Committee Reports::Audit of the 1995 Accounts of: Non-Commercial State Sponsored Bodies::06 November, 1997::MIONTUAIRISC NA FINNEACHTA / Minutes of Evidence

Mr. Martin Fahy, (General Manager, National Theatre Society Ltd.) called and examined.

Mr. James Hickey, (Chairman, National Theatre Society Ltd.) called and examined.

Mr. Patrick Mason, (Artistic Director, National Theatre Society Ltd.) called and examined.

Mr. Michael Kennedy, (Regional Manager, Western Regional Fisheries Board) called and examined.

Dr. Liam Donnelly, (Chief Executive Officer, Moorepark Technology Ltd.) called and examined.

Mr. Niall McCutcheon, (Principal Officer, Department of Marine Representative) in attendance.

Mr. Gerry Dromey, (Principal Officer, Department of Agriculture, Food and Forestry) in attendance.

REPORT OF THE C & AG ON THE AUDIT OF THE 1995 ACCOUNTS - NATIONAL THEATRE SOCIETY.

Mr. Martin Fahy, (General Manager, National Theatre Society Ltd.) called and examined.

Mr. Fahy: I am accompanied by Mr. James Hickey, chairman of the board of directors and Mr. Patrick Mason, Artistic Director. Mr. Phelim Donlon from the Arts Council is here as an observer as the council issues the society with a grant.

Chairman: Paragraph 15 of the report of the Comptroller and Auditor General reads:

In 1995 the Society received £2.49m in financial assistance4 from the State and generated box office income of £1.2m.

This was a considerable increase on 1994 which recorded box office revenue of £950,000.

The number of seats available in the two theatres run by the Society are as follows

The Society achieved an attendance level around 63% in 1995. However, due to discounts, agents’ commission and the tendency for the cheaper seats to be sold first the revenue generated represented approximately 50% of potential revenue. The Arts Council has set a target of 60% of potential revenue to be achieved which would involve increasing attendance levels to around 70%. In the period 1984-1995, only 30% of the 79 plays staged have achieved that level.

In response to my enquiries, the Society has informed me that the norm in commercial theatre in Dublin was to budget break-even on 50-55% seat occupancy for an eight week run.

4The assistance was paid by way of grants from the Arts Council and the Department of Foreign Affairs.

The Society attributes the difficulty in achieving higher box office revenue to a number of factors

•an overcapacity of theatre seats in Dublin in relation to population (with 60,000 seats available per week)

•the exploitation to near exhaustion of the more popular plays on the repertoire

•a demand for novelty or spectacle.

The General Manager has informed me that a tripartite working group comprising representation from the Department of Arts, Culture and the Gaeltacht, the Arts Council and the Society, has recently been established. The group is considering how to determine a formula to be used for arriving at the level of funding appropriate to the National Theatre.

Mr. Purcell: This paragraph is intended to give information on the box office performance of the National Theatre Society Ltd., particularly in 1995. The society which operates the Abbey and Peacock Theatres in Dublin is not strictly speaking a State-sponsored body but rather a private company in which the Government has a shareholding. Its financial lifeline is provided by the State in the form of an annual subsidy which nowadays is channelled through the Arts Council. At the present rate of subsidy, the society had an accumulated deficit of more than £500,000 at the end of 1995 and the unaudited figures for 1996 show this increasing to nearly £700,000 at the end of that year.

The Committee appreciates that national theatres cannot survive without State subvention and it would be unreasonable, given the important role they play in the scheme of things, to expect them to operate solely by reference to commercial considerations. That is not to say that every effort should not be made within those parameters to maximise the contribution of internally generated income towards meeting the outgoings. Obviously, without munificent benefactors or sponsorship the onus of providing this contribution falls on the box office.

One will see in the paragraph that attendance levels of approximately 63 per cent capacity were achieved in 1995 and I understand the corresponding figure for 1996 was 57 per cent. These percentages should be viewed against the 70 per cent attendance level necessary to achieve the 60 per cent target of potential revenue from productions set by the Arts Council. The difficulty in generating higher box office revenue is set out in the paragraph. The findings of the working group established to review the role of the society and to determine a formula for its future funding are expected to be published in the near future.

Chairman: Will Mr. Fahy give his opinion on the paragraph of the Comptroller and Auditor General?

Mr. Hickey: The immediate reaction is that since 1995, when those issues were raised with the Comptroller and Auditor General, we have had a very successful box office period. Taking 1994 as a baseline, we have had a 16 per cent increase in box office receipts to the end of 1996, and we look forward this year to a further 14 per cent increase. In relation to the financial stability of the society, we are happy to say that the Arts Council has implemented new funding arrangements which will put the Abbey Theatre on a secure financial foundation.

Mr. Fahy: It has. The first three months of this year have gone very well and we had surplus funds.

Deputy O’Malley: Inevitably the comparison is made between the Abbey and the Gate Theatres. The Gate Theatre receives assistance from the Arts Council but to a much smaller degree than the Abbey. It operates in a much smaller theatre which is less economic. It is an old theatre. Why is the Gate so successful and the Abbey so unsuccessful?

Mr. Mason: That is a dangerous comparison, and I do not wish to comment on the work of a very brilliant colleague, Michael Colgan at the Gate Theatre, and the very successful operation he runs.

The auditorium in the Gate is half the size of the combined seating of the Abbey and Peacock together. Mr. Colgan had no remit and he had no responsibility on a national scale. He carries very few overheads and operates very skilfully largely as a commercial theatre with an enabling grant from the Arts Council. All of this does not bear comparison to the remit and responsibilities of the national theatre, over and above the putting on of plays. Our programming is posited on principles obtaining since the founding of the theatre, and our interpretation of those principles is always an attempt to balance commercial success with artistic success. This is increasingly a very difficult area. One facet of this programming is our continued commitment to new Irish writing. Of the 14 productions in the past year, seven of them were new Irish plays. This represents an extremely high risk business. We have more long-term commitments and responsibilities. We are quite capable of commercial success with plays such as Dancing at Lughanasa, Wonderful Tenessee, the 1995 programme, Philadelphia Here I Come, which was a great success at the box office and we also had great artistic success. But we have wider responsibilities as well.

Deputy O’Malley: Mr. Mason, the Abbey is fortunate to be operating when Irish play writing is probably as strong as it ever was in our history.

Mr. Mason: Extremely lucky. One of the great strengths of the Abbey at the moment is the amount of young writing talent that exists. There is an enormously successful season of plays in the Peacock Theatre and the Abbey has always been to the forefront in supporting Irish playwrights.

Deputy O’Malley: Supporting Irish playwrights is not the penalty Mr. Mason implies. Many of them are very successful and among the leading playwrights in the world.

Mr. Mason: Some of them are very successful and I do not see it as a penalty; I see it as a privilege.

Mr. Mason: I do not mean it as an excuse. The remarks in the report of the Comptroller and Auditor General, which are taken from our policy reports, contextualise the work we do. They are by no means excuses nor are they attempts to blame anyone else. Sometimes the imagination of the writer and the imagination of the theatre does not find an equal response in the imagination of the public. This is a common fact of life in the arts, but that is not a penalty.

Mr. Mason: No, the artist has to work with the public, but the commitment of the theatre is to the artist first with a major awareness of his responsibilities to the public. The relationship between the artist and society has always been problematic. History tells us, particularly the history of the Abbey over 90 years, that very often the greatest artists, for instance, Synge and O’Casey, were ahead in some ways, their imagination led the imagination of the public. The play, “Observe the Sons of Ulster Marching Towards the Somme” by Frank McGuinness, was first performed in the Peacock Theatre in the 1980s and subsequently revived in the 1990s. The increase in public attention and public taste for that play is a case in point. In the intervening years the reputation of the play has grown. It was seen initially as an important play but not a popular one. When it was revived in the 1990s that trend was reversed. One of the long-term commitments of a national theatre is to develop its repertoire.

