Seanad Éireann díospóireacht -
Wednesday, 17 Oct 1984

Vol. 105 No. 11

Óstlanna Iompair Éireann — Report of Joint Committee: Motion.

Mr. Ferris

I move:

That Seanad Éireann takes note of the First Report of the Joint Committee on Commercial State-Sponsored Bodies — Ostlanna Iompair Éireann Teoranta.

I want to explain to the House the procedure that the Minister of State and the Minister for Labour will adopt in this motion. It is their intention to listen to the debate of the House. When the Minister is replying to the debate, he will have the benefit of the contributions of Members of the House.

The introduction to the report sets out the historical background to ÓIE, which was originally incorporated as a wholly-owned subsidiary of CIE with the responsibility of running the Great Southern Hotels and the catering services for CIE. Time went on and obviously economic circumstances changed in CIE. In December 1983 we in the Labour Party welcomed the decision of the Government, announced by the Minister for Communications, to transfer the ownership of OIE to CERT, which is the primary statutory body responsible for the catering industry. Arising out of that decision many changes have taken place in the management and structure of the hotel and catering industry, which was originally vested under the responsibility of CIE. We welcome the recent capital project in the refurbishing of the hotel and catering industry, which is now set up under the management of CERT.

Some of us attended today the Aer Lingus presentation on their particular enterprise, and it is gratifying to know that semi-State bodies can move into ancillary activities. Aer Lingus have done it very successfully, particularly with the hotel industry in Britain and in America with the Dunfey hotels. They have managed to do it efficiently and to make sufficient money to ensure the continuance of our national airline, Aer Lingus. It was a pity that CIE could not continue the responsibility they had in the hotel and catering industry. However, as it is a specific responsibility of CERT it is appropriate that this House should take note of the report of the Joint Committee on Commercial State-Sponsored Bodies and look in detail at what has been done in this area. Following the contribution of this House, the Minister will have the appropriate opportunity to respond.

Professor Dooge

I should like to second the motion and, in seconding what Senator Ferris has said, to indicate that in accordance with the policy we propose to adopt, all the reports of Joint Committees will come before the House for consideration.

I do not intend to deal in any detail with this report, except merely to say that this report has a double importance. Firstly, it is a report in regard to this particular operation, which is one of the operations of CIE and the first to be separated from them. But there is a further importance to this report to which I would like to draw the attention of the House. We look at the summary of recommendations on pages 37, 38 and 39 of the report which states:

While the Joint Committee has formulated these recommendations as a result of its examinations of the operations of Óstlanna Iompair Éireann Teoranta the issues raised are relevant to the commercial State-sponsored bodies sector as a whole. The Joint Committee recommends that legislation be introduced to give effect to any recommendation where it is needed.

It does indicate that the Joint Committee, appointed by this House and by the other House, is making a very broad recommendation in this regard. In a sense the scope of our debate here goes beyond merely this particular commercial State-sponsored body, If, of course, the Government do react and introduce legislation, either for this commercial State-sponsored body or for commercial State-sponsored bodies as a whole, we will have an opportunity to discuss it. Nevertheless I think the House should welcome the opportunity of being able to make a contribution before legislation is drawn up. Indeed, the House should take advantage of the fact that we now have this committee system, that we have recommendations for legislation coming before the House so that we can make an input before the stage of drafting legislation is reached.

Mr. Killilea

I welcome the report and compliment the Joint Committee. It is the first report I have seen which carries such a depth of argument and fact finding and a quite clear ending to all its consultations. It is a very good outline of what a Joint Committee can do and should do. First and foremost I compliment the members of the committee for their trojan work in the presentation of this document, the contents of which are very clear and in certain instances very shocking. It is really the bringing forth of a knowledge which hitherto has been kept absolutely secret and away from the public eye.

The performance of Óstlanna Iompair Éireann Teoranta — in times gone by the subsidiary of the CIE company, under the chairmanship of CIE — leaves no doubt that it was a mismanaged organisation which made decisions on its own, on many occasions without consultation with Government, without consultation with the Minister for Transport. In some instances described in the report they more or less told the Minister that he had no say in the matter at all, that it was not his business, that under the legal system by which they were formed he had no right to question certain misdemeanours, which have now been proven, in regard to many aspects of their performance.

There is one point on which I would differ with Senator Ferris. Indeed, the report differs also. It is a fallacy to say that CERT have taken over the affairs of the Great Southern Hotels. That is far from the truth. CERT have no say in the day-to-day policy, the day-to-day management or future proposals for the Great Southern Hotels. In fact CERT are the owners of the share capital which was reallocated to them. The board have now been appointed directly by the Minister with no consultation with CERT and no input by them. This will prove in time to be another mistake. I do not want to start this debate in this vein but one can see, looking at the report of this committee, the performance of the previous board. I want it to be known quite clearly in this House and throughout the country that CERT have no input in the day-to-day workings of the hotels. They have no involvement whatsoever and they should not be blamed in any way for decisions made — whether good, bad or indifferent — in any of the Great Southern Hotels. The committee more or less intimated that argument in saying that they did not fully agree with what the Minister had done in setting up this new structure and new board.

There are a few things one could say about it. If we look at the functions of semi-State organisations — in general as well as in particular — one can always say that the Houses of the Oireachtas, whenever in difficulty with any aspect of those projects, as soon as they became a hot potato, they then made it semi-State, appointed a board and handed over their responsibilities to that board. I have seen that happen in recent years. Instead of the Houses of the Oireachtas and the Government taking on the problem and sorting it out and instead of the Minister responsible taking over that project and sorting it out, they handed it over to this new State board. All the Houses of the Oireachtas were asked to do was to supply the money and the financial backup to all those semi-State boards. There is a common belief in the Houses of the Oireachtas that all problems can be solved by forming a semi-State organisation.

In the submissions sent by Óstlanna Iompair Eireann Teoranta that comes out very clearly — for example letters of guarantee take a high priority and letters of consent by the Minister did not stand for anything. They had to get the guarantee or nothing. If the State did not guarantee it, it was null and void. No more letters of goodwill or good wishes would stand credit even from one semi-State organisation to another as was proved in this case. Up to 1972 the Great Southern Hotel Group had been a profitmaking organisation, making not a huge profit but a reasonable one. One could understand that there could not be a very big profit because this group was a big employer and had a big labour content. That is good in itself and one would not be demanding such huge profits. Out of the blue, and seemingly for no reason at all, the board responsible for hotels made this crazy decision to purchase a hotel in Belfast. That seemed to be the downfall of the organisation. From that day on things went wrong. On page 19, paragraph 37 of the report it states:

This subsidiary company of Ó.I.É. was concerned solely with the Russell Court Hotel, Belfast. In August, 1968 approval was granted to Ó.I.É. to purchase a sixty bedroom hotel in Belfast (the Russell Court) and adjoining property which was to be used to provide an additional fifty to seventy bedrooms in early 1970's. The total cost of the completed project was estimated at £500,000 and this limit was agreed under the Public Capital Programme. A revised estimate of £555,000 for the project was given by Ó.I.É. in February, 1970. Later in 1978 it emerged——

——and this is where I say that we handed over authority to people who showed no responsibility for it——

——that work was well under way on a project radically different from the one that had been approved in 1968. The original Russell Court had been demolished and the superstructure of a new 198 bedroom hotel on the site was well on the way to completion. The design of the new hotel also allowed for expansion to 350 bedrooms for which planning permission had been secured. At that stage the capital costs of the project were estimated at £2.6m., to be funded by £0.6 m. grant from the Northern Ireland authorites and the balance from Ó.I.É and lending institutions. The final cost of the project was £3.1m. approximately.

