Seanad Éireann díospóireacht -
Wednesday, 11 Mar 1981

Vol. 95 No. 11

Joint Committee on State-Sponsored Bodies Report on CSE: Motion.

Professor Hillery

I move:

That Seanad Éireann pursuant to the Order of the Seanad of 18 February, 1981, takes note of the Report of the Joint Committee on State-Sponsored Bodies on Comhlucht Siúicre Éireann, Teoranta which was laid before the Seanad on 5 February 1981 and which contains a request for a debate thereon.

Sugar beet is a basic industry in this country and is vital to its economy. As outlined in page 33 of the report, sugar beet produces the highest cash return of several key enterprises, ahead, for example, of creamery milk. The Sugar Company itself is a very important source of employment in many towns throughout the country.

There are, however a number of serious problems facing the company at this time. The EEC sugar regime has imposed pricing constraints which have implications for an increase in sugar production. The white sugar produced by the company is under threat of competition in its main markets, namely, the Republic and the North of Ireland. This means of course that the company is vulnerable and is threatened by an erosion of its market share on its main markets. Sugar production in the countries of the EEC exceeds consumption. There is increasing emphasis on diet and allied to this there is competition from substitute products which in turn are contributing to this sugar surplus situation. A further problem faced by the company, is the high interest payable on the sugar company's borrowings. If the company is to turn the corner and to return to profitability factory modernisation is a top priority. As the report underlines, the company needs a capital injection now of £25 million to surmount its present financial weakness. It needs a further injection of equity combined with borrowing to support its additional modernisation programme. To improve its competitiveness in the countries of the EEC the company needs to modernise as a matter of urgency.

I would like to refer to industrial relations in the Sugar Company which in my view are a model of how industrial relations should be conducted. The company and its workforce down the years are to be commended for the exceptional record of industrial peace achieved. The industrial dispute which occurred at the Carlow sugar factory last year was the first in the company for over 30 years. This is a truly remarkable record. In connection with industrial relations, paragraphs 102 and 103 of the report are particularly relevant. As one who is deeply involved in industrial relations I fully subscribe to the management's tradition in the Sugar Company in which the implementation of personnel policy and industrial relations are considered part and parcel of every manager's job. It is up to each manager from foreman upwards to face up to issues where they arise and to resolve industrial relations problems nearest the point where they occur. Since most disputes originate at the work-place it is there that the capacity and the expertise on the part of management and employees and their representatives, the shop stewards, are most needed.

This underlines the importance of training people in industrial relations at management and shop steward levels. Power, as we know, has moved downwards from trade union headquarters to shop stewards on the shop floor. The number of negotiable issues continues to expand. I believe managements should encourage the growth of the shop steward movement. At the same time managements can reasonably expect professionalism and responsible behaviour from shop stewards. This would include adherence to written procedures, jointly agreed between the two sides, and shop stewards who do not conform to these agreed procedures should be dealt with firmly by their trade unions.

The Sugar Company has for many years had a system of written dispute procedures which have been agreed with the trade unions and in fact the company has been in the forefront of industrial relations practice in this respect. As one of the seven designated State-sponsored bodies, it has a number of elected worker-directors on the board. The company must again be commended for the vision it has shown by devoting very considerable attention to communications. For many years past, factory works committees have been in operation. There is a recognition that sub-board structures need to be strengthened further so that the worker-directors can more effectively report back to their constituents, the trade union members, and so that the trade union members in turn can communicate back through these sub-board structures to the directors themselves.

In conclusion, I think the opportunity to debate this report is a welcome and positive step. I feel confident this view is shared by the Sugar Company itself.

Mr. Connaughton

It gives me great pleasure to second the motion before us this evening and I, like Senator Hillery, am delighted to be given an opportunity to discuss some of the aspects of this report. First of all, the official news today or yesterday that the Sugar Company as a general body has lost over £9 million trading in the financial year under review leads one to hope that this position can be rectified in the years to come in the interests of Irish agriculture. I will have a lot to say about a certain region within the Sugar Company's operations in a few moments. It is true to say that because of the structure and the special relationship that has always existed between the Sugar Company and Irish farming it is very important for the overall agricultural industry that the Sugar Company should do well. I know that this is the first time that the deficit on trading has been so great. I understand that a number of elements would have caused this to a certain degree. A big debt would be one of those factors that the company would have to note. I understand that the strike in the Carlow factory last year has been costed at nearly £2 million.

One might assume that we would not have a return to that type of incident in the future and indeed, from the labour relations point of view, anything that can be done to avoid a terrible event like that recurring should be attempted. However, even taking that into consideration, the Sugar Company had a very bad year. There were special circumstances militating against the company. Reports that I have read in recent times concerning the company indicate that the amount of light at the end of the tunnel is not that great and that there may be a very difficult road ahead for the company. I would like to go on record this evening as saying that anything that can be done to ensure that they are allowed to fulfil the purpose for which they were set up should certainly be done.

I notice from the Joint Committee Report that it is envisaged that a sum of between £30 and £40 million would need to be spent in the next few years to modernise the company's sugar factories. Whether or not that money is available is another question. It is imperative on behalf of the farmers of Ireland that this investment be made and that the necessary money be made available by the Minister. It is in nobody's interest that the Sugar Company should be under-capitalised. The sugar Company represents an important aspect of agriculture. In nine or ten years time we would be sorry that we did not find this £30 or £40 million. I thought the modernisation proposals might demand even more than that, but the people concerned are the experts in this line of business and if they say £40 million, I assume that is what they are looking for.

I certainly hope that the Government of the day, no matter who is in office, will take particular note of this request, because in the years to come we might be very sorry if we allowed this call to go unheeded. We might find ourselves unable to have factories on a basis that they would be competitive with factories in Europe. Those are considerations that we have to worry about.

Allied to the general overall problems of the company I see in the Joint Committee report that there is a proposal that in order further to cut the losses of the company, a very close look be taken at the operations in Tuam. This is not the first time Tuam has been put on the chopping block and I dare say it may not be the last. It is not in the interest of anybody, the Sugar Company, farmers or the general workers that the factory in Tuam should fade out of existence. There is a bona fide case for the sugar factory at Tuam. In the next few moments I will go through some of the reasons why I think so.

First, I think so because of the social and regional development responsibilities that the Sugar Company have always shown. I personally regard the Sugar Company as being on the side of the small man. Over the years it has shown a very healthy respect for the problems of the small farmers of Ireland. It is significant that the factory was sited in Tuam originally. It is also important to say that from a financial and economic point of view and from a social point of view, that factory has done trojan things for the western region.

There is a very fine, skilled staff in the Tuam factory area. Their skills are on a par with anything that is available in any of the other three factories. The production and work rate of the part-time or campaign workers are as good as you will find anywhere. The factory has been almost totally without strikes of any description.

The big problem is: how do we answer the critics? The beet acreage in the west is dropping and I am the first to accept that that is so but it is important for the analysts to go back to their textbooks again. It has been proved that in 1979 farmers who grew beet in areas other than the Tuam factory area were able to sell 15½ tons of washed beet per acre. Unfortunately, the farmers in my area supplying the Tuam sugar factory were able to manage only 12 tons on average. Everybody must recognise that much of the land in the west obviously is not as good as in the other areas of the country where beet is normally grown. That does not mean to say that it is not a good crop and an important crop to a western farmer.

There are certain important technical advances on the way in regard to sugar beet production. I believe that Galway, Mayo or Roscommon farmers will be as quick as the next to catch on to those improvements if it is in their own interest. Basically a farmer on a normal type of land in the west can expect to receive £90 less for his acre of beet than his counterpart anywhere else in the country. The question is asked: why are not more farmers in the west growing beet? It has always been a recognised fact in farming that if a man is paid sufficiently for a certain line of farming that is the line he will be in.

There are other factors that I have not time to go through, factors like the small, fragmented farm, the lack of machinery and so on. The situation is changing dramatically. Some of the technology that is being used in other areas will spread very quickly to the small farming areas. There is an important part for sugar beet production in crop rotation in western agriculture. If the Sugar Company and the Government of the day are interested in retaining a factory of the type that is in Tuam, there are a number of points that they will have to look into very closely.

Tuam is not the only place in the Sugar Company's overall operations that is losing money. The reports that I have seen would suggest that. It is true that there seems to be some panic at this stage that, if the Sugar Company is to survive, Tuam will have to be cut off. There is no way that either the farmers or the factory workers or the people generally of the west, including the people of Tuam, can accept that, because for a lot of reasons it would be a retrograde step. If you take the average cost to the IDA of providing one new job in industry at the moment, you will see that the proposal that I am making this evening to keep 530 people at their work is only a flea bite in comparison with what it would cost the IDA to bring in a new Japanese factory or something like that.

There are a number of other reasons why Tuam should be helped. Most farmers throughout the country will say that the campaigns are too long. Tuam came in very handy on a number of occasions: the surplus or excess beet from the other factory areas could be diverted to Tuam and you could have a reasonable compaign suitable to everybody. In recent times, were it not for the £800,000 that the previous Administration put into the factory in Tuam we would now find ourselves with a factory that might not be able to keep going at all. I do not like to hear of the idea of closing, much less deciding at company level not to put any more funds for modernisation into Tuam.

