC, should be removed. There should be no need for the State to guarantee the ICC's borrowings. If the ICC are successful — and they are — why can they not borrow on the strength of their own portfolio of investments? Why do they need a State guarantee? Certainly they may have needed a State guarantee in 1933 when they were established, or in 1958 when the current provisions in regard to State guarantees of the ICC were introduced, because at that time they were a fledgling organisation competing in a financial world that was not sympathetic to them and their reputation as a financial venture had not been established, but they certainly do not need a State guarantee at this stage.
I do not understand why we need section 2. Section 1 should simply say that the company can borrow as much as they like as long as they borrow it on the back of their own assets. If that was the case there would be no need for continuing recourse to the House. Certainly it is a waste of time to have a ritualised debate on the ICC every few years to raise their capital by another £100 million or whatever if that occasion is not going to be used as a fundamental examination by this House as to why we need the ICC in their present form at all. It is quite obvious that there has been no such re-examination and I express a certain surprise about that.
If the ICC are to continue as a banking entity, lending money, I do not see why the Minister for Finance should own 99 per cent of the shares. If they are a bank like any other bank, which they seem to be, why should the State own most of the shares? Would it not make a lot of sense for the State to sell its shares and use the proceeds to reduce the national debt, which is a matter of very considerable concern for the Department of Finance? The main purpose for which the PAYE revenue, raised from the taxpayers of this country, is used at present is to pay interest on the national debt.
If the Minister for Finance could sell on the open market some of the 99 per cent of the shares he owns in the ICC he could raise money to pay off the national debt which would reduce the interest burden and reduce, ultimately, the tax burden met by our people. If the ICC are to continue as a body lending money to industry more or less along the same lines as other banks who are lending money to industry, why does the State need to keep the shares in it? The fact that the ICC have reached a point in their operations where they are expanding autonomously I do not think they need an umbrella provided by a State guarantee. They can get on with their own business, they do not need the granny-like protection provided by 99 per cent State ownership. If some Members, for other reasons, do not like the idea of the money being used to pay off the national debt, then OK, but put it into some other State investment that is considered necessary. Perhaps Coillte need money because forestry is an area that should expand. If that is the case and if that is what we need to use State venture capital for at present and if we believe — as we may well be right in believing — that if the State does not do it it will not happen, why should the State not sell some of its shares in ICC, which is already mature and well established, and put that money into Coillte rather than the State borrowing money for Coillte? It would make eminent commercial sense for the State to reorganise its portfolio of investments and to put them where they are most needed from the point of view of expansion of employment, not simply leaving all existing State shareholdings where they are and saying that we will hold on to everything we have while at the same time borrowing more money to put it into further projects. We should be trying to make our money work for us. That is the reason I believe a reorganisation of State shareholdings should take place where some would be sold and where investment would take place in new areas or we could redeem the national debt on an ongoing basis. It is simply a question of mature financial housekeeping using the taxpayers' money as prudently as possible to achieve the maximum effect in terms of employment.
It has nothing to do with the left or right, with views of the State and its role in society, with views of equity or redistribution or any of those things, but when you have a certain amount of money you have a responsibility to use it as effectively as possible. It makes no sense for the State to continue to deny itself the possibility of either reducing the debt or releasing capital for investment in new areas where investment is needed by retaining for some fixed reason 99 per cent of the shares in the Industrial Credit Corporation when they could be sold and the money used either for the redemption of debt or for funding further investments and expansions by existing State companies where there is a need for the State, rather than for somebody else, to provide the capital because of the long-term nature of the investment. I do not understand why that is the case.
There are some opaque references in the Minister's speech where he uses words which are obviously deliberately designed to conceal its meaning as follows:
... I had invited proposals from a number of financial advisory bodies on the terms on which they would advise me in relation to the future development and capital requirements of the ICC.
What does that mean? Is he seeking advice or is he really saying he is asking those bodies to buy the shares? If he means he is asking them if they would be interested in buying shares in the ICC, that is what he should say. He should not use this weasel language which does not convey his meaning. If it is simply a question of advising the ICC on how they should develop there is no reason to put that in a ministerial speech. The Minister should not be involved. If the ICC want to develop within their existing arrangements they can get their own consultants without the Minister getting involved. Clearly something more is involved here. Perhaps the Minister is thinking of privatisation. If that is what he is thinking about — I do not like that word "privatisation"; selling some of the shares would be better, and it does not have to be a majority of shares. If the company are successful people will be happy to invest in it with the State remaining as the majority shareholder. If it is a question of selling shares — which is the term I would prefer to use — and reusing the capital for something better, that is what the Minister should say and not use the lingo contained in the speech.
To sum up my position on this matter, the Government should look at the memorandum and articles of association which state that the principal object of the company shall be to take shares in companies.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
Would it be in order to point out that we have one Deputy here from Labour, one from Fine Gael and no one from The Workers' Party? It would be no harm if that were recorded.
I should point out that it is not automatically in order for the Deputy.
I hope my contribution will be sufficiently interesting to retain the attention of the press gang audience I now have. They are leaving already. This is very disappointing. I thought Deputy Roche could do better than this.
The Deputy might try attracting some of his own party as well.
Deputy Bruton with his undoubted experience knows that his assumption of presumption is not the best way of guaranteeing——
(Interruptions.)
Perhaps Deputy Callely would learn a little about pronunciation in the Irish language.
Perhaps Deputy Taylor would direct his train of thought——
For the benefit of the recent audience I have attracted I would like to sum up what I am saying in regard to this legislation. It is a pity this legislation has been introduced without any fundamental examination taking place about the purposes for which we continue to have a State-owned industrial credit corporation. I also feel that the Industrial Credit Corporation have departed significantly from their original objective, to invest in companies, and have simply become a bank. I question whether we need another State-owned bank given the availability of so many other banking services. Neither is there a need any more for the Industrial Credit Corporation, in respect of their own borrowing, to enjoy a guarantee from the State. It seems that the ICC are sufficiently well established that they can now borrow on the strength of their own assets without the need for a State guarantee nor do I believe, given the health of the ICC for which I congratulate their management, that the ICC should continue to be 99 per cent State owned. It would make a lot of sense for the Minister for Finance to sell shares, in whole or in part, in the Industrial Credit Corporation with the money being used to either redeem the national debt and reduce the interest burden being met by the taxpayer or, alternatively, to fund other State investments in, for example, forestry or other areas where special capital is needed from the State and nobody but the State can provide that capital. That would be a sensible reorganisation of the State's portfolio of investments which would have nothing to do with ideology and it is certainly something we should contemplate doing at this stage.
Against that background I must question severely the decision of the Government to wind up Fóir Teoranta, the industrial rescue company who perform a completely different role from that of the Industrial Credit Corporation and, having done that, to then go on and take an even more ludicrous decision to amalgamate the shareholdings held by Fóir Teoranta with those of the Industrial Credit Corporation. The Industrial Credit Corporation have fulfilled their mandate of being entirely commercial in their operations, of being profitable and only making investments which are justified on the basis of the prospect of profitability and not being concerned with rescue or any other objective of that kind. They have done that job very well.
The Government have decided that they are going to load the Industrial Credit Corporation with investments in companies who were on the brink of failure and who could get money from no one but Fóir Teoranta. Because of this, the investments are not worth their face value in most cases. To mix a State rescue function, formerly fulfilled by Fóir Teoranta, with a commercial banking function, very successfully fulfilled by the ICC, is to attempt to mix oil and water. They will not mix, they cannot be mixed and nobody should attempt to mix them. Any emulsion the Minister succeeds in making on a temporary basis will quickly separate itself because these functions cannot be aligned. By placing such a portfolio of investments in the possession of the ICC we will make it much more difficult for the ICC to retain their clear commercial outlook as they will suddenly find that they have to look at other considerations which they did not have to look at in the past in terms of defining corporate objectives and having clear, corporate performance indicators set by the board to be followed by them in their activities.
Not only is it a mistake from the point of view of corporate objective and ethos to introduce the Fóir Teoranta shareholding among the existing activities and shareholdings of the ICC, it is also a mistake from the point of view of any prospects there might be of shares in the Industrial Credit Corporation being made available to people in the commercial sector on the Minister for Finance ceasing to be the exclusive and sole shareholder because a company who have a lot of rescue type finance is not one which will attract the sort of investment we are looking for. I do not think the Minister could contemplate selling Fóir Teoranta so easily because of the nature of their work.
We should have a Fóir Teoranta. Industrial rescue is a perfectly respectable activity and very necessary in a society where firms can face short-term difficulties and we need some method other than simple commercial banking to see companies through those difficulties. I am all for retaining commercial rescue but this has nothing to do with the type of activity undertaken by the Industrial Credit Corporation. It is wrong that Fóir Teoranta are being done away with and the shareholding is being transferred to the ICC. If it is to be transferred to some other body it should be transferred somewhere else entirely on a contract basis and not intermixed with the shareholding of the Industrial Credit Corporation who are a successful company with their own clearly defined, if slightly changed, set of objectives.
As you are aware, a Leas-Cheann Comhairle, the Industrial Credit Corporation are not the only State-owned bank. There is another one, the Agricultural Credit Corporation, who, I have to say, have not been as successful since their foundation as the Industrial Credit Corporation. It is also fair to say that the Agricultural Credit Corporation got into very significant difficulties and could only have continued in being with the benefit of the State guarantee they enjoy. Whereas the ICC do not need a State guarantee, the ACC would not exist were it not for the continued existence of the State guarantee. That is undoubtedly the case.
I argued a few moments ago against trying to mix rescue-type bodies and rescue-type holdings with strictly commercial-type holdings and it seems there would not be much of a case for amalgamating the Agricultural Credit Corporation and the Industrial Credit Corporation. On the other hand, as a result of certain directions given by me and certain appointments I made to the board of the Industrial Credit Corporation when Minister for Finance which have been followed up by the Minister, his predecessor and the present board — I regret that some of the people I appointed are not now on the board despite their outstanding record and it seems they were dropped for reasons which do not bear any scrutiny here — the Agricultural Credit Corporation have made a major recovery from their previous difficulties.
It would be interesting to hear the Minister's views on the long-term relationship, if any, between the Agricultural Credit Corporation and the Industrial Credit Corporation. If the Agricultural Credit Corporation reach a stage where they are as commercially healthy and successful as the Industrial Credit Corporation and if—I hope this is a very big if — the State continues to believe that it should be the sole shareholder in both these institutions it would not make much sense for the State to continue to run and own two separate banks. I say this in the knowledge that the Agricultural Credit Corporation were established specifically to serve the needs of agriculture. Some of their problems arise from this fact in the sense they confined themselves to agriculture which is a notoriously cyclical sector. Therefore when agriculture and farmers got into difficulty so also did the Agricultural Credit Corporation, but that position is changing. It is fair to say that the Agricultural Credit Corporation are moving way outside the field of agriculture and are now offering a range of services equivalent to those being provided by any bank.
I understand people can get cheque-book services now from the ACC; if I am not correct in that I can be contradicted. If that is the case and if the ACC are well established and the State is to continue to be the predominant shareholder in both, perhaps one large bank in which there was a State interest of an equity kind would make more sense than two. However, that depends on a number of conditions, and I am interested to know whether they can be fulfilled, namely (1) if the State wishes to continue to be the primary shareholder and (2) whether the ACC have reached the point where they would not be a drag on the success of the ICC. I would favour nothing that would be a drag on the success of the ICC.
Under section 5 of the Industrial Credit Act, 1933 if shares in the corporation are to be offered at any time for subscription — that is on the Stock Exchange — and are not taken up by the public on the Stock Exchange, the ICC may act as an underwriter of those shares, and the Minister may agree to that. In other words they can enter into what is known in commercial parlance as underwriting. I would like to know two things about this. First, why is the Minister's consent needed still for underwriting activities by the ICC? Assuming that is the case, it would seem that it is not necessary any longer for the Minister to have to approve every such move. I have not got the 1958 Act or subsequent legislation, so it may be that restraint no longer continues to be the case.
Secondly, in regard to the accounts of the ICC I would like to have a breakdown of the performance in profit terms of their individual elements. We have in the ICC the following types of activity. We have normal banking activities and there is a loan portfolio of £609 million there. We have the granting of instalment credit which is a specialist credit operation. We have equity investment which is tiny at £13.7 million total share investments. That is money in, though I note the market value of those shares is now about £25 million, so for an investment of £13.7 million the ICC have achieved a value of their investments of £25.5 million, a very good performance and to their credit. They have other activities in the area of corporate finance. They have established a business expansion fund to use the tax concessions that were introduced and they have treasury activities.
If the ICC are to have handed to them this dubious gift of the shares acquired by Fóir Teoranta, then rather than simply a consolidated balance sheet and consolidated accounts which merely refer to a single figure for profit after taxation, we should have separate accounts for each one of these activities to enable comparisons to be made having taken into account the appreciation of assets as well as the profit that may have occurred during the year. One could then have comparisons of the relative success of the different types of activity undertaken by the ICC. That would be useful information both for the internal management of the ICC themselves and to this House in terms of giving the House an appreciation of which areas of activity are more successful than others. That would be useful both from the point of view of managing the ICC and the House itself becoming informed of what is happening in the investment market, what areas are successful and what areas are not. Those are the main points I want to make about the ICC in themselves.
