Seanad Éireann díospóireacht -
Thursday, 6 Dec 1990

Vol. 126 No. 17

Fóir Teoranta (Dissolution) Bill, 1990: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister for Finance (Mr. A. Reynolds)

I join in the tributes paid to Mr. Coughlan who, I understand is serving his last day in the Seanad. They are elevating him to our House and I will be there to welcome him next week. I have always found him extremely courteous and efficient in this House. This Bill provides for the dissolution of Fóir Teoranta, the repeal of existing Fóir Teoranta legislation, the transfer of its assets and liabilities to the Industrial Credit Corporation plc and related matters. It gives effect to the Government's decision, announced in February 1989, to wind-up the activities of Fóir Teoranta.

Fóir Teoranta was established in March 1972 under the Companies Act, 1963, as provided for in section 2 of the Fóir Teoranta Act, 1972. It was designed to fill a gap which was perceived in the range of State services available to manufacturing industry at the time. Its purpose was to provide an orderly procedure for restructuring ailing, but potentially viable industrial concerns which encountered financial difficulties and which were unable to obtain their financial requirements from commercial sources.

Fóir was established in a period of structural change in Irish industry prior to EEC membership in 1973, and the removal of many trade barriers. The progression to the open economy which we now have was taking place rapidly and the Government at the time took the view that transitional measures aimed at helping Irish industry to adapt to the new, more competitive conditions would be reasonable. Fóir's busiest period of activity was during the recessionary period of the early eighties when it provided very substantial assistance to Irish industry, mainly in the traditional sectors such as textiles and clothing, footwear and leather, furniture, etc. Unfortunately, despite Fóir's efforts, many of its client firms in these sectors did not survive. It would be difficult to assert that Fóir Teoranta had anything but a marginal effect on the overall performance of these sectors, one way or the other, over the period since its establishment. On the positive side, it must be said, that some firms in various sectors which were assisted by Fóir prospered and are trading successfully today.

Ireland joined the European Community in 1973 shortly after Fóir Teoranta was established. Since then, there have been wide fluctuations in the performance of the economy. In part, fast growth periods were stimulated by increased Government expenditure and borrowing. These borrowings eventually became unsustainable and the previous Government embarked upon the implementation of a Programme for National Recovery which had as one of its central aims the improvement of the environment for industry so that industry would be in a position to stand on its own feet and compete in the world marketplace. The aim was to reduce excessive Government expenditure, thereby reducing Government borrowing and lessening the upward pressures on interest rates and inflation. As Senators know, very considerable progress has been achieved in the past three years in this regard.

The level of activity in Fóir Teoranta had tapered off considerably in recent years, reflecting the improved outlook for industry from a peak of about £23 million in disbursements in 1983 to about £7 million in 1988. The number of applications received, cases approved and the average size of cases approved, had also substantially reduced.

In line with the fall-off in demand for its services and the virtual disappearance of large cases, together with buoyant own resources, Fóir Teoranta's requirement for Exchequer funding also declined in recent years. The last occasion when the company needed to call on the Exchequer was in 1987. Since then it has financed its operations from on-going income from its investments by way of interest and capital repayments, including a considerable element of pre-payments and share realisations. In fact, during the winding down phase, Fóir Teoranta has repaid a total of £10.6 million of Exchequer advances — £4 million in 1989 and £6.6 million this year. The company has been closed for new business since 23 February 1989.

Since Fóir Teoranta was a lender of last resort it is not all that surprising that a high degree of failure took place among its client firms. However, the failure rate experienced by Fóir Teoranta involved very considerable cost to the Exchequer. The failure rate may be measured by the fact that some £75 million of the Exchequer advances of £85 million currently outstanding has, in effect, already been written-off by the company as irrecoverable.

The level of write-off in Fóir Teoranta reflects the fact that many firms failed despite the assistance given by Fóir Teoranta. Many of those firms left it far too late to go to Fóir Teoranta for assistance in the first instance. Nevertheless, where assistance was given in such cases, the damage had already been done and the firms eventually went to the wall anyway. While there may be economic benefit in keeping jobs in existence longer rather than being lost at the outset, the prospect for long term sustainable employment may be better if firms are transferred to new owners quickly in the receivership/liquidation process than if they are kept in existence, with Fóir Teoranta's assistance, but with existing high levels of indebtedness and generally poor management as well as other weaknesses. The new examiner provisions in the Companies Act, 1990, will play an important and positive role in the area of company financial reconstructions in the future.

This is the background against which the Government considered the future of Fóir Teoranta. Their decision that Fóir Teoranta should be wound up, as indicated in the announcement I made on 22 February 1989, was based on the following: (i) the low level of demand for Fóir Teoranta's services; (ii) the very much changed industrial environment, as a result of the firm action taken by this Government and the previous one, as compared with when Fóir Teoranta was established; (iii) the provision, now enacted in the Companies Act, 1990, allowing for the appointment by the courts of an examiner in order to prevent a potentially viable company from going into immediate liquidation; and (iv) the need to prepare Irish industry to be ready to meet the challenges of the more competitive regime which will apply when the internal market is in place after 1992.

The decline in demand for Fóir Teoranta's services was due to a number of factors. The new climate of confidence in the economy and the favourable environment for industry were obviously major influencing factors. Another important consideration was the fact that finance for industry is now available on a much wider scale than ever before from private sector individual and institutional sources. Individual investors have the powerful advantage of State-backed tax schemes such as the Business Expansion Scheme.

Venture capital funds also exist on a significant scale with an important role in this regard being played by public sector agencies such as NADCORP and the investment arm of the Industrial Credit Corporation. Given these developments, it was inevitable that, leaving aside the improvements in the economy generally, demand for Fóir Teoranta services would be considerably lessened and the need for such an organisation diminished.

The examiner provisions of the Companies Act, 1990, have now been in operation for about three months. It is of course, too early to see how successful the provisions will be but there is, I believe, a strong desire among all concerned that the new procedure operates effectively to achieve the purposes for which it was intended. The similar Chapter 11 process in the United States has, of course, operated there for many years. The Companies Act, 1990, allows for a stay on the rights of creditors while the examiner attempts a reconstruction of the company's finances. One of my objectives in preparing the Bill originally was to provide a new procedure which would help to obviate the need for a separate State company to deal with industrial rescue, and indeed Fóir Teoranta itself advocated that the new procedures should be implemented. There is sufficient scope under the new procedure for genuinely viable firms to stave off closure if they are threatened by merely short term financial difficulties.

The industrial environment now is very much changed from the one which existed when Fóir Teoranta was established 18 years ago and during its main periods of business. Business confidence has never been greater. I believe that State intervention such as that provided by Fóir Teoranta has no place in this environment. Interest rates and inflation are at lower rates than those that exist in many of our competitor economies. The Confederation of Irish Industry is on record as stating that industry in Ireland would "prefer to have a competitive cost environment than seek to compensate for deficiencies in the environment through cash grants" etc., from the State. Clearly, we are living in an environment much more conducive to getting industry back on its feet and achieving increased long term industrial employment. The best action which the Government can take in relation to the survival of firms is to contribute as much as possible to lowering the input costs of industry, rather than giving them handouts when it is probably too late to save them anyway.

The underlying performance of manufacturing employment has been improving in recent years. The target set out in the Programme for National Recovery to generate 20,000 gross jobs on average per year in manufacturing and international services was achieved with average annual gains over 1988-89 of 20,900 jobs. The net annual gain in employment on average over the period was 4,700 in this sector. Total manufacturing employment is expected to grow further in 1990-91. The level of growth will be dependent on a number of factors, in particular the performance of economies such as those of the UK and the US.

To sum up, the Government took their decision in relation to Fóir Teoranta in the light of prevailing circumstances. The Government's view at the time was that with the other sources of finance available for investment in industry and with the economy in good condition, there should be little if any adverse impact on employment as a result of the closure of Fóir Teoranta. I am happy to say that view has proved correct; as already indicated, in the period since Fóir Teoranta closed for new business, employment in manufacturing industry increased. As regards the view that a need may arise in the future for the State to be actively involved in industrial rescue should economic conditions deteriorate, it has to be made clear that the days of feather-bedding Irish industry are over. Irish industry must be able to compete in the marketplace and in an intensive effort to ensure that this will be the case post-1992, the Government are already devoting greater resources to industry in the context of the EC Structural Funds over the next few years. Expenditure supported by the Structural Funds will be over £1 billion over the five-year period to 1993. There is, therefore, no lessening in the level of resources being devoted to industry. It is the purpose for which those resources are used which is important and we will ensure that the funds involved are put to best effect in order to secure good solid progress the aim of increasing the level of employment in the economy.