Imagine the board of a semi-State organisation which were given the normal capital allocation by the Houses of the Oireachtas taking it upon themselves to go from £555,000 to £3.1 million without even having the courtesy to report back to the Minister in question and tell him that what they had asked for and got in good faith had now been abandoned and that they had gone their own way with a project costing £3.1 million. If I had been the Minister in question I would have disbanded that board and sent them into oblivion, because from that day the Great Southern Hotels started going downhill.

The board were let off the hook and they continued to make serious errors one after the other. They tried to salvage something by selling off the little hotels around the country which had been making a profit — and which have continued to make a profit each year since they were sold. I can name a few of these hotels. They sold the Kenmare, Bundoran, Mulrany and the Sligo hotels for £550,000. Rather than believe they had made an error in Belfast, they continued to make further errors. That is where the rot started. I blame the Minister.

I appreciate the work done by this committee in pinpointing those issues. Eventually pressures were exerted on certain Ministers to sell that hotel, or practically to give it away when it was realised that it could not make a profit. They almost gave it away eventually. I remember the night it was sold. The man who purchased it, Mr. Eastwood, came on television and the words he said were "I bought it for a song". After crippling the whole of the Great Southern Hotels complex, which up to 1973 had been profitable, that was the comment from the man who purchased that hotel. He was right.

I remember suggesting in 1981 to the then Minister that I had information that the Mater Hospital in Belfast needed that site and building. I believe to this day, and nobody has proved me wrong, that despite informing the Department of Transport at that time that the Mater Hospital in Belfast were interested nobody had made an approach to them. Little wonder Mr. Eastwood could loudly and clearly state on our national network that he bought it for a song. He obviously knew what was going on. It was a sad drama. It was a terrible tragedy for that industry. It was a terrible tragedy for all the hotels, particularly where I live on the west coast, whose committed staff were very proud of the hotels in which they worked. We had three different grades of hotels. First we had the Great Southern Hotel, Grade A; second, we had the lesser hotels in Mulrany and Bundoran — they were very good hotels and served the community well and third, we had the new hotels, such as the Corrib Great Southern in Galway, which dealt with the motoring trade, the night trade and commercial trade, all working very well. This board sold for a nominal figure of £550,000 some of the most beautiful, and financially rewarding hotels in the group.

This can never happen again in any semi-State organisation because now semi-State organisations must take note that Joint Committees like this committee on commercial State-sponsored bodies who have brought out this first report, have sounded the warning bell that these semi-State organisations will have to behave themselves in future. There is little point in us doing that if the Government do not follow it up with action. The whole procedure has got to be tightened up. Capital invested by the taxpayers is the responsibility of the Minister for Finance, the Government of the day and the duly selected Minister for that particular Department or State-sponsored body. This comes over loud and clear from this report. The committee devote many columns to talking about the bad decisions, not the bad management, of the board. That seems to be the overriding factor in this report. For example, who made the decision not to pay the PAYE and PRSI employees' contributions — somewhere around £2 million? This money was kept by this board. It was not the hotel management who made this decision. Those cheques were paid to the central office. Who was responsible in the central office but the managing director and the board of this company. Imagine, for example, private hotels in a city like Galway. Demands are being made on them for PRSI and PAYE payments and in hard years the management of these hotels are striving to honour those payments. Imagine what they thought when they discovered that the management and board of a semi-State organisation decided to withhold £2 million PAYE and PRSI payments. I could never understand — and I still cannot understand — why the board and management were let off so lightly. There are people in our jails for a lot less than the disgraceful behaviour of that board.

The Minister, even at this late stage, should come in here and say what he proposes to do to that company which withheld that money, who literally stole that money from their employees. Something has to be done about it. This is remarked on on numerous occasions in this report and fair play to the committee who highlighted this. This Minister who talked about rectitude should do something about this. I appeal to the Minister and the Minister of State, Deputy G. Birmingham, before something else happens because the scene has been set, to do something about the manner in which the new organisation is set up.

We have an appointed board which is responsible only to the Minister. They are not responsible to CERT. The way this board is set up they can again put their hands into the till belonging to the PAYE and PRSI people, and can make another decision similar to that made in Belfast when they were given permission by the Houses of the Oireachtas to spend £500,000 and spent £3½ million. We have got to tighten this procedure. I ask the Minister and the Government to tighten the structures concerning expenditure on capital projects as well as the other matters that I mentioned. This report brings this out in their summary of recommendations; the committee are beseeching the Government to do something.

CERT is a wonderful organisation which has done an enormous amount of work for restaurants, hotels and tourists. It is involved in tourism and quality food and requires high standards in our restaurants. We have courses in regional technical colleges, secondary and technical schools organised by CERT. We have symposia in tourist districts organised by CERT to show the need to balance and to produce good food. Despite all those training facilities, we have a group of hotels which the public believe CERT own, and this, is true but CERT have no administrative authority over the running of these hotels. It is very important that that should be changed. There are lecture classes in each regional technical college in this country. During the summer months certain students could gain practical experience in any of the hotels. This would lead to better service and would mean that incoming hotel staff would be better educated.

Each year the regional technical colleges have a great problem trying to place students who have gone through a very grinding course for the summer and to give them practical experience. Here was one opportunity. Many hotels are just doing summer business. Their main business in the winter time is low and they do not need a big staff. It would be a wonderful experience for those young students to help provide a first class service. Under the new structures, could CERT take on a certain number of students in different grades this year, put them into their hotels as a part of their education — not as cheap labour — and at the end of that practical scheme say they will sit their examinations and then pass them? These students can get remuneration for their work. I do not expect them to work for nothing. It is not the remuneration aspect that is in my mind but the furtherance of their practical education. I beseech the Minister to think along those lines. It would be an outlet for the regional technical schools in particular, and for other catering schools as well. As CERT are involved in hotels and schools, this is an obvious choice.

The lessons that we must learn from this are loud and clear. A reappraisal has to be made straightaway as to the responsibility of that board and to whom they are responsible. If they were responsible to an organisation of the calibre of CERT, one can rest assured that some of the obnoxious happenings of previous times would not recur. It is not good enough for the Minister to think that he is depending upon a friend. Whoever was appointed chairman of this particular board was a close friend of the Minister, either politically or personally. If he was not a close friend of the Minister, he was a friend of the Labour Party. He was a Coalitionite of one description or another. This has happened with us, but not to the same extent of course. The point is that that is not just good enough when you are talking about the expenditure of such quantities of taxpayers' money.

