COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 9 Mar 2006

The Pensions Board — Accounts 2004.

Dr. M. J. Somers (Chief Executive, National Treasury Management Agency), Mr. P. Carty (Chairman, National Pensions Reserve Fund Commission), Ms A. Maher (Chief Executive, The Pensions Board), Ms A. Counihan (Chief Executive, National Development Finance Agency) called and examined.

Chairman

The matters on the agenda are the 2004 annual report of the Comptroller and Auditor General and Appropriation Accounts — chapter 16.1 — national debt, and chapter 16.2 — savings bank fund; National Treasury Management Agency — accounts 2004; National Pensions Reserve Fund Commission — accounts 2004; and The Pensions Board — accounts 2004.

Witnesses should be aware that they do not enjoy absolute privilege in these proceedings. The attention of members and witnesses is drawn to the fact that, as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons identified in the course of the committee's proceedings. These rights include the right to give evidence; the right to produce or send documents to the committee; the right to appear before the committee, either in person or through a representative; the right to make a written and oral submission; the right to request the committee to direct the attendance of witnesses and the production of documents and the right to cross-examine witnesses. For the most part, these rights may be exercised only with the consent of the committee. Persons invited to appear before the committee are made aware of these rights and any persons identified in the course of proceedings who are not present may need to be made aware of them and be provided with a transcript of the relevant part of the committee's proceedings if the committee considers this appropriate in the interests of justice.

Notwithstanding this provision in the legislation, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official, either by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions in Standing Order 156 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policy or policies.

I invite Dr. Somers, chief executive of the National Treasury Management Agency, to introduce his officials.

Dr. Michael Somers

I am accompanied by Mr. John Corrigan who deals with the National Pensions Reserve Fund. Mr. Paul Carty is chairman of the National Pensions Reserve Fund Commission and required to give evidence to the Committee of Public Accounts. Also present is Ms Anne Counihan, chief executive of the National Development Finance Agency. She is Accounting Officer for the purposes of the committee. Mr. Adrian Kearns deals with the State Claims Agency. Mr. Oliver Whelan deals with the issue of borrowing and debt management and will in the future deal with our new functions in respect of greenhouse gases. Mr. Brendan McDonagh is our finance director.

Chairman

I invite Ms Maher to introduce her officials from The Pensions Board.

Ms Anne Maher

I am accompanied by Mr. Tom Dunphy, head of corporate services and secretary to The Pensions Board. Mr. Brendan Kennedy is our internal actuarial adviser, while Mr. Jerry Moriarty is head of investigations and compliance.

Chairman

I invite Ms O'Donnell from the Department of Finance to introduce her officials.

Ms Stephanie O’Donnell

I am a principal officer in the PPP unit. I am accompanied by Mr. Ray O'Leary, assistant principal officer in the unit.

Chairman

We have received opening statements from all of the Accounting Officers. As it would take over an hour to read them all into the record, I would be grateful if they would give aprécis. With their agreement, we will publish their statements to the members of the press present and on the Oireachtas website.

Chapters 16.1 and 16.2 of the annual report of the Comptroller and Auditor General read as follows:

16.1 National Debt

The National Treasury Management Agency has the statutory function of borrowing moneys on behalf of the Exchequer and managing the National Debt on behalf of and subject to the control and general superintendence of the Minister for Finance.

Expenses incurred by the Agency in the performance of its functions are met from the Central Fund. The Agency incurred expenditure of €18.6m on administration in 2004 (€15.1m in 2003).

Under the provisions of section 12 of the National Treasury Management Agency Act, 1990 I am required to audit the accounts of the Agency and when making my statutory annual report on the Appropriation Accounts, to make also a report to Dáil Éireann regarding the correctness of the sums brought to account by the Agency in the year. The Agency's accounts for 2004 have been audited and the accounts, including an administration account and accounts relating to the National Debt, have been presented to the Minister who has laid copies thereof before both Houses of the Oireachtas.

I am satisfied that the accounts properly present the transactions of the Agency in 2004 and its balances at year end.

Table 1 shows the outturn for the National Debt in the five year period 2000-2004.

Table 1. National Debt 2000-2004

	National Debt Outstanding	Debt Service Cost
	€m	€m
2000	36,511	2,575
2001	36,183	2,379
2002	36,361	2,169
2003	37,610	2,277
2004	37,846	2,203

The composition of the National Debt at 31 December 2004 is shown in Table 2.

Table 2 - Composition of National Debt as at 31 December 2004

	€m
Medium/Long term Debt	31,864
Short term Debt	3,527
National Savings Schemes	4,518
Less: Domestic Liquid Assets	(2,063)
National Debt	37,846

The Agency's performance in regard to its activities is independently measured by an international accounting firm who are specifically engaged for that purpose. The rationale and basis of the performance measurement was agreed with the Department of Finance. It was determined that, measured on a net present value basis against an independent benchmark portfolio, savings attributable to the Agency's management in the year amounted to €28.44m.

16.2 Savings Bank Fund

The audit of the Post Office Savings Bank is carried out on my behalf by the auditors of An Post subject to my right to carry out further audit tests which I consider necessary.

In 2005 they reported to me on their audit of the 2004 accounts. I accept their opinion that the accounts of the Post Office Savings Bank give a true and fair view of its transactions for that year-end and of its year-end balance.

In addition to managing the National Debt, the National Treasury Management Agency is responsible for the investment and management of funds remitted to the Exchequer by the Post Office Savings Bank. The Exchequer is responsible for the repayment to the Bank of all such funds and for meeting interest charges thereon.

The state of affairs of the fund at year-end is shown in Table 1.

Table 1. Post Office Savings Fund

	2004	2003
	€m	€m
Liability in respect of funds due to depositors and creditors	1,304	1,126
Value of related investments held by Post Office Savings Bank Fund (at cost prices)	1,315	1,136
Surplus at 31 December	11	10

Mr. John Purcell

In the interests of the committee I will be very brief. The NTMA accounts for 2004 show that it cost €18.6 million to run the agency for the year. This includes an additional sum of €2 million to meet the deficit in its pension scheme. A further €3 million was also paid for this purpose by the NTMA at the end of 2005. The significant increase in running costs in recent years is largely attributable to the extra functions assigned to the organisation such as the State Claims Agency and the National Development Finance Agency and its involvement with the National Pensions Reserve Fund. The NTMA's ability to absorb these functions at senior management level has been helped by changes in the profile of the national debt, which now sees all debt denominated in or swapped into euro, thereby eliminating exchange rate risk, and by the favourable interest rate regime which has enabled the NTMA to fix the bulk of the debt at historically low rates, thereby virtually eliminating interest rate risk.

The NTMA has a management role in the National Pensions Reserve Fund, although overall responsibility lies with a Government appointed commission. As members might be aware, earlier this week the commission published its review for 2005 which disclosed that the value of the fund at the end of 2005 was €15.4 billion.

The NTMA is a well run organisation and I was able to give a clear audit report on all accounts operated by it in 2004. The inclusion of chapters 16.1 and 16.2 in my report on the appropriation accounts stems from a legacy type statutory requirement.

I was also in a position to give a clear audit report on the 2004 accounts of the Pensions Board. Members will see from the accounts that the board's main source of income is fees levied on occupational pension schemes and, to a far lesser extent, PRSA schemes, with the balance mostly coming from the Exchequer. The board increased its fee rates on occupational pension schemes in 2003 by approximately 50% to cover funding requirements in the short to medium term, with the intention of reaching a break-even position over a five-year period. As a result of this increase, the board's bank balance at the end of 2004 was a healthy €3.3 million. Draft unaudited accounts for 2005 show that this had grown to €4.2 million at year end. In response to my inquiries the chief executive informed me that it was expected that deficits would be incurred from 2007 onwards, thus absorbing the accumulated funds.

No public accountability issues arise from the financial audits of the accounts for 2004 before the committee for consideration.

Dr. Somers

I will briefly outline the functions of the NTMA. We started as a single function business to manage the national debt and borrow funds on behalf of the State. Over time we have become a four business unit. We now have the State Claims Agency which handles claims against any Minister of the State and more recently claims against doctors, hospitals, etc. We also have a function to advise State institutions on minimising risk. We have been given the function of manager of the National Pensions Reserve Fund for ten years. The commission is obliged to act through the NTMA in carrying out its functions. Since 2003 we have acted as the National Development Finance Agency. Each of these businesses has its own board. These are the NTMA advisory committee, the National Pensions Reserve Fund Commission, the State Claims Agency policy committee and the National Development Finance Agency board. In addition, there are two audit committees, one for the pensions fund and the other for the NTMA. The pensions commission has two committees, one to deal with its investment in property and the other its investment in private equity.

We act largely on behalf of the Minister for Finance who is our direct boss under authority delegated to us by the Government. We also have responsibilities to virtually every other Minister in respect of one or other of our functions.

The value of our combined portfolios at the end of 2004 amounted to approximately €50 billion. At the end of 2005 the figure was approximately €57 billion. In 2004 the cash moving through the organisation amounted to €530 billion. Last year it was €630 billion, approximately five times Ireland's GNP.

I will comment briefly on our various roles. On the national debt, the committee will be aware that interest rates have been at historically low levels. We have taken the opportunity to lock in as much of the debt as possible at fixed interest rates which are now very low. Some 84% of the debt now carries a fixed rate of interest. The remaining 16% relates to the small saving schemes, for which we are also responsible.

The State's balance sheet continues to improve. Taking the national debt and deducting the various assets for which we are responsible, the net amount is down to approximately eight months of tax revenue. In other words, if eight months of tax revenue and our assets were combined, the national debt could be wiped out. The debt to GDP ratio continues to fall and at approximately 28% at the end of last year, it continues to be one of the lowest in Europe. I read in a newspaper some days ago that the rate in Italy is 106%. Various other European countries also have high rates.

Interest payments continue to fall and account for about 4% of tax revenue. Ten years ago such payments took about 19% of tax revenue. This has freed up money for other purposes. Surprisingly, approximately 80% of our bonds are held by foreigners. Foreign parties are more inclined to invest in Irish bonds than local institutions. The rates at which we raise money are virtually the same as the major European countries such as France and Germany and there is effectively no interest differential. Ten-year money cost is typically between 3.25% to 3.75%. It is cheaper than I have ever seen money. We continue to have the highest possible credit ratings of AAA, given to us by all the major credit rating agencies.

In addition to acting as managers of the national debt and borrowing on behalf of the State, we also received the function of raising funds on behalf of the Housing Finance Agency. It was probably reckoned that we could get money more cheaply than it could because we are bigger players in the market. We also provide a central treasury service to local authorities and similar bodies. These bodies were at one time effectively being charged very high rates by banks, and if they had surplus cash they would get low rates of interest. If these bodies need money, they can now come to us for it, and if they have surplus cash they can leave it with us. We are not trying to collar the business, but an alternative is provided, and the banks are inclined to be more competitive in the terms offered to these bodies.

We manage the assets of the dormant accounts fund which come to approximately €200 million. We manage the social insurance fund which has recently reached the level of €2.5 billion. It is mostly invested on a short-term basis. We manage the balance in the Exchequer account on behalf of the European Central Bank. There is a requirement for a rolling forecast of how much money the State will have with the Central Bank here at the end of each day. To the extent that this forecast is out, we must either borrow money in the market and put it in the Central Bank or take money from the Central Bank and put it into the market. This relates to liquidity management on behalf of the European Central Bank.

With regard to the State Claims Agency, we are currently managing approximately 3,400 personal injury claims, with a reserve value of approximately €250 million. We have resolved approximately 1,900 claims since we began, and about three quarters of these claims involve the Prison Service, the Garda and the Defence Forces. We are now dealing with substantial new claims, mainly in the child sex abuse area and hearing loss cases. We have been advising various State institutions on how to reduce risk and have produced reports on toxic mould, radon gas, road traffic accidents and technology workshops in schools.

We operate the clinical indemnity scheme, which deals with hospitals and doctors, etc. This is because the two insurers which these had, the Medical Protection Society and the Medical Defence Union, wish to pull out of Ireland. The commercial company dealing with this, St. Paul's insurance, has also decided to pull out, probably as a result of the high cost of claims and the difficulty in making money. We also have a responsibility to advise and assist in the design and implementation of a national clinical risk management scheme. We are collecting data from all the hospitals around the country to identify where pockets of risk can arise in order to advise on what can be done about them. Some medical expertise has been recruited for this.

