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Dáil Éireann debate -
Thursday, 16 Nov 1995

Vol. 458 No. 4

Securitisation (Proceeds of Certain Mortgages) Bill, 1995: Second Stage.

I move: "That the Bill be now read a Second Time."

I appreciate the co-operation of the Opposition parties in the prompt taking of the Bill. My primary aim in introducing this Bill is to deepen and widen our capital markets by providing a new instrument for secure investment. This will enhance the range of investment opportunities in the Irish capital market.

The main function of the Bill is to provide the legislative backing to the securitisation of certain moneys due to local authorities from the repayment of mortgages financed originally through loans from the local loans fund. This form of securitisation is common in many states of the United States of America. It is beginning to be used in Europe. Ireland will be among the first European countries to utilise this form of financial instrument.

As the House is no doubt aware, the need for securitisation arises from the Government's obligation to pay to women the arrears owed to them arising from a High Court ruling in relation to the EU Directive on equality of treatment in social security payments.

An EU Directive on equality of treatment for men and women in social secruity was adopted by the Council of Ministers on 19 December 1978. The deadline for implementation of the Directive was 23 December 1984. The measures necessary to introduce equality of treatment, in accordance with the provisions of the Directive, were contained in the Social Welfare (No. 2) Act, 1985, which was enacted in July 1985. The provisions of that Act were brought into force by way of commencement order in two phases with effect from May and November 1986. Consequently, equality of treatment in accordance with the provisions of the Directive was not fully provided for in respect of the period of delay from 23 December 1984, the deadline for implementation, to November 1986.

There were four areas of the social welfare code which were discriminatory within the terms of the Directive during the period of delay. These were that married women received a lower personal rate of benefit than men and single women in the schemes of disability benefit, unemployment benefit, invalidity pension and occupational injuries benefits; they were entitled to unemployment benefit for a maximum duration of 12 months, as against 15 months for claimants generally; they were precluded from qualifying for unemployment assistance; and as a general rule, they did not qualify for increases in respect of adult or child dependants.

When the 1985 Act became fully operational in November 1986, many married men lost entitlement to an increase in respect of their spouse as an adult dependant and to half of the increases in respect of children, where the wife was not an adult dependant. To avoid a sudden reduction in income for the families concerned, the Government decided to introduce transitional payments in these areas. These payments, which were paid to men but not to women, were subsequently found by the courts to have been discriminatory also. These payments were reduced annually from 1988 onwards and they were discontinued entirely in July, 1992 by my colleague, Deputy McCreevy, former Minister for Social Welfare.

Arising from the delay in implementing the necessary measures in accordance with the requirements of the Directive, court proceedings were initiated by a number of married women in which they sought to have their entitlements in the period of delay determined on the basis of the rules applied to married men. They also sought payment of the transitional payments to them on the same basis as applied to men.

In a judgment delivered in the High Court on 3 February, 1995, in what was effectively a test case, Miss Justice Carroll found that married women were entitled to be paid on the basis of the rules applied to married men in the period of delay and that they were also entitled to transitional payments paid to men in similar circumstances. The judgment also provided for the payment of compensatory interest at a rate equivalent to the consumer price index on the arrears of benefit up to the date of payment.

The Government authorised the Minister for Social Welfare to put in place arrangements to implement the High Court judgment. This is in line with the commitment given in A Government of Renewal to pay the legally determined entitlements of married women to social welfare equality payments. Under these arrangements the estimated 70,000 women involved are receiving payments on the basis of the rules applied to married men in the period of delay in implementing the Directive. They are also receiving transitional payments. The total cost of implementing the judgment is estimated at some £260 million, of which up to £200 million will have been paid by the end of 1995. The remaining £60 million will be paid in 1996 and 1997.

At budget time, I provided £60 million for the payment of these obligations. I indicated that, if it were necessary to pay more than the £60 million this year, I would consider disposing of certain State assets so that the EBR would not be increased. It was in this context that I asked for an examination of the means by which certain assets of the local loans fund could be realised as a cash payment to the Exchequer.

The National Treasury Management Agency suggested a route which would involve the sale of the proceeds of the mortgages to the private sector. I decided to adopt the NTMA's suggestion. I hoped this proposal would encourage the financial markets in Ireland to look afresh at the idea of securitisation of mortgages and that the scheme would give an impetus to this area of financial market development. It is the Government's policy to encourage the development of corporate and mortgage bonds in Ireland, thus making the real economy less vulnerable to any temporary volatility in the financial markets particularly with regard to fluctuating interest rates. Since my decision earlier this year, two private sector schemes have been announced involving the securitisation of mortgages, albeit floating rate based transactions.

The local loans fund was established in 1935 under the control of the Minister for Finance to provide a new system of local authority capital funding. The fund is financed by the Exchequer. Over the years it provided loan capital to local authorities at fixed rates of interest for various purposes including on-lending to individual house purchasers who satisfied a means test, that is, the so-called SDA loans, or Small Dwellings Act loans.

