Postal and Telecommunications Services Bill, 1982: Second Stage.

Wednesday, 19 May 1982

Dáil Eireann Debate
Vol. 334 No. 8

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[1549]Minister for Posts and Telegraphs (Mr. Wilson): Information on John P. Wilson  Zoom on John P. Wilson  “Molaim go léifear an Bille an Dara hUair.”

Bille an-tábhachtach don tír an Bille seo, tábhachtach do fhorbairt shoisialta agus eacnamaíochta na tíre. Sa tsean córas tá cuid mhaith dul ar aghaidh déanta againn, ach táimid sásta go leanfar ar aghaidh leis an fhorbairt sin agus go gcuirfear leis le córas nua, le pleananna nua agus le smaointe nua.

This is an important Bill in a number of respects. It has major implications for the future of postal and telecommunications services — two vital parts of the national infrastructure serving the economic and social needs of the whole community; for the staff of the Department of Posts and Telegraphs; and for central Government finances. The Bill provides for the transfer of the control and the management of postal and telecommunications services from the Minister and the Government to two new State-sponsored companies — An Post and Bord Telecom Éireann. This involves transferring almost all of the staff of the Department of Posts and Telegraphs, comprising about 30,000 people and representing nearly half of the civil service, to the State-sponsored sector. Only a small number of the present staff of the Department will be needed to deal with certain residual and policy functions which the Minister will retain. The financial effect will be to remove from the central Government finances most of the expenditure on the two services. In the 1982 Estimates for Public Services the gross estimate for the Department of Posts and Telegraphs is £613.5 million, including £238.5 million in respect of borrowing for the Telecommunications Development Programme. It is the third largest of the 51 services listed and it accounts for over 11 per cent of the gross Estimates for Public Services as a whole. The purpose of the reorganisation is to give the public better postal and telecommunications services.

Before commenting on this Bill, which is designed to implement the reorganisation [1550] of postal and telecommunications services, it is fitting that I should give some background information about the two services and about the factors which contributed to the decision to wind up the Department of Posts and Telegraphs, as we now know it, and to hand over virtually all of its functions to the State-sponsored sector.

Control of the Post Office was taken over by the new Irish State in 1922, so that the Department of Posts and Telegraphs is one of our oldest Government Departments. The postal service at that stage was well established. The basic mail services were substantially the same as those in operation today. They provided for collection, conveyance and delivery of letters, post cards, printed papers, newspapers and parcels.

The telegraph service was also fairly well developed. It was the major telecommunications service at that time. The telephone service was still in its infancy. There were less than 20,000 telephones connected to a completely manual system and many parts of the country had no telephone service at all. It was undeveloped and unsatisfactory, even by the standards of its time. In the 60 years since 1922, telecommunications have been the major growth area. That service is now considerably larger than the postal service in terms of revenue-earning capacity, numbers of staff employed and the amount of money invested in it.

In 1979 the then Minister for Posts and Telegraphs, Deputy Pádraig Faulkner, announced the decision to launch the Accelerated Telecommunications Development Programme covering the years 1980 to 1984 inclusive. In their report which was published in 1979, the Posts and Telegraphs Review Group, about which I will comment in some detail later on, described the telephone service as being in a state of crisis. There was shortage of spare capacity in the system due to under-investment over a long period and growing demands for service as the economy recovered from the recession in the mid-seventies. By mid-1979 the service was at an all-time low and public awareness, particularly among the business community, of the importance for [1551] the country's economy of a high quality telephone service was sharpened. The need for further heavy investment to bring our telephone service up to the level of that in other EEC countries was widely recognised. Furthermore, the service had just emerged from a prolonged period of industrial unrest. The Government's recognition of the need for remedial action culminated in the launching of the five-year development programme for 1980 to 1984 inclusive. The programme had been prepared independently of the review body's report but that report confirmed that the programme was on the right lines.

In the initial period of the programme, priority had to be given — and this is important — to providing the base necessary for expansion; that is, getting sites, providing buildings and designing and ordering telephone exchanges and trunk systems. This is inevitably a lengthy process. The final design of buildings cannot be settled until sites are available, and to have a building of the type required to house a major telephone exchange within 18 months to two years from the time design work starts is a major accomplishment. However, as a result of various exceptional measures taken in collaboration with the Office of Public Works to speed up the provision of buildings, some of the special design exchanges required for the early stages of the programme have already been completed and work on most of the remainder is well advanced. Each telephone exchange has to be designed to meet the needs of the area it serves. This has to be done with care and following detailed analysis of the projected traffic levels. Design, manufacture, installation and commissioning of the equipment takes at least a year-and-a-half.

It will be clear from this that major improvements in the quality of the service could not have been expected before now. But much has been achieved and the next two years should see a major breakthrough in raising the standard of service arising from the infrastructural work done or in hand. Already the opening of a new trunk exchange in Dublin [1552] early last year and the substantial quantities of extra trunk circuits provided from it resulted in a reduction from 30 per cent to 20 per cent in the trunk call failure rate over most of the major routes out of Dublin. A major extension of this exchange and a large new digital exchange will be brought into service before the end of this year. These exchanges should provide sufficient capacity for the Dublin trunk exchange system for some time ahead.

A major new trunk exchange became operational recently in Cork. New digital exchanges were opened in Athlone and Ceanannus Mór last December and one in Bantry recently. These will be followed progressively over the course of the current year by new exchanges at centres such as Naas, Galway, Athy, Carrick-on-Shannon, Drogheda, Ennis, Limerick, Sligo and Tralee. All the key trunk centres in the country should be relieved by the end of next year.

Extension of trunk exchanges must be accompanied by a corresponding strengthening of the trunk routes. Much has already been achieved here. Additional circuits have been brought into use over most of the major routes. New microwave link systems have been provided on the Dublin-Sligo route, which will be extended to Letterkenny shortly, on the Dublin-Arklow, Dublin-Wicklow, Dublin-Athlone, Dublin-Waterford routes and on the cross-channel route. Work on a number of other microwave link systems is in hand or has been contracted for. These include Dublin-Cork, Dublin-Limerick, Dublin-Galway, Cork-Waterford, Limerick-Tralee, Limerick-Portlaoise and Galway-Tuam. The capacity of many co-axial cables is also being increased and numbers of these are expected to be completed in the current year. These include the Dublin-Navan-Drogheda cable, Castlebar-Westport, Cavan-Mullingar, Tralee-Dingle, Athlone-Ferbane-Banagher, Portlaoise-Carlow, Youghal-Midleton, Killarney-Kenmare and Newport-Achill Sound. Many smaller schemes are also in progress and planned.

It will be evident from the examples I have given that we are well on the way to [1553] a resolution of the congestion problems in the trunk network, and the country can look forward to a greatly improved trunk service over the course of this year. There should be a continuing improvement next year.

Subject to some minor exceptions, subscriber dialling of calls to Northern Ireland and Britain is at present limited to the Belfast area and to Birmingham, Edinburgh, Glasgow, Liverpool, London and Manchester. Following detailed studies in consultation with British Telecom, arrangements are now being made which will lead to subscriber trunk dialling being extended to Northern Ireland generally shortly and to Britain generally beginning towards the end of this year with completion in the second half of next year.

The programme for conversion of the remaining 430 manual exchanges to automatic working is being pressed ahead and all exchanges should be converted to automatic by the end of 1984 as planned.

Turning to the provision of telephones for those who want them, the rate of installation has been increased from 32,000 in 1979 to 62,000 in 1980 and to almost 70,000 last year. This year the target is to instal up to 90,000 telephones. The waiting list which had been growing for many years, was reduced in 1981 by 5,000 and this year should drop substantially. Already, the waiting list has been wiped out at many centres such as Athlone, Ballyshannon, Carlow, Killarney, Lifford, Limerick, Listowel, Nenagh, Tipperary and Shannon as well as in parts of our major cities. By the end of this year there should be no waiting list in much of the Limerick, Waterford, Portlaoise and Sligo engineering districts, all of which extend over a number of counties, and in a growing proportion of the major cities and urban areas. There is no reason why telephones should not be available generally on demand throughout the country by the end of 1984 as planned.

The waiting list for telex has been virtually eliminated in the country generally outside Dublin and, with the current rate of installation in Dublin, it should be possible to get into a similar position [1554] there this year.

A special effort is being made this year, too, to overtake the waiting list for data lines and achievement of this should be well on the way by the end of the year.

The present state of development of the telephone service might therefore be summarised as follows. As of now there are over 700,000 telephones installed in the country, representing about 21 per 100 of the population. This appears low as compared with most of the other member states in the EEC, where the number of telephones per 100 of the population in 1979 was 48 in the UK and 41, 43, 32 and 35 in France, Germany, Italy and Belgium respectively. However, the position here is not directly comparable. Allowance must be made for the larger number of persons per household on average in Ireland and the high proportion of young people in our population. But, even allowing for these factors, the scope for further growth is considerable.

About 91 per cent of the telephone system is automatic internally and about 65 per cent of subscribers can dial international calls without help from an operator. As I mentioned earlier, automatic subscriber trunk dialling will be extended during 1982 and 1983 to all Northern Ireland and Britain.

About 40 per cent of applications for telephones are being met on demand at present and, under programmes already in hand or at an advanced planning stage, telephones should be available generally on demand in the whole country by the end of 1984.

The network of trunk circuits and trunk and subscriber exchanges has been vastly expanded and capacity for future growth throughout the system has either been provided or is in course of provision. When the five year accelerated programme which was launched in 1980 is completed, roughly 30 per cent of subscriber exchange capacity and 50 per cent of trunk exchange capacity will comprise electronic equipment of the most up to date kind. In fact it will be one of the most advanced telecommunications networks, technologically speaking, in [1555] Europe.

The quality of service on local telephone calls is generally satisfactory with an average success rate of 97.5 per cent. On subscriber dialled trunk calls the position is not yet satisfactory, with an average success rate of about 80 per cent, but extensions to the trunk network to which I referred earlier, which are already in course of provision or planned, should result in a rapid and sustained improvement over the next year or two, and I expect that there should be a 90 per cent success rate in most areas by the end of 1983. The international service is generally satisfactory.

On the telex side there are about 6,100 installations at present, representing 17 per 10,000 of the population. This compares very favourably with our European partners. The service is fully automatic internally and virtually fully automatic to other countries. The quality of service is good, the only less than satisfactory feature being the waiting list in Dublin which, as I have already explained, should be cleared soon.

That is a bird's eye view of the present state of development of the main telecommunications services which will be handed over to Bord Telecom Éireann when this legislation is enacted. While there is still much to be done to complete the current programme and while development will, of course, be necessary on a continuing basis after that, it will be evident from what has been said that the ground work for a first class service has been well and truly laid. Indeed, the major task of Bord Telecom Éireann, as I see it, will be to raise the general level of efficiency and cost-effectiveness of the service so that this country will not only have good telecommunications services but will have them at the most competitive prices possible.

I referred earlier to the fact that the postal service taken over by the State in 1922 was well established, the mail services being substantially the same as those in operation today. Because of the relatively developed nature of the service, its history since then has been one of modest growth as compared with [1556] the more spectacular growth in the case of telecommunications.

