National Treasury Management Agency: Financial Statements 2017

Mr. Conor O'Kelly (Chief Executive Officer, National Treasury Management Agency) and Mr. Ciarán Breen (Director, State Claims Agency) called and examined.

This session will deal with chapter 23 of the Comptroller and Auditor General's annual report. The chapter relates to the accounts of the National Treasury Management Agency, NTMA. We will also deal with the NTMA's financial statements for 2017, which have been published recently. We are joined today by Mr. Conor O’Kelly, chief executive officer at the NTMA, Mr. Ian Black, chief financial and operating officer at the NTMA, and Mr. Ciarán Breen, director at the State Claims Agency. From the Department of Finance, we are joined by Mr. Eoin Dorgan and Ms Orlagh Collison.

I ask all present to turn off their mobile phones or put them on aeroplane mode. Merely placing phones in silent mode means that they can still interfere with the recording system.

I advise witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter to only qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members of the committee are reminded of the provisions of Standing Order 186 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 policies.

While we expect witnesses to answer questions put to them by the committee clearly and with candour, they can and should expect to be treated fairly and with respect and consideration at all times, in accordance with the witness protocol. I call Mr. McCarthy.

Mr. Seamus McCarthy

I thank the Chairman. As members are aware, the NTMA is a complex organisation with multiple functions that extend beyond its original and core role in managing Ireland’s national debt. The structure of the NTMA, following a reorganisation in 2014, is outlined in the written submission. The sets of financial statements before the committee this morning reflect the various statutory obligations that the NTMA has in respect of its financial reporting.

The NTMA’s primary function is to manage borrowing on behalf of the State. The results of that borrowing activity are reported in the national debt account. At the end of 2017, the gross national debt stood at just under €199 billion, marginally lower than the debt at the end of 2016. Total debt servicing costs in 2017 amounted to €6.2 billion. This was 9% less than in the previous year, reflecting the impact of refinancing of debt at prevailing low interest rates.

Other important functions and services of the NTMA include: management of compensation claims on behalf of certain State authorities, in its capacity as the State Claims Agency; the management of the Ireland Strategic Investment Fund, ISIF; and the provision of procurement and financial advice in respect of certain public private partnerships and other large capital projects in its capacity as the National Development Finance Agency, NDFA.

In mid-2017, €3.45 billion was realised from the sale of almost 29% of the shares in AIB held by the ISIF. The proceeds from the sale were transferred from the fund to the Exchequer in the year. The value of the State’s remaining shareholding in AIB at end 2017 was estimated at €10.5 billion.

The NTMA assigns staff and provides certain other support services, on a reimbursement basis, to two independent bodies - the National Asset Management Agency, NAMA, and the Strategic Banking Corporation of Ireland, SBCI. These are governed by separate boards, and the NTMA is not accountable for their activities. The NTMA also provides staff on secondment for the Department of Finance’s banking unit, with the costs in that case being carried by the NTMA. The NTMA’s administration account shows gross expenditure on administration costs totalled €116.4 million in 2017, with 80% of the expenditure in respect of staff costs.

The audit report on the account draws attention to expenditure of €6.2 million in 2017 relating to contracts that were not publicly advertised. The NTMA’s statement on internal control provides explanations for the procurement approach adopted in relation to those contracts. The audit report also draws attention to non-effective expenditure of €853,000 relating to the planned development of a treasury management IT system. The project was terminated by the NTMA in 2017 without completion of the planned system.

Section 12 of the National Treasury Management Agency Act 1990 requires me to report annually to Dáil Éireann with respect to the correctness of the sums brought to account by the NTMA. This is in addition to the audit certificates that in produce on each set of financial statements. Chapter 23 before the committee today is the report in respect of 2016 and it highlights key developments in the year.

A similar report is being prepared for 2017 and will form part of the report on the accounts for the public services in 2017.

I ask Mr. O'Kelly to make his opening statement. I apologise for the delay in starting. It is our last meeting of the season and we had much tidying up to do which took longer than normal.

Mr. Conor O'Kelly

Not at all. I understand.

I thank the Chairman and members of the committee for the invitation. With me are Mr. Ian Black, our chief operating officer and chief financial officer, and Mr. Ciarán Breen who the committee has got to know probably more than any of us had hoped as director of the State Claims Agency. I was not planning on reading my opening statement. I have supplied slides for reference. Their purpose is to illustrate some of the themes which inform our strategy and policy on the marketplace.

I will touch on a number of the businesses, starting with the primary original business, as the Comptroller and Auditor General described it, of managing the national debt. A theme at which we are looking is how late it is in the investment cycle and the changing interest rate cycle and environment. We see this in a number of ways, although the most obvious is the announcement of the withdrawal and ending of the quantitative easing programme and what that might do. The interest rate environment has been supportive and tranquil and had no surprises. That is the environment in which we have been for seven or eight years. It is supportive in that central banks have been buying bonds for quantitative easing in the European Central Bank's case; tranquil in that "lower for longer" has been the mantra for central banks with regard to interest rates; while "no surprises" means that the forward guidance central banks have given us on interest rates has been quite specific. It is our view that all three of these pillars of policy to which we have got used in the past seven or eight years are likely to change. As we will have the withdrawal of quantitative easing, it will not be as supportive, while rates will not be lower for longer. The Federal Reserve System has already raised rates seven times in its changing interest rate cycle and it is likely that the ECB will start to change its approach to interest rates, even though it has issued statements stating it will continue to keep rates low well into 2019. However, the environment is likely to change. That means that we will have to be careful and cautious heading into the future, particularly since Ireland is still very indebted, as we regularly point out in our bulletins and discussions with investors. Investors remain concerned about Ireland's very high levels of debt. Our debt-to-GDP ratio has traditionally been the metric used and it has moved in a more favourable direction, but investors are less interested in that metric these days because of the obvious difficulties we have had in Ireland with GDP as to whether it is an accurate measure of our ability to repay our debts. Investors look more at interest as a percentage of Government revenue and at total debt as a percentage of Government revenue. Ireland does not fare quite as well on these metrics as we do on others. We are still quite high up the league tables. I provided a chart to demonstrate this.

There are concerns about the indebtedness of the country, despite the interest rate environment. The interest rate environment has meant that our interest bill, as the Comptroller and Auditor General says in his report on our accounts, was €6.2 billion in 2017, down from €7.5 billion at its highest. We think it is on its way towards €5 billion, notwithstanding the fact that the interest rate environment will change. The reason we have a high degree of confidence that the interest bill will continue to fall, despite the changing interest rate environment, is we have pre-emptively locked in interest rates by building up a significant amount of cash, repaying the International Monetary Fund and taking a number of other actions in buying back higher coupon bonds and locking in today's lower rates. We have been able to buy insurance for taxpayers because of this pre-emptive action to lock the interest bill into today's interest rate environment before it begins to turn. We can be confident that that will occur because between now and 2020 we will have a lot of debt maturing, much of which is high coupon debt. The averages of the maturing coupons are between 4.5% and 5.9% which we are replacing at today's rates or the rates in the past 12 to 18 months. That differential is being locked in. What happened this morning is a good example. As committee members have been sitting here, an auction has been taking place in the market in which Ireland has issued €1.25 billion, a ten-year note at a yield of approximately 0.81% to 0.82%, or just below 1%, and a 30-year bond at a rate closer to 1.6%. We are locking in that differential as these coupons mature. That means that we will produce some savings in the near term. That is what one would expect the National Treasury Management Agency to be doing in this environment and what quantitative easing is all about. It allows more indebted countries to make interest rate savings. We have been able to do this to some degree to buy some insurance, but it does not mean that the environment will not change.

A good example might be what recently happened with Italy, which is a reminder of how quickly things can change and spreads can move. The Italian ten-year spread moved by 100 basis points, or 1%, over a three month period, as there began to be uncertainty about Italy's future policies and concerns about instability of the Government there. If Ireland's credit spread was 100 basis points wider, since we have issued €50 billion since the beginning of 2015, having borrowed €50 billion in the marketplace-----

Since when?

Mr. Conor O'Kelly

Since the beginning of 2015.

Therefore, in three and a half years, we have refinanced €50 billion of our debt.

Mr. Conor O'Kelly

Correct.

That is only about one quarter of our debt. We did not refinance three quarters of our debt when interest rates were at their best.

Mr. Conor O'Kelly

It is not capable of being refinanced until it matures, or pre-emptively.

I know. It is just to put the matter in context. All of the work done has only resulted in one quarter of the national debt being refinanced in the past three and a half years.

Mr. Conor O'Kelly

Correct. If we had to pay 1% more on the debt over the period, we would be paying €500 million more per annum in interest.

On the €50 billion the NTMA has refinanced.

Mr. Conor O'Kelly

Correct.

The other three quarters, approximately €150 billion, has not changed.

Mr. Conor O'Kelly

Correct. That is why we are vulnerable to widening credit spreads. That is the interest rate outlook and things are going to change. They are becoming more volatile, as we are beginning to see. The cycle will change. In the near term it will not affect the direction of travel or trajectory of the interest bill.

Moving on to the Ireland Strategic Investment Fund, I will talk about our investment returns and the co-investment that has been attracted into the fund. I will also touch on responsible investment.

For the benefit of people watching - many lay people are watching - to what do 100 basis points equate?

Mr. Conor O'Kelly

A figure of 1%.

We get that, but many people might not. Mr. O'Kelly mentioned the ISIF. For the people watching, will he explain what the Ireland Strategic Investment Fund and the National Development Finance Agency do?

Mr. Conor O'Kelly

The Ireland Strategic Investment Fund came out of the National Pensions Reserve Fund. It is a fund of €8.9 billion. It has what we call a dual or double bottom line mandate. It is charged with investing in Ireland only and its investments must produce a commercial return and a beneficial economic impact for the country. That is what we describe as a double bottom line. The fund has invested €3.8 billion across the economy since its inception at the beginning of 2015, across all sectors and regions.

Just under 50% is invested outside of Dublin. The returns so far on the fund have been reasonable. The annual return to date is 2.3%. The return last year, the year in question, was 4.3%. If we take the 2.3% annually, that has added €648 million to the size of the fund just because of the investment return. It has been a positive environment for the fund in that regard and it has been possible to add to the size of the fund through those returns.

One of the positive surprises for us in respect of the fund was the attraction of private capital. It was always envisaged that the ISIF would be a minority investor and would look to attract private capital to invest alongside it, or that it would invest alongside private capital. We thought originally that maybe for every €1 million the ISIF invested, it would attract €1 million from the private sector; that was the metric we were using in the initial studies. It has turned out that the multiple of investment and crowding in of private investment has been higher than that and is running at 1.7 times. This means the €3.8 billion of investment by the ISIF has resulted in €10.4 billion being invested in the Irish economy when we include the attraction of private capital. That is a very significant sum and a good bit higher than we originally envisaged.

The ISIF has a global portfolio. The €8.9 billion sits there and the bit that is not yet invested in the Irish economy is invested in the stock market and some conservative investments to wait for it to be drawn down, as it were, as the commitments come near. That portfolio sits in a variety of market vehicles that are reasonably conservative. It is managed actively by the team also.

In deference to Deputy Catherine Connolly, this time last year we had a discussion about responsible investing and I think it is fair to say that after that discussion we accelerated changes to our policy on responsible investing. Legislatively, we were only excluded from purchasing munitions stocks in the original legislation. We have expanded that policy to include the banning of tobacco stocks and have recently also included a list of the dirtier fossil fuel companies. Almost 16 stocks are now excluded from the portfolio. In accordance with what is really current best practice globally, we are still potentially investing in some older fuel companies provided they are making a transition to renewable and provided they have a proven decarbonisation strategy. They still attract investment from funds like ours. Those that are not are increasingly being excluded by the market and we have taken some steps to do that.

If Mr. O'Kelly and the members will indulge me for one moment, the last time he was before the committee was in 2016, I think. At that stage I raised the issue of investment in tobacco and issued a strong press release asking the NTMA to divest itself of its investments in that area. I commenced working on a Private Members' Bill that autumn, which was introduced in the Dáil, namely, the Ethical Public Investment (Tobacco) Bill 2017, a Bill entitled an Act to prohibit the investment of public moneys directly or indirectly in equities or debt securities issued by tobacco companies. Around that time - maybe it was a pure coincidence although I like to think it was more than that - the Minister announced that he was going to introduce similar provisions. I was very pleased to see that result. It was an issue that got well aired when the NTMA was before the Committee of Public Accounts in 2016 and within six months it had divested itself of the tobacco investments.