I will not make extensive comments on the National Development Finance Agency, as I believe Ms Anne Counihan will deal with this. The main function of this is to ensure the State obtains value for money on all public investment projects. To date, we have considered approximately 90 projects with a capital investment of around €20 billion. We have completed advice on a number of these and we are also involved, of course, in some of the public-private partnership areas.

In July the Government decided to add to the functions of the NDFA by giving it a procurement role in respect of three Departments, namely, the Department of Health and Children, the Department of Justice, Equality and Law Reform and the Department of Education and Science. The role was to procure PPP projects by putting them to tender, obtaining projects, cutting a deal with developers on the PPP costs, and handing the role back to the relevant Department.

The National Pensions Reserve Fund grew to €15.4 billion by the end of last year. Since then the markets have moved quite favourably and it is currently valued at approximately €16 billion. This is an approximate annual gain of €4 billion. Comments have been made regarding whether it makes sense to borrow money to invest in equities around the world. We have carried out an exercise on this to see potential results if funds were used for other purposes, to pay down the debt or not to borrow. The net gain would have been between €1.5 billion and €2 billion. It is money for the State which would not have been there if the fund had not been set up. Mr. Carty will give further details on the fund.

New functions have arisen for the NTMA in the recent past. On the PPP side, we will have a procurement function, and legislation will come before the Oireachtas in this regard. We have the new categories of claims, mainly hearing loss and certain child abuse cases which occur where children were abused in primary schools that were not residential institutions. There are approximately 350 of those cases. We are also to be the carbon credit purchasing agency, following the new fund which was set up in the budget. That arises out of the Kyoto Protocol arrangements, and we will have to buy credits because we are producing too many greenhouse gas emissions. This will cost about €550 million over 5 years.

We expect to get involved with the Department of Foreign Affairs in managing its foreign exchange needs. This could save €500,000 to €750,000 per year. We are to manage the assets of the education finance board fund, which is a relatively small fund relating to money received from religious orders in connection with child abuse.

That concludes my opening statement.

Chairman

May we publish the statement?

Dr. Somers

Yes.

Mr. Paul Carty

I am pleased to be here to discuss the work of the National Pensions Reserve Fund Commission with the committee. The fund's objective is to meet as much as possible the costs of social welfare and public service pensions from 2025 until at least 2055, when these costs are projected to increase dramatically due to the aging of the population. Before turning to the details of fund performance and our strategic asset allocation policy, I would like to pay tribute to the fund's first chairman, Mr. Donal Geaney, who passed away last October. The strategic course on which we are now set is a testament to Mr. Geaney's vision and energy and he has left behind a very clear and focused operating framework.

With regard to the fund's performance, 2005 was the best year so far, with its investments earning a return of 19.6%, or €2.4 billion. Performance was primarily driven by the fund's heavy equity weighting, although bonds also performed solidly during the year. In the five years since its inception in 2001, the fund has grown from €6.5 billion to €15.4 billion, a sum equivalent to 11.5% of GNP. It has outperformed its strategic benchmark by a cumulative 10%. In cash terms, it has earned €3.3 billion in excess of contributions received from the Exchequer.

The fund's strong performance reflects the benefits of the commission's averaging-in approach to the markets under which we continued to invest in the difficult market conditions of previous years. As a result the fund's equity allocation was close to fully invested going into 2005 and was well positioned to benefit from strong equity markets, particularly in Europe.

As has been amply demonstrated during the past five years, equity markets are volatile and returns of last year's magnitude should not be regarded as the norm. However, as a long-term investor, we are prepared to accept this volatility. The biggest risk we could run would be to take an overcautious investment approach and thus reduce the fund's potential contribution to Ireland's increasing pension costs.

The commission that controls and manages the fund is independent of Government in the exercise of its functions, which includes the implementation of the fund's investment mandate. This mandate requires that the fund operate on commercial lines so as to secure the optimal total financial return provided the level of risk to the moneys held or invested is acceptable to the commission. The NTMA acts as the manager of the fund and the commission performs its functions through the NTMA.

The return earned on fund investments is central to how it will influence the sustainability of the public pension system. Asset allocation, for example the proportion of the fund strategically invested in equities and bonds, is the main determinant of investment returns and is, therefore, a key decision for the commission. In making asset allocation decisions, we are guided by the fund's purpose as set out in the National Pensions Reserve Fund Act, that is, to meet as much as possible of the cost to the Exchequer of social welfare pensions and public service pensions to be paid from 2025 until at least 2055.

Our asset allocation strategy is founded on the premise that real assets such as equities and property will continue, in the long term, to outperform financial assets such as bonds. While equities are inherently more volatile than bonds, with sharp performance swings over short periods, the fund's 20 year investment horizon enables it to accept this volatility in a trade-off for the higher expected return. In this context we announced, 12 months ago, an ambitious plan for the period to the end of 2009. This plan entails allocating 18% of the fund to alternative asset classes, including property, private equity and commodities. Its objective is to increase the fund's potential long-term return while diversifying risk. During 2005 we made substantial progress on the implementation of the plan.

There is considerable interest in the fund's approach to public private partnerships. PPP projects are, as a long-term investment, a natural asset class for the fund and we are keen to access PPP investments where the risk return characteristics satisfy the fund's statutory commercial investment mandate. Three years ago, we made an initial allocation of €200 million to the asset class and will increase this allocation should suitable opportunities arise. As the committee may be aware, in 2004 the fund joined a consortium in order to bid for the M50 upgrade. That competition was recently cancelled by the NRA. It is being retendered and we will consider participating in the consortium again. Otherwise, we have announced a policy of not participating in specific consortia and instead making equity or debt finance available to the winning bidder for PPP contracts, provided we are satisfied with the prospective rates of return.

The success of the PPP programme is not dependent on investment by the fund. Where there are commercial PPP projects, there is no evidence of lack of funding from the private sector and the fund will be in competition with other investors to finance these projects. In other words, lack of capital is not likely to be an impediment to the development of PPP in Ireland.

In establishing the National Pensions Reserve Fund, Ireland is to the forefront of countries taking measures to prepare for the fiscal effects of population aging. We, on the commission, are conscious of our responsibilities in seeking to generate the maximum return from the assets entrusted to us, consistent with a prudent investment approach, in order to secure the pensions of today's workforce. We still have much work to do, such as completing the diversification of our investment base, engaging managers and selecting investment vehicles capable of adding value and ensuring that our investment approach remains at all times at the leading edge of international best practice. It is a task my fellow commissioners and I are looking forward to with confidence.

Chairman

May we publish Mr. Carty's statement on the Vote?

Mr. Carty

Yes.

Chairman

I invite Ms Maher to address the committee.

Mr. Maher

We are pleased to have the opportunity to speak to the committee. The Pensions Board is a statutory body set up by the Pensions Act 1990, following some pension problems in Ireland in the 1980s. It is a non-commercial, semi-State body and its parent Department is the Department of Social and Family Affairs. The board is a representative body with a chairperson and 16 other members and intends to represent the pensions interest in Ireland. While all its members are appointed by the Minister for Social and Family Affairs, under the provisions of the legislation the board must comprise representatives of trade unions, employers, consumer interests, pensioner interests, the Government, the pensions industry, member trustees and professional groups involved in pension arrangements.

The board has two statutory roles, a regulatory role and a policy role. It recognises its regulatory role as its primary one but it also sees its policy role as important. In addition, at the request of the Minister for Social and Family Affairs, the board has recently carried out some functions on promoting pensions development and awareness.

The board's regulatory role relates to supervising occupational pension schemes and personal retirement savings accounts, PRSAs. We supervise the trustees of occupational pension schemes and also the PRSA providers on approved products and activities. We do not supervise the actual providers of occupational pension schemes such as insurance companies and banks as these are supervised by the financial regulator. The board's policy role relates to pensions matters generally. It can advise the Minister for Social and Family Affairs at his request or at the board's own initiative.

The board's support activity on pensions development has recently been extended by a request from the Government to organise the national pensions awareness campaign which is now in its fourth year.

As the Comptroller and Auditor said, the board is not Exchequer financed. It is financed by the pension schemes it supervises and PRSA providers, apart from the start-up money given to us for the personal retirement savings accounts and also a sum of money given to us for the national pension awareness campaign, which amounted to €500,000 in the first three years and €1 million in the current year.

Our annual report 2004 is based on the agreed strategy of the board. The board is appointed for five years. Each board has had an agreed strategy for its five year term. The annual report gives details of the activities under the headings of that strategy. The key features in 2004 were that we continued a pro-active compliance monitoring policy. Originally the board was mainly reactive but in recent years it has done some pro-active auditing of 270 schemes and met 19 practitioner entities. Most of the pensions business is done through a comparatively small number of pensioner practitioners. We keep a register of all pension schemes and all PRSA providers. That register is important in the sense that it is the record of the schemes in Ireland, the number of people involved in the schemes and some information relating to them.

At the end of 2004 there was an active membership of 726,405 in occupational pension schemes on the board's register. A number of people have personal pension contracts which we do not supervise. Approximately 70,000 people have personal retirement savings accounts which the board supervises.

The first EU pensions directive was adopted in 2003 and was to be implemented by September 2005. The pensions board played a primary role in advising on the implementation of that directive. It relates to a supervisory activity and sets a minimum framework for pensions supervision across Europe.

Another key issue for the board in 2004 was the defined benefit pension schemes, that is, those with a promise of fixed benefit, rather than those which depend on contributions and investment returns where the member bears the risk rather than the employer. The defined benefit schemes, the old traditional schemes, were having serious funding problems as a result of the poor equity markets of early 2000. Many of the schemes had deficiencies and there were concerns that employers might have to close them down because of the deficiencies. The board had monitored defined benefit schemes to make sure they had enough assets to meet their liabilities through a statutory funding standard.

In late 2003 some changes were made in legislation which allowed the board to grant extensions to defined benefit schemes to get back to full funding, and those extensions could be given for up to ten years or longer in exceptional circumstances. Putting that in place, implementing it and dealing with pension schemes as deficits was a key activity in 2004.

We also carried out 56 investigations on occupational pension schemes, most of which would have come from inquiries or complaints that came to the board but some of which would have arisen from our own monitoring activities. We also had 41 whistleblows — there is a whistleblowing requirement under our statue — during 2004. Thirty of those would have related to non-remittance of pension contributions where employers had not paid through the contributions they had collected or were meant to pay through.

Personal retirement savings accounts were introduced in 2003. They had been first introduced in Ireland as an initiative to try to increase pension coverage and adequacy in Ireland and 2004 was the first year of formally supervising these. At the end of 2004 there were 46,257 PRSA contracts, with a total value of €178.5 million. That was our first year of supervising and it all went according to plan. The various data that was supposed to be submitted to us was submitted.

One of the issues which arose on foot of the introduction of the personal retirement savings accounts was that all employers in Ireland who did not have an occupational pension scheme were meant to give their employees access to a personal retirement savings account. An employer did not have to pay in but he had to arrange access through a PRSA provider. Our records showed that quite a number of employers had not done this; they had not complied with their statutory requirement. We issued a questionnaire to 64,000 employers whom we believed had not complied during 2004, because our records did not show compliance, and we followed up on those. We also received 61 whistleblows on personal retirement savings accounts, most of which related to people saying they had not been given the access the law allowed them to the PRSAs in their employment, some of which would have related to non-payment of contributions also.

We also have a function of making pensions information available and 42 formal presentations were given to interested parties by board personnel during that year and we have a role in regard to supporting the trustees of occupational pension schemes, who are the people with primary responsibility for occupational pension schemes. We produced a second edition of our trustee handbook and code of practice during 2004. This gives both the legislative requirements but also good practice for pension scheme trustees.

The big issues for pensions in 2004 were the funding strainswhich were encountered by the defined benefit pension schemes, the concern in Ireland that we would lose these schemes and that they would close down because they had funding deficiencies. The other issue which was beginning to be talked about widely was private pension coverage in Ireland and the adequacy of it. Our aim has always been to get a balance between our supervision role and fostering good private pension provision in Ireland, that we do not do anything on the supervisory side which thwarts good private pension provision or causes employers not to wish to provide it.

In the 2004 report we mentioned the main activities we would be undertaking in 2005. The policy side in 2005 was dominated by a request from the Minister for Social and Family Affairs to produce a national pensions review in Ireland of how pensions coverage adequacy was progressing, whether it would meet its targets and, if not, what could be done about it. That covered social welfare pensions as well as private pensions and the result of our work is the national pensions review, copies of which were sent to members of the committee at their request. It was requested in mid-2005 and was completed in the autumn of 2005.

Regarding our accounts, our financial statements are prepared under the accruals method of accounting and under the historical cost convention in the form approved by the Minister for Social and Family Affairs with the concurrence of the Minister for Finance. Our financial statements are also prepared in accordance with accounting standards generally accepted in Ireland.