The postal service employs 11,500 people at present including over 2,000 postmasters on a contract basis. The two major services provided by it are collection, conveyance and delivery of mail, including parcels, and the counter services available at all post offices. Over 400 million items of mail are processed annually and deliveries are made to over 800,000 addresses, ranging from deliveries in our cities to the most isolated homesteads. By arrangements made at international level, letters from Ireland are conveyed and delivered around the world just as letters from places as far apart as Alaska and Australia are delivered here by Irish postmen. Our postal network for collection, conveyance and delivery of mail.

A great variety of services are provided at post office counters where transactions valued at about £1,300 million are handled. Apart from services directly related to posts such as sale of stamps, posting of letters and so on, one can buy a television licence, a dog licence or wet-time social insurance stamps, send a telegram, pay a telephone bill, collect children's allowances or old age pensions, invest money in State savings services, or withdraw money already invested, to mention but a few. The range and variety of services handled by the staff at post office counters is probably greater than in any institution, whether private or public, providing counter services. This country-wide network of offices and the staff who serve in them is one of the great strengths of the postal service and one of its most valuable assets.

On the mails side the long-established standard of service aimed at is to deliver 90 per cent of first class mail on the day after posting and the balance on the following day. The standards for second class mail—for example, e.g. newspapers, post cards and so on—is generally the same as for first class mail, but handling of second class mail may be deferred if this is necessary to ensure due course treatment of first class mail. In the case of parcels the standard aimed at is to deliver 95 per cent on the second day [1557] after posting, the balance being delivered the following day. In their report in 1977 the Post Office Users' Council concluded from their own checks on the internal service that the overall quality of the mail service was high, that we were fortunate to have such a good service and that it should be husbanded jealously. Two years later, in 1979, the Posts and Telegraphs Review Group confirmed this. They stated that such international comparisons as they could make suggested that the range and quality of the service was high in normal circumstances.

Unfortunately abnormal circumstances arose around this time owing to the prolonged industrial problems to which I referred earlier. This resulted in a deterioration in the quality of the service. Unremitting efforts have been made since then to bring the standard of the service back to its former excellence. Those attempts have had some success but the standard at present being achieved still falls somewhat short of target. In 1981 an average of about 84 per cent of first class letters were delivered on the next working day after posting as compared with the standard of 90 per cent aimed at and previously achieved.

The service also suffered fairly substantial losses of traffic in 1979 and 1980 but growth was resumed in 1981 when traffic achieved a modest increase of about 1 per cent. However, there was a fall off towards the end of the year after the second increase in charges and it is not yet clear whether the 1981 level of traffic will be maintained this year. The economic recession and the increases in charges which it was necessary to introduce in 1981 were probably the major contributory causes.

Only a high quality service, sustained over a prolonged period, will restore full public confidence in the service and enable it to resume and improve on the growth achieved in the past. It will be one of the major tasks of An Post to achieve this by building on what has already been accomplished by my Department, and I am confident from consultations I have had with them that they will do just that.

In tackling this task, the company will [1558] be faced with a number of problems: the unsocial hours of work necessary to get mail delivered on time; traffic congestion mainly in Dublin and Cork; the sensitivity of the service to industrial action, not only from within but also in other organisations; use of containers to convey cross-channel parcel and foreign surface mail and a possible threat to mail volumes arising from developments in communications technology. There is no need to go into details about these problems except perhaps to refer to the possible threat posed by developments in communications technology.

In the medium and long term, the company will have to respond to the growing challenges which electronic communications will present. The developing telecommunications sector and the increasing importance of the time factor in many business and economic transactions are creating demands for quicker services within a relatively small part of the mail market. This is where the greatest challenge to traditional mail services lies, but it is also an area of great opportunity for the new company. It will have to go out and win a share of the market in services which new communications technology will make possible.

A start has been made by my Department in developing high speed conveyance and delivery services and the new Expresspost and Faxpost services will be ready for introduction shortly. Express-post will provide for hand to hand deliveries within hours in the major cities and between these cities on the same day. Faxpost will use the most up to date technology to transmit messages in minutes between public offices in Dublin and Cork and Britain, the USA and Canada. These services should provide a sound foundation on which An Post can build to meet the developing needs of customers in years to come.

There is one other area which I should mention where the future will pose threats but will also offer valuable opportunities; that is the sub-post office system which has served the community so admirably up to now.

The sub-post office system has made it possible to provide Post Office counter [1559] services which are readily accessible throughout the State. The system of remuneration of postmasters who run sub-post offices is related to the volume of work handled in the office subject to minimum annual payments.

The amount of work handled in sub-post offices has been reduced over the years arising from developments within the Department and in agency services provided by them for other Departments. Examples of these are conversion of manual telephone exchanges to automatic working, rationalisation of postal services by motorisation, introduction of the scheme of pay-related social insurance contributions deducted from income and membership of the European Monetary System and the break in parity with sterling. All of these have resulted in a loss of business to the sub-office system but the availability of this nation-wide network of offices offers great opportunities for the future. I know that An Post are very conscious of this — I have discussed it in some detail with them — and they will no doubt devote considerable attention to the maintenance and development of it. I have great hope for it.

So much for the services themselves. The organisational framework within which they were managed was considered by two independent commissions in recent years: by the Public Services Organisation Review Group chaired by Dr. Devlin in the sixties and by the Posts and Telegraphs Review Group chaired by Dr. Dargan towards the end of the seventies.

The Public Services Organisation Review Group issued their report in 1969. They recommended a radical structural reorganisation of the civil service based primarily on the concept of providing separate structures for policy formulation and for execution of policy. As regards the Department of Posts and Telegraphs, they suggested that a “Posts and Telecommunications Office” responsible for day-to-day management of postal and telecommunications services should be set up as an “Executive Unit” of a new Department of Transport and [1560] Communications. The group commented that there was little to differentiate between the combination of social and economic functions of the Department of Posts and Telegraphs and the tasks of State-sponsored bodies such as the ESB or CIE, and they listed a number of differences between postal and telecommunications services which pointed to the desirability of separation of the two services. They suggested that the operation of the two services in a single unit should be kept under review and that the merits of full commercial operation should also be kept under consideration.

The next major step came in July 1978 when the then Minister for Posts and Telegraphs, Deputy Faulkner, set up the Posts and Telegraphs Review Group under the chairmanship of Dr. Michael Dargan. The group's terms of references were:

1. To examine and report on the feasibility of giving to the telecommunications service such form of autonomous organisation as is likely to be most effective in meeting current public demand and providing for future development and expansion; and to make specific proposals regarding the nature, powers, and functions of the organisation recommended.

2. To examine and report on the organisational arrangements necessary to secure the modernisation of the postal system so as to promote an efficient delivery system nationwide.

In their report, which was submitted less than a year later, at the end of May 1979, the group found that the postal and telecommunications services were separate and distinct businesses in their own right. They analysed their strengths and weaknesses and their prospects for the future, in the context of their vital importance for the social and business life of the community. They decided that the shortcomings and inefficiencies they had identified were primarily structural arising in part from under-investment and in part from an inadequate organisational structure plus lack of managerial freedom.

The Group considered various organisational [1561] options, including the “Executive Unit” as recommended by the Devlin Group, private enterprise, competition and a State-sponsored body. They referred to the absence of a statutory basis for an “Executive Unit”; there was no fully developed model in operation on a statutory basis. While accepting that it would be an improvement on the existing type of organisation, they felt that it would fall far short of providing the freedom needed to manage the service as a commercial enterprise.

On the private enterprise option, the group adverted to the formidable opposition which a proposal to hand over the telecommunications service to private enterprise would generate; to the extent of State investment in this very large business which is deeply rooted in the public sector; and to the probable lengthy negotiations that would be necessary should a solution on these lines be favoured. They were of the view that control, as distinct from management, of both posts and telecommunications should be exercised through a public sector instrument which would point to the need for a State-sponsored body in any event. They ruled out private enterprise involvement in either service as part of this reorganisation.

On the question of competition they concluded that the telecommunications network is a natural monopoly for a country of our size, but, as I will refer to later, they recommended a modification of the monopoly in regard to supply and maintenance of equipment in subscribers' premises. In the case of the postal service they considered that selective competition, if uncontrolled, could undermine the viability of the national postal system.

The group finally came down in favour of the State-sponsored body as an established organisational model which is potentially flexible and adaptable. They recommended it as the most suitable form of organisation to meet the current needs of both services. They also came to the view that the circumstances of the two services required their separation. It is worth quoting from the portion of the report which outlines why they reached [1562] this conclusion:

Each service is a major commercial enterprise in its own right. Each service faces grave problems but the problems are essentially different and require different approaches. The telecommunications services are so seriously inadequate and the problems of development, from the present base, are so formidable as to require the full-time, single-minded attention of a commercially motivated board and chief executive. Organisational links with a major and fundamentally different service would be a distraction and would also carry the risk of a spillover of problems. The link also gives rise to risk of cross-subsidisation between the services. The management of the very large, labour-intensive postal service also demands the full-time, single-minded attention of its own commercially motivated board and chief executive. In a sense it faces more difficult problems than the telecommunications service, which will enjoy natural growth for many years to come. The postal service will require the highest skills of marketing, imagination and innovation in the immediate future. In the longer term the service faces technological change which seems likely to have major impact on its volume of business and profound implications for pricing, profitability, personnel and marketing. The planning and retraining task ahead will be a heavy responsibility.

Finally, the group considered what type of State-sponsored organisation would create the most suitable environment for tackling the management tasks facing the new bodies. They favoured the statutory company because it seemed to be more flexible than the statutory corporation, it provided the opportunity for private participation on an equity basis to any extent that might be favoured in the future and it might also provide greater freedom and flexibility in the management of the enterprises along commercial lines.

That is a brief summary of a detailed and comprehensive report which, I have [1563] no doubt, will continue to be studied by those responsible for postal and telecommunications services for many years to come. I will be referring to other aspects of the report when I come to deal with certain sections of the Bill.

In July 1979 the Government of the day announced their acceptance in principle of the basic recommendations of the review group's report and in May 1980 they issued a Green Paper containing proposals in general terms regarding the duties, responsibilities and powers of the new statutory bodies, the residual powers that would be reserved to central Government and the broad implications for the staff of the Department of the setting up of separate State-sponsored bodies for posts and telecommunications. Comments or representations relating to the Green Paper were invited.

A White Paper — Reorganisation of Postal and Telecommunications Services — was issued by the Government in May 1981. It contained decisions on the various aspects of the reorganisation and promised that legislation based on it would be introduced in the Oireachtas later on. The Postal and Telecommunications Services Bill, 1982 which is before the House is designed to implement that White Paper.

Before dealing with the Bill, I should like to comment on one very important aspect of the reorganisation which can be settled by legislation only to a limited extent. I refer to the implications for the staff of my Department. Chapter 10 of the White Paper contains details of the main aspects of the reorganisation about which staff unions and associations expressed concern on behalf of their members in their submissions on the Green Paper and during the course of subsequent discussions with officials of my Department. They were concerned primarily that staff should be given the option of moving to the State-sponsored sector or remaining in the civil service; that the transfer to the State-sponsored bodies would not result in any worsening of the superannuation benefits applicable to them as civil servants; that pension entitlements already earned would be [1564] protected; that the pay and conditions enjoyed by the staff prior to the changeover would be safeguarded and that their security of tenure would not be adversely affected. Concern was also expressed about promotion opportunities; about the type of procedures for negotiating pay and conditions that will apply in the companies and about the pay and conditions of service in the new employment.