Mr. Conor O'Kelly

Absolutely, and in fairness to the Chairman and the committee in general the point is that the fund should be mirroring what Members of the Oireachtas want or the actions they believe citizens want them to take. It would not be for us to lead in being the ethical or moral guardians of the portfolio but there should be a mirroring. That is appropriate and I acknowledge that we have indeed taken that path.

I apologise for the minor interjection.

Mr. Conor O'Kelly

Not at all. Obviously the fossil fuels Bill is going through the Houses as we speak and we have been working closely with the various committees on that.

To touch on the National Development Finance Agency, it is involved in direct procurement, public private partnerships, PPPs, and advising Departments in terms of financial value for money. The PPP that people are probably most conscious of at the moment is what we call "schools bundle 5", which has been affected by the Carillion collapse. That has been an extraordinary story for the UK with huge implications for jobs and a vast number of projects right across different sectors. Thankfully, in Ireland Carillion was only involved in one PPP in addition to a number of other smaller projects. The collapse did indeed cause very significant difficulties and complications for that PPP project. Ultimately, a number of the schools are likely to be completed, three of them hopefully by this school term, which was in doubt at various stages. Hopefully that looks likely to happen, which is a positive. The other schools will be delayed but works will start in the next couple of quarters.

As to what happened, what it means and what the lessons are, I think probably there are two things to take away. The first concerns the bundling of different projects to make a scale project suitable for a PPP. In PPPs generally, private capital wants a scale project. For example, we have bundled 14 primary care centres in a group, and we have also put a group of courthouses together to attract capital. Smaller projects will not attract that kind of capital, so we have bundled some. However, unbundling in the event of a failure of one of the counterparties proved to be very difficult. It has been managed, maybe just in time, but I think we will have to look at contracts involving bundled projects to ensure we have a better mechanism to separate them in the event of one of the counterparties failing.

The second consequence is potentially higher pricing in PPPs and procurement in general. There are still inquiries and lot of new reports coming out of the UK which we are watching closely. However, from the surface analysis, it seems that Carillion was serially underpricing contracts and the margin was too tight, which ultimately got it into trouble. There may be a recalibration in public procurement contracts of the price versus the strength of the counterparty and its ability to get the project done at the end of the day. I suspect that stronger counterparties and stronger balance sheets will prevail and will have an advantage. That may or may not be right. Ultimately, they will charge a price for their counterparty strength, which could mean prices rising in both direct and PPPs. That already seems to be happening in the UK.

The UK seems to have a specific exposure in aggregate to Carillion as a counterparty and that appears to be a big issue over there. I am wondering if Ireland has such an aggregated counterparty list. Should we have one? Are there companies to which the sovereign has a total counterparty risk - companies that are doing projects here, there and everywhere? Is there an aggregate list showing the top ten counterparties with which the sovereign currently has contracts? Should there be a limit on the State's exposure to any one counterparty rather than another? I think that is proven in retrospect in the UK, which would probably say it was too exposed, as a state, to one single counterparty. That is something we might take a look at and take forward proactively.

The other business that the NTMA is in charge of is NewERA, which is a corporate finance advisory business to commercial semi-State companies, and it produces its annual report which is about governance and shareholder value and having all of the State's shareholding in one place with the same metrics, governance structures, reporting and key performance indications, KPIs. I suppose a measure of confidence in the work that NewERA is doing is that it is getting a lot of additions to its portfolio and being asked to provide additional advice for various Departments. Recently all of the transport assets of the State were added to NewERA's portfolio as designated bodies and An Post has also been added. I can see NewERA developing as essentially a custodian - a single place where all of the State's assets and exposures are held in one place, analysed and subject to governance on behalf of the various Departments. That seems to be growing.

The Committee of Public Accounts is all too familiar with the business of the SCA. I am sure members will have questions for Mr. Ciarán Breen on the update. It is a big business now. It manages claims for 150 different agencies, and is dealing currently with 10,000 claims, 80% of which are non-clinical. The total contingent liability is substantial, somewhere between €2.5 billion and €3 billion. It is a significant business. The Houses of the Oireachtas are asking the agency, through the mandate it has given to us to walk that delicate line between watching out for taxpayer's money and being sensitive to the difficult and tragic circumstances that victims often find themselves in. It is a difficult balance and the staff of the agency walk it every day. It is a difficult mandate for somebody.

That covers my statement and I am happy to take questions.

The first speaker will be Deputy Catherine Murphy, to be followed by Deputy Catherine Connolly and then either Deputies David Cullinane or Jonathan O'Brien.

Good morning, gentlemen. There are no ladies present, which is something we tend to notice.

I will ask brief questions and I would like succinct replies because I am limited on time.

My question is addressed to the SCA. We had understood that the contingent liability was €2.6 billion, but the figure today is €2.7 billion and Mr. O'Kelly stated that it is between €2.5 billion and €3 billion while there have been 40 claims to date in respect of cervical screening process. Is that the most up-to-date figure?

On a previous occasion when the witnesses were before us, we were told that the agency only becomes aware of potential claims when there are pleadings or when the cases are escalated by the HSE and formally handed over.

Mr. Ciarán Breen

Yes, either a letter of claim or pleadings.

We discovered during a previous engagement that the average legal cost per clinical claim is €40,000, which compares with €8,000 for general claims. We were trying to get to a position where there is monetary disclosure and mediated settlements in cases where people have been damaged by the State and have a legitimate claim in order that the State's costs State could be lowered by a reduction in the legal costs rather that going through the expensive process of going to court. In regard to CervicalCheck is there active engagement other than pleadings or the formal letters of claim? Are measures being taken to make the process less problematic for the people while, at the same time, reducing the legal exposure?

Mr. Ciarán Breen

In all those cases as they arise, our preferred option is to go to mediation. In the three cases that have settled so far the first was a failed mediation, the second was a straightforward settlement where the other party decided not to go for mediation and in the third, the Emma Mhic Mhathúna case, which is the most recent one, we had mediation, which did not quite fail. The mediation broke up on a Sunday but during that week negotiations continued. Our aim is to ensure that all these cases, in so far as we can do them, go to mediation. We must remember that a plaintiff might decide that she does not want to do mediation.

How many cases is the State Claims Agency handling currently?

Mr. Ciarán Breen

We are dealing with 40 cases.

How many of those cases are being mediated?

Mr. Ciarán Breen

Our intention is to deal with each case as it arises. The court is case managing those cases where women are gravely ill and, therefore, they are falling into mediation immediately as a priority.

The Taoiseach made a statement in the Dáil, and from what I understand there is another party to this and there is a liability beyond the State in regard to one of the laboratories. The Taoiseach had said that the mediation could be concluded and the State would then pursue the third party. Is that viable?

Mr. Ciarán Breen

Let me give the example of the settlement in the Emma Mhic Mhathúna case. The parties contributed to the settlement and the defendant parties, that is, the State and the laboratory, have decided is that they will take to one side the issues between them as to how liability is apportioned. The reason for that is not to involve the plaintiff in that kind of dispute between the two parties. That is working quite well. The laboratories have been co-operative and we have a system in place whereby we are mediating these cases and are arriving at settlements. It is functioning well as matters stand.

Has Mr. Breen spoken to the HSE about cases that are likely to fall into the category where the laboratories are involved as a third party?

Mr. Ciarán Breen

Yes, the HSE is aware of the 40 cases that we have. When the HSE came before the committee last week, it indicated that it is aware of approximately 221 potential cases. Some 40 cases have come to us in the form of either-----

What happens to the other cases outside of the 40 cases? Is it up to the individual to issue proceedings or will the HSE handle the cases by advising people of their rights and entitlements, and the supports that might be available to them?

Mr. Ciarán Breen

There are supports which are independent of the legal process in any event, of which the Deputy will be aware, but the individual must issue at least a letter of claim, because that is the formal engagement to say that the individual is looking for compensation. They must do that in the first instance.

If people do not do that, they do not come to the attention of the agency.

Mr. Ciarán Breen

We would not know about them.

Some 87% of all the liabilities outstanding in 2016 were accounted for by Tusla and HSE. Some of the liabilities relate to catastrophic injuries at birth which account for a sizeable amount. If the SCA sees clusters or patterns where one hospital is subject to many claims, what does the agency do to get to the root of the problem?

Mr. Ciarán Breen

I will give the Deputy a recent example of that.

We have a clinical risk management team which is made up of doctors, physiotherapists, nurses and other such staff and when incidents are reported in real time through our national incident management system, the team picks up on them in the first instance and analyses them and then it also looks at our closed claims. Recently, when we were looking at a particular hospital, we discovered that there may be a problem in a particular unit with a particular practitioner. What we did was a very in-depth analysis of our expert reports on the claims and we looked at other incidents. What we do then is we have an active engagement with the hospital. In the particular case, the hospital will carry out its own independent investigation when we provide it with information that would appear to indicate there is a very definite cluster associated with the particular practitioner.

I want to move through some of the other areas, specifically, the National Development Finance Agency and Carillion. Carillion did not engage in building work but essentially contracted out the work. The opening statement refers to the transfer of risk, which is the purpose of public private partnerships. According to the agency, PPPs have been very effective and the risk has been transferred to the private sector. There have been many casualties in the case of Carillion, including the loss of 200 jobs and the impact on small suppliers and subcontractors. The risk has been transferred but, by and large, it has been carried by domestic suppliers and contractors and the fallout has been significant. School projects have been delayed. I am acutely aware of a project in my constituency where other accommodation had to be hired on an interim basis. There is a knock-on effect on the provision of subjects on the syllabus because of the lack of laboratory or other facilities. The cost is, therefore, much greater than only the financial cost.

There was a red flag over Carillion to begin with. Does the NTMA take into account such warnings when projects are being considered? I understand the need for economies of scale but that would be of value irrespective of whether it the project was undertaken by a public private partnership.

Mr. Conor O'Kelly

I do not for a moment dispute that. In our commentary we talk about PPPs and risk transfer. It is quite an academic point about the cost. I appreciate that the cost is very significant. The collapse of Carillion is a travesty and a very significant event and the knock-on effects for Sammon and others have been very difficult. Sammon went into examinership and ultimately liquidation and there are lots of consequences of that. The Department of Education and Skills was procuring directly with Sammon in lots of different ways so the collapse of Carillion has caused very significant damage. I am not underestimating that in any sense. I am just saying the financial structure of the PPP has meant that the schools were built by Carillion and Sammon. They were paid and the equity providers into that vehicle have lost 90% of the value of the money and the State has not yet paid any monthly payments. We do not pay until the school opens.

I understand that.

Mr. Conor O'Kelly

From that point of view, the State would normally have paid out all the €90 million to build the schools to date and would still have all the problems that are there. In that particular element - the schools that are built to date - here is no financial obligation on the State for the schools that are built to date, and that risk has been borne, appropriately, because that is what the PPP is supposed to have done. Some of the questions in the past have been about risk transfer and whether a PPP really transfers risk and if the State is not on the hook anyway and how the State always has to pay for everything at the end of the day. This demonstrates for that particular piece that that is not the case. The risk has been borne by the PPP funders and the risk has not transferred back to the State. It has been owned by funders. They have lost the money and they are currently under value or under water on their equity and that is the way PPPs are set up. That does not mean we do not have to solve these other problems about the schools opening, but one would have to do that whether the construction was direct or indirect.

The fallout has predominantly been domestic in terms of the liquidation of Sammon and the impact on subcontractors and jobs. The red flag that was connected with Carillion and the health of the company prior to the contract being awarded is a significant issue. People rely on the State to carry out due diligence. Smaller companies further down the food chain are not in a position to do the kind of forensic examination one would expect the State to do and it would be very unfair to expect them to do it. Does Mr. O'Kelly accept there have been failures in way in which this project has been handled?