Another question that would need to be teased out here is the relationship of the ICC with NADCORP. The ICC have, as I have read out, a responsibility to make commercial equity investments and they have done that very well. NADCORP also have that precise role of making commercial investments and they are doing it very well too, but they have made investments in a slightly different sector. NADCORP seem to have concentrated very much on natural resources for investment such as fish farming which in retrospect may not be the best type of investment to have made, but they have that sort of emphasis whereas the ICC have more a record of investing in mature companies. Maybe the two are so different in terms of their focus that there is no need for any relationship between them, but it is fair to say that one thing we are short of as a small country is people with investment experience who have the disciplines, training and knowledge necessary to make good investments. It is a very difficult skill to acquire and we are not so overflowing with talent that we can afford to have the talent spread around. It would be better if people who have talent of that kind, who are working essentially for the same employer, the State, could be in closer discussion with one another in assessing good investments rather than put in artificially separate boxes. Part of the problems of this State in general is that we have far too many little boxes and our talent is distributed far too thinly among too many agencies and bodies. This point, very valid in a general sense, was made in this morning's newspapers from a book published by a former Secretary of the Department of Finance and Governor of the Central Bank, Charlie Murray. Perhaps in this area also that disease of undue separation and compartmentalisation exist. I will be interested to hear the Minister's response and remarks on the issue of the relationship between NADCORP and the ICC. I am not suggesting they should be amalgamated — in fact, I do not think they should. NADCORP have their own body of legislation with very clear functions and statutory controls built in, of which I am very proud. I have not been involved, but I think at staff level there might be something to be said for co-operation and sharing of staff in certain areas.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
We should draw attention to the fact that there is only one Fine Gael Deputy present; one from the Labour Party and one from The Workers' Party.
Quality.
Deputy Briscoe appreciates that Standing Orders allow any Deputy to draw the attention of the Chair to the fact that there is not a quorum. That has been done. We now have a quorum. Deputy Bruton to continue without further interruptions.
I now refer to the effect on the ICC of the opening up of international financial boundaries and the ability of people to provide banking services directly to the State from outside. Given that our rate of interest is so high and that our currency has been so stable within the EMS, very significant profits stand to be made by banks from outside this State, banks who do not have the necessity of running an elaborate and expensive local branch structure, by picking and choosing large borrowers here and offering them money from overseas. They need not run anything more than a very small establishment in the State. I could see the possibility of, for example, the Commerzbank, whose commentary I have here, wishing to become involved in that way in the Irish market and picking up the local plums from among the overall mass of credit, some of which is household credit which might not have the same record of repayment success as higher loans. It costs the bank almost as much to manage a loan of £1 million as a loan of £1,000, in terms of management time.
The ICC, in so far as they are engaged mainly in lending to industry, could find themselves facing quite substantial competition, particularly from well-developed banking interests on the Continent, in Germany and elsewhere, where funds are available at a much lower cost than here. In Germany the yield on a ten-year Government issue is around 8.4 per cent, which is very low in comparison with the yield which has to be offered here to borrow money. It would be interesting to hear the Minister's view on whether the banking directives will result in ICC facing a new type of competition which would be highly discriminating in that it would pick the more lucrative portfolios, leaving the ICC with the less desirable type of smaller business.
That brings into sharp relief the fact that there is such a significant difference between the prevailing interest rates here and interest rates in the central part of the DM area. In common with all the EMS countries, we are part of the DM area. Yugoslavia and a number of other countries in eastern Europe in pursuit of a hard currency policy have decided to link their currency to the Deutsche Mark. We are now part of one of the biggest currency zones in the world, yet our interest rates remain stubbornly much higher than the interest rates obtaining in the core of the DM area. The ICC will suffer from that because banks from the core area of the DM zone will be able directly to provide banking services in our market. The Government, for the sake of the ICC, must have a hard look, in conjunction with the Central Bank, at the reason our interest rates remain so much higher than interest rates in the Federal Republic of Germany.
The argument is made that there is a possibility of rather speedy outflows of money from this country. This does not mean that people decide to put their money in a bag and bring it somewhere else. Usually it means that people who have a debt decide to pay it a bit earlier or a bit later. The timing of the payment of a particular debt can mean that money flows out or flows in. People make such decisions on a daily basis.
Given that we have considerably relaxed our existing exchange controls — I believe financial controls will have to be done away with almost entirely under the 1992 programme — I do not think there is much we can do administratively to prevent people moving their money out. That is inherently part of the package we bought when we opted to support the free internal market. We cannot go back to exchange controls; in fact, I do not think exchange controls really work any more than I believe industrial tariffs are a particularly successful method of industrial policy. However, that argument does not necessarily arise in this debate.
The Government need to establish — I have asked for this before — a public inquiry of some kind into our interest rates. The Central Bank, in their annual report, report to this House on an ongoing basis on interest rates. They have made it quite clear, and I compliment them on this, that they are independent of the Government in the exercise of their judgment on interest rates. Unlike the Governor of the Bank of England, the Governor of the Central Bank of Ireland can tell the Minister for Finance to get lost, and has done so in as many words. I compliment him on doing that and I compliment the Minister on accepting it. It is to the credit of both of them that they recognise the institutional framework within which they operate. There is no criticism of anybody; it is perfectly normal for the Minister for Finance and the Governor of the Central Bank to have a different view about this matter. It is entirely legitimate——
Then why does the Deputy want an independent commission to be set up?
I am coming to that point. The persistence of this substantial differential suggests that perhaps there is need for somebody who is not directly involved, as the Central Bank are, in the day-to-day business of maintaining the value of our currency, the day-to-day operations that go along with ensuring that the external reserves of the country are maintained, the day-to-day management of the solvency of the banking system and of individual banks and the day-to-day management of interest rate policy, which is a very important and essential role and is correctly the province of the Central Bank. Someone with a longer perspective who does not have to defend a decision he took yesterday, which the Central Bank have to do — they have to take decisions every day — and does not have a natural sense of defensiveness about everything that is presently going on, should have a look at our interest rate policy to establish whether this very substantial gap which has grown up virtually in the last 18 months between Deutsche Mark interest rates and Irish £ interest rates should continue.
The Chair is feeling a little lonely for a reference to the Industrial Credit (Amendment) Bill.
The drift did not start during the past few minutes.
The Leas-Cheann Comhairle is not alone.
As I have said, I believe this gap is a potential threat to the Industrial Credit Corporation in so far as it gives a competitive advantage to banks located in Germany under the freedom of establishment and the freedom of the provision services Directive to offer loan capital here on a more competitive basis than can a body like the ICC who are operating in the Irish market.
The ICC could borrow in Germany.
This issue needs to be addressed by the Government in conjunction with their overall examination of the Industrial Credit Corporation. I hope the Minister will advert to this point when he is replying to the debate.
To sum up it is important that we consider (1) whether the Industrial Credit Corporation should have their loans guaranteed by the State in future; (2) whether the State needs to continue to be the 99 per cent shareholder or whether it should sell some of its shares; (3) whether the ICC need to have any limit placed by the Dáil on the amount of money they can raise in loans if they are raising it without a State guarantee; (4) the need to stop the Government in their intention to transfer the Fóir Teoranta portfolio to the ICC; (5) whether the accounts of the ICC should contain specific profit and loss and asset depreciation-appreciation figures in respect of each of their separate forms of activity; and (6) the need to examine urgently the vulnerability of the ICC under the banking directives of the European Community in terms of competition coming in from areas where interest rates are lower, and to ask whether the ICC's corporate strength needs to be enhanced, possibly by bringing in outside capital to enable them to compete, and the need for the Government to establish a public inquiry or some other investigation into why interest rates both for Irish industrial and domestic borrowers are so much higher than those which obtain in the other markets of the Deutsche Mark zone. I thank you for your forebearance, Sir, while I made those points.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
The net effect of the Bill before us will be to provide an additional feather bedding device for the private sector. As Deputy Bruton rightly said, the Bill throws into sharp focus the whole area of industrial policy in Ireland — what it is designed to achieve, what it has achieved and how it would be assessed in the overall picture.
It is often put about that we are doing extremely well on the industrial front and that this brilliant Coalition Government have devised an industrial policy that is producing the results required by the people. That is a myth. The test of whether the industrial policy is a success is the response of the people. What do the people require from an industrial policy? First, they require that it should provide the jobs that are needed, particularly by the young people, so that those who wish to stay and work in this country have the opportunity to do so. Quite clearly that is not happening at present.
We have an unemployment rate of between 150,000 and 200,000 people and an emigration rate of approximately 40,000 people a year. That has been the case for some years. Our percentage rate of unemployment is the highest in the European Community. We are at the top of the league in that area. That is some league to be top of, something to be proud of. Where is the success that we were promised? The success, if it can be called such, is that we are at the top of the league in regard to unemployment rates in the entire European Community. We have an emigration rate, year on year, that is a disgrace. People are not emigrating because they have any particular wish to leave the country; nothing is dearer to their hearts than to have the opportunity to stay on here, work and build up this country rather than going abroad to help to build up other countries, which they have done in their thousands and are continuing to do. The truth is that the industrial policy applied here over the years has been and is an abject failure.
The Bill before the House this morning is a further twist of the screw, a further ramming down of those policies, a further determination by the Government to put their trust in private sector industry, the sector which has failed the country badly. Who are the private sector? This question should be activating the minds of those in Government but I am afraid it is not. The overwhelming bulk of industry here is now foreign owned; it is owned by foreign corporations, multinational corporations and foreign banking interests of all kinds. That trend is continuing. The volume of industry we have left in the country that is Irish owned is small and getting smaller all the time.
Deputy Bruton wondered about the outflow of money and speculated as to its cause. He did not, unfortunately, advert to the primary cause which is that it represents the profits being made out of this country by foreign industries being shovelled back home to the United Kingdom, Japan, Germany, the United States and so on. That is the reason for the outflows Deputy Bruton was talking about, but nothing is being done about that.
There is talk about commissioning more reports, providing more consultants and so on. However, we have the reports already. They are left lying on the shelves and nothing is done about them. We had the Telesis report which signalled what ought to be the way ahead for industry here, namely, that the Government should be involved in setting up locally based firms of a sufficient size as to enable them to operate competitively on the international markets and thereby secure job needs here at home. Nothing has been done about that. The Telesis report advocated joint ventures under which the State sector and the private sector would combine to build up firms of sufficient size as to enable them to compete in the international trading sector. The Government, however, concentrate on feather-bedding the private sector, boosting the financial interests of their own friends and cast aside the State sector which alone holds the key to providing the employment we need so badly.
Over the years the Government have constantly levelled criticisms against the State sector saying it would have to be self-supportive and could not be a drain on the taxpayer. When it happens, however, as has happened frequently, that there are many excellent State companies doing extremely well they are attacked by the Government. Aer Lingus comes under attack from the Government when they are doing extremely well, providing magnificent employment, making excellent profits. How do the Government respond to that? Routes are taken away from the company and given to the private sector, Ryanair and so on. The taxpayer, on the other hand, is called upon to subsidise the private sector when it falls into difficulties. We saw that with ICI and with Dublin Gas.
Here the Government are feather-bedding their own pals in the private sector. They are doing that in the Broadcasting Bill which is pending. The Bill now before the House is providing an additional facility of £200 million for the ICC to make available to the private sector. Should the House agree to that? It is the private sector who will benefit from the Bill before the House. The taxpayer is providing guarantees to provide additional funds for the private sector. That requires a great deal of trust because we know that Fianna Fáil in particular have very close links with the upper echelons of the private sector. They are buddies and they arrange affairs in this country so that those private sector companies are subsidised by the taxpayer. This raises the question of trust and confidence as far as the Government are concerned. If we had a Government in which we could have confidence and trust, a Government who operated with honour as their guiding principle, there might be something to be said for this. However, yesterday we saw how the Fianna Fáil Party can engage in an exercise of dishonour. There was an agreement reached with a Fianna Fáil backbencher that he would speak on the Bill for a specific period of time but he failed to honour that commitment.
The Deputy is being dishonourable in his intepretation.
The Deputy was dishonourable with the connivance of the Minister.
With all due respect, the Deputy is completely out of order.
The Deputy is out of order.
Minister, I will determine when a speaker is out of order. The Deputy in possession is in order.
I would be happy if the Chair determined when a Member is out of order. What Deputy Taylor was saying was not true.
Acting Chairman
Deputy Taylor should be allowed to continue.
Before the House could consider making this facility of £200 million available to the Government it must have a degree of trust and confidence that the Government in using those funds through the Industrial Credit Corporation—
Is the Chair saying that Deputy Taylor is in order? The Chair should bear in mind that this is on the record.
Acting Chairman
Is the Deputy anxious to make a point of order?
I am. My point of order is that Deputy Taylor is totally out of order.
Acting Chairman
That is not a point of order.
Excuse me, it is a point of order and I suggest that the Chair consult with the adviser in front of him.
Acting Chairman
We are dealing with the Industrial Credit (Amendment) Bill and I am ruling that Deputy Taylor is in order.
I suggest that the Chair ask the adviser in front of him if Deputy Taylor is in order.
Acting Chairman
I am declaring that Deputy Taylor is in order.
I can assure the Chair that he is not in order and the record will show that he is not in order.
The problem about the Fianna Fáil Party is that they have a guilty conscience and when they are found out in such matters——
We are not guilty of anything.
Acting Chairman
Deputy Briscoe, there has been enough disruption of the proceedings of the House yesterday and today and the Deputy should not argue with the Chair.
Is this the Chair's idea of fair play?
When they are found out all they can engage in is bluster. The thrust of the Bill before us is to make an additional £200 million available to the ICC. In effect, the taxpayers are being called upon to guarantee an additional £200 million to the ICC for disbursing among Fianna Fáil friends in the private sector. Before agreeing to the Bill the House should give careful consideration to whether the Government can be trusted with that money and allow the distribution of it to private sector companies in an honourable way. I should like to thank the Chair for agreeing that I was in order in pointing out that the events of yesterday throw grave doubt on that. A dishonourable event took place in the House yesterday when a commitment given by a Fianna Fáil Deputy was broken.
I wish to object to that remark. There was no commitment given. I have checked this with the Deputy in question and Deputy Taylor is telling a falsehood. I want that to appear on the record of the House. We are having a backhanded interpretation and the Deputy is being disorderly.
I am not telling a falsehood. I am giving the correct version of what occurred. I consulted with Deputy Michael Higgins and he assured me that he was told by Deputy Callely that he would be speaking next and would occupy the time of the House for the following 20 minutes.
