Wednesday, 11 April 1984
Seanad Eireann Debate
Minister for Communications (Mr. J. Mitchell): Irish Shipping Limited also find it necessary, as a temporary expedient, to continue the foreign crewing of the two vessels as at present. The company have informed me that the replacement of the foreign crews by Irish crews would involve the company in conversion costs amounting to about £500,000 and additional operating costs of £1.6 million a year. The company simply cannot afford these additional costs at present. When the freight market returns to normal, the company's intention is that Irish  crews will be employed on the vessels.
Following the negotiations with the foreign shipowners, the board of Irish Shipping Limited submitted a report to me in relation to the company's overall financial situation and having taken account of the substantial concessions secured from the shipowners, have requested limited support from the Government by way of Exchequer guarantees of borrowings. As I mentioned earlier, the company require an Exchequer guarantee of $12.5 million or about £10.7 million at current exchange rates towards the cost of purchasing the two vessels. In addition, the company estimate that they will need further guaranteed borrowings of slightly more than £12 million to meet their projected cash deficit in the period up to the end of 1985.
There is little doubt that Irish Shipping Limited face a very difficult time in the next few years. There is no point in my speculating at this stage on market rates in 1986 or beyond or on what the company's financial position will be in those years. There are too many imponderables involved such as the progress of the world economy, future oil prices and so on.
While there has been recently a slight improvement in market freight rates, it is as difficult to predict when a real recovery will occur as it would have been to envisage three years ago the depth of the present shipping recession. It has to be assumed that the present recession will not continue indefinitely and that rates will return to commercial levels in due course. The problem faced by shipping companies during a recession is that of staying in business in order to be able to benefit when the inevitable upturn in trade and market rates occurs. Irish Shipping Limited believe that the market will  have recovered sufficiently by 1986 to enable them to resume viable operation.
Senators will be aware that Irish Shipping Limited have had an enviable record of profitable operation in one of the world's most competitive market places. The company are now facing the most serious challenge in their history and the Government believe the company should be given the limited Exchequer support they are now seeking. Before this can be done, however, it is necessary to extend the statutory limit, which has already been reached, on guaranteed borrowing by the company and, as already indicated, that is the main purpose of the Bill.
The Bill provides also that the remuneration and allowances of the Chief Officer of Irish Shipping Limited will in future be subject to my approval given with the consent of the Minister for the Public Service. Similar provisions operate in many other State bodies. Changes in the company's superannuation provisions are also being brought under control in line with the situation in other State bodies.
Mr. E. Ryan: Irish Shipping have had a excellent record. I recall that, when Irish Shipping were examined by the Joint Committee on State-Sponsored Bodies some years ago at a time when we examined 20 of the 25 bodies, of all those we examined, they were the ones who came through with little or no criticism. They seemed to be an outstanding body who had been making profits for many years. They had been doing an excellent job from their inception and in every respect we found them a body that we could commend and approve of in every way. Obviously they have run into difficulty since that time. They have had very difficult years. The background to that  was very largely the world conditions, a situation they had no control over. It seems on the other hand that perhaps they had been a little too ambitious and speculated in a very big way and in a way which quite simply did not work out.
One must criticise the company for their judgment in this respect. Nobody can criticise a shipping company for not knowing what is going to happen in regard to rates in the future, but one can criticise them for being quite as speculative as they were in this situation. They certainly deserve some criticism for what they did. Nevertheless, by and large, having regard to their record over the years, their record has been a very good one and they should be supported in these circumstances.
Mr. O'Leary: Senator Ryan began by paying tribute to Irish Shipping Limited. I should like to start by paying tribute to the Minister who I think has very fairly put the problems of Irish Shipping before the House here today in seeking an increase in the guarantees which he may give in respect of the company. We are lucky to have in the Department at present a Minister who is as determined as he to grapple with the problems which have been created in this area. I should like to commence by paying a special tribute to him in that regard.
