Seanad Éireann - Volume 98 - 19 May, 1982
Irish Shipping Limited Bill, 1982 [ Certified Money Bill ]: Second Stage (Resumed).
Question again proposed: “That the Bill be now read a Second Time.”
Professor Murphy Professor Murphy
Professor Murphy: I am glad that other Senators, notably Senator Dooge and Senator O'Mahony, have sought some elucidation on matters arising from this Bill because I found the text of the Bill very difficult to comprehend. Given the late date at which the text became available and the lack of an explanatory memorandum, that difficulty was compounded, though I must say that from what I have seen of explanatory memoranda they are frequently rather meaningless documents.
I share some of the doubts about the shipping arrangments which have been  expressed by previous Senators. I understand that the need for the Bill is because there is need for legislation to authorise this kind of arrangement but I have difficulty in comprehending why it is necessary to change from the relatively straightforward earlier arrangements to the ones now being contemplated.
A point which is pertinent to raise is whether the people in Irish Shipping are satisfied with the new arrangements. That is rather important. One cannot but agree with the general proposition that the bulk carrier should be built in Verolme for Irish Shipping Limited. Any Corkman who disagreed with placing a contract with Verolme would not be very happy at the prospect of returning home. At the same time I must say, speaking as an absolute layman in these matters, I am mystified as to why the cost of building a bulk carrier should be so extravagantly greater in Verolme than would have been the case had Irish Shipping placed their contract on the open market.
I support what other Senators have said about Irish Shipping and their successes. Too often in this House we have to deplore the losses sustained by State companies. I remember particularly one painful occasion during the last Fianna Fáil administration when the Minister had to come before this House and outline the appalling losses sustained by one such company. It is good to listen to a success story and to reflect that the whole Irish Shipping success saga has been born out of our own experience as a State. It is very much a domestic achievement and an Irish achievement that we can be proud of. It may not be entirely inappropriate to recall that Irish Shipping were born out of our neutrality during World War II and of the very real struggle we had to keep everything ticking over while that policy was being successfully maintained and directed.
It is not an exaggeration to say that Irish Shipping were born of Winston Churchill's pugnacious antagonism to this country. At any rate it was, and remains, the application of the whole principle of self-reliance to an important area of the economy. It is applying sinn féin to the area of maritime commerce.
 It is one of the things we did our way and did it well. The achievement has been all the more admirable in view of the fact that the maritime economy was not only an underdeveloped area for a maritime nation but an exploited area by the previous imperial Government. There is no doubt that one of the reasons we are backward in the whole area of maritime development is a colonial hangup and so the achievement is all the greater. One can only wish that other features of our economic personality were as successful.
One important thing to stress is the principle that State enterprise can be a success, that men and women working for the State can work with commitment. The opposite is often stated. People think that James Connolly was very naive when he said that in a future socialist Ireland men and women would derive the same satisfaction from working for the public good as they would for a private employer. People are still very cynical about that point of view but surely the essence of the success of Irish Shipping is the dedication of the men and women employed in the public service.
Senator Crowley, while praising Irish Shipping, seemed by implication to say that other companies were unsuccessful because they did not pay the same attention to enterprise and the good management of their resources. I do not think it is as simple as that. It may well be that Irish Shipping have been particularly fortunate with the kind of people they have employed and the policies they pursue, but the fact that one State company are successful does not mean that application of the same principles or managment techniques would make other State companies successful.
CIE have been mentioned in the Minister's speech. We must remind ourselves that here are a company who have an entirely different function from Irish Shipping which arguably can never be commercially successful and it is the State's business to understand that. The State should be as loyal and sympathetic to State companies which provide a social service as it is proud of companies like Irish Shipping which make a profit. I  welcome the Bill but I share Senator Dooge's idea that we should separate the economic and social factors involved. I ask the Minister to clarify why it was considered necessary to change from one procedure to another.
Mr. Cregan Mr. Cregan
Mr. Cregan: I compliment the Minister on his speedy work as regards this move for Irish Shipping. It is very encouraging to see that Irish Shipping are involved in other businesses as well as shipping. It is encouraging to see that we are prepared to get involved in other areas, for instance, in the purchase and sale of ships and the extension of ships.