The Pensions Board is financed by levies on occupational pension schemes and personal retirement savings accounts providers. The occupational pension scheme activity is fully self-financing by means of the levy we collect. The levy is reviewed annually and we make a recommendation to the Minister for Social and Family Affairs on the amount. The aim the board has adopted is to adjust the levy once only during each five year board term which gives rise to surpluses in the first two years of the board's term, a type of even line-ball in the third year and deficits in the fourth and fifth years. We are now in the second year of this cycle and matters are progressing according to the plan. The current levy was set in January 2003.

The first PRSA products were sold in April 2003 and a levy mechanism was put in place with a view to the PRSA providers who would be mainly insurance companies and banks meeting the full start-up and ongoing costs of The Pensions Board activity, but pending the build-up of sales of PRSAs and the reaching of a volume that would provide that money, the Exchequer provided the board with a temporary recoverable subvention for the shortfall in the cost of PRSA regulation. The subvention amounted to €1.43 million and the direct levies collected from PRSA providers amounted to €140,494 in 2004. On the results for that year, the board recorded a surplus of income over expenditure of €1.4 million for the year ending 31 December 2005. The total income for the year was €6.46 million, with expenditure standing at €5.06 million.

Chairman

I thank Ms Maher. May we publish her statement in full?

Ms Maher

Yes.

Chairman

Would Ms Counihan like to make some opening remarks?

Ms Anne Counihan

Thank you, Chairman. As Dr. Somers has introduced the National Development Finance Agency, I will not go over it. However, I will outline a few highlights.

We have advised in connection with as many as 91 projects, with a total capital investment of some €20 billion. We have completed our financial advice in relation to 22 projects, with a capital value of €2.3 billion. Eleven of these were public private partnerships fully financed by the private sector. We advise in connection with a wide range of projects as the members are probably aware — roads, railways, harbours, metropolitan area networks, the national conference centre and other accommodation projects. I will highlight a few of these.

We would see a number of the roads projects, especially the recent ones, as being great successes. These are public-private partnerships, all of which are full blown public-private partnerships in that they are design-build-finance-operate and maintain and all of them are funded by tolls. These include the M1 Dundalk western bypass, which opened in September 2005, five months ahead of schedule at a total cost of €340 million. The M4 Kilcock-Kinnegad motorway opened in December 2005, ten months ahead of schedule, at a total cost of €550 million. The Rathcormac-Fermoy bypass is well ahead of schedule and due to open late this year. The expected total cost of the project is €320 million. All of these projects are coming in on or before time and on budget.

The pilot project for affordable and social housing regeneration programmes was Fatima Mansions. This contract was won by Elliot-Moritz Construction in June 2004. It was funded by equity and a mixture of senior debt, provided by Royal Bank of Scotland and Ulster Bank. It is the model for all other social and affordable housing projects taking place under the aegis of Dublin City Council. The private sector takes the full risk for the design, construction and finance of the development. The Fatima project is outstanding in that the first phase of the social housing element was completed in September 2005, that is, in one year and three months from the date of financial close.

I should highlight the degree of innovation being brought to bear in these projects by the private sector. In the case of Fatima, the social houses and affordable houses are provided in that order. All the social housing must be completed, followed by the affordable housing, before the private sector developer can build his own units. It involves tastefully constructed landscaping, playgrounds, a swimming pool, a gym, a playing field, a crèche and, in some other projects, health centres. In the largest of the social and affordable housing projects, O'Devaney Gardens, one of the imaginative things being introduced for the project is a football pitch. Obviously, it is not a full sized one but there is a pitch on the roof of one of the buildings.

Deputy Boyle

I hope they do not take corner kicks.

Ms Counihan

The other housing regeneration projects — all of them are public-private partnerships involving design, build and finance — have a total value in excess of €570 million. They are solely and exclusively funded by the private sector. In addition, the Infirmary Road scheme comprising 160 affordable houses and which does not have a social housing element reached financial close on 8 December 2005. It was awarded to Michael McNamara and Company.

I wish to highlight a couple of major accommodation projects. The criminal courts complex has almost completed the procurement process. There was huge interest, both international and national, in the project. We received ten serious expressions of interest as of June 2005. We are down to a shortlist of three bidders. We received the last bids in February last and they are being evaluated. This is to be a landmark building. It will house 22 courts, 100 holding cells, jury rooms, facilities for the public, witnesses, defendants and the media and facilities for the Judiciary, barristers, solicitors and the Bar Council.

The national conference centre is well down the procurement road. The provisional preferred tenderer is Spencer Dock International Conference Centre Consortium, which is principally made up of Treasury Holdings and Irish Rail. We are in negotiations with that bidder and the deadline for completion of those negotiations is the end of March, when it will go into preferred tender stage assuming the current tenderer is successful in the negotiations. Based on that timeline, we anticipate contract close will take place in May or June.

As Dr. Somers said, in July 2005 the Government announced the establishment of a centre of expertise. This is not a new legal entity but an additional role that has been conferred on the National Development Finance Agency. We are now entering into the procurement and delivery of public private partnership projects. This is not to the exclusion of our role as a financial adviser but in addition to it. It is, however, limited for the moment to three Departments and in connection with a roll-out of a programme of projects that each of those Departments has specified. Our instructions are to procure and deliver as quickly as is reasonably possible.

In education, there will be 27 schools at a total cost of €300 million, that is, 23 post-primary schools and four new primary schools. The timeline for building them is from 2006 to 2009. The first bundle of schools, consisting of four schools, two of which are located in Portlaoise and two in County Offaly, has been decided by the Department of Education and Science. As a first step, we have conducted a procurement process under EU procurement rules for the appointment of technical advisers and we have done it as a single procurement for all 27 schools. The advisers for the first bundle have been appointed. They are Healy, Kelly, Turner, Townsend. The first bundle of schools is due to go to market in mid-2006 with a completion and ready for occupancy date of July 2008.

In health, there are to be six radiation oncology treatment centres established: two in Dublin at St. James's Hospital and Beaumont Hospital; University College Hospital, Cork; University College Hospital, Galway and two new satellite centres in Waterford and Limerick. This involves the procurement of radiation oncology equipment, which is extremely expensive and complex and involves the expertise of highly trained radiation oncologists, dosimetrists, physicists and so forth, and the procurement of ancillary equipment, CT scanners, PET scanners and the complex IT equipment that goes with them, as well as the construction of the vaults that must house the radiation oncology equipment. That is not ordinary construction, obviously, because of the need to protect people from radiation.

We have visited centres of excellence both in the United States and the United Kingdom, where there is a couple of highly admired PSI projects. We also visited one of the top cancer centres in the world, Memorial Sloan Kettering in New York, and one of the top general hospitals in the United States, Johns Hopkins Memorial Hospital in Baltimore. We are at a stage where the clinical output specifications are being put together by the HSE as well as the building specifications.

We have been working on Mountjoy Prison. This is to be located at Thornton Hall, north Dublin. It is to be a design, build, finance and maintain public-private partnership. It will be a high security prison with a facility to accommodate a minimum of 1,200 prisoners, both male and female. The site has been purchased and Jacobs Engineering are technical advisers.

Chairman

May we publish Ms Counihan's statement?

Ms Counihan

Yes.

Deputy Burton

Why do we still need Departments, given all the work Dr. Somers has taken over? He appears to have taken over education and health as well as everything else. What is left for the people in the Department of Finance and in other line Departments to do?

Dr. Somers

I do not know what answer the Deputy wants me to give. The NTMA has had a particular advantage over Departments. It was established at a time when the national debt was extremely threatening for the country. We had one of the highest national debts in the world and 8% of our gross national product went to pay interest on the debt. The NTMA was set up to run on a commercial basis. In other words, we were given the freedom to hire people with specific commercial expertise and to try to get the debt under control on the basis that if one cannot beat them, join them. As we were the only body associated with central government which had a form of commercial remit, a succession of Governments added to the functions of the NTMA. There have been five separate significant pieces of legislation adding to the functions and I think further legislation will be required in connection with the procurement function for these new public-private partnership projects.

We certainly have a wide range of functions and we have tried to fulfil them as efficiently as possibly. We have kept down staff numbers, etc. There are approximately 104 staff at present. We will obviously have to increase the numbers because it is just not physically possible to do all that must be done.

We act as an agent. We ourselves do not take on functions. Whatever we do is done to a large extent under delegated authority from the Government where it delegates the functions of individual Ministers to us to carry out. The only things we can do are those we are empowered to do by specific legislation.

Deputy Burton

I recall Dr. Somers stating a few years ago that the cost of traditional direct finance by Government was lower than the rates associated for Government with PPPs. Is that still the case? If so, is it that it is a Government direction in favour of PPPs? I do not know whether I should direct this primarily to Dr. Somers or to Ms Counihan. When a project is identified, does the Minister determine whether it is a PPP or is Dr. Somers free to say in terms of going to the market that because we are the Government, we could get money at a much cheaper cost than the rates which apply to a PPP? Does Dr. Somers have a current differential between the rate the Government would pay for a traditional type of project and the cost of finance which the State pays as a consequence of a PPP? I recall Dr. Somers stating that there was a significant differential. At the time he was speaking about schools and saying that the traditional way of paying for a school was much cheaper than the PPP way.

Dr. Somers

Deputy Burton raised a number of issues and I will try to cover them. In terms of the cost of funds, there is no doubt that the State can borrow funds more cheaply than anybody else and the cost of long-term funds over ten, 15 or 20 years is between 3.5% and 3.75%.

I will focus on the financial end because obviously there are a number of aspects to this. If one has a project done on a PPP basis, as we understand it, a portion of that would be funded by equity and a portion by bank finance. The equity portion would be remunerated probably at the rate of 10% to 15% per annum. The bond or banking portion of it would probably carry an interest rate one to two percentage points above the rate at which we could borrow money directly. While that is the financing end of it, there are a number of other aspects to it. We are not the decision makers on whether a project is a PPP or a straightforward Government financed project, although that decision may be given to us.

There are many other advantages to PPP projects, for example, that they seem to be delivered much more quickly than those delivered through the traditional funding basis. The famous example was the five schools. The hearsay is that there was to be a sixth school which was to be built on a traditional basis and I am not sure that it was ever. The five schools were built and there were complaints about them. They were too lavish or something and perhaps cost over the odds, but at least they are in place. As Ms Counihan stated in connection with the housing projects, the period from when the deal was signed to the time the projects were finished was short at 15 months.

There is also much risk transfer to the private sector. With the traditional method the State seemed to bear much of the risk for delays, cost overruns and everything else. With PPP projects, the idea is that one employs a consortium. There is no need to design and redesign. Where traditionally a State body would do the design with another Department perhaps having its input into it and the builder then doing his design, in the case of a PPP one asks a provider for a school with particular specifications. It is up to the contracting group to design and build it and to maintain the building over a period of 25 or 30 years. If a lightbulb or something goes, it must fix it. The consortium puts up the money and the State in return pays a fixed amount per year over the 25 or 30 years.

To try to ensure the State is not ripped off in this area, there is what is called the public sector benchmark where an attempt is made to calculate what the project would cost if it were done directly by the State with the lower finance and other costs built into it. The submitted bids are compared with this public sector benchmark, which is kept secret in this country. It is not necessarily kept secret in other countries but it is here. If these project bids come within the public sector benchmark, they are evaluated and the best economic offer is taken. If the offers exceed the public sector benchmark, there is another measure called the affordability cap which can be a bit higher than the public sector benchmark but which gives some leeway. I am open to some correction by Ms Counihan on some of this. If all the tenders are above the public sector benchmark but one wants to get the project finished quickly, one can use an affordability cap which might be a bit higher. If the tenders are outside those limits, it goes back to the relevant Minister and the Government to see what they want to do.

The advantage is that one gets the project done quickly. We have spoken for years about some projects. People design, redesign and discuss them and they never seem to get done. There is also a cost in delaying projects because prices increase all the time. If one gets something done now rather than in three years' time, it will cost less. Building costs seem to escalate all the time. I do not know whether Ms Counihan wants to add anything to what I have said.

Deputy Burton

I was especially interested in the NTMA's move into the medical area. They will be PPPs. Who will own the facilities? Will these be part of the new private hospital structures or will they be part of a traditional public hospital structure? How will access to the facilities be determined? Is there a criterion for the use of the facilities based on, for instance, medical need as opposed to an individual's insurance class or capacity to pay? All the NTMA's PPPs must generate a return and I presume in the case of the cancer facilities that the return is generated by the payment of fees by the patients, the consultants or whoever uses the facilities.