There has been an orderly winding down of Fóir Teoranta's activities. Its portfolio of loans and investments under the terms of the legislation now before the House, will be assigned to the Industrial Credit Corporation to administer. The Exchequer's investment in the client firms concerned will be looked after by the Industrial Credit Corporation in accordance with the contractual arrangements entered into by those firms with Fóir Teoranta. It is not possible to say how long the administration of the portfolio in the hands of the Industrial Credit Corporation will take. However, I expect it will probably take of the order of five to seven years, but it could be longer in particular instances.

My Department are negotiating with the ICC on the fee for remunerating the ICC for its work in administering the Fóir Teoranta portfolio. The House is aware that in relation to ICC I have employed consultants to consider and report on the State's options in relation to the future of the company. Whatever the Government's decision in due course on the future of the ICC, I envisage that ICC will continue to administer the Fóir Teoranta portfolio on the basis now being established.

As regards the staff of Fóir Teoranta, I am pleased to report that the bulk of the staff have now either been redeployed to other parts of the public service or have taken early retirement on terms similar to those under the general public service early retirement scheme. Some temporary staff have been taken on so as to ensure that the winding down process proceeds smoothly and that the Exchequer investment is protected.

Before dealing with the specific provisions of the Bill, I would like once again to express publicly my appreciation and that of the Government of the work done by Fóir Teoranta since its establishment. I wish to pay tribute to the hard work, commitment and dedication of the staff, management and directors of the company over the years.

I will now deal with the individual sections of the Bill. First of all I should point out that the provisions of the Bill will come into effect on a day to be appointed by Ministerial order.

Section 1 is a definitions section. Section 2 dissolves Fóir Teoranta. Section 3 transfers all the assets and liabilities of Fóir Teoranta to the Industrial Credit Corporation save for a sum of £75 million of Exchequer advances which is being written off. This amount has already been written off in the books of Fóir Teoranta as being irrecoverable. It is important to emphasise that, apart from about £10 million written off in 1983, this £75 million represents losses incurred by Fóir Teoranta over the full 18 years of its existence. The balance of the outstanding Exchequer advances, which is about £10 million, will be transferred to the ICC.

Moneys received by the ICC in respect of the assets of Fóir Teoranta, mainly its portfolio of loans and equity investments will, under subsection (4) of this section, be paid to the Exchequer. Subsection (5) allows the Minister to pay to the ICC a fee in respect of its management of the assets and liabilities transferred to it.

Section 4 provides for the preservation of existing contracts of Fóir Teoranta and their transfer to the ICC. Section 5 provides that the ICC will be substituted for Fóir Teoranta where the latter is a party to legal proceedings immediately before the commencement of the Act. Section 6 exempts the transfer involved under these provisions from the imposition of stamp duty.

Section 7 deals with the final accounts of Fóir Teoranta which will be prepared by the ICC and submitted to the Minister who will present them to both Houses of the Oireachtas. The section also requires the corporation to keep all proper and usual accounts in relation to the assets and liabilities transferred to it and to present them to the Minister who will submit them to both Houses of the Oireachtas.

Section 8 provides that the ICC shall present a report of its activities in relation to the assets and liabilities transferred to it to the Minister who will present it to both Houses of the Oireachtas.

Section 9 (1) provides that the Minister may make advances not exceeding £2 million to the corporation in respect of liabilities of Fóir Teoranta, arising from the exercise of its statutory functions, which had not been discharged by Fóir Teoranta as of the transfer date. These liabilities arise from some outstanding commitments to client firms and to receivers of client firms where in certain circumstances moneys paid to Fóir Teoranta by receivers may have to be returned to the receivers together with interest thereon. The remaining sub-sections contain standard provisions in relation to Exchequer advances.

Section 10 provides for the repeal of existing Fóir Teoranta legislation. Section 11 provides that the expenses incurred in the administration of the Act be paid from moneys provided by the Oireachtas. Section 12 deals with the short Title and the commencement. As I mentioned already, the Act will come into operation on such day as the Minister may appoint by order.

I commend the Bill to the House.

Mrs. Doyle

I beg the indulgence of the Chair. I want to add a few personal words of good wishes to our Clerk, Mr. Kieran Coughlan, as this is his last day in this House. My colleague, Senator Maurice Manning, spoke very eloquently on behalf of all the Fine Gael Senators. I am sure his sentiments expressed the views of all of us in this House. I would like to add my personal thanks to Kieran for his kindness and courtesy to me since I came into this House just over a year ago.

I would also like to thank the Minister for coming and presenting this Bill to us in the Seanad. He was with us last week and I appreciate when a busy Cabinet Minister like the Minister for Finance takes time off to deal with a Bill in the House himself. Having been a Minister of State some years ago, there is a sympton which prevails I am afraid with all Governments at times, that you wheel in some unfortunate Minister of State and thrust a script into their hand as they are coming in the door and say, "read that and get it over and done with".

Mrs. Honan

That is not Deputy Reynolds' style.

Mrs. Doyle

I accept that. I thank him, particularly as this must be a very busy time of the year for him dealing with the Estimates and the budget after Christmas. No matter what we say about the contents of Bills and no matter what stance we take on different Bills, his personal commitment to this House deserves to be recorded.

Mr. O'Keeffe

And his competence as well.

Mrs. Doyle

Naturally. There is a sort of déja vu feeling about the script this morning if you read what was delivered in the other House — all the more reason I thank him for bothering to come and put it if you like, twice on the record in these Houses. There is only so much that can be said about a technical Bill and that is understandable.

We all appreciate what the Bill is setting out to achieve — the winding up and dissolution of Fóir Teoranta and the transferring of any assets and/or liabilities to the Industrial Credit Corporation. We have had some time to think about the principles involved in this because the Minister flagged his intention originally back in February 1989, if memory serves me correctly. Circumstances were somewhat different in February 1989 to those of today and I still remain to be convinced that the procedure we are taking today is the correct one. I understand the technical reasons behind it and, to a certain extent, the Minister is in a position to justify what he is doing. I will go through in a moment the main points he gives for justifying the situation we have before us today.

It would be fair to say that the main plank is that macro-economic indicators are most important to industry, particularly to small and manufacturing industry. Interest rates, inflation rates, the debt-GNP ratio and the cost of fuel are all factors that allow industry to be competitive and profitable and, we hope, not need a State rescue service of one kind or another.

In February 1989, if one recalls, interest rates were 3 per cent lower than they are today. Without going into the vagaries of interest rates in the interim, they have gone down and they have gone up, and the net result is that they are now 3 per cent higher today than they were at the time. The cost of money and access to it, particularly for smaller companies and the higher risk end of industry, for example, manufacturing industry, are the chief aspects of competition and viability.

The Minister pointed out that Fóir Teoranta was established in 1972 just prior to our entry into the European Economic Community, as we referred to it at the time, and prior to the rapid removal of trade barriers that took place around that time. They were to fill what was perceived to be at the time a gap in State services to manufacturing industry. Eighteen years on, much has happened and there have been major changes not only in the Irish economy but in the economy of Europe and the world economy generally in the intervening period. Fóir Teoranta was to allow for what was referred to as an orderly restructuring of ailing but viable industries. They have been referred to as "the lender of last resort,""the State rescue bank", "an industrial rescue company". Lots of labels have been pinned on Fóir Teoranta over the years. Indeed, I think all would be reasonable descriptions of the role they played.

Fóir Teoranta had a most important role to play in regard to manufacturing industry while industry generally was adopting to a more open economy and the competitive environment of free trade especially in industries such as textiles, clothing, footwear and furniture as the Minister pointed out. In recent times, particularly since 1982 or 1983, their role has appeared to be declining in as much as the demand for their services, if measured in terms of money lent, would show a decline. One can see that £23 million was lent in 1983 and that decreased to £7 million in 1988. I am not sure whether that is the only indicator of the role of Fóir Teoranta but I suppose it is the only tangible one we have got to measure it by. There were some great success stories as the Minister is well aware over the years but there was a high failure rate in relation to Fóir Teoranta involvement in different manufacturing companies. Most companies that approached Fóir Teoranta ultimately did not survive because by the time they got to Fóir Teoranta, the lender of last resort, they were of questionable viability, in many cases. Forty thousand jobs saved in the last eight or nine years is an impressive record and that is the record of Fóir Teoranta. For the people employed and for the management of the companies involved in relation to these 40,000 jobs, Fóir Teoranta provided an invaluable State service.