As a Senator from Cork, I am very glad to see that the Minister is encouraging Irish Shipping to buy within the State. The impression has been given that subsidies are only given in Ireland. That is not fair or true. The fact is that in Japan this year alone £350 million has been allocated directly to the shipyards and indirectly subsidies are being given to the steelyards. It is quite obvious that all areas of shipping at this time are losing money and it is not just happening in our country. Speaking of steel, what a pity that we have to go elsewhere to get steel to build our ships when we have it in our own country. Perhaps in the future with the new plant which is in Cork, this might not be the situation. British shipyards are also getting subsidies directly. This year they received £52 million. We shout about whether or not it should be given to Verolme.
As regards Irish Shipping, one of their first bulk ships was built in Verolme. It did Irish Shipping good and I fail to understand why we should ask why it is going into Verolme and why it should not be given to other countries. These are facts. It is only right and proper that it should be said.
The people who are working in Verolme must be protected. Irish joiners in the Verolme dockyard are half-idle. I compliment the Minister for creating a situation where naval boats are now being built and are ready to be put on stream. I hope that will not be held up. It is very encouraging to see this.
I should like to make one or two other  points. The planning of Verolme dockyard cannot be condemned, because it is to be complimented for the type of ship that is built there. Other countries throughout the western world have complimented them. As regards price, we will always be asking where State money is going and, as a Cork Senator, I have no objection to the fact that the Minister is prepared to let it go to Cork.
Mr. Lennon Mr. Lennon
Mr. Lennon: Coming from the other end of the country and having to share an office with Senator Cregan I should not like to oppose anything for Cork. I have to live happy with this man. Senator Dooge probably said everything that could be said about this. People all over the country admire the wonderful job that Irish Shipping have done. If we have any doubts about the Bill they are about the funding arrangement. We all welcome the Bill. There is a great need to give whatever help we can to Irish Shipping Limited. Their new involvement has proved that they are well worthy of whatever support they get. It is stated that by 1984 business will have increased from £18 million to £29 million. That is a very big increase. For that reason, all of us should compliment them on the excellent job they are doing. Perhaps in the near future we will hear about the funding arrangement and that is what most of us are unclear about. If we were clear about it perhaps we would not rise to speak at all. We hope that in due course we will be made aware of the way this money will be funded.
Mr. B. Ryan Mr. B. Ryan
Mr. B. Ryan: It is my first opportunity to welcome the Minister to the Seanad, and I do so happily. Unfortunately, I have a habit of forgetting that particular pleasant formality. It may be because of my belligerent nature but I have a habit of doing that and I apologise.
There are a few things in this Bill that fascinate me. First of all there is the obvious fact that Irish Shipping is a successful commercial organisation in an extremely competitive environment. At a time of over-capacity in international shipping, Irish Shipping has managed, and is continuing to manage, to run a  commercial organisation independent of any direct or indirect State subsidy. We should remember that there are two kinds of State subsidies to industry. There are the direct ones that are measured and there are those given in the form of tax exemptions, tax reliefs, and tax supports where people, instead of getting a handout from the State, which is obviously unacceptable to a lot of people, get a handout by being allowed to pay far less than what might otherwise be their fair share of taxation. As far as I know, Irish Shipping get neither.
A prominent backbench member of the Minister's party went on record at a youth conference recently as saying that all our semi-State companies are insolvent. That was Deputy Séamus Brennan. If he wants a list we can give it to him. They are not all insolvent, and many of the ones that have commercial difficulties are doing a lot better than many of their counterparts in the private sector. Aer Lingus has been rated as one of the most efficient airlines in western Europe.
It is important that public representatives should record vigorously and strongly that there are many successful semi-State companies in operation and that some of the ones that are less successful are often less successful because of political impediments that are put in the way of their commercial operation and not because of any inefficiency on their part. I instance Bord na Móna, who are asked to supply energy at a price which may well, for justifiable social reasons, be below the world energy price. They have to pay for their raw energy at the world market price. They are accused of being insolvent but they are caught between the devil and the deep blue sea, possibly rightly so. However, they should not be accused of being insolvent; but we could go on about this forever.