Mr. Conor O'Kelly

Things happen, first of all, so none of us can predict the future and what is going to happen. Companies go out of business and they succeed and they fail and that happens in the construction business which is a particularly volatile business. It does not matter how one is building; nobody can predict the future and nobody has a crystal ball. The question is whether one has a mechanism set up which, in the event of something like that happening, allows one to get around it and have enough flexibility. When the contract was originally put out Carillion was a very robust publicly quoted company which had the confidence of shareholders and investors all over the world. In our counterparty analysis, it looked like a fine company at that point. By the way, it was a fine company at that point. In designing the contract with what is a good counterparty at that point, we build into the mechanism that, in the event of one of the parties failing, which happened in the case of Carillion, the other members of PPPCo can take over the running of the PPPCo and then start to instruct and make sure the schools get built. What we are concerned about is the schools being built.

I understand that.

Mr. Conor O'Kelly

If one of the counterparties goes and that has collateral damage in the private sector, that happens every day and I am not sure the committee would want the NDFA to build in protections for everybody down the line. I do not think that would be possible.

No, that is not the point I was making. Mr. O'Kelly spoke earlier about the very tight margins Carillion was working to, which probably created exposure. These were also picked up down the food chain, if one likes, in terms of the domestic fallout.

I will move on to another aspect of the accounts on non-effective expenditure, which relates to the IT system. A total of €853,000 was involved. It was for an IT system that was not delivered. What was the nature of the project? Could Mr. O'Kelly could give us some details on it? Was any of it used? Was there any retrieval on it? Was a proper business case done before it was considered?

Mr. Conor O'Kelly

That is fair enough. I will ask Mr. Black to respond in a moment. In the case of the NTMA, a treasury management system is a very significant and critical bit of infrastructure. The system we have in place works extremely well and has worked well for many years. We were looking at upgrading it and adopting a new system because of the changes in technology, for the most part, and in terms of interaction with the market. We specced out very carefully and we appointed the company. I am not sure if we can mention the name but we might get to that. Our difficulty was that what it promised to deliver and what we needed it to deliver did not transpire and, ultimately, despite lots of negotiations along the way where it was promising to do so, nothing happened. The company was a very well-known public company.

The NTMA planned to spend a pile of money - €853,000 - on a system that was not provided. I am not really concerned about whether the company has a reputation. This will certainly damage its reputation because it was contracted to do something and did not do it.

Mr. Conor O'Kelly

That is correct.

There was a public cost from that.

Mr. Conor O'Kelly

That is correct.

Was a business case prepared which indicated that a product would be delivered-----

Mr. Conor O'Kelly

Of course.

-----but the product was not delivered?

Mr. Conor O'Kelly

Of course, a business case was prepared by a significant project team approved by our audit and risk committee and probably seen by the Comptroller and Auditor General, etc. However, the product was not delivered and we decided to abort the contract. Were that cost-----

How much would the contract have been worth, in total, if it had been fully brought to fruition?

Mr. Ian Black

It was a no-due contract. Its total value, excluding VAT, was €5 million over its lifespan.

How much was it worth?

It was worth €5 million.

Mr. Ian Black

€5 million.

What was the lifespan of the contract?

Mr. Ian Black

Ten years.

It would have included servicing and upgrades and so on.

Mr. Ian Black

It would have included ongoing maintenance.

Some €853,000 was paid before the contract was pulled. Was compensation obtained from the company or is it being pursued? Why was the company paid before the product was delivered?

Mr. Ian Black

We procured the contract in 2016. As part of the procurement and tender process, a percentage of the fee is normally paid on the vendor being appointed and signing the contract. The due amount was paid for the next phase, which was the planning stage. Thereafter, a design phase was gone through but our requirements were not met. We allowed the company a second attempt to resolve the issues but it failed to meet our requirements. Our decision to terminate the project was based on a lack of confidence in the performance of the vendor and, indeed, evidence that it had four project managers on the project but was failing to perform.

Will it be possible to recoup some of the money paid?

Mr. Ian Black

Arrangements are ongoing to recoup the money. However, we made provision for the amounts paid. The payments were made in 2016 and the decision not to proceed was taken in 2017 . We knew that we would not get value for it and have thus, in a sense, provided for that amount.

Has the NTMA issued another tender or is it seeking to install another IT system?

Mr. Ian Black

As Mr O'Kelly stated, the existing treasury management system will be maintained for the next couple of years. Thereafter, we may consider installing another IT system but for the moment we will continue with what we have.

Obviously, it is a large amount of money and the reputation of a particular company is at issue. In light of it not delivering on the contract, is there any reason for the committee not to be told its identity?

Mr. Ian Black

I am happy to identify it. The no due contract is published on the Internet. OpenLink is the name of the company.

The witnesses referred to the very low interest rates on the enormous national debt. The Chair pointed out that the refinance demand relates to €50 billion, approximately one quarter of the national debt. Obviously, we are considering maturities and a potential increase in the cost of servicing the national debt. Have projections been made regarding the end of a low interest rate cycle? Could that be done?

Mr. Conor O'Kelly

Is the Deputy referring to our interest bill?

Mr. Conor O'Kelly

We have projected that out to 2020 it will continue on a downward trend towards €5 billion. Thereafter, it will begin to increase towards or above €6 billion, depending on the interest rate environment at that stage. We have detailed forecasts and predictions incorporating the market forecast in terms of budget predictions, etc. They are all built into that forecast.

Many members believe that the State has been very short-changed by the IBRC although that is not the witnesses' concern; they are there to manage the national debt rather than the politics of it. Did today's auction relate to IBRC?

Mr. Conor O'Kelly

No.

I refer to the bondholders who, as of 2017, were to be paid €933 million. In terms of the outstanding claims for IBRC-----

Mr. Conor O'Kelly

Is the Deputy referring to eligible liability claims, ELCs?

Yes. Must the NTMA wait until the distressed assets and so on are sold? How is that managed?

Mr. Conor O'Kelly

We do not have to wait until that stage. We put in a claim to IBRC and the banks, as members are aware. That scheme, which was introduced in March 2013, ended in March 2018. Under the scheme, the NTMA, on behalf of the State, claimed the interest and was paid the interest due by the banks. That has been completed and the auditors of those banks are completing statements to confirm that everything due has been paid. There are some residual outstanding claims in regard to IBRC claims but NTMA ranks quite high up the chain of creditor priority and will not have to wait.

What is the estimated worth of the distressed assets?

Mr. Conor O'Kelly

I do not know.

The witnesses stated that the ISIF is worth approximately €8.9 billion.

Mr. Conor O'Kelly

That is correct.

What was it worth at its height?

Mr. Conor O'Kelly

That is its highest value in its current form but I assume the Deputy is referring to-----

Prior to its current form.

Mr. Conor O'Kelly

-----the National Pensions Reserve Fund, NPRF, which had a highest value of between €23.5 billion and €24 billion. Of course, that included bank shares. If one adds the value of the bank shares at current prices to the €8.9 billion and the proceeds from shares that have been sold, it comes very close to a total value as high as or possibly slightly higher than that of the NPRF at its peak.

However, the €8.9 billion would have created income in the meantime.

Mr. Conor O'Kelly

It would not necessarily have created income but it would have been exposed to the stock market so might be worth more. It would have been invested in the market and might be worth more than €8.9 billion. My calculation did not take that into account. The Deputy is correct that the €8.9 billion would probably have increased.

Deputy Catherine Murphy may ask a final question.

Retention payments totalling €80,000 were made to two NTMA employees in 2017. Are there any outstanding employment contracts which were entered into prior to 2014 and have retention implications?

Mr. Conor O'Kelly

I do not believe so. The practice of offering people retention payments in the NTMA has ceased.

The witnesses are very welcome. The lack of gender balance among them should be noted, although there is nothing they can do about it. Déanaim tagairt do chuile cruinniú.

I welcome the focus on climate change by the NTMA since its last appearance before the committee. Towards the end of the December report it is noted that the NTMA is obliged by legislation not to invest in cluster munitions, as was referred to, but that is not the case in the context of tobacco. The Chair single-handedly sorted out that issue, which made me crave a cigarette. Restrictions have also been placed on investment in coal and oil. I ask the witnesses to clarify what has been excluded and what changes have been made since the last time NTMA officials appeared before the committee.

Mr. Conor O'Kelly

We have specifically excluded all tobacco stocks and adopted a policy which excludes the dirtier fossil fuel stocks. We have looked to best practice in the global investment management business for guidance on how to categorise those fossil fuel stocks. There are currently 16 stocks on our excluded list.

Mr. Conor O'Kelly

Yes, 16.

Those 16 stocks have been excluded since the witnesses' previous appearance before the committee.

Mr. Conor O'Kelly

That is correct.

Has a list of the stocks in question been published?

Mr. Conor O'Kelly

It has not but I see no reason why we could not do so. There may be some sensitivity in that regard but I will make further inquiries and should be able to make it available to the committee.

The sensitivity in terms of climate change is a far bigger issue.

Mr. Conor O'Kelly

That is a fair point.

The subtleties must be appreciated.

Since Mr. O'Kelly was here last, the NTMA has divested of investments in 16 entities.

Mr. Conor O'Kelly

Correct. That was in addition to the tobacco industry divestments.

Is there a working programme to divest of more?

Mr. Conor O'Kelly

The fossil fuel Bill has a divestment element which we have been working through. We will execute divestment of additional stocks if we have to do so after publication of the Bill.

Mr. O'Kelly has said the NTMA is looking at companies and that if they have transition plans, they are looked on favourably. Will he elaborate on that point?

Mr. Conor O'Kelly

That is the common protocol for all investment managers around the world because sustainable and responsible investing has become much more important and a much bigger driver of investment policy. If companies that traditionally would have been classified as fossil fuel stocks demonstrate to investors that they are decarbonising or transitioning to more environmentally friendly production methods, they will receive support from investors in general.

I am speaking specifically about the NTMA and its strategy. How does it follow it? Does it have a team in place that looks at these companies?

Mr. Conor O'Kelly

Yes. We have a framework, a strategy and a team that works with investment managers, to whom we give the money to make sure the guidelines are being followed and monitored. Where we have questions, we receive information back the committee makes the decisions. The decision the committee has made to date is to exclude 16 stocks and not to exclude others but to actively monitor how the companies are performing through research and interaction with our fund managers.

Balancing that, with what companies has the NTMA taken up that are aware of climate change and actively pursuing the development of policies?

Mr. Conor O'Kelly

The global portfolio is winding down. In five years there will not be any stocks left in it and the funds will be invested in Ireland. The Irish portfolio receives a lot more attention-----

The NTMA's investment programme is moving away from the world portfolio to the Irish portfolio.

Mr. Conor O'Kelly

Totally.

There is a five-year limit.

Mr. Conor O'Kelly

That is the estimate. We have invested €3.8 billion. With the Minister's new review, there is probably a total of €5.5 billion in the fund which has been moving reasonably quickly. In the next few years the global portfolio will continue to decline. The Irish portfolio is specifically focused on Ireland's decarbonisation agenda. We have backed a number of renewable energy companies. We have backed a solar power company and made significant investments in the alternative energy space.

The review mentioned was due to take place 18 months after the Ireland Strategic Investment Fund was set up. Is that right?

Mr. Conor O'Kelly

Correct.

We are well past those 18 months. Is it a Government, rather than an NTMA, problem? Was it specifically laid down in the legislation that there would be a review after 18 months?

Mr. Conor O'Kelly

It was.

When was it set up?

Mr. Conor O'Kelly

At the beginning of 2015.

By the middle of 2016 the review should have been started.

Mr. Conor O'Kelly

It started at the beginning of 2017 when all the results for the portfolio were in. We started to engage with the Department at that point and it has been an iterative process. In fairness to the Department, the final conclusions were published by the Minister who asked us to focus on areas of market failure, particularly in the regions, Brexit and housing. He has asked us, officially and formally, to focus on these areas. Both he and the Department were aware that we were already moving the strategy in that direction towards areas where capital did not flow as freely and which were part of the original strategy.

Connacht, the region I am from, has done very badly. As Mr. O'Kelly mentioned the regions, I refer to page 24 of the NTMA's annual report.

Mr. Conor O'Kelly

That is a relative term. I am guessing that it is relative to its percentage of GDP. That is how we measure whether it is in line.