The Bill contains two important safeguards for the staff. Section 43 protects their position in relation to superannuation and section 42 protects them against a worsening of pay and conditions enjoyed immediately before the transfer to the State-sponsored sector. In addition, under section 16 each company will be required to set up machinery for negotiation of pay and conditions of service with their staff and section 32 provides for election of employee directors to the boards of the two companies. I am glad to have been able to meet the staff's requirements on those important issues. As for the rest, consultations with recognised staff unions and associations have been under way for some time past. They will be continued during the course of the next few months and everything possible will be done to ease the changeover for the staff, consistent with the realities inherent in the reorganisation. These are that the staff of my Department account for roughly half of the civil service and the work they are doing will be transferred to the new State-sponsored companies. The residual functions being retained in the civil service are minimal by comparison. Accordingly, it will be possible for only a very small fraction of the staff to remain in the civil service — probably not more than 100 to 200 of almost 30,000 employed by the Department at present.

I now come to the Bill, which is divided into seven Parts. The first Part, comprising sections 1 to 8, contains general provisions. Section 1 contains the short title of the Bill and section 2 defines terms used in the Bill. Section 3 contains the usual provisions about laying of orders and regulations made under the Bill before each House of the Oireachtas.

Section 4 provides for application of [1565] standard penalties to persons guilty of offences under the Bill as enacted. Section 5 empowers the postal and telecommunications companies to bring and prosecute summary proceedings in respect of offences under the Bill as enacted and in respect of offences under Post Office Acts, Telegraph Acts, Savings Bank Acts and other Acts relevant to the day-to-day operation of postal, telecommunications and savings services. The type of offences involved are interference with the mail, obstruction of post office business or staff, unauthorised disclosure of the content of postal or telecommunications messages, fraudulent use of the telecommunications system, breaches of the exclusive privilege of either company and so on. The Minister for Posts and Telegraphs may also bring proceedings under the section in respect of breaches of either company's exclusive privilege.

Section 6 provides in accordance with standard practice that the expenses incurred by the Minister in the administration of the Act will be borne by the Exchequer. Sections 7 and 8 provide for the repeal and amendment of the various enactments listed in the Third and Fourth Schedules to the Bill. In addition, section 8 empowers the Minister to adapt any enactment as necessary to give full effect to the assignment of functions under the Bill as enacted. He must do so by order, such orders being laid before both Houses of the Oireachtas under section 3. The consent of the Minister responsible for an enactment which he proposes to adapt must also be obtained under the section.

Part II, comprising sections 9 to 36, deals with the establishment of the two new companies, An Post and Bord Telecom Éireann. Section 9 requires the Minister, after consultation with the Minister for Finance, to have the two new companies registered and to nominate the vesting day of the companies.

Section 10 provides that the names of the two new companies shall be An Post and Bord Telecom Éireann and that they may dispense with the use of “limited” or “teoranta” in their titles. It also lays down the maximum authorised share capital of [1566] each company. This section together with sections 18, 27 and 29 covers the main elements of the financial arrangements decided on by the Government for the two new bodies. I will deal with this question in a composite form when I have dealt with all the sections in this Part of the Bill and before I move on to Part III.

Section 11 lays down that the memorandum of association of each company must be consistent with this Bill when enacted and be subject to the approval of the Minister for Posts and Telegraphs and the Minister for Finance.

Section 12 lays down the principal objects of An Post which it must include in its memorandum of association. These are to meet the industrial, commercial and social needs of the State for efficient postal services and to provide a money and postal order service and counter services for the company's own business and for Government. It also has the object of providing consultancy services at home and abroad. The principal functions of Bord Telecom Éireann as laid down in section 14 are to meet the industrial, commercial and social needs of the State for efficient telecommunications services and to provide consultancy services at home and abroad.

Sections 13 and 15 contain the duties of the two companies in relation to financial matters. They must pay their way and their charges must be kept at the minimum consistent with meeting approved financial targets. Approved financial targets will be formulated by the Minister for Posts and Telegraphs in consultation with the companies and with the consent of the Minister for Finance, under section 104(5) of the Bill. These targets will be settled in the context of the companies' rolling development plans normally covering a period of five years.

Section 16 provides that the articles of association of the two companies must be consistent with the Bill as enacted and must be approved by the Minister for Posts and Telegraphs and the Minister for Finance and, where appropriate, the Minister for the Public Service. The articles must contain specified provisions about the number of directors, appointment and remuneration of directors and [1567] appointment of an auditor. These are standard in the case of a State-owned company. The section also requires each company to set up machinery for negotiation of pay and conditions of service of staff and that the approval of the Ministers for Posts and Telegraphs and Finance will be necessary for investment in any other undertaking. Under section 17 no changes can be made in the memorandum or articles of association of either company except with the prior approval of the same Ministers and the Minister for the Public Service where appropriate.

Section 18 requires the two companies to issue shares to the Minister for Posts and Telegraphs in consideration for assets being transferred to them. I will deal with this in detail later on.

Sections 19 to 25 contain routine provisions about shares in the companies. Under section 19 one share in the share capital of each company must be issued to each subscriber to the memorandum of association of that company, the cost of such shares being borne by the Exchequer. Section 20 prohibits the issue of shares, except those provided for in the Bill, except with the consent of the Minister who must consult the Minister for Finance. The Minister may take up shares in the company and exercise the normal rights of a shareholder under section 21.

Section 22 provides that the cost of any shares acquired by the Minister will be borne by the Exchequer; that the Minister for Finance may borrow money to meet such costs; that such borrowed money must be paid into the Exchequer and that the cost of this borrowing would be a charge on the Exchequer. These sections are enabling only. It is not envisaged at present that there will be any issue of shares in either company except those provided for in the Bill. The two companies will be wholly State-owned. Should it be decided at some future date to have a public issue of shares in either company, amending legislation would be proposed to increase the authorised share capital of the company in question.

Section 23 requires persons who hold shares in either company as nominees of [1568] the Minister to pay any dividends received to the Minister and to transfer the shares in accordance with his instructions. Any sums received from the companies by way of dividends must be paid into the Exchequer or disposed of for the benefit of the Exchequer under section 24.

Sections 25 and 26 deal with borrowing by the companies. They are on standard lines. Under section 25 the approval of the Minister for Posts and Telegraphs and the Minister for Finance will be required by the companies for borrowing for capital purposes, an upper limit for such borrowing being laid down. Section 26 empowers the Minister for Finance to guarantee borrowing by either company. Similar provisions can be found in the legislation dealing with other State-sponsored bodies.

Section 27 provides enabling power for the Minister for Finance to provide an amount not exceeding £50 million for postal capital works and to make grants to An Post of an amount not exceeding £20 million for current expenditure in the first three years after the vesting day.

Section 28 contains a standard provision that moneys becoming payable by the Minister for Finance under the two foregoing sections, 26 and 27, will be advanced from the Central Fund. Section 29 lays down the amounts to be provided for each company from the Central Fund for working capital purposes.

Section 30 and 31 deal with the furnishing by the companies of annual reports and accounts which the Minister must lay before each House of the Oireachtas. These sections are also on standard lines except for one innovation. Under section 31 both companies will be required to include in their annual reports information about the cost effectiveness of their operations in a form to be decided by the Minister in consultation with the companies and with the consent of the Minister for Finance.

Section 32 deals with employee directors. In addition to providing that one-third of the directors of each company must be persons elected in accordance with the provisions of the Bill as enacted, the section deals with the period of [1569] appointment of these directors, filling of casual vacancies and specifies that elections must be held within 12 months after the vesting day, or later if this is agreed jointly by the company and recognised staff unions and associations, and that subsequent elections must be held every three years.

The procedures for the holding of elections are set out in detail in Part I of the First Schedule to the Bill. The provisions are on the same general lines as those applicable under the Worker Participation (State Enterprises) Act, 1977. Section 33 is allied to section 32. It provides that employee directors will receive the same remuneration as other directors and that their pay as employees will not be affected by their part-time directorships of the companies.

Section 34 provides for disclosure by directors of either company of certain interests. Section 35 contains the usual prohibition on any member of either House of the Oireachtas or of the Assembly of the European Communities being a director of either company. It also provides that, if a member of the staff of either company is nominated for election or becomes a member of the Dáil, the Seanad, or the Assembly of the European Communities, he must be seconded without pay from his employment with the company. This too is standard.

Section 36 provides for the appointment, as Chief Executives of the companies, of persons serving as Chief Executives of An Post and An Bord Telecom immediately before the vesting day.

As promised, before moving on to Part III of the Bill, it is appropriate that I should comment in a fair amount of detail on the financial arrangements proposed for the two new bodies. But before doing so there is one financial aspect of the reorganisation which is not dealt with in the Bill to which I would like to refer. That is the question of superannuation.

The staff of the Department of Posts and Telegraphs who will be transferred to the State-sponsored sector under the reorganisation are civil servants whose superannuation is governed at present by the Civil Service superannuation code. The outgo on pensions of former employees [1570] of the Department in 1981 amounted to £11.9 million and the provision for 1982 is £14.3 million. The cost is borne on the Vote of the Department of Posts and Telegraphs.

An up-to-date actuarial investigation was carried out recently to determine the pension liability in respect of existing and former staff of the Department. The findings were that the capital liability in respect of pensions of former employees of the Department amounts to almost £78 million and the capital liability in respect of superannuation benefits applicable up to 1982 of staff of the Department to be transferred to the State-sponsored bodies amounts to about £311 million. It would be normal practice under the Civil Service superannuation code for the Exchequer to accept liability for this.

However, the proposed transfer of the staff of the Department of Posts and Telegraphs to the State-sponsored sector is unique in two respects: its scale, and the fact that the revenue earned by the Department from postal and telecommunications services has traditionally met all or most of the costs of running the Department including the cost of pensions of former civil servants who had been employed in it. If normal procedures under the superannuation code were followed, there would be a heavy and continuing draw on the Exchequer as from the vesting day, in respect of pensions of existing retired Post Office employees and in respect of the pre-vesting day service of transferred staff who retire after the vesting day.

It is obviously desirable to avoid this immediate drain on the Exchequer particularly in present financial circumstances. Accordingly the Government have decided that the Exchequer will accept liability for existing pension costs and the accrued superannuation benefits of staff to be transferred to the new bodies on a contingent basis. The arrangements will be as follows.

The two companies will be required to make provision only to cover superannuation liability in respect of post-vesting day service of the staff transferred to them from my Department. Actuarial advice is that in the case of posts this [1571] would amount to 16.8 per cent of payroll and 16.0 per cent of payroll in the case of telecommunications. For many years these amounts will far exceed each company's share of the pensions of staff who retire after the vesting day. Rather than have all of these excess funds tied up in their pension funds, the companies will be required to bear the cost of pensions of virtually all former employees of the Department and the full cost of superannuation in respect of staff retiring after the vesting day.

The Exchequer Contingent Liability Fund will be drawn on when in any year the pension outgo of either company could not be met from its pension fund. Actuarial advice is that this situation is not likely to arise for about 30 years assuming that there is no significant reduction in the number of staff employed by either body.

This proposal is fair both to the companies, to the Exchequer and to the general taxpayer who would otherwise have to bear the cost of Exchequer contributions in respect of superannuation benefits. It is to be expected that by the time the Exchequer Contingent Liability Fund is being drawn on, probably in about 30 years or so, both companies will be paying dividends to the State which should offset, in whole or in part, the Exchequer contributions towards the pension costs. The proposal also safeguards the position of the staff.

