If it is agreed with the House, we will have this debate until 5.30 p.m., with 20 minutes given to each speaker. Is that agreed? Agreed.
Meat Processing Company's Financial Crisis: Statements.
I thank the Minister for coming to the House. I am sure he has heard enough about beef at this stage to last him for the rest of his life. The meat industry in Ireland is quite different from that in any of our European counterparts. Indeed, I can think of no other country in the world, with the exception of New Zealand, which has got such a dependence upon grass-based products, particularly beef and mutton. We are also in an unusual situation in the Community in that we have 600 per cent self-sufficiency in beef. As a consequence, we are exporting 85 per cent of the product. That means, of course, that we have greater difficulty getting to the main markets than most of our European competitors. To put it in context as far as the beef and mutton are concerned, they make up about 45 per cent of gross agricultural output and supply roughly 25p in every pound of net foreign earnings as well as giving jobs to thousands in the processing sector. Very importantly, all these jobs are based in rural areas. That is a consideration we cannot overlook.
We call this an industry, but as far as I am concerned it is anything but an industry; it is more of an accident than an industry. That is why it is so accident prone. It has never been planned. It has largely been built up by people who started out as cattle dealers, cattle tanglers, unlike the dairying industry which was managed, planned and expanded by professionals who were trained, I am proud to say, in my own faculty in University College, Cork. That leaves us in a very weak situation inasmuch as we are very dependent now upon intervention buying.
I am sorry to have to tell this House that last year 88 per cent of all steer beef in Ireland went into intervention. That is an appalling figure. It got worse every year in the 1980s. Ten years ago we had much more dependence on intervention. We are now facing into a situation where, due to the reform of the Common Agricultural Policy, we are going to have very restricted intervention in the future. Additionally, within the GATT negotiations there will be pressure to reduce the availability of intervention. Above all, other countries, especially the US and the Cairns group, have targeted export refunds, on which we depend very heavily because we export a large amount of our beef out of the Community. All in all, our beef industry is facing a rather rough time. As a consequence, the economy is facing a rough time.
Our two main meat processors, Goodman and UMP, are in trouble. About 12 months ago I spoke on the Goodman factories here. I said at that time that they should have been allowed to go into receivership. I said that the banks, who gave hundreds of millions of pounds in unsecured loans, should have taken the rap. I could not see why Irish people should end up paying the hundreds of millions that were owed, because that is effectively what would happen. The only way the banks could get their hundreds of millions was by the processor reducing the price of livestock and in various other ways. Effectively, the international banks — because there was only £10 million of money from Irish banks involved — would be squeezing hundreds of millions of pounds out of the Irish economy. I believed then it should have been kept going under a liquidator and the various units sold off to interests which would not be burdened by the debt and could carry the industry forward in a more planned and rational fashion. I say the same thing here today.
Perhaps I am disagreeing with some of my colleagues in the other House, but at least I am going to be consistent. I see no reason why taxpayers' money should be used to bail out and effectively to ensure that foreign banks again get money they put in. I believe banks are in the business of risk taking. If you are taking risks, you occasionally pay the penalty. I do not see why the Irish taxpayers should be expected to pick up the tab and let the banks off, when obviously they neglected to supervise the management of the plants to which they had lent whatever amount of money.
Consequently, I would hope that the liquidator, whom I understand is now in Mayo, will manage, with the aid of funds from Irish banks and perhaps some help from the Government, to keep the units functioning, to secure the jobs of those people who are in a desperate plight at the moment and to pay the farmers who are left once again without money for cattle they have produced. It is a gross misjustice that that should ever be allowed to happen. It has happened already here in the past. Twice in my memory farmers were left without their money in the Clover Meats debacle. That should not be allowed to happen. We need legislation to protect producers and traders.
It may come as a surprise to the House to know that people who sell cattle through marts are protected, because the marts are covered by the Auctioneers and Agents Act, 1967. There is a requirement there to put up a bond so that the seller will be protected and get the money. It may also come as a surprise to learn that as far back as 1921 the US brought forward legislation which they called the Packers and Stockyard Act, 1921. That Act required all operators in the livestock and meat sectors to put up a bond to ensure that people who were owed money would be paid.
I fail to understand why various Governments did not take steps in all of those years to ensure that the like of this could never happen again, to ensure that people who are making very little money and in some cases no money on the cattle — even losing money in some cases — would at least get the price they had hoped they were getting and that the cheques would be honoured.
This is a particularly sad situation because most of these plants are located in a part of the country which is denuded of population due to emigration and which depend extremely heavily on farming, and particularly on food processing. For these plants which are located west of a line by and large from Charleville to Sligo to be allowed to close would, indeed, be a major disaster for the west of Ireland. It would also be a disaster for other reasons.
Closing off 30 per cent of the lamb processing at this time of year, when we are coming into peak lamb processing time, would effectively destroy the market and any real competition we had for the lambs. Farmers would take a disastrous price for them. Second, in relation to beef, closing down 15 per cent of our meat processing would only ensure that the Goodman organisation would increase their percentage of the total kill, thereby giving Goodman an even greater dominance in the marketplace.
I said in the European Parliament in 1987 when I brought a motion before Parliament that the Commissioner responsible for competition should take a look at the beef sector in Ireland. I was concerned about the dominance of the Goodman group at that time. It was not a very popular or, indeed, profitable exercise to be engaged in at that time. I believe there was no real competition, and there was price fixing. I got very little support at that time, but subsequently I noticed that more people agreed with me. On 11 November 1990 I noted that Commissioner MacSharry accused the Irish beef processors of price fixing, so it was out in the open at last. Here we have a situation where the biggest beef processor is going to get bigger still if UMP is allowed to close down. I do not believe it will close down. At least some part of it will stay the course, but that will require urgent action by the Minister, the Government and the Irish banks who, incidentally, are very free with risking their money in Britain and the US but are extremely reluctant to take any chance with their money to develop native industry, particularly in the food processing sector.
It probably came as a surprise to most people to learn that of the £500 million owed by Mr. Goodman only about £10 million was from Irish banks. There had been up around £100 million, and they reduced it to about £10 million before the collapse occurred. That must make foreign banks very suspicious of what is going on in Ireland. It must make them feel that the Irish banks knew something and got out before the collapse. I hope they would at least at this late stage risk some of their money to secure the jobs in UMP and ensure that the producers are paid for their livestock.