Deputy O’Malley: Put at its simplest, the Gate engenders some sense of excitement and the Abbey does not.

Deputy O’Malley: Possibly part of the reason for this is that the Abbey company, in a sense, are civil servants.

Mr. Mason: I do not think that is a fair view of the Abbey company. It is a traditional perception of the Abbey and there are reasons for that, but I do not think those reasons are well founded anymore.

Deputy O’Malley: If a member of the company has passed his or her ‘sell by date’, to put it at its crudest, are they retained until they are 65 years?

Mr. Mason: There are nine remaining members of the old permanent company. Permanency as a policy was abandoned by the board in the mid-1980s. Nine permanent members of the acting company remain. In 1995 the acting company numbered in excess of 140 in the course of the year, nine of those are still permanent and we are negotiating with the Arts Council and the Department to seek a fair and humane resolution to this problem. Over 100 actors a year are contract actors. The policy which applied in the 1960s and 1970s when the Abbey moved into the new building was reversed in the 1980s and we are now committed to resolving the problems arising from that policy.

Deputy Byrne: I have only been in the Abbey Theatre about half a dozen times. As a Dublin Deputy, could Mr. Mason give me some idea of what is happening in the world of theatre for Dublin audiences? When I was growing up in the city the Abbey Theatre was very attractive. When I go to the Abbey Theatre now I notice the number of American and other tourists. Is there a drop in the number of working class people attending the Abbey Theatre? Is the theatre programme aimed at tourists or the Irish market?

Mr. Mason: This varies throughout the year. We have a very broad cross-section of audiences. Our most recent audience survey in 1996 indicated a very good spread of ages in terms of Dublin and rural audiences. The areas we play to vary depending on the play. For instance, the play “Brothers of the Brush” by Jimmy Murphy was a huge draw for Dublin working class audiences, particularly from north Dublin. We subsequently toured with the play around County Dublin because of its singular attraction. The plays by Tom McIntyre would be more suitable for rural audiences and the more dedicated theatre goer.

During the summer we are always aware of tourists and attempt to schedule the best Irish repertoire, classic or contemporary, for our two theatres. Visitors do not like to come to the Abbey to see Chekov during the summer but we will stage Chekov or Ibsen at other times of the year to cater for the Irish audience. Increasingly, we cater for many tastes and try to schedule a varied programme of plays.

Deputy Byrne: Can you give me a breakdown of the seating figures for tourist, Dublin and rural audiences? There is a 63 per cent seating occupancy. Is that a predominantly tourist audience?

Mr. Mason: You can to an extent. For instance, “Playboy of the Western World” staged at the end of 1995 attracted many students. I could give the Deputy a breakdown of any individual play. It is no longer true that the Abbey depends totally on visitors during the summer. We have a percentage of business throughout the year.

Deputy Byrne: Do you promote the Abbey to schoolchildren to encourage greater attendance?

Deputy Byrne: How does the decline in theatre going audiences compare with Britain and the rest of Europe?

Mr. Mason: There is a decline in theatre going audiences right across Europe, particularly in the Anglophone world, which has been apparent since the late 1980s. My colleagues in the UK and the US are very aware of this. It is a result of the impact of cinema, home entertainment and video etc. We have a marketing officer and department to target certain plays at specific audiences and promote the theatre in general. In 1996 we started an outreach programme which contacts community groups in Dublin and throughout the country through various schemes run in collaboration with arts officers, libraries, art centres, etc. These schemes promote theatre, not just the work of the Abbey, and drama as an educational and developmental process.

Deputy Byrne: Many Dubliners are not attracted to the national Abbey Theatre because of the impact of cinema etc. and there is a decline in theatre audiences internationally. I have witnessed brilliant performances in the Abbey Theatre and wished there were more people there to see them. Are you disappointed at the low figure of 63 per cent given the expansion of the Temple Bar area and the economic boom we are enjoying at the present? Ireland is the second most popular destination in Europe for weekend breaks.

Mr. Mason: Yes, I am disappointed. The figure is 63 per cent and rising. We are working very hard to raise those figures and the effects are beginning to register. We are seeking approval for a major building development scheme from the Department of Arts, Culture and the Gaeltacht. We are very committed to making not only our plays but the building as attractive as possible and to interact as much as possible with the city, particularly the inner city.

Deputy Broughan: The film industry has been very successful recently. The national theatre has developed many of our best actors and writers who are now famous. Is there any way in which it could benefit financially from our successful film industry? Last week a group of people were making a film for BBC1 at Dublin Castle. The national theatre is the mother institution of this great national achievement. Is there any way the national theatre could be more positively involved in order to balance the books? We are concerned you are finding it difficult to operate with the level of the grant available.

Mr. Mason: Yes, our initiatives range from trying to bring back some of our very successful actors to act with the company to using some of the kudos that Irish cinema has at the moment. We are also negotiating with RTÉ to produce a series of videos of classic Abbey plays and documentaries on the theatre and its history for the Irish studies market in the US. These are various initiatives in hand at the moment.

In terms of balancing the books the crucial element concerning the tripartite meeting between representatives of the Department of Arts, Culture and the Gaeltacht and the Arts Council is to fine tune the balance between earned income and subsidies, so that the theatre can survive and rise above a level of immediate financial difficulty. At the same time the pressure which all theatres must have to generate income is kept at a stimulating creative level rather than a crushing one. In terms of the Arts Council’s response this year which was done in the spirit of the tripartite meetings, we have achieved that balance. Given the evidence not only of 1995-96 but also our performance in the first four months of this year, which is extremely heartening we will be in a position at the end of this year, as the Chairman said, to balance the equation within the prudent confines of our remit and responsibilities.

Deputy Broughan: Obviously you do not envisage being involved in film production.

Deputy Broughan: Is it difficult to carry an experimental theatre as well as the full national theatre, that is, having to carry on with the Peacock Theatre as well as the Abbey?

Mr. Mason: Yes, but it is the same as research and development in any industry. That is where the young talent is tried and where the new talent comes through. It is a heavy investment but is a major responsibility of the theatre. As a national institution we have an overall responsibility to the art form to ensure there are trained actors, writers who know about stage writing, designers, directors and so on. It is a heavy burden, but an essential one.

Deputy Broughan: As a representative of the city, Mr. Mason mentioned developing an outreach with the locality in which the Abbey is situated. Many of us felt, that architecturally, the external building was a monstrosity and destroyed the streetscape in that area. We welcome the changes made to the building.

What is there in the Abbey to attract my constituents in Coolock and Kilbarrack to go to it? It still looks like a forbidding national institution with which has very little connection with their lives. When these people think of theatre they think of people such as Roddy Doyle.

Mr. Mason: This comes down to two things: the appeal of plays and the outreach work in contacting groups in the areas mentioned by the Deputy and other areas. There are problems with the building of which we are acutely aware. It is a two way process. There is an active dialogue between the work initiated in the building and bringing it and such people into the building. This process will take a little while but it has started and we are beginning to see some of the benefits. The theatre is very firmly committed to pursuing outreach policy over the coming years.