In his speech the Minister said the bankers required guarantees. One could elaborate at great length about who actually dictates public policy, whether it is the State through Government Departments and Government Ministers or the bankers who require guarantees. I remember when we had a telecommunications Bill here which was meant to offer  opportunities to the private sector to invest in the telecommunications industry, we also had guarantees required from the State.
I find it fascinating that in two areas such as these which are commercial, which are seen to be efficient and which are potentially extremely productive, bankers require guarantees which would be far in excess of what they would expect from a company operating in the private sector. I thought that banking was about the skillful analysis of opportunity, the skillful analysis of the money market and a highly competitive use of the funds of people who lodge their money with the banks, and not about safe, guaranteed investment in public companies where if anything goes wrong their investment is copperfastened. I do not understand why banks who are investing in a commercial enterprise which has a proven record of handling its own investments should insist, in addition, on a State guarantee. It is, at the very least, a disincentive to the banking institution to invest in real private sector growth industries if they have these doubled up guarantees to invest in the public sector. I suspect that Irish Shipping could raise their funds without these guarantees, and I often think that maybe we should tell the banks that if they are in the commercial business and giving lectures to everybody else about the importance and the role of private enterprise and of enterprise in risk-taking, then perhaps they should take a few more risks themselves, preferably in more productive areas than property speculation in Dublin's inner city.
Can somebody explain to me, will the distinction about leasing provide yet another tax outlet for some banking institution? Will we have a banking group investing money which is guaranteed by the State in a semi-State company in such a fashion that they will be able to guarantee for themselves that they will have to pay no tax to the State from the guaranteed return they have on their guaranteed investment? That is what I would call a fairly clever use of funds. Is there,  therefore, a tax benefit to the banks who are involved in this lending because of the fact that this is now a leasing arrangement as distinct from a lending arrangement?
I should like to record my congratulations to Irish Shipping, to record vigorously the fact that they are just one of a considerable number of semi-State corporations run efficiently, perhaps not commercially because of artificial constraints imposed upon them. I still believe that part of the mechanism in the vehicle for growth in productive industry has to be through a vigorous, expanding thriving, enterprising, public sector. The excessive reliance on private enterprise being advocated by private concerns and by the disciples of private enterprise in the IDA will not work. We have many models in the public sector of successful enterprise. They are to be encouraged, extended and expanded.
Minister for Transport (Mr. Wilson) John P. Wilson
Minister for Transport (Mr. Wilson): A Leas-Chathaoirleach, I wish you well in your new office and I want to ask you to convey my good wishes to the Cathaoirleach on her election as Chairman of the Seanad and to say how pleased I am to meet the Seanad for the first time in this session. With regard to the circulation of the Bill my office informs me that, whatever happened, we furnished the Bill in good time for circulation. I do not know what happened after that, but I just want to make that point.
Senator Dooge talked about the particular circumstances of the funding of the Panamax which is being built at Verolme Dockyard. I might as well come bluntly to the point. The reason the Government decided to make moneys available originally for the building of this ship was simply that we had a shipyard in Verolme which needed the work. We had 1,100 skilled people of one kind or another who did not have work, or were not likely to have work, if this provision were not made. The market, red in tooth and claw, would build this ship. The Japanese were quoted to us at the time at £14 million, and we made a considered judgment that we should subsidise the building of the ship and allocate  it to Verolme Cork Dockyard. It was as blunt and as simple as that. I invite Members of this House to calculate over a two and a half year period the unemployment benefit that would accrue to 1,100 workers, some of them highly skilled, add redundancy money to that, do the sum, and tell us, even on hard financial grounds, whether we chose wisely in choosing as we did.
It raised the whole question of social and economic objectives. Senator Dooge, Senator Crowley and others mentioned this in the course of their contributions. It is, as the House knows, one of the serious problems which confront any Administration. Senator Dooge asked for a sharp distinction to be made between the economic cost and the social cost. In my opening speech I made that distinction quite clearly. At present certain economists are propounding theories about what I call the market red in tooth and claw. Worse, not merely are they propounding it, but certain Governments and economies are following that philosophy with very dire consequences not merely to the countries in which they are being followed out but to the rest of the world as well. The economic cost was outlined in my opening speech, and the extent of what you can call a subsidy, if you wish, was also outlined to the House.