The reason I consider it necessary to do so is that many of the other things I have to say will be critical. I want to make it quite clear that while I might be bound by the rules of this House to direct my criticism towards the Minister, he will no doubt realise that I am governed in that regard by procedure. He no doubt will know the particular places to direct the criticism to, using him as the only conduit available to me under the provisions of the Constitution.
I consider that the recent performance of Irish Shipping Limited has been disastrous and worthy of a full investigation by the appropriate committee of this House and of the other House. The circumstances behind the placing of the contracts outlined by the Minister in his Second Stage speech must be fully investigated by the Houses of the  Oireachtas. Those who have day-to-day responsibility in that regard must be held accountable for these actions. It may be considered bad luck to make a decision to charter nine vessels with a gross tonnage of 393,000 tons. When I say chartered, I mean including their crews also. That a decision of that magnitude could have been made without the approval of the Minister of the day is beyond belief. It is an unacceptable exercise by the executives of a company of the authority which they were given. I am not saying they did not have the authority, but authority is given on the basis that it will be exercised prudently. In this case the authority was anything but prudently exercised. In that regard these people must be held accountable for their actions, just as a semi-State body that produce a surplus or provide a service of outstanding merit to the community will be the subject of praise in this House as many such bodies have been. Conversely, a body that behave in this way collectively must be the subject of the most severe criticism. I am not going to oppose the Second Stage of this Bill because no doubt the Minister has information available which he cannot make available to me. I accept that. The Minister has information available which leads him to the conclusion that the action he is now taking to remedy the situation is the correct action. Because I have such confidence in the Minister I can accept that that is the case but what I do not accept is that those who made those mistakes should be left unpunished by the Minister. I must put to the Minister that the disapproval and the wrath of this House must be conveyed to those who have the day-to-day responsibility for this. What we are asked to so in this Bill is to transfer out of this country substantial sums of money to foreigners on the basis of contracts which should not have been entered into and were not entered into with the approval of the Minister of the day.
It is absolutely imperative that the Minister examine the role of the board of directors in this case. I am not privy to it. I do not know what their role was. Were those contracts entered into without the  approval, either the active approval or the passive approval, of the board of directors, there being a substantial difference between the two? I would define it as follows: the active approval of a board of directors would come about where a direct board of directors would decide to approve a course of action, having been fully informed of the consequences of their action. The passive approval of a board of directors would be by way of their merely nodding through something which was not properly explained to them. I have not got that information.
In supporting this Bill and in giving the Minister the authority he seeks I am asking him to exercise his power to investigate these matters fully. What needs to be investigated also is whether the present members of the Board of Directors of Irish Shipping should continue in office. My belief is that those members who were members at the time this contract was entered into prima facie should not continue in office. They should be invited by the Minister to resign, and if not, they should be dismissed by him.
Mr. O'Leary: Yes, just like anybody else. What other business would lose £24 million and no change be made at the top? It just would not happen anywhere else. The Minister should not stand for this and I know that other Ministers of other administrations would not have stood for it either if they had been fully informed about the position as time went on.
It is absolutely imperative that the circumstances surrounding the signing of the accounts of Irish Shipping, dated 31 March 1982, and laid before this House would be fully and carefully examined. It is absolutely imperative that the directors would be called to give a full account of why these sets of accounts were laid before this House without any indication as to any future losses which might be incurred.
I am aware that there has been a change in the chairmanship of the Board of Irish Shipping since that date. The  Minister will no doubt take that fact into account but who are the executives for whom the Minister ultimately must accept responsibility? Who entered into this contract? What positions do they hold, if any, in Irish Shipping now? Do they hold executive positions or do they hold positions on the board of the company? I have no personal animosity towards or knowledge of, in the vast majority of cases, members of the Board of Irish Shipping. I am quite sure they are wholly honourable but there must be some relationship between result and reward.