Deputy Broughan: There are interesting companies which come and go. Someone who attended a meeting of this Committee a few weeks ago spoke about a new theatre in Collins Barracks. It is a very competitive business. Is it difficult to compete with the Andrews Lane theatre and the various other companies which have operated from time to time, the old Eblana theatre and so on?

Mr. Mason: In 1994 there was a sense of saturation of theatre in the city. Since then, unfortunately, there has been a thinning out of companies. Since 1994 many links have been made in both formal and informal relationships. We have very strong active links with the Gate Theatre. Michael Colgan and I started in the Abbey Theatre 25 years ago. There is an exchange of resources and talent across the board. I do not see competition as a problem. A problem exists with our image in regard to the building and so on but these things can and are being worked on.

Deputy Byrne: Deputy O’Malley probably attends regularly at the Gate Theatre and, I am sure that as a member of the Progressive Democrats Party he regularly attends the Abbey Theatre also. Some Deputies spoke about outreach and targeting audiences. Deputy O’Keeffe told me he has never been to the Abbey Theatre.

Mr. Mason: As the Deputy is aware I circulated a key note address to the Members of the Oireachtas last year. We offer a very attractive range of concessions for the unemployed, senior citizens and certain third level students. Maybe after the general election people will be able to avail of these concessions.

Deputy Broughan: Before I went into politics I attended regularly at both the Abbey and Peacock Theatres.

Deputy O’Malley: Is it necessary to spend £5 million on a building as relatively modern as the Abbey Theatre, which is only 30 years old? Apparently, it has not been maintained.

Chairman: I would like Mr. Donlon from the Arts Council to comment on the input of the Arts Council.

Mr. Donlon: The Arts Council has been responsible for determining the grant to the National Theatre Society for 20 years. In that period the Arts Council, various members of different councils and staff have become very familiar with the operations of the society. There is no doubt the objective throughout the years has been to try to achieve an acceptable and satisfactory balance between the potential for earned income of various types and the level of subsidy. The Council has been as supportive as possible over the years in the context of its remit and statutory duties in supporting all the arts throughout the country.

It is true to say that when the present Arts Council took office there was a feeling that with the appointment of Mr. Mason some of the difficulties of previous years would be put behind the Society and a period of development and stability would ensue. Perhaps at that time the Arts Council was over-optimistic as to what might be achieved and made certain suggestions to the management of the Society as to how its income from all sources, not only the box office but also sponsorship and ancillary income, might be increased from a base year and the Council would then match those increases on a pound for pound basis in terms of future funding.

However, the view of the board of the Society at that time was that the targets or objectives which the Council suggested as part of that package were unrealistic and, unhappily, that has proved to be the case for a range of reasons, many of which have already been outlined today in response to queries. As a consequence of that, a series of tripartite meetings took place over the past number of months under the aegis of the Department of Arts, Culture and the Gaeltacht. The Arts Council is now satisfied that a formula and framework relevant to current practice and experience has been arrived at to enable the Society carry out its important role with confidence in relation to Irish theatre. The Council has always recognised the important role of the National Theatre Society which has been described, correctly in my view, as the research and development unit of the Irish theatre where risk is taken. A fully professional production of a new playwright’s work is made available to an audience. It may well be the new work of an established playwright but that is still a high risk factor. The Arts Council places a high value on the importance of training young people. During a very extensive review of theatre in Ireland which the Council conducted in the past 12 months, it was interesting and gratifying to find that the profession, which might have been expected to be somewhat critical of the fact that a large proportion of the Council’s grant-aid for Theatre is allocated to the National Theatre Society, in responding to the questionnaire and at meetings we had during the review, accepted and acknowledged the value of the work of the National Theatre Society. That was most significant.

Deputy O’Malley: The latest year for which we have a report or details is 1995. Why did Mr. Mason direct all the productions, except two, in the Abbey Theatre that year?

Mr. Mason: I did one of the productions in 1994 which was revived in 1995 prior to an international tour. I directed “Philadelphia Here I Come” at the request of the author. I directed “Angels in America” because it was an extremely important artistic initiative, and, as I had done the original production of the “Sons of Ulster Marching Towards the Somme” I was asked by Mr. McGuinness to direct the revival, which I was happy to do. The same applies to Sebastian Barry’s play, “The Only True History of Lizzie Finn” which I had committed myself to direct in 1994 but it had to be postponed until 1995. Of those productions, one is a revival from 1994 and the other should have taken place in 1994. Unfortunately, this increased my workload for 1995.

Chairman: I note a substantial drop in sponsorship from £66,000 in 1994 to £37,000 in 1995. Has an effort been made to get proper sponsorship?

Mr. Fahy: Yes, our PR and marketing department is dealing with sponsorship and we have been reasonably successful this year. We hope to achieve at least £100,000 sponsorship in 1997. It is interesting that, overall, the arts are experiencing a fall in drama sponsorship. For example, the Dublin Theatre Festival had a major sponsor in Irish Life but it failed to secure a major sponsor in its stead.

The figure mentioned in the report is what we got in cash from companies and individuals. There is another aspect which is not recorded. Theatre in general, and the Abbey in particular, has been very successful in receiving benefit-in-kind. There is a high standard of settings on the Abbey stage and some of that would be donations from individual firms. There is at least another £100,000 in sponsorship to the Abbey Theatre by way of benefit-in-kind.

Mr. Fahy: Not a group, it is an extension of the PR department where one individual is solely looking after marketing to develop the audience in general. Part of that person’s brief is to target companies and individuals for sponsorship. We have opened up a number of schemes where people can become friends of the Abbey, patrons of the Abbey or benefactors of the Abbey. This got off to a slow start in 1995 but it is now beginning to be of benefit. We believe we will achieve cash sponsorship to the value of £100,000 this year, over and above the sponsorship of benefit-in-kind.

Mr. Hickey: The figure mentioned represents approximately 15 per cent of the total turnover per annum of the society, therefore, we must keep it in proportion. The success of the society, particularly this year, both in terms of box office receipts and arising from the tripartite committee of the Society, the Arts Council and the Department of Arts, Culture and the Gaeltacht, new arrangements, to which the Arts Council referred, means that the society is now on a financially stable footing. This will ensure it operates in future within its ordinary trading overdraft limit set by the bank. This is due to the Arts Council’s arrangements together with our success at the box office about which we are very happy.

Chairman: I note from the directors’ report that the Abbey and Peacock Theatres will require extensive refurbishment. How is it proposed to fund this work?

Mr. Hickey: We have approached the Arts Council and the Department of Arts, Culture and the Gaeltacht. The difficulty from the Arts Council’s point of view is that State funding in relation to capital investment is very modest. Therefore, we need to approach both the Government and the private sector in order to do something with the theatre.

There have been many changes over the 30 years since the theatre was built. The building was built with a particular design in the 1960s which would not be regarded now as user-friendly. It looks like a building which is less open than it should be. The auditorium is not ideal as far as we are concerned. Both those issues need to be addressed, because this is a State asset and as such should be brought up to the best possible condition. We hope to engage the State and the private sector in the redevelopment of the building.

Mr. Hickey: There are a number of alternatives. The main alternative which has been put to Government was for an approximate cost of £15 million.

Deputy Broughan: Is Mr. Hickey saying the theatre needs to be pulled apart or is there merit in a new building?

Mr. Hickey: There is a proposal which basically takes the existing building and opens it out. We have a model in the Abbey Theatre which shows how one can open out the front of the building while at the same time redesigning the auditorium so as to make it better from an acting and presentation point of view. We developed these proposals over a number of years and have put them to Government. We hope that with the combined efforts of Government and other sources, possibly European or private sector sources, we will be able to refurbish the existing theatre.