Acting Chairman
I have allowed the Deputy some latitude to make his point and I would be grateful if he would return to the Bill before the House.
Is it in order to ask the Minister why he did not permit Deputy Callely to go on "Morning Ireland" this morning and answer the question himself?
Acting Chairman
As I said earlier, we have had enough disruption of the House and Deputies should debate the Bill before the House.
As long as the record shows what I said——
Acting Chairman
The Minister should not interrupt.
I must ask who will benefit from this additional £200 million. Who will benefit from the money that the Government are seeking to make available by State guarantee, by guarantee of the taxpayers? Who will have the control of that money? The Minister for Finance is a shareholder and, for all practical purposes, the director and controller of the ICC and, therefore, directly or indirectly those funds will be under his control. It is for that reason that I raise the question of trust. We have a dishonourable Government and I have given the reason why. Yesterday a Minister connived with a backbencher to breach an undertaking given to another Member. The House must exercise great caution before making £200 million available to a company that is under the control of the Government.
The Government would be better employed directing their energies towards developing and expanding the State sector. Deputy Bruton referred to the inertia of the State sector. One wonders about such a statement when one considers how well RTE are performing, how well Aer Lingus and other State companies are performing, despite attacks from the Government. State companies, when they are doing well, are set up by the Government for privatisation, to be sold off to pals of the Government, to millionaires and supporters in the private sector. It is important that that is spelled out. Deputy Bruton commented about inertia in the State sector because for all practical purposes he agrees with the sentiments of Fianna Fáil and the Progressive Democrats about the State sector. They do not want the State sector; they want it privatised when it is doing well so that the profits and the benefits can go to their pals and backers, the millionaires who are making huge sums of money out of the State sector.
The Deputy should be careful.
I recall that during a debate on a radio Bill in the House the late Deputy Frank Cluskey pointed out that the only difference between Fianna Fáil and Fine Gael on that issue was whether the benefits of the natural resource of the airwaves was to go to the Fianna Fáil capitalists and backers or the Fine Gael capitalists and backers.
The Deputy is leaving himself open to criticism.
This may be why we have a measure of agreement between Fianna Fáil and Fine Gael, with the Progressive Democrats trailing somewhere in the background.
Acting Chairman
The Deputy should return to the Bill.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
The thrust of this Bill is that an additional guarantee of £200 million is to be given by the State for the Industrial Credit Corporation. While it is true that, so far, previous guarantees given by the State — for "the State" read "the taxpayers"— no call has been made on them. However, one can never be certain about anything in life and, as we know, major successful companies — even banks and insurance companies — have failed in the past. There is always some risk that any industrial venture could go under and it is conceivable that the taxpayer might be called upon at some stage to meet the guarantee. It is highly unlikely but, nonetheless, a guarantee is a guarantee and the taxpayer is being asked to give it.
If one had been asked some years back whether there was a likelihood of the Insurance Corporation of Ireland going under and that the taxpayers would have to pick up the tab, the Minister would have shaken his head — in the same way as he is shaking it now — and said that it was ridiculous and could not happen.
That happened when the Fine Gael-Labour Government were in office.
Banks, insurance companies and major companies and corporations have failed and there is always a risk, when one is talking about investment in industry, that the guarantee would be called in. Queer things could be going on in the Industrial Credit Corporation — I am sure that is not the case — but then queer things are going on in the Fianna Fáil Party and there is trickery in their arrangements. I accept that the risk of the taxpayer having to meet this guarantee is very small but, even if it is minute, why should the taxpayers undertake even the slightest risk on this issue? Will they receive any benefit from giving the guarantee? That is the issue in question. When one undertakes a risk — even a minute one — there is a commensurate benefit to the person who gives the guarantee. What will happen in this case? If loans are made by the Industrial Credit Corporation to various firms and industries in the private sector, if those firms do well, make very good profits and declare huge dividends, will the taxpayer get any benefits? Not at all. The private sector and the backers of the companies will get the benefits. The private sector stand to gain the benefit whereas the taxpayer undergoes the risk, which is totally unacceptable.
No less a personage than the Taoiseach, when he was in Opposition in 1985, made a speech dealing with the ICI débacle which is quoted in The Irish Times on Thursday, 7 June by Fintan O'Toole under the heading “An Irish Solution to Private Enterprise”:
He wanted, he said, from the Opposition benches, "to protect the interests of the taxpayers and ensure that the taxpayers were not compelled, directly or indirectly, to assume responsibility and pay the bill for something which was not of their making and for which they had no responsibility ... If a mistake is made involving major losses, then those losses could and should be borne by that private financial sector and not by the taxpayer. It would be an absurdity, an unacceptable injustice and totally ridiculous if the general public, the great majority of whom have never benefited one iota from banking profits ... were asked to step in and take up an additional burden because of someone else's mistakes ... The taxpayer has no responsibility for the matter and would not have benefited one whit if the acquisition of the ICI by AIB had proved a complete commercial and profitable success. In such circumstances nobody would have come here with a piece of legislation seeking to provide that those profits would be applied to the benefit of the Irish taxpayer or to the benefit of the Exchequer".
I agree with everything he said.
But Deputy Taylor's party were in Government then; why did they not take his advice?
Why does Deputy Briscoe not control himself. You are a great man for chipping in.
Acting Chairman
Deputy Taylor without interruption. Deputies might also address their remarks through the Chair.
On a point of order, I wonder if Deputy Briscoe intends offering; I want to make a telephone call?
Acting Chairman
Deputy Taylor to continue.
I am quite sure he does not but is contenting himself with chipping in——
No, what the Deputy is saying is hypocritical.
Is the Deputy saying he does intend offering?
I will, of course.
Acting Chairman
Deputy Taylor to continue, please.
When he does he can speak about hypocrisy; he knows all about it.
Deputy Briscoe says he can offer. I trust that his commitment in that regard can be better relied on than the commitment that pertained yesterday on the part of one of his colleagues.
If I can get in I will but, if I cannot, then I will not.
Acting Chairman
Deputy Taylor without further interruption.
Let us be fair——
Acting Chairman
Deputy Briscoe, please.
——when his party were in Government why did they not do something about it?
The general principle ought be — as Deputy Haughey then said — that the taxpayer should not be involved in taking any risk, however small, when he does not stand to gain from any profits or benefits accruing therefrom at a later date.
As Deputy John Bruton said — and in this I agree with him — there are banks aplenty from which the private sector can borrow and to which they can have recourse. Why does the taxpayer have to be involved in that issue here? If it were the position that the Industrial Credit Corporation were going to be developed by the State, as a State bank, with full powers to operate in the same way as does the private banking sector, that would be an interesting development, although I would have genuine fears that the intent would be to privatise them when they would begin to do well. That is the whole thrust of this Government's policy. I wonder if the expansion being granted the Industrial Credit Corporation under the provisions of this Bill is designed merely to lead to privatisation of a fine State-owned company in the same way as they plan to get their greedy fingers, for example, on the benefits of Irish Life and Aer Lingus; goodness knows what they are about. They speak critically of Margaret Thatcher on these issues but they emulate her economic policy here. There is no Government better at espousing Thatcherite policies than the present one.
What are they about here? Are they about converting the Industrial Credit Corporation into a State bank allowing them compete with the private sector banks in a full, free and open manner? Is that what they are about; why not? That would be a fine objective. Why not set about doing it? Since, as the Minister said in the course of his remarks, the Industrial Credit Corporation are doing that well, why mess about with half measures? Why not go the whole hog and give them full banking powers to compete in a proper, effective manner with the other private sector banks? I am quite sure they have no intention of so doing. As I said, if they did, then they would privatise the corporation quickly before taxpayers could gain the benefits therefrom, to which they would be entitled.
The Government have spent years ticking off the public sector, contending that it must be profitable and so on. Then they proceed to attack it when it achieves just that. One cannot be confident that this Government will adopt policies in the interests of taxpayers. Their interests lie elsewhere, with their backers, with the capitalists who are behind them. Their manner of Government is tricky, underhand, sleight of hand. One must have great caution about the matter in those circumstances.
This is only one of a series of measures we have been discussing and which mark out a piecemeal approach to the entire question of industrial policy, which is effectively what this debate is about. At the end of the day it will not be a matter of great moment whether the borrowing limit of the Industrial Credit Corporation is £800 million or £1,000. What is more relevant is what will be the future of the ICC, what analysis can be undertaken of their role at this stage?
Already we have had circumstances in which, during the discussion of the Finance Bill, the Minister for Finance proposed a particularly important provision, in terms of the advantageous tax rate applicable to foreign companies locating here, when he extended it to the year 2010. Then last week or the previous week we had the Second Stage of the Bill to dissolve An Fóir Teoranta. Today this Bill is designed to increase the borrowing limit of the Industrial Credit Corporation.
The connecting factor in all these three measures is that they all relate to industrial strategy, to the effectiveness of our industrial policy. It seems to me surprising that we are proceeding apace in this ad hoc fashion when it is known that a major review of industrial policy is about to be concluded, that the publication of the triennial report on industrial performance is due — according to the Minister for Industry and Commerce — within the next two to three weeks. If that assessment of industrial performance over that period is as critical as is being suggested, it seems to me we ought to have waited to take a major look at its findings before introducing the types of changes that have been brought forward over the past few weeks.
There is no doubt that this is the major discussion of the nineties. The only reason we have all of the difficulties endemic in our economy — about which Deputy Taylor spoke — in terms of levels of emigration, unemployment and poverty is that over the years our industrial policy has failed to put sufficient of our people to work. One can revert to 1933 when the Bill to establish the Industrial Credit Company was introduced. Right from the protectionist days of the thirties and from the days of concentrating on the attraction of foreign capital in the sixties to date, we have not managed to put sufficient of our people to work. That is the basis of the poverty trap. That is the basis of the number of people still unemployed. Indeed it is the basis of the revival of emigration to a level we have not witnessed since the dark days of the mid-fifties. Therefore, one can only conclude that industrial policy has failed. It is my submission that it has been a costly failure. I do not believe that the Bill before us will make any significant contribution in that respect. But, if we were to await a major review of our industrial strategy, it might well be that we would witness a different role for the Industrial Credit Corporation.
On a point of order, as the subject matter of Deputy Rabbitte's contribution is of the utmost importance, I think there should be a quorum present to hear it.
We will remind Deputy Taylor of that the next time he is knocking The Workers' Party.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
I was particularly struck by the praise the Minister lavished on the way ICC have executed their role down through the years. He was particularly praising of their record on profitability since 1969 and so forth. One can only be struck by the fact that the Minister was so fulsome in his praise of what is in fact a State company against the background of what is happening outside this House. The Minister is apparently unconscious of any irony in praising the traditional role of ICC in a situation where his colleagues in Government are at this very moment putting the final pieces of the jigsaw in place for the sale of Irish Life, the Irish Sugar Company and the Great Southern Hotels. I think we will have to tease out the reason that he is so praising of ICC. After all, if the Government were seriously concerned about looking for remedies for the failure of our industrial policy, it seems to me that the last thing the Irish economy needs is for the State to lose the control and influence it can exert through a company the size of Irish Life.
The Minister can take us through the history of ICC since 1933 and praise it against the background where commercial State companies that have the capacity to generate wealth and employment and tackle the problems which Deputy Taylor spoke about are being teed up for privatisation. I think that kind of double think is part of the reason we are in the hole we are in, economically speaking. I wonder if the praise the Minister has lavished on ICC is entirely merited? In his speech he said that this company have shown a profit in every year since their establishment in 1933 and have paid a dividend to their shareholders in most years, including every year since 1969. Because of the extraordinary developments in this House last evening one was unaware of the scheduling of this particular legislation and therefore one had no opportunity to look back over the accounts of ICC. It occurred to me that it is something of an anomaly that the ICC accounts are not audited by the Comptroller and Auditor General. Perhaps the Minister would address the reason that is the case and say why the Comptroller and Auditor General — who performs this function so effectively in other areas of public spending — should not be responsible for monitoring the performance and administration of ICC?
After all, one of the few functioning committees of this House, the Committee of Public Accounts, have the opportunity on behalf of this House in conjunction with the Comptroller and Auditor General to express the views of the elected Members on the efficiency of administration of public spending voted by this House and I do not see any reason that should change in the case of ICC. Certainly the figures I have managed to tease out give a somewhat different picture from the one presented by the Minister. For example, during the course of his speech, the Minister drew our attention to the after tax profits and he said how pleased he was that profits after tax reached over £10 million in 1989, excluding an exceptional item of £5.5 million.
I would like the Minister to address how fair a picture that presents of the performance of ICC? I understand the exceptional item the Minister has chosen not to spell out is the sale of property by ICC. My understanding is that the figure of £10.3 million profits is a figure before the exceptional item was taken into account and accordingly the profit figure looks much different. It looks dramatically different when one looks at the losses endured by ICC on the exchange rate guarantees that have been operating over the years. If my figures are correct — I confess I had little opportunity to study this — the loss on the exchange rate guarantees for the Department of Industry and Commerce alone were of the order of £14 million last year and perhaps we could add £1.5 million losses in respect of the Department of Tourism and Transport. Therefore there is a hidden subsidy provided by the Exchequer of some £15 million in 1989.
In true accounting terms the actual position for ICC in 1989 is not of the rosy complexion painted here but is an actual loss because of the hidden subsidy. Coincidentally, before I knew anything about this I put down a question to the Minister for Industry and Commerce on 6 June, Question No. 88, dealing with an aspect of this matter. I asked him, having regard to the figures that were presented in the Book of Estimates, showing that the Exchequer wrote off £14.1 million in 1989 and £7.9 million in 1990 in currency exchange losses on foreign borrowings by the ICC, to indicate if it was intended to continue with that subsidy in the event of any changes taking place in the character or ownership of the ICC. The Minister confirmed in his reply that: "The currency exchange losses in question refer to foreign currency loan schemes operated by ICC in respect of which the exchange rate risk has been covered by the Exchequer". It would appear that he is acknowledging that my figures are correct. He goes on to say:
The losses are reflected in ICC's annual accounts which are laid before the Houses of the Oireachtas each year by the Minister for Finance. The schemes in question are, in fact, due to expire over the next few years.