I would make the suggestion that the responsibility for and the practical administration of those hotels, and not alone for the ownership of them, should rest on CERT, an organisation that has wonderful technical knowledge. A board should be appointed and they should be responsible to the Minister when CERT have finished with their responsibilities or vice versa. In other words, let CERT pick the board, let the board be responsible to CERT and let CERT be responsible to the Minister. At present CERT are responsible to the Minister and the board are responsible to the Minister, but the board and CERT are not responsible to one another. That is the missing link which has to be filled. I suggest that the Minister do a rethink on this.

I have made a few points because some of the decisions of this board were really serious and I appeal to the Minister to do something about them. The decision to keep the workers' PAYE and PRSI contributions was most serious. Everybody seems to have passed it over, and the board have got away with £2 million. There are men serving 20 years in jail for a lot less. That is the truth. I know a man who spent 12 months in jail because he owed £241. That is only a drop in the ocean when compared with what these boys have got away with. I beseech the Minister and the Government to rectify this position, seeing they are the Government of rectitude and that everything will be perfect when they are finished. Our tourist industry has improved significantly this year. The standards are now clear and set. I hope the Minister will take those few points into consideration when he is replying.

Mr. Conway

I should like to congratulate Senator Killilea on his speech. He summed up very well the feeling of the committee as far as the hotels are concerned. He paid a tribute to CERT and said the part the regional colleges should play as far as CERT are concerned by giving practical experience in their hotels. As usual, he says all things will change when Fianna Fáil come back. It is nice to know that everything is going to be grand when they come back.

An Leas-Chathaoirleach

Something to look forward to.

Mr. Ferris

Impartiality of the Chair.

Mr. Conway

This is a fine report — and the first — from this committee on semi-State bodies. It is based on their investigations into these hotels and is a summary of what they would like to see happen in semi-State bodies. I agree with Senator Killilea when he says that we have sounded a warning to the semi-State companies that they had better take note that this committee mean business and mean what they say. They have produced a fine document here.

A list of major bad decisions made by the board of OIE has been catalogued and I will go through a number of them. The first thing, and probably one of the most relevant things, that came up in this report was when we met Dr. St. John Devlin. He said we had seven different Ministers over the last ten years as far as OIE are concerned, which indicates very distinctly that Dr. St. John Devlin and his board of directors did not give a twopenny damn about the Ministers, the Oireachtas and the Government, and continued as if there was no governing body.

The estimates for the year ending 31 December 1983 will show accumulated losses for OIE of approximately £12 million, with fixed assets of £3 million in book value. This indicates to even the least professional mind a disastrous situation. The balance sheet at 31 December 1982 shows current assets of £1.8 million and current liabilities of £10 million. Anyone can see — he does not have to be a technologist, an accountant or an economist — that that company was insolvent.

We had a recent report in a magazine which indicated the findings of the committee and took the committee to task and criticised them because they suggested that running a deficit of such magnitude was a mortal sin. They disagreed and outlined the various semi-State bodies which have current deficits and said that the committee were totally wrong to indicate that this semi-State body was in any way less efficient or were in breach of anything because they were running a current deficit. The current deficit being of such magnitude contravenes the Companies Act, 1963, and clearly indicates that this company was insolvent. Directors of an insolvent company are duty bound under the Companies Act to cease trading and to liquidate that company. We said at that time that it was the responsibility of the directors to resign, not only because the company was in a deficit situation and was insolvent, but because they were responsible for the magnitude of these losses. The losses did not happen overnight.

From 1977 to 1982 there were accumulated losses of £4.3 million. If one looks at the profile of the losses of this company, one will see that in 1977 the total accumulated losses of £4.3 million increased in 1978 to £4.8 million, in 1979 to £5.5 million, in 1980 to £8.2 million, in 1981 to £9.1 million and in 1982 to £10.4 million. The hotels show that in 1979 there was a profit of £107,000, in 1980 a loss of £296,000, in 1981 a loss of £383,000, in 1982 a loss of £557,000 and in 1983 a loss of £1 million. There is the profile of the losses in this particular company. That did not happen overnight. It happened over a long period of time. We were saying in effect in that report that once a company's current liabilities exceed its current assets to a material degree the Minister of the day should be so informed in writing by the board. That was one of the strong recommendations of this committee. Had that happened earlier the Minister would have been forced to take action because he would have been told in writing the exact position of the company. That is a major considertion we came to and it is a decision that should be adopted by the House in dealing with semi-State bodies.

As public representatives we know the only time a company come near the Oireachtas is when they are in desperate need of finance. We have seen it in Irish Shipping, in Irish Steel and in all the other semi-State bodies. We are saying that the warning bells are there and the procedure is laid down. It is a very simple exercise for a board of directors, faced with the accounts of the company where there is a material difference between the assets and liabilities to inform the Minister. We had a situation where this particular company were insolvent and still trading under the Companies Act, 1963, and thus acting illegal. The directors refused to sign the accounts for the years 1980 to 1983 on the ground that they wanted to bring pressure on the Minister to take some action. They decided they would take action by not signing the accounts so that the Minister would immediately refer to that and would do something about it. The relationship between the Minister's office and OIE at times seemed non-existent. The way this company should have brought pressure on the Minister to do something about their own organisation was for the board to resign. How could the board continue in existence when it refused to sign the accounts and thereby contravened the Companies Act? To me that was totally ridiculous. If they wanted to bring pressure on the Minister the way would have been to resign because they could not fulfil the role they were appointed to fulfil, namely, to run the hotels in CIE which are now in liquidation.

If accounts are not signed they cannot be judged by anybody because they do not represent a true and fair indication of how the company stands. Once the directors refuse to sign them it means they have no faith in the accounts. You can read from that that the accounts were wrongly drawn up. What they were actuping ally saying was that they were bringing pressure on the Government but what the Department of Transport say is that because the accounts were not signed the Minister could do nothing about helping this company. To my mind there is a difference here on both sides. Both sides are wrong. If they wanted to do something, if they wanted to bring pressure on the Minister, the way to do so was to resign because they could not continue in their role as directors in the company.

We have a board of directors set up to do a particular job, to look at a particular company. They are given full authority to control the company and yet they are not willing to take any decisions. Certain hotels in Ireland during the winter months are closed and we put the proposition to the chairman why CIE hotels themselves did not investigate why they should not close during the winter months. His answer to that was that a certain junior Minister contacted him on the telephone and told him that he was not to close the hotels in the winter. We requested to know the name of the Minister and we were not told. We also requested to have a look at the documentation but this did not happen. We were told that a major decision had been taken on foot of a telephone message from the Minister's office. To me that rings hollow and very wrong, because such a decision is a major one and must be covered by full documentation.

