I thank the Chairman. First, I would like to introduce the officials who are with me. They are all officials of the Department of Finance. On my left is Ms Ann Nolan, second secretary in the Department of Finance, and the two gentlemen accompanying me are Mr. Des Carville and Mr. Declan Reid. They are both attached to the share management unit of the Department of Finance and both have extensive experience in the private sector on matters which are relevant to the discussions of the committee.
I thank the committee members for inviting me to discuss the Comptroller and Auditor General's value for money report on NAMA's sale of its Northern Ireland portfolio. I wish the committee well as it undertakes its important work.
I will begin by placing NAMA's activities in context. We have all come a long way since the beginning of the crisis and we must not forget key challenges we have faced and overcome in getting to where we are today. One of our main priorities in recovering from the crisis was to increase confidence in the Irish sovereign and the Irish market in order to reduce the cost of borrowing for the State, banks, businesses and consumers. Creating NAMA was a bold step by my predecessor, the late Brian Lenihan. It was taken to reduce instability and uncertainty in our banking system and, ultimately, to help normalise land and development markets. Created at a time of scarce State resources, during a period of reliance on troika funding and emergency ECB liquidity, NAMA came with a very material contingent liability for the State in the form of €30.2 billion, guaranteed by the State, of NAMA bonds.
At NAMA's inception, very few believed that it would eliminate this contingent liability, never mind deliver a surplus. Most thought NAMA would fail in its remit. This view persisted throughout the bailout programme so when we think about NAMA, we must remember how well it has performed versus our expectations and the support its overwhelming success has provided to Ireland's recovery. NAMA has materially reduced the State's contingent liability and our banks' reliance on emergency ECB liquidity. NAMA's steady successes have made a major contribution to the recovery of our economic freedom and have helped reduce our cost of debt below that of Greece, Portugal, Spain and Italy, positively impacting the Exchequer, the banks, Irish businesses and consumers. We should take a moment to imagine where our economy would be if NAMA had not been established as an independent commercial entity and had not been as successful as it has been in reducing the State's contingent liability.
Turning to the debate over the value achieved by NAMA on its sale of the Northern Ireland loan portfolio, the committee has heard the Comptroller and Auditor General's and NAMA's differing opinions and positions. I have full confidence in both of these important State actors. Their differences of opinion do not alter the continuing confidence I have in NAMA, or the standing of the Comptroller and Auditor General. I am confident that by focusing on the salient issues, the Committee of Public Accounts can help navigate the technical issues under discussion.
The Government position remains that the Committee of Public Accounts is an appropriate forum for the consideration of the Comptroller and Auditor General's report and for the exercise of public accountability in these matters. In addition, the Government has its own responsibilities to ensure all matters of public concern that require further investigation are addressed in a speedy and effective manner and so has agreed with party leaders that a statutory commission of investigation would be established without delay.
I will now focus briefly on my powers as Minister for Finance and my knowledge of the Project Eagle sale process. Around this time last year, the Department of Finance provided to the Committee of Public Accounts over 40 documents regarding my and my Department's knowledge of the sale process. These documents remain available on the Department of Finance's website and I am happy to discuss them today.
I and the Northern Ireland Executive shared an understanding of the importance of NAMA to the economy in Northern Ireland and the care needed in dealings in Northern Ireland regarding NAMA's management of its portfolio of assets in that jurisdiction and any potential sales process. In light of these sensitivities, I had a number of discussions with members of the Northern Ireland Executive regarding NAMA's Northern Ireland loan portfolio and a potential sales process. These discussions are a matter of public record.
The fact that I, and my counterparts in the North, were cognisant of a potential sale and mindful of the potential impact on the Northern Ireland economy should not be surprising. However, this should not be misconstrued as political pressure on NAMA. As has been pointed out by the NAMA chairman, there was no political pressure on NAMA regarding this sale. Nor was there any divergence of views expressed to me by any party within the Northern Ireland Executive regarding NAMA and a potential sale of its Northern Ireland loan portfolio. From my perspective, as Minister for Finance since March 2011, I can categorically assure the committee that this is the case.
For my part, in each interaction with my Northern Ireland counterparts, I stressed that NAMA was independent in its functions, should be approached directly by interested parties, was obliged to run a competitive process, and must be satisfied that it had achieved the best price.
This is borne out by an examination of the records for each interaction between me or my Department and the Northern Ireland Executive. These records were provided for the committee one year ago.