Mr. O'Leary: Not in the slightest. The Minister, in the consideration of these matters — I emphasise again that I am not criticising this Minister or indeed either of his immediate predecessors — should now consider to what extent the purchase of these vessels will give rise to the possibility of continuing losses as a result of the operation of these vessels, whether they are operated by foreign crews or by Irish crews. Would it be better, having purchased these vessels, to sell them again even at half the price or even to give them away? Would such action result in less money being lost by the Irish people? That is what we should examine.
As I understand it, these vessels are involved, not in the transportation of goods to and from our country, but in the transportation of goods between two foreign ports. There must be consideration of the likely cost of running these ships as against the cost of writing off the £24 million and just forgetting about it. I cannot judge that as I do not have the information in regard to any contingent liability there may be concerning the staffing of those ships. It would not be reasonable of me to expect the Minister to give me that information today. The Minister should examine the position of responsibility in this matter most carefully.  He would also examine whether a payment of a lump sum of money now would cure this problem in a way which would be less expensive to the Irish nation in the long term.
The problems I have outlined could not possibly be examined or answered by the Minister in reply to a Second Stage speech. I look forward to the Minister indicating what mechanism he has in mind to enable Members of this House and of the other House to examine the circumstances which surround this debacle.
I am quite happy to wait until the Minister has completed his investigation and until such time as he has taken whatever action is considered necessary but ultimately the loss of some unascertained amount of money — it is in excess of £30 million anyway and indeed may be considerably more that that — cannot be left unexamined by the Houses of the Oireachtas. The people who are responsible must be called to book for their actions, not only privately but also publicly.
In passing the Second Stage of this Bill, we should like to indicate to the Minister our expectation of some major shake-up in Irish Shipping. If the Minister is of the opinion that that shake-up must extend beyond Irish Shipping to his own Department, that is a matter for him. It is something of which I have no knowledge but I am confident that I can leave it safely in his hands.
We must give the Minister time to solve this problem. We must encourage him in the difficult job he has to persuade people to take action. The advice the Minister will receive is that it is all right now, money will not be saved by taking action and therefore nothing should be done about the situation. No private enterprise would operate on that basis. Even if it had profits for 15 years in succession it could not wipe out £30 million, £40 million or £50 million without any change taking place at the top. Why should it happen in Irish Shipping? It is important that the Minister indicate what proposals he has to enable this House and the Dáil to examine the problems of the last few years of Irish Shipping and to come to a  conclusion, not primarily at least, from the point of view of penalising anybody involved, but with the objective of ensuring that no State-sponsored body in future incur liabilities of this magnitude without the approval of the Minister.
The Minister has a unique opportunity to do something for Government control and Government influence on State-sponsored bodies, an opportunity which he should grab with both hands, to ensure that losses of this magnitude do not occur in the future.
I would like to ask the Minister a number of specific questions. Firstly, based on the information available at present and assuming the transactions and concessions which have now been negotiated, including the purchase of these ships, what is the best estimate of the total cost to date, next year and every year up to 1989? If the information is not available in respect of some of the later years he should give it in respect of the early years. Would the Minister, in addition to that, indicate the value of the concessions which have been won, which is very important? The Minister might also indicate the net value of Irish Shipping now, having regard to their losses.
Mr. Ferris: Senator O'Leary in his excellent contribution torpedoed some of the Irish Shipping fleet, and I concur with everything he said. I discussed this Bill today at a meeting of my own parliamentary party and we are unhappy with this semi-State body, not alone because of the way they have run their business in recent times but in their accountability to the Minister responsible and indeed to the Minister for Finance. We realise that at present Irish Shipping are in a critical financial situation, which is one of the reasons that this House facilitated the  introduction of this legislation — to stop all our ships being torpedoed for lack of finance. In doing so, it is appropriate that the Houses of the Oireachtas who pass legislation involving a considerable amount of taxpayers' money should express our reservations about the way this company have been run, especially in recent times. I am concerned because taxpayers' money usually refers to the PAYE sector, who seem to carry a disproportionate amount of taxation. They would like us to be responsible when we pass an enabling Bill to allow additional borrowing in the sum of £45 million. I agree with Senator Ryan in his comment about the original success of Irish Shipping and I also join in commending them for their previous performances.