When we questioned Dr. St. John Devlin, he stated when the 1982 accounts were not signed it seemingly made no difference because nobody panicked and nobody was worried. In fact we were criticised by no less a person than the chairman of the Leinster branch of Chartered Accountants for a failure to produce annual accounts. I would have thought we acted very responsibly in trying to draw attention to an insolvency situation. Nobody took any notice. You can blame the Department, the Ministers, you can blame the Oireachtas, because the Oireachtas did not react either. We are actually saying that the Oireachtas should be much more involved in the semi-State operations. He is actually saying here that the Minister did not care, the Oireachtas did not care, the Department did not care and the board certainly did not care. Here we have the company that was costing the State £10 million and nobody cared. It was a disasterous situation. We are talking about accountability.

The committee talked about accountability when it investigated the Údarás and found that there was a company called G. T. Carpets that had not produced accounts since 1978. It ceased trading in 1980 and is still not in liquidation. What this body is saying is that there should and must be accountability. Taxpayers' money is going into Údarás and into Irish Shipping Limited and there has to be an account. The directors are responsible for what is happening.

Senator Killilea talked about PAYE and PRSI. The committee were alarmed that this situation had developed, that PAYE and PRSI was deducted from the staff and the company actually owed £2 million in 1982. We were concerned for the State and we were concerned for the employees and their protection. I asked Mr. Rabbitt who was the union representative when he heard about this and what information he had been given and he said he knew nothing about the PAYE situation until he saw it on television. He said RTE seemed to have more information about the company than he had. It is a crazy situation that the union representative did not know that there was a non-payment of PAYE.

Dr. St. John Devlin when asked about the PAYE and VAT situation said he thought there was some kind of arrangement with the Minister for Finance. He did not know what that arrangement was but he thought that because the collectors had not enforced legal proceedings on them that was to be taken as an indication that everything was squared up. That was the kind of relationship between the board of CIE and the Government. Money had been deducted by the company but was not paid over. The reason there was no problem was that somebody thought there was some kind of relationship between the Department of Transport—who probably did not know anything about it—and the Minister for Finance. He said that it would have been better if the Minister for Finance had brought them to court because it would have highlighted their case. He was looking for something else to highlight his case. It is a scandal, as Senator Killilea said, that this should happen and in our report we say it should never happen again. If the committee and the Houses of the Oireachtas were vigilant it would not happen. As the chairman said in his opening statement, he met seven Ministers in the past ten years, which meant that the company did not give a tupenny damn about the Oireachtas, that they were a law unto themselves.

I would like to talk about Powerscourt. This company entered into an arrangement in Powerscourt and over 15 months, in 1981-1982, they lost £249,000. The chairman of the company called it a disaster. There was no fixed capital investment. Therefore, the chairman and the board did not have to go to the Minister to get sanction because there was a leasing agreement and any leasing arrangement does not have sanction of the Minister and the Department. He said they were kept informed but I do not know how people were kept informed. Contact between the Department of Transport and the company was non-existent at times. It meant that the board could do whatever they liked. As long as it was not fixed capital investment, they could lease any property they wished and enter into any operation so long as it had something to do with the hotel/restaurant business. They could not invest in capital expenditure because if they did they would have to go to the Minister but they could do whatever they liked so far as leasing was concerned. They could enter into any project they wished and they could incur losses as they wished without any hold on them. In this particular project they lost £249,000. We asked what type of information they had and he said all the usual market research and so on. It was their own decision and it was a disastrous one.

The situation is that a company was set up with terms of reference but those terms of reference, in most cases, were flouted by the company. There are many things wrong with it. Many things have happened. You might say that things went wrong because of the economy but it had nothing to do with the economy. It had to do with the disastrous situation the company got themselves into and they took no great action to get themselves out of it.

Senator Killilea talked about letters of comfort. We said that no letters of comfort will ever be issued again. The company went to ICC looking for a loan and produced a letter of comfort. If anybody looked at the accounts of the company they would not issue a loan on anybody's recommendation or on a letter of comfort. Why should ICC give the company a loan on the Minister's letter of comfort when the company were insolvent? We are saying letters of comfort are meaningless and should be discontinued. A letter of guarantee is totally different. It is covered by statute and the Minister has to go to the Oireachtas in order to get a letter of guarantee. The ICC were correct when they indicated they could not loan money to the company. That should have been taken as an indication to the board that they were insolvent, that they could not raise capital, and to the Department that the company were refused by a body like the ICC. The situation should have been investigated and the company should not have been allowed continue in that loss-making situation.

We have stated in our report that there should be an overall strategy so far as hotels are concerned. There should be marketing expertise centrally. Údarás, Aer Lingus, Aer Rianta and OIE are all involved in the hotel business. We are a small country and we are saying there should be some kind of centralisation of activities. If it is to be done properly it should be done by people who understand the business. Dr. St. John Devlin, for whom I have some regard, has an expertise so far as CIE are concerned but I would query his expertise in the hotel business. We are saying here that you have and should have a central body, a central committee or a central semi-State body set up to run these hotels.

This committee, when it came out with the results of its investigation, was criticised by no less a newspaper than The Irish Times. In its editorial it gave credit to the committee and recognised what they were doing but said they would be better off looking at themselves and concentrating on their own jobs instead of criticising and highlighting the actions of all of these semi-State bodies. On the basis of the facts we have produced here, should we not highlight a situation where we find gross mismanagement? Should we not highlight a situation where PAYE and PRSI, to the tune of about £2 million, was not paid over to the State and where employees could lose benefit because of that? Should this committee not highlight that? Should not this committee, in this particular report, indicate a possible anomaly where a semi-State body can lease, ad infinitum, and have no accountability to the Minister or to the Department? Should this body not highlight these things? Should we not highlight the situation as we found it, where this company were trading illegally and in contravention of the 1963 Act? Should not we indicate and highlight a situation where this company, up to 1983, could run up £12 million in losses? If the executives, the board, responsible for the running of the hotels were not able to run them they should have resigned. They should have taken action. They should not have allowed a situation to develop where you get this glib answer and say that nobody cared. They are the people involved in the running of these hotels.

It is said that nobody took any notice, that nobody cared. I would suggest that this committee cares and it should be listened to. It is a committee made up of all the political parties, with expertise in business, in the trade union movement and in the industrial world. It is a body which takes its job very seriously. I have been on the committee since it was founded — and there is no division between the political parties, but there is the unanimous consensus that we take our work seriously. We take seriously the fact that so much money is being wasted in the semi-State bodies. We take exception to the fact that when we reveal a situation such as with Údarás regarding GT Carpets, where no accounts were produced at all, nobody seemed to know and nobody seems to care. We have a very important role to play. We take seriously the fact that when Irish Shipping go into long leasing arrangements they lose so much money and these things should be highlighted. The committee has charted a course to investigate and look at semi-State bodies in future. Probably people may disagree with some of the findings of the committee but it produces worth-while reports.

I would be remiss if I did not pay tribute to our consultant who produced this report and who worked so well with the committee. This report should be circulated to all Members of both Houses, the Dáil and Seanad, as it probably has been. It should be read and its recommendations should be heeded.

Professor Hillery

This first report of the Joint Committee on Commercial State-Sponsored Bodies on OIE raises several important issues which are relevant to the commercial State-sponsored bodies sector as a whole.