The Minister has indicated the four or five reasons on why he justified the winding down of the business of Fóir Teoranta and transferring what was left to the ICC. We should look at these in more detail at the moment: the low level of demand for Fóir Teoranta services. I presume one reads into that that companies with viability problems, companies that are under-capitalised, companies in profitability difficulties of one kind or another have been going elsewhere for rescue finance rather than to Fóir Teoranta. If I read the Minister's statement correctly, one assumes that the business expansion scheme, venture capital provisions generally and the establishment of the venture capital NADCORP, must be where these companies now in problems are finding themselves. I am not sure if the type of company that had to resort to Fóir Teoranta for State rescue during the past 18 years will find much succour or comfort in any of these avenues today.

All of these schemes operate on a strictly commercial basis. NADCORP, for example, is not a rescue capital company; it is a venture capital company and their terms of reference are completely different from those of Fóir Teoranta. If I were managing director or chief executive of a small manufacturing company that needed what we have understood over the years to be rescue finance, the type of finance that Fóir Teoranta provided, I am quite sure I would not be received with open arms by a venture capital company whose brief and terms of reference are quite different.

If we are going to justify the winding down of Fóir Teoranta as a State rescue company and say that one of the reasons is the success of the BES, if the Minister uses that as a plank of his argument, he owes it to the House to explain how he sees the future of the business expansion scheme. Only in the past few weeks a report of the Comptroller and Auditor General has questioned the whole BES situation throughout the country. There is a serious question mark over whether the Minister as a result will renew the BES from April next year. If the Minister is using this as part of his argument for winding down Fóir Teoranta, he should give the House assurances that the BES will be renewed from April next year when the present course runs out.

I would also like to know the views of the Minister for Finance on the report of the Comptroller and Auditor General and the references to the BES, which are reasonably alarming and which certainly question the whole situation at the moment.

The second plank of the Minister's argument for winding down Fóir Teoranta was — and I quote —"The very much changed industrial environment as a result of the firm action taken by this Government and the previous one as compared with when Fóir Teoranta was established". Fóir Teoranta was established 18 years ago. I certainly do not have any clear recollection of the business environment at that time; I probably was not paying as much attention to it in those days as I would have to today in any case, but I think the Minister, if he is being reasonable and if he is being fair, can add to his script and expand the point he is making as to why there has been a very much changed industrial environment.

At the general election in 1987 — and the Fine Gael manifesto for that election is in print and it is quite clear — we put the macro-economic climate of this country above everything else in terms of being the way forward for industry generally, not just manufacturing industry, and for the viability of this country from an economic point of view. As the Minister knows, his own party opposed everything we said and went to the doorsteps contradicting the points in the Fine Gael election manifesto of 1987. We knew the medicine would be difficult for the electorate to take. The electorate said to us quite clearly: "Sorry, there is a much sweeter message; there is more sugar on the Fianna Fáil message, we do not want to know the hardship and the hair shirt that you say will be necessary for the next three or four years". Consequently, we lost the election. We were very straight with the electorate at the time.

(Interruptions.)

An Leas-Chathaoirleach

Senator Doyle, without interruption.

Mrs. Doyle

As a result when Fianna Fáil got into office did they implement their plans to the economy? Did they do as they had said to the electorate they would do? Where were the goodies? Where were the deliveries and where were all the promises? I have to say, fortunately for the country, they did not run the country according to their 1987 election manifesto. What did they do? They stole our clothes, having told the electorate they would suffer from the hair shirt policies if they elected us.

Mr. O'Keeffe

We picked up the best and we sorted it out.

Mrs. Doyle

They picked up our manifesto, they picked up our policies and they ran with them. What did Fine Gael do on the Opposition benches — and this is what I would have liked the Minister to have acknowledged. After much heart-rendering and soul-searching and having campaigned on the basis of what was necessary and what was in the interests of the State and our people, we decided under the Tallaght strategy to support the very difficult measures the Government were then implementing. They were after all, implementing what we had been saying was absolutely necessary and for the sake of the country, we supported the Government when they got into office in 1987.

I am running on this point because the Minister specifically refers to the firm action taken by this Government and the previous one. The previous one was the one that came into office in spring 1987. The reason, and the Minister knows it, that firm action was possible on the economy was the conditional support of Fine Gael in relation to the economic measures that had to be taken at that time. If that is a justification for what we are about here this morning, we must understand clearly the reasons why firm action was possible by a Fianna Fáil Government at the time. It was because of the bravery of Alan Dukes as Ceannaire at the time and because the party put the country before their own political ends. Politically, we possibly have paid the price but I have no doubt that history will recognise and reward, not only Alan Dukes, but the Fine Gael Party for the stance it took. If the Minister is right — and to a point generally the climate has changed; it is much more positive and some of the problems are being ironed out with constructive help from the Opposition in these Houses — it is only fair to recognise history and not to be slightly revisionist about it as with the greatest respect, the Minister's script might be considered to be.

Leaving that political interlude aside, there is one point I would like to bring in here, and that is, the whole problem of interest rates. I mentioned earlier that effectively they are 3 per cent higher now than when the Minister indicated his intention to dissolve Fóir Teoranta, wind it up and transfer the assets and liabilities to Industrial Credit Corporation. That was in February 1989. For the last six months the Central Bank has had quite a clear policy in that the punt was pegged very clearly in line with the Deutschemark. It was around the 2.68 level and there was virtually no fluctuation. In the past two weeks it appears the Central Bank's policy in this area has changed. There were no headlines, no major announcement, we do not know what went on, but it appears the punt is now fluctuating within the EMS and is not as clearly pegged with the Deutschemark as it was. The Minister shakes his head. I would appreciate if the Minister would refer to this point in winding up Second Stage and explain why, suddenly, the apparent change. Does it indicate nervousness on the part of the Central Bank in relation to the Book of Estimates and the budget we are about to face? Does it indicate that the Central Bank are a measure of the political nervousness that is apparent in the main Government party? What do we read, if anything — and I am prepared to be corrected by the Minister on this — from what would look to be a change in policy in relation to the Central Bank? It may seem a technical issue but it has far-reaching effects on all of us because it could herald greater fluctuation in interest rates.

Mr. A. Reynolds

It has happened quite a few times before if the Senator looks back at the record.

Mrs. Doyle

I am not saying it did not but any time it happened one could read from the political scene of the day why it happened. What I am asking is for the Minister to interpret now why the change in the last fortnight in terms of the internal political scene and the external, the Community scene generally. There may be explanations on both fronts. For the record, we should straighten out the situation because if it means we are in greater risk of higher interest rates it would weaken the Minister's argument, apart from the fact that they are 3 per cent higher than they were in February 1989 when it was decided to dissolve Fóir Teoranta. This apparent policy change with the Central Bank could further weaken the Minister's argument in relation to justification of what he is now doing.

The Minister mentioned as his third point in defence of the procedure he is now enacting, the enactment of the Companies (Amendment) Act, 1990, if I give it its correct title, and what is generally known throughout the country as the Goodman Bill. Apparently Goodman is not the only company to benefit from this Act; even though it is only with us a short couple of months a small textile company is also benefiting. He has certainly made an approach but whether the company is actually in the hands of an examiner or not, I am not too sure.

We all stated — and I am sure the Minister over the years was also of this view — that justifying the existence of Fóir Teoranta when we did not have what we call the examiner procedure on our Statute Book was very easy. We all called at different stages over the years for bringing forward this section of the Companies Act. It was subsequently taken out of the major Companies Bill that is going through the Dáil at the moment, and is shortly to reach us here in the Seanad, and was presented as its own Bill in August. This would allow companies who were getting into difficulty to stave off the receiver and their creditors by approaching the High Court and having an examiner appointed to allow them manage and work themselves out of their financial difficulties.

I hope this provision will work as efficiently as we had all assumed it would. In the case of a company as large as the Goodman group of companies I see little difficulty in terms of the expenses and cost involved in invoking the provisions and the establishment of the examiner procedure. I would like the Minister to be specific as to whether the cost of one, two or three or several trips to the High Court under this provision would leave it out of the reach of most small manufacturing companies if they needed rescue of one kind or another. We all know the legal costs generally and the higher the court the more prohibitive the cost. If the procedures now under way in relation to solving the difficulties of the Goodman group of companies are a reasonable headline and if the number of trips backwards and forwards to the High Court indicate the normal procedure under the Act, it would be ruled out for the vast majority of small manufacturing companies for rescue and who would look for the examiner provision. The cost would appear to be prohibitive for anything but very large companies. I would like the Minister's comment on that.