I would like to dwell for a moment on the agriculture policy as far as the beef sector is concerned. We in Ireland made our share of mistakes in relation to beef; we made little else but mistakes. It cannot be said that the Commission did a great job on it. How could we commend a Commission that presided over a policy which went in the following direction? In 1987 every live animal produced in Ireland cost the taxpayer £250, of which the Irish producer got 13 per cent. By 1990 the cost to the taxpayer had gone to £500 per animal, of which the Irish producer got 8 per cent. The cold stores, and presumably the processors and various other people in between, creamed it all off. While the farmers' income was dropping dramatically the cost to the consumer was going up equally dramatically. There has been no attempt either at Commission level or, indeed, here in Ireland to reduce our seasonality. On the contrary, seasonality has been encouraged particularly by Aids to Private Storage which we had in vogue in the late eighties; they have been withdrawn since. Intervention selling enocurages seasonality, because if a man can get the same price for an animal in October as he can get in April — an animal that is going into intervention — he will go for the animal that is cheaper to produce. We are now in a situation where seasonality is significantly worse than it was ten to 12 years ago.
We need to organise ourselves in a manner which will ensure a reasonably constant supply of material. If we get the right quality product at the right price and in continuous supply, that is the only way we can break into the marketplace. About this time last year I heard the chief buyer of Tesco's speaking in Kinsale. He outlined what his company did in relation to beef. They started a programme at farm level, selecting their producers and telling the producers in detail exactly what they wanted, having the cattle killed as they wanted them, hung as they wanted them, and so on; I believe the Minister was present at that meeting. During the discussion the chief buyer was asked what impact that had on their sales of steak. Their sales of steak at the time when beef consumption was dropping dramatically increased by 250 per cent. In other words if we go about it the right way we can gain market share. That means that in future we start planning at the consumer's plate, not as we did in the past at the producer's plough. That means a total shift in thinking. That means that we go from the consumer back. Every link in the chain must be put in place and be equally strong. If a link snaps, we are going to lose out.
At the moment, there seems to be no planning at any level in the industry from producer to consumer. The only philosophy seems to be to get rich quick, particularly among the processors. That attitude of knocking as much as you can out of grants, loans, subsidies and intervention is a short term policy which has come a cropper and we are all, in one way or another, paying the price.
In the short term, I hope the Minister will be able to get good, reputable companies interested in buying some, or all, of the UMP plants. Our co-ops withdrew from processing in the meat sector and I hope they will return to it. However, I know from talking to them that they will not in any significant way get involved further in this area until they are confident there will be a level playing pitch. In other words, they must be confident that opposition will not be cutting corners. They must be sure that the people operating plants, owned by private individuals, will be playing the game according to the rules. If that happens, and if Avonmore, Golden Vale, Dairygold and Kerry increase their share, I think the future of the beef industry and, indeed, the red meat industry could be assured, but it will not happen overnight. It will take planning and discipline on the part of producers and processors. It will take a major effort in terms of investment to generate markets particularly on mainland Europe.
I welcome the Minister. Given what is happening today, he has had a difficult day and he will be involved in other negotiations. We appreciate his presence here today. I would like to commend him for the efforts he is making to procure a favourable resolution of what has become a terrible problem, particularly for people living in the west. I wish him well in his endeavours.
I would also like to thank the Leader and the Whips for facilitating this debate. It is very good to see that the House can respond speedily and quickly to topical matters of this nature and address them when they are of enormous public concern. We should reflect that public concern. It is good that we can have this debate and the Leader and the Whips are to be thanked in that respect.
The circumstances surrounding the closure of the UMP plants — and we hope it may not be a closure — have been pretty well documented throughout the day. There is perhaps no great need for me to go into them in enormous detail other than to say that all of us are terribly concerned about the 400 people involved in this predicament. The full-time employees of the UMP group and the other 600 part-time employees find themselves in this predicament. That is where the human tragedy lies.
Another group of people we must be concerned about are the farmers and the suppliers to the plants, but particularly those who have supplied cattle over the past few weeks and may now have to seek recourse to get their money back. I understand that it has been certified by the examiner that £2.25 million was paid out during the period of his examinership as being due to farmers. I know that a figure of £1.5 million was quoted in the paper this morning, but I would really like to know how much is outstanding to farmers and what hopes they have of recovering these moneys particularly where they were paid by the examiner. My understanding of it is that they would be preferential creditors, that people who are paid by the examiner are entitled to their money in full. Perhaps that has been clarified already in the other House today, but of course we are not meant to know what goes on there. I will ask the question again because somebody was admonished for referring in the other House to us. I only had that by hearsay, of course. I would not have any first hand knowledge.
There is a very facile suggestion that all of this occurred because £4 million was not advanced. Of course, that is very wide of the mark indeed. It was not a question of advancing £4 million; it was a question of whether £4 million would follow £45 or £50 million, or whatever the figure is, that is outstanding from this particular group. It has also been suggested of course that their assets are of the order of £50 million and that in that respect their liabilities might look tolerable. It needs to be pointed out however that the assets are only worth what can be got from them on the open market. My suspicion is that on the open market they would be worth significantly less than the £50 million which was being plucked from the air.
During the course of the past 24 hours comparisons have been made with the Goodman situation, with the fact that the Oireachtas was recalled and that it dealt with the difficulties in the Goodman organisation by the adoption of the Companies Bill. We have not been so speedy in this respect. Of course, the fact of the matter is that the procedure is exactly the same in both cases, the difference being that the examiner in the case of the Goodman group was able to find a solution and to bring the company forward, whereas in this particular case the examiner was not succesful. Whether the examiner is successful or not, it is good that that particular legislation is on the Statute Book and that we have this procedure. The examiner can look into the affairs of the company and it can be put under the protection of the courts. The legislation was right and it is still right. It is not very helpful to say that the legislation was at fault. It was very widely welcomed at the time. People realised the necessity for it going into the autumn period when there was a huge kill. The plants were able to operate and to handle the kill physically, apart altogether from the financial aspects, which of course would have been quite devastating had the company ceased to trade. The examiner succeeded in that case. In this particular case he has not succeeded and that is regrettable. However, when apportioning blame, it is not very helpful to point the finger at the examiner.
Significant efforts had been made by the Minister and by other members of the Government from what I have heard, to try to resolve this problem. The banks have a role and I will come to that in a moment. The other point that occurs to me is this. I have heard people blaming the Government, the banks and everybody in sight, but I have not heard anybody blaming the management. For a company to get into this situation, the management must have had some role in getting it to a point where it cannot continue to trade. How did these debts arise? To what use was the borrowed money put? Was it put to proper use? There is also the whole question of insurance. The other thing that needs to be said, apart from the inability to raise £4 million from the banks, is that it was not a fire in Ballaghaderreen which caused the collapse of this group. That is not the reason the group collapsed, nor did the failure of the examiner cause it.
I would like to deal with the creditors for a moment and to ask again what is the status of the cheques that were paid by the examiner. My understanding of it is — and the Minister is open to correct me if I am wrong — that cheques which were issued by the examiner have been returned. Those cheques had preferential status, so I have difficulty about that and whether the amounts certified can be paid. I understand that the examiner has to go back to court and vouch for these particular payments.
