This Bill has a number of objectives, firstly, to raise the limit on the borrowing powers of Fóir Teoranta — the State rescue agency; secondly, to raise, in parallel, the limit on Exchequer advances to Fóir; thirdly, to increase the maximum number of directors of Fóir from seven to nine to enable direct ministerial representation on the board; fourthly, to discharge the company from the liability to repay about £10 million in Exchequer advances in respect of assistance given to companies which is now deemed to be irrecoverable.
There has been an enormous increase in Fóir's spending in recent years. In 1981 Fóir spent £4.8 million. In 1982 spending had grown to £14.1 million; this year's outturn is likely to be as high as £23 million; and £27 million has been allocated in the 1984 Public Capital Programme. All of this is a reflection of the recession which has had such a severe impact on our manufacturing sector over the past few years. The legislation which fixed the present limits of £70 million on Fóir's borrowing powers and on Exchequer advances to Fóir was brought before the Houses of the Oireachtas two years ago. At that time it was expected that the increased limits would suffice for four or five years. Yet, in the period since then, Fóir's spending has accelerated to such an extent that the present statutory limits will very shortly be reached. The primary purpose of this Bill is accordingly to increase these limits to enable Fóir's operations to continue without interruption.
Fóir Teoranta were established in 1972 to provide finance for industrial concerns which might be in danger of going out of business because of inability to obtain their financial requirements from the normal commercial sources. The criteria for Fóir's interventions are laid down in the 1972 Fóir Teoranta Act. The employment content and the capital employed in companies seeking assistance must be significant either nationally or locally, and the owners must have made a reasonable contribution to the total capital. Furthermore, the company must demonstrate that their failure to receive financial assistance would have serious repercussions at national or local level. Finally, and of greatest importance, the concern must have reasonable prospects of returning to profitability on a permanent basis. To date, Fóir have assisted about 450 concerns, almost half of them on more than one occasion.
The period since the enactment of the last Fóir legislation in early 1982 has seen some major developments for the company. Upon their establishment, Fóir made an agreement with the Industrial Credit Company under which the ICC provided management services, including staff. This agreement was terminated by mutual consent earlier this year. The decision to terminate the agreement was taken by Fóir's board of directors in the context of a general reorganisation and expansion of the company to meet the increased demand for their services. Fóir now have separate divisions dealing with new clients and with the monitoring of existing clients. Their management executive unit has also been doubled in size. This is an especially significant development since management problems are generally regarded as a major cause of difficulties experienced by industrial concerns. Fóir, through their expanded management unit, are now much better equipped to probe management weaknesses in concerns requesting assistance, to advise on organisational and management changes required as a precondition to a financial rescue package, and to work closely with the concerns in carrying through these changes.
Another important development has been Fóir's decision to discontinue publishing the names of their clients so as to enable their relationship with their clients to be on the same footing as that of other financial institutions. The board of Fóir have emphasised the importance of this change in policy on several occasions both to me and to my predecessor. They are satisfied that this decision has already had a beneficial effect in that it has made firms less reluctant to approach the company, thereby enabling Fóir to help them before their positions have become irretrievable. I am aware that there has been some adverse comment about the nondisclosure of the names of companies receiving financial assistance but if, as Fóir say, its effect has been to encourage more firms to seek assistance before it is too late, thereby saving badly-needed jobs, then I believe it will be seen as a positive development.
There has always been close co-operation between Fóir and the Industrial Development Authority in rescue activity. Both agencies are conscious of the need at all times to strengthen and formalise this co-operation. The chairmen and chief executives of both organisations meet on a regular basis to discuss matters of overall policy. Earlier this year Fóir and the IDA negotiated liaison arrangements. In general, Fóir take the lead where financial or other restructuring of an existing business concern is required, while the IDA are primarily responsible for takeover, joint venture and similar cases. Over time, this agreement should increase the effectiveness of State assistance to industry.