If that is the case, the procedure enacted in August cannot be considered a fall-back for small manufacturing companies and thereby the removal of the provision of the facilities of Fóir Teoranta will further weaken the possibility of these companies being able to trade out of their difficulties and become viable. I await the Minister's specific response to that. I accept that that Bill, enacted in September of this year, is but in its infancy. We have only had a couple of months of operation. I also understand — and I hope I am correct in saying this — that there are amendments included in the Companies Bill that is about to reach the Seanad — the major Bill — referring specifically to the Companies (Amendment) Act of September last. Already difficulties, be they technical or otherwise — flaws — have become apparent in this new piece of legislation and two to three months later we are amending legislation which passed through both Houses in the past few months.

If we use the Minister's third plank of defence for the dissolution of Fóir Teoranta, the Companies Act, 1990, any difficulties that have become apparent in it in the short time of its enactment should be spelled out here. We should be assured that they are not of such a nature that they would preclude access to this legislation by companies that need an examiner appointed to allow them to trade out of their difficulties and stave off creditors, but particularly that it would not preclude small manufacturing industries, the type of industry that has been the main benefactor of Fóir Teoranta in the past 18 years. From a cost point of view and possibly because of some of the difficulties that have now become apparent, the very industries that Fóir Teoranta was set up to help would be precluded from using this legislation. They would not be precluded in law but in practice because of the cost. I feel it would be out of their reach and I worry about that because of the High Court implications and the enormous legal costs involved.

Constitutional difficulties are also becoming apparent in this legislation and I would like the Minister's comment on that also. Is the Minister satisfied that there is no constitutional question at all in the provisions in the Companies (Amendment) Act, 1990? I would like to know the Minister's views on that. This question is being raised in legal circles and one hears it bandied about from time to time in both Houses. I would like the Minister to expand on that. If it proved either with the present companies that are being examined or in the future that there was a constitutional question, then the Minister's argument is further weakened in using that legislation as a defence for winding down Fóir Teoranta. My main concern is for the small to medium manufacturing industry that has been traditionally under-capitalised. They were the industries that used Fóir Teoranta for the past 18 years particularly in the early 1980s when the demand for Fóir Teoranta's services was at its peak.

The Minister's fourth plank of defence for the winding down of Fóir Teoranta is the need to prepare Irish industry to be ready to meet the challenges of the more competitive regime which will apply when the internal market is in place in 1992. We all agree with that. It is a kind of "mother's milk" type aspiration; we could say that about anything. We all hope we will be able to compete in the open market and in the barrier-free Europe and that industry will be more competitive. The Minister in his speech was not slow to give bouquets to himself and the previous Government. It may be justified. In the area of preparing industry and Irish companies for the Europe of post-1992, I do not think bouquets are as deserved. The enthusiasm that should have been there in awakening Irish awareness to the reality of the situation post-1992 was absent. There was a programme — Europen, if I recall it correctly — that ran for a while. There were pretty billboards around the country and a few documents landed on our desks here and there and certainly the CII tried to stir up a little bit of interest at different levels of their activities but there is a justifiable feeling throughout industry and the commercial world in Ireland that the hard competitive realities of a barrier-free Europe really have not come home to roost yet. The Minister used the eloquent expression in relation to the abolition of Fóir Teoranta "they need to prepare Irish industry to be ready to meet the challenges". If that is one of his planks in preparing Irish industry to meet the challenges, he is stating effectively to small manufacturing industries, "Sorry, mates, no more State rescue for you. You have to stand up and be counted now. You are big boys. We are in a free Europe. Run off and look for BES. Go look for some venture capital from NADCORP". It is a different ball game from rescue capital and the Minister knows that. I know that.

The type of argument could be used retrospectively with great justification for all the companies that came to Fóir Teoranta and subsequently failed. The art in what we are talking about now is in having in place the correct formula for distinguishing potentially viable small manufacturing companies from those that obviously are destined, regrettably, for failure.

Certainly in the commercial reality of the banking world, whether in terms of venture capital or the strict commercial banks and the ordinary banking system that we have always been used to, most of the companies that went to Fóir Teoranta would not be received with open arms and the Minister realises that. They will now be left without any State rescue capital at all. If that is what we want, let us talk about it. Trying to pretend that there are alternatives in place when a company gets into financial difficulty is being slightly disingenuous. Effectively, from the vast majority of companies that would heretofore have approached Fóir Teoranta there will be no alternative in the future if they run into these financial difficulties. If that is what the Minister wants let him say that and let us talk about it because that is not what is being said. We are justifying the winding down of Fóir Teoranta on the basis that the whole climate has changed and there are alternatives in place now. They are the main thrust of the Minister's argument. There are effectively no alternatives. There is no State rescue bank there now. The Minister is stating that it is not needed. I am questioning that. I do not quite accept the Minister's argument, I am afraid, because it is his job and the job of the scriptwriters to justify the policy change he made in February 1989 and in a well-written script it is easy to gild the lily. We have all done it.

There is a very good debating point in what we are talking about here. Some will agree with the Minister, others will not agree. Others like myself, will have reservations, particularly reservations about the reasons he gives to justify it which do not stand up to scrutiny. The action in itself may be the right thing in the end but to try to justify it on four points through all of which one can drive a horse and cart is not the way to go about it.

The Minister has stated, not this morning if I recall correctly — I think it was in his presentation of this Bill last May to the Dáil that there would be no adverse effects for the employees of Fóir Teoranta in this dissolution. There was quite a good uptake I understand of the early retirement scheme and that for the rest it would be a matter of redeployment. Could the Minister assure this House that since May, in fact, those who have not opted for early retirement have been successfully redeployed within the public service and that all that matter has been resolved in relation to it?

Fóir Teoranta is to be dissolved and its assets and liabilities transferred to the ICC and the portfolios will be wound down over, hopefully, the next five to seven years. Any outstanding legal actions will be taken over by the ICC from Fóir Teoranta and the technical details are quite clearly spelt out in the Bill. What is the future of ICC? The Minister did indicate last May in the Dáil that he was going to employ a consultant to advise him on the future options of the Industrial Credit Corporation. Has he employed that consultant? Has he or she reported yet? Could he briefly synopsise the thrust of that report for the House this morning? Perhaps it is the private sector that will have to deal with the winding down of Fóir Teoranta or perhaps it is not. I have no ideological hangups on this. I ask the question out of interest because if we are handing over an extra portfolio of investments to ICC, let us be told frankly this morning what is the future for ICC and what are the details. I would be very interested in knowing generally.

There are two interesting references this morning in the Minister's speech and I think there is further reference to it. The first is, again, one of these aspirations we all have them from time to time. It is hard to disagree with the general thrust. In the present context they bear looking at. The Minister said that the best action which the Government can take in relation to the survival of firms is to contribute as much as possible to lowering input costs of industry. Yes no one will disagree. That is another mother's milk aspiration. There is no difficulty about that.

The Minister went on to say "rather than giving them hand-outs when it is probably too late to save them anyway". Do I detect from that statement that the Minister is now questioning the whole rationale behind what Fóir Teoranta have been up to for the last 18 years, that they were shovelling out money to no-hopers to shut them up in case they would become a political embarrassment in a certain constituency? Alternatively, one could interpret from that statement that the Minister had not a lot of confidence in the judgment of the board of directors of Fóir Teoranta and in their ability to decide those who deserved what he terms "hand-outs" and those who did not. I understand that the terms of reference referred to companies that were likely to be viable. It is a technical job to assess, given the state at a certain period of time of any company, the likelihood of its being viable. To talk about Fóir Teoranta giving hand-outs when it was probably too late to save them is questioning the modus operandi and the whole competence of the board to assess the cases that came before them and those that did not.