We have to look carefully at the role of the banks and what their responsibilities are. The one thing that would appal me above all else would be to find that it was inter-bank warfare which precipated this particular incident. Certain banks may have appeared to have got off more lightly than others during the course of the Goodman debacle. There is now a question of whether some banks are going to get their own back on the people who may have got rid of some of their liabilities prior to the collapse of the Goodman group. If banks at war with one another could be so selfish and so obsessed by their own internal profits that they would completely disregard the quality of the life of an entire generation of people in the west of Ireland, that would not be acceptable banking. I do not think that that is in the traditions of Irish banking, as I was brought up to know it.
The examiner is on record as saying that he thought he could save the group. That again brings me back to the role of the banks. Have they blocked payments from the examiner? As I understand it, these cheques were stamped under the protection of the High Court. What protection does the High Court give to these people? Was it correct that one group were prepared to go ahead, but because others were not they decided that they could not? There is the question of one group of banks getting better guarantees than the other group of banks. We are back to the same thing. To what extent is inter-bank rivalary at the heart of this particular difficulty? The banks have a social responsibility as well as a financial responsibility. The banks need to think of the consequences. What are the consequences for the banking situation in the west of Ireland and in the rest of Ireland? The suppliers to these companies are affected, the people with mortgages who work in these companies are affected. All those people are in debt to the banks. The banks need to remember that.
Another matter of deep concern to us is the welfare of employees and some suggestions have been made as to how their jobs can be protected. I know the Minister and his colleagues in Cabinet and the two Progressive Democrat Ministers, Deputy Molloy and Deputy O'Malley are trying to ensure that these jobs are protected. The objective for the receiver must be to keep the plants going at all costs in order to sell them as a going concern.
Trade in this area is sensitive; our products can be displaced from British supermarket shelves overnight, if continuity cannot be guaranteed or if product source is threatened. The processing must continue, markets must be protected and I understand that the Minister will meet the receiver during the next 24 hours. I hope he can find a solution which will take these matters into account. The Coop plcs now so active in the dairy sector and in other sectors could involve themselves more in the beef sector. The quality of their activities would enhance the beef sector. I am confident they could operate profitably there to the advantage of the country and of farmers and employees in the food sector.
UMP are responsible for something like 30 per cent of sheep and lambs killed and 15 per cent of cattle slaughtered in Ireland. This brings us back to the matter even more apparent in the Goodman Group debacle of the consequences of particular groups achieving a dominant position within an industry; over half the Irish beef industry has collapsed into receivership in the past two years. We need a rational debate on why the Irish beef processing industry has reached such a sorry state and how it came to rely on a couple of large players. I am sure the House knows the Minister for Industry and Commerce, Deputy O'Malley, has taken action to curtail possibilities for this type of dominance where ownership of factories falls into the hands of a small number of people. There are lessons to be learned by all of us from the consequences of monopoly situations where financial troubles in one group inevitably affect large numbers of workers and farmers and threaten the survival of entire communities. For that reason it is desirable to see the cooperatives involved.
It is regrettable that people in any part of the country should lose their jobs but it is particularly regrettable in the west of Ireland where such efforts are being made to revitalise rural communities. I attended the large conference held in Galway at which the bishops launched their initiative on western rural development and I was very impressed by the spirit of self-help evinced there. A crisis such as this is a body blow for that spirit of self-help and I hope it will not deter people from taking initiatives to improve the welfare of the people in the west.
The beef industry has been gone into in detail by Senator Raftery and there is not much more for me to add. I agree with what he says about the dominant role of intervention in the market but companies as commercial entities have identified intervention as the most profitable option and as long as intervention exists it will be capitalised on. If, as I have heard, only 15 per cent of money from Brussels for beef support goes to farmers, why can processors not trade more profitably and thrive on 85 per cent of that money? Farmers attempt to live on prices received for cattle and the small proportion of money from Europe, yet those who get so much more proportionately do not seem to be able to conduct their affairs efficiently or to continue to trade profitably.
The Culliton report identified the potential of our beef and food processing industries and I hope that potential will be realised and protected. The Minister when he was a junior Minister was active in promoting that potential. Out of this incident may we go forward to protect jobs in the west and to protect the livelihoods of all our people by developing an industry we can be proud of instead of one of which at times we are ashamed.
I welcome the Minister to the House and congratulate him on his new appointment; I know he has particular expertise and ability in this area. As somebody who comes originally from the west, having been born and reared in Sligo where there is a UMP factory, I am concerned about recent developments in UMP. It seems like a tragedy that in one fell swoop 1,500 jobs should be lost and virtually 1,500 families affected. Most of the jobs in questions were permanent; and an industry and jobs which were perceived as permanent now seem about to go down the tubes overnight.
I query the position of management. How could a company possibly accumulate a debt of £50 million? It is insufficient to blame everything on the fire in the UMP factory at Ballaghaderreen. The situation must have been seriously out of hand prior to that and now that the situation is further compounded by the banks' refusal to co-operate, we have a classical situation of profit before people, and entire communities in Sligo, Roscommon and Mayo are put at risk. Concern for those communities must be the bottom line for us. We cannot under any circumstances turn our backs on communities dependent on UMP jobs and on funding generated from this branch of the beef industry. Agri-business is our single most important indigenous industry. It is a shame that it has been allowed to develop on an ad hoc basis, with no overall organisation, no short term or long term policy. The industry has degenerated into a monopolistic concern controlled by a tiny number of individuals, a situation which should never have arisen in an indigenous industry, our largest exporting industry situated at the heart of many Irish communities.
We must look at the effect of this current devastating blow on communities that have been hard hit in the past by emigration, loss of jobs and lack of morale. An area along the western seaboard that has experienced endemic unemployment is now going to find itself pulverised by this development. The entire community will be affected because cash will not be there to be spent. Suppliers will not be able to supply goods as the cash will not be forthcoming. Cheques, it appears now, are not going to be honoured in certain areas. This unbelievable situation follows on other employment disasters along the borders of Sligo-Leitrim. The coal industry in Arigna was hit suddenly by decisions taken by the ESB and the workforce of 250 people in Arigna lost their jobs. On one hand we talk about creating a jobs forum and, on the other, we cannot guarantee the retention of jobs in areas of viable industry.
Mr. Guilfoyle, as examiner, has tried to bring together the banks involved — The Banque Nationale de Paris, Allied Irish Banks and the Bank of Ireland — and has failed. It is hard for the lay person to understand why there could not be mutual agreement on what is necessary in the short term to avoid receivership. The Banque Nationale de Paris was interested and I understand that the Irish banks would have had first claim on the company's remaining assets; the French banks were allowing the Irish banks first claim if it ended in liabilities. There appears to have been some internecine warfare between the Irish banks and the Banque Nationale de Paris and I would like to know the reasons for it.