I want to focus on the most fundamental problem arising out of the existence of a wide range of commerical State-sponsored bodies, that is, the problem of the control of these undertakings and the supervision of their policies and practices.

The Minister and his officials are responsible for the preparation of policies, that is the norm, and for ensuring that the boards of the bodies concerned conform to the policies laid down. In practice it falls to the civil servants to supervise the activities of the State-sponsored bodies, with the obligation to inform their Minister and secure his clearance on issues, as appropriate. It has not been the practice either for Ministers or civil servants to interfere with the day to day conduct of the business of State-sponsored bodies. That is as it should be. I certainly subscribe to that view as a member of the Joint Committee and also as one who worked for several years in State-sponsored bodies before I joined the staff of UCD. My complaint, however, is a serious one and has been voiced already. There is a very serious problem of inadequate control on major issues emerging from this report, for which the Minister and his civil servants must take at least some of the responsibility.

The case I have in mind is the Russell Court Hotel, Belfast, which accounts for £8 million of the £12 million debts accumulated to the end of 1983. As has been said already, the then Minister and his Department conveyed approval to OIE for the Russell Court Hotel investment in 1968. The total cost at that time for the completed project was estimated at £500,000. The project was to be finalised without exceeding the limit set for OIE under the public capital programme. A revised estimate for the project was given by OIE in February 1970, which was £555,000. But later in that year of 1970 it emerged that work was at an advanced stage on a project totally different from the one already approved. Again, as has been pointed out but it bears repeating, the cost of the Russell Court Hotel on its completion was £3.1 million. The effect was that OIE spent over £3 million on a project for which £500,000 had been approved. The Joint Committee, in the course of our hearings, received no satisfactory evidence as to why the initial project, as approved, was not adhered to.

This obviously illustrates a very serious weakness in the monitoring mechanisms which should and must exist between a State-sponsored body and a Government Department. As we pointed out in our report, regardless of the merits of the expanded project it should not have been undertaken without prior consultation with the Department. The total loss incurred by the Russell Court was almost £8 million which has now been paid out of Irish taxpayers' money. That raises the question as to who is responsible for this mess? The responsibility in my view must be shared between the former board of OIE for not informing the Department of the radical departure they made in this project and also the Department must take their share of the responsibility for not ensuring that they got the relevant information from OIE. A serious problem with the operation of State-sponsored bodies is that there is a civil service attitude that says, "We will control by exception; we do not particularly want to hear from you if you are progressing satisfactorily". That is inadequate. Here we have a case where there was not adequate monitoring by the Department and we have a project with approved expenditure of £½ million which ultimately costs £3.1 million without approval.

As we point out in our report, we strongly favour closer monitoring mechanisms. If there had been quarterly monitoring of the Russell Court project as a condition of approval of the initial £0.5 million then subsequent action by OIE would have been detected and appropriate action would have been taken. It is for this reason that we made recommendation No. 7 which reads:

Where a decision is taken by the company which would have the effect of exceeding approved capital expenditure, the formal approval in writing of the Minister concerned to exceed approved expenditure should be obtained.

Day to day control should properly belong to the State-sponsored bodies themselves. When we are talking about substantial investments and other major decisions, there is a need for close monitoring and for close control and hence our recommendation.

I have two specific recommendations to put to the Minister which are not contained in the report before us. There is the obvious danger that some boards of State-sponsored bodies will think of themselves as independent entities rather than as part of a larger organisation. At the end of the day, however, the responsibility for the failure and deficiencies of a State board rests with the Minister. The Minister has the power to change directors or to dismiss a board. If, in justifiable circumstances, he neither changes the directors nor sacks the board he is then indicating that he is satisfied with the performance of the board.

My first additional recommendation is this: where the Minister considers that circumstances warrant it, he should dismiss a board of a State-sponsored body, notwithstanding the lack of this practice in the past. The second recommendation that I wish to put to the Minister relates to the position of the chief executive of State-sponsored bodies. I put it to the Minister that chief executives of State-sponsored bodies should not be appointed for life but should hold contracts for a period of five years. If they give satisfactory service, the contract can be renewed. This should be general practice. I know it is already the practice in a small number of State-sponsored bodies. The relevant Ministers should direct the boards under their political control so that fixed contracts for chief executives will become the norm.

In the course of the Joint Committee's examination the scandalous fact emerged that unpaid PAYE and PRSI accounted for almost £2 million of creditors at the end of 1982. On further inquiry we discovered that towards the end of 1981 an arrangement was reached with the Revenue Commissioners and the relevant Minister at the time that proceedings should be withheld for the non-payment of the taxes. The Revenue Commissioners were asked by the Minister to consider withholding proceedings as the whole question of OIE and its future was under review. I asked Dr. Devlin, the former chairman of OIE in the course of our hearings how could he justify the non-payment of the taxes. He replied that he could not justify the non-payment of taxes and that he wished in fact that the company had been pressed to pay the £2 million arrears and thereby bring the future of the company to a head. A year later, at the end of 1982, funds were set aside by the Minister for Finance to meet the tax liability. In my book this is a highly provocative and dangerous thing, that arrears of taxes to the tune of £2 million should have been allowed to accumulate in a State company.

This provides a particularly bad example to hard-pressed companies in the private sector and it obviously gave an edge, at the taxpayers' expense, to the State owned hotel group over their competitors in the hotel industry in the private sector. Furthermore, the employees in OIE, whose entitlements could have been infringed by the non-payment of the taxes were not informed of the non-payment of taxes, taxes that they themselves had paid by way of deductions from their incomes. In this latter respect, I think there is a defect in the social welfare regulations. The social welfare regulations entitle an employee to inspect his employer's records with regard to contributions payable by him or he may obtain a statement of such record from his employer once in every period of three months. The regulations do not require an employer to disclose to the employee whether deducted contributions have actually been paid over to the Revenue Commissioners. In our report we recommend that where PAYE and PRSI payments to the Revenue Commissioners are overdue for a period in excess of three months employees should be informed of the position.

Personally, I want to put a further recommendation to the Minister in this regard. I feel that the social welfare regulations should be amended so as to require an employer to disclose to his employees whether deducted contributions have been paid over to the Revenue Commissioners or not. Earlier this year, ownership of OIE was transferred from CIE to CERT. Under the new arrangement the owners of the hotel group will be CERT but the new board was appointed by the Minister for Labour and will report directly to him. I joined with the other members of the committee when we produced our report in wishing the new board success. I also shared the misgivings of the committee about the new board's ability to resolve the difficulties facing the company. Precisely because of our misgivings the Joint Committee has recommended that the company be required to furnish to the Joint Committee a progress report in respect of the period ending 31 December 1984. The terms of reference of the new board are to make the hotels viable and commercial. In the course of evidence we were told that the Government were providing approximately £14 million to clear certain debts. While I would hope otherwise, I have serious doubts that this Government injection of the very large sum of £14 million of taxpayers' money to wipe the slate clean will actually be sufficient to ensure that the company will not show a loss in December 1984. I hope I am proved wrong but I doubt it.