It is something to which I might come back. My train of thought is focused on this issue. Is the review ongoing or will there be a report on it?

Mr. Conor O'Kelly

The review has been completed. The Minister made an announcement a couple of weeks ago.

The review is available.

Mr. Eoin Dorgan

The Minister has signalled his intentions. He will be writing to the chief executive in the coming weeks. He will write the section 40 letter with the complete review.

Will the review be made available?

Mr. Eoin Dorgan

That will be a matter for the Minister to decide, but I imagine that it will.

I am a little lost. The fund was set up under the Act which states there should be a review. Who carried it out?

Mr. Eoin Dorgan

The review was carred out-----

Mr. Eoin Dorgan

The ISIF conducted it and the Department carried out a complementary review. The ISIF could review its own mandate within its statutory mandate, whereas the Department conducted a broader review of the economic context in which the State found itself and the challenges and risks facing the State. The Minister considered both reviews and came to his final decision.

Mr. Dorgan does not know if the review will be available to us. It is something we will take up with the Minister.

Mr. Eoin Dorgan

It is a decision for the Minister to make.

I will go back to the IT issue into which Deputy Catherine Murphy went. Will the witnesses try to explain to me how it happened that €746,000 was written off in 2017 and a further €107,000 was incurred in 2016 and 2017? We are talking about a figure of €853,000. How could the NTMA make a business case, go to tender and get a company to do a specific job which it did not do, yet the company does not lose the money but the NTMA? Will someone, please, tell me when the NTMA became aware of it and how? Did it get someone in to carry out a review?

Mr. Ian Black

Given the size of the contract, it went through a public procurement process.

I heard that part.

Mr. Ian Black

The contract was awarded in May 2016. As part of it, there was a payment. It is normal for contractual payments to be spread over----

How much was paid at that point?

Mr. Ian Black

At that point €500,000, including VAT, was paid.

A sum of €500,000 was paid upfront.

Mr. Ian Black

Yes. Again, it would have gone through a public procurement process-----

I am more concerned with the NTMA's process that allowed this to happen. The company was appointed.

Mr. Ian Black

There were payment milestones. We went through a planning phase to produce a project plan to ensure functionality would be delivered. It went through an internal audit, an in-flight review, which it passed and a further payment of €250,000 was made in November 2016. The project ran into difficulties in January 2017, at which stage it was escalated to the vendor's senior management and a new project manager was appointed. It was the third project manager. We engaged heavily with the company until July, at which point the project was supposed to pass through to the next stage, the design phase, but it did not do so. It remained "red" - if we could call it that - for that period of time and a decision was taken based on a review not to proceed with that vendor.

Who carried out that review?

Mr. Conor O'Kelly

The vendor had teams of people in the NTMA, in Treasury Building, building these systems and working with us to build this new system throughout this period and they were getting paid along the way as they hit various milestones. At some stage, we became uncomfortable with the standards that were being achieved and we felt it was not going to be good enough for what we needed. It is such a critical system for us we could not afford to take any risk with it. It was not meeting the standards. We gave the company a couple of opportunities to come back and deliver the kind of standards we wanted. We had paid the bill to date and that ultimately had to be written off because the system-----

Those facts have been laid out to me by the Comptroller and Auditor General. I am aware of those facts. It had to be written off. What I am not aware of is how it happened. The NTMA has a huge portfolio of management of moneys. I have the greatest respect for the agency. The witnesses have given us tremendous information. Here is an example of utter failure-----

Mr. Conor O'Kelly

Sometimes-----

-----the NTMA is now doing without the IT system, which is extraordinary. It is now managing well without it.

Mr. Conor O'Kelly

We have had some learning from that.

Let us hear about the learning so.

Mr. Conor O'Kelly

We have had tremendous learning because we have learned what works and what does not work.

The NTMA has spent almost €1 million - more than €800,000 - to learn this was not necessary.

Mr. Conor O'Kelly

We did not spend it to learn. We spent it to get a system that ultimately was not delivered to the standard that we wanted and that is very disappointing. Obviously, that is something we have to be very careful not to repeat.

The NTMA is doing without the system now, so it does not need it.

Mr. Conor O'Kelly

It was replacing an in-house system. We continue to use the in-house system, which we have upgraded through the learnings along the way.

Could the decision not have been to upgrade the system rather than replace it?

Mr. Ian Black

We did look at that at the time but it was decided that the appropriate course was to buy a system rather than build or further develop the existing system. Again, that was the decision at the time.

In regard to those decisions, I have said repeatedly - the HSE is doing this too - that it is getting harder for us to determine value for money when it comes to IT.

Mr. Conor O'Kelly

We will not get every decision right.

I do not accept that. I am not asking that the agency get every decision right. We are all human and I do not mind mistakes as long as we learn from them. I see a particular theme emerging with information technology and expertise that is worrying for me.

Mr. Conor O'Kelly

I think that is unfair because the complexity of the IT in the NTMA is extraordinary. There are approximately 70 people working full time building software to allow this amount of money to go through the system with as little leakage or risk as possible. It is extraordinarily complex. A lot of the technology works extremely well. This particular piece did not work to our standards so we cut it. Obviously, there is a cost to that.

Is there a cost to come as well? Is there still costs outstanding?

Mr. Ian Black

That is the amount that we have paid. We have made no provision for further amounts because we do not believe there are further amounts due.

Is there legal action?

Mr. Ian Black

Discussions are ongoing between us.

There is a possibility of legal action.

Mr. Ian Black

Yes.

On the Ireland Strategic Investment Fund, there are two parts to it, namely, discretionary investment and directed investment by the Minister. Is that correct?

Mr. Ian Black

Yes.

Am I correct that the directed investments are mostly outside of Ireland?

Mr. Ian Black

The directed is AIB and Bank of Ireland.

Mr. Conor O'Kelly

On the €8.9 million, there is a global portfolio which is mostly outside of Ireland.

That investment is outside of Ireland.

Mr. Conor O'Kelly

Not necessarily, but mostly.

That is the investment that the NTMA will be redirecting back to Ireland in the next five years.

Mr. Conor O'Kelly

Correct. That is transitioning now.

The €8.9 million mentioned is within the discretionary fund.

Mr. Conor O'Kelly

The €8.9 million figure is the total. The €3.8 million that we have committed to the Strategic Investment Fund plus what is in the global portfolio makes up the total of €8.9 million.

The NTMA is looking at investments in Ireland in wind, solar and housing. Am I correct that it is investing in private companies that are building houses and apartments?

Mr. Conor O'Kelly

In some cases.

Is Avestus Capital Partners one of those companies?

Mr. Conor O'Kelly

Yes.

I read recently that the NTMA has put €29 million into that company. Am I correct that Avestus was formerly Quinlan?

Mr. Conor O'Kelly

I do not know the company's background.

I ask that question because the same names keep turning up but I will take this up with elsewhere. Avestus proposes to build apartments and houses and the NTMA has invested €29 million in that development. Is that right?

Mr. Conor O'Kelly

Correct.

With the possibility of another €29 million.

Mr. Conor O'Kelly

Correct.

Mr. O'Kelly believes that is a good investment because there is a need for rental accommodation.

Mr. Conor O'Kelly

Yes.

The article on Avestus references that the rental market has gone off the deep end. It has risen 80%. As of the first quarter of this year rents had surged by 87% in Dublin and 68% in other Irish cities from the low point during the Celtic tiger era. Would Mr. O'Kelly accept that the rental market is totally unsustainable?

Mr. Conor O'Kelly

There is a need for more supply.

Would Mr. O'Kelly accept that rents are unsustainable given the average industrial wage?

Mr. Conor O'Kelly

Yes, I agree.

Mr. O'Kelly earns his salary, which is a decent salary. I earn my salary. I would not like to be earning the average industrial wage and trying to pay for rented accommodation in Dublin or even earning €50,000 or €70,000 and trying to pay for it.

We now have a Government policy through the NTMA of putting more money into specific private companies.

Mr. Conor O'Kelly

We are trying to alleviate rental costs because the more houses that are built the better. The supply dynamic is skewed and we need more supply and we need it urgently. People can build houses and apartments to sell or they can build them specifically for the rental market. More people than has been previously been the case want to rent. This is the demographic shift across the world, including in Ireland. Ireland traditionally has not built residential units specifically for the rental market, which is one of the reasons rents are rising and there is tension in the market.

I disagree with that analysis because the State has pulled out of building houses, which was bad and has led to a crisis. In addition, the message from Government is private rented accommodation is very good and there is any amount of public money for it. However, that is a discussion for another day. How much money has the NTMA invested in social and co-operative housing?

Mr. Conor O'Kelly

We have looked very carefully at this area.

What is the level of investment in co-operative and social housing in comparison with the investment in private companies?

Mr. Conor O'Kelly

The one pilot scheme that we have backed is a scheme called Bancroft which involved the purchase of apartment block in Tallaght comprising 130 units. We helped to develop it. We put in €8 million or €9 million originally to a €25 million project. The development is now been fully occupied by people in receipt of the housing assistance payment.

Is the investment in a private company?

Mr. Conor O'Kelly

Yes.

A private company is not social housing. What Mr. O'Kelly has described is investment by the NTMA in a private company and tenants being provided with accommodation in a building owned by the company by way of the housing assistance payment scheme.

Mr. Conor O'Kelly

Yes.

I ask Mr. O'Kelly to note the circularity of what we are doing. Public money is being provided to help the developers. Public money is paid to the tenants and rents are sky rocketing. My question is what money has the NTMA invested in social housing and co-operative housing?

Mr. Conor O'Kelly

To be clear, that is not necessarily our role. The Ireland Strategic Investment Fund, ISIF, is an off balance sheet vehicle. Where the Government wishes to on balance sheet invest in housing, that is not a mandate of the NTMA. We are not involved in that.

The NTMA has been given a mandate to invest in the economy and to ensure equality within that sustainability yet the organisation sees fit to invest in private companies, developers, to help them make serious profits. Surely, it has a remit to look at public housing provision?

Mr. Conor O'Kelly

We do not.

Mr. Eoin Dorgan

The ISIF has to make a commercial return. The purpose of that is to ensure it remains off-balance sheet because ISIF was spending in such a way that its expenditure was on balance sheet it would reduce the amount that could be spent as part of the wider voted expenditure.

The witnesses are saying that vast amounts of public moneys are being channelled through the NTMA into private companies. They are justifying the NTMA's investments, which are causing serious problems in terms of the market.

Mr. Conor O'Kelly

I will clarify the investments made so far by the NTMA. Some €730 million has been invested by the ISIF in the residential housing space.

Some €730 million in private companies.

Mr. Conor O'Kelly

Everything we invest in is a private company.

Lovely. That is okay. I just wanted clarification on the matter.

Mr. Conor O'Kelly

The €730 million has been invested in about seven or eight different platforms.

Mr. Conor O'Kelly

They will add 15,000 residential units by 2021. It is an area of market failure. We have been charged by the Minister specifically to look at the housing area. As I said, we have put €730 million into this area and it has been matched by private sector capital. This will add to the supply which hopefully will take the pressure of rents and house prices.

The market has utterly failed to supply and now we are actively supporting it. I will move on. My last question is in regard to rented buildings. I will come back on other issues later to the State Claims Agency. On rent, what is the NTMA paying in rent; why is it moving and what are the implications of that move?

Mr. Conor O'Kelly

We are moving for economic reasons and because we think it is a good use of the State covenant, if one likes.

It will be about cost neutral. Our lease was ending in the Treasury Building. It is an interesting part of town. It was developed from-----

What rent is the NTMA paying now? Why does it have to leave? What is the cost of that, if any? What is the new rent?

Mr. Ian Black

We have been in Treasury Building from day one, but all of the leases have different end dates. We started on the fifth floor. Each floor is roughly 20,000 sq. ft at €50 per square foot excluding service charges. It is roughly €1 million per floor. Again all of the leases have different end dates. We took a decision whether to stay or go. Had we stayed, the landlord indicated that over the next period of time there was a likelihood that that building would be refurbished and as they do up one floor, the staff would be constantly moving over a two-year period. That was not very attractive from that point of view. We also then looked at other buildings and felt this one on both financial and non-financial grounds made sense. It was a decision that went to the agency board and was approved by the board.