Why was one bank prepared to go ahead and why did two others refuse? As a Government we have to do what was done in the Goodman bail out. There, the banks were virtually compelled to sit around the table, to take hard decisions and to accept that it was in their interests to ensure that the company did not go into liquidation. In this case the examiner has failed to achieve that outcome because of the rigidity of the Irish banks' stance; the company is being forced into receivership so that the operation can be restructured and the banks can divest themselves of debts of £50 million. In other words, the assets will be stripped away and we will end up with a fractured operation.
It is difficult to see who will gain here other than the banks. The conditions they insist upon to resolve the problem are not in the interests of the local communities but in the interests of the banks' profit agenda. Our priority and the Government's priority must be to protect the interests of local communities, but the banks have been allowed to dictate the agenda which will result in loss of jobs, rationalisation of various factories and inevitable closures. That will be the outcome.
Questions have to be asked of the banks before we consent to receivership and the Minister will meet the receiver during the next 24 to 48 hours. If receivership involves restructuring what will the consequences be for jobs? Are we putting the cart before the horse? Can we guarantee that jobs will not be lost, that the package put together by the receiver will retain existing jobs? I do not think that conclusion will be forthcoming from the receiver. The banks have taken a hard headed approach to guarantee their profitability and competitiveness in a laissezfaire market-place.
In the Goodman affair, the Government recalled the Dáil to enact legislation, the Companies Bill, to ensure a bailing out process and funding to prevent the company going bust. That showed initiative and has been largely successful. The banks came together and pressure was put on them to comply, but in this instance the banks are applying the pressure, which is wrong. The Government like Pontius Pilate has washed their hands, and said: We will allow UMP to pass from examiner to receiver subject to conditions imposed by the banks. Communities in the west are being thrown to the wolves and the Minister must intervene at this point. His talks with the receiver will be crucial in deciding the outcome for UMP.
UMP's closure will have devastating effects on farmers already savaged by the reduction in beef and lamb prices; all areas of the west are currently expressing low morale. Anybody travelling around isolated farming areas and rural towns, crossing the hinterland of Mayo, Sligo, Roscommon, Leitrim, Donegal and north Galway, will perceive the sadness of the situation; there is little optimism there about the future of farming. Unless we take a positive interventionist approach to preserve these jobs the outcome will be disastrous.
We need also to look at the long term future of the beef and meat industry. This extremely important industry has been allowed to go from step to step on an ad-hoc basis without any Government long term plans. We need a short term plan to save United Meat Packers but the long term plan is even more important and should have been put in place some time ago.
What is our vision for the development of the agri-business? Can we afford to allow one company like the Goodman company to control most of the beef business? Can we allow another company to go bust with no explanation as to how debts of £50 million were accumulated without public knowledge? What is the desirable level of supervision in this most important industry? What are our plans to extend the marketing and processing of beef? All this must be dealt with in the long term. Given the failure of the two biggest beef companies, the Goodman company and now the UMP company, the agri-business is clearly not founded on firm ground. It is imperative that the Government intervene to prevent an important national resource being allowed to continue without supervision, without a plan and unprotected from monopolising.
Over the last ten years this country has faced a number of crises similar to this one. In every single case it has fallen to the Government to spearhead a response. The Goodman affair was not an isolated event; there have been others. The Government intervened quickly in that case and in the ICI affair, where the banks were rescued from the consequences of ICI's collapse. The Government were criticised for their part in the ICI affair but their action ensured that the banks were not undermined by the effects of the ICI affair. Similarly, when Dublin Gas faced a crisis the Government took action to save the situation. The best example of Government intervention occurred in the PMPA affair. When the PMPA faced liquidation an administrator was appointed, legislation introduced and an ailing company saved. The PMPA are now trading satisfactorily again thanks to a levy put on insurance premia at the time and Government assistance to devise a viable solution.
There are precedents, in the Goodman affair, in Dublin Gas, in ICI, in PMPA for direct Government intervention to ensure that the implications of industrial fallout on large numbers of vulnerable people are not sustained. UMP is a perfect example of such a crisis and the Government have no choice but to take the initiative. There is a perception abroad already that the Government are doing very little for the west. The bishops have had to take the initiative in job creation and in trying to stem emigration; the Government are not able to sustain and retain existing employment there. It will look very bad if Deputies on the Government side go home at the weekend and tell their communities that the Government do not have an answer to their problems. They are leaving it lais-sez-faire fashion in the hands of the receiver.
The farming industry and the agri-business are organised separately. EC supports coming through under the Common Agricultural Policy are not being channelled to the farmer. Scandalously, less than 20 per cent of the money coming through from the EC over the last 20 years has reached the pockets of the producers. Obviously well heeled operations, and brokerages of one type or another exist among producers, hauliers, processors and others. We do not seem to know where the money goes, but it is not going to the prime producer and that matter should be examined.
We have asked on numerous occasions in this House for a debate on the operations of the banks and have not had it yet. The banks are not fulfilling their national responsibility and are being allowed to impose conditions in areas subject to a national policy. We need a debate in this House on how the banks do their business, because they do not have a carte blanche to operate as they wish. There is evidently another agenda here behind the scenes putting profits once more before people.
I welcome this opportunity to hear what the Senators have to say on this tragic situation which is completely outside the control of the Government and of the Members of the Dáil and Seanad. We have to face up to the problem and see how we can help to resolve it. I appreciate the constructive contributions made by Senators and will remain on to listen to the remaining contributions.
I want to record a few points in relation to my own and the Government's involvement in this matter. The UMP group's financial difficulties have been rumoured for some time. It appears that a reorganisation of the group's debt structure was necessary following discussions with its main bankers, a syndicate of seven banks, lead by the Banque Nationale de Paris. The problem which brought about this immediate crisis was the fire at the Ballaghdarreen plant. Short term credit facilities of some £15 million were arranged to help the group survive in the aftermath of the fire. When repayments on these loans became overdue, Mr. Des Guilfoyle was appointed examiner to the group by the High Court on 17 February last with permission to borrow £3 million. On 2 March 1992 he was given permission for further borrowings of up to £4 million. On last Monday, 9 March, his period of examinership was extended for a further week to enable him overcome substantial difficulties he had encountered in arranging a financial package to enable him to continue to operate the group while he prepared a report on its viability for the High Court. Intensive negotiations have taken place since Monday between Mr. Guilfoyle and the three banks involved, BNP, Bank of Ireland and Allied Irish Banks. These discussions concluded late yesterday afternoon and it was not possible to find agreement on additional funding.
The Irish banks had the strongest reservations about the prospects of a positive outcome of the examinership. They believed that if moneys were put forward now this would simply delay an inevitable complete overhaul of the UMP operation. Accordingly they were not willing to put forward the necessary funds. Under intense pressure from Government circles the two main Irish banks, Bank of Ireland and AIB, came together with the examiner. They agreed to provide the required cash of £4 million, but only on the strict condition that this money would be repaid at the end of the examinership. They made it abundantly clear that they did not wish to be involved in the UMP operation on a longer term basis. The examiner could not satisfy this condition as he could not guarantee that the money would be available at the end of the examinership. Alternative proposals for super-preferential status were rejected by the banks.