On the question of the future of the hotels, the evidence given by the former chairman of OIE, Dr. St. John Devlin, is both revealing and relevant. I would like to hear the Ministers reaction to the following quotes from Dr. St. John Devlin. At page 12 of the minutes of evidence Dr. St. John Devlin said:

If I was in the private sector I would certainly close down Restaurant na Mara. I would sell off the hotels either to a chain or to individuals. I would certainly get out of the business because I do not think it is possible to make a business generate an acceptable return on the investment that would be necessary over the next ten years. You may ask who would I get to buy it? I think one would need a different style of hotel management and indeed a different style of trading to make it pay. One would also have to have a different type of staffing. One would have to do many things that might not be possible in the public sector.

On page 13 of the minutes of evidence Dr. St. John Devlin has the following to say:

My philosophy is that the public sector should not be in anything that can be done by the private sector.

Nobody seems to have a philosophy about semi-State bodies.

My philosophy has been that the State should only be in if nobody else can do it.

These quotations from Dr. St. John Devlin raised the fundamental question as to whether these hotels should be in State ownership at all and also the question whether, if they remain in State ownership, and that is the more likely scenario at present, they have any real prospect of meeting the terms of reference of the new board, namely that they be made viable and commercial. If we assume that the hotels remain in State ownership it is vital that the recommendations of the Joint Committee be implemented and that is the plea that I as a member of the Joint Committee want to make and Senator Conway has already made. We make a plea for the implementation of the recommendations. No private undertaking could survive the haemorrhage of losses incurred by the OIE hotels in recent years. In 1980 the hotels incurred losses of £296,000 and in 1981 the losses came to £383,000, in 1982 £557,000, in 1983 the losses reached £1,008,000. All these figures are separate from the major problem of the £8 million lost on the Russell Court Hotel. There was no successful attempt made to remedy the situation and this reflects badly on both the company and the Department.

The performance of the hotels up to now has been monitored solely on the basis of annual accounts. These are historical documents and given the serious background of £14 million in debts, the Joint Committee recommends that the company be obliged to prepare halfyearly interim accounts, which would be available to the Joint Committee, and that where significant variances arise in relation to budget then the Minister should be notified in writing. This would be a far more effective control than relying on past history through the use of annual accounts as has been the practice up to now. We further recommend in the report that, where significant variances arise, the Minister should then ensure that corrective action be taken by the company.

There is the question as to whether the monitoring arrangements stressed and recommended by us is too close and too severe. I put it to the Minister that such close monitoring is both justified and necessary. There is an urgent need to protect the taxpayer's money, the aggrieved PAYE sector in particular, and to ensure effective management in the hotels. While I believe that there is a compelling case for the closer monitoring of the hotel company as already described, I must add my personal concern about the ability of the Department of Labour to evaluate the business of the hotels in the future. I am aware that there are civil servants in the Department of Communications, the previous parent Department, with expertise regarding OIE. In the course of evidence we were informed that these civil servants will not be transferred to the Department of Labour. I know many civil servants in the Department of Labour and I have the highest regard for them. What I am questioning here is whether the necessary expertise is within the Department of Labour to evaluate a hotel group. Therefore I raise the question as to how the Minister can expect his Department officials adequately to evaluate proposals and proposed decisions submitted to them by OIE. In the particularly difficult circumstances in which OIE finds itself, I would make a personal additional recommendation to the Minister that he either arrange to transfer the people with the OIE experience from the Department of Communications to his own Department of Labour or, that he put a Department of Labour representative on the board of OIE, or that he does both. I look forward to the Minister's reply.

Mr. Daly

Most of the points have been covered by the previous speakers. I would like to compliment the previous speakers who have been members of this committee who were responsible for this report. There are a few points that really surprised me in this report. The first one was where Senator Hillery spoke about the fact that there was £2 million collected in PRSI that was not handed over to the Government. If a private company had withheld money they had got like this they would find themselves in court and possibly in jail. What surprised me altogether was that a Minister could get the Revenue Commissioners to withhold taking action to recover this money. I did not think the Minister had the power to stop action being taken in relation to a company who had withheld payment of their PRSI, money which they had collected from the workers which was rightfully the workers'. I cannot say how he did that.

Senator Killilea spoke about the sale of hotels and said that some of them were given away for a song. It would be better if the hotels which were losing money were given away for a verse of a song rather than continue with those loss-making units.

Various figures have been given by Senator Conway and Senator Hillery. I would like to go into the details published in the report. The Great Southern Hotel in Galway in 1979 lost £91,000, in 1980, £32,000, 1981, £75,000, 1982, £138,000 and in 1983, £331,000. The Great Southern Hotel in Killarney in 1979 lost £80,000, in 1980, £53,000, in 1981, £100,000, in 1982, £95,000 and in 1983, £234,000. The Great Southern Hotel, Parknasilla, in 1979 lost £11,000, in 1980, £50,000, in 1981, £39,000, in 1982, £52,000 and in 1983, £47,000. Progressively, the losses have got worse and worse. The Corrib in Galway in 1979 lost £53,000, in 1980, £59,000, in 1981, £82,000, in 1982, £155,000 and in 1983, £174,000. The Torc in Killarney in 1979 lost £52,000, in 1980, £8,000, in 1981, £9,000, in 1982, £30,000 and in 1983, £53,000. The Great Southern Hotel in Rosslare lost in 1979 £2,000, in 1980, £94,000, in 1981, £78,000, in 1982, £87,000 and in 1983, £169,000. The total losses in 1979 for this group of hotels were £107,000, in 1980, £296,000, in 1981, £383,000, in 1982, £577,000 and £1,008,000 in 1983.

In any well run business if the business is losing money there is an investigation. Accountants come in, there is an audit done and the part that is loss-making is got rid of, otherwise there is a haemorrhage. Any money that the companies may have just flows away like blood from a wound in the body. That was some wound in CIE. I do not know how they got away with withholding the money from the PRSI and how the Revenue Commissioners could let them run on, because this obviously went on over a number of years. If a private company withheld their payments for more than two months they would be visited by an inspector from the Revenue Commissioners who would want to see their books and would want to know why they had not paid this money. I know companies where the Revenue Commissioners are going back five years. If their payments were late two, three or five days because of postal delays the Revenue Commissioners are now looking for interest from these people. These people have a workforce just the same as CIE.

In September 1971 Senator Killilea was a member of a Government who took a decision to sell these hotels. The sale of the hotels was being processed when there was a change of Government. The new Minister could not do anything about the sale of the hotels at that stage as CIE in their typical attitude of running the show by their own rules, had made reservations for the whole of 1982 and the Government had no choice but to honour them. The same thing happened in 1983. In 1984 we have CERT running the hotels.

The remedy is not to sell the hotels. I come from Killarney where there are two of these hotels and a neighbouring one in Parknasilla. They are beautiful hotels, an asset to the area and very important for tourism. I would not like to see these hotels sold in case they would be put to other use. I should like to see the hotels retained, but not at the taxpayers' expense. If the hotels were not to become viable and if the PRSI worker and every other taxpayer had to provide luxury holidays for somebody thousands of miles away, I would not like to see that happening.