In order to keep the factory in Tuam as viable as possible it is necessary to pay a direct subsidy to a farmer on a production basis. I am not at all advocating that a man should be getting money just because he grows beet of one description or another. I am talking about a production bonus for beet delivered within the Tuam factory area. It is the answer to a great extent to the critics of the so-called farmers' dole. Some people have been shouting for years that it should be connected to some type of production bonus. I am suggesting that there is an ideal opportunity to bridge the gap between the average grower in Galway in the disadvantaged areas and the average grower in Tipperary or Cork.

There are many other reasons why the Tuam factory should be retained. The future of the potato co-op is interlinked with the beet factory in Tuam. There has been an exchange of staff and it is very important that both should be retained.

Finally, and most important of all, there are 530 people in full-time employment. We have them and they are trained. We can increase production by the very simple method of direct production subsidy. Certainly with all the talk about EEC aid to disadvantaged areas, now is the time for people in authority to show that they really care for the people in those areas.

I am making a special plea to the House that there should be no talk whatever about closing the factory at Tuam because to close that factory would be a retrograde step and it would take the IDA several years to have a replacement in that area, if in fact they could do it at all.

Minister for Agriculture (Mr. MacSharry)

I would like to thank the members of the Joint Committee for the work they have put into the preparation of this comprehensive report on the Sugar Company. The report itself, together with the minutes of evidence, clearly indicate the sustained efforts made by the committee to examine the role of the company, to lay bare its weaknesses and to suggest remedies where appropriate. The minutes of evidence, in particular, demonstrate the depth of detail which the committee was prepared to grapple with so that the full picture of the company would be recorded. The committee even went to visit the company's premises at Carlow to make sure that they acquired first-hand experience of what they were examining.

As we know, the company no longer deals exclusively with the manufacture and sale of sugar, but also engages in extensive food processing operations, the manufacture of agricultural machinery and other ancillary enterprises. Each of these areas has been covered in the report which contains a wealth of information, is a model of clarity and will be of great assistance to me and to the officers of my Department in dealing with the policy and activities of the company, responsibility for which was comparatively recently assigned to me. Up to February 1980, as the House knows, statutory responsibility for the company was vested in the Minister for Finance. That Minister remains the principal shareholder, holding £6.5 million of the issued share capital of £7 million.

I understand that this is the first occasion on which the Members of the Seanad have had an opportunity to debate a report of the Oireachtas Joint Committee on State-Sponsored Bodies. For my part I welcome the report as a constructive document and look forward to hearing the views of this House on it.

Before commenting on the more salient matters arising from the report I think it well to recall briefly some of the relevant background to the company's activities, with a view to putting its present situation into better perspective.

The Sugar Company was set up in 1933 to provide an additional source of revenue for Irish farmers and to improve the national balance of payments by reducing or eliminating sugar imports. The four sugar factories which we still have were established in those early years.

Before we joined the EEC the sugar industry operated within a protected home market which safeguarded the Irish manufacturers of goods containing sugar for domestic consumption. At that time world sugar prices were generally low and such manufacturers, using home produced beet sugar were finding it impossible to sell their products on export markets in competition with products incorporating sugar at world prices. To help these manufacturers stay in business the Irish Sugar Company committed itself to importing substantial quantities of raw cane sugar for sale, after refining, to the sugar goods sector, for incorporation in products for export.

During the ten years prior to our accession to the Community these sugar imports averaged 42,000 tonnes a year. As a result, because of the necessity for the imports, and the low prices generally prevailing for sugar on world markets limitations had to be imposed on the production of the more expensive beet sugar. The area under beet was, accordingly, limited to around 69,000 acres a year, although demand by growers for beet quotas was often in excess of that figure.

These limitations on beet acreage and the retention of four production units to process this, acted as a severe constraint on the development potential of the industry. Such capital as was available was invested in the establishment and development of food processing. Consequently, on entry to the Community in 1973 the Irish sugar industry was underdeveloped, much of its equipment being old and inefficient.

The advent of EEC membership and the integration of the industry into the common organisation of the market for sugar changed the situation, however, and provided the industry with the desired scope for development. Among other advantages the Community pricing system for sugar enabled the use of home grown beet sugar in processed products for export. An investment and modernisation programme was, therefore, commenced. As the joint committee have pointed out the company regards this investment programme as essential to the survival of the sugar industry; efficiency in production is no less vital in this industry than it is in any other. I shall return to the company's investment programme. In the meantime I should like to offer some comments on the importance of CSET in the national context.

With an annual turnover last year of £140 million the company is one of the top 20 Irish companies and employs about 3,600 people. It is the second largest enterprise in the Irish food industry. Apart from those directly employed there is vital ancillary employment on the farm, in the cultivation and harvesting of the crop. In addition, there is substantial employment in providing necessary inputs for the crop — fertilisers, seed, machinery, ground limestone and so on. In the haulage area employment on road and rail transport is involved. Up to 16,000 people are employed in the sugar using industry which is serviced with supplies of sugar from the company.

Another very important aspect of the Irish Sugar Company's role in the economy is that it is a rurally based industry. With its sugar factories in Carlow, Thurles, Mallow and Tuam and with its other activities in various corners of the country, the company spreads widely its economic advantage. I would like at this stage to refer to the point made by Senator Connaghton in relation to the Tuam factory and to state quite clearly that there are no proposals before me regarding the closure of the Tuam factory. Not only does the commercial life of a town benefit greatly from the presence of a sugar company operation but so, too, does the social environment. Departure of young people to the major cities is greatly stemmed as service industries also grow up in the town, creating employment in all walks of life.

Last year there were approximately 8,000 farmers growing beet under contract for the company; the importance of the industry to these farmers is very great indeed. For example, close on £40 million was paid to growers which represents a sizeable contribution to farm incomes generally. At present the company is issuing new beet contracts for 1981-82 and every encouragement is being given to new growers to undertake beet production. At a time when many aspects of farming are experiencing difficulties of one sort or another, the importance to the Irish farmer of a guaranteed market and a comparatively favourable price for his produce cannot be overestimated. As recent statistics published by An Foras Talúntais show, beet is still the most lucrative of farm enterprises.

Apart altogether from the importance of the industry in terms of employment created, and in terms of the benefits to the farmers, the very existence of the industry ensures not only that we are self-sufficient in sugar but that we can be net exporters also. This helps our balance of payments. The approximate value of our sugar exports for 1979-80 was £17 million. Domestically we consume in the region of 150,000 tonnes of sugar annually. If this sugar had to be imported the adverse effect on our balance of payments would be close on £60 million.

Any discussion of the Irish Sugar Company should take place, therefore, against the background of the definite importance of the industry to Ireland, its economy and its people.

I have already mentioned the impetus which our joining the EEC gave to the industry. One of the matters referred to in the report is the fact that proposed changes in the EEC sugar regime would, if implemented, adversely affect the company's operations. The background to this is that last year the EEC Commission proposed the introduction of a regime which was essentially aimed at cutting back production in the Community. The Commission advocated this because Community consumption had stabilised and the cost of disposing of surplus requirements on a depressed world market was proving to be very costly on the EECs financial resources. As far as Ireland was concerned the measures proposed envisaged a substantial reduction in our so-called ‘A', or basic sugar quota from 182,000 tonnes to 164,000 tonnes.

The direct implications of the proposals were of extreme gravity for the industry in Ireland. It was, therefore, incumbent on me to present the Irish case in Brussels and to point out the disastrous consequences such proposals would have for our industry. I am glad to say that eventually the Commission withdrew their proposal and presented an alternative which at least ensures us of the retention of our basic quota and thus provides an opportunity for the industry to develop.

I should point out that the production levy to which Senator Hillery referred is a maximum levy and not a fixed amount. None of it need be charged unless the Community incurs losses on its sugar operations. In fact over the past year or so sugar prices on world markets have been high and no losses were incurred on surpluses. Naturally I would have preferred to have no levy at all on ‘A' sugar. However, it is not possible to argue plausibly in favour of one approach to sugar and in favour of a conflicting approach to milk. If the levy is at the maximum it will represent about £1 million but the price increase already put forward by the Commission represents a gain of close on £5 million for the industry. I have already said I will press for an increase on this figure of £5 million.

When the Council of Ministers are discussing sugar quotas, past production performance is a vital consideration. I was very disappointed, therefore, at the decline in our production from the campaign recently ended. I realise, of course, that the weather in 1980 was not particularly favourable to growth and that harvesting conditions were also difficult. But these factors only partly explain the decline in our sugar outturn. The acreage of sugar beet last year was almost 6,000 down on that of the previous year. Obviously acreage is a critical factor in determining total production and any significant fall in acreage is greatly to be regretted.

Apart from its effects on our sugar quotas such a fall clearly has implications for the profitability of the Sugar Company, not alone in relation to the domestic market but also in relation to exports, especially at a time when world market prices are higher than those obtaining in the Community.