Notwithstanding that, my colleague, Deputy B. Ahern, Minister for Finance, contacted the President of BNP in Paris and asked the bank to reconsider its decision. It was all to no avail. The essential difficulty which could not be overcome was a failure to achieve consensus between the banks on how to deal with the huge burden of overhanging debt. That is what I meant about it being a sad day when Government, State agencies and Members of the Dáil and Seanad are faced with a commercial company that has a massive debt problem. If companies want to operate in the commercial world, they should have a sufficiently prudent management in place who would not allow this to happen because they have a responsibility to their workforce and creditors to run a good show. They cannot expect Governments or State agencies to ask the taxpayer to bail them out when they run into a problem like this.
As late as this morning my colleague, the Minister for Finance, has had a meeting with top executives from the two main Irish banks, AIB and the Bank of Ireland. The Minister impressed upon them the concern of Government that they should act in the national interest in protecting jobs and in assisting an industry of vital national importance which has excellent propects for the longer term. The banks have responded in a very positive manner and they have indicated unequivocally their wish to act immediately and constructively in finding the best possible solution to the present crisis.
The banks are ready to work with the receiver in providing working capital to secure an immediate resumption of activity in all the plants. The banks are also ready to provide the necessary financial support for potential purchasers of individual plants. The Irish banks believe that the only constructive way forward is to remove the very large burden of debt on this company. They confirm that there would be no problem about providing £4 million but they felt that this would serve no useful purpose because of the large overhang of debt which is of the order of £50 million.
I very much welcome the positive response that has come this morning from the Irish banks. I welcome, in particular, this support for continuing operations in the west of Ireland.
As has been pointed out, the real difficulty is with the west of Ireland plants. I understand that there is no difficulty finding purchasers for the southern plants who will keep them as a going concern with their full complement of jobs. We are extremely concerned about the west and to ensure that those plants are maintained as going concerns, that jobs are retained and that small creditors and farmer creditors are protected as far as possible.
I am confident that Banque Nationale de Paris, the main creditor, will also respond positively so that jobs can be protected and that a strong and viable industry will emerge from the receivership.
Many unfounded allegations and criticisms have been made, some of them downright dishonest and untruthful. I want to refer in particular to the allegations made in many quarters that the Government showed more energy in the Goodman situation than on this occasion. For the benefit of this House I want to put the record straight. The Government gave no money whatsoever — not a penny — to rescue the Goodman group. What the Government did do was to speed up the enactment of the same legislation which has now been used to appoint an examiner to the UMP group. After that it was a matter for the banks involved to come up with a rescue package, which they did. The Goodman case was different to this one in that a large number of bankers were directly involved in the Goodman case but, in this case, there was one main banker, the BNP group. When the Irish banks were asked to become involved, their attitude was why should they be involved with that massive debt when they were not the main bankers involved.
Once the examiner was appointed to the Goodman group, no further action was taken by the Government, unlike the UMP case, where there were long discussions and strenuous efforts made by Ministers, officials and State agencies together with the banks and examiners to find a solution to the problem. Given the size of the company's liabilities, a constructive receivership is the best method of ensuring that the plants will continue in operation and that jobs will be protected. With receivership one puts the overhang of debt to one side; it does not cloud the issue. As Senator Raftery said, that was a risk taken by the banks concerned. If they are at a loss because their assessment of the company was not as good as it should have been, so be it. As far as the taxpayer, the creditors and farmer suppliers to the company are concerned the debt is taken out of way and a fresh start can be made. There is every reason to believe that the plants will be bought from the receiver. On that basis, they would commence their operations free of the large debt that has encumbered UMP.
Senator Dardis make the point that it would be welcome if the co-ops and plcs not already involved in the beef and meat business became involved. They have a tremendous record in the dairy industry. They have a record for good management, they are farmer controlled and they have a quality product which, unfortunately, has not been the case in the beef industry. I would like to see Avonmore, Dairygold, Golden Vale and others involved. Then we would have a more broadly based and better structured industry.
In the Goodman case, the banks largely controlled that operation and their first priority was to get their money back. If UMP continued on the same basis, the banks would control about 60 per cent of the beef industry and their first priority would be for a return of their money, and the only way that could be done would be by squeezing margins to the farmers and taking it out of the industry.
There is an inherent profitability in the beef and sheep industries and I have no doubt that these plants will go on to operate profitably. As I mentioned earlier, the banks have given undertakings that they will be willing to fund the purchase and ongoing operations of the plants. I welcome that.
Finally, I would like to inform the House that I have spoken to the receiver, Mr. John Donnelly, and I have arranged to meet him tomorrow in Agriculture House. I will be putting to Mr. Donnelly that the Government's priority in this matter is the preservation of the jobs involved through keeping the plants operating and through their earliest possible sale. I will also discuss with him the need to protect, in so far as is possible, the position of the farmer creditors and the other small creditors. I will offer the receiver my fullest co-operation and that of my Department and of other Departments and agencies in finding a way through this impasse which will be to the benefit of the economy, the food industry and the farming community.
I am confident that, with the co-operation of all concerned, the future of all UMP plants will be secured as a result of this receivership.
On a point of order, there have been four speakers but nobody from the main Government party. What is the reason?
I can explain that very easily but I do not want to do so here. I will explain it to the Senator outside the House. I now call Senator Staunton.
With the agreement of the House and the Minister, can we extend this debate to 6 p.m.? It would allow those who have a special interest in the debate to say a few words.
Agreed.
I am sure the Chair will allow Senator Finneran to speak later.
In a conciliatory mood which I might not maintain, I welcome the Minister to this House and congratulate him on his recent appointment. It is fitting that somebody from County Cork should sit at the Cabinet table in any Government. I wish him every success.
Having said that, I take the Minister and his Government to task. This is a serious issue and there are many aspects to it. We have the catastrophe in the meat sector. This group together with the Goodman group accounted for a massive proportion of the Irish meat trade and there are question marks over the desirability of two giants controlling such a huge sector which is vital to the Irish economy.
There is the question of the social consequences of this for many people, especially those in the west. There are all kinds of question marks about the position of the banks in relation to development issues. The bottom line ultimately is what the Government perceive as their role in this issue, what input will they make and will they arrange for a satisfactory outcome to the issue?
I come from County Mayo and wish to make the Minister and the House aware of the extent of this social catastrophe in the area where I live and explain why it is so different from an event of this nature happening in north Cork, Wexford, Waterford or in parts of Meath and Kildare. Deputy Higgins when speaking in the Dáil referred to what he described as the black triangle. In the eastern part of County Mayo successive censuses of population over the last 50 years have recorded that the biggest drop in population compared to every other rural district took place in the Swinford rural district, namely, the black triangle. It is an area with very poor land, small farms and virtually no industry except a small tourist industry.