Deputy Broughan: What is the timescale for this work and how will the theatre operate while the work is going on?

Mr. Hickey: We tour extensively throughout the country and internationally. Last year we travelled to Bonn, Paris, Liverpool and London. We would arrange a combined national and international tour while the building is being renovated. Fund-raising is the major issue at this point.

Deputy O’Malley: The last report is dated 31 December 1995 and was produced in April 1997. This report is out of date. Is the 1996 report ready or can you publish it?

Mr. Hickey: We are working in conjunction with the Comptroller and Auditor on the report.

Mr. Purcell: The audit was completed in good time and the audit report on the 1995 accounts was completed in July 1996. The difficulty is in bringing to the Committee’s attention items which are of interest that spread across the noncommercial State-sponsored area. It can be quite difficult to get all that material together. The 1996 audit is underway at the moment and within the next couple of months I would expect to sign an audit report on the accounts of the National Theatre for 1996.

Deputy O’Malley: In the accounts the box office receipts are approximately half the State subsidy.

Deputy O’Malley: The box office receipts totalled £1.202 million and you received £2.45 million from the State.

Mr. Hickey: We receive a relatively low level of State subsidy by European standards. The Norwegian National Theatre receives three times as much subsidy as box office receipts. The Danish National Theatre gets two and a half times as much subsidy as its box office receipts. Ironically, by European standards, we have a high amount of box office receipts compared to subsidies.

Deputy O’Malley: But the national theatre in Ireland is held in high regard internationally which is an asset.

Deputy O’Malley: This is a very marketable product whose brand image is historically good.

Mr. Hickey: Yes. Recent international success including “Dancing at Lughnasa” contributes to that perception of success but our primary location is Dublin and, whatever our international success, the national theatre is where we need to bring in people.

Deputy O’Malley: The accounts furnished to this Committee estimated the cost of refurbishing the theatre at £5 million last year. I am disturbed to learn that it will now cost £15 million.

Mr. Mason: As the Chairman said there are various alternatives. A major structural and mechanical survey of the national theatre was carried out in 1994 when I joined the theatre and it was estimated that it would cost £5 million for the renovation project. This project would not change the building but would bring it up to current safety standards, rewire the entire building and refurbish seats. Other alternatives were then explored to open up the public areas and ameliorate the problems we experience in the main auditorium in the theatre and to make provisions for shops, restaurants and more public areas. That figure came to £16 million.

Another alternative which was not explored fully was to look at a green field site but the board, shareholders, the company and staff believe the national theatre belongs in the heart of the city. They believe the site not only has historical connotations but deeper cultural significance and should remain within the inner city limits. Costings were prepared for various alternatives and I can furnish the committee with that report and recommendations.

Deputy O’Malley: The building was designed by the late Michael Scotland it is only 25 or 30 years old. It is disturbing that you all find it very unsatisfactory now.

Mr. Mason: It is disturbing but the dissatisfaction has been there from the very beginning. The building carries with it many of the problems inherent in the architecture of the sixties which have been encountered worldwide. It is a highly mechanised building in engineering terms, for instance, the original drainage system used to keep the river Liffey out of the Peacock Theatre and the crude airconditioning system is now 30 years old and at least ten years past its sell-by date.

Deputy Broughan: The sixties was a great era for brickwork, particularly building walls.

Deputy Byrne: There was no shortage of bricks used in this construction. It was built by a company called A. J. Jennings with whom I was an apprentice for seven years.

Deputy Byrne: If the £15 million programme were adopted would that include an additional site? Do you envisage doing everything within the existing structure? The reason I ask this is that I get a claustrophobic feeling in the Abbey Theatre unlike the Gate Theatre which has a fresh, bright and airy atmosphere, particularly in the bar area. In the Abbey everything seems to be squared off, heavy and dense. There still seems to be a lack of seating facilities even after attempts to brighten up the bar area.

Mr. Mason: I agree with the Deputy. I would be delighted to go over the building proposals with you and show you a model of it. We have land at the back of the building which we use as a store and we can use that land. It is a difficult site but in pushing the administration services back and by restructuring the Peacock Theatre and relocating it we can open up the front of the house area to which the Deputy refers. One of the reasons that area is so cramped is because the fly tower from the Peacock takes up almost one-third of it. By relocating it on the roof the architects have opened up the building and that will afford room for a lobby, restaurant and a recital area. It will be a very large open space with a glass frontage which will be open to the city and will emphasise a different aspect to the building.

Deputy Byrne: One building programme costs £15 million. What could you do with £5 million?

Mr. Mason: Replace the plant and bring it up to current safety standards. Obviously the board and the shareholders feel it would be better to develop the building and give us all a better national theatre. It would be a more attractive building opening onto the city and would not suffer from the claustrophobic atmosphere the Deputy mentioned.

Deputy Byrne: I agree. There is no accounting for taste. Architecture in the sixties was in bad taste. The national theatre is a very dense and dreary old building.

Deputy Byrne: You made alterations to the front of the building and to the bar, but it is not consumer-friendly.

Mr. Mason: That space is compromised by two factors. One is the presence of the Peacock which cuts into that space and the other is the heavy wood panelling. It was beyond our budget at that time to do anything about that factor. In the next four weeks there will be a new visual display in the lobby of the theatre. We also installed new lighting which has done much to lift the surroundings and give them more warmth.

Deputy Byrne: You take pride in your tours of America and performances such as “Dancing at Lughanasa”. How does that impinge on the finances of the company and do you lose money when you tour overseas?

Mr. Mason: When we tour to major international festivals by invitation we never expose the theatre to a loss. Last year we toured in the L’Imaginaire Irlandais and took two productions to the Odeon in Paris. We always seek to cover such visits with guarantees from the receiving venue.

Dancing at Lughanasa transferred to the commercial sector in the West End and on Broadway. We always ensure not to expose the society to a loss, but once a play gets into the commercial sector through arrangements with commercial managements and the payment of royalties, then it is earning money and receiving a percentage of the profits.

Mr. Mason: There was but it was abandoned in the 1980s. We took up our training responsibilities in collaboration with the Samuel Beckett Centre in TCD. Our training now of young actors is done through the Samuel Beckett Centre.

Mr. Mason: We have a professional input into the shaping of that course and into the auditioning of applicants for the course. We also operate in a consultative and advisory role. For example, our voice coach, who is on our staff and gives in-service training to all actors who come to the national theatre, teaches voice in the Samuel Beckett Centre. I give classes on acting technique as do other staff directors and the literary manager is also very involved in the course. This is at a very early stage as we have only been doing it for four or five years. We are working to develop our involvement with the Samuel Beckett Centre and particularly with Professor Kennedy who was appointed to the chair of drama two years ago.

Deputy Byrne: How do standards in Irish theatre rank vis-à-vis our European counterparts?

Mr. Mason: We rank very highly in two areas. We have a phenomenal reputation in Europe for the strength of our play writing at a time when most European theatre is dependent on the revival of classics such as Shakespeare. We are still perceived as being a home of playwrights. Following our European tour last year with the production “Observe the Sons of Ulster Marching Towards the Somme”, the strength and passion of our acting and the great resource we have in a new generation of actors who are appearing with the national theatre was very evident.

Deputy O’Malley: Were the productions of “Dancing at Lughanasa” in the West End and on Broadway Abbey productions with the Abbey company or were they with people who were introduced afterwards?