It has been suggested that I, as Minister for Finance, should have directed NAMA to halt the sale process when I became aware of the circumstances under which PIMCO had withdrawn from the process. On 13 March 2014 the NAMA chairman called to inform me of developments in the sale process and the board's decisions in this regard. The chairman recounted that on 10 March 2014 PIMCO's compliance department had informed NAMA of a proposed advisory fee arrangement with a former external member of NAMA’s Northern Ireland advisory committee, NIAC. The chairman advised me that, on learning that NAMA did not find this acceptable, PIMCO had withdrawn from the process. The chairman informed me that, having carefully considered the impact of PIMCO’s withdrawal on the sale process, the board was minded to continue the process with the remaining bidders, subject to receiving advice from their financial adviser, which I understand was received a number of days later. It is important that I make this very clear. The chairman was not, in any respect, requesting permission to proceed with the sale, nor was he required to. He was notifying me of issues that had arisen and the board's considered decision to proceed. I appreciated the courtesy of being informed by the chairman, as this was a potentially sensitive issue.
Suggestions that I, as the Minister for Finance, should have interfered with NAMA's commercial decision and called a halt to the board approved sale process fundamentally misunderstand NAMA's independent mandate and my role as Minister. From the outset, during the formulation of the NAMA Act, the Oireachtas shared the view and strived to ensure NAMA would be independent in its decision-making. As a result of this broad consensus, section 9 of the Act is unambiguous when it states, "NAMA is independent in the performance of its functions", prohibiting political interference for good reason. I am sure the committee will agree that there is no role for political influence in the commercial decisions of NAMA.
Section 12 bestows the NAMA board with the power to "sell or dispose of the whole or any part of the property or investments of NAMA, either together or in portions, for such consideration and on such terms as the Board thinks fit". It has been suggested I should have directed NAMA to halt the sale, or should have directed it to break up the portfolio into smaller lots for sale, or should have instructed it to work out the portfolio over a long time horizon. I want to be absolutely clear on this point - there was no legal basis for me on which to instruct NAMA to do any of these things. Under section 14(1) of the NAMA Act, I "may give a direction in writing to NAMA concerning the achievement of the purposes of the Act", as set out in section 2. This effectively limits the Minister’s ability to direct NAMA to undertake such actions that directly reflect the wishes of the Oireachtas as set out in the purposes of the NAMA Act. Section 2 sets out these purposes which include "to protect the interests of taxpayers". This section has been cited as the clause which could have empowered me to direct NAMA to halt the sale process.
It is important to be specific in recounting what was being decided at the time. The chairman of NAMA informed me that, having consulted its financial adviser, the board had made a considered commercial decision to continue with the sale process. I should correct this. The chairman of NAMA informed me that he was about to consult his financial adviser and that if the advice was favourable, they would proceed with the sale process to maximise value in achievement of the purposes of the Act. There is nothing to suggest from this that NAMA was not operating in line with the purposes of the Act in proceeding with the sale process. That being the case, there was no legal basis on which I could have directed NAMA to discontinue the sale process. Department of Finance legal advice has confirmed this position. Any such direction would have been an interference with NAMA's commercial independence and conflicted with NAMA’s purpose to deal "expeditiously" with its assets as set out in section 10 of the Act. It is important for me to be clear when I say that, even if I had had the legal basis on which to interfere with the NAMA board’s considered decision at the time, there was no evidence that such interference would have been in the interests of the taxpayer and I am still of that view. In fact, neither the Comptroller and Auditor General's audit of NAMA's annual accounts for 2014 nor the recently published value for money report have asserted that the sale process should have been halted.
In summary, in crafting the NAMA Act in 2009 the idea that NAMA should have statutory independence from the political sphere was broadly shared across the Houses. The Oireachtas worked to ensure NAMA would be independent in its decision-making and insulated from political influence. This is enshrined in the NAMA Act. A number of Deputies contributed and I want to quote them. As Deputy Joan Burton astutely put it on Committee Stage, "One does not want Members of the Oireachtas being in a position to interfere in respect of the activities of NAMA." Similarly, the Chairman of this committee contributed on many occasions during the formulation of the Act and was also firmly in the "hands-off" camp when he stated about NAMA's valuation process:
It would be better to take this Minister and all future Ministers out of this role. It would remove them from the process and would be a far more independent and transparent way of doing it.
Deputy Michael McGrath also referred to NAMA during a motion on the accountability of Government agencies and companies stating, "While oversight is important, it cannot be allowed to interfere with the operational decisions that have to be made by bodies." Many more Deputies contributed and members can check the record. I could not agree more with these statements and believe the Oireachtas did, ultimately, strike the appropriate balance between independence and accountability for NAMA.
As the committee will be aware, we are charged with the task of upholding not only the letter but also the spirit of the law. I believe I have properly upheld both the letter and the spirit of NAMA Act.