When Halal, as it was called until recently, grew in Ballyhaunis from a very small company employing a few workers to a giant company, it became a huge part of the fabric of economic and social life in east Mayo. The group had four plants and employed about 900 people. My understanding is that about 600 of these workers were employed in the two western plants which are relatively near one another. They were only about 20 miles from one another one in Ballyhaunis and the other in Ballaghaderreen. As I said at the outset, this area is not like north Cork, Meath or Dublin. There are no alternative employment opportunities there. The traffic out of Knock to London has diminished as a result of the economic problems in Britain. These workers cannot get on a plane at Knock and find a job in the south of England next week.
Leaving aside entirely the meat sector and the problems therein or any intellectual arguments about the banks or objective arguments about the role of Government and whether they should intervene, this in human terms is a catastrophe for this part of Mayo and gave rise to the emotiveness among Deputies from the region in the Dáil. I hope the Minister appreciates that there is an understandable, highly volatile reaction to what is happening in Ballyhaunis. The Government must be aware of the dimension of the catastrophe and the Government must make a massive input to ensure a satisfactory outcome to this ugly mess.
There are positive things in the sector. If there is anything basic in life it is food, and if there is anything basic about the Irish economy it is agriculture and animals. We are a member of the European Community and there is a support system there. While markets from time to time are not satisfactory, there is a broad market for Irish beef and lamb. I hope that restructuring will take place. We have the necessary resources — grass, animals and markets. Having said that, it is not all that simple.
I see the point in not throwing £4 million, £5 million or £10 million after £60 million or £70 million. It could be argued that to do so would be to shore up a highly geared unsatisfactory borrowing structure and, at the end of the day, would force the company to service the debt on massive overdrafts, leading to higher production costs than are desirable and, maybe in the medium term, an unsatisfactory deal for the farmer selling lamb and beef. I can see that clearly.
The Minister described the receivership as constructive receivership. The merit in many receiverships is that one clears the debt, there is new management and a new broom sweeps clean. There is a very solid, lean foundation and one takes it from there. I go along with much of that argument. The danger in it — we are talking about social issues here, not economics — is this: there is one plant in Charleville in north Cork which might very easily be picked up by one of the southern or south-western co-ops. There is another plant in County Wexford adjacent to Waterford and Rosslare Harbour and the continental markets; it is a leaner unit and that may, in turn, be picked up.
May.
I am sure it will be, but I cannot speak with any certainty. My fear is for the two plants in Ballyhaunis and Ballaghaderreen which employ 600 of the 900 workers. It may not be that easy to arrange that they are picked up in the market-place. One of the consequences of a constructive receivership might be that the plants in the south-east and in Munster are picked up pretty smartly and there will be a big problem in Ballyhaunis.
The Senator does not know the south or the south-east too well.
Anyone who contested four Seanad elections has a fairly intimate knowledge of Munster and the south-east.
Of the electorate, but not of the problems.
Acting Chairman (Mr. Farrell)
The Senator without interruption.
And of the problems as well. The Senator will have time to speak on this and he might afford me the same privilege. This is a deprived area. At the end of the day the Government will have to take account of the position and address the issues. The Minister said words in his speech which were nice to hear, but I want to see them implemented. He spoke about the Government being, in his words, "extremely concerned" about the west. This is east Mayo and not west Mayo where there is a tourist industry and where in Westport there are about 1,000 jobs in the manufacturing industry. There is no fishing industry here. This is the black triangle and there is an overwhelming responsibility on the Government to sort out the problem here. We are talking about the means to solve this issue. It is a little early today to propound the ultimate solution, given that the receiver has only been appointed and that we do not know the true internal position of the company. No doubt that will be made known to the Minister at the earliest opportunity.
I am concerned about the position of farmer creditors. My understanding is that cheques totalling £4 million have been issued to farmers. Some say that these cheques will bounce. This must be investigated.
The Minister had discussions with senior representatives of the two largest Irish banks, Allied Irish Banks and the Bank of Ireland. We appealed to them to hang in there, but without success. I was amused to hear the Minister say in his speech — it struck me as being very Irish — that the Minister for Finance, Deputy Ahern, spoke to the president of the Banque Nationale de Paris, having been rejected by senior executives in two Irish major banks, in an effort to help bail us out. It is ironic and very Irish. It is no wonder that the foreign bank——
They are a major financier.
I take the point but if there is no core support from the major banks within the Irish system we will not get much mileage in Paris, Berlin, Brussels, Hamburg or anywhere else.
It raises other questions about the banks and where we stand. We had a debate in this House yesterday in relation to the development of Waterford Harbour, the new berthage, cranes and so on to facilitate lo-lo container traffic. A massive proportion of the Irish trade is held in Waterford now, partly because of the death wish in relation to Dublin Port. There was a major European Community financial input and satisfactory negotiations were concluded with Bell Lines, one of the biggest shipping companies on this island. The Minister asked for the consent of the House to very substantial loans being guaranteed by the Government. This is against the background of letters of comforts having been thrown out the door together with Government policy decisions in the last four to five years that there would be no Government guarantees for the future, that it would be viability all the way. In fairness to the Minister, he pointed out that negotiations took place with a number of Irish banks leading to refusal in every case to get their feet wet on that project. The reality was that there would be no new project at Waterford unless the people, through the Oireachtas, agreed to guarantees being given by the Government. There was a question mark over the banking system in relation to that just as there is about this issue and in many other areas as well. It is for these reasons that there has been a consensus in this House on the entire issue of the banks and there has been a call for a debate by a Member of the Minister's party for some time which the Leader of the House has agreed to and which is to take place within a couple of weeks. It is ironic. When we look at projects in Ireland in agriculture, industry and the services sector we see that they are financed from outside this country with very limited support from Irish banks.
This is an extremely serious matter. I have confidence that the issue will be sorted out if it gets the attention it deserves. Food is scarce and we have all the resources necessary to produce meat. My huge concern as a Mayo man is the social issue in so far as the workers and farmers in the west are concerned. I can objectively take on board what the Minister is trying to achieve by what he describes as constructive receivership. I see the merit in cleaning up the debt and in the plants being picked up. The plants in Munster and Leinster may well be picked up, but I fear the consequences for Ballyhaunis and for Ballaghaderreen. For these reasons, I would appreciate if the Minister, who will devote a great deal of time to this issue in the coming days and weeks, would bear my words in mind. It is crucial that the Government, whatever the cost at the end of the day, given the horrific alternative of unemployment, make certain that the plants of Ballyhaunis and Ballaghaderreen survive, not just as skeleton plants but as viable ones employing many people and handling lots of cattle and sheep.