Members of this House will, therefore, I hope forgive me if I take this opportunity to address myself, through them, to beet growers. Acreage of beet is, of course, a matter in which growers themselves can exert a real influence. I realise of course that costs of production have gone up but, notwithstanding that, beet growing continues to be most attractive for producers. According to the findings of an Agricultural Research Institute research team beet production gave the best return of all farm enterprises in 1980 and it is expected to head the list in the current year also.

In addition to the advantages of beet as a cash crop there is the consideration that beet is ideal for a tillage set-up where, in rotation, the crop cleans up the land after cereals. Beet has none of the marketing problems and risks associated with some other crops and, moreover, the pulp provides farmers with a valuable and economical livestock food.

I would regard farmers as partners with the Sugar Company when it comes to ensuring the survival of the beet sugar industry. We are now at a stage where the company's profitability will be seriously threatened — perhaps irreversibly — unless its production targets are achieved.

For the coming season the company is making a new drive to expand the acreage of beet and has recently agreed with the Beet and Vegetable Growers Association on the prices to be paid. It is anxious to have at least 90,000 acres grown and will not be limiting its offers of contracts to existing growers. I would urge all concerned to co-operate fully with the company in their drive to ensure the security of the sugar industry and its thousands of jobs for the future.

I welcome the careful consideration given by the committee to the company's food division — Erin Foods — and I note the comments and recommendations made. 1980 was a particularly unfortunate year for this division as it suffered from much publicised irregularities. The total cost of these to the company is shown in the recently published accounts at about £1.8 million arising mainly from stocks of goods which as yet remain unsold. This is a very large sum and Garda investigations into the irregularities are continuing. I am assured by the company that every effort is being made to prevent a recurrence of any similar incidents by improving procedures, systems and controls.

Apart from this, Erin Foods has been having more widespread and more deeply rooted problems over the years. The company has made these known to the committee. One of these problems — indeed the major one — is its overdependence upon the production of industrial dehydrates. The dehydrate market is currently suffering from a severe downturn not only in Ireland but in the EEC as a whole. The diminishing market is also subject to strong competition from non-EEC low cost producers. It is in such a context that the company has had to implement certain rationalisation measures within its food sector in order to safeguard the company as a whole. The recent decisions taken to cease its Carlow Erin Foods operation and to terminate its financial involvement with the Fastnet Co-operative Society represent attempts by the company to secure a commercially viable food division. These measures were as regrettable as they were inevitable. The sugar division cannot, as it did in the past, bear the losses of the food division. The recently published annual accounts of the company, which show a trading loss for the group of over £8 million, highlight only too dramatically this very point.

However the company, in keeping with its traditional social commitment, is at present making every possible effort to limit the adverse effects of such closures on the communities concerned. In conjunction with the IDA it is attempting to provide alternative productive employment in the areas directly affected by the closures. As I have said, I regret that the need for the company to cease these food operations was necessary but I am confident that, given the priority which the IDA are according the matter of replacement industries and given the genuine concern of the company itself to absorb staff by transfer to other parts of the company where possible, the adverse effects of what are necessary measures of rationalisation will be the minimum possible.

In the case of growers who have regularly grown vegetables in the areas and who have committed significant expenditure to the production of these, the company assures me that efforts will be made, where appropriate, to offer beet contracts in lieu. Where this is not feasible alternative special arrangements will be considered.

The future of the food industry as a whole is at present under detailed examination by the Horticultural Development Group which I have set up under the aegis of my Department and I will ensure that the questions raised and the recommendations made will be given detailed examination.

Apart from the two aspects of the company's activities to which I have broadly referred, namely, sugar and food, the committee deal with many other matters in their report. While all of these are important and are at present being considered in my Department there is one which is, perhaps, of more importance than any other. That is the present serious strain on the company's finances.

I have attempted in my earlier remarks to indicate one of the underlying causes for this, namely, the lack of investment over the years on the sugar side which has resulted in the company having now to borrow heavily for investment purposes at a time when interest rates are very high and when the general level of activity in certain of the company's areas of operation is not very buoyant. The existence of high interest rates has added to the company's financial burden in regard to its working capital also since at periods of the year it has to carry very sizeable stocks of sugar.

The question of an immediate equity injection of £25 million is referred to, as well as further injections to help fund the investment programme over the next few years. Coupled with this reference is a recognition that opportunities for innovation may exist in financing the company's development. One of the suggestions made, for example in paragraph 31, is that the question of widening the ownership base and the provision of funds from suppliers' resources should be examined.

The report concludes with the observation that the company faces difficult decisions in a number of areas in its attempt to restore profitability and to correct the imbalance on its capital structure; and it suggests a number of areas where Government action and assistance are required. It indicates also that the company will need the full co-operation of all concerned if it is to continue in its long-standing development role in key areas of the Irish agricultural industry.

In this regard I can say that subject to the company coming forward with a suitable programme for restoring full viability the Government will not be found wanting. I have already initiated a detailed examination within my Department of the committee's report. In so far as the immediate major problem is concerned, namely, that of the company's financial situation, consultations between the company and my Department and the Department of Finance are already in progress.

Although the problems facing the company are by no means minor ones the report rightly draws attention to a number of favourable aspects in tackling them. These include the company's management expertise and physical infrastructure, its strong position on the home market, its capacity for applied research and development work in all of its main areas of activity, its background of good relations with the agricultural community and its tradition of good industrial relations.

In conclusion, I want again to thank the joint committee for providing me with the opportunity to take part in this debate and to have made available to me the views of this House on what the committee described as one of the major industrial enterprises in the economy.

Mr. Harte

We are glad to have the opportunity to debate this report coming from the Joint Committee on State-Sponsored Bodies. It is a most important document because it deals with one of our major State enterprises which over the past 50 years, has achieved a turnover of over £140 million and provided secure employment for almost 4,000 people. When one adds ancillaries such as road haulage and so on, one is talking of about 21,000 or 22,000 people who are either directly or indirectly gaining a living through this company. The good thing about this industry is that it is giving employment not just in one particular area but is spread around the country and the value to the economy is phenomenal.

It is, as the report states, one of the major industrial firms in the economy. It has fulfilled a very long-standing development role in key areas of the economy particularly in the agricultural and food processing industries. The Sugar Company contributes in a most significant way to our economic welfare and this can be seen from the recent annual report which reveals that the turnover of £140 million is in fact making the largest single contribution in the food circle. When we see that the export sales amounted to £30 million, that wages and salaries reached £23 million and that payments to beet and vegetable growers were more than £36 million we must immediately understand the very substantial value to the economy and the very major role that this company plays in the whole area of the economic life of the country. It is a lasting contribution and not just something that has been going on for a few years, for example, where one might put a lot of money into a company in the private sector which might go out of business in a short time and one would have to start thinking of putting something else there to replace it. The Sugar Company has been very consistent over the past 50 years and this has been of great value to us in the Labour Party because we are great advocates of State enterprises.

When we look at the report of the Joint Committee and the company's report we have to admit that some serious problems are revealed. We also have to take cognisance of the part that the company have played over the past 50 years and the importance of that role not only to the economic benefit of the country but also to the social benefits that have come through the actual inflow of money generated throughout the economy. The problems are there and they have to be faced up to. We in the Labour Party are realistic and we want to face up to them. But we also recognise that the basis of the policy and the message going out from this House must be positive. The best way we can do that is to look at the statement of the Chairman of the Company. He states that the industry is basic and vital to our country and he affirms his faith in the enterprise and its future and obviously we can glean from the Minister's speech that he in fact has the same faith in the company that the chairman has. Whether he is prepared to walk down the same road as the chairman is another matter.

Here we are talking about a company who make a balance of payments contribution of at least £75 million annually and who are the largest and highest quality provider in Europe of a whole range of processed foodstuffs. To face up to the reality of the report and to face up to the issues that are raised in the report it is absolutely vital that we should set down the things that have to be faced up to. In this respect I would like to make four points.

First of all, we must support the committee's call for an immediate injection of £25 million in capital and for further capital investment in line with the company's own internal plans. The present situation in which the State's investment is only £6.5 million in a company with assets of £50 million is in fact absurd. For example last year the amount of interest on borrowing was £8 million. Much of that was used to fund necessary fixed capital investment. The State must look at this, it must have a look at the committee's report and it must be prepared to support the company by giving it the injection of £25 million and it must also have regard to the fact that the small State investment of £6.5 million is an absurdity. This is particularly so when one takes account of the £800 million being invested in the IDA — for whom I have great respect — and where there is no real evidence that the IDA are not working well. However, there is evidence that they do not always work well. Here we have proposals and policies set out in the committee's report and in fact all the signs are that if an injection of £25 million is made instantly the future of this company will look well.

Secondly, all efforts must be made to secure the future of the basic sugar industry. We feel that the company should be supported in the drawing up and implementation of a development plan which will lead to the economic production of our full sugar requirements and of sugar for export to available markets. This plan, we believe, should be adequately funded and fully backed. We took exception to the imposition of the EEC levy on Irish sugar output. The Minister has made some points in his speech about this. We still believe that the levy should not have been accepted by the Minister in the light of the unjustified burden it placed on the industry as a whole and the side-effects that it was liable to have on employment.