Mr. Conor O'Kelly

It will be effectively cost neutral for us staying versus going.

Perhaps we might get a note on the rent of €1 million per floor.

The witnesses could forward it to us.

How many floors are involved?

Not too many, I hope.

Mr. Conor O'Kelly

We have five floors, now four floors. We are going to move to a different part of the city which will be down beside the Central Bank and about cost neutral versus where we are now. We think it is a better position for us.

I have no problem. I am just trying to establish facts; that is all. It is €1 million per floor and there are five floors.

Mr. Ian Black

Our sister organisation, NAMA, has two of those floors. In a sense we only have leases for two floors - the fifth floor and the ground floor. NAMA has the leases for the first and third.

Is NAMA paying €1 million as well?

Mr. Ian Black

It is similar rent. They are slightly different because depending on how high one goes up, the rents are slightly different.

I ask Mr. Black to come back with a note on what the NTMA is paying and what it will be paying.

Mr. Ian Black

Yes.

Was a business case made for purchasing a building?

Mr. Conor O'Kelly

Government policy does not encourage purchasing buildings. Today the policy is to rent. We did look at buying a building.

The NTMA looked at buying a building. Did it prepare a business case on that?

Mr. Conor O'Kelly

We were told it was Government policy for State agencies not to purchase buildings.

I welcome Mr. O'Kelly and his team. I ask him to give us an overview of the strategic investment fund, its purpose and what it does or should do. That is under the NTMA's remit, is it not?

Mr. Conor O'Kelly

Yes. The strategic investment fund was set up and given what we call a double-bottom-line mandate. So it has to invest to produce a commercial return and it must invest to achieve economic impact. It must meet both of those criteria. It can invest in Ireland only. It is expected to be largely a minority investor and look to attract in private capital into projects, particularly in areas where capital is not flowing freely.

What is the mix or blend of finance? There is some private capital; from where does the rest of the money come?

Mr. Conor O'Kelly

The money all came from the NPRF. The residual of the NPRF was transferred over to the ISIF.

What is the NPRF?

Mr. Conor O'Kelly

The National Pensions Reserve Fund. Originally that was used to recapitalise the banks.

I am not even at that stage. At the moment from where does the money come? There are multiple income streams for this fund. Some of it is private sector and some is State investment. It was a savings fund. It was the National Pensions Reserve Fund, was it not?

Mr. Conor O'Kelly

Yes, it was the National Pensions Reserve Fund. It was what was left in the National Pensions Reserve Fund which was invested in overseas assets. It was a pension reserve fund investing in various assets and holding them.

That is historical. Is additional funding going into it?

Mr. Conor O'Kelly

No. The NPRF was used to recapitalise the banks and what was left at the end became the Irish Strategic Investment Fund. It was not as much as €8.9 billion, which it is today. It was closer to €5 billion at its original set up. Dividends from the banks go into the ISIF and the investment returns that the ISIF have made to date, which is as I pointed out earlier around 640-----

Therefore it is not envisaged that any additional funding would go into that fund.

Mr. Conor O'Kelly

Not currently. Actually it is the opposite. I believe that in terms of the rainy day fund or the setting up of House Building Finance Ireland, HBFI. That money would transfer out to various other projects.

That is what I want to get to. Mr. O'Kelly mentioned the National Pensions Reserve Fund. That was set up essentially as a rainy day fund, was it not? That was the logic of that at the time it was set up.

Mr. Conor O'Kelly

Yes, I believe so.

What was it used for? When it rained what was it used for?

Mr. Conor O'Kelly

I was not around for the-----

I know Mr. O'Kelly was not around, but I imagine he lived in the country.

Mr. Conor O'Kelly

Actually I did not, but that is okay.

I imagine Mr. O'Kelly knows the answer to the question: it went to the banks to recapitalise them.

Mr. Conor O'Kelly

Yes, I did.

Can the Deputy repeat question?

Where did the money go from the National Pensions Reserve Fund? It was a rainy day fund and it rained.

Generally the first €18 billion of it went as the first tranche of the bailout. The first tranche of the bailout came from that and the balance of that came from the troika. A lot of the rest of it went into the banks.

My point is we had a rainy day fund before. That rainy day fund was meant to ensure that if there was an economic downturn of if there was any economic turbulence we would have some money to invest or even to tap into to be able to pay for day-to-day spending if there was a shortfall, but certainly it was more of an investment. That did not happen. It did rain. The economy crashed and the money went to recapitalise the banks.

Someone can correct me if I am wrong. I understand that was called the National Pensions Reserve Fund. It was not for any of the things the Deputy mentioned at all. It was to pay for pensions when people retire in the long term.

Mr. Seamus McCarthy

Yes. It was a very long-term investment.

It was never a rainy day fund. It was specifically to provide for pensions, but then it became used for the first element of the bailout and then to buy the bank shares. It was never an investment like this portfolio. It was for pensions only.

Okay. The money that was left in that fund went into this ISIF. Some of that money will now be put into what is being called a rainy day fund, will it not?

Mr. Conor O'Kelly

Yes.

Mr. Conor O'Kelly

I think the Minister has said €1.5 billion.

A total of €1.5 billion from the ISIF will go into this rainy day fund.

Mr. Eoin Dorgan

The draft heads of the Bill were sent to the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach.

If that money was not put into a rainy day fund - let us say a decision was made not to transfer it in - what would that money be spent on?

Mr. Conor O'Kelly

It would continue to be used for the purposes of the rest of the fund, which is to invest in Ireland under that double-bottom-line mandate.

In what types of areas would it be invested?

Mr. Conor O'Kelly

All sectors of the economy where there are felt to be areas of market failure. It is across the regions and across different sectors.

That is what I am trying to establish. It is accepted by almost all the economists, think tanks, expert groups and even the European Commission that there is a serious lack of capital investment in this State. There are huge challenges in social infrastructure, health and housing, as well as in transport in respect of roads, rail and ports. There are huge challenges in investment generally. Even though the economy is recovering we are still not keeping up with capital spend even compared with European Union averages and yet we have to make up for lost time where a huge capital spend was stopped because of the crash. Why is it wise to take €1.5 billion out of what is an investment fund to put into a rainy day fund at a time when there is an absolute need to invest? Is that essentially a Government decision and if so, what opinion if any was sought by the NTMA in respect of the wisdom of doing that? Would the NTMA have had any input? Would its opinion have been sought?

Mr. Eoin Dorgan

That would have been a Government decision as part of budget 2018.

I know it is a Government decision. Who administers the fund? Who decides where the money should go and how it is spent?

Mr. Eoin Dorgan

The Ireland Strategic Investment Fund, ISIF, was established under the National Treasury Management Agency (Amendment) Act 2014 and comprises €8.9 billion.

Who decides how that money is spent?

Mr. Conor O'Kelly

It is a matter for the team, the investment committee and the board.

My point is that the money is taken from the NTMA and is put somewhere else. Is it asked its opinion? Was it a Government decision and the NTMA was not asked whether it was a good or bad development?

Mr. Conor O'Kelly

There was a review scheduled 18 months after the ISIF was set up. One of the key questions of that review process was about what amount of money would be needed to be in the fund to execute and deliver successfully on the mandate of the double bottom line for an economy like Ireland. It was agreed that the €8.9 billion which sat in the fund had an excess which would not be needed in order for the fund to still continue its mandate. In that regard, those reserves were identified by the ISIF and the NTMA in our first submission to the Government, namely, that there would be significant excess, maybe several billions of euro, which could be used for other purposes.

Government policy is a matter for the Government. I am not asking Mr. O'Kelly to account for what the Government does. It can account for itself. What message are we sending out, however, that we have money in a fund that can be used for investment in areas where it is needed? What message are we sending out by taking that money out of that investment fund and putting it into a rainy day fund which may or may not be used in the future? We must bear in mind we had a similar type of fund before that was used for different purposes. Where is the wisdom in doing that when there is a need for investment now?

Mr. Conor O'Kelly

Again, it is a policy decision. An economy like Ireland's can probably only take a certain amount of investment at any given time. It is quite a small economy. The commitment of €3.8 billion has been matched by private capital, making a total of €10.5 billion invested so far through the ISIF mechanism over the past three years. That is a lot of money and projects for this economy. Whether the pipeline or the capacity would be there for the entire €8.9 billion is very questionable. We identified and believed that there were excess reserves which could be used for other purposes. I suppose it is a matter for the Government as to what those other purposes might be.

Is Mr. O'Kelly saying that the NTMA had not done its homework and that there were not enough projects in the pipeline on which to spend the money? That does not really tally with where the majority of the experts are at. Economists and think tanks are saying there is a dire need for increased capital investment across the economy. The NTMA, on the other hand, is saying that while that might be the case, it cannot be done too quickly. Essentially the NTMA is saying we are spending enough at the moment and we do not need to spend any more in some of these areas because we should not spend too much too quickly. That does not really sit with what the experts are saying.

Mr. Conor O'Kelly

I am not necessarily saying that. Government capital expenditure in general is a separate business. The ISIF has been asked to do a specific thing, namely, to match private capital off balance sheet and to find opportunities for investment that will meet our double bottom line. We have invested-----

The NTMA has not identified enough projects, however.

Mr. Conor O'Kelly

We have done between €600 million and €700 million a year.

I know that. However, Mr. O'Kelly is saying there is a surplus of money which the NTMA may not be able to spend because there are not enough projects. Whatever about the rights and wrongs of it, I am not saying the NTMA is wrong. The factual position is that we have X amount of money to spend and we will spend as much as we can. It is dependent, however, on having pipeline projects in place which can enable the NTMA to spend the money within a period. As it cannot spend the overall figure, there is a surplus which will now be used for something else. Is that what Mr. Conor O'Kelly is telling me?

Mr. Conor O'Kelly

First of all, we are not spending money, we are investing it. We expect to get our money back and make a return on it.

When it is invested, it means it is spent.

Mr. Conor O'Kelly

Spending and investing are not the same things. Spending is where one does not get the money back. It is expenditure. Investing is where one gets the capital back and one gets a return.

That is semantics. There are questions about the wisdom of it. However, we are not going to agree on that.

We did put some questions to the HSE and the Department in respect of several court cases regarding the cervical cancer scandal, a number of which were settled recently. Are there 40 cases before the courts?

Mr. Ciarán Breen

There are 40 cases before the courts. Of that, 35 have letters of claim or proceedings. There are three cases which are now finalised, except for issues about legal costs. There are two potential claims.

The first claim we became aware of in the public domain was Vicky Phelan's. The majority of that claim, as was presented to the committee by the Secretary General of the Department of Health, came from the lab involved but €20,000 was paid for by the HSE.

Mr. Ciarán Breen

It was €25,000.

We know in the case of Emma Mhic Mhathúna that she got a €7.5 million settlement. We were told that there was an acceptance of liability by the HSE in respect of non-disclosure. Obviously, the main liability was with the lab. Is it still the case that the breakdown of who is responsible for what has not been worked out?

Mr. Ciarán Breen

That is the case

Was the acceptance of liability in Emma Mhic Mhathúna's case the first time in any of the court cases that the HSE accepted liability in respect of non-disclosure?

Mr. Ciarán Breen

No. In the three settled cases, the HSE has accepted liability in respect of the non-disclosure issue.

If it was €25,000 in the first case, will that be the benchmark for all other cases?

Mr. Ciarán Breen

No. When I presented originally to the Oireachtas finance committee, the first committee meeting after the Vicky Phelan case, there was a discussion about how that settlement was arrived at. The Deputy may recall that. I was asked if there was a contribution by the HSE. I said a contribution was made by the State Claims Agency, on behalf of the HSE, of €25,000. The reason we made that contribution in that particular case was that we were told by the laboratory involved that it was going to go to an additional day of court hearings if we did not make some contribution to that case. We did not want Vicky Phelan to have to spend another day in court. We then decided to make a contribution of €25,000.

Was that the same logic used in Emma Mhic Mhathúna's settlement?

Mr. Ciarán Breen

I hope the Deputy will not feel I am evading any answer but the Emma Mhic Mhathúna case is very sensitive on an intra defendant basis. Given that the matter could ultimately end in terms of a court apportioning that liability, I cannot talk in public about how that is being worked out.