Dr. Somers

They need not all generate a return because with some of them, the State would just agree to pay so many million euro per year. The alternative for the State is to build and maintain the project. In the case of some of the roads projects which would be tolled, the income from the tolls would be expected to cover the developers' cost of the road. In the case of these radiation centres, which would all be in public hospitals, there is no question of any limitation in respect of their availability. The idea is that the private sector would develop and maintain the facilities.

I went to see one here in Dublin. These machines are complicated. They generate approximately 12 million volts and are housed in bunkers with walls approximately 2.5 m thick. If it is not done properly, one could get zapped by radiation a half a mile down the road. They are public sector projects. The machines will be installed in two places in Dublin — St. James's Hospital and Beaumont Hospital — but there are others in private hospitals. St. Vincent's Hospital and the Mater Hospital have two and there is one in Beacon Hospital. The public hospitals may contract the private hospitals to use the machines. St. Luke's Hospital also has machines which are due to be transferred to St. James's Hospital, but they may be old.

Ms Counihan

It is important to understand that we do not decide what projects are undertaken. In the three instances relating to the Departments of Education and Science, Health and Children and Justice, Equality and Law Reform, the Government decided the projects would be undertaken and they would be delivered by public-private partnership. The next step is for the Department of Education and Science to specify the schools, the number of classrooms, the capacity of the rooms, playgrounds, laboratories, catering arrangements and so forth. We are only the delivery boy and what it wants delivered is a matter for the Department concerned.

With regard to the Deputy's questions about the Department of Health and Children, it outlines what it wants and we try to deliver.

Deputy Burton

Why did Ms Counihan visit various centres of excellence around the world?

Ms Counihan

This was because a number of these have been delivered by PPP. In North America, which never went in for this, and Canada, in particular, radiation oncology centres are delivered by PPP. St. James's Hospital in Leeds is one of the most admired PPP projects under the private financing initiative in the United Kingdom. Our job concerns risk analysis and so on and I wanted to be sure my staff and I knew what was involved with this very complex equipment. When I visited St. Vincent's Hospital, I thought I would see X-ray machines. These are highly complex machines and it is comparable to buying aircraft. I felt we should have knowledge about these machines from a financial point of view as well as everything else.

Deputy Burton

I have a question for Mr. Carty. Does the National Pensions Reserve Fund have an ethical investment policy? The fund invests prominently in tobacco and armaments companies. Investments are listed, for instance, in Halliburton, which is heavily involved in the war in Iraq in support of the American effort. Is there an ethical dimension to the deliberations of the fund managers? I refer to investment in products regarded in the past by the Oireachtas as harmful, such as tobacco, in multinationals that employ people in Third World, and in US armaments companies.

Mr. Carty

Yes, it is an issue which the commission is addressing. Investments are made by the managers who do not come back to the commission to say what they invest in but, as a commission, we have closely examined guidelines and policy. We are working on this and expect to have a policy in the next few weeks. The question is how one does this. Our mandate under the Act is to optimise the return. The return of tobacco companies, strangely, is greater than the norm. Under the Act, we must optimise our return and, at the same time, there is a conflict about whether ethics is an issue, as the Deputy correctly stated.

Deputy Burton

There could be a synergy with Ms Counihan. Mr. Carty invests in tobacco companies while she invests in the linear accelerators to cure the cancers caused by tobacco.

Mr. Carty

We are independent of the NDFA. I am only trying to answer——

Deputy Burton

I am pointing out potential synergies.

Mr. Carty

I am identifying our remit which, as the Deputy knows, is laid down by the Act. The commission is examining this issue. Should we give instructions to the managers to screen or would it be better to use our voting proxies with other organisations of similar mind and work together? Within the next few weeks, we will have a guideline on policy under which this will be addressed.

Deputy Burton

It is a difficult area. Do the managers appointed by the commission undertake a computer-based automatic selection?

Mr. Carty

Some of them work towards indices and, therefore, the indices will have tobacco and armaments companies. It is a factor. The percentage they represent of our global investment is small. For example, Altria group owns Marlboro cigarettes but it is also involved in other activities such as crafts and cheese as a conglomerate. Perhaps we should not invest in that company because a small element of its activity relates to tobacco. That is why a guideline is needed and the question of screening or exercising a voting proxy must be considered.

Deputy Burton

Will a positive guideline be agreed?

Mr. Carty

I do not want to pre-empt the input of the other commissioners. We will have a guideline which we will address closely. I am positive we will address it in such a way that our reputation remains intact and we will not just invest in anything.

Deputy Burton

I refer to The Pensions Board. Does the board publish information about the different costs associated with pensions? Many people feel PRSAs are a waste of space because the associated costs are high. At times, it seems the board operates very much as an arm of the pensions industry. What is its function regarding customer protection and the costs incurred by people when contributing to a pension? Does the board publish information outlining which pension funds represent value for money? Most find that broker costs can be high. In some cases, the first year of a person's contribution to a pension can be absorbed by costs.

Ms Maher

With regard to occupational pension schemes, we do not publish anything. The providers of such schemes are supervised by the Financial Regulator because he supervises banks and insurance companies. When PRSAs were being designed and introduced in 2003, people's perception that they were being overcharged by pension providers was taken into account. A framework for a standard PRSA was provided for in the legislation and that places a cap on charges. The cap is 5% of the contributions paid and 1% of the assets per annum. This was considerably lower than the charges that would have applied before then. The standard PRSA was designed as an off-the-shelf product which could be bought without having to pay for expensive advice. It was aimed primarily at lower paid people in the workforce who had not already made private pension provision.

The cap has worked well in the sense that most of the charges are below it. The charges are published on the board's website. We do not provide an advisory service for people as to which one they should take out, but we publish the charges which must be expressed in a way that is easily understood. The problem in the past was that the charges were blurred and it was difficult to compare one product with another.

There is also a non-standard PRSA which was aimed at people who were prepared to take more of a risk on their investment policy and, therefore, were probably better able to pay for pensions advice. This did not have a cap on the charges. In the main, the charges for non-standard PRSAs are considerably lower than previous pension charges. They are approximately the same as the standard PRSA.

Deputy Burton

I am aware that just under 50% of people in the workforce have no pension. What is the gender breakdown of this? Given that women are lower paid than men, are they less covered for pensions?

Ms Maher

The Central Statistics Office carries out a survey each year, to which The Pensions Board inputs questions, etc., to assess pension coverage in Ireland. We try to get more information on each occasion. We have information on the gender division. Women have approximately 10% lower coverage than men. Approximately 46% of women overall have private pension coverage. It is considerably less in the private sector where approximately one third of women have private pension coverage. The other factor which comes into play is geographic location. People in the Dublin area and surrounding counties have a higher level of coverage than those in the midlands or the west. People who work for a large employer have a much better chance of having private pension coverage than people who work for a small employer.

We are concerned about the gender issue. The board has invested in campaigns to try to encourage women to take out private pensions. We have specific literature and we do many roadshows aimed at female participation. It appears that one of the reasons women have less pension coverage is that they tend to take time out for caring during their career. They are more likely to have part-time or contract work where coverage levels are lower. There is still some suggestion that the old historic view is held that if the male partner is the main breadwinner in the house, he will be the provider of the pension. There still appears to be a little residue of this around. However, we are trying to heighten the awareness and education of women to the effect that they should have their own private pension arrangements. We launched a scheme yesterday with one of the recruitment agencies to try to ensure that everyone starting work has a pensions checklist and asks their prospective employers whether they will provide pensions. We are doing a lot of work in that area.

Women's coverage came up during the national pensions review. The Minister for Social and Family Affairs asked us to examine the issue specifically. It is one of the areas identified for further research because it is of considerable concern.

Deputy Dennehy

I will open with a personal observation for Mr. Carty in line with the comment by Deputy Burton. While I appreciate the commission's full autonomy, the people, especially pensioners, would gladly forgo any financial benefits accruing from either the tobacco or armaments business. I cannot speak for all the public but think this view would be widely accepted. While we cannot interfere with the commission, Mr. Carty should take on board the wishes of pensioners, in particular, and potential pensioners.

Mr. Carty

The Act is laid down by Government.

Deputy Dennehy

If we need to change the Act, we may do so. I am sure there will be agreement on all sides on the matter.

Mr. Carty

I appreciate the Deputy's concern.

Deputy Dennehy

Unfortunately, a major part of our job is to be critical and to try to correct what is going on. Despite the range of projects in which Dr. Somers is involved, which includes five or six different reports, it is difficult to find fault with the work. The Comptroller and Auditor General has given him a clear certificate and no issues arise. As a result, I have just a few general questions.

Perhaps we can examine the cost of running the agency. It might appear like nitpicking to say that this cost has gone from €8 million in 2000 to €18.6 million in 2004, which is the year under examination. I appreciate that the savings attributed to the agency on the national debt were €28.4 million for that year, which more than justified the cost of the agency. I would be interested to get some breakdown of the figures involved. Does the figure consist primarily of enhancement bonuses and payments to the present staff? Bearing in mind the new projects and the new duties the agency has been given, does the figure account for the increased staff numbers and, if so, will the numbers change?

Dr. Somers

The Comptroller and Auditor General raises this question each year. I spent a few years as Secretary General in the Department of Defence where I was responsible for tens of thousands of people who were on the payroll. As I spent most of my time trying to deal with personnel problems, I swore that if I ever had a different job, I would keep down staff numbers. The fewer people one has working, the smoother an organisation can run.

When the National Treasury Management Agency began, approximately 75 people were employed in the agency. I reduced that figure to the mid-40s through efficiencies, people generally being flexible and automation. This took place at a time when we were dealing with the debt, funding, etc. The three new businesses have added enormously to our range of responsibilities. As my colleagues will clarify, we keep a very heavy hand on the recruitment of staff and on what we pay them. Even though we pay commercial rates of pay, it is not easy to recruit staff. The good people are well ensconced in their existing organisations and manacled to them with golden handcuffs. We only want the best because the amounts of money with which we deal are vast. No one will thank me for hiring people at low rates of pay if something goes wrong.

The staff numbers have increased to approximately 104. We have been carrying out reviews on how many staff are required. We must employ expertise for some projects. For example, on the pension fund side, we began by investing in equities and bonds. This involved a great deal of work because we had to hire approximately 20 fund managers, global custodians and so on. After that, the pensions commission decided it wanted to get involved in private equity, property, commodities, emerging markets and small capped businesses. The ones that caused me concern were the property and private equity businesses. Private equity is a particularly difficult business. It is not pleasant either because people set up these funds, take over a company, get rid of many staff and non-core businesses, etc. and make huge rates of return. The commission decided that we should get into this aspect. We invested €2 billion in private equity and another €2 billion in property.

Deputy Dennehy

What is the current situation regarding property?

Dr. Somers

We have approximately €400 million committed to property which is not all paid in and about €130 million committed to private equity. Between now and 2009, that must rise to €2 billion for each of them. To achieve €2 billion invested, we probably will need to commit approximately €3 billion.

Deputy Dennehy

I presume this will all be non-Irish investment.

Dr. Somers

Most of it will be non-Irish. It sticks in my gullet as much it sticks in the Deputy's that we do not seem to be able to get this money invested in Ireland. If a person tries to get into property in Ireland, they must jump a huge hurdle by paying 9% stamp duty and then all the legal fees. Before a person starts, he or she is down something like 11% to 11.5%, before any return on the investment. It is about 4% or 5% in the United Kingdom and in the United States there are no particular costs such as stamp duties or levies. It looks as though most of the money going into property will be abroad. The same applies to private equity. These large funds are mostly out of the United States. The NTMA is involved with Clayton, Dubilier and Rice, which has just achieved a buy-out of Hertz, the motor car people. They will move in and over a three to six-month period will slim down that business and achieve a rate of return increase of about 20%. That is what these people typically get. In some cases these private equity firms can get up to 60% or 70% on their return.

I must hire specific forms of expertise to deal with this. Most of the people hired by the NTMA come from the United Kingdom because there is very little expertise in this country and they must be paid.

Deputy Dennehy

I am trying to get a picture of where the NTMA is heading. I am not afraid of it taking over all the Departments and I welcome what is happening. This committee has given advice to the National Roads Authority because it did not have the financial expertise and was not able to compete on costing with private enterprise. Is the NTMA supplying that expertise to NRA projects?