Thirdly, the importance of the food sector must be underlined. While restructuring is necessary, Erin Foods must be enlarged to enable them to grow in suitable market areas. They must be allowed to go ahead with technological and product development and to operate effectively in combating the take-over of our food industry by the multi-nationals. The take-over by the multi-nationals is not just a "Reds under the bed" scare, saying that the capitalists are going to take-over; it is happening all over the world on a regular basis. We in the Labour Party, make no apologies for giving the State-sponsored and semi-State bodies all the protection that is necessary, particularly where, if there is a slide in any direction, they could well end up under foreign domination and control. When this happens it usually puts an end to the whole question of public employment scrutiny and we would not be, as we are today, debating a report on a State-sponsored body if that scrutiny and control were to be removed by multi-nationals getting in by the side door taking over the profitable side and leaving the other side to the company itself to run on a State basis, as is happening in other areas.

We cannot afford to allow this basic industry to fall into foreign hands, but if we panic, or if we are too sparing, there is great likelihood that we might, through agitation or pressure from outside sources and so on, find ourselves heading in that direction. It is our job in this House to see that this does not happen and we offer our support — in this direction anyway — to the company.

Fourthly, the general strategy that was outlined in the committee's report should be endorsed, not in every detail but in terms of its insistence on planning and on prudent development of this great national industry. We should pay attention to the Committee's insistence on planning. We are not the best in the world when it comes to the question of accepting the concept of planning. For some reason or another we associate or identify planning with the Eastern bloc countries.

An Cathaoirleach

The Senator has three minutes in which to conclude.

Mr. Harte

Many of the problems experienced by the Sugar Company are shared by all Irish enterprises. Many of the problems are exacerbated by the total failure of the Government's agricultural policy which has led to a collapse in the farm input sector. They can be solved if the policy is changed and redirected positively and if the company are encouraged and supported in their own development planning. A company who engage in this wide spectrum of services and industry and so on should get the support we can give them, not only by the injection of £25 million but by paying attention to their insistence on planning.

Mr. Kitt

I welcome the opportunity to speak on this report in which are some statements which show the achievements of the Irish Sugar Company. From it I gather that Ireland has been essentially self-sufficient in sugar during the past 40 years through the efforts of the Sugar Company; and also that their industrial relations have been very good. For 32 years there has not been any industrial relations trouble. I note that the company has reported profits in all but three years since it was established in 1933. These are solid achievements by the company. I took from the report that there was a debate concerning the future objectives of the company as between social and commercial roles and the question as to whether restoring the company to profitability would conflict with other objectives of the company. There was a regional development objective for the Sugar Company which influenced the siting of the four factories. I would like to stress the social and regional objectives because they are very important in the west of Ireland.

Before I deal with the question of quotas, I would like to commend the Minister for Agriculture for the very strong case he made in Brussels for retaining our basic quotas. It is interesting to note that in the last five years the Sugar Company has failed to produce enough sugar to fulfil the basic quota of 182,000 tons. What amazed me in the report was that there was a recommendation to close the Tuam sugar factory when we have not even reached our quota with the four factories. It reminds me of the type of argument that CIE have when they say they will close down such and such a railway line and save money while their subsidy seems to be increasing every year. However, I am glad the Minister has said that there are no proposals before him as regards the closure of the Tuam sugar factory.

The question of the competitiveness of beet vis-à-vis other farm enterprises was raised in the report. It is true that the popularity of beet will depend on the attractiveness of tillage in general. The price is very important for the grower, and technological developments will undoubtedly influence the acreage of beet. The level of input is high in growing beet and this increases the risk which the grower takes. One interesting item in the report is the suggestion of making attractive premiums to growers who would be willing to commit themselves to the crop for a number of years. I hope that the response to this will mean increased acreage.

The question of efficiency in the Irish sugar industry was mentioned and the fact that we lag considerably behind our competitors in Europe. Two reasons given were our out-dated equipment and the small size of our plant. For that reason I welcome, as the other speakers have done, the Oireachtas Joint Committee agreement to invest £25 million immediately. Again, I will have to be critical, because Tuam is singled out as having problems because of its small size. All our factories are small compared with sugar factories in other European countries. We should realise we are talking about the Irish sugar industry. The first point I would make is that most of the farms in the west are small farms. Eighty per cent of farms in County Galway are under 50 acres. If we are to increase our acreage it is from these small farms that the extra beet will have to come. For example, in the 1975-76 campaign 3,341 acres of beet were grown in the west of Ireland, and in 1980-81 the acreage was 2,431 and the number of growers decreased also. Factors mentioned by Senator Connaughton cause problems in the west of Ireland. Climate is one. Wet springs and wet autumns bring problems in sowing and harvesting. Numbers are decreasing also in areas east of the Shannon where traditionally beet is grown for the Tuam factory.

I have to agree with the speakers who mentioned the yield per acre in the west of Ireland compared with the rest of the country. There was a difference of three and-a-half tons per acre in the 1979 campaign and that means a difference of £90 per acre in what the grower gets for the beet. The difference should be made up to a farmer who sees people in other parts of the country getting much more for their beet. It is small farms who will have to produce the extra beet. There are problems with breakdowns in machinery which I hope can be overcome. Farmers overcame them in the past because of their determination. If farmers from the south, east or any part of Ireland would come into the west to grow beet I do not think they would do any better than the farmers there.

I welcome the initiative of the Sugar Company in providing a land bank for tillage. I understand that this has now reached over 1,000 acres and 500 acres will be devoted to sugar beet in the coming season. Considerable publicity should be given to this fact. In the past farmers have said that they could not get land, and I hope that young farmers in particular will have access to this land pool. Macra na Feirme have been involved in this scheme which was promoted by young farmers who up to now had not been able to grow beet on their own land, and Macra na Feirme are very strong in County Galway. Their traditions go back as far as sugar beet growing, and I hope that they will be successful regarding this scheme to which they certainly have given enthusiastic support and a good response.

Other young farmers have financial rather than land problems and I hope that the Sugar Company can help them. We all hope that these "steps" will result in increased acreage of beet, particularly in the province of Connacht. Many farmers in Connacht do not grow beet at all. This problem can be overcome by publicity regarding the land bank and the advisory service. There are signs that acreage will increase in the coming season.

It is important for the west of Ireland that an agreement be concluded with CIE to continue the rail transport of sugar beet. The report stated that CIE have been reluctant to bring sugar beet to Tuam. It is very important to have an agreement with CIE so that beet can be transported from east of the Shannon to the Tuam factory.

A number of incentives can be given for beet production. Beet machinery might be included for grants under the group fodder scheme. I would like the Minister to take a note of that because beet produces fodder and that is one incentive that farmers would respond to. The smaller farmers in the west of Ireland should be given every incentive to grow beet because many of them work as seasonal workers in the factories. This provides a supplementary income, which helps to maintain them on the land. It is in the interest of the west of Ireland that beet growing would continue. We were very glad of the western drainage programme which has succeeded in getting many acres of land drained in the west of Ireland. It made a lot of land suitable for growing beet. I hope the western development programme which will soon be commencing will add to that acreage. I might mention that, five miles from Tuam, the river Nanny remains undrained and thousands of acres are flooded.

In view of the fact that there are at a maximum 627 people employed in Tuam, closure of the Tuam factory would send a shudder through the whole of County Galway. The question has to be asked as to where the alternative employment will come for these people. The IDA could not move in there until the factory closed and a lot of skilled people like plumbers, fitters and electricians would be unemployed and there is a danger of the skills being lost to the area. Social welfare would have to be paid to these people. The report mentions that in the event of the Tuam factory closing the western growers would get a transport subsidy to bring their beet to one of the remaining factories. If that happens it will mean that beet will not be grown in the West of Ireland. I hope that in the coming campaign there will be improvement in procedures as regards sampling and sugar determination so that the technical quality of individual consignments of beet will be better assessed. I would hope also that from now on all statements on beet growing would be encouraging. We have had a lot of gloom and doom and a defeatist attitude particularly as regards the Tuam factory. There have been many difficulties in the Tuam area in the past. Since the thirties there have been many times when the Tuam factory could have closed down but it weathered the storm and I believe it will do so again.

Mr. Molony

Thanks be to God for the Joint Committee on State-Sponsored Bodies. Without it, I wonder how long the situation in the Sugar Company could have continued in the direction in which it is going before the question became public and we had the opportunity to express our views on the very serious state in which the Sugar Company find themselves at the moment. I compliment the Joint Committee on the excellence of their report. It is a marvellous report and for people who are not expert in the technical aspects of the industry it is certainly easy to follow. The financial and economic aspects are made clear and the report highlights the remarkably difficult future the industry is facing.