I am not asking Mr. Breen to do that because it would be unfair. In process terms, is it up to the court to decide who pays what share of the €7.5 million settlement?

Mr. Ciarán Breen

Ultimately, yes. However, the Deputy will understand there will be ongoing negotiations between the laboratory and ourselves as to how this will be broken down.

There are three cases in which the HSE accepted liability for non-disclosure. Is it correct that there are monetary payments associated with these?

Mr. Ciarán Breen

That is correct.

How many women were not informed in total?

Mr. Ciarán Breen

When the HSE presented to the committee last week, it spoke about a figure of 221 women.

Three of these women have been somewhat compensated because they took court cases for non-disclosure. What about the rest of the women in question who have not been compensated yet, given we do not have class actions in this State?

Is it the case that each of these women will have no choice but to take a court case to be compensated financially for what is now an acceptance of liability? If the HSE has accepted liability in these three cases for non-disclosure, logic dictates that it will have to accept liability in all other instances in which there was non-disclosure. There are 40 cases, of which 35 are active before the courts. It may be that there will be an acceptance of liability in all 35 and an associated monetary contribution and a cost to the State. What will happen then to all of the others who have not yet taken a court case?

Mr. Ciarán Breen

Each case is unique and the periods will differ.

Leaving aside the uniqueness, the principle has been established that the HSE accepts liability in three court cases for non-disclosure. There are 35 active court cases and I imagine the principle will hold in all 35. There may be nuances, differences and complexities associated with each because of issues such as length of time, which is fine. That will determine the level of compensation to be paid. However, the principle of liability and compensation has been established in three cases, while there are 35 active cases. Is it fair to say the same principle will apply to the 35 cases and that, most likely, there will be monetary compensation associated with accepted liability on the part of the HSE? Is that, at least, a fair assessment?

Mr. Ciarán Breen

Yes. If one fails to disclose something, as a matter of law one has to concede liability that there was a failure. By the way, that is a concession we make on behalf of the HSE having regard to our delegated function. I will make one point about why women have to go to court, as opposed to being dragged into it, the phrase the media sometimes use. There are very good reasons a lawyer acting on behalf of any of the cervical cancer women would want to commence pleadings in court. Sometimes there are child dependents who, in some cases, may ultimately need to be made wards of court or in respect of whom the courts may have to ensure they will be looked after by way of certain orders. There is another factor, that the lawyers must protect themselves against the Statute of Limitations. An additional factor is that serving pleadings allows someone to set out their case in the best way possible for the defendant to meet.

I accept that, but I stop Mr. Breen there because there are a number of elements to each claim. In each claim being brought the vast majority of any award relates to the failure of the laboratory.

Mr. Ciarán Breen

Correct.

We all accept that, but what I am saying is that in the HSE's case, there is now an accepted liability for a failure to disclose information to the women concerned.

Mr. Ciarán Breen

Yes.

In that circumstance is there anything stopping the State from stating it will compensate each of the women concerned? Notwithstanding whether they take cases, there is an established and accepted failure. Rather than wait for them to go through the courts which they are entitled to do and separate from the fact that they can take the laboratory to court, there is an established acceptance of failure on the part of the HSE and the State and it can now compensate the women concerned.

Mr. Ciarán Breen

On the aggregation of compensation which would come from the different factors in a case, including the failure to materially disclose something and negligence, if there is negligence in the reading of a test result, no lawyer will want separate compensation amounts to be paid. It would be a much better and simpler approach to take each case as it came and then to aggregate the compensation in order that a woman would receive full and final compensation. When she has been through that process, she knows that she has dealt with all of the defendants.

There are 35 active cases and I imagine some compensation will be paid to the women involved for non-disclosure. The outstanding cases involve the difference between the 40 and the 221 women who were not informed. Some of them may have passed away, but if those who are still alive do not take court cases, they will never be compensated for the accepted liability or failure of the HSE. Is that the bottom line?

Mr. Ciarán Breen

There would be no engagement with us in that case. If someone does not make a claim, we do not get involved. We only get involved when someone triggers a claim.

As such, they have to take cases.

Mr. Ciarán Breen

Yes.

As a last point, it does not prevent the Government from establishing a redress scheme as a separate matter. That was mentioned on day one. The State Claims Agency is the current legal mechanism, but the Government could establish a redress system without having to go through the agency and have a redress board to deal with it. I do not want the public to think that if people do not take a legal case, they will get nothing.

The Chairman cannot just come in and throw that comment in at the end. With respect, my line of questioning-----

It was for this organisation.

Please bear with me. My line of questioning was to ask if the only option available to the women concerned was to take court cases. Everything Mr. Breen said in that regard indicated that the answer was yes, that was the only option. The redress scheme is completely different. My understanding of redress is that one looks at all of the other issues surrounding expenses and the provision of supports. I am not sure whether one looks at liability for non-disclosure. While one could and we can argue that one should, it would equally be unfair to put it out that it will be looked at. Perhaps, Mr. Breen might answer that question because it was the logic behind my series of questions.

The Deputy is quite right that today that is the only avenue.

There are two options.

The redress scheme has not been established. It is only compensation. It may or may not, but it might.

There are three options. Option 1 is that we allow all of the women concerned to take cases. Option 2 is that the HSE could decide to compensate all of the women concerned, irrespective of what redress scheme is put in place. The third option is establishing a redress scheme. Perhaps Mr. Breen might answer the question. Is it possible that a redress scheme established by the Government would be a way to compensate all of the other women who may not take court cases arising from the HSE's failure to disclose?

Mr. Ciarán Breen

One would have to look at an individual redress scheme. There has been a number of schemes during the years, including, for example, the scheme foer Our Lady of Lourdes Hospital in Drogheda. One would have to look at the terms of reference of the scheme.

Mr. Ciarán Breen

Broadly, a redress scheme would look at all kinds of factor. Anything is a possibility in a redress scheme. It is about how one designs it and what it is meant to do.

The question then is whether it is likely. The Chairman is saying it is.

Mr. Ciarán Breen

I cannot answer the question of whether it is likely. That is a matter for the designers of such a scheme.

speaking genuinely, I do not want women with claims to feel they may never have any other option. They may do, but it has not yet been provided for. I did not want them to be upset unnecessarily thinking that if they did not sue the State, they would get nothing. Most agree with having a redress scheme.

However, that is the current position.

As we sit here, that is absolutely right.

Of the 221 women involved, as of last week, how many have taken proceedings, not necessarily against the laboratories but generally in connection with their smear test results, a failure to inform or a failure to address their circumstances in a timely fashion? According to the figures, three cases have been settled. What are we up to?

Mr. Ciarán Breen

Let me take the committee through it again. We say there are 40 cases, of which two are potential cases and three have been settled, leaving a balance of 35.

Outside those 40 cases, there are another 181 women. Has any of them taken a case?

Mr. Ciarán Breen

The figure is very dynamic on a weekly basis. When I appeared before this committee and the finance committee the first time, there were 11 cases around the time of the Vicky Phelan case. That has now grown to 40 cases. Cases come in on a weekly basis as solicitors' firms are going on record for the women.

I will rephrase the question. Before the Vicky Phelan case, had any of the 221 women that we now know of taken cases?

Before Vicky Phelan.

Mr. Ciarán Breen

Looking at the total number, as it was at that time, we presume some of those were women who were in that group of 11.

Was there a case settled in March 2017?

Mr. Ciarán Breen

The Deputy mentioned this also at the last meeting with the HSE, and gave the name of that person.

Yes, with her permission.

Mr. Ciarán Breen

That is not a cervical screening case from CervicalCheck. It was a case which involved on the one hand a general practitioner and on the other hand a hospital in the HSE group. It was about a misdiagnosis or a failure to diagnose. It is not in the CervicalCheck complement.

But she is one of the 221 women.

Mr. Ciarán Breen

As far as I know, she is not because-----

She has met Dr. Scally.

Mr. Ciarán Breen

I appreciate that, but my understanding is that, based on the name the Deputy provided, and having looked it up and examined that file, she is not. That is my understanding from the file. This was a different case which did not come from CervicalCheck. I do not want to go into too much detail about it because I do not want to identify somebody. It was a case which initially involved a GP and a referral to the hospital. The referral was not dealt with expeditiously. The diagnosis was subsequently made and the allegation, which was properly made against the hospital that delayed-----

Is Mr. Breen saying that not all the 221 women's misdiagnoses are related to CervicalCheck and the laboratories?

Mr. Ciarán Breen

No. There are two classes of claims we deal with. There are the cervical cancer cases which come from CervicalCheck's screening process. There are also non-screening cervical cancer claims that arise from colposcopy units in hospitals which are made against hospitals-----

And both of those together-----

Mr. Ciarán Breen

No, they are quite separate, and that is the point.

Are the 221 women all CervicalCheck?

Mr. Ciarán Breen

Correct.

Is Mr. Breen saying that this particular woman is not part of the 221?

Mr. Ciarán Breen

That is right. I checked it out when the Deputy gave the name.

It means that there are more than 221 women. There are other issues.

Mr. Ciarán Breen

I would like to clarify that misdiagnosis happens in hospitals and then within the CervicalCheck screening.

Is Dr. Scally meeting not only people affected by the misdiagnosis of CervicalCheck, but also people who may have been misdiagnosed through non-screening services?

Mr. Ciarán Breen

I do not know. Perhaps, but I do not factually know that.

It is my understanding this woman has met Dr. Scally. I have the date she met him.

Mr. Ciarán Breen

That could be. I am only explaining what I know from the file.

I appreciate that.

Does Mr. Breen have a figure of other claims about cervical cancer which are not part of the 221?

Mr. Ciarán Breen

Yes, I do.

What is that figure?

Good question. We might get to the nub of it.

We have not heard this issue aired before.

It is a wonder it was not volunteered beforehand. It is like pulling teeth.

This is approximately the tenth Oireachtas committee meeting between HSE and the State Claims Agency and the Committee of Public Accounts and the health and finance committees. I know that question may not have been asked, but sometimes it is great if people volunteer the full figure.

Absolutely. I could not agree more. It will get worse.

There is a public perception, whether it is intentional or accidental, that all the misdiagnoses of cervical cancer were as a result of failures by the labs and the screening. We are now told there is a whole cohort of other women, some of whom have taken cases. They were misdiagnoses from non-screening services. Is that an accurate and fair assessment?

Mr. Ciarán Breen

When I appeared here previously, I gave these figures for misdiagnoses of cervical cancer arising from both the screening service and the non-screening service.

For clarification, I was in the Chair and Mr. Breen gave figures. However, whether it is clear that they were broken down in the manner in which the Deputy asked is the real issue.

Mr. Ciarán Breen

There was never any misunderstanding on our part. We gave these figures-----

We will clear it up now.

I accept Mr. Breen's point. I may not have been here.

Mr. Ciarán Breen

There are 12 active claims around cervical cancer misdiagnosis from non-screening services, four closed claims and one potential claim, which is a total of 17.

Now we need to get an answer, and obviously Mr. Breen cannot answer this, to whether Dr. Scally is meeting those women as well as the 221 women about the screening service. That is now the question which needs to be answered. Is Dr. Scally looking only at those misdiagnoses through the screening services, or is he looking also at those women who have had misdiagnoses through the non-screening services? It is a question which cannot be answered in this room.

Mr. Ciarán Breen

I cannot answer that.

I appreciate that. Mr. Breen can understand where I was coming from. I know this particular woman has met Dr. Scally, and there was the impression put out that he was only meeting those involved in the screening service, which is why there was a bit of confusion about this woman. She was informed on 10 May this year that she was one of the 221.

Mr. Seamus McCarthy

My recollection is that the audits carried out were not just of cervical screening. It was all testing and diagnosis of cervical cancer, where the individuals were diagnosed. It may be that it is not just laboratory-related cases. There are other-----

It is anyone who was diagnosed and put on the registry. Some of them would have come through non-screening services, while some of them would have come through screening services. As I said, that is the question that now needs to be asked. Is he meeting both?

