British & Irish Steam Packet Company Limited (Acquisition) (Amendment) Bill, 1986: Committee and Final Stages.
Wednesday, 18 June 1986
Dáil Eireann Debate
Minister of State at the Department of Finance (Mrs. A. Doyle): On acquisition by the Government in 1965 the B & I company had an authorised share capital to two million shares of £1 each of which 1,600,000 shares had already been issued. Section 2 of the British & Irish Steam Packet Company Limited (Acquisition) (Amendment) Act, 1971, and amendments thereto of 1976, 1979 and 1982 gave the Minister for Finance power to purchase not more than 58 million additional shares in the company, making the  present total authorised share capital 59,600,000 shares of £1 each. All but £100,000 of the present authorised share capital has been taken up by the Minister for Finance. The purpose of this section is to increase from 58 million ordinary shares to 96 million ordinary shares the provision in section 2 of the 1971 B & I Act.
Mr. Wilson: I indicated on Second Stage that the general thesis of helping the B & I Company to restructure and to become commercially viable would get support from this side of the House but there are some questions I want to ask about section 1. If we on this side of the House are convinced that the general principle of this section is that the money being provided, £38 million, will be used for the reconstruction of the company and making the company commercially viable, we will support it. If we are investing a sum of money of that size, £38 million, we should consider the many facets of the problem. One important point which has not been emphasised in the House is that if the House is voting £38 million — that in effect is what section 1 purports to do — then we would expect an increase in employment, but as it seems at the moment anyway — may be in the future this will change — we are voting £38 million for a venture which is reducing employment. I would like to hear the Minister's view on that because it is important to realise that is the area of our national life to which we would have to look in the future for an increase in employment. I mean the services sector, and this is true of the world economy.
We must not forget that the USA, which is the strongest economic unit in the world, employs two thirds of its total labour force in the services area, so that if we are allocating moneys to a semi-State company, as we are here, we can not avoid the consideration of employment and of the number of people employed. A recent study, important in its own context and in that of this country, indicates from 1986 to 1990 and from  1990 to the end of the century where the possibilities of increased employment are and the general conclusion is that overall numbers will decrease in agriculture, engineering and such important areas except for the top experts, scientists and engineers of top calibre. The operatives area will decline but in the top areas the numbers will increase. It seems a paradox, but it is important, that the one place where everybody is agreed employment can be increased is in the services area. I would like to know the Minister's thoughts on this.
The second point I would like to raise on the section is that the plan for reconstruction of B & I about which we were told originally indicated that the chairman and chief executive and the board were looking for £43 million rather than £38 million, the figure mentioned in section 1. I do not intend to oppose this section if I can get a rational explanation of the cut of £5 million which is implicit in the allocation mentioned in section 1. For example, I expect that the plan as forwarded to the Minister for consideration by the Government finally accounted for every £1 million in the restructuring process. Consequently there must be an area to which the £5 million referred in the restructuring which is now to be changed, or neglected, or excluded from the plan. Therefore, I would like the Minister to expand on that.
The original plan was for £43 million of equity; that is now £38 million, and £10 million of that in the original plan was to be new investment. I called for the specifics of that on Second Stage, although I suppose Second Stage is not for specifics but Committee Stage is. The House should know if there is an area which the chairman and chief executive and the board wanted covered by that £5 million which will not now be covered. The Wicklow and the Tipperary were damaged. Were they insured adequately? Who insured them? It would be interesting to know. Was it the Insurance Corporation of Ireland? Is any of the £38 million to cover the losses sustained  when the Wicklow and the Tipperary were damaged?
Mrs. A. Doyle: The first point the Deputy alluded to was the jobs and employment situation vis-á-vis the £38 million. B & I employment figures before rationalisation were 1,800 employed by the company. After rationalisation this was reduced to 1,400, which meant a job loss of 400. The £38 million will protect the 1,400 jobs that exist now and ensure a secure future for all those working in the company.
The Deputy mentioned a shortfall in the original request of £5 million. Let me refer him back to the Minister's Second Stage speech a few days ago which catalogued the requests of the board when they submitted their proposals to the Minister who detailed them. I will not got through them all. One was the £43 million and there were various other things. A specific proposal of the board was that substantial cost efficiencies would be achieved through various means, and I understand that the Government's offer of £38 million bore in mind the fact that even greater cost efficiencies could be achieved and thereby the £38 million would suffice. Insurance loss was not included in the £38 million.