In the same vein, the Minister said: "It has to be made clear that the days of feather-bedding Irish industry are over". Is it the Minister's opinion that that is what Fóir Teoranta has been doing for 18 years — feather-bedding Irish industry? I doubt if the boards over the years would agree with the Minister on that. I doubt if the Minister's late and I am sure, esteemed colleague — we all held him in much esteem, we might have disagreed with him on political idealogies — the late George Colley, who was responsible for the terms of reference of Fóir Teoranta would agree with those two sentiments the Minister expressed here this morning. I am plagiarising directly from the contributions in the Dáil in May in putting on the Seanad record the terms of reference and procedures of Fóir Teoranta. It is in fact from the speech of Deputy John Bruton that I am quoting these specific words, as reported in the Official Report of 31 May, columns 1073-74. He said, "Fóir Teoranta are not and never were an easy touch for a loan". The Minister used the words, "feather-bedding Irish Industry" and "State hand-outs when it was probably too late to save them anyway". Deputy John Bruton said that Fóir Teoranta were not and never were an easy touch for a loan and he was a former Minister for Finance and Minister for Industry and Commerce, if my memory serves me correctly. He made the following comment that under Fóir Teoranta's terms of reference, established by the late Deputy George Colley:

... in order to qualify for aid from Fóir Teoranta a company must: (1) be engaged in industrial activity; (2) have significant employment involved which is either nationally or locally significant; (3) there must be a sufficient contribution of money from the owner of the company going in at the time of the rescue; (4) there must be reasonable prospects of profitability on a permanent basis;

—the Minister's view is that he is giving hand-outs, when it was probably too late to save them anyway——

(5) its continuance is in doubt because of inability to obtain its financial requirements from commercial sources and, finally, failure to receive assistance would have serious repercussions either nationally or locally.

Those are the five points Deputy John Bruton put on the Dáil record as being the terms of reference established by the late Deputy George Colley when he set up Fóir Teoranta 18 years ago. Deputy Bruton went on to say:

All of those criteria must be complied with if a company is to get aid from Fóir Toeranta. There is no question of Fóir Teoranta ever being used simply to bale out the banks because, under the law, if a company can get assistance from the banks, they cannot get it from Fóir Teoranta. It is only companies that cannot get assistance from the banks that are qualified to receive assistance from Fóir Teoranta.

To complete the record, the late George Colley's terms of reference setting up Fóir Teoranta need to be spelled out here today, particularly with regard to the two questionable references to the operations of Fóir Teoranta by the Minister in his contribution. The Minister feels that lowering input costs for industry is the best contribution he or the Government can make. Yes, we do not disagree with that. But I object to the Minister's further reference in his statement when he says "... rather than giving them hand-outs when it is probably too late to save them anyway".

I object to the statement by the Minister when he said: "It has to be made clear that the days of feather-bedding Irish industry are over". I do not accept that Fóir Teoranta ever feather-bedded Irish industry. Of course, they made decisions that ultimately did not stand up and the companies did not prove to be viable; but they also saved 40,000 jobs in the last eight years. If the commercial banks and the other financial provisions that the Minister states are now there — and hence Fóir Teoranta is no longer relevant — if they can come back in eight years' time and state that they saved 80,000 jobs in the manufacturing industry sector, I would be prepared to come in here again and debate it with whatever Minister happened to be in place on the day.

A point on BES which I did not refer to is this. The Minister opened it up to the tourist industry generally last spring and I welcome that move. It was a well-judged and very welcome move, Given our potential in the leisure activity area. BES was opened up to the leisure industry and, as we are talking about investment in fixed assets, many small investors hoping to avail of the tax breaks involved in investing in BES schemes have now opted for the tourism and leisure industry rather than the higher risk manufacturing industry sector. Therefore, as a consequence of what was a good move, there will be less money available now to manufacturing industry, which of its nature is higher risk investment, from the small investors through BES. That is a further reason why the Minister's four points of justification for the dissolution of Fóir Teoranta at this point are weakened.

I hope the Government have prepared the ground sufficiently for our taking a full and equal position in the European Community and post-1992. It will be a highly competitive free trade environment and our manufacturing industry will be exposed as never before. I hope we know the realities of what we are entering. There are marvellous advantages, provided we are properly prepared. I hope the realities are being faced up to and that the relevant sections and sectors of industry and commerce are being prepared properly. There will be winners and losers post-1992. No matter how well the job preparation is done — and I do not think it has been done sufficiently well — there will still be winners and losers. I remain to be convinced that the advent of BES, particularly with the extension of BES to the tourism industry, the venture capital schemes, the advent of the Companies (Amendment) Bill, 1990 and even with the present macro-economic indicators, all add up to justify the abolition of our only State rescue bank for a most important sector, the manufacturing industry sector.

Mr. O'Keeffe

As a Corkman I wish to take time out to pay tribute to another Corkman, Kieran Coughlan, Clerk of the Seanad, to wish him well in his new role and to thank him for the courteous way in which he has dealt with all of us in his time here. I wish him every success and, like many other Corkmen, I would not mind following along the path on which he is going at present.

I will try and not be too political, but with Senator Doyle across the way it is particularly difficult. She speaks about Fianna Fáil coming into Government in 1987 and taking on Fine Gaels' clothes. It is right to acknowledge the role that Deputy Alan Dukes adopted in the Tallaght strategy. However, one would want to temper that somewhat by asking the question: what other role did he have to adopt at the time, given that he was a new leader and that he did not want another general election? While we acknowledge what he did with the Tallaght strategy, did Senator Doyle's party in the long term acknowledge what he did because for some reason we have a new Fine Gael Leader? Many people have suggested to me that the Tallaght strategy was the beginning of the end for that leader. In terms of acknowledgment he got more from this side than from his own party.

Mrs. Doyle

The Tallaght strategy will always be a testament to the political judgment of Alan Dukes.

An Leas-Chathaoirleach

Senator O'Keeffe without interruption please.

Mr. O'Keeffe

But not to his long term survival.

Up to the time of the Government's decision to put an end to the existence of Fóir Teoranta one of the things that was agreed by everybody was the multiplicity of agencies. In every county there were county development teams, the IDA, Shannon Free Airport, Fóir Teoranta, venture capital groups and NADCORP. Anybody dealing with these groups had difficulties in trying to get through the mesh and any rationalisation would be welcomed by people in political circles generally. We have seen the amalgamation of SFADCo and the IDA. One has to look at what the position of Fóir Teoranta was and why the Government of the day took that decision in 1989. It is important to acknowledge the crucial role that Fóir Teoranta played in regard to manufacturing industry during the transition to full open trading. They performed extremely well during that period but the question has to be asked: are the same circumstances present now as were present then?

I mentioned the difficulties for politicians dealing with a multiplicity of agencies. I should also acknowledge the level of representations from Members of the Oireachtas to Fóir Teoranta when it came to difficulties with firms in their constituencies. The pressure being applied to Governments, Ministers for Finance and Ministers for Industry and Commerce is again reflected in Fóir Teoranta itself. I quote from an article by a financial correspondent: "Fóir Teoranta had an unhappy knack of backing losers." While Senator Doyle is adamant about the excellent role that Fóir Teoranta played over the 18 years, I think we must also take cognisance of the fact that at this present time the Exchequer is writing off £75 million. That in itself begs the question: were all the decisions made on good, sound commercial analyses? In my view it must indicate that a restructuring was urgently called for. Is it any wonder that in 1989, when the Government in their budget had as an underlying objective the promoting of good, sound economic activity and sustainable employment, that Fóir Teoranta should come under the microscope?

Mrs. Doyle

Are you saying they were subject to political pressure in their judgment?

Mr. O'Keeffe

As I develop my speech I will quote an instance where one of your own Deputies in Cork became involved. I hope that I will set out the parameters under which Fóir Teoranta often worked, given the level of representation that was coming from Members of the Oireachtas in a constituency, to the Minister for Finance and to the Minister for Industry and Commerce. Obviously, that representation landed at the door of Fóir Teoranta.

Mrs. Doyle

Which politician was it? Surely it is an indictment of the board of Fóir Teoranta?

An Leas-Chathaoirleach

Senator O'Keeffe, without interruption.

Mr. O'Keeffe

If we are now writing off £75 million, surely it is a logical question to ask: did commercial analysis play its due role right down through the 18 years? It is also important that we look at the performance of the economy since 1989. If we do that it will bring us to the view that the existence of Fóir Teoranta may not be as critical from here on in, because the provisional figures for the end of 1989 show that the employment in the manufacturing sector rose by 4,900 over the previous year. In the year up to May 1990, unemployment figures were down by 13,300. Everybody will accept that this must be seen as the result of the Government's sound and responsible economic and financial management.

Mrs. Doyle

What were the corresponding emigration rates?

Mr. O'Keeffe

It is extremely important from the point of view of getting confidence back into this economy. Basically, what Senator Doyle has said is that we must all agree with what the Government have done.

(Interruptions.)

Mr. O'Keeffe

Senator Doyle told me this earlier, Senator Upton.

Dr. Upton

It must have been while I was out.

An Leas-Chathaoirleach

The Senator without interruption, please.

(Interruptions.)

An Leas-Chathaoirleach

The Senator should not be inviting interruptions. I would ask him to address the Chair.

Mr. O'Keeffe

Senator Upton is disrupting the proceedings.

An Leas-Chathaoirleach

I am asking the Senator to address the Chair.