The Minister of State dealt with that matter at some length in his introductory speech this morning.
The point I am making is that there is a hidden subsidy here to Irish business and the profitable track record of ICC is not as we might imagine. Is this the way we ought to disburse hard-earned taxpayers' money to industrial enterprises? In 1933, in an era of protectionism and tariff barriers, the business environment was entirely different. There may have been, and probably was, a valid role for a State bank like the ICC at that time but the situation has changed dramatically, and not for the reasons outlined by Deputy Bruton. He said the reason Government policy cannot change and adapt to new conditions — and I think I quote him correctly — is a tribute to the inertia of the State sector. I cannot understand how the inertia of the State sector comes into it. Rather it is the inertia of our political policy makers to change and adapt with the different business environment that operates in free market conditions in 1990. Maybe our political policy makers do not want to change, that it is convenient to have yet another financial prop for less than successful businesses, businesses which cannot raise money from the commercial banks, and that the money ought to be available to them as another hidden subsidy from the State.
Any serious examination of industrial policy will show that there is a range of such State agencies in existence, at very great cost to the taxpayer, whose primary role seems to be to buttress and support private enterprise. There is an entire range of agencies, from the stage at which companies are attracted here, to the matter of training being provided at a cost to the taxpayer, to favourable loans that can be secured through the ICC, right across to the whole area of professional bodies such as EOLAS, Teagasc and such bodies all of which are available to the private sector. I am not arguing for the privatisation of ICC, and I want to return to that point, but I am saying the position has changed completely. The position when there ought to be available to private enterprise a choice of areas from which it can get favourable loans from the State needs radical examination at this stage.
The ICC were born in the conditions I have described, in order to provide cheap loans for Irish businessmen. The ACC were born in similar circumstances, in order to provide favourable loans for the farming community. Would the Minister care to address whether, in his view, the time has come to consider whether we want to continue both of these banks in their present form, operating separately, and both subsidised to the extent that I have indicated? I am being put off my stride by Deputy Roche constantly smiling at me. Can I be of any assistance to the Deputy?
Deputy Rabbitte should not be so paranoid. I was merely indicating that my contribution would be very short.
Shorter than Deputy Callely's.
This is something that is greeted with relief by the House.
I would imagine the Deputy's contribution will also be shorter than usual today.
Acting Chairman
Please, Deputy Rabbitte must continue.
The question of the audit being performed by the Comptroller and Auditor General is one that I would like the Minister to address. We ought to call a spade a spade. If the ICC are being used as a channel to provide funds to industry and there are hidden subsidies as provided in the Estimates, as I already put on the record in respect of 1989, in order for us to be able to make an assessment and do a proper audit, those figures should be up front. Similar figures in the case of the ACC are even more striking. I query whether the time has now come to rationalise both banks so that we could look again at what was the primary role of the ICC when they were created by this House in 1933. Its primary role was to enable the State to take strategic shareholdings in Irish business. As has already been said, the ancillary role was to make loans available at more favourable rates than the commercial banks and that has completely predominated in the existing sense of the ICC.
In the discussion of the Bill to dissolve Fóir Teoranta, I referred to the fact that my party recently published a document on the need to reconsider the effectiveness of our industrial policy. In that document, called A Framework for Industrial Development, we query whether we can afford to continue to give free handouts and subsidies to private industry in the manner in which we have been doing at an accelerating pace for more than 30 years rather than the State to shift its emphasis towards making loans available taking shareholdings as a quid pro quo in key industrial firms. In other words, we cannot go forward without some agreed plan for the future of industrial policy. There is a necessity to identify certain areas of the economy as having the potential for growth and to trade internationally their goods or services. If one can identify those particular areas of the economy it would be more a productive way, that instead of giving free handouts in the manner we have been doing, that we consider taking stake holdings in those companies, not least because of the necessity to protect the investment of the taxpayer but because it would provide us with an opportunity to influence the direction of industrial development. The State as a shareholder in that context would have the ability to exercise some influence over the direction of industrial policy. It is ironic that that was one of the main components of the raison d'etre of the Industrial Credit Corporation.
Deputy Bruton was of the view that it would not be sensible to raise the question of whether rationalisation of the ACC and the ICC was feasible but it seemed to me — and I was here for most of Deputy Bruton's contribution — that at the end of the day he was raising the spectre of privatisation for the ICC. He certainly seemed to be hinting that they had outlived their usefulness and that there was no particular reason the Minister for Finance should continue to hold the shares in ICC. I do not agree with that view. There is a future for the ICC, perhaps in some arrangement, similar to that which I mentioned for the ACC.
In addition to my feeling that the rosy picture presented here is designed to induce us not to ask too many questions in the context of overall industrial policy of this continued role for the ICC, I am somewhat concerned by the losses that have been registered in terms of the guarantees that have been given on the exchange rate. The Minister refers to the fact that the borrowing includes deposits with the company but also ordinary borrowing which he said has been done mainly on the inter-bank market. Regarding the figures I mentioned earlier it appears that there is a significant and disproportionate loss on the guarantees given on the exchange rate. How is it that having regard to the favourable position of the pound to the yen that we could manage to make exchange rate losses in that area? Is it because there are State guarantees that the same caution is not exercised as would be exercised if it were otherwise? The amount of the subsidy provided is reasonably significant in the context of the total trading position of the company. If you subtract that figure of £15 million approximately from the gross interest income for 1989 you will find that the subsidy is equivalent to something of the order of 23 per cent. I would like to hear the Minister address that point. There may be a perfectly logical explanation for it but I do not think it is necessarily desirable that the taxpayer should continue to be expected to fund losses in this area.
I hold the view that it is a pity we are continuing to approach this entire area of changes in our expensive and failed industrial strategy by bringing forward, in a piecemeal fashion, measures such as I have suggested both in terms of extending the special tax rate for the manufacturing sector, the dissolution of Fóir Teoranta and the vesting of their assets and liabilities in the ICC, and now this change in the case of the borrowing limits of the ICC. The question is much broader and we are effectively pre-empting some of the decisions we might make based on what I hope will be adequate time provided in this House to discuss the findings of the triennial report on industrial performance which will have available to us — as I understand it — before the House rises.
I hold the view that for a Government who have completely and so dramatically changed their stand on the State sector as compared with where they stood at the 1987 election——
There have been changes since then.
——the Minister's praise for the ICC rings very hollow indeed. Immediately prior to the 1987 election the Taoiseach gave an undertaking to the Congress of Trade Unions that Fianna Fáil would always value and cherish the role of the commercial State companies and that under no circumstances was the privatisation of the State companies on the political agenda so far as Fianna Fáil were concerned. Now the situation appears to have changed utterly; the more profitable, the more effective and the more significant in the Irish economy the particular State company happens to be the more it appears to be targeted for privatisation. It is extraordinary at a time when we hear so much about the necessity to level the playing pitch that when a particular State company is successful the Government feel it is necessary to take extraordinary measures to either constrain that success or hive it off to the private sector altogether. We have seen a number of examples of that during this term, none more outrageous and brazen than this week in the measures introduced to this House by the Minister for Communications in respect of RTE.
While this House was sitting this morning it was announced outside that Cablelink has been taken from the ownership of RTE. Whatever the reason for the siege mentality of this Government towards RTE that is one State company that is destined to discontinue their proud record of achievement, success, growth, development and public service to the Irish people if these measures go through the House. I do not think it is possible to come up with any major review of industrial policy that does not give a key role — I am not making an ideological point — to the State sector that has funded Deputy Roche so adequately all his working life. Those key companies must include Irish Life. Irish Life already have a number of significant stake holdings in private firms and, therefore, is in all the more influential position for that.
Now we are told that before the House rises for the summer recess the Minister for Finance will bring before us legislation that effectively is designed to sell off that valuable strategic State company to the private sector. This House cannot consider a major review of industrial strategy which does not have regard to an industry the Minister knows better than I and that is the food sector. If we cannot use our natural advantages in the agricultural sector, and in the food area in particular, to create jobs, based on natural resources, I do not see any prospect of us ever tackling the extent of unemployment, emigration or poverty.
I cannot understand the hostility to the argument that the Irish Sugar Company be used in developing that sector, yet the Irish Sugar Company are targeted for disposal to the private sector. The same is true in the case of a number of the other examples I have given. Therefore I take with a grain of salt the praise the Minister has lavished on the ICC. I think he did so for the wrong reasons, that it is in the event of the other cows running dry, another option to suckle Irish businessmen who cannot raise money on the commercial market. This in turn allows the commercial banks to continue to evade their responsibilities in this area. Unless there is a cast iron guarantee the commercial banks will hive a person off to Fóir Teoranta or the ICC.
The Minister has told us that he is to invite in consultants to advise him on the future development and capital requirements of the ICC. I am not sure whether this portends a change in the ownership structure of the ICC or whether it prepares the way for their privatisation. The Minister should tell us if it is the intention to retain the ICC in the ownership of the State because, notwithstanding the necessity to have regard to the changing environment since the ICC were founded, I still believe they could play a very significant role in any revamp of industrial policy and that the privatisation of the ICC is not desirable. We should look at whether some rationalisation is possible, for example, with the ACC.
According to the Minister the main strengths of the corporation lie in the high regard with which the institution is held by Irish business and its range of small and medium sized business client firms. I have no doubt that within the parameters laid down the ICC are doing a worthy job but I am always sceptical of this kind of undiluted praise from Irish business concerning the service being provided to it by the ICC. I am wondering whether it is not being given for some of the reasons I have outlined.
I would also like the Minister to comment on the fact that what was the corporation's secondary role when founded, their lending role, has predominated and why we were so shy of identifying companies with considerable potential but who were, in the short term, in need of capitalisation and why we did not take shares in companies in those circumstances. Can a logical argument not be made for bringing NADCORP into the equation at this stage? I am aware that they have their own specific terms of reference but I do not think NADCORP have been allowed to function in the manner envisaged. Surely, the concept and idea——
Notice taken that 20 Members were not present; House counted and 20 Members being present,
It is not good enough to bring forward legislation to this House that does no more than once again provide for an increase in the borrowing limits of the ICC in the same manner as has been done so many times in the past. The last review provided for an increase in the borrowing limits from £400 million to £800 million in 1983-84. Now we are doing no more than making that one change again. I do not know whether there is any significance in the request the Minister makes in section 3 of the Bill which requires our agreement to allow the corporation to alter their articles of association——
It is just enabling.
——whether it is to enable the borrowing limit to be increased or whether it has any connection with future ownership of the corporation. I will accept the Minister's commitment if it has no significance in terms of the ownership or whether the shares continue to be vested in the Minister for Finance. However, having regard to the fact that this bank was founded in the thirties, and all the attention this House devotes to considering the future of the bank is to continue periodically to raise the borrowing limit, it seems a grossly inadequate response to the dramatically changed business climate since the thirties. Surely there is an obligation on us now to look more deeply at the role of the ICC. If the ICC have reached the limit of their borrowing facility at the moment I have no objection to facilitating an increase in that in order to continue the business.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
On a point of order, I want to put on record that the Labour Party could not provide a speaker in the House yesterday or on the business last Friday and are totally disruptive in the way they are behaving here this afternoon. They should be thoroughly ashamed of themselves. They have no credibility whatever.
I would like to put on record that Deputy Spring walked into the House when there was no Labour Deputy present, called a quorum and walked out of the House.
It is up to the Government to provide a quorum.
I ask Deputy Rabbitte to continue the debate.
(Interruptions.)
On a point of order, Deputy Roche has interrupted and attempted to speak totally out of order and he did not raise a point of order at all, so I will not be lectured from that quarter on any subject.
Acting Chairman
I am deciding on a point of order. I call Deputy Rabbitte.
He should call the Fine Gael management committee.
You fellows will need a management committee next week.
May I make a small point? I was waiting for four hours to contribute to this debate. Now I have to go to a meeting of the CPP and that is why I am accused of running away from the debate.
That is incorrect. The Deputy has been here for the last half hour.
I am sure we can rely on Deputy Roche to do the right thing at the meeting of the CPP and that the misadvice given this morning to the Ceann Comhairle will be corrected.
Acting Chairman
Deputy Rabbitte, I have to call you to order. Please continue.
I was saying that if the ICC have reached the limit of their borrowing and guaranteeing facilities I have no objection to that limit being increased. However, it is not a good enough response from this House that the only attention we devote to this subject is periodically increasing the borrowing limits and facilities for this State bank. The situation has changed so dramatically that there is a necessity for us to look at the entire role and functions of the ICC and whether they may not be enabled to play a more productive role in industrial expansion in the years ahead.
In his contribution this morning the Minister drew the attention of the House to the dissolution of Fóir Teoranta and he said that the Fóir Teoranta (Dissolution) Bill will vest in the ICC the assets and liabilities of Fóir Teoranta, but he said, "There is, however, no connection between this Bill and the Fóir Teoranta Bill". Does that mean that in no circumstances will the ICC in the future be required to play any role similar to the role traditionally played, or at least since entry to the EC, by Fóir Teoranta? In other words, will the facility that was there to rescue a corporation who were considered in need of some restructuring or some short-term assistance but were considered to have some potential in the medium or long term now to be terminated? Is the Minister saying we must in future rely entirely on the changes being discussed currently by the Special Committee on the Companies Bill, in other words the introduction of the American style chapter 12 mechanism which would enable an examiner to be appointed in certain circumstances to stymie the outflow of funds to creditors where it is considered not necessary and not desirable and that the company had good medium-term and long-term prospects?