One final point. The annual provision which the companies will be required to make in respect of superannuation which, as I have said, represents 16.8 per cent of payroll in the case of posts — somewhat larger because of the age grouping — and 16 per cent in the case of telecommunications compares with 9.5 per cent of payroll provided for in the Post Office Commercial Accounts at present. The net effect of the higher provision in respect of pensions to be made by the companies is that their projected outturn for 1982 is less favourable than it would be if the existing provision were maintained. I will return to this aspect later.

So much for the pensions aspect. As [1572] regards other financial aspects, the Posts and Telegraphs Review Group Report and the Government White Paper on the reorganisation contained certain guidelines.

In their report, the Review Group recommended that the capital structure of the new telecommunications company should be appropriate to a commercial enterprise; that it should recognise the major development needs of the new organisation and be designed to provide a balance sheet with sufficient equity to enable it to attract debt capital at home and abroad. Their terms of reference did not require the group to deal with this question so far as the postal service is concerned. The White Paper recognised the need for a postal development programme and the fact that it was likely to be some time before the postal service would be in a position to finance the investment needed for such a programme. It was stated that it was proposed to make capital available from the Exchequer for this purpose and that the form in which this capital would be made available would be dealt with in the draft legislation.

In the case of telecommunications, the White Paper recognised the need for continued large injections of capital into the service. However, it stated that the telecommunications company would be in a more favourable position than the postal company because of the unfilled and expanding market for telecommunications facilities; that the company should be in a position to generate a considerable amount of the money required to finance its development programme from its own resources within a relatively short period and that it should not require further advances from the Exchequer.

The Government have accordingly decided on the following financial arrangements for the two companies. Taking the postal company first, it is proposed that the assets appropriate to the service which are valued at about £30 million based on current costs at end 1981 will be assigned to the company in exchange for shares equal in nominal value to the value of the assets. As provided for in section 18 the initial capital [1573] structure of the company will accordingly consist of 100 per cent equity capital.

This does not involve a draw on the Exchequer. Funds for investment in the postal services were met from the Vote of the Department of Posts and Telegraphs so that postal assets are debt free.

Under section 29 of the Bill, it is proposed to provide working capital not exceeding £8.5 million for the company in exchange for shares equal in nominal value to the amount provided. £8.5 million is the estimated working capital required by the postal service in 1982. The amount actually provided will depend on the net current assets of the service on the vesting day. This may be less than £8.5 million but it will not be more than this figure. This does not involve a new liability for the Exchequer nor will it involve a net draw on State funds. It has always been the practice to meet the working capital requirements of the postal and telecommunications services from the Exchequer on a non-cost basis. The value of the net current assets on the vesting day will cover the Exchequer liability in regard to the working capital.

Projections of the financial outturn for An Post have been prepared assuming fairly optimistic growth in mail volumes over the 5-year period starting on the vesting day, that further increases in pay and in charges will no more than keep pace with the rate of inflation, taking one year with another and allowing for a provision of 16.8 per cent in respect of superannuation as compared with 9.5 per cent provided for in the Post Office Commercial Accounts at present. On this basis the company would be in a loss-making situation for about four to five years before making any provision to finance development works.

To put this in perspective, it must be remembered that the commercial accounts for the service have shown large deficits for the last few years. The recent increase in charges was designed to ensure that the service would break even this year. The main reason for the deficits projected now is the higher provision in respect of superannuation which, as I mentioned earlier, is based on actuarial [1574] advice and represents the amount needed to cover the company's liability in respect of service of staff after the vesting day.

On the face of it, the obvious solution would be to increase charges further to meet the projected deficits. However, there is a limit beyond which increases in charges become counter productive. While postal traffic had not been unduly sensitive to price increases in the past, there was a significant fall-off in traffic after the increases introduced in October 1981 and the recent increase is likely to prevent any quick recovery. Further increases over and above the rate of inflation in the future might well result in a situation of diminishing returns. Moreover the present level of charges is higher than in most if not all countries with which we are competing in export markets. The company will have to look to other means than rate increases to get back into a profitable position. These include improving the quality of service in order to attract higher mail volumes, more cost-effective operations, imaginative marketing, acquisition of new profitable business, and so on, but it would be unrealistic to expect the new company to achieve instant results.

Accordingly the Government have decided to provide enabling power for the Minister for Finance to make an amount not exceeding a total of £20 million available from the Exchequer by way of grants to meet current expenditure for a period of not more than three years of a five year development programme. The extent to which grants will be made available to the company under this enabling power will be decided by the Government in the light of a five year development or corporate plan which the company will be expected to produce at the earliest possible date. I will return to this later.

It will be clear from the foregoing that it would be very difficult for the company to arrange for financing of a development programme itself. This was recognised in the White Paper. Accordingly the Bill contains enabling power to make available not more than £50 million from the Exchequer for postal development, either in exchange for shares in the company [1575] or by loan or a combination of these. The amount that will be provided by the Exchequer under this enabling power and the method of financing will be decided by the Government in the light of the five year plan to which I referred earlier. It is expected that this plan will contain details of pricing and marketing policies; development projects proposed, the capital costs involved and the return expected from such investment; proposals designed to gain new profitable business, to improve the quality of the service and to increase mail volumes and the strategies designed to achieve the full economic viability of the service within a period not exceeding five years.

To sum up, the Government recognise that there is a strong case for providing some assistance for the postal service during an initial five year development period. When a development plan is produced by the company the enabling provisions in section 27 of the Bill will be activated to provide the assistance deemed necessary and practicable by the Government.

Lest the foregoing might be interpreted as indicating a lack of confidence in the potential of the postal service, I would like to place on record my conviction that the service has considerable potential for profitable development. My meetings with An Post and the chief executive have convinced me that this is so. Developments in communications technology may pose a threat to mail volumes in the future. However this threat if it materialises can damage the service only if An Post does not win a proportionate share of the market in services made possible by the new technology. Moreover many postal administrations are now optimistic about the prospect of growth in mail volumes at least for the rest of this decade. Some have achieved remarkable growth in recent years and are planning for continuing growth. All these have been studied by the board. The prospects in this country are potentially quite favourable. We have an increasing population and a potential for further economic development, [1576] while existing levels of posting are relatively low compared with other developed countries. I have repeated this a couple of times already and this will show the importance attached to it. The countrywide network of post offices is also a very valuable asset. Given the more favourable environment which a State-sponsored company offer, there is no reason why the postal service here should not be a profitable venture within a relatively short period. I will go on now to discuss the financial arrangements for Bord Telecom Éireann.

In the case of telecommunications we are dealing with a different type of service. It is highly capital intensive. The value of telecommunications assets at the end of 1981 amounted to about £660 million based on historical costs and £1,080 million at current costs. By the end of 1982 the current value of the fixed assets is expected to reach over £1,350 million. Some £250 million of this amount will have been financed by way of loan or leasing arrangements with Irish Telecommunications Investments Limited by the end of 1982. The balance of the assets were financed over the years by of repayable advances made available by the Exchequer under the Telecommunications Capital Acts, 1924 to 1981.

Repayment of and interest on the advances was provided for in the annual Vote of the Department of Posts and Telegraphs. The nett sum outstanding at the end of 1981 amounted to a total of £630 million and this should reach about £710 million by end 1982. The repayment and interest charges for 1982 is £82 million which will increase to £96 million in 1983.

As in the case of the postal service, working capital of not more than £130 million will be made available from the Exchequer under section 29 in exchange for shares in Bord Telecom Éireann equal in nominal value to the amount provided but this will not involve a net draw on the Exchequer. The net current assets of the service in 1982 which are estimated at £130 million will be available to offset the Exchequer liability.

The total assets of the service, fixed and current, should amount to about [1577] £1,480 million at end 1982 of which some £495 million will be debt-free. Of the remaining £985 million, £710 million represent Exchequer loans and £275 million represent loans with accumulated interest charges negotiated by Irish Telecommunications Investments Limited. If the debt-free assets only were assigned to Bord Telecom Éireann in exchange for shares in the company, the debt-equity ratio at the end of this year would be 2:1. This would involve no change in the method of financing the service up to now. Development has been financed by repayable loans, the repayment of the loan charges being a charge annually on the Vote of my Department. I mentioned already £82 million for this year and £96 million for 1983. The commercial accounts of the service have been drawn up on the same basis. A 2:1 debt equity ratio would not be unsatisfactory for a State-sponsored company operating a public monopoly and having available to it a State guarantee of its borrowing as provided for in the Bill which is before the House.

However, there are the facts that continued heavy capital investment will be needed for development of telecommunications services within the foreseeable future and that charges on the £985 million loan capital would be a continuing heavy drain on current income, as would the increased pension provision which I mentioned earlier. The service would probably be in deficit for a number of years and, as Bord Telecom Éireann will be expected to operate on the basis that no further assistance will be available to it from the Exchequer, it would have to borrow to finance these deficits as well as the heavy borrowing needed to meet development works.

Having considered the position, the Government decided that it would be undesirable to set up the company under such arrangements. It would be contrary to the recommendations of the Posts and Telegraphs Review Group and to the guidelines laid down in the White Paper on the reorganisation. It is accordingly proposed to transfer £355 million worth of assets covered by Exchequer loans plus the debt-free assets to the company in [1578] exchange for shares equal in nominal value to that amount. This will give Bord Telecom Éireann a debt-equity ratio of about 1 : 1.35 at the end of 1982. This will be a much more favourable financial structure than has applied to the service in the past. It will involve a reduction for the company of £48 million in current expenditure in 1983. £48 million is exactly 50 per cent of the £96 million I mentioned a moment ago and £355 million is 50 per cent of the £96 million I mentioned. The loan charges on the £355 million will be a charge on the Exchequer but the company will be required to pay dividends in respect of State shares which over a period of, at most, ten years will at least equal the loan charges. Thereafter the annual dividends will be expected to be at a level which will provide a net gain to the Exchequer in return for the valuable State assets being assigned to Bord Telecom Éireann under the reorganisation. The amount of dividends to be paid will be decided by the Minister for Posts and Telegraphs and Finance in consultation with the company. They will form part of the financial targets which will be laid down in accordance with section 104 of the Bill to which I will refer in greater detail later. It is a very important and new kind of section.

The potential gains to the Exchequer are considerable. Apart from the net gains expected from dividend payments, the company should be in a position to fund from internal sources a rapidly increasing proportion of the capital needed for development purposes. This would result in a proportionate reduction in the overall public sector borrowing which would otherwise be necessary. Because of the improved environment available to it, Bord Telecom Éireann should be in a position to achieve more rapid development and improvement of the service than has been possible for my Department owing to the constraints inherent in management of a commercial enterprise within a civil service structure. Users of the service will reap the benefit from this.

I hope Deputies will agree that the Government have achieved a reasonable [1579] compromise between the desirability of launching these two major new State-sponsored bodies under the most favourable financial arrangements practicable and the constraints of the present budgetary position.

Part III of the Bill, comprising sections 37 to 58, contains a number of miscellaneous provisions which apply to both companies.

Section 37 provides for the vesting of land and buildings appropriate to the postal and telecommunications services in the two new companies as from the vesting day. Section 38 provides for vesting of other property appropriate to the two services in the companies. I have already dealt with the financial basis for transfer of these assets.