On procurement, which was touched on earlier, is it fair to say there is too much weighting put on the lowest tender, and that is causing some of the issues? Most countries which use PPP go with the medium, or in-between. There is not so much focus put on the lowest tender. We have now seen the consequences of focus being put on the lowest tender. I know it is a policy decision. The National Development Finance Agency, NDFA, was given a statutory mandate under the 2007 amendment. Will Mr. O'Kelly talk us through that? Is it down to the Department of Finance or is it through the legislation that more weight is given to the lowest tender?

Mr. Conor O'Kelly

There are EU procurement guidelines, weightings and much academic research on what is the right weighting to give. There are seven different categories normally, and pricing tends to get approximately 40% of most tenders.

One of the factors that looks like it will come out of the UK analysis and the reports that have been done to date since Carillion is the question of whether price is given too great a weighting and whether it is possible to win a tender just by putting in the lowest price, with the other criteria being given insufficient weighting. I am speculating that there may have to be a recalibration of weighting and that is something we will have to monitor.

Who does that recalibration? Is it done at an EU level, is it a Government decision or who does this?

Mr. Conor O'Kelly

We would generally adopt EU guidelines there but there can be flexibility in individual jurisdictions and on individual projects. We can consider it.

Is it correct that the assessment remains the responsibility of each Department and Minister? The National Development Finance Agency, NDFA, advises but must a Department follow its assessment? Will Mr. O'Kelly talk me through the process?

Mr. Conor O'Kelly

On direct procurement, we give an opinion on value for money. We often give opinion on the procurement process or counter-party risk, if asked. On public private partnerships, PPPs, we have full responsibility for the procurement process ourselves.

The Minister takes over the responsibility for the operation after completion then?

Mr. Conor O'Kelly

That is correct. In the case of a PPP, it is not even post completion because it returns to the Department after 25 years, at the completion of the PPP programme.

I had intended starting with the opening statement, however I first turn to CervicalCheck, following the information highlighted by Mr. Breen. I understand that previously, he was clear in acknowledging that there were potentially other cases. However, from what has been highlighted here this morning, I understand there may be further deficiencies in our testing system and there may be issues with where the colposcopy tests are going. I do not believe we were aware of this before now.

There is drip-feeding of information. Here we are, on another Thursday afternoon, learning of possible further difficulties for women, which further erodes confidence in the system. I am not blaming the witnesses but we have been in this process for months. Each time someone comes in, there is another wallop to the system and damage to the testing process and screening system will mean that people will die in the future.

On the standard payment for non-disclosure, it seems obvious that women who have been affected should be afforded a payment as soon as they apply. There should be a very simple process in order that they do not have to go through the indignity of a complex process when their health is in a precarious state. What is the view of the witnesses on this? Would it not be easier to give a standard payment to those affected? As someone might be wasting €1 million on an IT system that does not work, surely it would not be too difficult to give €25,000 to women who have been affected by this. From the perspective of sums, would it not be easier to just write the cheque?

Mr. Ciarán Breen

I do not think so. If one takes an average case, which can run to a figure in excess of €7 million, as it did in Emma Mhic Mhathúna's case -----

I am not talking about compensation or the whole package; I am talking about the non-disclosure element and the State's liability.

Mr. Ciarán Breen

That is the point that I am trying to make. As I said to Deputy Cullinane, it is so much easier when the case is up and being mediated that one takes care of all aspects of the case between the two defendants at that point and settle the case for the women once and for all in respect of all aspects. It is a much simpler, functional way to do things.

In Mr. Breen's view.

Mr. Ciarán Breen

In my view.

Has Mr. Breen asked the patients affected what they would like? What would their preferred method be?

Mr. Ciarán Breen

I can only say in relation to the ones we have done -----

I want a "Yes" or "No" answer. In Mr. Breen's view this would be easier. Has he asked the families and patients what would be easier?

Mr. Ciarán Breen

I am answering the Deputy's question.

Just a "Yes" or "No". It is a very simple question.

Mr. Ciarán Breen

I am answering the question.

Mr. Ciarán Breen

In relation to the three women with whom we settled, yes, that was the way they wanted it done. I do not know about the other women. I have not gone out to all the other cases because they are at such different stages.

My personal view would be that if someone is going through the treatment and has led a life without any litigation, that the easiest thing to do would be to fill in a form. To me, it would be €25,000 for peace of mind, not to drag people through the indignity of this. However, I am not in their position and neither is Mr. Breen. It seems obvious that might be easier for them. It seems we have created another problem this morning with the drip feed of information.

I return to the opening statement. It refers to the divestment of all global exposures and the focus on a low-carbon, climate-resilient and sustainable economy with the Ireland Strategic Investment Fund, ISIF. While I am all for that, are we not at risk of putting all our eggs in one basket again? If we are divesting all into Ireland and if something extraordinary happened, are we not, yet again, exposing the people of Ireland to another crash? It focuses on the low-carbon and green agenda - which I am all for - but it needs new technologies. If the NTMA cannot get the IT system right, maybe it will not get this right. It seems irresponsible to put all of the eggs in one basket so soon. Would the witnesses agree with that or not? Perhaps Mr. O'Kelly could answer that.

Mr. Conor O'Kelly

The legislative mandate is to invest in Ireland only.

Does Mr. Kelly agree with that or is he not allowed make a call on policy?

Mr. Conor O'Kelly

That is a matter of policy. The Minister agrees with the Deputy to a degree, as the purpose of the rainy day fund and the excess being moved into other investment vehicles is to access a counter-cyclical buffer in the event of something happening, such as the Deputy described.

It is €500 million.

Mr. Conor O'Kelly

It is €1.5 billion.

It is €1.5 billion, but in the scale of what the NTMA spends it is not exactly a good insurance policy.

Mr. Conor O'Kelly

We spend €3.8 billion and then €1.5 billion into a rainy day fund.

Therefore it is one third. As someone who is not an expert, it seems obvious to me that we might be exposing the Irish people yet again if something goes wrong.

On investment in private companies for the delivery of housing, whether social or private, it is clear to a non-expert that there are strong yields in the rental market. Does the NTMA's remit have any element of social conscience? The purpose of investing is to make money. I acknowledge that interest rates are very low and therefore putting money in bank accounts does not result in good returns. Is it not morally wrong that State funds are put into a private company where the return is based on the acceleration of rents? Would Mr. O'Kelly agree that this is contradictory? It follows on from Deputy Connolly's question earlier.

Mr. Conor O'Kelly

I take the opposite view. Our investments are exclusively designed to increase supply. An increase in supply is very likely to mitigate against higher prices and rent in absolute terms.

That is where I was going.

Mr. O'Kelly mentioned that earlier and expressed his hope that adding supply will deal with demand. It is not definite.

Mr. Conor O'Kelly

None of us can predict what is going to happen. There is clearly a supply-and-demand imbalance in regard to housing in this country. For a long period we did not build many houses.

We know all that.

Mr. Conor O'Kelly

Therefore, one of the solutions is to build more. The Ireland Strategic Investment Fund has been charged with looking for vehicles, off balance sheet, that could allow for the faster building of residential units. We have backed seven different platforms. Some €730 million has been invested-----

I get all that but the fund is investing money in companies whose profits will rise based on rents accelerating. Then it goes back into the kitty.

Mr. Conor O'Kelly

The fund does not need rents to rise in order to be profitable at these levels.

I understand that it would be preferable if, when investing money, the rents were to rise.

Mr. Conor O'Kelly

We are hoping that we invest money-----

Could I have a "Yes" or "No" answer to the question of whether it would be preferable when making the investment if rents accelerated from a return point of view?

Mr. Conor O'Kelly

No.

So the agency does not like making money.

Mr. Conor O'Kelly

We are not trying to maximise profit. We have to make a commercial return. We will take a return that is modest by free market standards. We are not looking to maximise-----

So is that the social conscience element?

Mr. Conor O'Kelly

Yes, it needs to be a satisfactory return, which, for taxpayers, means-----

Who makes that decision?

Mr. Conor O'Kelly

If we do not make money in excess of the average cost of our debt, then it is a net loss to the taxpayer. So we are all-----

It is just simple stuff. The crux of it is that the agency is investing Irish taxpayers' money in private or social housing and is supposed to be managing assets and, therefore, getting a better return for the taxpayer. It is crucial to the agency's model that rents rise, therefore.

Mr. Conor O'Kelly

No, it is not. We want a sustainable commercial return that is reasonable and above the cost of debt, which is currently around 3%. A blended return on the portfolio does not have to maximise profit. It has to produce a commercial return. What we want to do is invest taxpayers' money, get it back, make a modest return and make an impact on the economy. That is the design of the fund. If we build 15,000 houses, invest €730 million, we get our money back, plus a modest return and build 15,000 houses, that is a good outcome. It will probably have the effect of-----

Surely if 30,000 were got back, there would be a better balance sheet at the end of the year.

Mr. Conor O'Kelly

It is a taxpayers' balance sheet. We are more interested in the sustainability than in making money. It is not a private company.

In the case of the companies picked to do the housing, I am assuming that we will not be back here in five years - if the people re-elect us - discovering all sorts of shenanigans going on regarding due diligence, conflicts of interest and all the decisions. Can Mr. O'Kelly assure us due diligence is done on these companies?

Mr. Conor O'Kelly

I take umbrage at the use of "shenanigans".

Well, whatever. Is there potential that we could be back here in five years? Is the due diligence being done correctly on these private companies that are being used companies? Bancroft was mentioned. Can Mr. O'Kelly assure us we will not be here in five years' time looking into the "carry-on" - I cannot think of another word - of these companies? Does Mr. O'Kelly take umbrage with that?

Mr. Conor O'Kelly

We have a professional internal team. We have our own NTMA control function. The NTMA has been around for a long time. Bearing in mind the areas of compliance and risk, we have an independent board, chaired by Willie Walsh and with some excellent non-executive directors, which we have been fortunate to have. We have our own audit and risk committee. The Comptroller and Auditor General audits the accounts.

So Mr. O'Kelly is happy that due diligence is correct.

Mr. Conor O'Kelly

Separate due diligence is done on all the individual investments in addition.

Good. In the case of the building with the view, the rent, at €1 million per floor, is very high. Why does the agency need to be in Dublin city centre? Could it be down in Thurles or somewhere?

Fair play to the Deputy.

Surely when the agency is the body with the money, they should be coming to the agency. I refer to an alternative to being in the city of Dublin. My understanding is that there is no expiry date on the organisation until national debt is ended. Why did it not just buy a building?

I can think of loads of them in Thurles.

I would imagine there are plenty of buildings in Thurles. Why did the agency, which had such insight into the market when managing assets, not buy a building when they were going for nothing back in the day? The current rate is €1 million per floor.

Mr. O'Kelly referred to the price going up and down. Does it go up on higher floors? Is it the view, the lift or the air quality that the agency is paying for? Have we a figure for the cost of the fitting out of the building? Mr. O'Kelly used the phrase "cost neutral". Was he just referring to rent? We had an issue here before with a building that was fitted out for an extortionate amount. What was the cost of the fit-out? Is the fit out period rent-free? Is the planning correct for the new building? This arose here before. Why not Thurles? Could Mr. O'Kelly answer those questions for me?

Mr. Conor O'Kelly

First of all, I wish to clarify a couple of points. The total rent the NTMA pays for its 500 employees is €1.8 million per annum. That we have five floors-----

It is not for the employees; it is for the building.

Mr. Conor O'Kelly

Currently.

Is that for the agency's section of the building?

Mr. Conor O'Kelly

Correct.

How many floors? Is it 1.5?

Mr. Conor O'Kelly

Just under two.

Mr. Ian Black

There are different floor rates. There are two different buildings.

Is the rent dearer on a higher floor?

Mr. Ian Black

In the Dublin Landings, the rent is the same, other than on the lower ground level, where the rent is lower.

No view, no air quality.

Mr. Conor O'Kelly

The reason we moved to Dublin Landings, down beside the Central Bank, was to use our covenant in terms of the NTMA and the State covenant to help build an emerging new financial sector and hub in that part of the city and that part of Dublin. It was felt that we had more value to add by doing that than where we were, in what is now-----

Is that value being realised? Has it been assessed? Does it matter?

Mr. Conor O'Kelly

I think the area looks good and there are----

It would want to look good for €1.5 million.