There are lessons to be learned obviously, not just about the sugar industry but about the whole system in which our semi-State industries are being run, in that they can find themselves in such serious financial straits and going in such seriously wrong directions before the political publicity that is needed sometimes to correct the course is brought to bear upon them. The report says on page 5 paragraph 8:

There is a clear need to think hard about the basic goals of the Company. Given its present precarious financial position, it is essential that the Company has a mandate setting out its future role and responsibilities unambiguously so that the management can tackle the Company's difficulties in a realistic fashion.

If that statement had been made two, three, four or five years ago something might have been done before now that would have improved the position that the Sugar Company unfortunately had cause to report the other day. The really sad thing about it is that the losses the Sugar Company announced the other day are not the hallmark of an improvident company because, as many speakers have pointed out they are a company with a superb record. They have had 47 years of existence. Their profits are described as unspectacular but consistent nevertheless, by the report, and for every year except five in their history, as Senator Hillery has pointed out, they have had superb industrial relations. As Senator Connaughton has pointed out they have had and have superb relations with all types of farmers. They have played a very important role in regional development. They pioneered industrial development on a regional basis.

All in all, here we are faced with a problem which is met by perhaps the most successful semi-State body or semi-State company that we have, one that stood the test of time, that helped this country in so many ways and is now almost on the brink of falling altogether because — maybe I am being simplistic — the financial structure was not examined and was not, perhaps, attended to a few years ago. Having said that, I want to make it quite clear that I am far more optimistic about the future of the sugar company than the Minister for Agriculture appears to be from the speech he has made this evening. I will say more about that in a few minutes.

The book of evidence of witnesses which has been published and accompanies the report is a very useful document. One gleans far more interesting information from it, certainly in relation to some of the remarks made.

On page 3 of the report of the Joint Committee on State-Sponsored Bodies, 14 May 1980, Mr. Sheehy, in answer to a question put by Deputy Lawlor makes the statement:

On a national basis, if a sugar industry were not there at the moment, somebody would have to think of putting one there.

That is the basis upon which we should commence our consideration of this report and this entire debate as to what is going to happen in the Sugar Company.

Of course, there are problems. Any company relying on expensive capital, plant and equipment to manufacture their produce, whatever it might be, must at various stages in their history run into difficulties of modernising their plant. We are in an unfortunate position now in that some of it should have been done maybe ten or 15 years ago. Now if we are to live at all in the competitive scene into which our entry to the European Economic Community has put us in relation to industry it is an absolute must that we modernise our plant. If this industry is to continue to exist and to play the part it has played to date in this country, money must be provided. I find it awful, depressing and frightening that the Minister could not make that simple statement. The Minister has suggested that he will consider the position in the future. The overall loss was £9 million but a great proportion of that was due to the appalling interest repayments that the Sugar Company had to make because of their commitment to modernising plant. I would have hoped that the Minister would have been more alive to the problem and more encouraging than he was here this evening.

The company are under-capitalised. That is absolutely clear. There are big problems to be faced, problems as to how the probable total of £75 million will be spent. Is it going to be spent on one or two plants out of the four major ones? Is Tuam going to close down? Is Thurles going to close down? I do not mind being parochial and saying that I do not want to see Thurles sugar factory close down any more than Senator Connaughton or Senator Kitt or anybody else from the west of Ireland wants to see Tuam sugar factory close down. It is a great pity that the Minister did not have something to offer on this. What will his approach be in dealing with this problem? The report highlights questions: What is the purpose of the Sugar Company? Is their purpose that of commercial success? If it is, then probably the answer is to close down all but one or maybe build a new one outside Dublin or in an area where most beet is grown and where production is best and to put all your £70 million or £100 million or whatever it will be in one plant. Certainly you will make it a tremendous commercial success if you take that approach to it.

However, there is another aspect to it, namely regional and social responsibility. The Sugar Company have pioneered the industrial development that we have seen in regions of Munster through the factories at Mallow and Thurles and in the west of Ireland through the establishment of the plant in Tuam. We must make a decision on that. That is not something that can await some further report or proposal. It is astonishing that in this day and age this question has not already been considered and that the powers that be, namely, the Minister, who is responsible no matter how he might try to fob off his responsibility on to the board of the Sugar Company, has not made a decision before now. I am disgusted and distressed that the Minister has not indicated what his mind is on that subject.

I regard the social aspect of the Sugar Company as important. That is obvious, coming from Thurles as I do. If we did not have in Thurles the sugar factory or if it closed down Thurles would be a ghost town. Of that there is no doubt. It is a town that has found it hard to attract real industry. I make no bones about it, as long as I represent the views of people in that region, of course I want to see the sugar factory kept there and I will fight tooth and nail to stop anybody trying to take it from us. I can understand Senator Connaughton and Senator Kitt taking similar views with regard to Tuam but a decision must be made. The Minister must make his mind up very quickly as to what his intentions are in this respect. The Sugar Company cannot be blamed if they run certain plants at a loss. I do not have figures in relation to Thurles. In fact, I do not believe that Thurles is so badly off. There is something that goes unexplained in the report but appears in appendix 4 to the report. Everybody speaks here of Tuam; maybe the Joint Committee was well informed that people from the west of Ireland were concerned about the Tuam factory but, extraordinarily enough, in the years 1974-75 to 1978-79 there was an increase of employment in the four sugar factories. Tuam had the smallest increase with 36. There were 148 in Carlow and over 100 in Mallow and there was a drop of 154 persons employed in the Thurles plant. Why did that happen? Is it that Thurles is being downgraded? The investment that is being made in Carlow and Mallow has not been made in Thurles. I am concerned from that point of view.

Obviously, anybody is concerned about his or her own area, but, on the general question, so far as the Sugar Company is concerned they must have their goal set out clearly. They are not simply a commercial enterprise. No semi-State organisation can be simply a commercial entity. They are not there simply to make profit for the sake of making profit. They are there to fulfil a function in the community and that is the function that we are here to consider today. If the Minister is having any difficulty in deciding whether the Sugar Company should benefit from the largesse of the taxpayer and have injected into them any number of millions of pounds he should consider it on two bases. First of all, if we are to accept that the Sugar Company have a social responsibility then they should be subsidised to the extent necessary to fulfil their social responsibilities if in fact they take a loss, in say, the Tuam factory to maintain that enterprise there.

The decision is whether the Government are prepared to subsidise the Irish Sugar Company to that extent. If there is a commercial operation in Tuam, Thurles or anywhere else, you are going to lose money there, but you have a responsibility because we ask you to run a factory there and if you are going to suffer a loss we are going to pay you for the loss. As this report has already discussed, if you analyse the cost of putting men on the dole and of spending millions of pounds to bring in a foreign company that might not last too long and might cost the country an awful lot more money, it would be much cheaper to subsidise. To accept that principle now is what is basic and fundamental to our consideration of this matter.

There is not one word in the Minister's speech to give one encouragement to believe that he is facing up to that reality. He is, he says, awaiting proposals from the sugar company itself. He does not say and does not seem to acknowledge that he has responsibility in the matter. The Minister has a very heavy responsibility, which is highlighted in the report. The Minister for Agriculture, the report says, oversees the general policy of the company, is advised of major investment expenditures and is generally kept appraised of the progress of the company.

Listening to the Minister's speech one would believe that the first he heard about the problem of the sugar company was when he got this report. I do not believe that. I believe that the Minister for Agriculture, or his predecessor who was the Minister for Finance prior to that, has known of the difficulties in the sugar company for the past three or four years. He must have known and if he did not know the blame for that lies either with senior executives or with the board of the sugar company. I have no reason to believe that that board have not discharged their responsibilities. If they had failed to discharge their responsibilities in that respect, it would have emerged in this report. It has not.

We must accept that the Minister has known of the difficulties for as long as the sugar company were investing these millions and millions of pounds, namely, in the past two or three years. He must have known. He has a responsibility to know about it. The Minister knew about the increase in interest rates. The Minister also knew that this is a company that had a measly capital investment from the Government and was under-capitalised. I imagine this company was under-capitalised before these high interest rates occurred at all. When the decision was made, as it had to be made, to invest this sort of money, that was the time when the money should have been provided by the State. It is a pity that the money was not provided then.

Why does the Minister come in here and indicate to us that now he hears about this and that even at this moment he has not made up his mind about it? He has read the report but he is awaiting further proposals. Does he not recognise that he has a responsibility in this matter? Is he perhaps pleased to let the matter lie until after an election takes place and then announce the closure of a couple of plants? Senator Kitt said he was pleased to hear that the Minister did not intend to close down the Tuam sugar complex. That is not what the Minister said.

I remind Senator Kitt that the Minister said that he has received no proposals himself that the plant in Tuam should be closed down. I believe that the Minister knows that some proposal is being discussed. I do not know what that proposal is. The Minister should put before this House — he should have done it in his speech this evening — what his intentions are in relation to the Irish Sugar Company. I offer my suggestions to him. This is an excellent company. It has proved itself by its record. Give it the money. We may have to put more money into one or two plants or into other plants but it has a tremendously important role to play in the whole area of community and regional development. It would be a shame if we lost sight of that, even given the financial difficulties that are faced by this company. What this report demands and what the sugar company need is a commitment by the Government to do something about their problem.