Is the vesting of the assets and liabilities of Fóir Teoranta in the ICC not a signal to some sectors of Irish business, or will it not be taken as such, that the ICC may now be requested to play a similar role in the kind of circumstances we have dealt with in the past? I am not entirely opposed to the motion of the winding up of Fóir Teoranta, for reasons I have previously given, but we have not devoted enough attention to the immediate post-1992 effect on vulnerable sectors, if such sectors are left in Irish industry. Will there be a necessity for short-term assistance? Are we cutting off and option for companies in those circumstances who will be purely at the mercy of free market forces post-1992?
My preference with regard to the future of ICC would be for greater emphasis on its primary role, that of identifying, or having identified for it, areas where capitalisation is necessary in the short term. Rather than making it available in the form of loans, which was envisaged as an ancillary role, stake holdings might be taken by ICC in those firms. The primary purpose of State investment is to achieve a reasonable social or economic return. It is beginning to be agreed on all sides of the House that since resources are finite we cannot continue to spread the butter as thickly as in the past; we cannot continue to scatter grants, subsidies, advice and technical assistance across the entire industrial sector without discrimination or selectivity. It is not working, nor is it producing jobs. Letting everybody put a first into the jar of sweets is not producing desperately needed employment. It is becoming more and more accepted — outside this House if not inside — that there is a need to be more selective in the areas the State must support. More attention will have to be given to identifying winners rather than losers. Too much good money has been thrown after bad because of the former approach. In the future it will be necessary to select areas or subsectors of the economy which have potential for growth and the enhancement of our export figures, generating jobs and creating wealth.
My contribution will necessarily be short because we have had an extraordinary filibuster, much of which was not relevant to the Bill. An extremely good contribution was made by Deputy John Bruton and I agree with much of what he had to say. My only comment is that it is extraordinary that a man who for so long spoke about Dáil reform should take so long to say it.
That should not be a new experience for Deputy Roche.
As I have said more than once in this House, Fine Gael's origins show through every now and again when they try to stymie free speech.
That is rich, coming from over there.
The Bill has much to commend it. I cannot see anything wrong in increasing the borrowing requirements of ICC. It is a procedure which has long been adopted. If people gave mature thought to the idea they would see that it is an excellent way of keeping control of State borrowing requirements.
ICC has done extraordinarily well since its foundation. Economic circumstances have changed dramatically since then. The ICC and ACC were set up specifically because commercial banking refused to support native industry or agriculture. The charter setting up the ICC was incredibly far-sighted in that it effectively incorporated the view that some day it would be a mature bank which would pass to the private sector. Most of the staff in ICC feel that this period has come to pass. I do not agree with the idea which has been floated in some lengthy contributions that ICC and ACC should be married. That might be a fundamental error because the ethos which exists within each would suffer.
The Bill is designed to tidy up arrangements and to extend the power to borrow up to £1,000 million. There is no problem in doing this because the company has been so successful and so well managed. The Bill has a great deal to commend it. I wish I had more time to deal with the issue of ICC's possible future. I believe ICC has reached the stage where it would be prudent for the State to consider realising its investment in ICC and investing the funds thus released either in the reduction of the national debt or in fruitful investment in other areas.
I was interested in Deputy Rabbitte's contribution on his party's new industrial policy, on which I compliment them. It is a heck of an improvement on the party's previous industrial policy, which seemed to be to close down private industry.
I regret that my contribution must be so short. A CPP meeting is in progress and I am needed elsewhere.
The House is grateful for small mercies.
I am honoured to have an opportunity to speak on this Bill. I do so in the knowledge that it is somewhat overshadowed by events here yesterday. A Bill in regard to ICC is always to be treated with some importance by virtue of the fact that industry is employment based. As such there is a requirement to treat it with a great deal of seriousness and respect. We must ensure that what we are doing is conducive to the ongoing health of ICC.
I listened with interest to the previous speakers, having points of agreement and disagreement with each of them. There is a great need for a realisation that the financial base of industry needs to be sharper and more responsive than in the past. The reason is that there will be more competition from people who will be available to provide jobs. One has only to look at what has happened in eastern Europe. There is a vast market of people there who have been restricted for a considerable time and have not been allowed to express themselves freely and democratically. One of the major results of the redemocratisation of eastern Europe will be an industrial awakening. I have made this point several times in the House during the past six months. The developments which are now taking place in Eastern Europe will fully vindicate the view expressed by me and other speakers in this House. When these people realise their potential, which they are beginning to do, this will create greater competition for Irish industry from the point of view of job creation, investment and the resources which will be available.
I want to refer to the funding available to industry. Obviously these eastern European countries are attractive to investors. I do not want to get too deep into the argument about the private sector versus the public sector which took place here this morning because there are merits on both sides. We have a mixed economy and we need to be aware at all times that even though private enterprise, an open market and a free economy have been the mainstream, there has always been a certain amount of State involvement, encouragement, investment and assistance. There is no reason we should not continue to go down that road. Because of the changes which are taking place in Eastern Europe we need to protect our vulnerable trading position.
From time to time we have heard speakers in this House refer to the threat to the assistance we receive from the European Community due to the emergence of the eastern European countries. I am not going to go into the whys and wherefores of that argument except to say that we will have to compete with other countries for the investment opportunities which will be available throughout Europe. The question we now have to ask is: what changes should we make to ensure that our position will be that little bit sharper?
Deputy Rabbitte referred to a possible merger of the ACC and the ICC. I am not so sure that this would be the ideal solution. I do not understand why there is not some system or mechanism in place whereby the ICC and the IDA can work more closely together. Surely it is realistic to expect that the organisation who draw up our industrial plans, market Ireland's industrial development throughout the world and attract investors here should be in a position, instead of having to refer them to another State, semi-State or private financial agency, to back up their proposals and put their money where their mouths are. They should be in a position to say to potential investors, "This is what we believe and we are so steadfast in our belief that this is the right policy, we are now in a position to lend you the money to proceed." That would be a logical step forward instead of having two separate agencies and bureaucracies working in the same area.
I wish to refer to the position in relation to parliamentary questions which are put down to the Minister for Industry and Commerce. When one puts down a parliamentary question in relation to industrial policy it is refused — I resent this but it is no reflection on anybody in this House at present — not necessarily by the Ceann Comhairle's office but by the Department of Industry and Commerce who say it is a matter for the IDA. Some Minister should accept responsibility at some stage for the various agencies under his aegis. A Minister should have the guts and courage to come into the House at Question Time and debate these issues. Parliamentary life is sufficiently stymied at present without introducing new ways and means every other day of excluding Members from raising valid questions.
I believe that in dealing with the ICC we are dealing with the funding part of industrial development and there is no sense whatsoever in talking about funding if we do not talk about the whole development and the potential which exists for job creation and investment. I will refer in a minute to the questions raised by previous speakers in relation to the repatriation of profits. I want to reiterate my hope that the Minister for Industry and Commerce will shortly recognise that this House cannot be treated with contempt when replying to questions on industrial development and expansion. I am totally frustrated at the number of questions in this area which have been refused, not by the Ceann Comhairle's office but by the Minister's office who refuse to accept responsibility. Various Ministers proclaim expansively in this House about their proposals for the future but they do not accept responsibility for any of the negative aspects. They do not want to have to come in here and accept responsibility for job losses, company closures or the lack of finance under various headings. We dealt last week with the position of Fóir Teoranta. Nobody wants to accept responsibility for the down sides in this area.
I want to refer to the repatriation of profits which has been referred to again and again in this House. Depending on whether one is supposed to be on the Right or the Left in terms of political ideology, people believe we will take one side or the other.
Is the Deputy going to relate this to the Second Stage debate on the Bill before the House?
I am referring to the points which were made by previous speakers.
There are no fences in the Curragh.
These points were all raised by previous speakers.
That, Deputy Durkan, would not make them in order.
I am raising points which were made also by speakers on this side and on the other side of the House.
There was no reference to repatriation.
I do not wish to be disorderly—
Deputy Durkan knows that on a Second Stage debate he should address himself either to what is in the proposed legislation or to what is not in it but which he thinks should be in it.
That is what I am doing.
This does not give the Deputy the liberty to wander over a wide industrial field.
I am not wandering—
I ask Deputy Durkan in passing, to relate his remarks to this——
——and I have not called a quorum, nor do I intend to.
The Deputy is entitled to do so under Standing Orders.
I am referring to the points raised by speakers on the other side of the House who were referring to the Minister's speech. The point I am making relates to the manner in which the ICC encourage investment in Ireland and to the suggestion that the profits of many of these countries are repatriated. The point I was making before I was interrupted——
Was the ideological one.
Exactly. We must question whether it is possible to stop this repatriation of profits. I do not think it is because if a free and open economy such as ours asks an investor, bank or lending agency to support an industry or financial institution which, in turn, will support a particular industry and says: "We are delighted to have you here because we will benefit in terms of jobs and so on but we will not allow you to utilise your profits as you see fit" then, as Deputy Currie rightly said, the ideological question arises as to how one can encourage investors, financial, industrial, etc. to become involved in that kind of venture in an open market economy. I do not think it can be done and developments in eastern Europe in recent times have shown it cannot be done.
This is a question of balance and we should be able to achieve a reasonable balance. I do not think anything useful can be gained by castigating the firms who have qualified for IDA or ICC assistance over the years and who have afterwards repatriated their profits; we should be encouraging them to expand and reinvest in our economy. They will do that only if they believe the economy is on a sound footing, but not if they think the shutters will be pulled down on them overnight. If they cannot carry on their business freely and bargain and develop their expertise they will go elsewhere to the places that will offer them the best opportunities. I want to sound a warning. There are competitors in the market at present for investment. Apart from Japan, Asia and so forth there is eastern Europe who will be the hungriest competitors and we should take lessons from them.
The points made by Deputy Taylor and others are fair enough but they are not valid at present. They sound good on television but when analysed one finds that the reality is far different from what is suggested by the rhetoric.
How effective is ICC? This was also raised by speakers here in the House this morning. I have to admit that most of the people who call to our clinics are not big businessmen looking for assistance in getting a loan from ICC, but occasionally something comes up. Businessmen or women with investment proposals do not suffer fools gladly; they will not hang around while somebody is making up their mind but like to get responses quickly. If we want to encourage people to invest here, we must respond quickly and in a businesslike fashion and let people know that we know what we are doing. In most cases we will be dealing with people who have been through this a thousand times. They will compare their experiences elsewhere with their experience here and if they get a businesslike response they will be impressed.
The financial needs of small and large industries have been compared already. Their requirements are different. The large sophisticated investors have been through the course many times and know exactly how to go about it. They are also in a position to employ the expertise to present a case very attractively. This same expertise is not always available to the small investor, the person who is going to provide eight or ten jobs — and such jobs, in a small alley or backyard, are every bit as important as the jobs provided by somebody from the US or Japan who comes along with a brief case and a computer and the ability to send in a team of experts to impress everybody in the ICC or the IDA. The small, homegrown variety of business is just as important and often has a greater ability to stick around longer.
That is one side of the argument, but we need to look at the other side. Not everybody would agree with me but I believe there is a great need to encourage large investors with big employment potential. We have said over and over that we need small industries. We do not, however, need them first. First we need the large investor and in the wake of that there is obvious scope for service-type back-up industries. Speakers on the other side of the House like to claim that an industrial revival is taking place already, but the 75,000 people who left the country last year know quite well it has not taken place at all. When and if that comes, however, it will be as a result of a clear decision by the IDA, the ICC and the financial institutions to specify regions where large industries can be encouraged. I know that the environment is most important and there will always be competition for the clean industries but there must be a balance. A clearly defined policy should be laid down to encourage large investors in such a way as to balance out the employment potential throughout the country. There are countless examples of how this could be of benefit. If that is done there will be an obvious growth of smaller industries in its wake many of which would not need as much financial back-up, because of the extra payloads percolating into the area and the extra demand etc., as they would if they had started off on their own with no bigger enterprise in the area.
In other countries where such action has been taken it has been very successful. We have not gone down that road. We have spoken about the merits of the small industry and the need to encourage them with sufficient funds but it is a lot easier to float that small industrialist if there is a big industry in the background. After a long battle and a lot of encouragement we were very lucky some time ago to get Intel in my own constituency. In passing I will say that when I was on the other side of the House and asked a question of the then Minister for Industry and Commerce, Deputy John Bruton, in relation to industrial investment and the purchase of a site in north Kildare, he answered those questions and ultimately the response was positive. We were lucky to get such investment, which was a big employer. That is the type of thing that will create the umbrella for the smaller industries which will find it that much easier to survive than if they operate on their own.
In this House we pass legislation that we hope will be beneficial to everybody. We have the IDA and various politicians encouraging the small investor. For example, the Abattoirs Act which we passed in this House a couple of years ago had the effect of standardising upwards the conditions prevailing in slaughterhouses throughout the country.
The purpose of that Act was not to eliminate a certain number of people from the marketplace but to improve the standards so that the consumer would have a better product. Some of us indicated at the time that it could be seen as the thin end of the wedge in trying to eliminate from the marketplace the small operator who was already supplying a certain area of the market and depending on the ICC and other financial institutions.
What will happen now is that they will be forced out of business and we will be left with a few big operators, concerns that will have a monopoly in the marketplace. I should like to warn Members on the Government side that if that occurs we will pay a high price. That is completely at variance with stated Government policy of supporting small industries. It will eliminate the small industrialists from the marketplace and there is no need to do that. Our small businesses were always able to compete in the market place but, because of the criteria being laid down, they will not qualify for assistance from the IDA, the ICC, the banks or for FEOGA grants. The big operators will be the only businesses that will qualify for assistance. I do not have to name them in the House because they have been referred to often enough in the last six or eight months.
If this policy is carried through many slaughterhouse operators who are willing to upgrade their facilities will be cleared out of the marketplace. Then the monopolies will take over and those who qualify for financial assistance under the Bill, and various Acts, will move in and gain a monopoly on the home and export markets. We should not allow that to happen because those operators are not providing the alternative jobs. They do not give a good return on the investment in them and I have no doubt that events will prove me correct in that. Another example of small operators who require assistance to get a project going and being hindered in their efforts relates to bakeries. Let us take the present bread price war.