I compliment and thank the Minister for attending here at short notice. It shows the concern of the Minister. I know his schedule was interrupted by the House restructuring its order this morning. However, the Minister has responded to that and I compliment him on it. It shows how seriously he takes the matter and how seriously he takes the concern of Seanad Éireann.
As a Roscommon Senator, I would say that today has possibly been the worst day as far as Roscommon is concerned for a long time. I say that in the knowledge that only two hours ago I left a meeting in Bord na Móna headquarters where they took a decision to walk away from a £30 million investment in the Derrynafadda Bogs and the developments in Ballyforan. Earlier this year the Arigna Mines were closed. The power station has not closed yet, but closure is on the way after 30 years. Today we have a receiver in the Ballaghadereen plant, where between itself and Ballyhaunis there are 600 jobs.
Any county that can survive an attack from the north-west, the north-east and the south in a period of a couple of months, and indeed in a period of a couple of days as far as two of the attacks are concerned, should be looked up to. However, I am not so sure that our county and the people living there will be able to withstand this on their own. I plead with the Minister, the Government and State agencies to save Ballaghaderreen plant. We do not have that much going for us in our county, but at least one thing we have are good, hardworking small farmers. We have lots of sheep and good cattle. We have a number of outlets, one of them being Ballaghaderren. If Ballaghaderren is allowed to go down then the whole area of north-west Roscommon will be isolated. This area is in a pretty desolate state as it is. In fact emigration levels from north-west Roscommon are possibly only second to Leitrim, and that is a sad reflection on us all. If the plant in Ballaghadereen is closed, that part of Roscommon will be a wildernes.
Possibly 900 jobs nationaly could be lost as a result of this crisis. Why is it that in a very popular industry where there are big profit margins, a £50 million debt could be allowed to accrue? It is extraordinary that in a viable concern which has been in operation for 18 years a debt of £50 million was allowed to accumulate. Who is in charge of these operations? A company who buy and sell products at a profit should not accumulate such debts. I do not believe that the right people are operating the meat industry at present.
I support Senator Dardis's view that we will be far better off when the meat industry is in the hands of the co-operatives because we will then have people operating this industry who have a genuine interest in farming. Farmers are hard working people and it is appalling that, tonight, farmers in the west have cheques for £5,000, £6,000, £10,000 and, I believe up to £14,000 that are not worth the paper they are written on. The people in Roscommon have been through this before. We remember Towey and that cheques were not honoured at that time. I am not asking for direct payment to this company, I ask the Government, the Minister and all involved to restructure this company with a view to maintaining jobs. I am not worried abut the company going into receivership provided proper action is taken and that the people in charge do not run up a bill of £50 million. That is not the way the meat industry should develop; that is not the way to develop confidence in business and it is not the way to foster farmers' confidence in meat outlets. There have been many revelations about the meat processing plants over the past few years which have destroyed the good name of meat processors at home and abroad. Hopefully, some day farmers will taken on board what I believe to be their proper position, that is the proper organisation, processing, retailing and exporting of their own produce. We would be much better off if that happened.
What about the farmers who are owed money? I understand that a couple of weeks ago a notice was put in the paper by the examiner guaranteeing that all cheques would be honoured. Does that guarantee stand today? The examiner left this morning and he is no longer in charge. What is the position in regard to all those cheques that are owed to people around the west and, possibly, all around Ireland tonight? Will the receiver honour the guarantee the examiner put in the paper; if not, it is another breach of confidence, another undermining of the credibility and confidence in Government support. Confidence is of paramount importance where a farmer's livelihood — his earnings for the year — is tied up in one cheque. In fact, 35 per cent of it might be owned to his own bank and his farm might be in jeopardy, not to mention the stock he has given away. I ask that the farmers be looked after.
The 900 jobs which are at stake are just one aspect of this operation, there are many ancillary industries, the hauliers, the processors, the meat and bone meal people, etc. who make a living from United Meat Packers. Those 900 people directly involved from one-third of the possible number of people who would eventually be involved if this operation is allowed to close.
I am glad this debate has not been a political one; political point scoring would not benefit the young people and their families in Ballaghaderreen, Ballyhaunis, Charleville and elsewhere, who may not have money to pay their mortgage in a month's time. I hope there is a consensus and a determined approach by all sides on this matter.
Finally, I hope the Government and their agencies will support the people of Ballaghaderreen, Ballyhaunis, and those who worked for United Meat Packers. People will not be upset if the company goes into receivership provided their interests are looked after in in the restructuring of the company. We, in Roscommon, wait for continued positive response from the Government and their agencies that they will protect the interests of the families in the west, particularly in Roscommon.
First, I welcome the Minister, Deputy Walsh, to the House. The fact the Minister is present is a clear indication of the interests he and the Government have in this difficult problem. I also thank the Leader and the Whips for allowing this debate to take place. I also compliment the Leader for extending the debate and thank the House for agreeing to let others who have an interest in this problem contribute.
Six speakers, all concerned with the west, have already contributed. I do not wish to take from the west, but I want to remind the House and the Minister that there is also an east and a south-east of this country. A sheep slaughtering plant in County Wexford, is also involved. It should be noted that County Wexford has the second highest unemployment rate in the country. That came about when agriculture started to go downhill and the agricultural services in Wexford collapsed. I appeal to everybody — I am confident Senator Ó Cuív will join the campaign for the west — to remember that there are difficulties in the south-east also. Senator Staunton inferred that there is no difficulty with Charleville or Camolin, that the problems there would right themselves. The doors of Camolin are closed; there is nobody working there today. If jobs are lost in United Meat Packers it will add to our difficulties. The Minister mentioned the west as having particular problems but the south-east also has problems. Therefore, I ask people to be even-handed when dealing with this issue. Do not let anybody be conned into the belief that the banks or anyone else will be any more reasonable in regard to Wexford than in regard to the west, but I accept that the west has always had problems. I was interested to hear Senator Staunton mention the development of the port at Waterford. I will not mention all of the developments that have taken place in the west because we should not be competing; we should be here as a group of Senators looking after the people in the country as a whole.
My colleague, Senator Finneran, spoke about the difficulty for farmers who have been paid by cheques that are not worth the paper they are written on and this is at a time when farmers need to buy fertilizer and other farming materials. As Senator Finneran said, one of those cheques could represent a farmer's wages for a full year. Therefore, I ask the Minister to tell us this evening that regardless of the procedures adopted — I hope his plans to keep those plants open will be adopted — and the farmers in question will be paid. Too often in the past farmers have been left as non-preferential creditors as happened in the case of Clover Meats.
As the slaughtering of cattle and sheep has ceased, farmers will have to keep their stock and feed them on fodder which is already in scarce supply. Thankfully, we have had a mild winter and fodder is probably in greater supply than might otherwise be the case. The fact that more sheep and cattle have to be kept on the land is disturbing the plans farmers set out to achieve at the beginning of the year.