Mr. Lanigan

It gives me great pleasure to be able to talk on this report which is very timely in relation to the working of the company. It is a disturbing and thought-provoking report dealing with a company which is, as has been said, undercapitalised but which has a turnover of £140 million, directly employing 3,600 people. We have heard of the problems that the industry has and whether they are based on the historical financial set up of the company, on bad management or other factors outside the company's control, we should have a look at the problems. The sugar company was originally set up in 1933 for the manufacture of sugar and I think that we should take that as the base from which we argue or the base from which we look at the company. Since 1933 there has been a diversification programme and it is because of that programme that was undertaken by the company that it now finds itself in difficulties.

The company was eminently successful when it was manufacturing sugar. The profits that were being made by the sugar company were very good by any standards. They were very good employers, they were good to the farmers of the regions, and they were good to the infrastructure of the particular regions in which the factories had been set up. The problem of the sugar company came about when they started to diversify into other areas of operation. This is borne out by the figures which have been produced in this excellent report. In this report we get the turnover breakdown of the various, aspects of the operations of the company. We get the turnover of the sugar-making situation. We get the turnover of the agricultural engineering operation and we get the turnover in the Erin Foods operation. Unfortunately, when we come to the breakdown profit or loss we only get a general breakdown of profit and loss. Therefore, it is not very easy for anybody to distinguish where the problems lie.

However, it seems at present as if there is an immediate need for £25 million to put the capital structure of the company right and there is an immediate cash injection of £40 million needed to modernise the plant. It is interesting to note that this is possibly the amount of money which was lost in the ancillary activities of the company for the past number of years. It has been stated in the report that the losses in the food section and in the engineering section are understated because of the fact that the overheads and working capital are not written into the main company financial reports, whereas the ancillary companies are working on the trading profit and loss account only. The needs of the sugar company itself are great.

I do not think that £40 million will be enough to bring this particular enterprise up to modern standards. £40 million is probably needed in Carlow alone to do this and when anybody visits the factory in Carlow he can see the run down state of the machinery. I do not know how workers achieve their production levels in that factory. It is stated in the report that CSET as a whole are only getting 60 to 70 per cent of the production levels that are being got in Britain at present. I have heard people say this is because of the low productivity level of the workers within the sugar company factories in Ireland. I disagree totally. There is no way that a man can produce if the machinery with which he tries to produce is 40 years old. There will have to be a capital injection for equipment before the workers can produce. They are producing to a very high level. The situation is that the wages in the factory in 1978-79 were in the region of £20 million and this was about 15 per cent of the turnover of the factory whereas in 1940 it was about 17 per cent, and in 1945 about 16.8 per cent, so they are producing at a reasonable level given the machinery that they have to work with.

It was very necessary for somebody to go into the food section because we are living in a country which is, possibly, the best producer of food products in the world. There is a definite need to have these food products processed and put on the market in a way that the housewives of this country and other countries can buy. The research and development which went into the Erin Foods section of this industry were not enough. They came up with products which have proved to be unsaleable. It was a terrible mistake to get involved with Heinz. I do not see any advantage to the Irish economy or to CSET or Erin Foods in their marketing arrangements with Heinz. We market for them in Ireland and they market for us abroad. The market here is quite small to them but we needed them to push the products that we were producing. They have not pushed Irish products as against Heinz products. They pushed the products from the places where they are getting them more cheaply produced. Executives were hived off from the Sugar Company into the ancillary end of their enterprises so that people could get promotion. There were promotion blocks within the Irish Sugar Company so hiving them off as managing directors into this company or that company meant they were better paid and they are quite satisfied. The average engineering business they went into was very limited. They produced a very good beet harvesting machine of high quality and it is recognised world-wide as such. I feel they would have been much better off if they had got in touch with some manufacturer of a beet harvester or farm machinery and gone in on a joint venture basis with them. I think there would be a much better marketing and sales arrangement for such products.

Another area that they got into in the seventies was the manufacture of fertilisers at a time when the over-capacity in New Ross alone would have produced more than enough fertilisers for our whole needs. Still, the Irish Sugar Company built a factory to produce fertiliser within 14 miles of the factory in New Ross. It was lack of thinking to do something on an ad hoc basis and it says in the report that it was Government intervention that stopped them from doing this, as if Government intervention was not a good thing at the time. They have now gone in with the other fertiliser manufacturers. On the basis of joint venture with them they are selling products that are manufactured by Irish companies. That is a very good idea because it is giving the fertiliser manufacturing companies, such as Erin, a better chance of surviving in a very tough market.

The Irish Sugar Company and their offshoots play a very important social role in the life of small towns around the country. When you think of 3,600 people directly employed, of the people who grow, the people who transport, the people who maintain the transport, the shopkeepers, those who service the machines in the factories, and the many thousands of people outside the direct employment who are involved in the Irish Sugar Company, one begins to see why it is essential that this industry is maintained.

I do not think it was a right decision by the Sugar Company to close the Erin Foods factory in Carlow. There was a very high level of technical expertise in that factory. There were very good people working on research and development there. The big problem was, because they were part of a group, they were not standing on their own feet. Therefore their marketing and financial controls were not as they should be and this is borne out by the fact that there was a massive fraud within the company which is going to create further problems for them.

If we are ever going to get a viable food processing industry it can be based on the expertise that is now within the Erin Foods division of CSET. I sincerely hope that the IDA will fight very hard not just to put in another industry into the premises which are being vacated by Erin Foods but that they will put in industries which are closely allied to the agricultural industry and particularly closely allied to the food processing industry because if that food cannot be processed and sold we might as well build factories and import raw material such as steel and iron and so on and produce machines. I do not think that is what we want or need. The Sugar Company played a major part in the industrial development of Ireland. I sincerely hope as a result of this report that in future, as an industry, it will be looked at much more carefully both from within and without. I say from within because it is the first time I know of that a State-sponsored body has come under the scrutiny of this Chamber. I sincerely hope it is not the last.

It is very necessary that this industry should be protected. It can be protected with the help that I know the Government will give. I think that I counted the Minister's lack of responsibility 60 times in the speech made by the Senator from the opposite side. He did not mention one aspect of the industry but he did criticise the Minister time and time again. He did not make one solitary conclusive argument about where the Sugar Company could be going. If we are going to have a debate on the report from the Joint Committee on State-Sponsored Bodies, criticism is not needed in this or the other House. We should be talking about the industry and airing our views. I hope that there will be the same airing of views on many other reports from the Joint Committee on State-Sponsored Bodies because it is very necessary.

Mr. McDonald

Senator Lanigan is getting a little thin skinned but, nevertheless, I am glad that the Minister for Agriculture has now the responsibility for this semi-State organisation because, since 1933, they have been under the aegis of the Minister for Finance. The Department of Finance see things in rounded figures and perhaps they do not get down to the grassroots. I am very glad to have the opportunity to speak on the 13th report of the Joint Committee on State-Sponsored Bodies. I hope that 13 is not an unlucky number. The report itself is most interesting and I compliment the colleagues who serve on and put so much work into that committee. Comhlucht Siúicre Éireann have a long, distinguished and successful history of operating in the agricultural sector. Personalities like Lieutenant-General Costello played a tremendous role in developing the Sugar Company.

I live less than 20 miles from Carlow and 30 from Thurles, which Senator Molony was worried about, and indeed only about ten miles from Lisduff which is one of the company's own lime works which is on the blink at present. The lime transport subsidy was removed over the last couple of years. It is not attractive for farmers to use crushed limestone now.

We must recognise — I hope the 3,600 employees of the group of companies agree with me — that the growers should be considered as close partners in this industry. There is not sufficient emphasis on this close interdependence between the people actually working on the factory floor and the people who contract to supply either beet or vegetables to the companies. This is very important. That was brought home a little over a year ago when there were meetings on the international sugar agreement. For the first time very many people in the industrial sectors saw that the common agricultural policy impinged on them and had relevance to them. I hope that the Irish Sugar Company will continue to foster that idea. In the midland counties where the Sugar Company have been so successful, where their efforts have meant such a lot to the ordinary living and working conditions of the people, it is good agricultural practice to have crop rotation. The Minister has responsibility to see that the line of agricultural produce is maintained and that proper crop husbandry continues.

When I was in the European Parliament, I travelled very frequently to various European cities with personnel from the Carlow agricultural machinery plant. They were servicing or selling machines even in Eastern Europe. Their operation was eminently successful. They were people who knew their business and in whom you would have confidence. I have confidence in the Irish Sugar Company. I see a future for them and that is why I think the entire operation must be supported. I am amazed at the board of Comhlucht Siúicre Éireann over the years stuck with a long term policy for development and modernisation. In 1980, it is not an excuse to say that the plant is run down, old, or not modern enough. The plant should have been improved and modernised as time progressed. This is a weakness in this country. The disturbing thing is, that a decision was taken to close Erin Foods. It is horrific to think that last year we imported £7 million worth of vegetables. An ordinary chipper or a hotel will not take a bag of potatoes. Potatoes have to be imported, frozen and chipped, either from Belgium, Cyprus or Israel. The Minister has responsibility, he also has an opportunity under Article 93 of the Rome Treaty to take measures if there is evidence that produce is being dumped.