All rights and liabilities of the Minister under any contracts or commitments made by him or by others on his behalf in relation to the functions being assigned to the companies will be transferred to An Post and Bord Telecom Éireann under section 39. Examples of typical contracts or commitments covered by this section would include contracts for purchase of equipment or for provision of services, commitments to purchase sites, or to provide facilities such as telephone kiosks or letter boxes.

Section 40 provides that vesting in the companies of property in accordance with the provisions of the Bill as enacted will be exempt from stamp duty and section 41 empowers both companies to acquire land compulsorily subject to compensation and with provision for arbitration in the event of a dispute. The same type of provisions can be found in other similar legislation. Section 41 also protects the companies against compulsory acquisition of their land by others and it provides that neither company may acquire State lands or wayleave rights over State lands except with the consent of the appropriate Minister.

Sections 42 and 43 provide a statutory guarantee for the staff to be transferred that the pay, conditions and superannuation provisions applicable to them immediately before the vesting day may not be worsened in their new employment. Section [1580] 42 also provides that existing pay and conditions will remain unchanged until such time as they were varied by the companies following consultation with recognised staff unions and associations and section 43 requires the companies to prepare superannuation schemes for the grant of pensions, gratuities and other allowances for their staff. These schemes are subject to the approval of the Ministers for Posts and Telegraphs and the Public Service. This is standard in the case of pension schemes of State-sponsored bodies. The two sections contain other provisions of a technical nature which it is not necessary to go into at this stage.

Section 44 empowers the trustees or managers of the Rowland Hill Benevolent Fund to provide for members of the two companies from the fund. This fund which is peculiar to the Department of Posts and Telegraphs is funded by subscriptions from the staff. It helps out members of the staff and their dependants who are in need. A second benevolent fund — the Post Office Sanatoria Fund — is covered by the section also should it be necessary for the managers to avail of the enabling power in it.

Sections 45 and 46 deal with the establishment and functions of users' councils for each of the two services. They are on the general lines envisaged in the White Paper. These in turn were based broadly on the functions of the existing Post Office Users' Council who were set up in 1974. There is one important modification. The existing council have no functions in relation to charges and it was envisaged in paragraph 7.6 of the White Paper that the new statutory councils would not have any function in relation to charges either. However, I am proposing that under section 46 the councils would have the function of considering charges as appropriate. They would also have the function of advising the Minister or the companies on any matter in respect of which he or the companies may seek advice. My intention is to seek the advice of the two statutory users' councils on applications for increases in charges by the companies. I will comment further on this when I come to section 49.

[1581] The other detailed provisions about the two councils contained in these two sections can be discussed in Committee.

Section 47 requires the Minister to set up statutory interim boards for postal and telecommunications services when this Bill is enacted. In effect what is involved is conferring statutory status on the two existing non-statutory interim boards, An Bord Poist and An Bord Telecom. They will have the same functions as they have at present, that is, to prepare for the change over to State-sponsored status but the Minister may delegate other functions to them. There is no legal basis for delegation of any functions to the present non-statutory boards so that legally the Minister is responsible for all of their actions. It is clearly desirable in the interim period between enactment of the legislation and the setting up of the two companies that the Minister should have no function in regard to, or responsibility for, decisions by the boards in relation to matters applicable to the day-to-day management of the new companies which will be their sole prerogative after the vesting day.

Section 48 contains novel provisions. It deals with a situation in which the Minister considers that in the public interest and by virtue of the statutory responsibility of either company in relation to provision of postal and telecommunications services, certain services should be provided or maintained even though they are loss-making but the company's interpretation of its statutory obligations is that the service in question need not be provided or maintained. In this situation the Minister with the consent of the Minister for Finance may direct the company to provide the service and the company must comply. However, if the company demonstrates to the Minister that the services are loss-making over a period of at least 12 months and that provision for these losses was not allowed for in any previous increase in charges, the Minister must certify that the service was provided or maintained under a direction issued by him and this certificate would automatically entitle the company to increase its charges to make up for the losses involved. While the section [1582] does not go as far as recommended by the Posts and Telegraphs Review Group, it does establish the principle that the company should not be required to carry loss-making services provided by direction of a Minister without compensation in the form of an increase in charges.

Section 49 provides that the Restrictive Practices Act, 1972 and the monopoly provisions of the Mergers, Take-overs and Monopolies (Control) Act, 1978 will not apply to activities carried out by either company under the exclusive privileges granted to them under sections 60 and 83. It also provides that the Prices Acts will not apply to the companies. Traditionally, statutory functions of State-sponsored bodies have been exempt from all the provisions of the Restrictive Practices and Mergers, Take-overs and Monopolies (Control) Acts. For example, provision of transport services provided by CIE, supply of electricity and so on are exempt. It was decided by the Government that, in the interests of consumer protection, a blanket exemption of this kind should not be granted to the State-sponsored postal and telecommunications bodies. Instead, the exemptions will apply only to the exclusive privilege portion of their activities and they are not being given any exemption from the mergers and take-overs provisions of the 1978 Act.

The Government also decided that the Prices Acts should not apply to the companies. This does not mean that increases in charges will not be controlled or will not have to be fully justified. Sections 67 and 86 provide that increases in charges will be subject to the consent of the Minister for Posts and Telegraphs. I have already referred to the fact that the users' councils will be empowered to consider proposals for increases in postal and telecommunications charges for services within the companies' exclusive privileges. The companies will be required to supply information on request to the councils about any plans they may have in this regard under section 46 and, as I said earlier, my intention is to seek the advice of the users' councils on any proposals by the companies for increases in [1583] charges under their schemes.

Before leaving this question, I would like to explain why it was decided not to adopt the proposal in the White Paper that the companies would be subject to the Prices Acts. During the initial development period of about five years, Bord Telecom Éireann will be involved in very heavy capital expenditure. An Post may have difficulty in breaking even during that period. Financial performance targets for both companies will be set by the Minister, in consultation with the companies and with the consent of the Minister for Finance. In the case of Bord Telecom Éireann this will include from the outset the rate of dividends to be paid on the State shares in the company. The criteria normally used by the National Prices Commission for determining whether or not to recommend an increase in prices would not necessarily be compatible with the special requirements applicable in the case of the two new companies. Accordingly, the Government decided that the Prices Acts should not apply to them. However, scrutiny of proposals for price increases will be no less rigorous as a result. As I mentioned earlier, the proposal is that the Minister for Posts and Telegraphs will have the benefit of the advice of independent bodies—the users' councils—in the matter.

Section 50 empowers the Commissioners of Public Works to undertake work at the request of either company. Traditionally the commissioners have undertaken work primarily for the civil service. They will inevitably have some building work on hands for both services on the vesting day. The purpose of section 50 is to put beyond doubt their legal power to complete these works and to perform additional work for the two companies should they be requested to do so. The section also ensures that when working for either company the commissioners will not be regarded as a State authority for the purpose of the Planning Acts.

Section 51 provides that property vested in An Post and Bord Telecom Éireann will be subject to rates in the usual way and section 52 is a transitional provision which will enable the two companies [1584] to start off with their motor fleet taxed. Section 53 provides that as from the vesting day claims in respect of loss or injury against or by the Minister which are pending on that day will be deemed to be claims against or by the two companies and section 54 provides that An Post or Bord Telecom Éireann as appropriate will be substituted for the Minister in any legal proceedings in which he is involved on the vesting day, in relation to the functions being assigned to the companies. Under sections 55 and 56 notices, certificates, licences and so on, issued by the Minister which are extant on the vesting day and which relate to functions of the new companies will be deemed to have been issued by the appropriate company. Section 57 contains similar provisions in regard to consultations with planning authorities under the Planning Acts.

Section 58 provides the companies with relief from the full application of the Planning Acts in the case of development works commenced in the first two years after the vesting day. The companies will not require planning permission in respect of such works but they will be obliged to consult the appropriate planning authorities who will have power to object to the proposed works or to attach conditions to their execution. The Minister for the Environment will have power to settle any unresolved differences between the companies and the planning authorities and to attach other conditions to the execution of the works.

The reason for this concession is that, in common with development works of Government Departments generally, development works for postal and telecommunications services have not been subject to normal planning requirements up to now. It would be contrary to the spirit of the reorganisation, which is designed to provide a more favourable environment for rapid development of postal and telecommunications services, if An Post and Bord Telecom Éireann were to be subjected to the full rigours of the Planning Acts from the outset. The Government decided that a more gradual approach would be appropriate.

Part IV of the Bill, comprising sections [1585] 59 to 81, contains provisions applicable to the postal company only. Section 59 contains a definition. Section 60 provides for assignment to An Post of the exclusive privilege in regard to postal services enjoyed at present by the Minister for Posts and Telegraphs under the Postal Acts, no more and no less. The parcels service will continue to be open to competition. The section also contains a statement justifying the grant of the exclusive privilege. Inclusion of a statement of this kind in the legislation was recommended by the Posts and Telegraphs Review Group. It is envisaged that both the company itself and the Minister will have regard to this statement if the question arises of using the enabling power in section 70 or section 105 to issue a licence to a third party to provide a service covered by the exclusive privilege.

Section 61 provides for continuation after the vesting day of the existing immunity from liability applicable in the case of the postal service. There is one modification however. The section empowers the Minister for Trade, Commerce and Tourism, after consultation with the Minister for Posts and Telegraphs, to apply by order one of the provisions of the Sale of Goods and Supply of Services Act, 1980 to postal services provided within the State.

Section 62 empowers An Post not to deliver mail to a person's residence or place of business if acceptable alternative arrangements are made. The purpose of this is to have statutory backing for experimentation in alternative methods of delivering mail should An Post wish to do so. Section 63 provides for the inviolability of the mails, except where there is statutory provision to the contrary, and for immunity from prosecution of postal staff who, for example, in the course of their duties deliver mail which, unknown to them, contains prohibited matter. This does not establish a new principle but there is no explicit provision accordingly in existing law. Legal advice was that it was desirable to close the gap.

Section 64 enables the Minister for Finance to authorise An Post to provide [1586] banking services including a giro service.

Sections 65 and 66 ensure that money orders, postal orders and postage stamps issued before the vesting day will continue to be valid after the vesting day. They also contain other technical provisions arising from the reorganisation. Revenue from postage stamps and from the poundage on postal and money orders will no longer be revenue due to the State. It will form part of the income of An Post. As a result, the Revenue Commissioners will no longer have functions in relation to postage stamps, postal and money orders and it is necessary to ensure that certain sections of the Stamp Acts will continue to apply to postage stamps.

Section 67 empowers the company to make schemes providing for the charges and terms and conditions applicable to the provision of postal services but the company may make special arrangements in some cases with customers. Schemes made under these sections must be published and any increases in charges under these schemes must be approved by the Minister for Posts and Telegraphs.

Section 68 contains technical provisions about evidence as to sums due for services provided by the companies and section 69 provides that certain Statutory Regulations made under the Post Office Acts which deal with the charges and terms and conditions applicable to postal services will remain in force until the companies alter them by making new or amended schemes.

Section 70 empowers the company to issue licences to others to provide services covered by its exclusive privilege. The issue of such licences and the terms and conditions applicable to them will be subject to the consent of the Minister. A person whose application for a licence is refused may appeal to the Minister.

Section 71 empowers An Post to regulate the operation of the free postage scheme applicable in connection with elections. This power may be exercised only with Ministerial consent and section 72 entitles An Post to be compensated by the Exchequer for the cost of free postage in the case of elections, letters to Government [1587] Departments etc.