Mr. Wilson: I am afraid the Minister's answer is too general to satisfy me with regard to the £5 million. Was there an arbitrary decision to cut just by £5 million or was the cut related to specifics? I know that the chairman and chief executive, Mr. Spain, has a reputation for efficiency and for sharp business knowledge. Therefore I would expect that when he put his demand in for £43 million equity the specifics of that £43 million were spelled out in detail. From my understanding of his modus operandi I gather that he would  not give a global figure and say he needed this for a particular purpose but that the purpose of the £43 million would be spelled out in detail.
The Minister simply said that the conclusion was reached that cost efficiencies were built into the original structure and, I expect, pruned and sharpened as much as the the experience of the chief executive of this board and the management generally could do. The £43 million was a pruned down, pared down, slimmed down, ascetic figure as far as this venture was concerned. Did the Department of Communications say simply that they would chop £5 million off and after that restructure or re-jig the whole figures with regard to running the operation? It would not be worthy of the Department if that is what they did, but I do not believe they did that. There must be an area to which that £5 million related. Just saying that other cost efficiencies to the tune of £5 million was expected is not good enough. It is not an explanation that would or should satisfy the House as far as this Bill is concerned.
Mrs. A. Doyle: The Government, having examined the proposals made by the B & I, felt that certain aspects of the proposed capital expenditure could not be justified then, particularly in the context of the tight Exchequer cash position. The capital expenditure to which I refer includes the proposed move to Dún Laoghaire, for example, upon which no decision has yet been made. Taken in the context of the offer of the board of B & I for greater cost effiency all round, the Government felt that £38 million was adequate and the board of B & I accept that that sum will meet the position at present. Basically, the Government's objective is to make B & I an efficient and commercially viable enterprise which will provide a vastly improved service for their customers in sure, secure employment and which will contribute to the development of tourism and trade and general economic growth.
Mr. Wilson: Am I to take it from the  Minister's remarks that the cost efficiency related to suspending the transfer to Dún Laoghaire will cost £5 million? If so, I would be surprised and disappointed because a £5 million tag on that exercise is excessive. I did not understand from the debate so far that that kind of money would be involved in moving from the port of Dublin to Dún Laoghaire. During the course of the debate Deputy Andrews raised the exact reverse move which seemed to be something in which the Dublin Port and Docks Board were involved and addressed Dún Laoghaire Borough Council on it. From the Minister's reply on Second Stage, it is clear that a document had arrived in the Department of Communications about this and it is not now a live issue. I appreciate what the Minister said about maintaining and preserving 1,400 jobs and I am also on record as saying it is important to strengthen management vis-á-vis this whole operation. I hope the board will not be so conservative as to think they cannot expand the labour force beyond 1,400. They should consider that as part of their brief also.
I wish to return to the question of the £5 million. Is the Minister saying the movement from the port of Dublin to Dún Laoghaire will cost £5 million in capital expenditure? If so, my response would be very different from that which I gave already to such a possibility. It seems a huge sum of money in this regard considering the very heavy State investment in Dún Laoghaire and the very fine facilities provided for what used to be a competitor company — but not any more — and that reciprocal arrangements very often were not provided on the other side of the Irish Sea. It is also worth taking into consideration that facilities were made available at a knock down charge to Sealink over the years.
Mrs. A. Doyle: While I do not consider facilities at Dún Laoghaire to be adequate — I now have my OPW hat on — I hope I did not mislead the Deputy in to thinking I was referring to the cpital expenditure in Dún Laoghaire taking up all the £5 million. I apologise if I did  because any necessary capital developments that might have been intended for Dún Laoghaire will be included in the shortfall of £5 million. Also, for example, B & I had intended moving their head office from the North Wall to the ferry port and this has also been deleted. There was a proposal to have 520 redundancies at one stage but, by agreement, this was subsequently reduced to 400 so there was less redundancy compensation. Those items would be included in the sum of £5 million and there are others which would come under the general heading of cost efficiency which I am not in a position to itemise but I will send that information to the Deputy.