Mr. O'Keeffe

My apologies, a Leas-Chathaoirligh. If one looks at the activities of Fóir Teoranta one will see that it has tapered off from a peak of about £23 million disbursements in 1983 to something like £7 million in 1988. If you look at the number of applications received, the number of cases that were approved and the average size of case approved, that had also substantially reduced in the interim period. The facts are there to show that. Fóir Teoranta's requirement for Exchequer funding also declined in those years and the last occasion when the company actually needed to call on the Exchequer was in 1987. Since then, the Minister has pointed out, it has financed its own operations from ongoing income by way of investment, interest and capital repayments, including a considerable element of premiums and share realisations. During that winding down period Fóir Teoranta repaid to the Exchequer something like £8.2 million of Exchequer advances and that was reflected by £4 million in 1989 and £4.2 million in 1990. So, in many ways the going out of existence of Fóir Teoranta will not have that dramatic effect on the viability of industry in this country.

We should also look at what the Minister called the "environment costs". Inflation was at 3 per cent when the Government decided to wind up Fóir Teoranta; it was 4 per cent on average in 1989 and in 1990 we are now back to 3 per cent. That is well below the European average, which is expected to be in the region of 6.25 per cent. We also had a welcome easing of interest rates and again we are considerably below the UK interest rates. The higher wage costs in the UK have also significantly improved our competitiveness relative to that country.

We should also take into account something that was mentioned by Deputies when this was being discussed in the Dáil. That was the examiner provision; and, with the amendment to the Companies Bill referred to by Senator Doyle, this has in fact got us over any temporary discomfort that any operation might have.

My view is that Fóir Teoranta did have an unhappy knack of picking losers. In many respects Members of the Oireachtas have to take a fair share of the blame for the undue pressure that was exerted. While one can claim that many jobs were saved over the years through Fóir Teoranta, I would like to mention an occasion quite recently in Cork when we had the closing down of the Sunbeam Wolsey factory. I can remember well the furore on that occasion. I can recall quite vividly the expressions emanating from Deputy Bernard Allen at the time — his call that Fóir Teoranta would be brought back into existence and that money would be made available to management in the Sunbeam factory to keep it open. With hindsight what has happened there would again indicate that in fact Deputy Allen was very foolhardy on that occasion, because what has happened is that another company has come in and has taken over. It is providing 150 jobs and, please God, the growth over the next couple of years will indicate that the employment levels could be back to 450, not far removed from what it was previously. That in itself is a clear indication of the type of thing I have been talking about — Deputies in constituencies making the case, putting the pressure on, to try to get Fóir Teoranta to give handouts, when in fact the jobs are not sustainable. They were not in this case.

Mrs. Doyle

Open public calls to Fóir Teoranta are one thing, but what went on behind closed doors with politicians——

An Leas-Chathaoirleach

The Senator has spoken already.

Mr. O'Keeffe

As somebody who was not at the door of Fóir Teoranta, all I can tell the Senator — and this must be admitted on all sides — is that if a company in the Senator's constituency was in difficulty I know who would be the first person rapping on that door, and certainly on the Minister's door. Do not tell me, Senator Doyle, that if any company got into difficulties in the past in your area, you have not done so. You would not be in the political game——

An Leas-Chathaoirleach

The Senator should address the Chair.

Mrs. Doyle

You know that is not what I mean. We all call publicly for Fóir Teoranta help, if it is relevant, when we have a company in difficulties. That is not what I am referring to. The Senator should realise what the reality of that was. It is the back door operations and not the overt public calls for help I am talking about. That is our job as public representatives.

An Leas-Chathaoirleach

Senator O'Keeffe without interruption, please.

Mr. O'Keeffe

I can continue now. The Senator is upsetting me very much this morning. Obviously, what I am saying must be unsettling her somewhat; it must be recalling the past.

An Leas-Chathaoirleach

The Senator should not be inviting interruption.

Mrs. Doyle

Do not draw us out on those who have been aided and abetted by Fóir Teoranta. There was a list of companies, including pet foods and others, which were assisted and if you want the list I will give it to you. I can list them out and they will be very close to home for the Fianna Fáil Party. I did not refer to it in my contribution, but if you want the list you will get it.

An Leas-Chathaoirleach

You are being disorderly, Senator.

Mrs. Doyle

I am sorry. Yes, I am being disorderly.

Mr. O'Keeffe

It looks as if it is not one of the best days for Senator Doyle.

Mrs. Doyle

I am waiting for the opener, there is so much more I would like to say.

Mr. O'Keeffe

One must take into account that finance for industry is now available on a much wider scale than heretofore and that this in itself has been seen as one of the reasons why there is a demand for further investors. Individual investors have the advantage of State-backed schemes, tax schemes such as the business expansion scheme. The Minister also mentioned that there was a decrease in funding for the manufacturing sector since it was related to tourism export. That would not be accurate, because in the tax year 1989-90 manufacturing accounted for over £20 million, or 30 per cent, of the BES investment notified to the Revenue Commissioners. These figures speak for themselves.

It is only right that we should acknowledge the precarious position in which the management of Fóir Teoranta found itself during the recession years because of the large increase in the number of applications coming before it because fire brigade action was needed and fire brigade action was provided, very often with disastrous results. Demands at the time for decision-making in regard to what would lead to sustainable employment were questionable. There is genuine concern that the adverse consequences arise from the administration of Fóir Teoranta and this is understandable if one recognises that the IDA itself — we are talking about what remains — has the power to provide finance for the restructuring of companies and that this is particularly significant for the food sector which is export related. We also have to realise that we have venture capital funds to provide equity; there is the role played by NADCORP and the role and investment section of the Industrial Credit Company.

We should take into account at the end of the day what the Confederation of Irish Industry states. It is an important statement. It states that Ireland would prefer to have a competitive cost involvement than seek to compensate for deficiencies in the environment through cash grants from the State. The best action the Government can take in relation to the survival of firms is to contribute as much as possible to lower the input costs rather than givng them hand-outs when it is probably too late in many instances to save those firms. Indeed, the Minister is quite right to end the featherbedding of Irish industries, because they must be in a position to compete in 1992.

A question was raised by Senator Doyle about the establishment of Fóir Teoranta. I understand that, out of 31 staff, there were 17 voluntary redundancies, that nine were redeployed. At the moment there are two permanent staff left and that obviously all of these are being looked after. With that, I will leave you to calmer waters and say that I support this Bill.

Dr. Upton

The first thing that should be said about this Bill is that in many ways it is the cart before the horse. The Minister announced the decision in February 1989 and it is now that we get the legislation, over a year later, which seems to be a curious way of doing business. I would like to pay tribute to the work which Fóir Teoranta did over the years. In many ways it was very valuable and worth while. A number of speakers have alluded to the fact that Fóir Teoranta lost a lot of money; the figure of £85 million in losses is being bandied about. We need to keep in mind when we are talking about Fóir Teoranta that its job was primarily one of damage limitation.

When Fóir Teoranta moved into a company, the company was already in difficulties; and that is, of course, one of the reasons why Fóir Teoranta had such high levels of losses and failures. That is a very important factor which has not been adequately considered by many people alluding to the inability of Fóir Teoranta to pick winners. Fóir Teoranta only met losers; they were in trouble when they got to them and that is one of the reasons the losses were as great as they were.

The other thing that has not been taken into account is the question of the real net loss after many of these rescue attempts by Fóir Teoranta. Fóir Teoranta were instrumental in saving many jobs in a number of industries situated all over the country. There was a consequent saving in social welfare payments because of the fact that people remained in employment. Indeed, because of the fact that they continued in employment they were able to continue to pay their own contributions to the social welfare system. Of course, there was the reduction in emigration numbers arising from the successes which Fóir Teoranta had over the years. Those aspects have been too easily brushed aside in this debate. I also believe that many of the infrastructural limitations or difficulties of Irish industry are not considered when people talk about the failures which Fóir Teoranta had to encounter. These difficulties include very high overheads, costs of energy and fuel and so on are, by international standards, quite high. The telecommunications system up to recently was quite problematic and remains expensive.

I am not at all happy about what alternatives might fill the functions which used to be filled by Fóir Teoranta. The Minister, in a curious type of way, seems to have tried to assure us that we are all going to live happily ever after Fóir Teoranta, that everything will be hunky dory as we drive off into some place of great industrial development and, indeed, great industrial happiness.