There was obviously mismanagement on the part of CIE because they were handed over premises, equipment, a business and goodwill. It is the same as many a father who ran a successful business which he built from the ground up and which he handed over to his son but the son just eroded that business until it went burst. They say after a gatherer comes a squanderer. We took over these hotels from the British Government who were the gatherers and we have turned out to be the squanderers. Unless there is something done now about making these hotels viable, it would be better to get rid of them no matter what use was made of them. People who have expertise in the hotel business should lease these hotels. These people could run these hotels profitably, charging reasonable rates which would be an attraction to tourists. They would be giving a service to the country.

At present CIE link tours to their hotels with their own coaches. It is a sad sight to travel from Dublin to Kerry and see five or six people in a 55-seater CIE coach going to Killarney. I know if they want to provide a service, there may be reasons why they cannot fulfil their engagements, for example, if something happens overseas or in circumstances which are outside their control. I cannot understand why CIE when they have not the people to fill their luxury buses, could not use minibuses and at least keep down costs. I should like to know if CIE are responsible for the losses in the coach department or are the coach department adding some of their losses to the hotels? Who is codding who? I have not seen anything in the report on this.

An American ambassador's wife wrote a book about her experiences in Ireland and she said that one thing she could not understand was that we did not have a sense of outrage. If there was a sense of outrage there would be an outrage about the way CIE manage their affairs and how they ignore all the rules. It was pointed out by Senators Conway and Hillery that CIE are a bankrupt concern and that this is in contravention of the 1963 Act. If this is allowed to continue people will be very bitter especially when they see a big portion of their hard earned money going in tax and that money being used to subsidise somebody coming from Tanganyika or Saudi Arabia to get a suite in the Great Southern Hotel in Killarney.

I should like to ask the Minister to examine this whole question, and if the hotels continue to show the losses they have been showing, to get rid of them. CIE should lease them. There is one particular man in Dublin who had a group of hotels. He built them one by one. He did not get the hotels provided for him, or the equipment or the goodwill provided for him like the people did with CIE. He is giving a service today to the people. Many more people like him around the country, particularly the family-run hotels, have a human approach to the business. I do not want an inhuman approach in cutting our losses, closing the doors and leaving it at that. There are people involved whose livelihoods are at stake. Their livelihood will go anyway if the hotels continue in the way they have been run in the past. Lease the hotels and offer them to people who have the expertise to run them. The leases should be short term in case the people who get them do not do a good job. They might not make them viable or might affect tourism in other ways. With a proper drawn-up programme these hotels can be successful. If the right people get them I have no doubt whatever that they will pay.

An Cathaoirleach

An tAire, I have a problem as the House agreed to adjourn at 5.30 p.m. for tea.

Minister for Labour (Mr. Quinn)

I will facilitate the House. If the House wishes to return to the debate——

An Cathaoirleach

No, we are taking the Forum debate at 6.30 p.m.

Mr. Quinn

I am in the hands of the House.

Mr. Durcan

If we could finish this now it would be better.

Professor Hillery

We support that. If the Minister is going to be the last speaker I feel he would like to wind up the debate, and we would certainly like to hear his views on what we have said.

Mrs. McGuinness

That would be agreeable.

Mr. Fallon

That being so, at what time will the Forum debate commence?

An Cathaoirleach

It will start at 6.30 p.m. If the Minister is short the Senator will have time for his tea.

Minister for Labour (Mr. Quinn)

I would like to apologise for the fact that I was not here at the beginning of the debate. My colleague, the Minister of State, Deputy George Birmingham, has given me a note of the line of discussion that has been taken by various Members, so I am aware of the broad outline of what has been said.

I would respond initially by complimenting the Joint Committee on their report. It underpins the extraordinary value that the reform of the Oireachtas has in enabling Members in an investigative way to examine the operation of different aspects of the State sector and different aspects of public administration. The verbatim evidence of the committee is an extraordinary document in showing the way in which, for the first time probably at central Government level, public representatives are able directly to question executives of semi-State companies and civil servants in a manner that previously was not the case.

The committee made a number of recommendations. I would like to respond to them and in so doing to take up some of the points that Senator Hillery and other Senators made. I would like to start at the very beginning, because it was fundamental to the reasons why these hotels are still in public ownership. Since Senator Hillery quoted Dr. St. John Devlin on page 13 of the report on this very point, I would like to respond to it. Dr. St. John Devlin stated:

My philosophy is that the public sector should not be in anything that can be done by the private sector. Nobody seems to have a philosophy about semi-State bodies. My philosophy has been that the State should only be in it if nobody else can do it.

He seems to be very poorly informed, I am sorry to say, because the Labour Party have a very consistent theory on what the State sector should be doing. In this area I would make the distinction between the commercial State sector and public service State sector where in fact the public service element is distorting the pricing mechanism that the market would otherwise operate for the services that the State sector company would provide.

It was the view of the Labour Party members at that time, and still is the view of the Labour Party, that there is a valid role for a State-owned chain of hotels in this country. People tend to focus on the failures of a particular enterprise if it is State-owned and use that as an argument to prove a spurious ideological belief that somehow or other State-owned enterprise is incapable of being efficient. If one was to apply the same logic to every private company that goes bankrupt and extend from the number of bankruptcies in the private sector the conclusion that private enterprise is somehow or other inefficient because of the failure of individual firms, the contradictions in the first argument against State-owned enterprises would become very apparent. I do not think the nature of ownership in itself is the critical factor in the operation of a commercially viable enterprise. What is critical is that the terms of reference of that enterprise are clearly stated and that the management are given a clear mandate to operate within commercial terms of reference and given the resources to undertake it.

I would go on to say in relation to Dr. St. John Devlin's comment that in view of what he says on page 13 it is quite extraordinary to read his justification in response to Senator Brian Fleming as to why he authorised, as Chairman of OIE, the participation of OIE in the Powerscourt restaurant lease, an area where the private sector was manifestly doing on a fairly substantial scale in the city centre something which seems to be directly at odds with what he states in chapter 13. However, this is not a debate through the Seanad with Dr. St. John Devlin.

The report has clearly indicated that over a number of years political interference or political procrastination, the phrase that occurs in the verbatim report, has not helped the commercial operation of this group of companies. Therefore it is my intention to ensure that having set the terms of reference and appointed the board of the OIE group of hotels or the Great Southern group of hotels there should be no political interference of that kind. They have been given a job to do. The terms of reference are clear — to make a commercial success, in consultation with the trade union movement. There has been very good relations with the trade union movement on that front and they have a mutual interest in making a success of this important chain of hotels. That view regarding the retention of public ownership and the successful contribution to the tourism infrastructure is a view that is shared by the Irish Hotels Federation and by Bord Fáilte, who recognise the critical and pivotal role of the Great Southern Hotels within the infrastructure of our tourism industry and welcome the decision that this hotel group should be retained in public ownership, provided it will run on an efficient basis.