Mr. Mason: Eventually they were. For instance, the Abbey production on Broadway with the original company ran for six months. Following an arrangement with American Equity we went to New York and rehearsed in a company of American actors who then took over. This is common practice in the American context. The Abbey production then went to the Royal National Theatre and went with that cast to the West End. After a year there was a transfer and I was responsible for rehearsing a new company into that. That then proliferated into touring companies.

Deputy O’Malley: Would that be of the order of 1 per cent or 2 per cent of the takings?

Mr. Mason: Yes, and this would be in line with standard practice, for example, transfers from the Royal National Theatre or from other subsidised companies such as the Royal Shakespeare company going into the commercial field.

Deputy Broughan: How does your financial subsidy and seating capacity compare with that of the British National Theatre which is also operating in a very competitive marketplace?

Mr. Mason: The British National Theatre has three auditoria as opposed to our two. In the ratio of box office receipts to subsidy we get 1:1.87 and they get 1:1.60. Their overall grant is £11.5 million as opposed to our £2.7 million.

Mr. Mason: They operate a continental repertory system which is where you can hold three or four plays in a repertoire so you may do two nights of one play and two nights of another play in the same week. That means holding an acting company of almost 200 actors. It is a great system, because if you have the luxury of doing that and if a play does not perform as expected you can withdraw the number of performances for that play and increase the number of performances of a successful play in the repertoire. This means there is some flexibility in controlling levels of box office success. Unfortunately, we must adopt a series of straight runs. A play going on in the Abbey has to survive a minimum run of six weeks because it takes that much time to prepare the next production. Therefore, one must second guess, particularly with a new play, how successful it will be. An enormously successful play such as “The Importance of Being Ernest” will be revived in the late summer season. An element of flexibility we have is that if a play works in one season we can then bring it back in another season, though it has to be said that the problem with that is you are sometimes unable to bring back the same cast because people have got other jobs in films or television. Though there is a lot to be said for the continental system, I do not think we will ever be able to afford it.

Mr. Hickey: The most recent annual box office figure we have from the Royal National Theatre is 54 per cent. In the context of box office figures it is interesting to note that is the basis upon which they operate with the flexibility they have.

Deputy Byrne: The film industry has an awards system and the Irish equivalent is a critic’s choice. Is there a similar independent award system to recognise the theatre world?

Mr. Mason: There have been awards schemes. In the 1980s Harveys sponsored a theatre awards scheme. A new awards scheme co-sponsored by the ESB and The Irish Times was launched at the beginning of this year. The Abbey Theatre has a lifetime achievement award. As regards objectivity, I think it is in short supply in the arts generally but particularly in theatre.

Chairman: The Committee understands the difficulty of running the national theatre without incurring an overrun but is concerned by the level of losses incurred in recent years. It trusts that every effort will be made to reduce these operating overruns to a level which is more acceptable. The Committee wishes the society well in its efforts to increase attendance levels.

REPORT OF THE C & AG ON THE AUDIT OF THE 1995 ACCOUNTS- WESTERN REGIONAL FISHERIES BOARD.

Mr. Kennedy, (Regional Manager, Western Regional Fisheries Board) called and examined.

Mr. Kennedy: I am accompanied by Mr. L. Flaherty, Chairman, Dr. Greg Forde, Assistant Manager and Mr. Cecil Keaveney, Finance Manager with the Central Fisheries Board.

At the end of each of the years 1993, 1994 and 1995 considerable sums of money were owing to the Revenue Commissioners in respect of PAYE and PRSI. The amounts that were payable are set out in Table 16.1.

By May 1996 the arrears outstanding had been reduced to £200,334. At that point the Board entered into an agreement with the Revenue Commissioners to discharge the arrears together with interest over a 24 month period.

I asked the Manager of the Board why deductions of PAYE and PRSI made by the Board from staff salaries had not been paid promptly each month to the Revenue Commissioners.

The Manager informed me that a combination of administrative difficulties and resource constraints contributed to the non-discharge of the liabilities.

The Board’s resources were constrained due to reductions in licence revenue, rates and sales from the Cong Hatchery and Fish Farm.

The Board had been under pressure for a number of years due to problems specific to the Western Region, which had direct financial implications for the Board, and the additional effort needed on the part of management and staff to deal with them strained an already overloaded administrative system.

In addition, the increasing trend in recent years to rely on contract income, specifically from EU sources put further strain on the Board’s cash-flow position. The administrative requirements associated with the processing of proposals, the subsequent application procedures, together with the documentation of claims for reimbursement, caused cash flow difficulties and added to the existing administrative difficulties.

The Manager stated that he was very concerned about the problems these difficulties were causing and raised his concerns on numerous occasions.

One of the solutions was seen to be the computerisation of the accounting system which had been planned as far back as 1990 and which would provide for efficient financial control and compensate, at least in part, for the vastly increased administrative workload in the region. However, the lead-in time towards computerisation had been longer than anticipated, and a major setback occurred in 1995 when a fault developed in the system which meant that the entire year’s work had to scrapped.

Additional administrative support, specifically the appointment of an Assistant Manager, sought for so long, was finally provided in 1994. Because of pressure on the Board to initiate new projects under the Tourism Angling Measure, the new appointee had initially to devote almost all of his time to applications under this measure, in particular the Corrib System Development Project which is the largest project within the measure. The Western Board is the biggest participant in Tourism Angling Measure projects.

While the Board had been through a number of frustrating years, significant progress had been made in 1996 and the problems of the past have been, by and large, resolved by a combination of computerisation, additional staff resources and reorganisation.

The Manager has assured me that the arrangement with the Revenue Commissioners was strictly adhered to and all current deductions are paid promptly.

Mr. Purcell: Paragraph 16 draws attention to the past failure of the Western Regional Fisheries Board to pay PAYE and PRSI deductions from its staff to Revenue each month. Since the late 1980s it had been the practice of the board to work about a year in arrears in its pay over as a means of financing its activities without going too much into debt with the banks. Typically cheques for the outstanding amounts would be written but would not be released until the bank position was clear. The arrears had grown to £372,000 by the end of 1994. Effectively the board was using the tax deducted for cash flow purposes, a practice that is not unknown in the private sector but it is something you would not expect to find in the public sector especially in an organisation like the board which has most of its running costs funded by way of Oireachtas grants.

The Committee will see in the paragraph that the manager explains the extenuating circumstances in which the practice developed. There were reductions in revenue earnings, timing difficulties, delays in the receipt of EU funds, staffing difficulties and problems with the computerisation of the board’s accounting system. Arrangements were made with the Revenue Commissioners in May 1996 to clear the arrears over a two year period and to keep current payments up to date. What does not come out in the paragraph is that there was a general problem in the regional fisheries boards concerning the adequacy of their administrative arrangements and, in particular, their accounting functions. The manifestation of the problem in the Western Regional Fisheries Board was different because it led to the situation that is before the Committee today. Historically there has been a problem in finalising the preparation and audit of accounts in all of the boards including the Central Fisheries Board. I would like to think there is some light at the end of that tunnel as the position is being gradually brought up to date.

On a broader level my staff are currently conducting a value for money study on the operation of the fisheries boards. The report on the study will be available later this year.

Chairman: Mr. Kennedy, this is a serious report from the Comptroller and Auditor General regarding payments to the Revenue Commissioners. What is the position at the end of 1996?

Mr. Kennedy: The position is that we have met all of our commitments in accordance with the agreement of the Revenue Commissioners. We are up to date. I acknowledge that in the past we had a lot of difficulties especially in my region from the late 1980s to the early 1990s with the collapse of the sea trout stocks. Resources was an issue since the mid 1980s and was only addressed in 1994. In the past two years we have made significant progress particularly in 1996. I assure the Comptroller and Auditor General we will bring our accounts up to date.