Dr. Somers

Yes. I am theex officio chairman of the NDFA and Ms Counihan is the chief executive. As the Deputy knows, we do many other things, apart from those two functions. We have advised CIE, the Railway Procurement Agency and the National Roads Authority. With regard to the National Roads Authority, the only aspect we have not been involved in is the widening of the M50 because the pension commission has put up €20 million for that project which will now be retendered.

Deputy Dennehy

Many Deputies were of the view that a centre of expertise was needed, especially in the information technology area, and I refer to the PPARS project. The centre is now handling everything from Luas lines to the 23 linear accelerators. Could that centre handle the IT used in all Departments? Is there a format to handle all of them or will they all have to act independently?

Dr. Somers

The NTMA system of IT is under the direction of Mr. McDonagh, the director of finance technology and risk, and it is a very good IT arrangement. We developed much of it ourselves. We bought in some packages, put them together and have built on this during the years. We have an integrated IT system covering all the activities within the NTMA. At one stage we licensed out a part of the IT to another country. There is a business opportunity there if we had the time to do it.

On the question of whether the NTMA could take over IT functions on behalf of other Departments, we could certainly take over some of them. We would need additional expertise but we already have some very good people on board. I am not in the empire-building game. If people want the NTMA to do something, we are certainly happy to do it.

Deputy Dennehy

Professor Drumm has informed the committee the Health Service Executive will need to spend billions of euro on technology. I have seen one of the linear accelerators in action and it took four years to design the dungeon for it. It would seem to be logical for the NTMA to take over the supply and co-ordination of technology for the health service.

Dr. Somers

On the general question of IT and referring back to the days long ago when I was Secretary General of the Department of Defence, I wanted to computerise the Department's payroll for dealing with the ordinary soldiers because this was being done manually. I was informed that this would be very difficult to do because the ordinary soldier had a total of 117 variables in his weekly pay. His pay depended on allowances and deductions. If a soldier lost a button off his uniform he was penalised at the rate of one penny a week. The first step was to simplify the system. By the time I left the Department, it had been simplified down to about 40 variables which is still far too many.

The first step in dealing with some of these major State projects is to examine whether they can be simplified. A great deal of money can be wasted on computerising a system that may not deserve to be computerised and where it may be cheaper to do it manually or else simplify it.

Deputy Dennehy

I am not suggesting that but Professor Drumm has assured the committee he will need to spend that kind of money. On the question of PPPs, we either love them or hate them but most of us are convinced they are the right route to take. I note the Minister suggested that 10% of the NTMA investment should be in PPPs.

Dr. Somers

As the pension?

Deputy Dennehy

Yes, of the NTMA total investment.

Dr. Somers

We agreed with the pension commission to allocate €200 million to PPP infrastructure projects in Ireland. Wearing the pension fund hat, we have invested nothing so far because the opportunities have not arisen. The M50 was the only project we came up with. There were allegations we could be in a conflict of interest by wearing our NDFA hat. We got the pension commission to state that in future it would not join a bidding consortium for PPP but it would be prepared to join a consortium after the competition was over. I am not sure how realistic that is because it is like betting on a horse after the race has been run and the winner is known. If people want to allow the pension fund in on that basis, that is fine.

In many cases money is not really the issue. The NDFA has the legal power to borrow up to €5 billion and another amount from the Exchequer. If there is a question of funding a project, subject to whatever the Minister for Finance may direct me to do, the NTMA has the technical ability to get money, either wearing the Exchequer hat, the NDFA hat or if I can persuade the pension commission to come up with money. We hold ourselves open and ready to do any of these things.

Deputy Dennehy

People are either for or against PPPs. It is agreed and recognised by Departments that the sharing of risk and the associated reward is the issue. The public need a reassurance on the benefits and need to know who is benefiting and by how much. They need to know how much the private partner is getting and what risk the State is carrying. There seems to be a code of secrecy attached to PPPs. This committee has trawled through the tolling situation for months to find out what happened ten years ago. All contractual agreements should be in the public domain. Did Dr. Somers refer to work on benchmarking being kept secret?

Dr. Somers

It was not my decision but I think the Comptroller and Auditor General may have been involved. There is a decision that the size of the public sector benchmark should not be revealed. I gather that is not the case in Britain. We do not know whether we are supposed to produce a landmark building or a tin hut in the case of a school or a conference centre. We do not know the style of building that is required. We can say that the State wants a particular style of building which we think will cost €100 million and we can invite bids. At least then we have an idea of the kind of area we have in mind, but that is not my decision.

Deputy Dennehy

I am thinking of what happens after the event, that once the contract is signed and the work has begun, the public is aware of who will get what out of it rather than have five or six years of argument and somebody making a huge killing on tolls. We are obviously building up expertise in the area. Does Dr. Somers agree that, as far as possible, it should be an open book?

Dr. Somers

I am happy to have everything out in the open. Does Ms Counihan wish to comment?

Ms Counihan

The Deputy has hit on the real benefits public-private partnerships can bring because the State can transfer the risk. The question of risk has been examined in respect of each public private partnership project that has arisen. There are certain risks that private sector organisations will not take. There are certain risks that they will take. However, they will only do so at a premium because basically they do not want those risks. If it is a risk against which they can insure, it will increase the premium. There are then risks that they will readily take.

The second aspect relates to the origin of the contracting company. The Spanish, for example, have a very high appetite for risk. In fact, I am staggered at some of the risks they will take. An equivalent French construction company would have a corporate policy that would prohibit it from taking certain of the risks that the Spanish might take. I am not trying to single out particular nations; I am just giving the committee an example.

There are some risks that can be shared with the State. An example would be archaeological risk where — despite what might have appeared to be the case — the private sector has frequently taken a chunk of the risk and, of course, ended up sitting on very considerable losses. I refer, for example, to circumstances where it is intended to run a bridge across a river and where a Viking site is encountered by the construction company. That company could run up considerable costs in having its employees on site but idle and in respect of not being able to control when a decision will be taken regarding whether construction of the bridge should proceed or whether the road should be rerouted. If, following this delay, the company was allowed to continue, under the unitary payments system we use in respect of PPPs, it would not receive payment until the project was delivered. In one instance, a company suffered a loss of the order of €1.5 million and this was attributable to the delay in delivering the project.

Deputy Dennehy

Did the European Union change the rules two years ago? I refer here to the case of Cork School of Music, the project in respect of which was delayed and we were informed that a change of rules regarding the carrying of risk by the private sector was to blame.

Ms Counihan

The European Union does not address issues of that nature.

Deputy Dennehy

Does it relate to the extra 3% of GDP that we could spend nationally? Mr. Purcell might remind me of the position.

Mr. Purcell

It was more to do with the way it was accounted for in the national balance sheet. There was a clarification of how EUROSTAT would classify certain PPPs and that depended on the extent to which risk was transferred. It was interpreted as being a relaxation of those rules.

Deputy Dennehy

I find that interesting because we were involved, for a while, with the rigid structure to which I refer. It helps to get guidelines from elsewhere. We have looked at Canada, the United States and other places. People with a union perspective are opposed to PPPs and would like to see projects handled in the traditional way, while those who are anxious to obtain new infrastructure tend to be in favour of them.

Cash assets might seem a minor consideration. I understand that the agency had €1.3 billion, gaining interest at a rate of 2%, at the end of 2004. Why was this figure so high?

Dr. Somers

The Deputy is probably referring to the pension fund. There has been a problem regarding the investment of funds on the pension side. There is a specific allocation for the investment of money in bonds. As the NTMA, we have been issuing as many bonds as possible because interest rates have never been so low. To the extent that we can get money and lock it in at these low rates of interest, we have been doing so. We then act as the National Pensions Reserve Fund Commission and we look again at these rates of interest and we ask whether we really want to tie up the public's money in such low-earning assets. Somebody told me that we would never get any kind of decent pension by investing it at 3.5% or whatever and that we would never get a return. We have, therefore, held back on investing that money in bonds until the rates rise. They do seem to be moving up.

Deputy Dennehy

It is a very large amount to have in one's pocket waiting to be invested.

Dr. Somers

That is essentially what it represents.

Deputy Dennehy

Considerable work has been put into the monitoring regime. There are controls to monitor funds and the agency has two audit committees. With all the movement of funds, is there any possibility of there being a John Rusnak or a Nick Leeson? I know others have said it could never happen in their organisations.

Dr. Somers

One does everything possible to stop that happening. As far as I am aware, there is nothing more we can do. As I said, we have two audit committees in the place. We have an internal audit function, which has three people in it. PricewaterhouseCoopers carry out an overview of our practices, procedures, IT systems, etc., once or twice a year. The Comptroller and Auditor General has a regular presence in the place, auditing everything in addition. We adopt best practice in everything we do. For example, we will only transfer money to specified banks and financial institutions that are already on our list. We operate the SWIFT money transfer system, which is an electronic system of moving cash and is again highly controlled. We tape the telephone calls of all our dealers. There is, therefore, a public record of all the financial transactions that take place. The correspondence relating to the people concerned is opened by our head of control every day. One cannot do a deal and get a letter confirming that one has done it. He opens all the letters.

I have done everything that everybody has told me to do and more. I am as sure as I can possibly be that there is no Nick Leeson or anybody else around the place.

Deputy Dennehy

Like Deputy Burton, I have concerns on the pension side regarding PRSAs, etc. Whatever about personal funds, when one considers the smaller ones of €25,000 or €30,000 and the agency fees plus the levy imposed by the NTMA — regardless of whether it is right — the perception is that it is not worthwhile doing business because it is too costly. Four years have passed since the agency started advertising to encourage people to take up pensions. How is the national pensions awareness campaign proceeding? People I meet seem to indicate that, considering the fees involved, PRSAs are not worthwhile. While this may be incorrect, there is a lack of information on the matter.

I did not realise that trustees were required to produce copies of documentation for pension fund members. Is this practice widespread and are such copies often requested? The construction federation is often cited as the offender in this regard. Are steps being taken to bring it into line? This may be somewhat out of date because of the system of using subcontractors and the fact that the traditional structure no longer applies.

Ms Maher

On the value of taking out a PRSA, apart from the charges — as there is a cap on the standard PRSA charges, they are good value — there are excellent tax reliefs from the Government to encourage private pension provision. A person on the higher rate of tax paying €100 into a PRSA is saving €48 because of the tax relief on PRSI and the health levy relief. A person on the lower tax rate who pays €100 into a PRSA saves €28. The average investment returns on pension funds are pretty good, on the whole — they were more than 21% last year. There have been average returns of more than 10% per annum in the past ten years, notwithstanding the three very bad equity years at the beginning of this decade. The good returns on the tax relief make it worth putting money into these contracts.

Members of the committee are aware that the Finance Bill 2006 includes a provision that encourages lower paid people to transfer their SSIA proceeds across to PRSAs. I hope that very good offer will be taken up by many such persons. The Pensions Board will use its national pensions awareness campaign to try to make lower paid people who do not tend to have private pensions cover aware of that offer. The board has engaged independent parties like Lansdowne Market Research to conduct surveys about the campaign at the end of each year to see how it progresses. The surveys have found that approximately 80% of people are aware that they should do something about their pensions. The difficulty is to translate that into action. It has been shown that there has been a gradual increase in awareness levels in the years since the start of the national pensions awareness campaign. Some €500,000 was spent in each of the first three years of the campaign and €1 million is being spent this year. The campaign is being aimed, in particular, at areas with low levels of awareness of the importance of pensions and at people who do not have pension cover. As Deputy Burton said, many women do not have pension cover.

The level of awareness of this issue is increasing, but we need to consider how to transfer that into action. Although Ireland has the youngest population in Europe, by some distance, that will change radically within 20 years because its population is aging. There are 4.3 economically active people for every retired person, but that figure will have decreased to 3.7 in 20 years' time and to 1.4 by the middle of this century. Some 11% of the population is over the age of 65 years, but that will have increased to almost 30% by the middle of the century. We have to sort out our pensions system now.

Trustees are required to provide information on the many small pension schemes in Ireland. There are more than 88,000 pension schemes on the register, for which my colleague, Mr. Dunphy, is responsible. As the board cannot check every scheme, trustees are obliged under legislation to provide certain basic information to members by reporting in their annual accounts on the governance of pension funds and by issuing individual statements to people on their current positions. The board takes the requirement that is imposed on trustees very seriously. My colleague, Mr. Moriarty, the board's head of investigations and compliance, undertakes random monitoring of schemes to determine whether trustees are complying with the requirement on them to provide information. That a number of serious criminal prosecutions have been taken in court against trustees that were not supplying information is an indication of the importance that the board attaches to this matter.