I am pleased to be able to report to the House that so far to date — and the transfer only took place on the 9 March and the board came into operation very soon after that — their projections for this year are being out-performed in terms of what they had hoped to get at the beginning of this tourist year. According to the note that I have here revenue for the current year is 17 per cent ahead of the 1983 level. There is an increase in sleepers, I presume that is bed nights, of 12.5 per cent in the hotels. There is a 20 per cent increase expected in business from North America. Despite the difficult economic situation in Ireland the aggressive marketing of the hotels is yielding an extra increase in what is referred to as sleepers, or overnight stays. This summer would indicate that there has been a successful trading on behalf of the ÓIE group and they have had a satisfactory series of discussions with the trade unions in relation to manning and staffing levels and other matters of management.

On the question of the recommendations of the report, I will say that in principle I am accepting all of the recommendations. I believe in the disclosure of information and the right of elected members to comment upon it. So in principle we will come back at some stage suitable to the House on that matter.

I would like to turn briefly to a point that was raised both in the committee's report and during the debate as to why there should be a relationship between the Department of Labour, CERT and myself. A political decision was taken, supported by the private sector in the form of the Irish Hotels Federation, to retain these hotels in public ownership. The question then was to which Department should that hotel group be responsible. The only Department that had a catering dimension to it was the Department of Labour in the form of CERT. Therefore the decision was taken, before I became a member of the Cabinet, to assign the hotel group from the Department of Communications to the Department of Labour under the ownership of CERT. That decision was taken in principle and the details were to be worked out. When we came to work out the details in full consultation with the council of CERT it was agreed that the relationship should be some form of an arm's length one, for the very reason that there is not a board of CERT but a council.

CERT is a representative organisation in which there are nominated members both educational and commercial. They felt it would be inappropriate themselves felt it would be inappropriate for that representative council to be involved in the operation of what will be a commercial operation in the very field from which they were drawn as representatives. Yet there was a political decision to retain the group of hotels in public ownership under the umbrella of the Department of Labour. We therefore agreed that the best way to handle that situation was for the legal ownership of the hotels to be vested in CERT, which is an organisation directly under my responsibility, and for me in consultation with the council of CERT, to appoint the members of the board and to have the board reporting on a direct basis to the Minister and the Department of Labour. That was agreed by CERT and by the Government and the necessary arrangements were made.

I am very pleased with the way it has operated to date. The members of the board were selected by me in consultation with Government, as is the normal practice, on the basis of their proved ability in areas related to the running and operation of a hotel or of a catering organisation. They were also selected on the basis that they had the time available and were prepared to make the commitment, which would be quite onerous in terms of time, to the successful re-launch of this publicly-owned company. The figures I have read out would appear to indicate that it is a case of so far so good in that regard. That is the essential nub of the question in relation to the nature of the ownership and its reporting relationship with the Department of Labour.

Senator Hillery raised the question of the way in which PAYE and PRSI payments, which are the legal property of the employee, were utilised in effect as working capital in a manner which was effectively illegal as far as one can gather. I hesitate to use that word, so the qualification is there. He raised a broader point with which I am in full agreement. There is a problem about the utilisation of moneys by any employer which are properly in the ownership of the employee and which should properly be in a particular fund or contributed to the State in the shape of a social welfare contribution. I will certainly bring the points that have been raised in this regard to the attention of the Minister for Social Welfare because it does, as the Senator points out, involve changing or improving the operation of the social welfare code. It is not peculiar to this company, as the House will agree, and many public representatives will be aware of that problem.

Another point in the report is the suggestion that there should be an overall strategy for State sector hotels. The report brings out the fact that Aer Lingus is a very substantial hotel operator both in this country and abroad. In this country it is a minority shareholder in a large and commercially successful hotel chain, and it is either an outright owner or a leaseholder or an equity partner in one shape or form in a whole range of hotels in three, if not four, countries. Ancillary services of Aer Lingus in that regard have been extremely successful. Údarás na Gaeltachta through the Department of the Gaeltacht also own and operate hotels. There is considerable merit in the idea of looking at some form of co-ordinated strategy for the State hotel sector. I would, however, be inclined to leave it to the commercial good sense of the people involved, because the objective would be to maximise the commercial operational performance of those hotels within the terms of reference that have been set for them by the relevant Department.

The final point I raise is the way in which our State sector companies can be monitored in a responsible way by public representatives, because in a sense we are the ultimate shareholders acting in trust on behalf of the public whose taxes are put into them either as initial capital or frequently as additional equity capital. We must consider the way in which that particular responsibility can be exercised, while at the same time preventing undue or unhelpful political interference which gets in the way of what would be seen as normal and bona fide commercial operational activity. Part of the trouble, politically, ideologically or philosophically — to go back to Dr. St. John Devlin — is that we have had a large State sector for a long time run by some people and some parties who fundamentally do not believe in a State sector to begin with, who find the whole idea of public ownership somehow anathema to their political philosophy and who, therefore, do not apply one category of commercial sets of rules or another and then, to my chagrin, at the end of that process of intervention and interference, have the temerity to suggest that the State sector does not work, when in reality over a period of time they have succeeded in ensuring that it could not possibly work.

That is why the Labour Party have always said that in the commitment to a mixed economy which we share there is not only room but an absolute necessity for a vibrant commercial State sector working side by side with private enterprise companies, possibly working in joint ventures with private enterprise companies or possibly doing things which private enterprise has manifestly refused to do since the foundation of the State. Therefore, the committee's report has enabled, probably for the first time, the public at large and Members of the Oireachtas to see some of the tensions and contradictions that have in a general way permeated through the operation of some of our State-owned companies. I hope we have learned a lesson from that kind of unhelpful interference. It is right and proper that public representatives should set criteria for operation through the enactment of the legislation that establishes a company and should set certain aspirations and standards of performance through the authority of the Oireachtas and the Government. What is clear and comes right through the operation of this hotel group — I use this merely as an example rather than a particular case and I am sure the Members of the House will agree with me because it is the first report of the committee — is the contradiction brought about by the lack of a clear philosophy on the role of a State sector in our economy.

To conclude on a general note, we have quite clearly taken publicly and politically a decision that has been supported by the workers in the enterprise, by the tourism organisation and by the hotels' organisation that this group of hotels should be retained in public ownership and should be made successful in the interests of themselves, the tourist industry and the taxpayers, who at the end of the line are effectively the shareholders. Having taken that decision, it behoves all of us to maintain a benign and fatherly interest in the operations of it but to enable the organisation and the company to get on with the job. I am quite confident that in this case they will be able to get on with the job and I hope that when we come to review at the appropriate time and in the appropriate manner the first year we will be able to consolidate the preliminary figures of success that I have indicated to the House.

I hope I have taken all of the points raised by the various Members. I will be happy to come back at some later stage and elaborate on them if that is required.

Question put and agreed to.

Sitting suspended at 5.50 p.m. and resumed at 6.30 p.m.