Chairman: Is there any outstanding arrears to be paid to the Revenue Commissioners as at 31 December 1996?

Mr. Kennedy: We have an agreement with them to pay arrears over a period of two years and this agreement will expire in one year’s time. We meet this requirement on a regular basis. The monthly repayments are being made on time and regularly.

Chairman: Were the staff of the fisheries boards aware that their PAYE and PRSI deductions were not being paid to the Revenue Commissioners and, as a result, they were not covered by social insurance?

Mr. Kennedy: The P35s were always submitted on time. The staff were aware that we had difficulties.

Chairman: What caused the accounts package to fail with such disastrous consequences? Was any action taken as a result?

Mr. Kennedy: It happened at the end of 1995. The accounts package was making payments twice. We came to the conclusion that it was best to scrap 1995 completely and start again in 1996. The accounts package is now operating successfully and we can produce accounts on a monthly basis. I have accounts prepared for the first three months of this year.

Mr. Kennedy: The 1994 accounts have been audited and the Comptroller and Auditor General’s report has been submitted. The 1993 accounts have also been audited.

Mr. Kennedy: They were audited towards the end of 1996 and we are awaiting the Comptroller and Auditor General’s report.

Mr. Purcell: All the fisheries boards experienced problems. The situation is improving but realistically it will be the end of this year before we can reach a satisfactory position. I would prefer not to comment on the matter because it will be referred to in the value for money report which is being finalised at the moment. I would not like to pre-empt some of those comments in the report.

Mr. Kennedy: In 1995 there were 44 full-time and 18 temporary seasonal staff employed.

Mr. Kennedy: In 1995 an assistant manager, two clerical assistants and I worked in administration.

Deputy O’Malley: The Comptroller and Auditor General’s is primarily concerned with the PAYE and PRSI deductions that were not paid to Revenue. Will the board have cleared its arrears by the end of this year?

Mr. Kennedy: The arrears will be cleared by April 1998 in accordance with an agreement with the Revenue Commissioners.

Deputy O’Malley: Of all the fishery boards, angling in your region has been the worst hit over the past decade because of the proliferation of fish farms in the area. Are those fish farms licensed directly by the Minister and the Department without any consultation with your fishery board?

Mr. Kennedy: Yes, the Minister has full power over aquaculture and can grant licences, etc. Before a licence is granted the board is asked for its opinion and sometimes our objections are taken on board. It is correct that there is a proliferation of fish farms in the western region which we believe is the major cause of the collapse of sea trout stocks. Unfortunately representatives from the fish farming industry are not in attendance to refute this claim.

Deputy O’Malley: Can you take any steps to reduce the inordinate amount of aquaculture in the western region? The Connemara area, from Killary Harbour through Ballinakill Bay down to south of Slyne Head, is littered with fish farms.

Mr. Kennedy: No, we have no control over it. The Minister alone has the power to grant or refuse licences.

Deputy O’Malley: Rivers such as Ballynahinch and Dawros are almost denuded of fish. Are you happy with this?

Mr. Kennedy: No, low fish stocks is a major problem for us and, apart from the loss to the economy, has also caused a loss of direct revenue from licence sales to anglers. We are very unhappy about this and we have been very vocal about it since 1990.

Ballynahinch river has recovered in the past few years because fish farms in Bertraghboy Bay were fallow. In other words, the fish farms were empty at the crucial time between February and March when the sea trout smelts were going to sea. The same happened in Ballinakill Bay with the Dawros river which resulted in a slight recovery of fish stocks. If the fallowing process is not continued any improvement in fish stocks will be reversed. Even with some improvement fish stocks are still far below their original level.

Deputy O’Malley: In a bay the size of Ballinakill it would be possible for a net of a few hundred yards to take every fish in it.

Deputy O’Malley: Is Mr. Kennedy sure poachers are not using such nets throughout the year?

Mr. Kennedy: No, there are always poaching problems and there always will be. Ballinakill Bay and Killary Harbour had a big poaching problem. Every year we take about 40 illegal nets out of that area alone. The Deputy is correct that a small net of 40 yards can do much damage when it is positioned close to the shore where the fish tend to move. We have to constantly patrol this area. In the mid-1980s poaching was rampant in this area.

Deputy O’Malley: Why was poaching rampant? Was there not a permanent staff there?

Mr. Kennedy: The staff were not working efficiently. Since 1984, with a tremendous effort on our part, we have solved the poaching problem.

Deputy O’Malley: Is Mr. Kennedy not a bit quiet about the tragedy that some of the finest salmon and sea trout fishing in Ireland is now almost nonexistent in many parts of your region due to aquaculture? Do you think the Western Fishery Board should be more strident about it?

Mr. Kennedy: We have been accused of being too strident and outspoken about this issue. Since 1990 we have been actively involved. We have seized every opportunity to publicise this problem. I accept the Deputy’s criticism that we may not be vocal enough.

Deputy Byrne: Does Mr. Kennedy agree with Deputy O’Malley’s point that the sea trout stocks are almost exhausted? Do you also accept that salmon stocks are in a similar state?

Mr. Kennedy: There is a suspicion that salmon stocks have been affected in the same way as sea trout stocks and by the same source, but in all our research we have got very few salmon smolts returning. The phenomenon of sea trout is they migrate to sea in April and May and return prematurely in late May-early June heavily infested with lice. As a result the skin and mucus of the sea trout will be eroded and they become lethargic and die. Crabs then eat the bodies so there is nothing left. There is a similar suspicion with the salmon stocks, particularly those in the Ballynahinch system. Deputy O’Malley has already referred to the dramatic slump in the salmon stocks in the Ballynahinch river. We never found the salmon smolts returning with lice infestations like those found on the sea trout. We have only the suspicion and more research is required.

Deputy Byrne: I am conscious of the major controversy over sea lice, aquaculture and sea trout stocks. Have scientists not given an authoritative prognosis?

Mr. Kennedy: There will always be a difference of opinion amongst scientists. Some scientists are adamant that the problem is linked to fish farms. In the past few years the problem has been kept quiet because a number of fishery owners instituted legal proceedings against the Minister and fish farmers. Some legal proceedings have been put on hold or an interim settlement has been reached in recent times which has helped to keep the problem out of the public domain. Some scientists are adamant the problem is linked. It is hardly coincidental that the problems related to sea trout are only occurring in areas with fish farms, for example, in Scotland and Norway. Of course they are not here to defend themselves.

Deputy Byrne: Are you likely to argue the extreme case that fish farming should cease or do you see a happy medium with some fish farming and natural stocks of trout being revived? Are you totally opposed to all forms of fish farming?

Mr. Kennedy: The board’s policy is that it welcomes fish farming provided it does not adversely impact on wild stocks. Obviously, we are concerned that fin fish farming is impacting on wild stocks. Our attitude is, if it can be shown that the problems associated with fish farming is manageable then we would be happy to see it continue. If it is not manageable we would have to take a more extreme view.

As I mentioned in the case of Bertraghboy Bay, where the entire bay was fallowed for two months in February and March, we saw a distinct improvement. We would like to see more progress along those lines coupled with adequate treatments for farm fish.

Deputy Byrne: The Comptroller and Auditor General’s report seems to be riddled with allegations or suggestions that there are major administrative difficulties. Will the additional clerical assistant appointments overcome the administrative difficulties? Is it at clerical assistant level that the problem arises?