Mr. Wilson: I should like to take up the point regarding the proposal to move the head office to the ferry port. As I understood it, there was then the suggestion that the head office as it is now would be turned to profit by the company by being leased or sold and that the money coming from that would counterbalance any expense involved in the change to the ferry port.
Mrs. A. Doyle: To my knowledge, there was no final decision in that regard. I remember media reports of the kind to which the Deputy referred but, as I said, there was no final decision. In view of the depressed state of the property market, especially in certain areas of Dublin, it was not considered prudent to take into account what might have been realised if we had proceeded as suggested. The figure was not taken into account in coming to the original figure of £43 million. Possible capital expenditure in moving to the ferry port was taken into account but that has since been deleted.
Mr. Wilson: Surely a strict exercise, which one expects before anything is presented to the Minister and Government, must take into account — I am only saying this in the context of the £5 million — the possible use of offices which would be abandoned in favour of a switch to the ferry port? A large property like that  could not possibly be left out of the reckoning and if it was left out as the Minister suggested it may have been, it was a culpable omission which would not be easy to pardon in putting this package together.
This is the substantive part of the Bill. Again I must refer to the sum of £38 million and relate it to the freight part of B & I. Are we now voting £38 million to B & I, some of which will be used in the freight end of the business? I and other speakers raised a tricky point in regard to semi-State bodies, also relevant to CIE's activities. Will there be any help to the freight sector which would leave private hauliers in a less than official position vis-á-vis the B & I as a freight operator? It is important that that should not be so and that the hauliers concerned should see that it is not so, because I have had representations with regard to the B & I as well as representations with regard to the CIE freight operation and there have been allegations that State subsidisation was being used to the detriment of the individual haulier involved in this trade.
Mrs. A. Doyle: I will refer to the Deputy's last point first and assure him that there is absolutely no intention to put the independent hauliers at any disadvantage at all. Basically there are no capital moneys for the freight side included in the sum of £38 million. In that figure, however, there are some redundancy payments which occurred in the freight section. But generally, apart from the redundancy payments that would go to the freight section. There is no provision within the £38 million for the freight end of the business. As the Deputy is probably aware, and I think the Minister, Deputy Donnellan, referred to it this morning, the restructuring plan in relation to this area will improve the company's freight operations in that the manning and overhead cost reductions being implemented apply to all the company's operations, including freight. The B & I are, in fact, carrying on a detailed review of their freight operations and  pending the outcome of that review there is no proposal for capital improvements and it is certainly not included in the £38 million.
Mr. Wilson: In the freight area, I understand that as of now the maintenance of the fleet was an inhouse operation. It has been stated that outside contractors are being used or that there is a plan to so use them. Are the redundancies in that area? Is the total operation being switched to the outside contractors so that there will be a capital saving and even a possibility of realising some assets that the company have at the moment by way of sales of machinery and equipment?
Mr. Wilson: The medical people tell me I have excellent blood pressure with no sign of it going up as the years go by, but the Chair is bidding fair now to drive it up. We got a reply from the Minister this morning with regard to ICL and, if I recall his answer correctly, he said that no part of this money was ear-marked for any dealings with ICL. There is a report in one of today's newspapers, The Irish Press, with regard to ICL. As far as the figures given by the Minister to the House go, the £38 million will be used for certain expenditures in 1986 and certain further expenditures in 1987 and 1988.
I do not know if there is any substance in the reports about Mr. Spain's view of  ICL, but it is that there will be a total incorporation of ICL into the B & I in the event of that company being taken over. Does that mean the Minister will have to come back to the House with a proposal to amend section 1 and to increase again the equity to be taken by the Government in the new amalgam company? I am relating it to section 1, seeing that there is something imminent. I raised this in the House already having visited Rosslare and having listened to what people were reporting in that area.
If it is imminent it looks as if we are not doing the job properly in simply asking the House to substitute 96 million ordinary shares for 58 million ordinary shares. A permissive wording could have been used, as has been done in the past, giving an upper limit beyond which we could not go without committing ourselves to spending the sum mentioned as the upper limit. I mention this because it looks as if we are making work for ourselves in the context of reports that there is a proposal that the B & I will take over ICL. If I were on the other side of the House I would know the answer to this question; I know what a civil servant would tell me should be said in the circumstances. I am not going to give the answer, but I know what it is.