I see no evidence that the Department have even tried to slow down the importation of vegetables. Distributors will not sell fruit to supermarkets unless they take vegetables as well. At a time when farmers across the midlands are ploughing in vegetables and produce, Erin Foods are closing down for the lack of markets. We cannot lose faith in an industry like that. The Department should not acquiesce in the closing of a plant like that. There are 83 jobs involved in Carlow. There are also a considerable number of growers. Senator Hillery paid tribute to the remarkable industrial relations of the company. He said there was no strike for 30 years. A strike occurred in Carlow last year in the middle of the beet harvest. That created a lot of bother and worry for growers. I presume they were compensated. This does not go far enough. The unfortunate thing about that is that one of the company's worker directors was out on the path. We hoped when that legislation was going through, to see worker participation on the board.

It is just not good enough to say we are going to close this company because it is non-viable and to hell with the workers. You can promise them an IDA factory but what can you promise the farmer who has, perhaps, invested in specialised machinery costing thousands of pounds, to grow and to harvest the crop? It is not good enough to agree or to say that that entire industry should go to the wall, that we are able to import vegetables from Cyprus and Spain much more cheaply. I do not accept that for a minute. I think that this House would certainly be reneging on its responsibilities if it agreed to that.

Market gardeners and vegetable growers throughout the country at present do not grade any of their top quality produce grade A. It is all grade 2. Ordinary shopkeepers or supermarket managers do not want to see them, because it is handier to get frozen or semi-frozen vegetables from the Continent or wherever they are imported from. There is absolutely no excuse. The housewife thinks everything is Irish if there is a "G" on it. How do you get that "G" on to a carrot from Israel? The country has gone crackers. We must have a realistic approach. If the machinery is run down, it must be modernised. It must be brought up to standard and the entire company must be adequately capitalised.

All enterprises, whether they are public, semi-State or private must be based on the old capitalistic notion that the element of a healthy profit is essential for safe, secure employment.

Are the Government seriously supporting this industry? If so, how can they reconcile that with the Minister's recent decision to agree to a new levy on the production of beet this year and a regulation where he zero rated the levies on milk and beef? It is quite extraordinary that in the same place in the same week he agreed to a new levy on the beet crop, especially since the whole sugar industry is in difficulty at the moment.

I wish to compliment the Joint Committee on the preparation and the work they put into this report. I hope that the examination they gave it will perhaps encourage the company to get out of their present difficulties and I hope that the Government will grasp the nettle firmly and will provide whatever capital is necessary to ensure the continuation of this rural-based industry which is very important to a quite large number of rural-based families, both people directly working on the land and people who are servicing the inputs in farming and also processing farm produce.

Mr. Lambert

Since the first oil shock of 1973 all of Irish industry both public and private has had to cope with severe and deepening problems but these all pale into insignificance in comparision with the rates of inflation which we have to face today. I want to get this debate into that perspective because one can dwell on the past to a great degree without getting very far. The Sugar Company is an operation which is most akin to private enterprise and therefore I welcome this debate on its affairs because we must all face up to this fact of inflation and reducing income expectation if industrial progress is to proceed.

There are two points in the report: one the Sugar Company complains about the slowness of the National Prices Commission. Many other industries complain about this causing a downturn in profits because they do not give the permission soon enough. I feel they have to do their job like everybody else, and try to keep the consumer index as low as possible. It is a good thing that the National Prices Commission take such a strong view and require the executives of companies, both public and private, to justify their price increases and that one is committed in this way to try to control unnecessary inflation. I hope that these reports will have the same effect in analysing the public enterprises and provoking some welcome reaction.

The other point in the report is that I think it a bit unfair to compare profit margins with other large Irish public listed companies, due to the fact that profit margins are traditionally very low in the food industries. For instance, in Britain they operate on high volume-low margin which makes them very competitive. Therefore, it is unfair that the Sugar Company should be compared with other companies which do not operate on such low margins.

The report also highlights the lack of corporate planning in assessing soon enough the necessity for re-investment to replace outdated plants. Paragraph 6 on page 4 identifies objectives of the Sugar Company and it seems to me that the maintenance of its present sugar business and the restructuring of Erin Foods are looked upon as subsidiary objectives to creating ongoing growth and to maintaining employment.

From a totally commercial point of view I would have thought that a company such as the sugar company which is facing a serious crisis in profitability which needs massive investment of capital to replace its assets and which must come to terms with the chronic loss-making operation in Erin Foods, should be thinking totally in terms of consolidation and of streamlining its present operation before considering any further growth and development. With the experience I had in private enterprise in the Irish biscuit industry some years ago, this process of consolidation would, I reckon, given the size of the Irish Sugar Company operation, take at least three to five years and may mean significant loss of employment but could result in a much more efficient and profitable company.

I agree with Senator Lanigan that traditionally the Sugar Company has made a lot of profit which was unfortunately reinvested in mainly unsuccessful trading diversification rather than put back into sugar manufacturing activity. The lack of investment in sugar manufacturing is now catching up with the company and the successful completion of a major capital investment programme costing an estimated £40 million, together with an effective restructuring of Erin Foods poses a major challenge for any management group in the present economic environment. Any view that such needs can be dealt with as routine while simultaneously growth and diversification should continue will involve the company and therefore the taxpayer in heavy loss and ultimately threaten the survival of the company.

There is no doubt in my mind that the State needs the Irish Sugar Company. It needs a local sugar manufacturing operation because of the strategic importance of sugar and the enormous added value to the Irish farmer and the community, as the company has proved in the last four decades. I can vouch for the fact that the Sugar Company has for many years past been an efficient and helpful supplier to us and everyone else in the food industry. The essential problem seems to be that they have been trading with outmoded assets which now have to be replaced at vastly higher costs, a problem which, quite frankly, we had to face up to ten years ago, which led to the complete modernisation and relocation of the whole Irish biscuit industry.

Let no one under-estimate the toughness of the job. In my opinion the essential concern should be that the Government and the company should see the task of updating the Sugar Company factories as a major priority. I do not mean just that the investment required be made but that it be undertaken in such a way that the Sugar Company can achieve the same rate of productivity with the investment as is achieved by their European competitors. It is reported that the British Sugar Company has double the output per person. Unfortunately, the report casts some doubt on this possibility. The company must resolve this problem if it is to become competitive in the future.

The unprofitability of the food division could indirectly have been responsible for putting other Irish food manufacturers out of business because they could not compete with the State subsidisation of Erin Foods. The story of the Sugar Company illustrates a general concern in the community that even if such divisions do make profits they are often overstated or if they make losses they are understated to the extent that they do not often include overhead and working capital charges borne by the State enterprise. I, therefore, thoroughly agree with the Joint Committee recommendation that future annual accounts of the company should provide relevant information on profits and losses and rates of return on capital in each of the different activities. Such information is necessary to account properly for the management of its affairs and the use of Exchequer funds subscribed.

Listening to this debate I think such criteria should be extended to all debates on budget estimates, in order to overcome this euphoria that seems to take place when we are debating State enterprises, euphoria aligned with politicians' loyalty to their constituents, which over-emphasises the general concern. There are various commitments which I would like to see opened up a lot more in debates within the Seanad. For instance, we have had reference to the closure of Tuam Factory, that it is inevitable. Like everyone else, I have great sympathy for the employees of the Tuam factory and some way must be found to get alternative employment, but those who question the unpalatable decision to close it down must face up to the fact that unless the Irish Sugar Company does become competitive then many jobs may be lost in other Irish industries, due to the noncompetitive price of sugar. That includes exporting of food products which have a sugar content. The Joint Committee supports the company's view that an immediate injection of £25 million is a matter of urgency and I support this view provided attention is given to the reservations I have expressed and that realism prevails. The Minister has expressed his consciousness that realism must prevail and I have every faith that provided the Sugar Company is given new terms of reference and given time to achieve them, then with the total commitment of management, it can succeed in the future.

Mr. Governey

I welcome this report of the Joint Committee. I am glad to have the opportunity to discuss the matter in this House. Coming from the town of Carlow, in which I live under the shadow of the sugar factory, I could not put too much stress on what the consequences would be, not alone for the town, but for the agricultural community and indeed the hinterland, if anything were to happen to the sugar factory in Carlow. We read on last Saturday's Irish Independent, 7 March, and I quote, “Another State Company in Trouble”. It is not unusual these days to read that many companies, not alone State companies, are in trouble.

My first remark here with regard to the heading on this paper is that if the Sugar Company need £25 million from the Government that request should be acceded to, not left on the long finger for six months or more before anything is done, not left, as has already been said here tonight, in the same way the sugar factories and plants were left and allowed to run down over the years. We have an example of this in the factory in Carlow. Senator Lanigan has already mentioned this. If one visits that factory — and indeed I am glad to see that the Committee did their homework and did go there — it is quite obvious that the plant and machinery were allowed to run down over the years. I do not say that that was the fault of the management. It may have been because funds were not available from the State. With inflation as it is, with interest rates as they are, the cost of replacing this type of machinery will be enormous. So that, apart from the £25 million that has been mentioned here, there must be some other huge injection needed in order to service the four factories.