Mr. Kennedy: Taking resources and computerisation together we now feel we can handle the problem and are doing so.

Mr. Kennedy: We are the biggest beneficiaries of EU funding in terms of the Corrib Development Plan, which is significant. We have been held back in recent times because the Department decided to appoint an independent firm of auditors to look at our systems. They have recently reported that everything is satisfactory. We are looking forward to moving on that programme. It is a programme with which there were other difficulties.

Chairman: The Committee is pleased to see that the board has arranged a settlement of its liability but is somewhat concerned that it was allowed to get to such a serious situation and trusts that, in future, all liabilities will be paid on time. I propose to note this paragraph.

REPORT OF THE C & AG ON THE AUDIT OF THE 1995 ACCOUNTS-MOOREPARK TECHNOLOGY LIMITED.

Dr. Liam Donnelly, (Chief Executive, Moorepark Technology Limited) called and examined.

Chairman: Dr. Donnelly, you are very welcome. Perhaps you might introduce your officials.

Dr. Donnelly: I am accompanied by Mr. Brian Mangan, financial advisor to Moorepark Technology Ltd., Mr. Sean Gilroy, administrative director of Teagasc - one of the majority shareholders in Moorepark Technology - and John Brehany, finance department, Teagasc. I would also like to introduce Mr. Gerry Dromey, Assistant Secretary, Department of Agriculture, Food and Forestry.

Moorepark Technology Ltd. (MTL) provides pilot plant and research services to the food processing industry and commenced trading in August 1993.

Teagasc holds 59% of the issued shares in MTL. The balance of the shareholding is held by Forfás (6%) and commercial companies in the food sector (35%). MTL shares the same campus as Teagasc’s National Dairy Products Research Centre, with which it is formally linked through joint management.

The facilities consist of a modern plant covering 2,500 square metres in floor area and containing pilot scale processing equipment. The plant can simulate commercial food processing and has been assembled specifically for research and development and small scale manufacturing in dairy products, powder products, long-life liquid products, food ingredients and formulated foods.

The facilities comprise 8 units which can provide services in the following areas

•Wet Processes

•Evaporation and Drying

•Cheese Making

•Fresh and UHT Products

•Dried Food Ingredients

•Food Technology Ingredient Applications

•Fat Technology

•Special Purposes Unit.

The facilities were funded through grants from State sources and the EU (£2.1m) and an interest-free contribution from commercial shareholders (£1.9m).

The company has been operating since 1993. The Company Business Plan of 1993 set the objective of achieving a profit three years after commencement of operations taking into account IDA and other grants and the resources provided by Teagasc. It has incurred losses in each year of operation with the accumulated losses to 31 December 1995 standing at £278,936. The trading position of the company is summarised in Table 2.1.

Over and above the trading losses, Teagasc has contributed £462,654 up to the end of 1995 towards the running costs of the company under the terms of a shareholders’ agreement. It also leased the land upon which the facility stands to MTL over 50 years at a nominal rent.

The current staffing of MTL is eight consisting of five operators who can be assigned to work in any unit and three research staff who are assigned to contract research and development work. The utilisation of the plant capacity of MTL was reasonably satisfactory by the first half of 1996 with the exception of plant assigned to the cheese unit which was operating at 40% capacity. The extent of reliance on work from Teagasc was quite high. Table 2.2 sets out the plant utilisation position.

In 1995 sales to Teagasc amounted to £151,000 - approximately 40% of turnover. The total externally generated sales was accordingly of the order of £231,000 for the year.

In response to my inquiries, MTL informed me that the role of the company in stimulating industrial development and in facilitating Teagasc’s public mission was central to its establishment. In a practical way the company is also reducing the cost of State intervention since it centralises certain costs incurred by industry and offers a mechanism in the long-term for funding certain equipment required by Teagasc.

The initial projections and targets established for the company as set out in the Business Plan and in the budgets adopted for 1994 and 1995, the first full years of operation, envisaged a lag period of 3 years before profitability would be reached, in recognition of the fact that MTL was a new concept and would require time to establish its position vis-a-vis the food industry’s own research and development activities.

The performance in 1994 and 1995 was below expectations and the level of use of the plant by commercial shareholders was disappointing. A major improvement took place in 1996 as a result of a more aggressive budgeting and marketing policy. Rental income from commercial shareholders is projected to rise from the 1994 level of 35% to 41% in 1996.

The company has attributed its difficulty in extending its turnover to the low level5 of research and development carried out in the food sector in Ireland and it argues that it requires time to build up that turnover. Its success will depend on its ability to stimulate research and development work which is additional to the in-house research carried out by individual companies.

•the facility allowed it to carry out research and development work it was previously not in a position to do

•it also assists Teagasc in its industrial development mission.

5Estimated at 0.3% of turnover in the sector in the Report of the Science and Technology Innovation Advisory Council.

Teagasc acknowledged the difficulties the company faced in its initial years and expects performance to improve and a profit to be generated in the future. It has stated that considerable improvement is evident from the management accounts in 1996 and is projecting a positive cash flow of the order of £50,000 for the year.

The Department of Agriculture, Food and Forestry has informed me that the project must be viewed in the light of the recognition in recent years of the need for increased commitment to research and development by the Irish food industry aimed at developing new products and improving our competitive position. This was the rationale behind the setting up of MTL and remains relevant. However, the success, or otherwise, of MTL depends on the degree to which it is used by the industry to carry out research.

A central objective of the dairy sector remains reducing reliance on basic commodity products mainly by increasing cheese and food ingredients output. Research and development must be an integral part of such diversification policy. Likely changes in the future market environment within which the Irish dairy sector must operate, both within and outside of the EU, make even greater commitment to research and development an imperative.

The Department stated that the results of the initial three years of operation, with attendant start up costs, provide too narrow a basis for making a definite judgment on the viability of MTL. As Teagasc is the major shareholder in MTL, the Department will keep its performance under review.

Recently, the company’s facilities have been used in the development of new cheese varieties. It plans to participate in this way in the development of cheeses in two phases

•a pre-commercial stage which is funded from public sector research moneys and involves market testing of the product

•when a cheese is fully developed it will be manufactured under contract to a commercial company.

It is planned to reach the second stage for some varieties by March 1997. MTL sees contract manufacture of this kind as one of its important strategic functions since it eases the path for companies wishing to diversify. However, it is limited in scale and the intention is that each cheese product would be moved to an industrial plant at the earliest opportunity.

Mr. Purcell: This paragraph gives information about the financial performance of Moorepark Technology Limited since it started trading in 1993. Sixty-five per cent of the issued share capital is held by State agencies and, as the Chief Executive stated, the majority of shares are held by Teagasc with the balance being held by commercial companies in the food sector.

The company undertakes research and development and operates a small scale food manufacturing facility. In the first three years of operation the company accumulated losses of nearly £279,000. In addition, Teagasc has contributed £462,000 towards the running costs of the company. It was recognised at the outset that it would take time for the company to establish its position in the market and that it was likely to be three years or so before it would become profitable. This view has been borne out by events since and the company attributes the poor level of performance to the low level of research carried out in Ireland and specifically to the low usage of the particular plant by its commercial shareholders. In contrast, 40 per cent of the 1995 turnover represented work carried out on behalf of Teagasc. It is probably too early to judge the performance of the company but indications are that things have improved in 1996. The draft accounts show that the company broke even last year as a result of more aggressive marketing and budgeting. Hopefully this will give the company the impetus to clear its accumulated deficit in the near future before moving into profitability. I will be keeping its performance under review.