There were allusions made to the value of the provisions of part of the Companies Bill which went through the House last August. As I understand the provisions of that Bill, they are not going to be very relevant to anything other than to very large industries. For small industries the service which that Bill will provide or the facilities which it makes available are going to be very expensive and difficult to utilise. For small firms I do not believe that that is a practical proposition.

Another thing which is being forgotten about is that for the most part Fóir Teoranta rescued small to medium-sized industries and most of those industries were Irish-based. It was Irish entrepreneurs who had developed those industries and, unfortunately, had got into trouble. Again, that is something which has not received the attention that it might have. The multinationals to a large extent were outside the scope of Fóir Teoranta. The basic strategies and decisions made by those companies would not have been influenced to any great extent by any of the facilities which Fóir Teoranta would be able to provide.

I am concerned that the staff of Fóir Teoranta would be adequately catered for. I am happy to hear from Senator O'Keeffe that, to a fair extent, that seems to have been the case or at least that things appear to have resolved themselves now. I would be concerned however that the people who worked in Fóir Teoranta would be adequately looked after and redeployed in circumstances which would be acceptable to them. I hope that that is the case and I certainly have no difficulty in accepting Senator O'Keeffe's assurances on those matters.

I want to allude to some aspects of the Minister's speech — he certainly seemed to be off form this morning. First of all, there was his lashing out at the featherbedding of Irish industry despite the fact that he has been Minister for Industry and Commerce and has been an important player on the economic stage for many years. It is as if he is now, in a funny type of way, almost starting to attack himself because of what he has done in the past. He then went on to tell us that business confidence was never greater. I find this a puzzling type of statement. The Minister is a very experienced politician. If one reads the newspapers and believes the rumours he is on his way to becoming even more experienced and even more important but we will have to wait to see how those things happen.

Mrs. Doyle

There is a head shaking in the second row.

Dr. Upton

Business confidence, he tells us, was never greater. I thought that one of the first lessons that people in politics were told was never to use the word "never". I suppose that could be modified to say never use "never" when it refers to the future; but, as for the past, it might not create that great a problem. "Business confidence was never greater." I am hearing and reading in newspapers about industrialists being worried about the effects of 1992. I am reading about the disturbance in the farming community about the effects of the GATT negotiations, hardly enhancing their confidence and hardly encouraging them to make investments.

Senator O'Keeffe quoted some interesting figures about employment. He reminds me of the Professor of Philosophy in UCD who spoke about an abstraction from the totality of reality. Certainly, Senator O'Keeffe's figures were an abstraction——

Minister of State at the Department of Finance (Mr. Daly)

Is that why you want to get more pubs open in Dublin?

Dr. Upton

There is a big need for them and I am glad the Minister raised this item. I can assure the Minister that I had a wonderful response to that suggestion. I am sure the Minister is well aware of the situation in Dublin but I can tell him the number of pubs is not really that much greater than the number of pubs in the town of Kilrush, a town with which he is quite familiar as I have been myself over the years.

"Business confidence was never greater". I find that puzzling. We have had GATT, 1992, the unemployment figures which are the ones that I would be drawing attention to; the emigration figures. Senator O'Keeffe dealt with some aspect of employment. I am sure that the data is right but it is much less than the whole story. In today's Irish Independent I read on the front page that there is a threat to 900 jobs in Aer Lingus. What will come of that threat, I do not know; but it is hardly the type of headline that one associates with business confidence never having been greater.

I will conclude by reiterating my concern about the necessity to provide some special care for small to medium sized Irish industries which get into trouble. I am not happy that that is adequately catered for and I would be interested in hearing the Minister spell out in a little more detail what he has in mind or what proposals, if any, he has in relation to the help for industries which are small and which find themselves in trouble.

Professor Conroy

I would like to welcome this Bill. It is really a tidying up exercise for a body which has tried to perform an almost impossible task at times, tried to perform it to the best of its ability and on a few occasions has been successful. It is a body which was set up in the climate of the time. It was set up with very good intentions and now really has been overtaken by events and the changes in both the local economy and world economy. We now realise that bodies such as Fóir Teoranta and efforts such as that, however well meaning, however temporarily prolonging a situation, basically and uneconomic. they raise false hopes which are then cruelly dashed for the employees and indeed all people associated with the companies concerned.

This raises some general points in relation to the funding of industry and Government/industry relationships. One has to take it as a fundamental point of business that you must have some risk/reward ratio. It is up to business, it is up to industries, it is up to the shareholders, it is up to those people who are involved in industry to assess to the best of their professional ability, of their competence, what are the risks and likely rewards. There should be a reward, not an immoderate or gross reward but certainly there must be rewards both for the business people concerned and their employees and everyone else associated if they are successful.

Equally well, it is not a situation in which there can be no risk. When you are setting up a company there is no such thing as no risk. When a company is ongoing there is no such thing as no risk. Any attempts to fudge that situation merely mean that eventually any artificial crutch just crumbles away and one is left with a situation far worse than that from which one started out. I am not sure if all businessmen fully realise this. They may perhaps wish to have the risk element removed and simply have the reward. There is a tendency on all sides to imagine that, if we can rush to bring up an industry or a company or whatever institution it may be which is running into trouble, pump money into it, keep it going, it will provided jobs and so on. This is very understandable, very well meaning, but likely in the end to have quite the opposite effect. They will probably end up losing jobs anyway and in the meantime something much more viable will have been prevented from becoming established.

It raises a very general point. Many industries have been undercapitalised. There must be a working partnership between Government, industry, the unions, the various parties concerned. This extends far further out than just simply the immediate industry, business and Government people. It involves such things as education. One of the reasons why the Japanese and some other economies have been so successful, particularly the Japanese, has been this interrelationship between Government and industry and also a tremendous emphasis on a very high standard of education.

There are other reasons why as well. I talked about rewards, short term rewards. There is something very inappropriate about them. It is one of the major deficiencies in present western style economies, particularly here and in the European Community and in North America, this desire and drive to produce, for example, three month figures or six month profit figures. One had an almost imbecile situation at one time in which various financial institutions were posting up the fact that they had done half per cent better than some other financial institution. You cannot run a proper company, a proper industry, on 12 week figures. One of the great advantages that the Japanese have is that government, trade unions, shareholders all recognise that it is the long term strategy that matters. That is where the real growth is, growth and profits for the company, development of technology which can beat its competitors and full employment at a profitable rate for the employees.

I welcome this Bill, which is bringing us up to date. I am delighted to see it. I am very happy to support it and congratulate the Minister on speaking on it here in the Seanad.

Minister of State at the Department of Finance (Mr. Daly)

I would like to thank the Senators who have contributed to the debate and I concur with them in paying compliments to the work of Fóir Teoranta during its 18 years of existence and agree that it contributed well to manufacturing industry during the transition to full, open trading conditions in this country. That transition has now been completed and the company has outlived its original purpose.

I will refer again to the overall economic environment, the essential background against which the Government decision to wind up Fóir Teoranta was taken in February, 1989. The 1989 budget had as its underlying objective the promotion of sound economic activity and sustainable employment throughout the economy. The plain fact is that manufacturing employment has begun to recover, following a long period of decline. Provisional figures up to June 1990 show that the total employment in manufacturing industry rose by about 7,000 from a year earlier. It is also reflected in the falling level of unemployment. In the year to the end of October the Live Register fell by 1,800. This is a welcome result of the Government's sound and responsible economic and financial management.

The external economic environment is uncertain but I am confident that Irish manufacturing firms are in a strong position to take advantage of the opportunities that will arise in Western Europe in the post-1992 situation and possibly also in Eastern Europe, now that the barriers of trade are breaking down in that region.

Senator Doyle asserted that the reasons given in April 1989 for winding up Fóir Teoranta were no longer valid and therefore that this Bill should not be proceeded with. I cannot accept that. In April 1989 the Minister stated that the decision that Fóir Teoranta should be wound up was founded on four main points. They are as follows: (1) The low level of demand for Fóir Teoranta's services. The fact is that in the years leading up to 1989 the amount of funds disbursed, the number of applications received, the cases approved and the average size of approved cases all fell sharply. (2) The very much changed industrial environment now as compared with 1972 when Fóir Teoranta was set up. (3) The beneficial effect of the Examiner provisions of the Companies (Amendment) (No. 2) Bill, 1987. The House is aware of course that these provisions are now incorporated in the Companies Act, 1990. (4) The need to prepare Irish industry for the more competitive regime which will apply when the internal market is in place after 1992.