The board is aware that there have been several problems with the construction federation operatives pension scheme, which is the biggest industry pension scheme in Ireland. Many workers in the industry have not been included in the scheme and contributions have not always been paid through by employers in the industry. A number of Departments and Government agencies, including the Department of Enterprise, Trade and Employment, the Revenue Commissioners and the Pensions Board, have been involved in trying to resolve the problems in question. The Office of the Pensions Ombudsman has also received a number of complaints. A report, two thirds of the costs of which were paid by the board and one third by the Department of Enterprise, Trade and Employment, was commissioned to ascertain how non-compliance in the construction industry can be addressed. Copies of the report, which was completed approximately six months ago, have been sent to the Ministers for Finance, Social and Family Affairs and Enterprise, Trade and Employment. I ask my colleague, Mr. Moriarty, who was in charge of the project, to give the committee further details on it.

Mr. Jerry Moriarty

The problem with the construction federation operatives pension scheme does not apply to the scheme but to the failure of employers in the construction industry to live up to their responsibilities, as set out in the registered agreement that covers the industry. For example, employers in a number of areas have failed to include people who should be included in the scheme by right. The report mentioned by Ms Maher, the compilation of which was co-ordinated by the board because so many agencies with different areas of responsibility are involved, identified two main issues. The first issue is the failure of employers to include in the scheme people who should be included in it. The board has direct responsibility for the second issue — the problem of contributions being collected but not paid across, which has been an offence under the Pensions Acts since the beginning of 2003. That many in the construction industry are deemed to be self-employed and, therefore, not eligible for participation in the scheme is a further problem. The report raised some questions about whether some such people are genuinely self-employed. The report outlined a set of recommendations. It proposed that the Revenue Commissioners should examine the particular issues of the self-employed in more detail. It suggested that the possibility of providing for the collection of contributions through the PRSI system should be examined in more detail as a means of dealing with problems in that regard. The board is trying to organise a meeting of the various parties represented in the construction industry pension scheme, including the unions which brought this issue to the attention of the board in the first place and sat on the steering committee, to see whether progress can be made in respect of the various recommendations to improve the situation.

Deputy J. Higgins

The National Pensions Reserve Fund Commission has spread fabulous amounts of funds among all the major industrial countries and corporations. What will happen to public pensioners if there is a stock market crash?

Mr. Carty

The allocation of assets is a crucial issue for the commission. The pension as it is structured has a long horizon of 20 years. When the commission made its decision on the allocation for the year under examination, it decided that 80% of the assets would be invested in equities and 20% would be invested in bonds. When the commission reviewed its allocation of assets ahead of the current year, it decided to move into private equity in an attempt to improve the return while diversifying the risk. The Deputy asked what will happen if there is a stock market crash. I remind him that we are talking about a 20-year timeframe. Serious situations have arisen in the past. The market dropped significantly in 2001-02. We are taking a long-term view. The history of the last century tells us that equities will outperform bonds and other asset classes. There will certainly be an impact on the fund if there is a crash. As the commission is taking a long-term approach — there is a 20-year horizon — it is confident that by investing in the allocation it has suggested, it will outperform any other asset class. It has received professional advice to that effect.

Deputy J. Higgins

Mr. Carty is telling me that the commission is completely insured against a slump in world capitalism.

Mr. Carty

I cannot give a guarantee. I am considering matters like history, asset allocation, return and risk. The commission has taken a very conservative approach to risk and return. It is not looking for annual growth of 20%. There has been successful growth this year, but that is not the norm. I think we will all agree that the——

Deputy J. Higgins

The stock markets are sometimes almost like casinos. The commission has invested a considerable amount in the United States where the growth in many companies is based on borrowing to a frightening extent. Economists and forecasters will argue that this is unsustainable.

Mr. Carty

Against that, we have invested in 1,800 companies. In terms of risk parameters, the law of averages would indicate they will not all collapse at once.

Deputy J. Higgins

We hope that is the case.

Mr. Carty

With regard to the profile and allocation, our objective is to spread and diversify our risk as much as possible without affecting our return.

Deputy J. Higgins

Unfortunately, as my time is short, I must address my comments to Dr. Somers. I wholeheartedly agree with previous speakers' comments on the policy of investing in the armaments industry and other such disreputable activities. To broaden the discussion a little, I appreciate Dr. Somers is an agent for the Government who has agents around the world investing on his behalf. Does it not place pensioners in an invidious position that, in order to support our pension fund and maintain assets, agents for the Government have been reduced to working with speculators, asset strippers and wide boys of all kinds who, as Dr. Somers noted, show no respect for workers' rights when they move in to asset strip a company?

Dr. Somers

While I do not disagree with the Deputy, this is part of the price we pay for the world in which we live. Tobacco and armaments have been discussed previously in this committee and I do not hold a grá for armaments manufacturers or tobacco smokers and producers. On the issue of investing in these types of companies, we have, as Mr. Carty stated, invested in approximately 1,800 companies. We choose fund managers, rather than companies, and direct them to invest a set amount in Europe, Asia, North America, etc., and to secure the best possible rate of return. I have never heard of most of the 1,800 companies in question and do not know what they do. They are just names on a list.

On tobacco, etc., as Mr. Carty stated, we are examining the possibility of trying to join an international group that would work to get rid of unethical investments. These extend beyond tobacco and armaments. For example, children are used as semi-slave labour in some countries and there are all kinds of other issues. The difficulty is deciding where to draw a line. Does one buy bonds issued by a country which will go to war with another country? We do this already because various countries go to war. Despite this, their bonds are sold on the international markets and we buy them.

On the private equity issue, as already stated, I would not like to be at the receiving end of some of the private equity fund managers who move in and asset strip companies. However, that is the reality of the world in which we live. I have no more sympathy for these kinds of activities than Deputy Higgins.

Deputy J. Higgins

While I do not pin responsibility on Dr. Somers, who acts an agent for the Government, it is a rather curious public policy position that the Government is directing assets around the world without consideration of standards in how funds will be raised. I will leave that point as I must move on.

Dr. Somers referred to difficulties about investing in Ireland, particularly in property. We have a major, successful public company, Aer Lingus, which badly needs investment. Is there anything preventing the National Treasury Management Agency from investing considerable funds in Aer Lingus equity? I am not referring to the European Union because we accept that, as a going, profitable concern it is possible for the shareholder to invest in a State-owned company such as Aer Lingus. What is the position with regard to the NTMA supplying funding for Aer Lingus instead of the Government pursuing the company's privatisation? I am not asking Dr. Somers to make a judgment on the policy position.

Dr. Somers

The Deputy is correct that this is a policy issue for the Government and the NTMA does as it is told on the matter. Other than what I gather from reading newspapers, I do not know how the Government intends to privatise Aer Lingus. The NTMA is not party to any Government thinking on the matter. If the company is floated in some form, the National Pensions Reserve Fund Commission, in its wisdom, could invest in it if it so wished but it would be only one investor. The commission has not been asked if it would like to take over the company.

Deputy J. Higgins

Is there anything to prevent the Government approaching the NTMA's funds and directing that €1 billion be invested in the purchase of new aircraft and so forth for Aer Lingus?

Dr. Somers

The NTMA wears a number of different hats. In terms of the National Pensions Reserve Fund Commission, it is not an option for the Government to tell it what to do because it has been given complete statutory independence. In terms of the National Development Finance Agency, the NTMA can raise up to €5 billion wearing that hat and this money could, in theory, be invested. That is a policy issue and not a decision for me to make. Simply put, while it is technically possible, it is not my call.

Deputy J. Higgins

The National Development Finance Agency, if asked by the Government, could supply the equity being sought by Aer Lingus.

Dr. Somers

The NDFA has the legal power to borrow, subject to the approval of the Minister for Finance on whose behalf we at all times act as an agent. We can also set up special purpose companies to aid future projects. Subject to what Ms Counihan may say, we could technically do as the Deputy suggests but that does not mean the Government would want us to do so.

Deputy J. Higgins

Yes, I wanted that matter clarified. I listened to the comments made about the public sector benchmark and the affordability cap. On the design, build, operate model for schools, hospitals or any other project, if I recall correctly a study carried out into a pilot scheme involving six schools found they were 15% more expensive to deliver than if they had been delivered by the State. As well as the cost of borrowing being cheaper, an issue Dr. Somers addressed, the private operators are involved in these projects to make profits which must come from the public purse. The profit element would not apply if the State developed this infrastructure directly. Does the National Treasury Management Agency have a role in advising the Government on this matter?

Dr. Somers

Not really. I am not trying to avoid the question but we do as we are told. We were not involved in the schools projects to which the Deputy referred. I read the reports published at the time and, as I understand it, six schools were involved in the scheme of which five were built under public private partnerships. I am not sure if the sixth was built. The five schools in question appeared to be built quickly and to a high standard — at least the project was completed.

On the question of profitability, again this is part of the system in which we live. One does not get something for nothing from anyone. Everybody gets involved in projects to make money. The only guarantee of keeping down costs and reducing the profits going to the private sector is to have competition and pit companies against each other. The State does not appear to be good at delivering these types of projects directly. It is very slow.

Chairman

A final question.

Deputy J. Higgins

I wanted to raise a number of other interesting points but perhaps I will be able to do so on another occasion. For example, the total amount of the national debt, which is still a considerable drain, is very close to the sum of profits repatriated by multinational companies in one year. We will leave that issue.

My next question relates to pensions and what Ms Maher said about the information coming forward on the number of workers it takes to support the pension fund, our current pensioners and the fact that there will be fewer workers in the future. This has featured a great deal in recent times. Those of us who are not too far away from pension age are beginning to feel very edgy. On hearing that we will be such a burden on society that it will not be able to afford us, we almost guiltily edge towards our dotage. Is it not the case that the productivity of the estimated 1.4 workers there will be in 50 years may be equal to the 4.3 workers currently in the workplace, in order that the total amount of wealth will be the same and can therefore support the same number?

I was very interested in the point made about the construction industry. The remarks of the Pensions Ombudsman absolutely shocked me, that there is a good chance that up to 130,000 construction workers are criminally deprived of pension rights by construction bosses. Is a direct supervisory role in the construction industry part of the remit of the Pensions Board? If that is the case, how can this criminal situation be allowed to continue? Surely the situation is easy to monitor as construction bosses and sub-contractors pay tax, or should do? Surely it is possible to have a unified system so that pension obligations can be checked out and workers are not left bereft, as is the case? If the Pensions Board does not have direct supervision of this matter then who has? Last week the Department of Social and Family Affairs informed me it did not have responsibility in this area.

Ms Maher

With regard to the worsening ratio of workers to retirees, one of the factors is that when the national pensions review was carried out, the biggest surprise that we in the Pensions Board had was that the cost of sustaining the social welfare pensions had gone up considerably because of this ratio. Everybody says we will have more older people in the population and, like the Deputy, I think it is very good that we will all live considerably longer.

The number at work will not increase considerably. There will be a slight increase, from 2 million currently to 2.2 million in 2016. That figure will stabilise and around 2046 the projections are that 2.1 million people will be working and the figure will remain at that level. There will not be many extra people working. The hope is that workers will be more productive but how that productivity translates back into providing pensions will probably depend on where the pensions fund moneys are invested. The theory of funding properly for pensions is that as the population in each country ages it should invest its pension fund money in a country with a much younger population.

Deputy J. Higgins

We will probably invest in the moon at that stage.

Ms Maher

We could. We hope there will be an increase in productivity but it will not solve the problem because the increase in longevity is a significant matter with which the actuarial profession is trying to deal. The life expectancy for somebody aged 65 years who is now retiring has increased by four years in the next 20 years and it has gone up by an extra four years in the past 20. That is a major increase and nobody knows where it will stop, given the advances in medicine referred to by my colleagues. Nobody knows whether this trend will continue. I have been bandying about this statistic, which I obtained from my actuarial colleagues, that a baby girl born today has a 50% expectation of living to more than 100 years. That is an indication of what the situation may be like.

The cost of pensions has gone up considerably because of low interest rates. Going back to 1980, interest rates were probably about 15.7% and they are now around 3%. That means the pool of money one had back in 1980 would have bought far more in terms of annuities than it will buy now. Every 1% drop in interest rates means that a pensions annuity costs about 10% more. There are many factors involved in putting up the costs. The main conclusions we came to in our national pensions review were that pensions are very costly, whoever pays for them — the taxpayer or the individual. That is a problem this country is facing.

Deputy J. Higgins

What about the construction industry?

Ms Maher

I will ask Mr. Moriarty to enlarge on that point.