Mrs. A. Doyle: Perhaps the Deputy could have saved me rising again, if he knows the answer. But I will give it anyway with pleasure. I can only reiterate what my colleague the Minister, Deputy Donnellan, said this morning that as of yet no proposal has come to the Government or B & I in relation to the proposed purchase of ICL. It would be considered on its merits if and when that happens, but it would be irresponsible of me to speculate in the House now and there is no part of the £38 million to which the section refers allocated for the purchase of ICL.
Mr. Wilson: That is a fair enough answer and as far as the Minister can go. Am I right in thinking it would be in this context that any advance in that area would have to take place? If it were a  B & I investment it seems that we would not need a new Bill but, in fact, would be back in the patch and mend business with this Bill in the future. I know it is a hyphothetical question but it is in the context of this Bill rather than in the context of a new Bill that we would have to deal with it.
Mrs. A. Doyle: Again I would be speculating if I went too far down this road. If the question did arise in relation to the possible purchase of B & I by ICL it may not even require equity so we really do not know what section or what part of this Bill it might otherwise have been in if things had been different and if perhaps the whole ICL saga had been further down the line than it is today. We are all speculating mainly because it is wishful thinking perhaps and we are all hoping for a satisfactory outcome. I will go no further in relation to this whole difficult area at the moment. I cannot go any further. We cannot talk about what might have been in this Bill or what section it would be in if things had been different.
Mr. Wilson: I accept what the Minister is saying. I trust that there will not be an intervening period of two or three months. If the commercial activity takes place, in other words, if B & I are advised by the Government that the Government will support the purchase, we could be in the middle of the summer recess. I do not know what kind of tools can be used by the B & I for the purchase. I am very heartened that the Minister said that they might not need any money at all. Perhaps some of the financial institutions might put money up front.
Mr. Wilson: There was a big rush to get to the Minister's ear. It might not need Government equity. It would seem that there are other ways in which it  could be arranged. There are banking institutions already heavily involved in the ICL, having very heavy guarantees. I am putting on the record of the House the concern of this side of the House in regard to ICL in the light of what is being reported as to what is happening. We on this side of the House are committed to Irish ownership, whether a full State ownership, or shared with private interests, or whatever, provided it is Irish ownership in the context of a company who are profitable and have already established themselves, are plying between this country and the mainland of Europe, particularly in the light of our membership of the EC. I am glad the matter got a little airing. I know the Minister is constricted in what she can say in this regard. I hope we shall not find ourselves in a commercial desert in the middle of summer if things progress in the direction in which the reports are saying that they will.
Mrs. A. Doyle: I think my colleague adequately covered this point this morning. I can only reiterate what he said. We shall not go back over the history of the money which was on offer but not taken up over the last couple of years in relation to those routes in the southern corridor. It is really now a matter for local interests to pursue this. In case we get back to it I should say that, to my knowledge, it is not included with the £38 million. I presume, the debate being on section 1, that is the context in which the question was asked.
Mr. Wilson: I am very pleased that the Minister has agreed to the position which I advanced on Second Stage. To recap the points of my opposition, I thought it was cutting the ground from under the board and management of the B & I, that it was taking away a fundamental right of management with regard to remuneration. I also thought the language was excessively strong. It stated: “The company shall comply with any directive...” That language, in the context of industrial relations, was very strong indeed. I expressed doubts as to whether it might infringe the rights of the board and management in law. As company law applied to them and as company law put obligations upon them, this section was putting them in a very false position. It was frightening in a sense, and an attempt to arrogate power to the Minister in an area where he should not be looking for power and where possibly he could be taken to court by workers and staff as infringing their constitutional right.
It seemed to thumb the nose at the Departments of Labour and of the Public Service and to indicate that there was a whole new section of the Department of Communications where a degree of expertise in industrial relations, industrial bargaining and so forth had been developed beyond what was available in any other Department. This was downright arrogance on the part of the Minister in putting section 2 into the Bill. I regret to say this appears to be a tendency which has developed in recent years. This is the first Bill which came to this House that I was involved in that included it. Another Bill is coming which also has this inclusion, but I understand that in another place the Minister indicated that he was withdrawing it. I am glad this section is being withdrawn. I am not advancing that argument in any context other than the one I have mentioned now.