As was said in the opening remarks by the Minister, we are now in an environment much more conducive to getting industry back on its feet. As regards the cost environment, this is largely determined by the general rate of inflation and the cost of funds, that is, the interest rate. As to inflation, the rate was 3.3. per cent when the Government took their decision to wind up Fóir Teoranta. It was 4 per cent on average for 1989 as a whole. The figure for 1990 will be about 3 per cent — in other words, below the level which prevailed in February 1989. The likelihood is that the Irish inflation rate in 1990 will yet again be below the average for the European Community where the average inflation this year is expected to be 5 per cent. The recent easing in interest rates is also a welcome development and our rates are still considerably below UK rates. The considerably higher inflation, higher interest rates and wage rate increases in the UK will aid the competitiveness of Irish firms relative to their UK competitors on both the domestic and overseas markets.

The best action the Government can take in relation to the survival of firms is to contribute as much as possible to lowering the input costs of industry rather than giving them handouts when it is probably in many cases too late anyway.

Senator Doyle referred to a change in recent weeks in exchange rates vis-a-vis the Deutsche Mark. The very minor change that took place over the past few weeks has been the strengthening of the Deutsche Mark against all currencies. The change in our case was very small and has very little, if any, significance one way or the other at this stage.

The general economic position and the question of the impact of the closure of Fóir Teoranta on employment was dealt with by the Minister in his opening statement and I am not going to deal with it here now. Extra employment will only be generated on a sustainable basis when the general economic environment is correct. There is little point in trying to save jobs by direct State intervention in firms which are perhaps grossly undercapitalised, badly managed or perhaps both.

Senator Conroy made the point very effectively that such firms should have to sort themselves out. There is no easy way to deal with this otherwise than that people will do it for themselves. It would be far better to see a firm taken over on a newly recapitalised basis, with perhaps new dynamic management, than to prop up old firms with taxpayers' money which may well not yield any positive results for the company itself.

The overall level and quality of employment in the economy is what we are really concerned with at the end of the day and the Government will do everything in their powers to ensure that the increased industrial production necessary to sustain increased long term viable employment is achieved. I am encouraged and the Minister is encouraged in this regard by the fact that the number of proposed redundancies notified under the Redundancies Payments Scheme has decreased from about 24,200 in 1987 to about 11,500 in 1989.

Senator Upton raised the question of other sources of finance in the absence of Fóir Teoranta. Only manufacturing companies are affected by the decision to wind up Fóir Teoranta. The examiner provisions of the Companies Act, 1990, on the other hand, apply to companies generally. Such companies who experiencing financial difficulty may approach other financial institutions, such as the Industrial Credit Corporation, or seek equity finance with a view to having their financial requirements met.

Mrs. Doyle

But the cost of the examiner provisions for small companies is very questionable.

Mr. Daly

The Senator will be aware that these provisions have recently come into place. At this stage it would be very premature to pass judgment on how it will——

Mrs. Doyle

We are amending it next week in this House.

Acting Chairman (Mr. R. Kiely)

The Minister should be allowed to reply without interruption.

Mr. Daly

To get back to the points that were made in the debate, the business expansion scheme — Senator Upton was concerned about this — may be of assistance to firms in this situation. NADCORP or the private venture capital companies, may also be in a position to provide equity finance to suitable firms. The Industrial Development Authority has power to provide, in the interests of promoting the restructuring of Irish industry, financial assistance where an industrial concern is being merged with or indeed acquired by another industrial concern. There is also of course a range of State services which includes the provision of financial advice for industrial firms generally. In fact, in my own region I have seen precisely how this can work very effectively with companies like Shannon Free Airport Development Company. We had a review and rationalisation of the agencies there which has worked out very successfully. We had a number of agencies with various responsibilities often overlapping, duplicating effort and creating problems and difficulties not only for industrialists but indeed for politicians as well. We had a rationalisation there which has proved very beneficial and where with the work of the Shannon Development Company it is possible to rationalise the services of State agencies and to get a very good return for the kind of investment made.

NADCORP is not, as was suggested by Senator Doyle, a replacement for Fóir Teoranta. It was never seen as that. It is there as a source of venture capital for Irish firms and had been operating very successfully.

Senator Doyle also referred to the number of jobs saved as a result of Fóir Teoranta's operations. There is no doubt that jobs were saved but they were saved at a very high cost to the taxpayer and, of course, not all the jobs were saved permanently. As has been said before, the days of giving hand-outs to industry are over. But, even in many cases where Fóir Teoranta assisted by giving financial handouts to companies to save jobs, some of these jobs — I have experience of this — were lost afterwards. In many respects it was more to do with management rather than just providing capital. I have seen very few companies close purely for lack of financial resources but I have seen many companies close because of bad management, poor capitalisation and many other reasons.

Senator O'Keeffe and Senator Upton referred to the staff of Fóir Teoranta. Every step was taken to ensure that the staff were dealt with fairly. The Department initiated discussions with both management and staff representatives immediately after the wind up decision was announced. The terms of the public sector voluntary redundancy/early retirement scheme programme were offered to the staff and at the same time, staff wishing to be considered for redeployment to other areas of the public sector were facilitated in so doing. Of the 31 staff at Fóir Teoranta at the time of the wind-up announcement, 20 have taken the voluntary redundancy/early retirement package, nine have been redeployed to other areas of the public services, two heads of staff are still employees of Fóir Teoranta and it is expected these two staff members will be dealt with satisfactorily in the near future.

Senator Doyle also raised the quesiton of what would happen to Fóir Teoranta's portfolio if the State shareholding in the Industrial Credit Corporation were to be sold to a private sector entity. If the Minister's shareholding in the Industrial Credit Corporation were to be sold suitable arrangements would be made as part of the terms of the sale which would ensure that Fóir Teoranta's portfolio would continue to be administered by the ICC in new ownership on the same basis as is at present contemplated i.e. in accordance with the contractual arrangements entered into by client firms with Fóir Teoranta. There would be no question of clients of Fóir Teoranta being thrown to the wolves or abandoned.

Mrs. Doyle

I actually asked what you were going to do with Industrial Credit Corporation.

Acting Chairman

The Minister should reply without interruption.

Mr. Daly

I have been trying to deal with all the questions the Senator raised. Unfortunately, I was not here when she made her contribution but I have been checking here. She raised a question on the business expansion scheme. As she will be aware, the scheme is under review by the Department at present and some announcement will be made by the Minister on that in due course. The business expansion scheme funding for the manufacturing sector had become virtually non-existent since the inclusion of export tourism in this scheme. I can assure the Senator that this is not so and in the tax year 1989-1990 manufacturing accounted for over £20 million or some 30 per cent of all the BES investment notified to the Revenue Commissioners.

Mrs. Doyle

Less attractive now with tourism and higher risk.

Acting Chairman

The Minister should be let reply without interruption.

Mr. Daly

The statement was made that good money was thrown after bad money by Fóir Teoranta. It is a point of view that people are entitled to hold but we can be wise after the event. The severity and length of the recession of the early and mid-eighties caused a great shakeout of long-established indigenous firms, many of which were household names. The recession also led to a big increase in the number of applications coming before Fóir Teoranta and in the payments and disbursements it made. The latter was affected by a small number of very large applications for assistance.

I have dealt fairly fully with the points that have been raised. I want to thank the Senators for contributing to what was a very constructive and worthwhile discussion.

Question put.

The Seanad divided: Tá, 25; Níl, 16.

Tá

• Bennett, Olga.
• Bohan, Eddie.
• Byrne, Hugh.
• Cassidy, Donie.
• Conroy, Richard.
• Cullen, Martin.
• Dardis, John.
• Fallon, Sean.
• Farrell, Willie.
• Finneran, Michael.
• Fitzgerald, Tom.
• Foley, Denis.
• Haughey, Seán F.
• Honan, Tras.
• Keogh, Helen.
• Kiely, Dan.
• Kiely, Rory.
• Lydon, Don.
• McCarthy, Seán.
• O'Brien, Francis.
• Ó Cuív, Éamon.
• O'Donovan, Denis A.
• O'Keeffe, Batt.
• Ryan, Eoin David.
• Wright, G.V.

Níl

• Cosgrave, Liam.
• Costello, Joe.
• Doyle, Avril.
• Harte, John.
• Hourigan, Richard V.
• Howard, Michael.
• Jackman, Mary.
• McMahon, Larry.
• Manning, Maurice.
• Murphy, John A.
• Naughten, Liam.
• Neville, Daniel.
• Norris, David.
• Ó Foighil, Pól.
• O'Reilly, Joe.
• Raftery, Tom.

Tellers: Tá, Senators Wright and S. Haughey; Níl: Senators Howard and Neville.

Question declared carried.

Agreed to take remaining Stages today.