The Deputy is straying so far that he could have a gate open and a mad cow getting in.
I am not worried that there are so few on the Government benches and I will be lenient in regard to that.
The Deputy should endeavour to adhere to the provisions of the Bill.
I will do my best.
The Deputy is not succeding all the time in relating his remarks to the Bill.
The Chair should bear in mind that I have managed to make my contribution without a quorum being present.
If business had been done fairly yesterday we would not be discussing this today. It is the fault of the Government side that this is the case.
That is water under the bridge and is not relevant to what we are dealing with now.
We hope it has not gone under the Bridge of Sighs.
The Deputy has the competence to relate his remarks to the Bill and the Chair would be happy if he did so.
The Minister of State continues to interrupt me. However, my remarks relating to the bread price war are relevant because we are talking about increasing the support for companies. The ICC have in the past, and I hope they will do so in the future, supported many bakeries. A question that must be asked about the bread price war is if its purpose is to provide a reduction in the price of the product to the housewife or is it a short-term attempt to lever out of the marketplace the small operators and make way for the monopolies? Again, we are back to the question of the large and small operators. I support big businesses provided it is not their intention to expand at the expense of the small fry and then claim that they are providing a service that did not exist. Members on the Government side may claim I am suggesting that the price of bread should be increased to the detriment of the poor and the hungry. That is a load of rubbish and Members opposite know that. If small operators do not get the support they deserve, if they are not allowed to continue, the people most likely to suffer are the consumers. If the Government do not do anything to prevent them going out of business, the number of industrialists will drop drastically.
Some Members may describe such moves as rationalisation and say that we must prepare for 1992 but that is a load of rubbish because in France and Germany small industries are proving very successful. However, there is a great concern in those countries for the small industries and they are given credit for the employment they create. The Government should remember that if the object of the bread price war is to eliminate competition so that the big operators can gain a monopoly they will have to accept responsibility. I do not wish to delay the House because other Members are anxious to contribute to the debate and I have no doubt that most of the points raised in the debate will be repeated by other speakers.
Repetition is not allowed.
I wish that was the case in the House.
We would have a very short week if that was the case.
I hope we do not have a repetition of what took place yesterday. I should like to thank the Chair for giving me the opportunity to contribute to the debate.
He realises that it is not by bread alone that one exists.
I was tempted to say that the Deputy's loaf was not rising too well.
The Chair should not tempt me because it has been known to flounder and flourish again. While the Bill is a good one the Minister should take on board the points raised in the debate. I hope that after our debate the Minister, while complimenting Members on their contributions, does not ignore the points raised. I did not raise these issues for spurious reasons but arising out of my frustrations when attempting to deal with those issues in recent years, particularly in the past three years. Nothing has frustrated me more than being unable to elicit information on industrial policy and industrial investment proposals. I have been told repeatedly that the Minister does not have responsibility to the House. If he does not have responsibility to the House to whom is he responsible, to whom are the IDA, the ICC and other State agencies responsible? Must they answer to anybody? They must answer to a Minister and that Minister must be answerable to the House. If that is not the case the House is being treated with contempt.
I was very impressed by the speakers who referred to the absence in the context of the Bill to stated industrial policy. The Minister made a number of comments in his speech about the upturn in the econmomy. He said that the assets of the Industrial Credit Corporation had grown from £476 million in 1983 to £841 million, an increase of 77 per cent. He also said that the company had experienced a very successful period of growth, despite some difficult years but that the past few years in particular had, in line with the upturn in the economy, been very successful, culminating in their most profitable year ever in 1989.
It is very important to take the Minister's phrase "upturn in the economy" and submit it to scrutiny.
What has taken place over the past few years has been the development of the concept of — what I call before — the depeopled economy. It is the notion that the economy separated from the people, the society of which it is supposed to be an instrument, can do very well while the people suffer. Thus, it is possible to say that the economy is seen as a machine, separate from any kind of social obligation, with its indicators that despite inflation and interest rates, the balance of tade and the balance of payments it can do very well while at the same time people suffer. I am reluctant to make this point because of the presence of this Minister of State, one of the honourable exceptions within the Fianna Fáil Party in a number of ways in so far as he can be relied on, for example, to keep his word in this House, something which cannot be said for the rabble who occasionally sit behind the front bench. I also know of the commitment of the Minister of State to the traditional philosophy of Fianna Fáil.
I will develop my point about the depeopled economy. I was in Chile in November 1988 taking one of the statements of General Pinochet in which he described the Chilean economy — by comparison with its immediate neighbour — as being in very good shape. He made a statement that could have been taken from any Minister who regularly sits over there and begins with the new mantra of conservatism: "In these difficult economic times when at last the public finances are under control". On a previous occasion I described these words as a mantra and I was immediately followed by a Minister with a prepared script who started off by saying: "In these difficult economic times when at last the public finances have come under control" and so on.
I have been reading the speeches in the Library which were made at the time of the foundation of the Industrial Credit Corporation and I notice the great difference in vision between the Fianna Fáil Party at that time and the present members of Cabinet. I suspect that you, a Leas-Cheann Comhairle, have an occasional twinge of regret for the Irishness, the sense of national purpose and commitment to the people that have been abandoned by Fianna Fáil. Old Mr. De Valera used to stand up over there and from his gaunt frame would come words about the people of Ireland and so on with whom he claimed to have a special communication, in his heart, not in his head. It was said at that time that the Industrial Credit Corporation were formed to create jobs and opportunities for our people. I now look at this two-part Government and think of the difference between then and now. I understand that our Taoiseach is in Paris playing emperor, his favourite role. It is wrong to blame the Minister of State for not providing jobs as the emperor does not talk about it. It is all very well to talk about the upturn in the economy but 65,000 young people left the country last year. We have the second highest unemployment rate in the European Community and we have the grossest disparity between quintals in relation to the distribution of wealth. There is also gross maldistribution in relation to income with the top and the bottom quintals, when compared, having a profile exactly the same as that of Bangladesh.
There is deprivation in access to services, housing, health and education. How can we dispassionately discuss raising the borrowing limit of a company when there has not been a presentation — even from the Minister of State today — of the strategy of that company? I listened to the thrust of what people said and we need to deal with facts. We spend £1.32 billion per year in subsidising our industrialisation effort through a host of measures for assisting private sector development and export-led growth. I wonder if the public know that that is within a few hundred thousand of the total sum of money spent on education. Do the public know that we demand cuts in education while, at the same time, demanding very little accountability in relation to our industrial strategy?
The Minister said this was a short Bill about raising the borrowing limit. Where is there a profile of the sectors the ICC have chosen for funding? Where is there a profile of the firms they have chosen and by what criteria? Where is there an examination of the linkages in the economy which one NESC report after another has stressed as important in relation to industrial investment for the creation of jobs? It is now part of the ethos of this House — and very particularly of the undemocratic ethos of the Government — that they do not need to say that. This is just a simple matter of taking the public's money and putting it into a company. The money can flow in any direction without a stated policy or an obligation to define one or to establish a profile of investment or credit.
Notice taken that 20 Members were not present; House counted and 20 Members being present,
I had been making the point that it is important to place the remarks of the Minister of State in the context of the presence or absence of any stated industrial strategy which might address the major problems of this country, particularly that of unemployment. What I find very interesting is that the Minister made no reference whatsoever to any of the published reports of the National Economic and Social Council which commented on industrial policy.
As I had said at the beginning of my remarks, there is a marked contrast between the thinking that led to the establishment of the Industrial Credit Company and present thinking. To summarise that part of my remarks I will simply say this: the Fianna Fáil Party from 1932 onwards — in the creation of their great populist phase — seemed to believe in the concept of the right of Irish people to work and live in their country.
It is very clear that, thereafter, there was a great attempt, whether successful or not — I am not commenting on whether it was appropriate — to construct our economy around the basis of native industry and that continued into the late fifties. However badly intentioned or managed, at least that contained a few remnants of idealistic principles. In their early days the Industrial Credit Company loaned money and so on to what was seen to be the native industrial base. In the sixties and right up to the present time, it is very clear that there has been an absolute abandonment of any social vision, in other words, the notion that the economy might constitute an instrument to create jobs, end emigration, assist in raising incomes and so on. One of the most unstated things in the media in relation to this has been the extraordinary similarity between the economics of the Chicago school, the Friedmanesque economics, the economics of Mrs. Thatcher, General Pinochet and others, the manner in which there has been developed here an extraordinary consensus that the people must suffer in the interests of the separate machine I have described that is the economy.
I am interested in spelling out this point for the couple of Members who remain. There has been an extraordinary abandonment of any commitment to the social fabric of this country. There has not been a single major economic speech from these benches here that has acknowledged the problems of emigration, high unemployment, of the maldistribution of income, indeed of access to services or of the unique way in which wealth has been exempted from taxation.
The provisions of this Bill, which increase the borrowing capacity of the Industrial Credit Corporation, must be viewed in the context of the £1.2 billion taxpayers are asked to spend to create an industrial fabric here. The manner in which Bills like this go through begs the question: where is the investment strategy of the Industrial Credit Corporation stated? It might be contended that it is contained in the reports of the ICC. But that is not so. Those reports do not specify which sectors have been given priority. They certainly do not specify any regional pattern of investment that might address the problems of unemployment, emigration, poverty or whatever.
What is happening in this House is very unreal, as what occurred yesterday was unreal. There is a divine disrespect for the needs of the people; it is as if we can go on whining about the economy with its inflation and interest rate levels, its balance of payments, balance of trade levels doing very well while the people suffer. What the people would like to know is where the Industrial Credit Corporation strategy meshes or does not mesh with that of the Industrial Development Authority, or where it fits in relation to the Government's projected growth in the economy and so on.
There is a list contained in the introductory remarks of the Minister of State which has become the bible of the Government Party, their partners and indeed other parties also. It is stated:
It now provides a wide range of financial services, comparable to private sector financial institutions, such as: corporate finance and planning; venture capital funding; stock market flotations; pension fund management; foreign exchange; full range of trade finance services; deposit and loan facilities;
and continues:
hire purchase and leasing facilities, including leasing business in the Financial Services Centre.
What is that list? Where is the productive outturn from that list? Perhaps the Minister of State would like to specify what job creation will emanate from any one of those listed activities. Perhaps he might like to say, in relation to the remarks contained in his speech, what is the distinct role of the Industrial Credit Corporation vis-à-vis the private financial sector. It is well known that there has been no clear statement of the credit policy of our commercial banks or any indication from the Central Bank of what that policy might be. Indeed, a very interesting situation has arisen; there is an ideological consensus in this House that the Central Bank should never be asked to have a social policy which they might seek to implement through their credit policy. What can the Minister of State say about the ICC to a person who may wish to start a small business employing a few people? Is he capable of telling this House they are likely to get funding because they are in a particular sector, region, or that they are supplying linkages to other related industries? The fact of the matter is that there is not a single line in this speech that indicates a coherent credit policy. In summary, there is no mention of industrial policy, employment, credit policy, linkages in the economy but it is consistent with the reborn Fianna Fáil in their right-wing guise of expressing confidence in the marketplace.
When people speak about the marketplace, I ask them to contrast the speeches of Fianna Fáil today with the speeches that were made in the thirties. Today, the marketplace must take pre-eminence, while the people must go or remain unemployed and stay poor. Let us compare this with the thirties when the old bogus gaunt fool was standing up, mustering up a few idealistic comments about the nature of the country — he was later to say we would not only have people living and working in it but that we would have his famous Constitution and so forth. Rambling and mad as he was, I grant him this; he believed in something, unlike Members sitting on the bench at present.
A very interesting question arises in relation to the whole question of accountability. Will the ICC explain regularly in a form that can be discussed by this House their performance in any of the areas I have mentioned? There is, of course, the shadow of privatisation hanging over the ICC. It is appropriate to speak about what privatisation is, which is in line for the ICC. They are on the hit list for privatisation. The figure of £1.2 billion of which I speak is the cost of the socialisation of the costs of production. We are unique in the European Community, in "Emperor" Haughey's Europe — today he can tell them in Paris, we are unique, we have the highest level of emigration the second highest unemployment rate and we are also unique because we have a tax exemption on wealth. We are the only country in the European Community without a wealth tax. We take from those who pay tax, 70 per cent to 80 per cent of whom are in the PAYE sector. We take £1.2 billion from the taxpayers, the same amount we spend on industrial policy — it is the same amount that we spend on education — and we hand it to the private sector so that they can get on with creating jobs.
Why has the Minister of State not the courage to say how many jobs have been created in the ventures funded by ICC? Why does he not have the courage to speak, if he believes in the marketplace, about the ventures that were successful and those that were failures? The answer is, of course that the £1.2 billion which socialises the cost of production and cushions the private sector must be completely unaccountable. No one comes back here and speaks about it. This attitude about the marketplace is bound up with privatisation. A decision was made to fatten up Telecom, which is also on the hit list for privatisation. It is well known who will be the bidder for Telecom, but what this shower of republicans will not tell you is that the taxpayers funded borrowings of £100 million to establish Telecom Éireann. There were decent people out there in the country who thought there was something to being Irish and they thought they were paying their taxes to develop a country for all people but they are now being told they funded the borrowing of all this money so that the Government could fatten a company to sell it off to people who are, in fact, robbing it from the public.
Privatisation is robbery, no more than the scam we had yesterday and we will have next week with the communications industry. Old de Valera used to come on Radio Éireann on St. Patrick's Day addressing Gaels at home and abroad. He would make his speech as an Irish man. Now there is to be no more of that. The broadcasting service is to be sold off in bits and pieces. These heros and heroines of the marketplace will do better than merely robbing from the public. They will say that if their friends lose in the marketplace, if they are not able to get people to listen to their radio stations or watch their television programmes they will make sure that they do by knocking the station that is there out of existence. That is the republicanism of this group of people who are there now.