The record of the Sugar Company down through the years has been an excellent one with regard to industrial relations. In Carlow, over the lifetime of that company, we have had only two strikes. That, I think, is a fair record for any company of this size. In the brief time which is at my disposal, I want to ask the Minister to act quickly and not wait for the day when we as Senators and Deputies from the other House will be breaking our necks coming up here to Dublin to meet the Minister for Agriculture or the Minister for Finance to ask him then to rescue the company.

I have seen the Erin Foods plant in Carlow and I cannot understand what has happened here. I cannot understand why the board of directors of the Irish Sugar Company took a decision to close Erin Foods in Carlow. I have said it was a wrong decision and I still say so. I was at a meeting last December in Carlow at which there were Deputies, Senators, Members of the European Parliament, the BGA and the IFA and everybody clamoured that night to have that plant kept open. We were told that the Government had not taken a decision at that stage. Here we are now in a situation where that plant is closing. We have pious platitudes from the Minister, such as:

"the company, in keeping with its traditional social commitment, is at present making every possible effort to limit the adverse effects of such closures on the communities concerned. In conjunction with the IDA, it is attempting to provide alternative productive employment in the areas directly affected by closures".

He goes on to say:

I am confident that, given the priority which the IDA is according the matter of replacement industries and given the genuine concern of the company itself to absorb staff by transfer to other parts of the company where possible, the adverse effects of what are necessary measures of rationalisation will be the minimum possible.

When the Minister says "absorb staff", I know he can absorb staff and the company can do it by moving some of the workers that are employed in Erin Foods across the road to the sugar factory but when Erin Foods is lying there idle, there are other people left in the dole queue who should be working in the sugar factory. It is not sufficient to transfer one lot across the road and leave out the people who should be taking part in the campaign.

I want to emphasise a few points with regard to Erin Foods, having said that I do not agree with the decision that was taken. Increasing quantities of vegetables are being brought into this country. There are carrots coming from Italy and France in the early season and, in the main season, onions and cauliflowers are coming from the United Kingdom. Irish growers provide good crops but the marketing set-up is poor. The multinational supermarkets are seeking quantity and quality and continuity of supply and they are buying from importers instead of buying from Irish companies.

Apart from the home market, with our natural advantages for vegetable production we should be expanding in the fresh vegetable export business. As I have said, before the phasing out began and the closure was on the way what was needed was an-expert marketing organisation. I wonder was this considered at any stage by the Sugar Company. Erin Foods should be the organisation to streamline Irish vegetable production, both fresh and processed. They have the expertise to supervise the growing and harvesting, the grading and packaging and the loading and so on. The fresh vegetable business would complement the processing business. For example, produce which is too big or too small for the fresh market could be used in the processing side of the business. This is done in other countries in the case of carrots, onions, potatoes and sprouts. Was this ever considered before the decision was taken to close this plant?

I believe there was a considerable opportunity through this company to combine a fresh vegetable and processing enterprise. I am on the record in this House — I am sorry I have not got the date; I think it was in the "Buy Irish" campaign debate — as calling on the Minister for an immediate and comprehensive examination of this potential. I said it was required without delay. That debate took place long before the Christmas recess. Was any heed paid to that suggestion? Did the Minister or his Department ever act in that direction? These are just some points that I think should be highlighted with regard to this industry. It was a pity, even though they found themselves on the losing side in Erin Foods that the company were not given another 12 months. Indeed, I was on a deputation when it was suggested that they be given another 12 months so that the farmers who had supported this company down through the years by growing vegetable crops for the company would have continuation of operation. Now the time is past and that cannot happen. The serious aspect of this is that if that 12 months had been allowed and contracts given for this year the position would now be different. I am aware that the people who attended that meeting in Carlow that night, both those representing the IFA and the BGA, would continue to grow vegetables for Erin Foods to help the survival of that company. That was their clear message.

I hope that this excellent report that we have before us will be fully examined over a lengthy period by the Minister and his officials and that even at this late hour something will be done to ensure that the position of Erin Foods in Carlow will be reconsidered. The board refused to rescind their decision on one occasion. Even at this late stage I would appeal to them to reconsider the matter and I would ask the Minister also to ensure that whatever moneys are necessary for the Irish Sugar Company be given forthwith in order that jobs be retained and the farming community and the business people concerned be assured of a decent livelihood through this great company.

Dr. Whitaker

I shall be arguing later against the viewpoints underlying some of the recommendations of the Joint Committee but I would like to take this first available opportunity to express my admiration of the very fine work which is being done by the Committee. Their standard of analysis and presentation is extremely high and in terms of quality and quantity no criticism can be levelled against their productivity.

Before I come to the reservations I have about the philosophy underlying some of the recommendations of the Committee, lest time runs out may I just refer quickly to the disturbing problems of the Sugar Company so effectively brought to light by the Joint Committee? I am afraid that things are so bad that quite a radical restructuring is needed and that a new look must be taken, in the light of the Committee's findings, at the £40 million programme of modernisation of the company's sugar operations, which, as the Committee said, "has not been justified to it on the grounds that it would yield a worthwhile economic or financial return". The Committee also believe that the company "would be unable to service its borrowings unless it achieved substantial improvements in its processing efficiency, even if the Government take steps to improve its capital structure". The table on page 37 of the report shows how enormous is the gap in processing efficiency, a gap due to a combination of factors, including inadequate throughout in all factories, outmoded plant and other inefficiencies. It is a frightening picture. The Committee does not relieve our worries by saying that Ireland has a comparative disadvantage in sugar beet production within the European Community.

I think it is very urgent that the relevant Departments, the IDA, the company themselves, and the unions representing their employees should come together with a view to reaching as soon as possible a situation in which self-sustaining, not subsidised, employment will be given by the restructured and consolidated — I agree with Senator Lambert on the need for consolidation — operations of the company plus such economic activities as may be put in place of those which are clearly no longer viable. The Minister gave some reassurance, at least I read it as reassurance, when he said that if a suitable programme for restoring full viability is put forward by the company the Government will not be found wanting.

Now I come to the reservations I have about the Joint Committee's approach to two basic issues — first, the issue of compensating State bodies from the Exchequer for losses incurred on any social responsibilities they are thought to discharge; second, the issue of providing equity capital from public funds to relieve the interest burden on State bodies associated with their borrowing from the market.

On the first issue, I would not disagree with the view that an identified and specific social service for which there is a public need should be paid for by the Exchequer so as to make explicit the cost involved. Rather would I emphasise the need to qualify this principle very carefully indeed. A State body, whether it be the Sugar Company, CIE or Aer Lingus, may be tempted to excuse a loss-making activity on the grounds that it is a social service. If such claims where too readily accepted in principle, the loss might then be thought defensible almost irrespective of its amount. I have two reservations. The first is that to claim that something is a social service does not make it a social service. The service may be helpful to some people but it may not be indispensable. Surely there must not only be an absolute necessity for the service but also there must be a clear inability to provide it or a reasonable substitute for it in any less expensive way. My second reservation is that, even if the claim that an activity of a social kind is a necessary public responsibility is established beyond question, it certainly does not follow that the social benefit — the benefit to the community — is measured by whatever loss the company providing the service may make. The loss may be excessive because of inefficiency due to low productivity or unnecessarily high costs. Indeed, almost inevitably, if a company is less than efficient in its general operations, it will be less than efficient in the social elements of its activities and the loss it incurs on them will, therefore, exceed any justifiable charge to the community on social grounds.

These criticisms or qualifications apply to describing a job as a social service as much as describing, say, a transport facility as a social service. While we must do all we can to ease social problems and maintain employment, we cannot forget that we live in a country in which capital is scarce and has to be borrowed on a large scale from abroad, and in which taxation is high. We just cannot afford deliberately to lose money in maintaining non-viable industries and services. Our only hope of realising the social aspirations we all share in regard to employment and living standards is by moving up the scale in efficiency in all our operations.

An Leas-Chathaoirleach

The Senator has some seven or eight minutes but as we are approaching the normal time for adjournment, let me ask the acting Leader of the House what he proposes to do.

Ruairí Brugha

For how long more would Senator Whitaker expect to speak?

Dr. Whitaker

Five minutes, and I could give the rest in evidence to the committee.

An Leas-Chathaoirleach

Are there no other speakers? There are still 35 minutes of time allocated to this debate. The House can either adjourn now or resume the debate again.

Ruairí Brugha

My instructions were that if the debate could be completed in ten or 15 minutes the House might sit on but if not it would be better to adjourn.

An Leas-Chathaoirleach

With Senator Whitaker with some eight minutes left and two speakers offering, plus Senator Hillery to conclude, it would probably take half an hour.

Debate adjourned.

The Seanad adjourned at 8.35 p.m. until 2.30 p.m. on Wednesday, 18 March 1981.