Senator Ryan said that when they had been investigated previously by the Joint Oireachtas Committee on Semi-State Bodies they were perfectly happy with the running of this company. But it is almost three years now since they have been subjected to the critical eye of the Joint Oireachtas Committee which have responsibility to the Houses to see that all bodies under our control are subject to the correct spending of money or in the management of the companies for which they are responsible.
Arising from the recent decision of the Joint Oireachtas Committee that they would invite representatives from these various companies on a twice yearly basis, I hope that that committee — I do not know if it is appropriate to call on them to do so — should investigate Irish Shipping Limited as a matter of extreme urgency as many people on both sides of the House would like to see the decisions made accountable to the Houses of the Oireachtas. The decisions that they made regarding long-term charter agreements in the Minister's own words proved disastrous. The facts alone speak for themselves. Whereas we have possibly a total of 12 ships carrying the Irish flag we discovered that nine of them are foreign owned. They are manned by foreign crews and carry out a lot of their business in foreign waters at the expense of the Irish taxpayer.
The Minister said that the company  informed him that replacing the crews of these vested ships would incur an additional expenditure of £500,000 and additional operating costs of £1.6 million. At least we could stand over that kind of expenditure on the basis that not alone would they be providing employment for all the unemployed crews at various ports throughout the country, particularly in Cork, and could justify the expenditure on social and economic grounds. It certainly would be much more acceptable to have a deficit incurred because of that and the creation of employment. Irish Shipping create very little employment in our economy and it is unacceptable that a large amount of this money which is now being made available to them will be spent for the benefit of other people.
I am pleased to see that they have at least made an effort to renegotiate some of the contracts they had entered into and whereas we may not be privy to the total amount of money involved in these previous commitments they had entered into I have no doubt that it runs into possibly a hundred million pounds. I am glad they showed some initiative in renegotiating these contracts because otherwise bringing in a Bill like this would be unacceptable. If Irish Shipping want to act in a responsible manner and if they are accountable to the Minister for the kind of money they require or are spending we must ask serious questions of the management, the chief executive officer or whoever made these decisions in the past.
Whoever makes the decisions should be responsible on a commercial basis. Any other commercial organisation who conducted their business in this way would have to answer to somebody. As Senator O'Leary said, we are asking that they should be answerable to the Minister for Finance and, indeed, to Deputy Mitchell, the Minister present. That is the least we would expect. What worries me about the intolerable decisions that were made is that the first people to suffer were the employees at the lower level in this company, the crews working on the ships on rates of remuneration that could, at least, be called questionable. As the  Minister has extended the limit of credit to this company, we are expecting the chickens to come home to roost or the ships to come into port and that their crews and management will be counted.
The decision to purchase the hydrofoil was most extraordinary. It may have been made by B & I and not by Irish Shipping but these are the kind of decisions we must question. A child could prove that it is not possible to float that kind of ship, boat or whatever one likes to call it, in the waters for which it was purchased. I hope that when the Joint Oireachtas Committee on Commercial State Bodies have an opportunity to investigate the workings of Irish Shipping someone will be held responsible for the errors, deliberate or otherwise which have been made over the past couple of years and which have cost the taxpayers so much. The crews who have been probably the hardest working people in Irish Shipping should not suffer, as indeed they have suffered, from redundancies which have taken place arising from some of the decisions.
I realise we have a statutory obligation to ensure that until such time as we can investigate the workings of this company we have aresponsibility to ensure their survival. It is important to have a shipping company which will carry our flag with pride throughout the world in trade and commerce. Because of that, I lend my support to the Bill, on the understanding that the Minister will be passing on our comments.
Section 2 deals with the remuneration of the chief executive officer and other employees of the company. Do I take it from this section that it is possible that heretofore other levels of remuneration had been decided without the decision or permission of the Minister? If so, I welcome this section and I hope it will benefit crew members who I hope are getting the proper remuneration for the kind of work they do and that they will be appropriately compensated under this section. Possibly the Minister can outline for me whether in fact the reason for putting this section into this Bill is because these people were obviously making decisions on the amounts of pay which they were  able to give themselves without recourse to us. In view of some of the decisions made, those payments would be questionable.