Sections 73 to 76 deal with collection of television licence fees and other work connected with such licences.

This work is at present done at post offices throughout the country and a sum equal to the gross proceeds after deduction of collection costs is paid over to RTE each year. On a number of occasions in the past RTE asked that responsibility for collection of television licence fees be handed over to them. RTE renewed their request recently but even if it were decided to accede to the RTE request it could take quite some time for RTE to make the necessary arrangements to assume responsibility for the work. In the meantime, the obvious solution is to retain at least for a transitional period the existing system under which sale of licences and allied clerical work is performed in post offices throughout the country. The system will be operated by An Post on an agency basis for the Minister for Posts and Telegraphs. Sections 73 and 74 of the Bill contain enabling power for delegation of these functions to An Post.

Under section 73, the Minister for Posts and Telegraphs may, by order, empower the company to issue television licences on his behalf, detect unlicensed sets, and exercise his statutory powers in regard to registration of television dealers and supply of information by such dealers. Orders made under the section would have to be laid before both Houses of the Oireachtas under section 3.

Section 74 empowers the company to prosecute persons found in possession of unlicensed sets and dealers who fail to comply with the provisions of the Wireless Telegraphy Act, 1972 while an appropriate Order is in force under section 73. Section 75 requires the company to pay over promptly to the Minister proceeds from sale of television licences and section 76 requires the Minister to pay the company for work done in connection with these licences.

Section 77 empowers An Post to determine the hours of duty of telegraph offices under its control but it must consult Bord Telecom Éireann which will [1588] have overall responsibility for the telegraph service.

Section 78 requires the Minister to appoint as a director of An Post a postmaster elected in accordance with the provisions of the Bill when enacted. Postmasters, who run the 2,000 or so sub-post offices on a contract basis, perform a crucial role for the postal service. It is fitting that they should be represented on the board of An Post. The provisions in the section are similar to those in section 32 which deals with appointment of employee directors.

Section 79 preserves the existing rights of postal staff to enter harbours and Shannon Customs-Free Airport in the course of their duties.

Section 80 contains detailed powers being assigned to An Post in relation to day-to-day management of the postal services. The powers in question are conferred on the Minister for Posts and Telegraphs at present under the Postal Acts and Statutory Regulations made down through the years under these Acts. In addition to conferring powers, the section also limits the exercise of certain powers by the company in the interests of consumers. For example, it lays down the circumstances in which An Post may refuse, detain or open mail.

Section 81 contains a number of transitional financial provisions which arise because it would be impossible with concerns of the size involved to make a clean break on the vesting day. These are mainly of a technical nature.

Part V of the Bill, comprising sections 82 to 95, contains special provisions applicable to the telecommunications company.

Section 82 contains a definition.

Section 83 assigns to the company the exclusive privilege in regard to telecommunications services enjoyed at present by the Minister for Posts and Telegraphs under the Telegraph Acts, except for provision and maintenance of telecommunications facilities in subscribers' premises for connection to the public network. The exclusive privilege in this area will remain with the Minister but section 105 provides enabling power for him to issue licences for provision of these services.

[1589] This modification of the exclusive telecommunications privilege is in accordance with a recommendation of the Posts and Telegraphs Review Group. They dealt with this question at some length in their report. They had regard to the existing practice whereby private concerns are freely permitted to supply and maintain private automatic branch exchanges — PABXs — for connection to the public network and modems for use on privately leased circuits, provided the equipment is type-approved. The group's view was that the statutory monopoly, or exclusive privilege, as it is described in the Bill, should not at any time be more extensive than is demonstrably necessary to achieve the objectives of such a privilege, that conservation of the unity and integrity of the network must be a governing consideration and that regard must be had to the risk of “cream-skimming” which is inherent if there is selective competition against a State-sponsored company which is statutorily required to provide a national service which will almost inevitably involve carrying some loss-making services. The House will understand that quite clearly in other areas as well.

They finally came down in favour of excluding from the exclusive privilege in respect of telecommunications provision of facilities in subscribers' premises. The Government announced its acceptance of this in the White Paper. Bord Telecom Éireann will of course receive a licence to provide and maintain equipment in subscribers' premises.

The section also contains a statement justifying the grant of the exclusive privilege to Bord Telecom Éireann on much the same lines as that in section 60 dealing with the exclusive privilege of An Post.

Sections 84, 85, 86, 87, 88, 92 and 95 are on broadly the same lines as the corresponding sections in Part IV which deal with the postal company. Section 84 provides for continuation of existing immunities from liability; section 85 empowers the company to issue licences for provision of services covered by its monopoly; section 86 empowers the company to make schemes covering charges and conditions applicable to telecommunications [1590] services; section 87 is a technical provision dealing with evidence as to sums due; section 88 provides for continuation after the vesting day of existing regulations dealing with charges etc; section 92 contains the powers of Bord Telecom Éireann to regulate the services and section 95 contains transitional financial provisions of a technical kind.

The remaining sections in this part of the Bill are Nos. 89, 90, 91, 93 and 94.

Section 89 provides for transfer to the company of deposits for call charges collected by the Department of Posts and Telegraphs as security for payment. Section 90 ensures continuance of any arbitration proceedings under the Telegraph Acts that may be in progress on the vesting day.

Section 91 provides enabling power for the Minister for Posts and Telegraphs with the consent of the Minister for the Environment to make regulations requiring developers of housing and industrial estates to provide such facilities as would enable telecommunications services to be provided in them in the most expeditious and efficient manner. What is involved here is pre-ducting and/or precabling of these estates. The Posts and Telegraphs Review Group recommended that such a provision be considered because of severe difficulties experienced by the Department of Posts and Telegraphs over the years in providing telephone and telex facilities promptly in new housing and industrial estates.

When the Irish Telecommunications Investments Limited Bill, 1982, was before this House, on 5 November 1981, the Minister for Posts and Telegraphs stated that the Reorganisation Bill would provide for transfer of ownership of that company from the State to the State-sponsored telecommunications company. Section 93 provides accordingly.

Section 94 penalises the fraudulent or attempted fraudulent use of the telecommunications system. This closes a gap in existing laws.

Part VI of the Bill, comprising sections 96 to 103, deals with the transfer to An Post of responsibility for day-to-day management and control of the Post Office Savings Bank and other savings services [1591] on behalf of the Minister for Finance on an agency basis.

Section 96 contains definitions.

Section 97 empowers An Post to make regulations for the control and operation of the Post Office Savings Bank but this power may be exercised only with the consent of the Minister for Finance. It also provides for continuation of existing regulations until they are amended or revoked by the company, and it empowers the Minister for Finance to require An Post to revoke or amend regulations about the Bank.

Section 98 prescribes the powers of An Post in relation to savings bank business such as deciding at which offices the business will be conducted and when. It also provides for discharge of the liability of the company when they issue a warrant or transfer an account in accordance with the regulations. Section 99 transfers to the company the existing immunity from liability conferred on the Minister under the Post Office Savings Bank Acts in respect of loss or damage arising out of the conduct of the business.

Section 100 continues the existing exemption from stamp duty applicable to cheques, warrants, etc. issued on the business of the bank and the existing exemption of correspondence between the bank and customers from pre-payment of postage.

Section 101 is a technical provision; it clarifies that supply of information for the purpose of proceedings in respect of an offence is not a breach of the prohibition on the disclosure of information about customers' deposits. Section 102 provides for continuation of proceedings in regard to disputes related to the bank and savings certificates. Finally, section 103 requires the company to pay over promptly to the Minister for Finance deposits and other moneys received for investment in Government savings schemes and confers an entitlement on the company to payment for the cost of managing these services.

Part VII of the Bill, comprising sections 104 and 105, deals with the general Ministerial powers in relation to the two services.

[1592] Section 104 empowers the Minister to issue directions in writing to either company requiring them to comply with Government decisions about policy in regard to development of postal or telecommunications services; to do or refrain from doing specified things which he considers necessary in the public interest or to enable the Government to comply with international obligations; or to perform work for a State authority. It also empowers the Minister to formulate financial performance targets for both companies with the consent of the Minister for Finance and after consultation with the company in question. Directions under the section, except those related to public order or security or to international obligations, will be issued by the Minister by way of statutory order if the company so requests.

These are novel provisions — to which I call the attention of the House — in that they contain a statutory statement of Ministerial powers in relation to postal and telecommunications services vis-á vis the State-sponsored bodies. Their purpose is to provide formally for the minimum statutory controls considered necessary in the public interest over policy aspects of these two vital parts of our infrastructure.

The provision as regards financial performance targets for the companies is also an innovation. As I stated earlier when dealing with sections 13 and 15, these targets will be settled in the context of rolling development programmes to be prepared by the companies. The development programmes will normally cover a period of five years. In fact, we are in the middle of the five-year programme and I suppose the four-year period is regarded as a suitable one. The targets will be determined following consultation with the companies and with the consent of the Minister for Finance. An Post and Bord Telecom Éireann will be required under sections 13 and 15 to so conduct their affairs as to enable them to meet their targets. I would expect the companies to include in their annual reports in due course particulars about their approved financial targets, the steps [1593] taken to achieve them and the effectiveness or otherwise of these steps.

The setting of targets of this kind has a number of advantages. It should enable An Post and Bord Telecom Éireann to plan their financial strategies and development programme in a systematic way and they and their staff should be in no doubt about what is expected of them in this area. The targets will also enable the Government to ensure, for example, that the value of the substantial assets being transferred to each company will be maintained in real terms; that an adequate return will be obtained from them and that reasonable dividends will be paid on the State shares in the case of the telecommunications company from an early date and from the postal company later on.

Section 105 is enabling. It empowers the Minister to issue licences to third parties to provide services of the kind included in the exclusive privilege being assigned to An Post and Bord Telecom Éireann under sections 60 and 83.

The rationale behind this enabling power is as follows. The Posts and Telegraphs Review Group consider that the exclusive privilege of either company should not at any time be more extensive than is demonstrably necessary to achieve the objectives of such a privilege. The objective of the grant of the exclusive privilege to An Post and Bord Telecom Éireann is to facilitate provision of efficient, cost-effective, national postal and telecommunications services. Should a situation arise in the future in which the exclusive privilege was not deemed necessary to achieve this objective, or the objective was not being achieved in the case of either service despite the existence of the exclusive privilege, under section 105 the Minister with the consent of the Minister for Finance could license another body to provide some of the services within the exclusive privilege, in competition with An Post and Bord Telecom Éireann. I stress however that this is an enabling section only and that there is no intention at present of issuing such a licence.

The section also empowers the Minister to issue licences for the provision and [1594] maintenance of telecommunications equipment in subscribers' premises which are not included in the exclusive privilege of Bord Telecom Éireann, but as I indicated earlier, a licence will be issued to the company to provide such services as from the vesting day. The section safeguards the integrity of the network by providing that licences must be subject to technical conditions which will ensure that equipment installed will be compatible with the network. These conditions will be drawn up by the Minister in consultation with Bord Telecom Éireann.

That concludes the sections in the Bill. There are also four Schedules to the Bill. The First Schedule contains provisions about the election of employee directors to the two boards and of a postmaster director of An Post. The Second Schedule contains provisions applicable to compulsory acquisition of land by either company. These are on standard lines. The Third Schedule contains particulars of Acts and Statutory Regulations which are being repealed in whole or in part — in the Bill there is a total of 125 Acts and Regulations — and the Fourth Schedule contains particulars of amendments of existing Acts and Statutory Regulations. I do not propose to comment on these at this stage. They can be considered in any necessary detail on Committee Stage.