I am sure the House will understand that, because of the nature of the company's operations and objectives, Fóir have a particularly difficult task. We can all be satisfied, however, that Fóir carry out their functions conscientiously and that they consider applications for assistance thoroughly and with a full understanding of all the implications of their decisions. I would like to pay a personal tribute to the board and staff of Fóir for the way in which they have carried out their task. In 1982 alone, the board of Fóir approved assistance amounting to almost £23 million for 84 concerns employing almost 8,000 workers. There was an even higher level of activity in 1983. This clearly demonstrates the need for an agency of this kind particularly in today's difficult economic circumstances.
Fóir's operations inevitably give rise to a cost to the Exchequer and to the taxpayer. At the end of 1982, Fóir had a cumulative deficit of almost £20 million. The costs of Fóir's operations are reflected in one of the provisions of this Bill which relieves the company of the liability to repay more than £10 million in Exchequer advances. Similar provisions will arise in future Fóir legislation. The House will appreciate that this situation is an inevitable result of Fóir's role as a lender of last resort. The cost would be higher but for Fóir's diligence in holding to its statutory criterion of helping only potentially viable firms.
I turn now to the provisions of this Bill.
Section 2 of the Bill provides for an increase in the maximum number of directors of Fóir from seven to nine. The purpose of this proposal is to enable representatives of the Departments of Finance and of Industry, Trade, Commerce and Tourism to be appointed to the board. The nature of Fóir's activities is such as to require close on-going contact with these Departments. This close relationship is reflected already in the administrative arrangement, introduced on Fóir's establishment, under which the prior approval of the Ministers for Finance and for Industry, Trade, Commerce and Tourism is required before Fóir can provide assistance above a certain limit. Because of Fóir's increased importance to industry and the resultant implications for both the Exchequer and industrial policy, it is now opportune to strengthen these contacts by placing Departmental representatives on the Fóir board. I am confident that this provision will contribute further to the better co-ordination of assistance from public resources.
It would be possible to accommodate Departmental representatives by reducing the number of directors from the business world. Such a move would, however, deprive the board of some of the expertise of such directors whose practical experience has been invaluable to the company. For that reason I consider that the alternative of increasing the size of the board is preferable.
Before leaving this section, I would like to emphasise that this provision is not intended to — nor will it — reduce in any way the independence of Fóir's board. Neither will there be any diminution of the board's capacity to deal quickly and effectively with the issues and cases coming before it — rather the reverse.
The primary purpose of the Bill, as I have said, is to raise the existing statutory limits of £70 million on Fóir's borrowings and on Exchequer advances to Fóir. These advances are Fóir's only source of borrowings. Fóir's borrowings from the Exchequer now amount to more than £63 million. Sections 3 and 4 of the Bill provide respectively that these limits be increased to £150 million. For convenience, a technical change is being made in relation to the limits which has the effect of bringing the outstanding borrowings of £6.3 million which Fóir took over from their predecessor, Taiscí Stáit, within the overall borrowings and Exchequer advances ceilings for the first time. It is relevant also to mention that section 5 of the Bill discharges the company from the liability to repay £10.24 million in Exchequer advances in respect of amounts which Fóir have formally written off in their accounts up to end-1982 and certain amounts which, although not formally written off, are now regarded as irrecoverable. Taking account of these various provisions, the net effect of this Bill is to increase Fóir's borrowing capacity by about £84 million. This should be sufficient to meet the company's requirements for the next 3-4 years, particularly as the beneficial effects of the emerging improvement in the world economic situation are felt in Ireland.
Sections 6 and 7 are intended to make certain of Fóir's remuneration and superannuation arrangements subject to the approval of the Ministers for Finance and the Public Service. The provisions are those generally applicable to commercial State bodies. It is opportune to introduce these provisions for Fóir at this stage in view of the reorganisation of the company to which I have already referred. These provisions essentially put into a legislative framework powers which the Minister for Finance already has under Fóir's memorandum and articles of association.
As I have already mentioned, there is an administrative limit above which Fóir requires prior Ministerial approval before making funds available. This limit was increased from £250,000 to £1 million following the enactment of the last Fóir legislation early in 1982. I do not propose to increase this limit for the present.
In summary, the purpose of this Bill is to enable Fóir Teoranta to continue their operations and I commend it to the House.