I commend the Minister for his forthright speech on this subject. I am also confident he will use the enthusiasm he has shown in his dealings with semi-State bodies in trying to make them as self-sufficient and commercially viable as possible, taking into account the social factors from an employment point of view and the economic factors which obviously the board of management had not taken into account in the past. Normally I would be a defender of semi-State bodies on principle; they are the nearest we have to public ownership in this area and people are often very quick to condemn the public sector in this regard for making decisions which cost the taxpayers a lot of money. This company come into that category and I am not slow to criticise them because I feel it is justifiable. It is a pity that we have arrived at that stage, that we should have criticisms of this nature being levelled at a company who are directly responsible to us but, as the Minister said, they have ignored their responsibility to us. Indeed, some of the people involved have publicly denied any responsibility to us. I should like to remind them — because this is the only forum in which we as Members of the Houses of the Oireachtas can remind them — that they have a responsibility to us, to the Minister and to the taxpayer whom we all represent. We would be neglecting our duty if we did not spell out to people who run boards like this on our behalf that if they run them on a commercial basis they must accept the commercial consequences.
Senator O'Leary has called for their dismissal and for other stringent measures to be taken. The Minister should not be slow to look at it because if that is justifiable he will have the support of the House in doing so. Other people are very quick to condemn the public sector and most of the problems in the public sector can be traced back to management and the workers often come in for criticism although nine times out of ten they are  not responsible. Management are generally responsible for some of the decisions. The workers are the first to take the stick from the public and the first to suffer in disastrous economic and critical financial situations as Irish Shipping have found out. The first person to suffer there is the man on the deck, I resent that.
Minister for Communications (Mr. J. Mitchell): Firstly, I would like to thank the Senators for their contributions on the Second Stage of the Bill. I have noted the very severe criticisms that Senators have made of Irish Shipping for this mistake. It was a very serious mistake. I have noted the points that have been made. Senators will be aware that the Oireachtas Joint Committee on State bodies have a facility for deciding to summon any particular company at any time to examine their affairs. I, as Minister, would not be opposed to such a decision if the committee decided to take it.
In relation to calling people to account I have noted what Senators have said, though my first duty was to see how the very severe crisis into which Irish Shipping had got could be averted. As I said in the other House the crisis was only resolved in the dying seconds of the last hour because the Government were determined not to accept huge liability for a decision about which they were not even informed. The decision was taken in late 1979 and early 1980 and neither the then Minister for Transport nor the Minister for Finance was informed, Given the extent of the risk involved that was a very serious omission. The decision taken clearly did not have any regard for the extent of the downside risk. Indeed that risk turned out, even with hindsight, to be much greater than most people experienced in business and, indeed, in shipping would have thought possible because the tramp shipping rates hit rock bottom, in fact went far below anything that could reasonably have been predicted. Nonetheless, the risk was enormous and a very grave mistake was made which threatened and almost brought about the end of the Irish Shipping group.
The Government are still determined not to accept liability for a decision in  which they took no part. However, given the fact that in the circumstances the charterers saw fit to negotiate with Irish Shipping and to allow concessions both in terms of reduction of the cost of charters and in terms of time for repayment the Government felt it right to give Irish Shipping the necessary respite in order to allow them time to seek to retrieve the awful situation into which they had got. I can only hope that the deal that has been negotiated and which will be finalised with the enactment of this Bill will be sufficient to allow Irish Shipping to survive beyond the end of 1985.
I do not know if there is anything else I can say. It would certainly be inappropriate for me to give any details as to the deal done or anything that might be reasonably considered as commercially confidential. Senators will understand that. I would like to thank the Senators again. They can rest assured that the views expressed here will not only be taken into account by me but will also be noted by Irish Shipping Limited.
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