Now more than 50 years after the foundation of the ICC in 1933, there they all sit, spouting out their market economics. It is irrelevant to them that people in this country are forced to emigrate, that people are unemployed or ground into poverty. They come in with what they regard as the professional little bits of legislation, technicist legislation, that this is a simple little Bill which is just about raising the borrowing limit of the ICC. I say it is much more than that. When the foundation of the ICC was discussed in 1933 the debate was about industrial strategy and industrial policy. It is typical of the arrogance and disrespect of the people who sit in the Government parties at present that they do not feel it incumbent upon themselves to come in and say that the company was established in the thirties to achieve certain purposes. This was addressed in one of the earlier speeches. They took equity and could facilitate borrowings and so forth. There was no mention of any of this; it was a little piece of technicist language where the Minister rambled through four or five pages.
However, there are people in this country who ask about our industrial strategy, our credit policy and the role of supposedly State influenced credit institutions vis-à-vis private credit institutions. There are people who are worried about the private banking sector and the manner in which they have forced the closure of businesses and destroyed jobs. Believe it or not, there are decent people in this House who have respect for the principles of State enterprise. This country knows full well that whatever was established that created employment or established the basis for innovation or created export-led niches in the market came from the State sector. We all know the sorry, long history of the hucksters in the principal parties who because they were making galvanised buckets in Wexford opposed the development of the Irish Sugar Company. One State company or another had all their native predators, the shabby, seedy people who did not found this country but who moved in because it was a catching on thing. The new State would work. They moved out of the woodwork and they lent opposition to the State companies. There were people who opposed the ESB and one State company after another, but it is being left to the detritus of de Valera's old Fianna Fáil, the present Government, to say that we are abandoning everything, everything is for sale. You can have Telecom, RTE, the Industrial Credit Corporation and Irish Life, but I would like the people who are pounding this path of privatisation to answer a few questions to the public. What are they going to say to the people who pay their taxes to fund the base of these State companies which are the public's property? I repeat that privatisation is robbery and is being facilitated by this bogus group of people who put in small print under the name of their party: “the Republican Party”. They are grinding the people into unemployment and driving them from the country. The answer is not to be found in asking others what they did or what someone else did; the answer is that they believe in nothing but this nonsense. We will have more of this, week in and week out. Even when the emperor is home he is at the same thing. In these difficult economic times when at last the public finances have come under control these people are swanning around Europe saying how wonderful they have been to have evolved to the point we are at. I wonder if the people of eastern Europe and elsewhere know what we do, not only in relation to our own people but in relation to this House, where principles have been made a mockery of, where word meant something once but means nothing any more.
This Bill is part of the decline of democracy in this House. We had a short speech justifying a significant change. The public are entitled to know why we are raising this limit. To what have the ICC directed their activities over the last five years? There is no point in telling me about the reports, I have read them. I could give other examples. Will the credit philosophy encourage the development of new technologies, of innovation? Will that be allowed or will the ICC confine themselves to this little bunch of rackets that is described in the Minister's speech. Venture capital funding is a fine term that rolls off the tongue. When did the Irish banking system take any significant risk? These people are known all over the world as those who require more collateral, have a shorter time span on their investments and have a much narrower range of investments. Stock market flotations is another interesting term, but the best of all, the emperor's dream, the little scam in the port and docks board site, is hire purchase and leasing facilities, including leasing business in the Financial Services Centre. The Minister picked up that term somewhere. Somebody probably told him about all the different laundering operations that exist in different little crooked islands around the world. Where is the employment content of any of that?
It is very interesting that the ICC, the Minister for Finance nor the Taoiseach have ever answered a fundamental question about this little location in the port and docks board site. One must ask how much of the existing financial services structures migrated into it to escape tax. There they were, the poor creatures, in a country with no wealth tax, low levels of corporation profits tax, hardly any tax at all on profits while we are waiting, as I said a few years ago, to kick this dead cow of Irish enterprise into life. We have visions of the entire Fianna Fáil Cabinet standing around the cow of Irish enterprise, giving her a kick and trying to persuade her to get up on her feet, throwing £1.2 billion of our money at it and then raising the lending facilities and then saying, like the boot boys they are, that in case the private sector is not getting enough we must destroy the State sector as well. They will steal from the people everything they own and float it off into private ownership. I hope that when the Fianna Fáil Deputies go home they tell all their constituents exactly what they are doing.
The notion is that when all this is over a spirit of enterprise will have been created in this country. People would not need to be marvellously enterprising to become involved in services where they are told they will not be taxed, that they can socialise their training costs, write off their machinery costs, get soft loans, be helped in paying the cost of trading abroad and that export-related activities will be set up for them. In the end they are not able to succeed but the good old Government that is the Republican Government will come back and say that there might be a bit of the State sector that can be used to help these people on their way. That is the thinking that led to the position whereby, as I have said, people who had an ethos of capital moved into an ethos of broadcasting but they could not make the people listen to them or view their programmes. I am beginning to believe that the only thing the Minister for Communications has not done yet is to make the people watch his friends' TV and listen to his friends' radio.
There are people who believe in the concept of the public, the concept of the civic society, who resent a great deal of this. The interesting thing about the privatisation of all of these companies, apart from my statement that it is a robbery from the taxpayers, are the so-called statements from this House about, what the people opposite in their rural way, call our enterpreneurial class. Is it not a marvellous commentary on them that these companies are able to create nothing in this country? They can their beans, peas, soups, etc. abroad. They do not live here but they want to exercise a monopoly in our print media. They have their eyes on what the taxpayer has funded and what brave and good people in the State sector built up, Bord Telecom, the ESB, Irish Life — you can go through the list and now the ICC. Is it not very strange that the Minister will not stand up and say today that ICC are on his hit list for privatisation?
There are people who are encouraged by the new philosophy of individualism, which is now like a cancer in this country, where all social solidarities are being regarded as suspect. The chief executives of these companies are told they must make a case for privatisation because they will be better off as a result, they will have a better income, they can have shareholdings and so on. This is what is being said, for example, to the Great Southern Hotels Group where people are being told they may acquire shares in this company. People who work in premises that are funded from public moneys are being asked if it ever occurred to them that they would like to own them. That is the current Fianna Fáil and Progressive Democrats philosophy. They are taking bits of public property, projects that could have created jobs, and handing them around, appealing to greed and individualism.
The old croaker, in 1933, when he was speaking about the country that had to be industrialised, before he got as far as his dementia about dancing maidens at the crossroads and so forth, at least believed in keeping people in this country. We are now told — which is most interesting — that we should not discuss these things in this House. The ICC has been very successful while the economy is doing well. It is irrelevant that 65,000 people left and that we have the second highest unemployment rate in Europe. When Charlemagne goes off and sits down with all the others and feels that he is running Europe and the world because Kohl and Mitterrand occasionally nod in his direction, does he ever think about the people in this country or the people in Dublin city? One can come in and wave one's hand and be a kind of an ethereal being above and beyond it all. These are the people who, when the ICC was established in 1933, claimed to represent the agricultural labourers, the people of no property, who stood up commemorating different heroes, people who had died and so forth, and then there was the great capitulation.
There is nothing as seedy as the new run of Fianna Fáil conducting their business transactions sideways outside this House. That is why, Sir, it was particularly objectionable when that allegation was made in the specific instance of broadcasting that the Minister who was responsible would not stand up and either acknowledge or deny the allegation. The new ethos of this Government is to treat people with disrespect. Separate from that, on the day afterwards they come in and seek a rise in the borrowing capacity of the Industrial Credit Corporation and say that it is one of their achievements providing such services as hire purchase and leasing facilities, including leasing business in the Financial Services Centre — congratulations. The Minister had nothing to say about unemployment, industrial policy, no reference to any of the NESC reports, the different reports on credit facilities, the different projects that have failed or succeeded, the accountability for the new sums which the public will be asked to guarantee, nothing whatsoever in relation to the employment outturn of the ICC's lending policies in the past, nothing about the sectors they have chosen, nothing about the projects they have earmarked, nothing about any regional employment impact, nothing about the linkages in the economy; it is just a simple five page job on a Friday.
The mark of this Government will be their total abandonment of every ideal for which their party was originally founded — whether or not it was honourable in pursuing it — their total abandonment of any respect for the democratic process, their arrogant ignoring of the suffering of the people. If parliament is dragged into contempt it will be this party and their colleagues who will be responsible for it, because at the end of the day, between elections and at elections, people are interested in the children who have to emigrate, those who need jobs. They are interested in looking on at the scam of the wealthy being untaxed, while they themselves are taxed to the ground. They will ask the questions. I can assure you, a Cheann Comhairle, that if this House is ever to be restored in relation to proper debate and proper accountability we will need more than these five page jobs on a Friday, which is what has been thrown at us today.
All the quorums we have called today have been very interesting. Here are the people who are so interested in pulling a fast one within parliamentary procedure. They are not interested. This Government are unique in another sense. The failures of our industrial policy have, in fact, sent thousands on the emigrant boat to England. They are unique also in the European Community, because this is the only country in the European Community, that allows those emigrants the right to vote. A depeopled economy — Fianna Fáil's depeopled economy — borrowed Thatcherisms, borrowed half-baked ideas, encouraging individualism, spouting like parrots words they do not understand, the spirit of entrepreneurship with a corset of £1.2 billion a year around it, are what they represent.
I will be very brief. I concur with many of the observations from the Opposition benches which are unanimous, that, despite the fact that the Industrial Credit Corporation are, in their own right, a so-called vehicle for economic growth and industrial advancement, the Minister's speech on the Bill, sails far away from reality. One is taken by the well crafted elegance of the Ministers phraseology, but the fact is ignored that industrial advancement has been negligible or nil when taken in terms of the overall investment and the borrowing required. While we are prepared to give the Industrial Credit Corporation another chance, unfortunately, in terms of net gain, net resources and net worth to the economy we have not got anything like the return one would have imagined. In his contribution the Minister said:
The past few years in particular have, in line with the upturn in the economy, been very successful, culminating in its most profitable year ever in 1989, when profits after tax reached over £10 million including an exceptional item of £5.5 million.
That would be fine if there were commercial criteria only applying to the ICC. I understood also that they had a social role, which was a promotional role, and that the promotional role should be evaluated in terms of net gain in terms of industrial jobs. Looking at net gain in industrial jobs we have targets of 35,000 per year but unfortunately we have net results falling far short of that target. As Deputy Michael D. Higgins has said, the hard reality for the vast majority of people who find themselves on the dole queue on the first Friday of every month is that the ICC means very little indeed. The phrases of praise and self-evaluation by the Minister and the commercial sector outside must sound very hollow in the ears of such people. To every single one of the 215,000 people who on last Friday week found themselves on the dole queue — and today in all probability the number is greater — high-sounding phrases such as ICC executives, Burlington dinners, the Berkley Court, etc. must be something of an economic mirage.
As has been said, there is a perception among the general public — if one is to evaluate opinion polls — that there is a sense of economic wellbeing when one looks at the key indicators, the inflation rate — which appears to be fairly static — interest rates which are rising, the surplus in the balance of trade which we praise so often, but if one looks at the hard reality nothing is actually percolating through in terms of job creation, growth in the economy, in terms of worth or of providing money or a better standard of living for Seán Citizen. It has been rightly said that it is a crying indictment on each and every one of us and the commercial sector in particular — because these are the people who claim to have the invincible right to create wealth in the economy and jobs — that we have failed and reneged on providing jobs for those 215,000 people who are out there asking, waiting and begging for jobs. In this regard the ICC must take their share of the blame.
Equally, our claims for economic advancement must sound very hollow to people abroad who buy the Irish Independent, the Irish Press and The Irish Times. If one takes the emigration rate into account we could well be classified as a nation in exile.
The Minister in his speech stated and I quote:
Its contribution to the well-being and development of the industrial, tourism and services sector of our economy has been immense and is a tribute to its board, management and staff over the years.
No one can deny that the management and staff have done a certain amount of good work during the years but we have to look at the true position which is that, in terms of industrial growth, we have come nowhere near fulfilling our potential.
The ICC have claimed that they have diversified into new areas, enumerated in the Minister's script, such as corporate finance and planning, venture capital funding, stock market flotations, pension fund management, foreign exchange, a full range of trade finance services, deposit and loan facilities and hire purchase and leasing facilities, including leasing business in the Financial Services Centre. It is quite obvious they are trying to joust with those competing in the financial sector. I suppose it would be legitimate for them to do so if the purpose is the creation of competition and bringing extra finance into the coffers of the ICC but, on the other hand, it is clear that there are already enough native companies competing in the financial sector who would be weakened by further internal competition. It would be far better to allow these companies to increase their resources and prepare for 1992 when undoubtedly they will face further external competition.
The ICC should stick to their main responsibility, as laid down in the early thirties, to make money available at low interest rates to small enterprises to enable them get off the ground and create jobs. There are many people bursting with ideas who simply cannot get money to finance their projects. The financial services sector is a lucrative one and it is quite obvious that the ICC want to diversify into it. However, what we should be about is the creation of jobs and the attainment of industrial growth so that people can go out to work and expect to get a decent return from it. By diversifying into the financial sector the ICC are diluting their main responsibility. They are a development bank but are becoming more commercially-orientated. I submit they are losing sight of the original intention. I submit that, even though we have promotion agencies such as the Industrial Development Authority, county development teams and other agencies such as the ICC to which we are voting more money this afternoon, one is struck when one examines the policy that native industry and entrepreneurs are not getting the encouragement they deserve.