Mr. Moriarty

The Ombudsman has highlighted a number of cases. It is not just a case of people not being provided with pensions. One of the more tragic consequences is that people who die on building sites are not in the scheme and are not covered by the death benefit which is more than €60,000. In monitoring the Pensions Act we have a direct role in the case of people enrolled in the scheme and contributions are either not being paid across for them or are being deducted and not paid across. We do not have a direct role as far as the people who are not being put into the scheme are concerned. That is where the bigger issue lies in regard to the estimated 130,000 workers.

Deputy J. Higgins

Who has that role?

Mr. Moriarty

That role lies with the construction industry monitoring association, a body set up in partnership between the unions and the Construction Industry Federation. One of the recommendations of the report commissioned by The Pensions Board and carried out by Mercer is that this role should be put on a statutory basis. Cases not resolved can be referred to the Labour Court which can force employers to pay what is due to those people who were not in the scheme.

Deputy J. Higgins

Something far stronger is needed.

Mr. Moriarty

Absolutely, that is the reason we had the report. It is an area that needs much more focus. Obviously the other big issue is the 70,000 who are self-employed. Anecdotal evidence suggests that in many cases the people concerned have been forced to declare themselves as self-employed, otherwise they will not get work on sites. It has happened that people who do not even own shovels suddenly become self-employed, but they are not truly self-employed in the correct sense of the word and, therefore, are excluded from the scheme on that basis. That is something which requires attention.

Chairman

Will Mr. Carty remind us what category of subvention may be subvented when the drawdown occurs in the fund in 2026?

Mr. Carty

It is social welfare pensions and public pensions, which cover a range of pensions across the board, including old age pensions. We start paying out from then on. The fund is in a very strong position in so far as we have the benefit of cash flow coming in. That is why we can choose our time with private equity which has a four-year profitability cycle.

Chairman

In Mr. Carty's introductory statement he has some demographic projections that would suggest that by mid-century about a quarter of the liability could be covered by the fund.

Mr. Carty

Yes, but there is a very large balance remaining to be dealt with.

Chairman

On what studies is the National Pensions Reserve Fund relying for those projections?

Mr. Carty

The pensions review board has carried out a very detailed study.

Chairman

Is Mr. Carty basing it on that?

Mr. Carty

Yes.

Chairman

Has Ms Maher taken into account the changes in immigration patterns?

Ms Maher

That is one of the great unknowns of the population projections. Our in-house actuary, Mr. Brendan Kennedy, is dealing with this matter. Perhaps he can comment on what we did in regard to the population.

Chairman

What has the Pensions Board factored in regarding immigration trends and birth rates? Birth rates have suddenly taken off in a positive direction again.

Mr. Brendan Kennedy

Birth rates make no difference to the projections made for the national pensions review because the review is to run until 2056. Anybody born from now on will not collect a pension before the term ends because 2056 is only 50 years from now.

Chairman

The fund is to come into play in 20 years' time. If Mr. Kennedy is making a case on the basis that a certain proportion of the population will be of pension age, birth rates matter for 25 years of the drawdown.

Mr. Kennedy

Yes, they matter in determining the number in the workforce but not in terms of the number collecting pensions. The Chairman is correct that they will affect the numbers in the workforce. The birth rate assumed in the projection is the current rate of birth, which, at 1.95, is slightly below the replacement rate. This is one of the highest birth rates in Europe in terms of population replacement, yet it is slightly below what is deemed necessary. The more important rates, which have a much greater financial impact in terms of the projected numbers, concern emigration and immigration. As Ms Maher said, these have been the most difficult to predict.

A number of projections were made but the central projection assumed continuing immigration of approximately 30,000 immigrants per year, which figure is to taper off over the next ten or 15 years. It is difficult to put an exact figure on current immigration levels. The rate of 30,000 per annum is probably below the current level but is very high by comparison with historical figures. When these figures were produced, they were something of a surprise by comparison to previous figures and the main reason is the change in emigration and immigration patterns since the early to mid-1990s has had a knock-on effect on the projected cost of pension and other social welfare benefits. The assumptions broadly suggest a higher level of immigration than was traditionally the norm, although the current level is to taper off.

Chairman

The reason I am questioning Mr. Kennedy on this is that I was involved in the debate when the legislation was passed. Fairly similar projections were advocated by the then Minister for Finance. If my memory serves me correctly, fewer than 900,000 people were at work in Ireland at the time, while there are now more than 2 million. Circumstances can change very rapidly, as they have done. When one compares labour force figures with those that obtained when the Act was passed, one will note that circumstances have changed dramatically. I question whether we should assume that what is being put into the National Pensions Reserve Fund will not support a bigger tranche of pensions than the estimates suggest. We will not pursue that matter here.

On the State Claims Agency, will Dr. Somers indicate why 75% of claims are attributed to the Garda, Defence Forces and prison officers? Is it because this is principally the business he has been conducting or is it because the personnel in these sectors make more claims than those in any other sector with which he deals?

Dr. Somers

By the nature of their business, they are more likely to be involved in accidents, etc., than other people employed in the public service. In the case of civil servants and teachers, for example, one would expect the number of accidents to be small. Gardaí have many road traffic accidents and in prisons people seem to fall down stairs and get injured. In the Defence Forces people get injured exercising or in traffic accidents. This seems to be in the nature of their activities.

Chairman

What percentage of claims arose from the crashing of Garda cars?

Mr. Adrian Kearns

Members of the Garda Síochána made about 203 claims.

Chairman

What percentage of claims does that amount to?

Mr. Kearns

Some 27% of the claims relate to the Garda.

Chairman

Does the figure of 75% contain the Army deafness claims the State Claims Agency is to deal with? Did it calculate the figure before it was given this responsibility?

Mr. Kearns

We were given that responsibility beforehand.

Chairman

We are rerunning the numbers——

Mr. Kearns

The Army would represent a higher amount and the figure could probably increase to approximately 80%. We are dealing with about 500 Army deafness cases. These would tend to push up the total figure.

Chairman

Obstetrics and gynaecology are responsible for a very high proportion of claims in respect of the clinical indemnity scheme, amounting to approximately 63%.

Dr. Somers

It is a question of the sheer cost of these cases. If something goes wrong in this area, it costs a fortune. In a case on which we were signing off yesterday involving a child born with cerebral palsy, the court award was €4.7 million. We just signed off on the legal costs of the plaintiff and these costs alone amounted to €840,000. This was a case we inherited and the costs are the costs before those for the counsel for the doctor, hospital and State come into play.

There are 15 to 20 of these cases in the system at various stages and they are the most expensive types of case with which we deal. In other cases, in which one might have suffered from some sort of damage in a hospital, costs might amount to €50,000 or €100,000, but where children are born with brain damage, the costs are unbelievable.

Chairman

Has the NTMA an active risk assessment programme pertaining to obstetrics and gynaecology and is it advising the gynaecological units around the country on how to reduce risk?

Dr. Somers

We are starting out on this and we have been trying to hire someone that knows about this area. We hired one doctor with some expertise in this area and we hope another will join us soon. I do not know how much we will be able to do — I am a little sceptical. These cases are fairly isolated but when they arise the consequences are catastrophic. They usually concern a child deprived of oxygen at some stage during delivery. One reads the files and asks how it could happen. It is sometimes the case that a doctor cannot be found in time or that somebody makes a mistake. I am not sure what we will be able to do to guard against such occurrences. We obviously do our best but I suspect we will be small players in this regard.

Chairman

I understand the Medical Defence Union's case involving the Minister for Health and Children is to be decided within weeks. If the decision goes against the Minister, what will be the implications for the State and what will be the additional liability?

Mr. Kearns

It is a question of the extent of the transfer of funds from the Medical Defence Union. If it gets off the hook, so to speak, the State will carry the can for the full amount.

Chairman

Has the NTMA estimated the contingent liability?

Mr. Kearns

One figure for the total liability, which the Department of Health and Children produced some years ago, was €400 million.

Chairman

Has the NTMA considered the Department's assumptions?

Mr. Kearns

We have not looked in detail at its assumptions. The lack of information from the Medical Defence Union in the Department might mean that the assumptions will have to be taken with a certain degree of caution. It is likely to be an outside figure but nevertheless, on looking at the Government's finances, it is one we would at least have to bring in on the horizon.

Chairman

If, as Mr. Kearns said, the Medical Defence Union gets off the hook completely, it will fall on the NTMA to negotiate and provide the funding.

Mr. Kearns

It would fall to us anyway to manage these cases because the MDU has left the field. The State is trying to get as much money back from it as possible but the cases and claims will be dealt with by us.

Chairman

The best case scenario is that the Department will get a lump of cash from the MDU.

Mr. Kearns

Exactly.

Chairman

Have the liabilities involved with the Medical Defence Union matured or will the €400 million continue into the future?

Mr. Kearns

It will continue into the future. Many of these cases take a very long time. Within that sum there is a figure for "incurred but not reported" incidents that happened that could lead to claims. That figure would need to be dealt with as well within the €400 million. There is a great deal of flexibility in that figure and it depends on the assumptions put in and how the Medical Protection Society dealt with it. It all makes it difficult to properly estimate full liability but the State will have to carry it ultimately.

Chairman

Dr. Somers mentioned that the State claims agency will now deal with the State's liability for the abuse of children in primary schools. Does that include physical abuse or is it simply sexual abuse?

Dr. Somers

It covers both because there is frequently an interaction between the two. There are 350 cases so far, mainly of sexual abuse.

Chairman

What numbers are involved?

Dr. Somers

There are 50 claims.

Chairman

Are those claims in hand or is that an estimate for claims that might come through?

Mr. Kearns

There are 190 claims but the total is expected to be 350.

Chairman

Will settlements be around the average figure for settlements from the redress board?

Mr. Kearns

We must accept that and try to improve on it from the State's point of view by making savings on it. With the redress board, in addition to the figures Dr. Somers mentioned, there are 40 cases of people who were in State inspected orphanages who could have gone before the redress board but opted to go before the courts. When they do that they are put on proof. They have chosen to take that route. We also manage those cases.

Chairman

Is the National Development Finance Agency responsible for all PPP projects?

Ms Counihan

State authorities, encompassing Departments, local authorities, harbour authorities, universities, the Railway Procurement Agency, the National Roads Authority and CIE, to the extent that they have a public investment project which costs €20 million or more, are obliged under guidelines issued by the Department of Finance, which have statutory effect, to consult the National Development Finance Agency for financial advice and risk analysis. A public investment project can be a project that is being traditionally procured and funded by the Exchequer or a public private partnership. In either case, when a project hits €20 million, they must consult us. They do not, however, have to take our advice. If a project is a public investment project which costs less than €20 million, they have the right but not the obligation to consult us.

Chairman

Those for which the agency has responsibility for procurement are a subset of the outline.

Ms Counihan

The provision of financial advice, analysis of risk and, occasionally, questions of insurance are our traditional roles. We sit on the project boards to the extent that when there are financial issues we participate closely. We examine the bids from a financial perspective, prepare the public sector benchmark, the outline business case, cost benefit analyses and evaluation of bids all the way through to the final award of the contract.

The procurement and delivery role conferred on us on an interim basis pending legislation in July 2005 is so far limited in scope in that it relates only to the Department of Health and Children, Education and Science and Justice, Equality and Law Reform in the areas I have described and no other projects. The decision on the manner in which those projects would be delivered is a decision of the Government. It has decided that it wishes these to be delivered by public private partnership. There will be a public sector benchmark exercise notwithstanding the decision to test the value for money in terms of going down the PPP road because that is done in all instances. It is one of the main protections for the State to ensure it is getting a good deal from the PPP system.

Chairman

Is there an opportunity to chose from the list of projects in the schools building programme or are they given out by the Department of Education and Science?

Ms Counihan

The projects are given to us. It is entirely the decision of the Department of Education and Science which schools it wants delivered first, the size of those schools, the number of laboratories and so on. We have no part in that. The only input we have is to sound notes of caution that schools do not over-design because the private sector will not take design risks. Other than that we have no say in the size or whereabouts of the schools, we merely deliver what the Department wishes to have.

Chairman

The four major schools are all in one constituency. Was that a decision of the Department of Education and Science?

Ms Counihan

I do not know where the decision came from. That is bundle one. We are anticipating the second bundle of schools very shortly. The Department of Education and Science is working hard to get plans completed. It is a hefty exercise but we expect the second bundle soon and I have no idea how many there will be or where they will be located.

Chairman

Was the NRA the procurement agency for the successful road projects?

Ms Counihan

Yes.

Chairman

How did the agency interact with that authority? Did it just give financial advice?

Ms Counihan

Yes.

Chairman

Does the agency work out the details of the PPP or does the NRA do this?