The necessity to reopen those plants immediately has been overlooked in this debate. The Minister said the banks are prepared to play some role but he must apply stronger pressure on them because their cavalier attitude to these and other difficulties demonstrates total irresponsibility, and I make no apology for saying that. Profit seems to be their only concern and that applies to Irish banks in particular. The banks must be told they have a major responsibility to the industry, the workers and the farmers. I acknowledge that the Minister has a particular interest in this problem and that he has done all he can, but it is the immediacy of the problem I am talking about. I understand the Minister is meeting the receiver tomorrow and that the receiver will do all he can to ensure the properties are sold and back in operation as soon as possible. I ask the Minister to meet with the receiver, the farmers, the banks and the workers immediately to ensure that all interests are represented and that the non-operational plants will become operational as soon as possible, next week at the latest.
Of course, the Government have been criticised for not doing what they did in the Goodman case, but that should not dampen their enthusiasm. This is a whole new ball game and an enormous number of people are facing ruin. Having said that, the impression this morning was that the plant was gone and that the business was dead; it is not gone and I am sure this House will give its full support to the reopening of the plant as soon as possible and ensuring that anybody who has lost out will be fully compensated.
I dtosach báire, gabhaim buíochas leis an Aire as ucht bheith sásta fanacht chomh deireanach seo tráthnóna agus an méid de ghnóthaí atá idir lámha aige. Lá dubh, dorcha, dubhrónach é dúinne, go mór mhór san iarthar agus san oirdheisceart, an scéal seo faoi UMP.
I thank the Minister for staying late for this debate. It is important that we should be given an opportunity to express our strong feelings on this matter. In passing, I might mention that a fish factory in Rossaveel in Connemara is also part of the UMP group and the future for those employees is also uncertain tonight.
My first concern is in relation to the payment of farmers. When this problem arose in the travel industry, bonding was introduced. However, following the failure of Clover Meats and many marts, we still have not instituted a system of bonding for farmers. I hope that a system of bonding is instituted for the agri-business, both in marts and livestock plants, to ensure that all farmers' payments are bonded.
As my colleague, Senator Hugh Byrne, pointed out, the consequences of a farmer having sold a year's supply of cattle to a factory and not getting paid for them could result in tremendous knock-on social and human costs within the community. We must also take cognizance of the position of the small suppliers, the transport people and the people who supply all sorts of raw materials to such a factory. There are 900 jobs on the line with 1,800 people in support jobs who are also worried tonight. The consequences for the sparsely populated area of the west are catastrophic because, aside from the physical consequences of potential loss of employment and ruin for farmers and suppliers, there is also the social consequence of the breaking of confidence that has been carefully built up over nearly 20 years.
I remember dealing with Sher Rafique in 1975 and 1976, shortly after he came to this country, and I saw at first hand the tremendous potential for his business. At that time we were exporting live lambs to Italy and following our lead he took on the marketing of lamb on the Italian market. This was the first time that a steady outlet was provided for the small hill men of the west. Over the years that market has ensured steady prices each autumn. That is now gone. I hope the people concerned — the Government, the banks and the agencies — will ensure that there is no break in the continuity of the operation in those factories. They should immediately seek people to run them and ask the banks, particularly the Irish banks, to put up the finance to ensure that slaughtering will continue. If this does not happen, the consequences are too serious to contemplate. Some serious questions need to be answered. The IDA seem at times to encourage the big companies at the expense of the small ones. As a result certain industries tend to be concentrated in too few hands which resulted in the serious of collapses in the beef trade in the past few years.
Because we are an island nation there is a limit to the size of our market and supply. I have always favoured a policy of diversity, ensuring that a maximum number of people are involved in the processing side of the industry. If necessary there should be a marketing authority as in the dairy industry — An Bord Bainne — to ensure that a product is marketed internationally. However, I have always opposed the policy that ensured that the number of big players in any industry are very small and that 80 per cent of an industry can be concentrated in a small number of hands.
I think everybody knows the consequences of doing nothing. I compliment the Minister on his efforts in this case and I appreciate the time and effort the Government have put in. I hope the banks will ensure continuity of production. This company must be helped out of its financial debt. If the company were to continue in business with a debt of £50 million, they would spend the next ten years working for the banks. The banks took the risk, the risk went sour and as far as I am concerned, that is the banks' business, not ours. The banks have the advantage of having access to information and should have to say why they took this risk.
A receivership which would quickly dispose of the factories to people who would be able to manage them profitably, and which would not leave them with an outstanding debt, is the only rational way out of this problem. The situation was allowed go too far to enable the company to be rescued in the normal way. The amount of money to be repaid is too big. However, I want to stress the necessity to ensure continuity of supply or outlets for the farmers as well as work for the employees to ensure that confidence in that community is not eroded.
Finally, we often talk about the cost of rescue packages and saving jobs, but for every job lost between the difference in income tax and PRSI revenue the State would get from the company as opposed to the cost of keeping the worker on social employment, is about £10,000 per annum. In this case the loss of 900 jobs is a loss of £9 million per annum minimum, not to mention all the social consequences to the State. If you take it every direct job creates two indirectly, you are talking about £27 million per annum. When we look at it that way it becomes apparent why we should ensure that those 900 jobs, and the ancilliary jobs, are saved, that the factories continue to function and that this black day for the west is averted. I hope there will be a sign "business as usual" on the factories in the coming weeks and, since we have not yet instituted a system of bonding, that farmers would be guaranteed payment. If not, the consequences for confidence in agriculture, particularly in the west, will be disastrous. Go raibh míle maith agat.
I welcome the Minister to the House. This is the first time I have had an opportunity to congratulate him in his well deserved appointment. Like everybody else, I am confident he will do a very good job.
The beef industry has been in crisis for almost 12 months and it is ironic that the second largest company is now in receivership. We should review the beef situation and possibly, in the next debate on this issue, have a broader look at the potential for the beef industry. The potential for job creation in the beef industry has not been tapped. The potential for job creation in the added value products in the "fifth quarter", as it is known has not been tapped; the potential for job creation is enormous. The IDA and others have issued reports on this over the past 20 years but very few of their findings have been put into operation. It is time we had a look at the industry in the context of its potential for job creation, for added value, for better prices and better return to the agricultural community.
There is no doubt there is a great deal of concern among the workforce of UMP. Over the weekend 900 will not know if they will have jobs this day week; I hope they will. The Minister is confident they will. I welcome that confidence and hope it bears fruit. Some of the plants are very productive and, hopefully other meat processors will purchase them and bring their expertise to bear. I congratulate Sher Rafique for the contribution he has made to the economy of the west and to other parts of Ireland, since 1974. I have a particular interest in the Charleville area.
The Senator must conclude his remarks.
I thank the Minister for coming to the House at short notice. The House will meet again at 2.30 p.m. next Wednesday.
The Seanad adjourned at 6 p.m. until 2.30 p.m. on Wednesday, 18 March 1992.