We have to acknowledge that during the years foreign industries have been a major asset and have provided a sizeable number of jobs. They were pursued by successive Governments and by the Industrial Development Authority and can be found in every single county, including my own county of Mayo. However, we also need to look at the balance sheet. On 10 May I asked the Minister for Finance the amount of profits repatriated by foreign industries and if he would make a statement on the matter. He stated in reply and I quote from the Official Report, column 1455, volume 398:
The latest published data refer to the fourth quarter and year 1989, and show that gross outflows of profits, dividends and royalties amounted to £2,337 million last year. These outflows, to the extent that they relate to industry should be seen in the context of the sector's turnover which last year amounted to around £18 billion.
I think it is time to stand back and appraise the degree of help we give on the one hand to foreign industry and on the other to native entrepreneurs. The Minister went on to state that industrial exports in 1989 amounted to almost £12 billion. Having regard to the fact that over £2.3 billion is taken out of the country and lodged in foreign banks, we have to acknowledge it is now time to analyse the present position. Time and again we hear reports of Irish people within a relatively short time of emigrating creating new enterprises in places such as Manchester, Birmingham or New York. It is also quite clear they did not have to deal with the red tape which seems to strangle enterprise here.
I also asked the Minister for Industry and Commerce in the House recently the amount of confectionery imports in 1989. I was aware the figure was sizeable; all one had to do to get an idea of this was to go into any supermarket in any small town in rural Ireland where one would see on the shelves long-life products such as swiss rolls, biscuits and confectionery from Sweden, Australia, countries behind the Iron Curtain and the member states of the EC. I was amazed to learn that the figure for 1989 was £132 million. This should make us realise the potential to be exploited. There have been reports in each of our national newspapers of a bread war in the diminishing bakery sector. The price of a loaf today, according to the expensive two and three page advertisements, is 35p but tomorrow the price will be down to 32p. The names of the supermarkets concerned, such as Dunnes Stores or whoever it may be, are carried in big capital letters in an effort to lure people in to buy other products.
Hear, hear.
We should ask ourselves if the smaller bakeries throughout the length and breadth of the country, in terms of trying to meet the import substitution target which we all speak about in grandiose terms, got anything like the grant aid given to foreign industry. Not one single penny is shelled out by the Industrial Development Authority — I doubt if the ICC do so either — to bakeries in an effort to meet the import substitution target of £132 million. After all, each of these products can be produced in this country but, unfortunately, we are unable to get the conditions right.
We acknowledge that the ICC have done some good work but when one looks at the amount of money being voted to them, at the industrial chaos prevailing, at the unemployment figure of 215,000, when one takes into account the fact that there are more Irish people living outside than within the country and that we are a nation in exile, one has to ask: where are we going and is it all really worth it?
I am a bit reluctant to start by thanking all those Deputies who contributed to the debate but I am afraid I will not be able to say I agree with at least some of the contributions. Nevertheless, we had a very wide ranging debate. I do not know whether it was because today is the beginning of the World Cup and people expect a great deal of foul play or whether it was the events of yesterday——
The foul play started yesterday.
——but certainly nobody felt there would be any white flags raised if they were offside in relation to the scope, leverage and ground covered in the context of this Bill.
It is important to appreciate that this Bill is a housekeeping exercise in that it enables the corporation whose borrowing is regulated by Statute to continue their ongoing business. ICC are already very close to their statutory borrowing limit and without the increase proposed in this Bill the corporation's development would come to an abrupt halt. I am very sorry Deputy Higgins has left, having pontificated for a long time from the high altar of failed socialism. He could and should remember that he that exalteth himself shall be humbled and he that humbleth himself shall be exalted.
Socialism has not been tried
I did not interrupt anyone here today. It is obvious from the way Deputy Higgins sought to lecture this House and particularly in his reference to members of the Government and the Taoiseach and the late Éamon de Valera, that there are still a few fundamental lessons he should try to learn.
When I look back to the 1983 debate I say there are some people on the Opposition benches who would be a little ashamed if I were to read out that debate and see the consideration that was given to the very simple Bill that was brought in here by then Opposition Members who lectured us for not dealing with a wide range of industrial and financial issues in the context of this Bill. All I will say is read that debate and then consider whether it is fair in that context to make the type of attacks that were made here against members of the Government and against the Taoiseach and to raise the name of Éamon de Valera in the context of this debate. If they read the debates from 1933 they will see that when the very first Bill was introduced to give a statutory remit to the building up of ICC, provision was made for the sale of shares and that what is now made out to be a sinful, corrupt intention on the part of this Government or any other Government, looking at various options in the context of State enterprises, was enshrined by the people who looked forward to the time when, though the taxpayer is expected in the beginning to subscribe so strongly to the development of different agencies, the day could and should come when he would not have to continue to do that and these resources could be released to deal with some of the social concerns in society, and that we should not be flat-footed and have to remain constant to every single agency established in the past. I agree with Deputy Bruton when he said this morning there can be times when we leave the life to agencies established for a particular purpose who have long outlived that and that it is time to look on a rational basis to see whether there is need for more coordination and rationalisation, and to use these resources more intelligently in the light of a changing world and changing circumstances, and that if we can deal more comprehensively with other social concerns in different ways we should try to do that. We do not have to stick to everything that was decided a long time ago in a world that has changed dramatically.
This debate brought out one other very dramatic thing, though this is not new, and that is how much Deputies on the benches opposite disagree with one another.
A number of fellows on the other side, too, disagree with one another and nobody seems to worry about that at all.
On the one hand we have demands for outright privatisation of key profitable State companies and from the very same source a demand on the State to hold on to any lame duck that is there, including Fóir Teoranta. On the other hand Deputy Taylor demands more and more State enterprise with no risk to the taxpayer. I say to Deputy Taylor as honestly as I can that there is no such thing as more and more State enterprise without risk to the taxpayer.
I did not say that. I said the taxpayer would take his risk with a State enterprise because he owns it but that he does not want it sold off to the Minister's friends.
You cannot establish enterprises owned by the taxpayer without taking risks.
Agreed, and it is all right provided they are left with the taxpayer.
Let us hear the Minister without interruption.
This afternoon we also had jeering at a trade surplus. I do not see a trade surplus as something held in the hands of so-called entrepreneurs. I see graduates, workers, families all over the country who contributed to our trade surplus. Is a trade surplus a healthy thing?
The foundations——
Interruptions should cease.
Yes, it is. Is low inflation healthy?
Provided you know where it came from.
Is it a fundamental economic and social desire to manage our public finances prudently or is that also wrong? I am lectured here in this House by individuals who were party to a Government who in a four year span doubled the national debt from £12 billion——
It had been quadrupled in previous years.
——to £24 billion. The cost of servicing that debt is £1.2 billion per annum. That additional debt was imposed——
(Interruptions.)
I sat quietly here all this afternoon and I listened and was lectured, and all I am asking for is the right to read into the record some salient facts that have to do with the economic life of Ireland. From 1980 to 1987, since we are going to deal with a wide range of issues——
What about unemployment and emigration?
I will deal with that. Unemployment grew by 80,000. Mervyn Taylor and people like him——
Deputy, Please.
Deputy Mervyn Taylor and Deputy Michael D. Higgins can remain silent——
Deputy, please.
What about emigration?
Yes, of course. I regret as much as anyone else in this House that we have to lose some of the finest talent in this country. That is why in my Department in this year with very small resources I, with the assistance of my staff and other people, will account for up to 350 graduates who will find employment in this country and who would otherwise not find employment here. I want no credit for that; the responsibility of government is to try to divise new schemes in advance programmes of technology, in micro-electronics, power electronics, materials and software and other areas. An additional 160 places will be found for graduates who will be selected on the basis of their skills to help out small industry where these skills are needed.
And for how many will the Minister not find places?
That is negative thinking. Every man or woman who can provide one job anywhere is extremely valuable to this community and we want more of them. I will belittle nobody, in the Labour Party, Fine Gael, The Workers' Party, any party, the media or anyone else, who finds one job——
That is magnanimous.
——or helps to do so. If Deputy Mervyn Taylor belittles people who create jobs that is his right. I do not want to do it and I will encourage everybody where I can to increase the resources to find employment for people who can be so valuable to the development of the economy. So far as emigration and unemployment are concerned, I mentioned that unemployment grew by 80,000 between 1980 and 1986. For the first time in many years the number of people employed grew in 1987 by 6,000.
And 75,000 left the country.
That number has grown by an average of 12,000 since. Nobody is saying it is sufficient. It took a long time to turn it around and we are determined to turn it around faster. I am second to nobody in this House in my social concern. People in this House want to pretend that public representatives on the Fianna Fáil side do not care. They want to portray an individual or the Government as being heartless. It is painful for us when we cannot meet a social concern. We are not saying we are better than anybody else but we are trying.
I agree there is need for a debate on industrial policy. The Government are reviewing industrial policy and it would be no harm to spend a day in this House discussing fundamentals regarding the use of our resources and whether there is duplication in agencies which could perhaps be amalgamated, thereby giving a better return on investment.
People talk about a figure of £1.2 billion as a cushion for industry as if these resources were handed by the Government to some entrepreneur. In the IDA, Eolas and other State agencies are a great number of public servants who are putting in a great effort on behalf of the country. They should not be belittled as they were today by people who on the one hand are totally against privatisation and on the other hand are slashing by the words they use the instruments of the State which are used to support and encourage new industry.
Nobody on this side of the House did that.
Not to stand any more accused than those I am accusing of straying off the path, I will try to return gracefully to the business of the day. The ICC evolved from a development bank in the thirties and forties to a much more commercially orientated entity. It is not correct, therefore, to say that ICC has remained inert. It is constantly evolving and expanding its services in the light of changing needs in our economy. It is also not right to say that ICC has concentrated only on lending rather than investing in shares. Investments are running at a level of £22 million. The State also has NADCORP, which is specifically designed to take equity investment in developing companies.
Deputy Bruton referred to linkage between NADCORP and ICC. Clearly they have separate and distinct functions, the ICC being a commercial bank and NADCORP a venture capital institution. I take the point that there should be liaison between the officials of the two organisations who may on occasion be involved in helping the same companies. We can work on achieving better cohesion between the two organisations but it would not be realistic to amalgamate these two instruments into one force. We must also take into account the traditional reluctance of entrepreneurs to admit outside investors unless forced to do so. This factor must be borne in mind.
Deputies Bruton and Rabbitte referred to what they saw as a disproportionate allocation of its funds by the company as between loan finance and equity investment. They claimed this was not in keeping with the principal objects as laid down in the 1933 Act. That Act envisaged that the predominant function of the company would be in the giving of loans or credit, while also investing in equity shares, debentures etc. There is no departure from the fundamental principles enshrined in the original Act.
In regard to State ownership of the ICC, it should be remembered that as long ago as 1933 a provision was inserted in the legislation allowing the Minister for Finance to dispose of his shares in the company. There was indeed a public flotation at the time, underwritten by the Minister for Finance, in order to secure private ownership of at least part of the shares in the company. In the event relatively few of the shares were taken up by the public. The Government have a pragmatic approach to this question. If a State company such as ICC needs fresh funds, the competing demands on the Exchequer may act as an inhibitor to the provision of those funds. This Government do not wish to prevent the desirable and worthwhile development and expansion of a successful State company such as ICC. Far from it. What we are doing is trying to make every effort to secure the future of the company on the best basis possible. We have no preconceived notions on this question and we will look at the options thrown up by the consultants in a balanced and objective manner and with the best long-term interests of the company and its management and staff firmly in mind.
Regarding the consultants' report on ICC, the Department of Finance are still at the stage of assessing the various tenders which have been submitted. The Minister hopes to make a decision in this regard very shortly.
The consultants will be assessing the options open to the Minister for Finance in the light of the fact that ICC will be under pressure to increase its ratio of shareholders' funds to risk assets very substantially over the next few years. There may be little alternative in reality to increasing shareholders' funds in the next year or two and the various ways in which that may be done will have to be assessed. The Minister is employing consultants to advise him in this matter. The future development of the company will be decided only after that advice has been received and fully considered.
We are under increasing pressure for new funds for health and education. People laud the idea of reducing taxation while at the same time they seem to think that the State can find additional funds from some unknown source to create the equity capital base that many of these enterprises will require to survive. Their ability to compete outside this country will depend on the building up of a capital base. These are serious matters for trade unions and workers everywhere. We must not be caught up in a debate on ideology but should concentrate on securing the best possible future for these enterprises. The ICTU have been extremely responsible in preparing to face an entirely new situation. There is a strict limit on Government resources. Painful decisions have to be taken and all of us together must find solutions which are in the national interest.
ICC's borrowings, including, its deposits, are all State guaranteed, apart from a relatively small amount borrowed from the Exchequer. It would be invidious not to guarantee new borrowings and deposits over £800 million while the existing borrowings and deposits have the benefit of the guarantee. ICC is a bank and as such it is important that all of its depositors and lenders are treated in the same way.
Reference was made to the lack of satisfactory answers to questions raised in the Dáil by Deputy Durkan. On the one hand people want the Government to be involved in the day-to-day activities of these organisations so that they can answer to the House, but clearly it is more desirable that these companies should function in a commercial way without day-to-day interference or control from Government. There is a dilemma there.
There was no suggestion of interference. There was a suggestion about accountability to the House.
The cost of funds available as a result of the State guarantee is of course less than it would otherwise be and it would be a serious handicap to the company to vary the State guarantee at this stage. That takes account of the points made by Deputy Rabbitte. We take his point in relation to the accounts and the questions asked in the Dáil in relation to Exchequer write-offs.
What about my other question about the Comptroller and Auditor General?
In the normal way the Comptroller and Auditor General deals only with the non-commercial sector. It has never been the practice for him to deal with the accounts of companies in the strictly commercial sector.
I have dealt with most of the points raised and we will have the opportunity on the remaining Stages to tease out other aspects which may not have been covered. I thank Deputies for their contributions.
Question put and declared carried.
When is it proposed to take Committee Stage?
On Tuesday next, subject to the agreement of the Whips.
Committee Stage ordered for Tuesday, 12 June 1990.
The Dáil adjourned at 4.05 p.m. until 2.30 p.m. on Tuesday, 12 June 1990.