Seanad Éireann díospóireacht -
Wednesday, 3 Apr 1963

Vol. 56 No. 9

Irish Steel Holdings Limited (Amendment) Bill, 1963—Committee and Final Stages.

Section 1 agreed to.

SECTION 2.

Question proposed: "That Section 2 stand part of the Bill."

Professor Hayes

I think this is the operative section of the Bill. I am like the Minister from the point of view of ideology. I am not a doctrinaire supporter of public enterprise against private enterprise. Like the Minister, when private enterprise fails I would support public enterprise. A beginning was made in establishing the Shannon Scheme and the establishment of the sugar beet factories. But my concern is that we should not get ourselves into the position that such an enterprise would appear to be something which means spending more and more money possibly for less and less results. It is worth while remarking that although the Minister, myself or any of the two principal Parties of the State are not committed to public enterprise, the State here is actually more socialistic than Britain which had a Socialist Government for a number of years. I am entirely in favour of this kind of factory in Haulbowline or anywhere else that is suitable, particularly from the point of view of providing variety of employment for our people, employment not only in agriculture but in industry. A variety of employment would mean a variety of interests, a variety of culture and a general improvement. The Minister is right in saying that the money is being invested as share capital and the company are not supposed to pay interest. At the same time, invested capital nearly always gets a return. Perhaps the Minister would say whether the company, in the circumstances in which they have not to pay interest on capital, are making suitable provision for depreciation, because it is presumably in a business where depreciation is heavy. I presume that suitable provision is being made in that regard.

So far as I am concerned and so far as we are all concerned we would hope that this enterprise would be successful and that the Minister's hopes—because that is all they are— for its success in the difficult circumstances that seem to be almost certain to arise will be realised.

Tomás Ó Maoláin

It might be interesting to recall, in connection with Senator Hayes' queries, that at the last annual general meeting of the company at which the accounts for the financial year ending on the 30th June, 1962, were considered, the Chairman described this development project as leading to the creation of a new industry—not merely the extension or addition to an old one. Apropos the query in regard to exports, it is interesting to recall from this statement that in the year ending on the 30th June the company did an export business valued at almost £200,000.

Mr. Murphy

Senator Hayes, earlier on, referred to the loose investment of public money.

Professor Hayes

I do not think I used the phrase: "loose investment of public money".

Mr. Murphy

I accept your correction. I took a note of it at the time and I certainly thought you did. I wish to say that whilst my Party are committed to public enterprise, we are not committed to the loose investment of public money, even though the expression was not used by Senator Hayes. I should like the Minister to be a little clear in his explanation about the large increase in the capital required. After all, we are not talking about hundreds of thousands of pounds or tens of thousands of pounds. We are talking about an increase of 50 per cent in the capital required.

To what extent is that 50 per cent increase related to wrong judgment— maybe excusably wrong judgment, wrong assessment of the facts originally, and to what extent is it related to a subsequent decision to expand further the development of this company? I am not very clear on this at all. There has been a variety of excuses put forward as to the reasons for the necessity to increase the capital required by 50 per cent but there has been no attempt to relate those excuses, to break them down or to allocate the cost involved in each item. I know that would be difficult. However, I should be somewhat reassured if the Minister could say that a large percentage or a large proportion of the increased capital was related to further expansion of the company rather than possibly a wrong assessment, wrong judgment of the people engaged on this original capital expansion.

In this connection the Seanad, like the other House of the Oireachtas, is in some difficulty. The Minister comes along and says it is necessary that the House should vote authority to the Minister to increase the share investment in this company. He says why but the House itself has no independent assessment of it. Would it not be possible in circumstances like this that some committee of the House should be able to examine the position and report back as to whether or not they thought this was really essential, really desirable and well merited? At the moment the Minister comes along and says: "Well, it is necessary in order to continue the expansion of this company and in view of the employment involved that the capital should be increased by 50 per cent." That is all very well. I should like to have far more evidence as to why this is necessary and whether or not it could have been avoided by better management originally.

Mr. J. Lynch

At about the same time as the Irish steel development was going on, a huge British company went into another development of their particular lines. The amount involved was much higher than is involved here. Their original estimate was up literally by tens of millions of pounds. I am not using that as an excuse. I am giving an indication that in a business like this close assessment or close estimation is not always possible.

So far as the suggestion of Senator Murphy is concerned that there is a 50 per cent increase in the capital, that does not mean that there is a 50 per cent error in estimation. The capital originally envisaged exceeded £3½ million. This is the actual capital in the new development, irrespective of the working capital and irrespective of capital for certain contingencies. The new cost is estimated at £5,020,000, so, in effect, the increase is not £2 million over £4 million, but £1.3 million roughly over £3.8 million or so.

I might suggest to the Seanad that I could get a dozen people of this House to go into these figures and it would be very difficult for them to be able to put up a report either justifying or damning the project, with all due respects to his recommendation. I gave the figures in the Dáil as to the details of increased costs. The major one was the foundation and civil engineering costs caused by the invasion of the sea into the excavation. The increase in that case was about £300,000. The plant and buildings increase was £119,000. The increase as a result of the deutschmark devaluation was about £55,000. Anticipated increase or actual increase—I am not sure which it is—is due to the operation of an escalator clause of £140,000.

These are the main items. As well as that, a figure of £750,000, which is built into this £6 million that I have referred to, which is covered in this Bill, is for contingencies in the event of greater specialisation that may be required in the event of our entry to the Common Market or to some other free trade arrangement. Therefore, that £750,000 is not committed at all in the present development programme.

There is one other factor involved, too, that I should mention. I did mention it in my opening statement. There was certain electrical equipment in Haulbowline which was thought, initially, would be sufficient for the new operation without replacement and as time went on it was found that this was not possible.

Let me come back to the major reason for the increase in the cost of foundation and civil engineering works. These are increases that I am assured could not possibly have been foreseen at the time the original estimate was given.

An Leas-Chathaoirleach

Before Senator Fitzpatrick proceeds I should like to remind the House that the reading of newspapers is not permitted during discussion.

Mr. Fitzpatrick

I should like to pursue one point raised by Senator Hayes and not dealt with by the Minister. That is the question of provision for depreciation.

Mr. J. Lynch

I should have said that there is provision for depreciation in the costs proposed by the company.

Mr. Fitzpatrick

Has the Minister satisfied himself on behalf of the Minister for Finance that the provision of depreciation is adequate, because I think it is very necessary that adequate provision for depreciation should be made? Here we have a large sum of money, something in the neighbourhood of £6 million being invested in this company in share capital. Therefore, of course it does not bear any interest and it is quite likely that this company might not pay dividends for a very long time. It is also, I think, clear that there must be a lot of extremely expensive machinery and equipment in this company and it appears to me that unless adequate provision is made for depreciation that the Minister for Finance may be called upon from time to time to inject more money into this company for replacement. I think that if that were so then the employment given by this company would certainly be something in the nature of a social welfare operation.

Mr. J. Lynch

In answer to Senator Fitzpatrick, I cannot give him the actual figures provided for depreciation, but I want to assure him that they are considered to be quite adequate in the context of the type of industry involved here. As he remarked, there is very heavy and expensive machinery, some of which will depreciate quickly, but I can assure him that all the ordinary considerations with regard to depreciation for capital of that nature have been taken into account by the company.

Question put and agreed to.

Sections 3 to 5 inclusive agreed to.

Title agreed to.

Agreed to take remaining Stages today.

Bill reported without amendment, received for final consideration and passed.