There is one other point I wish to mention. Deputies may have seen the recommendation made by the Public Service Advisory Council in its Annual Reports for 1979 and 1980 that there should be statutory provision for a review of the structures of the new bodies after a stated period. While a statutory provision as recommended is not being included in the Bill, it is the Government's intention that the structure of the new bodies would be reviewed after a period of about five years. This review will, of course, be quite separate from any examination of the bodies by the Joint Oireachtas Committee on State-Sponsored Bodies, whose remit it is proposed to extend for that purpose.

It would be inappropriate for me to finish without paying tribute to the staff, past and present, of the Department of [1595] Posts and Telegraphs who devoted their working lives to the postal and telecommunications services. They have suffered, mainly in silence, much criticism from the public and the media over the years. Inefficiencies for which they were criticised were often due not to failures by the staff but to inadequate structures and to the inability of government at various stages to devote sufficient of available scarce resources to development of the two services.

Towards the beginning of this speech, I described the present state of the two services. While there is room for considerable improvement in both, there are many areas where efficient services, as good as the best available elsewhere, are being provided. On the telecommunications side, a solid basis for providing a fully automatic first-class service within two to three years at most, has been laid.

The fact that two services with considerable strengths, which in my view far exceed their weaknesses, will be handed over to the new companies is due almost entirely to the staff of my Department at all levels. I expect An Post and Bord Telecom Éireann to build on the strengths which they are inheriting and, with the more favourable environment and greater freedom they will have, they should be able to achieve far more rapid development of the two services than was practicable within the confines of the civil service. I look forward to their achievements in this area.

Finally, Deputies will probably wish to know when it is proposed to set up the new companies. This will, of course, depend on when this legislation is enacted. There is a consensus on both sides of the House — at least, I hope so — that the quicker the postal and telecommunication services are transferred to the State-sponsored sector the better. I would like to see An Post and Bord Telecom Éireann in operation in the autumn or within three months at most from the date on which this Bill is enacted.

There are many other points I could make but I may get an opportunity at a later stage. I wish to pay tribute to distinguished [1596] Ministers for Posts and Telegraphs who held this position and to very distinguished secretaries of the Department, some of whom not merely attained eminence in the Department but in the literary world as well.

There are other aspects of the development of the postal service, which is the older of the two, set in an historical context to which I would like to refer but I will leave it at that for the moment.

Mr. Cooney: Information on Patrick Mark Cooney  Zoom on Patrick Mark Cooney  As the Minister said in his opening paragraphs, in the ritual Irish introduction, this is an important Bill. It is important in the sense that it proposes very far-reaching changes in our postal and telecommunications services. What we must do in the course of this debate is to examine — the Minister has examined the matter in some detail and this side of the House does not need to go into it in the same detail — the reasons the reorganisation as proposed by the Minister is necessary, to consider if it is the best form of reorganisation and to consider if this Bill is designed to achieve that form of optimum reorganisation.

The first thing we must ask ourselves is whether reforms could have been achieved within the present structures and the short answer must be no. That is not just my view but is the considered view of a high-powered review body that studied the problems of our postal and telecommunication service some three years ago. They came to the conclusion it would not be possible to make reforms within the existing structures in order to achieve the efficient services we want. It was their view that the best type of structure was the State company as proposed in the Bill.

I agree with that. I do not think the civil service structure, with its emphasis on personal accountability and a hierarchical form and the procedures that have been there for a long time—which because they have a long history automatically assume a certain rigidity — could be reformed or altered without traumatic administrative consequences so as to produce efficient postal and telecommunication services, bearing in mind that they are essentially commercial and [1597] have to be commercial. I do not think the existing civil service Department could be reformed: that option has to be ruled out. I think it is common case that these services could not have been handed over simpliciter to private enterprise. There are very valuable monopolies involved here, monopolies that have potential for great profit, and I think that profit when it is based on a monopoly should inure to the benefit of the Exchequer. That is not to say that private enterprise should be totally excluded from participation, either in terms of its contribution by way of personnel and subsidiary activities or financial contribution, but provision should be made for private participation as the situation evolves. The State companies proposed permit for private involvement later on as the scene develops.

To put it briefly, I do not think there was any alternative when one considers the entire scene but to move away from departmental control in the running of the services to something else. The something else proposed here, and which was proposed by the review group, is the proper one. We have to consider if the State group as proposed to be set up will achieve the ends that we all want. The ends that we want to achieve are to have a postal and telecommunications service that is efficient, and one that is efficient has to comply with certain requirements. It must be most efficient in terms of cost; it must be most efficient in terms of the levels of service which it gives—and there could be conflict between these two norms of efficiency, if I may put it that way and it must be efficient in terms of the job satisfaction and the morale of those working in the services.

These services at the moment have been criticised on the basis of cost. There have been recent increases, as the Minister knows, on both the postal side and the telephone side. The public wonder whether these costs are the most efficient costs that could be charged to them, and they suspect that they are not. They might very well be right. Very often these costs are increased merely to procure added revenue in the context of the entire Exchequer position and the important [1598] position which a large Department like Posts and Telegraphs bears in that context. The public could be right to be suspicious about the efficiency element, about whether they are getting good value for these increased charges and costs and whether efficiency is related to the actual cost or whether it is now possible at all in the context of a departmental structure to cost accurately the charges that go into the end price which the consumer has to pay. It is extremely difficult, if not impossible at this stage, to do that and we can only do that when we get into a commercial area.

The level of service has disappointed many people both on the postal side and on the telecommunications side. There are a myriad of reasons for this. Poor staff morale is one. The Minister paid tribute to the staff, and undoubtedly very many members of the staff of the Post Office are entitled to have that tribute paid to them. They suffer the frustration of having to deal with a justifiably complaining public and that has damaging effects on their morale. Also the level of management and the structure of line management has not been such as to procure the best return from staff, and the indolent amoung the staff have had perhaps a greater chance to express themselves because the energetic among the staff have not had the option to be rewarded and recognised, as would happen in a commercial company. There have been difficulties in that area—we have seen it reflected in recurring industrial difficulties—and this has interfered with the level of service the public have been getting.

On the postal side one consequence is that many actual and potential customers have been lost to the private couriers. It will be one of the major tasks of the new postal board to recover from the private sector those customers that have been lost and who are getting efficiency both in terms of a high degree of efficient service and in terms of what they obviously consider to be good value, although we know from information available to us that they are paying considerably more than the charges that would be charged by the Post Office. [1599] Obviously there will be a great challenge to An Post and the staff of the Post Office in regard to whether they will be able to hold the business they have, expand it and possibly recover some of the business that has been lost in the recent past. I am confident that they will be able to meet that challenge.

While there have been in parts of the Post Office recurring industrial disputes and signs of a morale malaise, I am pretty confident that this is not widespread and that where we do see it it is not that deep. There are many people in the Post Office who are not too anxious to take on the challenge being posed to them by private sector competition. They are aware that to take on that challenge they will have to be prepared to offer the same service and incur the same charges as the private sector and that may mean making themselves available above and beyond the level of services they provide at the moment. I see no reason why the challenge should not be met successfully. I have every confidence in the people in the Post Office to do that. They are well aware that they are working in what is the oldest public utility of all with great traditions of service. It is a matter of great pride to have the mail on time and to deliver it through difficult circumstances and provide the service that the public require. I have no doubt that that tradition will be very important and will be continued in the new board.

While there are some people who would be pessimistic about its commercial potential, I do not share that pessimism. Undoubtedly in its early years it will be in a loss-making situation, but I have no doubt that this can be turned around significantly. Also it has potentially a huge asset in so far as it has retail outlets throughout the country, a great many of them in high street locations, in prime shopping locations. The initiative and novel approach that is needed to make optimum use of these and to turn them into useful sources of revenue for An Post is there. Undoubtedly, one problem that will arise is that when these outlets are availed of in retailing sense people in business already may feel that [1600] this is the State going into competition with them. There will be pressure on the Minister to restrict the State company competing with private enterprise. At this stage I would be inclined to say let the State compete. But saying that I would have to offer the reservation that the competition must be fair. If private enterprise is entitled to compete with the State in taking its business away through the couriers, the State in its operations is quite entitled to compete with private enterprise, provided the competition is fair. If this is the case the end result will be to benefit the consumer and the net result will be more efficiency and that in turn will be for the national good as a whole. There are difficulties but there is great potential.

I do not have to spell out the potential on the telecommunications side. It is self-evident. The technological developments mean that an immense range of sophisticated services can be offered both to the business sector and the private sector. Technological services available within the country and through worldwide international connections have to be provided and will be availed of and that will be profitable. Up to now the service has been inadequate mainly because there has not been sufficient investment over the years. The investment has been very heavy now for quite a number of years and it is only now that it is beginning to have an effect in so far as the individual using the telephone perceives. Of course the commercial potential is immense.

But there is one little cloud on the horizon and that is the pretty high rate of refusals by people who have applied for telephones who when they see the charge for connection say “No, I do not want a telephone”. The Minister might tell us what the present ratio of refusals is. It would be interesting to see that. I would perceive that as an indication of consumer resistance to too high a charge for the services. People may decide it is not worth paying anything from £200 to £400 to have a telephone installed and will do without. It is possible that in the future development of the telephone service the [1601] connection charge may be substantially reduced or removed altogether. It does not make commercial sense to charge when you are trying to sell a service, because you get your return from the charges for the service rather than for installing it. It is understandable, at this stage when capital is scarce and so much development is needed, that the State should make these installations charges to get back some part of their capital, but that is now producing a certain element of consumer resistance and that capital recoupment may not be available for the new board in the future.

The charges to be asked by the new board and the level of service in terms of repairs and installations will be critical factors. We want to ensure that the level of charges is reasonable and that the service is good. What we have to consider is if these new boards are the best way to achieve these desirable objectives. Of the various options considered — the reform of the Department, a private enterprise, a State corporation or a State company — what we have arrived at here, which is the recommendation of the review group, a State company, is the best, provided — and this is very important — its structure and financial base are adequate to allow it to operate commercially and efficeintly. I have some worries about the financial provisions in this Bill.

The first area of reservation — and I will deal with them in the order in which the Minister dealt with them — is the question of pensions. What is proposed here smacks of sleight of hand, and is typical of some of the budgetary proposals we have had from the other side of the House in the recent past. The two new companies are being asked to pay and take over the State's present pension obligations. At some future date these new companies will have the pension liabilities as and from the vesting date and must start providing money now to meet those future liabilities. The State is asking the company to pay over the money they should be setting aside to meet future liabilities. In the future they may not be able to meet their liabilities because the State is taking this money on a current basis and the State says it will [1602] set up a contingency fund to meet any shortfall. The Exchequer tells the new companies they are no worse off if they pay the State now because they will still have to provide this money. In my view they are worse off because if they were providing this money to meet their future liabilities, it would be invested in a pension fund and the produce of that fund would ultimately be in ease of a proportion of the current expenditure they would have to lay off on pensions.

It is wrong that the State should ask these companies to take over what was the State's obligation. The Minister argued that the State has been paying its obligations out of current revenue, but if the State wants to do it that way that is its business. Obviously the national Exchequer can approach its pension liabilities from a different basis than a commercial organisation. We are setting up two commercial organisations and they should be allowed to operate according to commercial criteria.