Indeed, I was interested to hear in a very good contribution from a new Senator that the Japanese Government were subsidising the shipyards directly and, in a hidden fashion, subsidising the steel industry which would also help the shipyards. I was interested to hear that since the country which could have built ships so many millions cheaper than the Cork Dockyard could was, in fact, Japan. Irish Shipping Limited quoted to us what it would cost in the open market and they said that, in accordance with the principles on which they were running their business, they would regard it as unjust if they were forced by us to accept a contract at anything greater than what they could have got it at on the open market. I do not think there was any failure in what I said to distinguish between the economic cost, the cost on the open market, and the price we put on  the ship. If you subtract the economic cost from what we now call the social joint economic and social cost, you will see exactly where the amount of subsidisation came in.
It is not fair to say that, because of this arrangement, which is, in fact, a subsidy for the shipyard rather than for Irish Shipping Limited, any kind of doubt about Irish Shipping Limited should rub off as the result. It was made quite clear by us when we made the original decision and it has been made clear by us now, what the motivation was, which was connected with the availability of 1,100 skilled people in the shipyard for whom we wanted to provide work. I made a reference to CIE simply to indicate the kind of guarantee the Government can give. I was not comparing the activities of CIE with the activities of Irish Shipping Limited. I accept the point made by Senator Murphy later on that, in so far as we have a public service which on strict economic grounds cannot be justified but which can be heavily justified on social grounds, we should be as proud of that service as we are of the one which is making a profit in the State.
Senator Dooge and all the other Senators who spoke paid a tribute to Irish Shipping Limited, a tribute which is very well deserved. What particular benefit paying the subsidy directly would have, as Senator Dooge suggested at the end of his speech, I do not know, if we can lay our hands on finance now at reasonable cost and use it for this development. Senator Crowley again raised the matter of economic and social costs in the semi-State area. Some Members of this House took part in the joint committee deliberations on many of the State companies, and nearly everybody in public life is aware of the problems.
There is a danger in developing a kind of subsidy syndrome and lying back and waiting for the State to pay the debts at the end of the year. I am not necessarily conceding to Senator Crowley that this is the case in any of the ones he mentioned, or any of the ones under the aegis of my Department and whose activities I have been studying very carefully and very deeply over the past few weeks. I admit,  as Senator Crowley said, that the money that is around nowadays is dear money and there is a difficulty when a semi-State body have to be subsidised with dear money as of now. In the other House today we introduced a Bill setting up An Post and Bord Telecom Éireann. The Government deliberately made generous allowance for the original funding of those two boards because they did not want heavy debts with heavy interest rates hanging around their necks, thus inhibiting them and impeding them from the very beginning.
Senator O'Mahony paid tribute to Irish Shipping but expressed regret at the method of funding of this operation. I should like to take this opportunity to reiterate what I have already said, that in no way could this arrangement be construed as being critical of Irish Shipping, casting any doubts on their ability to carry out the business for which they were founded and which they are carrying out very successfully. Both in Senator Dooge's contribution and in Senator O'Mahony's there seemed to be an indication that there might be a kind of guilt by association or something like that. I should like to refute that.
I was asked a number of questions which I will answer in so far as I may at this moment. The funding is being done by banking organisations. It is a banking transaction. The details are being worked as of now, so I cannot give the rate of interest. As I mentioned and as can be seen in the Bill itself, these details will be available when the accounts are laid before both Houses of the Oireachtas. With regard to the repayments, Irish Shipping will not have to pay back any more than they would have had to pay under the original arrangement, that is to say, their obligation will be tied merely to the £7.1 million mentioned in the original arrangement. As far as the Exchequer is concerned, as I indicated already, the Exchequer will repay it. It will appear in a subhead in the Estimates for the Department of Transport.