Chairman: Has the operation of MTL improved in 1996 and to what extent has the accumulated overrun been reduced?

Dr. Donnelly: The company generated a small profit in 1996 through a substantial increase in the overall business income and indications are that this is being maintained through 1997 where a further advance on that position is planned.

Dr. Donnelly: Yes, and that belief is shared by the company and Teagasc. It might be worth pointing out that the company has a dual mission. It is established on foot of an agreement between Teagasc and the commercial shareholders. The mission was to stimulate innovation in industry and to facilitate Teagasc in carrying out research on behalf of the dairy industry. In the course of pursuing that mission it was expected to achieve financial equilibrium. The board has interpreted financial equilibrium as achieving full recovery of both its depreciation and operational costs. We will present a business plan in the middle of this year which we feel will show how we recovered the accumulated losses over the years ahead.

Chairman: Have you been able to attract greater interests in your facilities from the commercial shareholders and if so how did you do it?

Dr. Donnelly: Yes, there was a 50 per cent increase in usage of the plant by the commercial shareholders in 1996. That was achieved through the marketing of innovative ideas arising from Teagasc’s public research programme. We see this as being a vital component of increased utilisation in the future. It is in accordance with the company’s mission which is to stimulate innovation in industry. Basically an increasing proportion of the usage of the plant arises out of contract work placed with Teagasc by individual companies to commercially develop research carried out from the public programme. This suits Teagasc in that it is a vehicle to get its public information into commercial practice. It suits industry in that, from a low base of innovation and R&D expenditure, innovation ideas can be given to them from which profitable products can be made.

Chairman: Is Dr. Donnelly disappointed that Moorepark Technology has only 50 per cent support from commercial shareholders?

Dr. Donnelly: We always saw it as a growing curve. While the commercial shareholders are the vital component in this it is worth pointing out that the company markets its services to the Irish food industry and not just to its commercial shareholders. We see a very important role being played where the technologies are relevant in working with the non-shareholder commercial food world. The company, in its membership, represents 75 per cent of the total milk pool of the country. Very few dairy companies are not members. The general food industry also require some of these technologies and we see them all as part of the market for the company.

We were disappointed in the first two years because we had to prove the point at technologist level in each company, not just at the top level. We had to develop a relationship with technologists and we are much happier with the performance in 1996 and with what we envisage for 1997. We are where we want to be after three years in operation. It was a difficult marketing strategy for the early period of the company.

Deputy Broughan: Why are the company’s staff numbers so small? I note the low number of research staff and that there are only five operators mentioned in the paragraph. In relation to capital and the size of equipment, I presume part of the research facility is in devising new methods of production which involves different types of equipment. For example, the cheese making equipment operates at only 40 per cent of its capacity. I wonder at the rationale behind this type of company. Is there a need for it or could Teagasc have done this on a contract basis with the food industry?

Dr. Donnelly: It is a service company and is a very high class development facility. The machinery is small scale for product development purposes and the staffing of the company is at operator level. All the research which leads to usage of the plant is carried on by other people - the 60 research and development staff of Teagasc at Moorepark, with the assistance of the operators. Researchers of the large and small dairy companies also work in the plant using the operators. The staff of the company can largely be thought of as operators who maintain the equipment. Research is carried out by people from the various users of the facility.

Deputy Broughan: What was the merit in hiving this off from the main work of Teagasc?

Dr. Donnelly: It is not as the Deputy describes it. The rationale for the concept was that such high class development facilities did not exist in Ireland. The Irish dairy industry’s competitors had such facilities. We put a proposal to the partners in industry that if they wished to compete they had to have access to the highest quality research and development plant possible. They did not have sufficient scale or profitability for each company to build its own plant and it would have been foolish to do so. It was a necessary extension of the capabilities of Teagasc in serving industry and of industry in competing with the Danes, the Dutch and the New Zealanders. It could not have happened otherwise.

Deputy Broughan: Why did the company not allow them provide more of the share capital for establishment?

Dr. Donnelly: It is a question of dealing with the art of the possible. Moorepark Technology is the only recent example of such co-operation between dairy companies in Ireland. They are all competitors and are not accustomed to pooling resources for any purpose. It is a unique example not only in that respect but also of a public research and development company which took on the challenge of being commercially run. Nowhere in the world has any publicly owned research and development company been obliged to cover its depreciation and operational costs. Problems have arisen with similar facilities set up elsewhere by public institutions in that they could not afford the operation of such an expensive facility. Moorepark Technology has a commercial drive and structure in place so that it would be operational and affordable.

Deputy Broughan: The Comptroller and Auditor General said the company has broken even in the latest accounts on which you are to be congratulated. When a system is produced is there, or will there, be significant earnings in relation to patents, licences and so on or are the innovations given to the shareholders in the private sector?

Dr. Donnelly: Moorepark Technology does not have a research programme in its own right but is a rental facility. The intellectual property of Teagasc is owned by Teagasc through its national dairy products research centre. We patent information, commercialise it and transfer it in different ways but ownership lies with Teagasc. There is no connection between the intellectual property of Teagasc and Moorepark Technology. It is a pilot plant to serve the programme.

Deputy Byrne: One will appreciate we have come a long way from the days of Calvita processed cheeses, thankfully. I note from the report that Moorepark Technology is becoming involved in the production of a variety of cheeses and that a two stage approach is being taken in the development of them. The report states that when a cheese is fully developed it will be manufactured under contract to a commercial company. Will Dr. Donnelly explain that contractual relationship? Does it mean the product, formula or ingredients will be in contractual ownership?

Dr. Donnelly: A typical example - we have four such cases at present - is where, from the public programme of Teagasc, a cheese variety is developed after consultation. It is presented to the industry and a company may decide to test market the product. The test market goes through various stages requiring the production of the cheese for market development purposes. Moorepark Technology is then rented for the production of that cheese which has been transferred from Teagasc to a company. Without Moorepark Technology it would be impossible to bridge that small scale stage. It is not the wish or intention of Moorepark Technology to be a contract manufacturer other than an incubator for products that are moving from research into the full scale.

Deputy Byrne: Where does that leave major companies such as Avonmore that manufacture their own cheeses? Do they have in-house research in alternative cheeses to the standard cheddar etc., independent of Moorepark Technology? At what stage will they relate to Moorepark Technology?

Dr. Donnelly: A typical example is a soft cheese which was developed for a public programme at University College Cork about ten years ago. On the basis of market projections by the Irish Dairy Board for this cheese an investment of £1 million by a major company in a small scale manufacturing plant took place. That cheese was not successful and, as a result, the industry became very wary about diversification.

The concept behind Moorepark Technology was that they had easier access to the marketplace and there was no need for a capital decision until a position was consolidated which would remove that impediment.

Chairman: The Committee welcomes this paragraph and hopes that Moorepark Technology will increase its research and development in a sector that is so important to the Irish economy. It trusts that an effort will be made to achieve profits on an ongoing basis and would like to be kept informed of progress.

MIONTUAIRISC NA FINNEACHTA

(Minutes of Evidence)

AN CÓISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

Déardaoin, 17 Aibrean 1997.

Thursday, 17 April 1997.

REPORT OF THE C & AG ON THE AUDIT OF THE 1995 ACCOUNTS - NATIONAL THEATRE SOCIETY.

REPORT OF THE C & AG ON THE AUDIT OF THE 1995 ACCOUNTS- WESTERN REGIONAL FISHERIES BOARD.

REPORT OF THE C & AG ON THE AUDIT OF THE 1995 ACCOUNTS-MOOREPARK TECHNOLOGY LIMITED.