Feargal Quinn (Independent)

I welcome the Minister. We are getting fond of the Minister or she is getting fond of us as she has been in the House two days in a row. I congratulate the Leas-Chathaoirleach on his election yesterday.

When I was elected to the Seanad 15 years ago, I wondered how I would handle Bills coming through the House and I decided that I would look for the customer in each Bill. I wrote a book some years ago entitled Crowning the Customer, the first chapter of which was the boomerang principle. It stated that everything one does in business and in every enterprise is to try to get the customer to come back again. Admittedly, I had problems with the Governor of Mountjoy Prison who claimed that it did not apply to him to that extent and I had a problem with my cardiologist last year when he shook hands with me and said, "I hope I never see you again." It is from that point of view that I was impressed with Senator Liam Twomey's contribution because he talked about the customer and about patients. I was chairman of a hospital and I tried to get the hospital to change the word "patients" to "customers", but I was singularly unsuccessful in that regard.

I want to examine this issue from the point of view of the customer. I have long been a champion of competition in most areas of economic activity, but for even longer I believe I have been a champion of the interests of the customer. It is that hat I would like to wear on this occasion. Looking at the Bill from the customer's point of view, it is not immediately clear to me where the benefit lies. The explanatory memorandum states the purpose of the Bill is to oblige the board to attain the level of reserves necessary to achieve authorisation as an insurer and to provide it with a structure that, inter alia, gives commercial freedom on products and pricing to the VHI.

The first part of that is an attempt to what I call shoehorn the VHI into the European Union competition regime in the area of insurance. For many years we have succeeded in resisting that move and currently we have a derogation from it. By passing this legislation, we are, in effect, abandoning that derogation forever. I want to question, first, whether it is a good thing to do so and, second, whether it is necessary to do so. There is no doubt that abandoning the derogation will be costly for the customer of VHI services. Under the existing regime, where the State carries the ultimate risk, the company does not have the considerable expense of maintaining the level of reserves that would be necessary if we are to regard the VHI not as a State enterprise but as a private insurance company like any other.

We must be under no illusion that under this Bill, we are significantly increasing the cost that must ultimately be passed on to the customer. This Bill cannot be passed off as being in the interests of the customer in any way that I can see. The motivation behind the move is ostensibly to open up the voluntary health insurance market in this country to competition or, at the very least, to conform with the current European Union ideology on competition, which could be summed up as, "Thou shalt have competition even if it kills you."

I was brought up to believe that competition was good and I believe that intrinsically in my business life. The more of it, the better. Invariably, competition reduces costs and brings about the lowest costs for the customer. Following some of our experiences in recent years, I am beginning to wonder if that is quite as straightforward as I used to believe was the case. For instance, in the past decade we have had to suffer successive increases in electricity prices, which I spoke about last year, the justification for which was to make the market profitable for new competitors to enter. Somehow magically the prices go down simply by more players being in the market, but so far it has not worked out that way in the case of voluntary health insurance.

There is another consideration at work. In this country we have irrevocably committed ourselves to the principle of community rating as a priority matter of national importance. That means the risk of health insurance is spread over the entire community, including both younger people who have less call on it and older people who always cause the major share of health expenses. That is a wonderful principle of which I thoroughly approve. It is a great example of the community working together to share a burden across generations. By spreading the risk that way, we make it possible for many people to enjoy health insurance who would otherwise be unable to do so.

Our subscription to this principle makes me proud to be Irish but with the best will in the world, I am not sure that we can mix the principle of community rating on the one hand and an open insurance market on the other hand in which companies compete with one another for the business. The only way community rating can be maintained in a regime of open competition is by risk equalisation, in other words, making it impossible for companies to reduce their costs by selecting only the best risks. If they cannot benefit by cherry-picking the risks and if they cannot reduce the benefits they offer because if they did so they would not get any customers, the only area in which companies can compete on costs is by reducing what they spend on administration, and in that area I suggest the pickings are very slim.

If we are totally committed to the principle of community rating and to the practice of risk equalisation, it raises the question of whether those two commitments can be made compatible with the European ideal of open competition no matter what happens. I doubt they can. Any attempt to square the circle will have the effect ultimately of being at the expense of the end user, the customer. I am almost afraid to say this out loud but it may be that voluntary health insurance is one of the few areas that justify having a State monopoly in place. The Minister has no idea how difficult it is for me to say that out loud, and I am sure she finds it difficult to hear with her history, but I find that logic inescapable.

I was chairman of An Post for ten years and it brought home to me that some functions are better done by public rather than private enterprise if the social aims of the activity are to be met. The European Union does not agree with me about the postal service, and we are about to see a major battle in that matter, but perhaps what we should be having is a battle about voluntary health insurance.

The second aim of this Bill is about giving the VHI more commercial freedom, another principle that, a bit like motherhood, we tend to approve of in what I call a knee-jerk way. From the detail of the Bill, it is clear that what is envisaged is an extension of the VHI's activities away from what we have always called its core business, the payment of people's medical costs. Should the VHI, as this legislation envisages and as the Minister described very well in her contribution, stop being just a medical insurer and spread its wings so that it becomes a provider of medical services? If that is so, the business case must be carefully and thoroughly made before we take such a radical step.

Something I have observed in my years in business is the widespread tendency of empire building and what happens very often occurs by a process known as mission drift, that is, where companies start doing one function and begin to do others as well. It is the opposite to what should be a core principle, that is, sticking to one's knitting. That is the approach I tend to favour. I am a little concerned about allowing the VHI to get involved in other businesses, perhaps to support the basic business. I hear it in many other cases and I always have a concern about it. If the core business exists, they should stick to their knitting.

After our experiences with Telecom Éireann and with Aer Lingus, I hope in future we will be much more careful about privatising State enterprises. With my background, that is difficult for me to say, but I do question it and I questioned it last year at the time of the privatisation of Aer Lingus. If we intend to privatise something, we should be clear about our objective rather than just be driven into an automatic assumption that everything should be privatised. We should determine our approach not according to what I would call a supposed ideology but by answering the basic and simple question, "Will this benefit the customer?" Only when it clearly does should we do so. I understand where the Minister is coming from. I understand the ideology and the European Union's pressure on us to do this but I would like to look back at every Bill that was brought before the House and ask if it benefited the customer. In this case, I doubt it.