I was also asked about ownership. At the end of the period the boat will belong to Irish Shipping. Another point raised  was about trading with South Africa. I have no information on that as of now, but I will inquire into it and I will communicate with the Senator. Senator Fallon emphasised very heavily the importance of the provision of jobs in the prevailing economic climate. We welcomed the idea that private investment should be available and that there had been an invitation for such private investment for some time.
I come now to Senator Murphy's contribution. I regret the lateness with which the Bill reached him. My Department inform me that they had it ready. I do not know what happened that it did not reach Senators in time. All I can say about the shift in arrangements for financing is that it is to the benefit of Irish Shipping. He put a very pertinent question when he asked: “Are the people in Irish Shipping themselves happy with the arrangements?” In fact, the people in Irish Shipping are working out the arrangements in consultation with the Department of Finance and the Department of Transport. So the answer to the question is that Irish Shipping are perfectly happy with the arrangments which have been worked out.
Senator Murphy said he was mystified at the great difference between the cost of building the ship in Verolme Cork Dockyard and the cost on the open market. I agree that it is mystifing. Perhaps a fellow Senator gave an indication of one of the reasons, which is that the shipyard being quoted to us when this arrangement was first entered into was heavily subsidised by its own Government. Perhaps Senator Murphy was not in the House when I referred to that. The Japanese shipyard which was prepared to build at the low figure I mentioned may have been getting an open Government subsidy, both direct and, as the Senator said, indirect.
Professor Murphy Professor Murphy
Professor Murphy: Is not Verolme subsidised by the Government?
Mr. Wilson Mr. Wilson
Mr. Wilson: This is, in fact, a subsidy. This is a system of subsidising the building of this ship. Senator Murphy went on to give a short historical conspectus on  the origin of Irish Shipping, and rightly said they were born out of our own domestic need and were a domestic achievement of which we could be proud. In fact, there is a recent history of the whole shipping story which spells this out in great detail, and which is of great interest, and a source of great pride to any Irish citizen in assessing how this self-reliance was developed - the self-reliance which was referred to by Senator Murphy. I also agree with him, and it has been proved in the case of Irish Shipping, that people can get as much satisfaction from and dedication to public enterprise as they can from the private field.
I have already referred to the interesting contribution by Senator Cregan, who quoted an exact figure of £350 million in direct subsidies to shipbuilding companies in Japan, and also mentioned, as I did, indirect subsidies through the steel industry. Senator Lennon was a little worried about the funding arrangements but, again, welcomed the fact that the ship is being built in this country.
Senator B. Ryan made a useful defence of our semi-State companies and congratulated Irish Shipping on being so successful in what are agreed to be rough economic times. He mentioned something very interesting about Bord na Móna being asked to supply fuel at lower than world prices and said we should not blame them if this shows on their balance sheet. This is interesting to me because I come from a little bit north of an area where Bord na Móna have been a very strong sustaining economic force. I remember years and years ago reading the ESB annual report, and seeing there that the unit cost of electricity produced from turf or the various kinds of processed peat Bord na Móna were supplying to the ESB, was greater than that for oil. Now the reverse has taken place, so we should not be too positive about anything in the field of economics.
A pertinent question asked by Senator Ryan at the end of his speech was: Is a tax benefit at the expense of the Irish taxpayer going to somebody outside the country? The answer to that is “No”.
I want to thank Senators for their contributions.  We are anxious to have this Bill passed and become an Act on the Statute Book for reasons which became obvious from my speech on Second Reading. Our reason for changing from the original arrangment was quite bluntly to tap a new source of funds not otherwise available to the Government. That is desirable in these times, provided — and we are sure of this - we are getting a good bargain and it will not cost us any more. In fact we may gain substantially from it. Irish Shipping, as I have said already, are very happy with the arrangments and are working out the arrangements themselves. I think I have covered all the points made by Senators and I recommend the Bill to the House.
An Leas-Chathaoirleach An Leas-Chathaoirleach
An Leas-Chathaoirleach: I should like to thank the Minister for his kind words at the outset of his reply, which I deeply appreciate, and I shall convey his remarks to the Cathaoirleach.
Question put and agreed to.
Agreed to take remaining Stages today.
Seanad Éireann 98 Irish Shipping Limited Bill, 1982 [ Certified Money Bill ]: Second Stage (Resumed).