Mr. Conor O'Kelly

Fifty euro per square foot is the Dublin commercial rent.

It is not; I looked it up. It is very expensive. It would be different if there were an expiry date and it was concluded it was not worthwhile buying a building. Why did the agency not buy a building? It could probably have bought one that size for €2 million.

I want to let Deputy Alan Kelly in before we go to the vote.

Mr. Conor O'Kelly

Government policy is that the State agencies do not purchase the buildings themselves.

It seems very short-sighted and very irresponsible. It seems to be very clear that where it is taxpayers' money, it is a case of easy come, easy go.

I have three questions, two on CervicalCheck and one on the Ireland Strategic Investment Fund. One is a follow-up to that of Deputy O'Brien, whose questioning was very revealing. Deputy O'Connell and I are on the health committee and the Committee of Public Accounts and we have gone through this intricately for months. I have probably attended eight to ten committee meetings on the subject. I have probably been at every committee meeting, between everything, yet it is a drip-feed. I am seriously worried, now that the Houses of the Oireachtas are about to go into recess, that the greatest form of transparency emerging in this actually transpires in these rooms. The Houses are to be closed for the next couple of months.

With regard to what Deputy O'Brien teased out, I do not want to wrong Mr. Breen; he did give figures before. Maybe we could have gone further in the way we teased it out so I do not want to wrong Mr. Breen. I must ask him, however, on having taken down his figures, whether he can break down the categories of claims of the 12, four and one, or 17 cases, in other words. We know we have 221 cases and that there are 17 in the "others" category. It would be revealing, informative and educational to know what types of cases the 17 cases are.

We know of one because in fairness, Deputy O'Brien has raised it on a number of occasions. What are they? I am meeting the Minister for Health later on today and I would like to know whether these 17 cases are part of the Scally review. I doubt he even knows. I am sure some of his people are watching this. I would like to be able to ask. Is there any way Mr. Breen can break that down for us today? If not, I would be surprised because I think he should be able to do so.

If one teases it out, this case is pre-Vicky Phelan. If Vicky Phelan had not come out and blown the lid off all of this, what would have happened? Are there issues here relating to non-disclosure preceding Vicky Phelan that we do not know about? Why were we not aware of cases like this? Are there issues relating to the laboratories that are involved in these 17 cases that are outside the 221 cases that we need to know about?

The third question is a catchall. Mr. Breen has been before us a number of times. On occasion, through our own fault, we might not have probed things to the level they should have been probed. I think we often do but perhaps we do not. I say this with the greatest will in the world and am putting this out there because of what the Chairman said. Is there anything Mr. Breen needs to tell us or members of the public who are watching about this issue; is there anything we need to know? There are three parts to the first question. I have two more questions.

Mr. Ciarán Breen

I will deal with them in the order in which they were asked. Deputy Kelly will understand that I came with the figures relating to the 17 cases. The actual breakdown of those would involve going to each of those files and looking at them but I can tell the Deputy that-----

Can Mr. Breen come back to us-----

Mr. Ciarán Breen

I can tell the Deputy that, as I look at them, generically, they are claims one would find in a hospital environment, for example, a colposcopy that was not properly reported on where there was a delay in diagnosis of cervical cancer or something like that.

Did any of them involve laboratories?

Mr. Ciarán Breen

It may be a hospital laboratory - not that I know of any other. I would have to look at each one individually.

First, could Mr. Breen come back to the committee within a week and break down what they are? Second, could he come back to us and clarify - because Deputy O'Brien's probing is important here - whether any of these involve any of the CervicalCheck laboratories? That is the way in which we will ask for them to be broken down.

Mr. Breen can send the information back-----

Mr. Ciarán Breen

A week is a very short period of time to give us to do that.

Two weeks so.

Mr. Ciarán Breen

This is a fairly big analysis. We would want at least three weeks to do this job properly. It means going to every individual file and analysing all its individual parts to see what was involved.

We will give the agency three weeks if it wants them but I find it offensive and wrong to say it would take three weeks to just go and look at 17 files and say "this is in this category...". There are people and families watching this who would find it bizarre and wrong that it would take three weeks for a public servant to go through 17 files and say "this gets into this category." There are probably only three or four categories.

Mr. Ciarán Breen

It is not as simple as that. I deal with these cases on a daily basis. It is not as simple as looking at the file and having the appropriate answer within 20 minutes.

We will give the agency three weeks. I do not agree with Mr. Breen but we will give the agency three weeks. Mr. Breen might continue with the answers to my questions.

Mr. Ciarán Breen

I presume the Deputy is asking whether there had been material non-disclosure pre-Vicky Phelan in respect of non-CervicalCheck cases. Because the cases have been disclosed, I do not see non-disclosure. All of those cases are cases where claims have been made and, therefore, there was a disclosure. The person had to know that something was wrong.

Were there any confidentiality agreements?

Mr. Ciarán Breen

Not that I am aware of.

Will Mr. Breen come back to us and confirm that?

Mr. Ciarán Breen

I will. Again, I will look at that in the context of the look-back at all the files. Finally, the Deputy asked me whether there was anything people need to know that-----

The public is watching.

Mr. Ciarán Breen

Every time I have appeared before this committee, and I think the Chairman will agree, I have been completely upfront about all the statistics. I have given them all the time-----

I am just giving Mr. Breen the opportunity. That is all I am doing.

Mr. Ciarán Breen

I have given them appropriately and on time. I think the Chairman would agree that we have always given a reply to this committee within a very short period of time.

So there is nothing-----

Mr. Ciarán Breen

Nothing. When I talk about three weeks, it is not a case of me being difficult or not wanting to get that to the committee sooner. If we can do it sooner than three weeks, we will do so.

I will take that.

In respect of the additional information, could I request one other thing? If Mr. Breen does not have this, could the committee get it? How many of the 221 women came from the registry through missed diagnosis through CervicalCheck and how many of them came through hospitals and GPs in terms of missed diagnosis?

Mr. Ciarán Breen

That would be a question for the HSE. It has all that information. We do not have it.

The clerk will write to the HSE and ask that question.

If the Deputy wants to give the wording of precisely what he is looking for, the committee will write to the HSE.

I support that. I have two other questions. Does the NTMA come under FOI?

Mr. Ciarán Breen

Yes.

We all know about GDPR. If I looked under FOI or submitted a data protection request for all the information the NTMA and its subsidiaries or related agencies had relating to me, I presume the NTMA would comply and give me everything.

Mr. Conor O'Kelly

Yes.

Is that correct? Do all the witnesses agree? Does anyone across the way have anything alternative to say to that? Does anyone disagree with the contention that the NTMA would give over that information?

Mr. Ciarán Breen

There are certain carve-outs under FOI, which is recognised in the Act, concerning the State Claims Agency's core function. I am talking about a person who would seek an FOI request about a particular file we handled or a particular set of files. There would be certain carve-outs for reasons of sensitivity and data protection. By the way, these are legislative carve outs. They are not things we are simply refusing-----

I know Mr. Breen knows where I am going with this. I have been contacted by the solicitor of a family of one of the women who, unfortunately, passed away and who was one of the group of 221 women. I am sorry to have to read this off my phone but I did not get a chance to print it out because I came in here straightaway. They submitted an FOI request to the NTMA, which was really to the State Claims Agency, for the immediate release of all documents of any nature held by the State Claims Agency, its servants and agents regarding the late Ms X - obviously, I will not say the name. The request was refused. I might remind Mr. Breen what the Taoiseach said in the Dáil regarding non-co-operation and I hope there are civil servants watching this who will relay it back to the Taoiseach wherever he is in Ireland or the world. How in the name of God when the family of one of the women who, unfortunately, passed away because of this scandal, looks for all their information from a State agency, which is handling the claims, can that agency say it will not give over the information it has on that woman but still say it is co-operating fully with all family requests and all requests for information?

I am shocked by this. That is why I raised concerns earlier regarding getting transparency when the Dáil and the committees are closed down for the summer. It is beyond my comprehension how the head of freedom of information in the NTMA, through the State Claims Agency, can turn down this request for documents from the family of a woman who is deceased as a result of this scandal.

Mr. Breen and his colleagues may hide behind FOI legislation, etc. That is find but I imagine that, somewhere along the line, a person went up the line - through the NTMA and all the way to the Department - and said that the organisation had a moral duty to supply this information. I am sure Mr. Breen will tell me he did that. I am sure he will not tell me that he hid behind the fact that, possibly, under a technicality relating to the provisions of the FOI legislation, the agency does not have to give out the information.

That would run counter to everything the Taoiseach told Mr. Breen and everyone else involved to do. It would also run counter to the fact that we have the State Claims Agency saying that all cases will be mediated and dealt with as quickly as possible and in the best way the organisation can manage. I take Mr. Breen at his word on that. To be fair, when he is before the committee, he provides good information, although sometimes we have to ask the questions. In any event, not giving out this information runs counter to all of that. It runs counter to the morality of the situation in the sense that these people are entitled to it. The entire country is watching. The Taoiseach and the Minister for Health have said that all this information should be provided and that there will be a serious problem for anyone who does not co-operate. Why has this family not been given this information to which it is entitled?

Mr. Ciarán Breen

I am at a complete disadvantage in that I do not know. I do not have the details.

Mr. Breen has corresponded with the representatives of the family on this issue.

Mr. Ciarán Breen

Is the question whether I have done so personally?

I am referring to the organisation. Mr. Breen is before the committee representing his organisation.

Mr. Ciarán Breen

I am, but we should remember that FOI falls under a separate function within the organisation.

I am sorry - that is rubbish.

Mr. Ciarán Breen

The point I am making is that I am at a disadvantage in that I do not know the particular case. If Deputy Kelly wishes to give me the particular details, I will definitely come back to him.

I find this extraordinary.

If Deputy Kelly gives Mr. Breen the details, then by the time we return from the vote in the Dáil, he might have made a telephone call. I am trying to be helpful.

I will do the following: I will give Mr. Breen the details, confidentially. Let me say this on the public record: I think what is happening is wrong and disgraceful. In a scenario such as this, there is a real moral duty to give over the information to families when they request it. The State Claims Agency should facilitate that and I am requesting that it do so within the next 24 hours.

When we suspend proceedings in a few moments, I will ask Deputy Kelly to give the names to the officials. We will be back afterwards.

I have a final question. Mr. Breen can take a break because it is not a question for him. It relates to ISIF. I want to get this question on the record. ISIF and what it is used for are important. Some investments relate to various energy projects and a range of other potential investments. When it comes to investments and working with State bodies, does the NTMA believe that such bodies actually put forward projects in which the agency could and should invest? I understand and appreciate that the terms of reference of the agency are defined. Indeed, I acknowledge it. Perhaps they are a little too rigid but the agency has to work within its position. I have no issue with that. In any event, are projects ever put forward in respect of which the NTMA takes the view that it would be good to invest in them but where the State bodies involved effectively do not co-operate or put forward the projects in a way that would make it possible for ISIF to invest? Have there ever been such cases? I am not asking Mr. O'Kelly to outline the cases. Has there ever been a situation whereby projects have been put forward by State bodies but where ISIF was not in a position to invest purely because the bodies involved have not put forward those projects in way that is accessible in the context of how ISIF invests?

Mr. Conor O'Kelly

No, I do not think so. State bodies can sometimes move slowly and perhaps not see opportunities as clearly or as commercially as may be necessary to meet our criteria. If, however, we believe there is an opportunity or the bones of something, then we would generally work carefully with the appropriate state authority. In Kilkenny, we are working with Kilkenny County Council. We are working in Cork with the Port of Cork. We are working with Coillte and Bord na Móna. I do not believe there is anything systemic in that regard.

It is a "Yes" or "No" answer. All I want to know is whether there has ever been a situation for ISIF in which Mr. O'Kelly believes that a State body has not put forward a project in a way in which ISIF can invest.

Mr. Conor O'Kelly

No.

That is all I wanted to know for the record and for the future.

We will suspend because the voting will take place presently. We will resume at 2.30 p.m. We have a voting situation and we want a little time for a break. No doubt we will finish. I do not imagine it will be too long into the afternoon.

The witnesses withdrew.
Sitting suspended at 1.05 p.m. and resumed at 2.40 p.m.