The review group emphasised in their recommendations that there should be an actuarial assessment to determine the present liability for pension commitments so that the new statutory company should not inherit an unprovided for liability, but as I read it, that, in essence, is what is happening. The new companies are being asked to provide for the State's current pension liabilities for existing pensions for pensioners up to the date of vesting and, of course, they will have to take on their new obligations as from the date of vesting. That is a bad start for the two new companies and is a clog on their commercial viability from day one.

With regard to the financial arrangement for An Post, I am glad to see their assets will be debt free. That is commendable but we all know — and the Minister's speech is short on facts here — An Post are required to make substantial capital investment within the next few years. We also know they will make current losses in their operations and they will not be able to provide their capital requirements because of their loss situation. The Minister says he is going to provide £50 million for capital investment, which he may or may not provide [1603] by way of equity. He may decide to give it by way of loan capital. I urge him to make a commitment to provide this capital by way of equity. It would be good for morale and would be equal so far as the State is concerned. If he provides this money by way of a loan and the company is not able to meet their repayments, they will become involved, as the review group said, in the vicious circle where interest costs lead to deficits and further borrowing and at the end of the day the State has to come in with a subsidy. Then that State company, will, in the public mind, be categorised as an inefficient loss-making operation, like another State company which shall be nameless and which has got an unfair amount of blame because it is wrongly structured in terms of capital. Again I urge the Minister to make this money available by way of equity.

In his reply he should tell us firmly that it will be available and if it is not sufficient for the board's capital development programme that he will make sufficient capital equity available. It is only by giving that assurance to the people on that board that he will lift the morale to encourage them to take on the competition they will have to face in the years to come. They must have the financial confidence of the Government if they are to take on this competition successfully.

The Minister tells us there is an enabling power to provide £20 million — an enabling power is different from a commitment to provide £20 million — to meet current expenditure. This figure means nothing until we are told what level of losses are projected, how far the £20 million will go to meet these losses, if there is a decision in principle that the losses for X number of years will be met and what will be the financial position on the basis of a projection in say five years' time. The Minister says the companies have to prepare a five year plan. I would be surprised if they are only starting at this stage to prepare such a plan. I ask the Minister to be more specific when replying in regard to the future financing arrangements of the postal board. The only consolation at this stage in the Minister's [1604] speech is that the assets will be as he says debt free as of now. How long that will be the case depends on whether the £50 million capital will come by way of equity alone and on how much assistance the State will give in the critical early years towards meeting the deficit. I presume that is what the £20 million is provided for. The Minister should give us figures so that we can see whether it will be adequate or not.

There is the burden, a very big one on a loss making company, of having to provide for the pension liabilities of the State. I regret to see that in the situation. It is significant that in the other parts of the Bill the Minister mentioned the views of the interim board and that in the entire financial section, both in the case of capital structure of the postal board and the capital structure of Bord Telecom there is not a word as far as I can recall in the Minister's speech about the attitude of the interim board to the financial structure. I consider that ominous and I interpret it as an indication that the board are opposed to and unhappy with what is being provided for them.

As I said initially the whole success of this change depends on these companies having an independent commercial life and that cannot happen unless they are structured properly in terms of capital from day one. If these boards are put into a position where they will be loss making for ever, efficiency will be hidden behind the interest subvention that will inevitably have to come from the Exchequer. Staff morale will be damaged and to get away from that situation they should be put on a proper basis from the beginning. Further, it is as broad as it is long as far as the Exchequer is concerned; it might be preferable to do it by way of equity at this stage rather than by loan capital that the companies are not able to remunerate. We are only causing them to accumulate losses and eventually the day will come when those losses have to be met by Exchequer subventions. The Exchequer might as well realise that from day one they should put these companies on a proper structure.

Much the same remarks apply to the financial arrangements for Bord Telecom. [1605] It will also be burdened from day one with this very big liability for pensions — over 15 per cent of its payroll. Bearing in mind that the payroll of Bord Telecom will be a very big sum we can see that this is a huge liability. Again the Minister is a bit short on facts here. Why did he not tell us what 15 per cent of the payroll in the first year of operations will be? Would he give us that information when replying? When we add that burden to the cost of paying for the loan capital which the company will have to take over we see there is a very big financial burden being imposed on this company. It will have to take over loan capital of some £680 million. On the basis that the loan charges on £355 million are calculated as £48 million — if I read the Minister's remarks correctly, that the Exchequer is taking over £355 million worth of the repayable advances and putting the rest of them on to the new company by way of loan capital — I calculate that £600-odd million will cost £70 or £80 million. That added to 16 per cent of the payroll will mean a huge sum for interest and financial charges that the company must find before putting aside one penny for its own development, for depreciation and all the other things that a properly structured balance sheet and profit and loss account should provide for.

The £355 million will not be risk equity in the normal sense because the Minister says that the loan charges on it will be charged on the Exchequer but the company will be required to pay dividends in respect of State shares over a period of at most 10 years which will at least equal the loan charges. I find a certain inconsistency between that and the requirements in the sections which impose the duties on these companies. There is also inconsistency there as regards commercial freedom. If it transpires that the company is going to leave its capital financing short, if it is to meet the Minister's directions to pay dividends at least equal to the loan charges, what happens? Surely if the telecommunications sector is inherently profitable — and everybody says it is very profitable — and we have appointed people of proven commercial expertise to run and manage it we should [1606] let them decide on the level of remuneration the equity capital will attract over the years.

Obviously the shareholders are entitled to look for the maximum they can get. That is the privilege of shareholders; that is why they invest their money — to get the best possible return on it. But if they ask for a return that will cripple the operation or inhibit the viability of the operation, that is not satisfactory. In effect I think that is what the Minister is saying here. It is a bad approach to this problem.

I am not altogether happy with the capital structure for either company. It may not allow them the commercial freedom they should have or give them the equity ratio that is desirable but we cannot really assess the position because the Minister is regrettably vague. I hope that when replying he will flesh out with more financial information his exact proposals in regard to the two companies and how the companies see the first five years of their operation working out having regard to the Minister's proposals. We can then make a real assessment of the proposals.

One matter that the Minister does not mention is the position of both companies in relation to VAT. I ask him to deal with that when replying and with what implications that liability or lack of it will have on the finances of the company.

The only other matter I wish to mention is to reassure, as far as I can from this side of the House, the staff to be transferred to the new boards. There has been already a considerable amount of consultation with staff associations and there are a lot of details to be ironed out. It is very important that the Minister continue to assure the unions and staff associations concerned that the provision in the statute means what it says, when it provides that the staff's personal positions are not to be prejudiced or rendered any less valuable than at present within the civil service. The people going into these bodies must have confidence that their career prospects, their working environment and the demands on them [1607] will be such that the change will be attractive.

Part of the rationale for making this change is to get a better return for the money we are paying to the people concerned. We do not want to frighten them into thinking that they are going into a harsh working regime. There is no question of that. They must be reassured that, far from its being harsh, a regime can be devised which will provide more job satisfaction arising from the greater public approval of what is being done. There can also be more financial satisfaction because the bodies are working on a commercial basis and, it is hoped, will be allowed and enabled to introduce systems of financial incentives, bonuses and so on, to ensure that the work is done quickly and efficiently. Far from the change being to the detriment of the staff, nothing but good will come, from their point of view. Nevertheless, it is important to assure the staff of the Post Office who are going to the two new companies that it is the intention of the Government and of the companies that their working environment will be as good in the new companies as it was in the civil service and that they will not be prejudiced financially, or in terms of conditions of employment. They must, however, acknowledge that they will be moving into a different working environment which will inevitably bring some change. I believe that mainly they are prepared for this different environment and will fully co-operate with it.

By and large, I welcome what is proposed in the Bill. I concur with the view of the Minister and the review group that this type of structure is the best for solving the problems, provided the financial structures for the two new companies are adequate, bearing in mind what we are requiring them to do. I am not satisfied, from the Minister's speech and the amount of information given to us at this stage, that the financial structures are so designed as to make these companies operate to the maximum possible. I may be wrong in that and the Minister may be able to give the house more information when replying to the debate. With that [1608] reservation, I welcome the Bill.

Mr. O'Sullivan: Information on Toddy O'Sullivan  Zoom on Toddy O'Sullivan  The first question to be asked is why we have the Postal and Telecommunications Services Bill before us today. In effect, the answer to this question is provided at the beginning of the Minister's speech. It is that the financial effect will be to remove from the central Government finances most of the expenditure on the two services. It is, in effect, to rid the Exchequer of the cost of running this service. Deputy Cooney in his contribution struck the right note regarding his reservations vis-á-vis the funding of the two bodies. I differ from him, however, in his approach in the area of the important assets of both organisations. The greatest asset, in my view, is the people who down through the years provided a service which, up to 1979, was second to none. Something happened in that year on which the people whose lifestyle will now be altered considerably had little influence. I happened to be part of that organisation up to that time. For a period of 57 years — something which has no precedence in labour relations in any country, certainly within any postal organisations throughout the world — there was not a major disruption of service. For our pains and the pains of all the people employed in the postal services, we were left on the streets for 18 weeks. Since then there has been a sense of grievance which will not be easy to eradicate from the service. There is to be a transfer of the problems from the Department of Posts and Telegraphs to the two semi-State bodies.

After waiting for five years we have a situation where a Bill was circulated last Thursday and Second Stage is now expected to be put through the House by 2.30 p.m. today. The Minister has expressed his wish to see the Bill passed through the House by autumn. This would be grossly unfair to the people who have worked this service down through the years and to the unions involved.

By a strange coincidence, three of the unions involved who cater for the needs of the staff in the Department are now about the business of their annual conference and as a result have not had an [1609] opportunity to study this documentation or to lobby their Members in this House. In the current issue of The Postal Worker there are approximately 230 claims outstanding which must be dealt with. Will we transfer these claims also? Is there any facility to deal with these problems when transferred? I take it that the conciliation and arbitration machinery is no longer applicable. What has been set up to replace this? This machinery was introduced by an inter-Party Government in the late forties and has worked to fairly good effect up to now.

Deputy Cooney says that private enterprise should not be excluded. My fear is that there is a danger that they will cream off — a term used in the Minister's speech — the profitable side of the business. It is quite commonplace to see in this house members of private courier firms actually about business which postal personnel should be doing. There is a danger — and it must also be mentioned in the telecommunications area — that the facsimile transmission, which is a new development, could prove very attractive to private operators and the Minister may, if he so desires, give a licence to such operators. This licence is also available to people who wish to carry out a courier type of service. At the moment there is legislation governing monopolies, but to date this has not been implemented. For one reason or another, there has been a noted reluctance on the part of the Minister and the Department to enforce these regulations which would prohibit the use of courier services, which are being used quite frequently.

Regarding consultation with the staff, the Minister has said that there has been such consultation. That is true, but there has been no agreement, and that is the important part. As things stand at present, one union in particular has indicated its total opposition to the introduction of both boards, and bear in mind that this is the largest union within the postal service.

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  I am sorry, Deputy. It is now 1.30 p.m. and we must adjourn.

[1610]Mr. O'Sullivan: Information on Toddy O'Sullivan  Zoom on Toddy O'Sullivan  Will I have an opportunity of speaking afterwards?

An Leas-Cheann Comhairle: Information on James C. Tunney  Zoom on James C. Tunney  Yes, the Deputy is entitled to resume.

Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.

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