Ms Counihan

Many of the roads projects have had a considerable lead in time and, therefore, the decision would have been made before the National Finance Development Agency was established.

When projects are presented to us, the decision usually has been made as to whether it will be a traditional procurement or a public-private partnership. We are consulted sometimes, however, on our opinion from finance and risk perspectives on whether it would be more efficient if the project was delivered by PPP or traditional procurement. In most instances where a PPP is favoured, we agree. There was only one occasion where a project which would have been suitable for a public private partnership was not favoured on the basis that there was no risk involved in the project and, therefore, there was no advantage to the State in doing it that way. The higher the risk, the more we are directed towards PPP because that is where the advantage lies.

Chairman

Will Ms Counihan explain how the National Development Finance Agency relates to the Department of Finance? For example, in the Mountjoy Prison project, it deals with the Department of Justice, Equality and Law Reform and will opt for a public private partnership.

Ms Counihan

That is correct.

Chairman

How does the agency connect with the section of the Department of Finance that deals with PPPs?

Ms Counihan

I have not had contact with the Department of Finance specifically in respect of the new Mountjoy Prison.

Chairman

Has there been a project that involved such contact?

Ms Counihan

Yes, I have frequently had contact with the Department about issues concerning its guidelines or about policy matters that need to be discussed.

Deputy Boyle

In recent months, the European Central Bank, ECB, increased its lending rate by a quarter of a percentage point on two occasions. Has the National Treasury Management Agency factored in the effect of this and the likely increase in the rate by a full percentage point in 2006 on the management of the national debt? At €37 billion, the national debt has increased marginally, although the debt service repayments have come down through good management. We have returned to an era of budget deficits, although we are supposed to be glad that they are lower than projected, and this is eating into the general reserve. When does the National Treasury Management Agency start expressing the need to decrease the principal of the national debt? If economic growth does not continue at its current level, this will become a problem in the future.

Dr. Somers

In regard to the increase in interest rates, the pundits say there are probably two more increases on the way. To an extent, we are protected against this because we have locked in 84% of the debt at fixed interest rates, which will not change as the ECB changes short-term lending rates. In some cases, they are locked in until 2020, while, in others, the periods are shorter. A rise in short-term rates does not necessarily mean that long-term rates will rise. They may or may not do so. Some think that if short-term rates rise, inflation will be kept under control and that, therefore, long-term rates will not rise but, perversely, may fall.

There is some upward movement in long-term rates but only by fractions of a percentage point. The immediate effect on us of a rise in interest rates is quite small because we have locked 84% into a fixed rate. Next year, we must refinance approximately €6 billion in maturing debt. We do not have much to refinance this year. If the interest rates rise we will have to pay extra on that sum but it will not be an earth-shattering rise.

The only way to reduce the principal is for the State to run a surplus on the budget by taking in more tax than it spends and using the balance to reduce the debt. The State does not often do so, although it happened over a few years. In 2004, there was to be a deficit of between €2.8 billion or €3 billion but there was, in fact, a small surplus. Last year, there was to be a deficit of €3 billion but the figure published was €500 million. This year, there should also be a deficit but the figures produced for the first two months showed a surplus of €2.4 billion.

The debt was predicted to rise in recent years but remained more or less static. As GNP increases, the burden of the debt reduces. It is not for us to say what Government should do. We simply do what we are told and take the figures we are given. We are doing extremely well. I mentioned an article reporting the Italian debt to GDP ratio at 106%. Ours is down to 28%. When our agency was established in 1990, the debt to GNP ratio was over 100% and, at one stage, it reached 125% or 130%. The burden is small.

One can also regard the burden in terms of the amount of tax used to pay the interest. That is down to approximately 4% of the tax take, compared with 15% or 20% some years ago. If something catastrophic happened, for example, if the building industry's output fell from 80,000 to 40,000 units per year, the growth rate could fall by three percentage points according to some figures produced by the ESRI. If that happens, tax revenue will fall and unemployment will rise and we could very quickly return to a deficit. At least we have pinned down most of the cost of the existing debt. It is well controlled.

Deputy Boyle

Is Mr. Carty familiar with the operations of the Norwegian state pension fund, given that Norway has a similar population to Ireland's? Are comparisons made between the Irish investments and the basket of companies in which Norway invests, nationally and internationally, and the amount it invests in national infrastructure? Is he aware that the Norwegian Government and fund managers have drawn up ethical investment guidelines for that fund? Has he investigated those guidelines and, if so, would they apply here?

Mr. Carty

I do not know if the Deputy was present when Deputy Bruton raised this question. We are considering ethical guidelines.

Deputy Boyle

I asked specifically about the Norwegian guidelines, which are in place.

Mr. Carty

I am aware of that but I thought the Deputy was asking about our ethical guidelines.

Deputy Boyle

I heard Mr. Carty's response to Deputy Higgins. The Norwegian ethical guidelines apply to a national pension fund similar to ours. Have they been examined and would they be applicable to our fund?

Mr. Carty

They are being examined as we put our policy together for the commission to consider. Within the next few weeks, we will decide on the issue we have discussed, namely, whether to screen every investment one intends to make or take a more active view on one's voting proxy. Other institutions of a similar size might then join in. That is all up for discussion. We have not decided what way we will go.

Our mandate under the Act states clearly that we must optimise our situation. While I am not saying that I am in favour of the tobacco industry, the return on the benchmark for tobacco shares is 7% more than the average. We might go to managers and tell them that we want them to get our return. The Act merely requires us to maximise our return and consider our risk, it does not mention ethics. The commission is faced with the difficulty of interpreting the Act.

Deputy Boyle

How does the Irish fund compare with the Norwegian fund in terms of its return and the nature of its investments? Is there a bias in the Norwegian fund towards national infrastructure?

Mr. Carty

I have not gone into such detail. The other point is that all of these——

Deputy Boyle

Do we benchmark our national pensions fund against those of countries of similar size?

Mr. Carty

The commission establishes its own benchmark.

Deputy Boyle

Are there international comparisons regarding how our national pensions fund measures against similar funds in other countries?

Mr. Carty

Yes, we would have that information. When comparing benchmarks, it must be remembered that the terms of reference each national government sets out are different. The French Government, for example, has gone into private equity but it will have taken a different allocation.

Deputy Boyle

However, each government has the same bottom line, namely, the return accrued. Figures for this must surely exist. How does Ireland compare with other countries in respect of the return accrued by its national pensions fund?

Mr. Carty

Ireland is at the top of the league.

Deputy Boyle

Is there a table which shows this?

Mr. Carty

The table is not in my possession but we can obtain it.

Chairman

Will Mr. Carty send it to the committee, with as much information as he can obtain in order to answer Deputy Boyle's question? We understand when people do not have information to hand but it can be sent on to us.

Deputy Boyle

The Pensions Board recently completed a review of pension matters for the Department of Social and Family Affairs. It seems, however, that the review has been treated rather coolly. I understand that a new review must be undertaken by the newly appointed board. Part of the problem with The Pensions Board is that its remit is solely in monitoring the uptake of private pensions. The board does not have a policy or monitoring role in the State pension, which, when compared to average income, is low on the European scale. Is it possible to have a pensions policy that looks at one area and not the other?

Ms Maher

The Pensions Board recently completed the second national pensions review. It was a follow-up to the previous review, the national pensions policy initiative, from 1996 to 1998, presented to the Government in 1998.

I would not like to think that the recent review is being treated coolly. The Minister for Finance told the House that it is a large issue and that the Government needs some time to consider it. We understand from the Minister for Social and Family Affairs that it was discussed at Cabinet several times. An incentive is being introduced through the Finance Bill to encourage lower paid people to take out private pensions with their special savings incentive scheme, SSIA, yields. The board, however, has not yet received a response to the main recommendations of the national pensions review.

The new board was appointed for a five-year term in December 2005. It is recommended that there should be a further review of progress in 2008, as part of the national pensions review. We hope that some progress will have been made in the meantime. Pension issues have been tabled as a priority at the national partnership talks. There will be some form of a response and action taken.

The Pensions Board agreed in its review that, in the absence of changes, Ireland will not have adequate pension provisions for its people. There are two main questions. Should Ireland continue to put enhancements into its voluntary private pension system to achieve the targets of having adequate provision? Should it look at some form of mandatory pension provision? In other words, will everyone have to make some contribution towards his or her pension?

We received one response. The Minister for Social and Family Affairs wrote to the board in the past month and asked us to examine the best form of a mandatory pension system. Obviously, he requested that we do so before any decision is made. He asked us to design a model system that would be appropriate to Ireland. Several other countries have introduced such systems, Australia being the best known. The latter moved from a system that was very similar to the Irish model to one that is mandatory in nature. Employers in Australia contribute 9% towards pensions. We are working on that. The Minister for Social and Family Affairs has asked for a final report by the end of September 2006.

The board's role as a policy adviser applies to private and social welfare pensions. In its 1998 report, The Pensions Board was the first body to recommend the establishment of a national pensions reserve fund. That highlights the scope of the advice we can offer. We have a wide advisory role. Our supervisory and regulatory role only applies to private pensions.

Deputy Boyle

Is the position sustainable in the absence of new policy developments? The only measure introduced in the budget relates to the transfer of SSIA moneys. If the €7,500 mentioned in this regard was put into a pension fund for an individual on the 42% tax rate, with PRSI and the levies on top of that, he or she would receive a State subsidy of €3,400. For an individual on the 20% rate, the State subsidy would amount to €2,200. An individual not in the tax net would not get a State subsidy. What kind of logic is that for a national pensions policy?

Ms Maher

The Deputy has identified one reason that is often put forward as to why lower paid people do not take out private pensions. They do not get the same incentive as those on the higher tax rate. The national pensions review recommends to the Government that people, regardless of whether they are on the lower tax rate or not in the net, should get the same tax incentive to take out private pensions. We suggest changing the personal retirement savings accounts, PRSAs, the product aimed at increasing private pension coverage, to an SSIA-style delivery of the tax. We suggest that every €1 invested should be matched by €1 from the Exchequer. We also recommended people on the lower tax rate should have the same advantage of getting the higher rate tax relief. The Minister for Finance has not responded to that. These are the considerations before the Government.

Deputy Boyle

In percentage terms that would be true but the more people save, the greater the benefits that will accrue to them in absolute terms. I question whether that is equitable. There are issues in respect of raising the maximum benefit, which, for top tax earners, is 48% to50%. There is also the issue of the cost to the State of tax forgone, which is higher than what we actually pay in State pensions. Every year, €3 billion is forgone in tax, while €2.7 billion is paid in State pensions. The system is imbalanced.

PRSAs are a mechanism to encourage people on lower incomes to take up private pensions. Do PRSA rules stress that an individual taking one out must leave the money in his or her account for a set period but that, during said period, the intermediaries are entitled to take 1% of the value of the fund for every year?

Ms Maher

Yes, one argument about all pension funds is that individuals cannot access the money they are putting away. We have a recommendation from the national pensions review that people up to the age of 45 years should be able to take out up to approximately 30% of their money tax free. The purpose would be to stop people having their money locked away because, as Deputy Boyle said, it is locked away until they reach retirement age.

Charges are incurred on an annual basis and are now considerably lower than they used to be because there is a cap, but they still amount to 5% of contributions paid in the year and 1% of the assets. They are considered to be low. If one strikes them too low, providers will not enter the business. We were trying to place a cap on charges at a level which would not discourage providers from doing business because, as Dr. Somers noted in another context, people are there to make money and will not enter the business unless there is something in it for them.

Another recommendation made in our report was that there should be some State support, that the State might become an annuity provider. The argument was that it could do so more cheaply than private providers because it would not be subject to the solvency requirements of insurance companies, would not have to make a profit and, in particular, would allow for lower contributions and small amounts going into PRSAs. There are several recommendations in the report to be looked at but if someone has a small pool of money, it is considered that he or she could pay it to the State to receive an enhanced social welfare pension which I think is now to be called the State pension under changes in the legislation.

All of these initiatives were suggested to try to make the system work better. The State can pay pensions more cheaply than private operators because it is doing so on a bulk basis.

Mr. Purcell

I have no further comments to make, unless the committee wishes me to comment on any other matter.

Chairman

May we dispose of chapters 16.1 and 16.2 and note the accounts? Agreed.

The witnesses withdrew.

Chairman

Our agenda for Thursday, 23 March is as follows: 2004 annual report of the Comptroller and Auditor General and appropriation accounts; Vote 25 — Environment, Heritage and Local Government.

The committee adjourned at 3.05 p.m. until 11 a.m. on Thursday, 23 March 2006.