 There is a drive or thrust, of which I approve, to make this company one which will be a good employer and a profitable company which should be making returns to the State of the profits which they will make as a return on the money being invested in the company. As I mentioned on Second Stage the last report indicated that there was a turnover of about £88 million and a loss of £10¼ million. That was an intolerable situation. It is hard to believe that it could happen that on that amount of turnover one could have such a huge loss. The thrust now is to achieve a commercially viable company. It was in that context that I expressed my opposition and that of my party to that section in the Bill. It was a recipe for industrial chaos and trouble in the future and I want to express my gratitude to the Minister for having withdrawn the section from the Bill.
I want to put it on the record that I got in touch with the Bills Office. My amendment was to have the section deleted. I see that the Bills Office interpreted that as “Section opposed” but I presume that is tantamount to the same thing. The section is now gone, anyway.
Mrs. A. Doyle: This section provides that the approval of the Minister for Communications, given with the consent of the Minister for the Public Service is required for alterations to any superannuation scheme currently in operation in the B & I, or the introduction of any new scheme. All bodies under the aegis of the Minister for Communications, with the exception of B & I Company, are required to have their superannuation schemes and amending superannuation schemes in respect of their employees, including the chief executive, approved and in some cases confirmed by the Minister, with the consent of the Minister for the Public Service. This provision will  merely bring the B & I Company into conformity with our other State bodies and with State bodies generally.
Mr. Wilson: I wish to comment on that because it is an area that is causing some anxiety. I considered putting down an amendment to have that deleted also. The wording is not quite as aggressive or all-embracing as the wording in section 2, in particular the statement “the company shall comply with any directives with regard to such remuneration”. Even the word “directive” is something which one would expect to see coming from the Kremlin. There is no such phrase in section 3. Nevertheless, it would be foolish of the House not to recognise that there is a problem, in particular with regard to the remuneration of top management in semi-State companies. As the House is aware, the method of employment of the chairman and chief executive which was adopted by the Minister for Communications in regard to B & I was generally believed to be an attempt to get round the shackles put on the Departments and the Government by the Devlin recommendations. The method was to appoint a chairman and chief executive combined and to employ a consultancy firm of which the chairman and chief executive would be a very important member. There was legal sleight of hand in that regard.
The office is mentioned specifically. It would be foolish of the House to ignore that there is a problem, a problem which does not refer exclusively to B & I. It is encountered in other semi-State companies also. The House must give consideration to this whole area and make it unnecessary for a Minister to have to contrive a method of securing somebody who is regarded as the best person for a particular job such as this. It would have been easy to put down an amendment to have it deleted. It is important to realise that the weaknesses that inserting this would show up in the whole system as of now. I am not pressing it to a division but it is important to air the difficulty and to have regard to it. The market decides what one pays a person to do a job like  this. If we allow too much of a gap between what the market is offering and what a semi-State body are offering that is a recipe for getting a less competent person.
In the past, and also at present, there were people in State and semi-State bodies who, outside of the company or body in which they operated, could command a much higher remuneration but stayed with the semi-State body because they had given their lives to it. They become proprietorial with regard to it and are emotionally committed to it. They could not see themselves operating outside that body, even for more money. We gain by that. I doubt if in the future it will be possible to get such people. When they develop the kind of strength and expertise that enables them to take on that kind of position, they will move with the market to wherever they are best remunerated. It is important that we take cognisance of that.
Mrs. A. Doyle: This section is a standard section which already applies to all other bodies under the aegis of the Minister for Communications. There is no person in mind at present. It would merely bring B & I into line with the other commercial semi-State bodies in the country.
Mr. M. Ahern: I support Deputy Wilson in what he said about the derisory payments made to most chief executives in the semi-State bodies. As the Minister stated, this is a standard section. The whole area of payment of chief executives in semi-State bodies should be reinvestigated in order to attract the top management. People get involved in a personal way and many of the top class people have stayed within the semi-State sector. We should look at this area in order to ensure that we have the best people willing to come into the semi-State sector for the good of the country.
Mr. Wilson: I will call the attention of the House to the Irish version of the name of this Bill. It is very inelegant — An Bille um an British & Irish Steam Packet Company Limited (Fáil) (Leasú), 1986. I do not think I need comment on that. Something should be done about it. It is a monster which I would not like to meet on a dark night.
|Last Updated: 13/09/2010 23:45:36||Page of 90|