Since 1988 new loan approvals by the fund have been very limited, having been replaced by direct Exchequer grants in the main for local authority capital projects. In the case of the housing loans, the Housing Finance Agency has since 1986 provided the local authorities with the requisite funds at variable rates of interest.

Total loans outstanding from the fund to local authorities are of the order of £480 million and of these about £440 million are SDA loans. A little less than half of these loans are involved in the proposed securitisation.

The National Treasury Management Agency, at my request, consulted my Department and the Department of the Environment as well as various financial institutions and the local authorities in the development of its proposal. Broadly, the proposed scheme is as follows: first, a special purpose vehicle, or SPV, will be established in the private sector but managed by the NTMA; second, this SPV will raise £140 million in the current year by a bond issue to investors and pay the proceeds to the Exchequer; third, the local authorities, with the help of the NTMA, will agree a pool of mortgage repayments, the revenue from which will be assigned to the SPV — the SPV will fund payments to the bond holders from this assigned revenue; fourth, all payments by the local authorities to the SPV will be routed through the Local Loans Fund which will act as agent for the SPV; fifth, as a local authority makes payments through the Local Loans Fund to the SPV, it will be deemed to have made a repayment of its LLF debt; sixth, the local authorities will continue the existing practice of paying over the mortgage payments as they become due to them, even if not collected; seventh, in the very unlikely event of a local authority defaulting on its payments, the Minister would pay to the SPV the amount due and pursue the local authority by way of the Local Loans Fund's legal powers, which give it a charge on the local authorities' general revenue; eighth, in the event of early redemption of a mortgage in the pool, the sum can be passed to the SPV by the local authority and this would be invested by the SPV and, finally, any surplus remaining in the SPV will be handed over to the Exchequer on the winding up of the company.

In essence, this scheme means that the Exchequer will receive a lump sum up front in exchange for a stream of income that would have been payable to it from local authority sources over the coming years. This structure is necessary because I wish to ensure that the underlying mortgage asset is not affected in any way by the proposed securitisation scheme and also that the local authorities are in no worse position under this scheme than they are at present. I want to emphasise this point. There will be absolutely no change in the existing relationship between the individual mortgagor and the local authority and there will be no adverse effect whatever on the finances of the local authorities.

While the proposed scheme may appear complex, similar schemes are standard financial market practice for securitised bonds and a special purpose vehicle is almost always a feature of such schemes.

As stated already, the scheme provides that the Minister for Finance will guarantee the payments to the SPV thereby ensuring that the SPV will not have, or require to have, access to the security of the mortgage itself. The local authorities will have their Local Loans Fund debt forgiven to the extent of the payments made to the SPV. As each payment is made it will be deemed to be a repayment off their Local Loans Fund debt.

As is the case at present, if there is a default by a mortgagor the local authority will be obliged to continue paying to the Local Loans Fund and pursue the debtor.

If a local authority itself were to default, then the Local Loans Fund would be able, through its general powers, to enforce the debt. This is no different to the present position where the Local Loans Fund can pursue a defaulting authority. Of course, the possibility of a default by a local authority is largely theoretical; no local authority has ever defaulted on its debt to the fund and I do not anticipate that any ever will.

Deputies can be assured that the reason I am dwelling on these points is because I do not wish there to be any misunderstanding of the position and I want to ensure that unfounded fears are not generated. We are not disposing of mortgages; we are disposing of the proceeds of the mortgage loans, and there is a fundamental difference.

I would make one further general point. This scheme involves the sale of a State asset to the private sector. In return for a lump sum payment of £140 million this year, the State sector will assign the loan repayments due to it from persons with mortgages financed by funds from the Local Loans Fund. These repayments are due under contract law to the State and this securitisation scheme involves the sale of the repayments. In this, it is identical to a sale of assets, via securitisation, by a private sector mortgage lender.

I hope this securitisation scheme will act as a catalyst in the development of the securitisation market as a whole, with consequent benefits for both investors and borrowers. In this instance, investors will be provided with a new investment alternative in the form of fixed rate bonds to be issued by the SPV. For some time, institutions here have been channelling a significant portion of their resources abroad, citing the lack of suitable investment opportunities in Irish financial markets. These bonds will provide a new investment opportunity for them.

One of the major gaps in the Irish mortgage market has been the absence of long-term fixed rate mortgages for householders. The lead which we are giving through the launch of this transaction should facilitate the development of a mortgage bond market. In turn this should increase the availability of fixed rate mortgages. This process will, of course, take some time; nevertheless a start has to be made. Such a development would merely be following trends in the United States and Europe which have highly developed markets for mortgage backed securities.

The Exchequer borrowing requirement will be unaffected, as the £140 million to be raised under the scheme in 1995 represents the balance between an original £60 million provision for equal treatment on budget day, and the £200 million which is actually being issued to the social insurance fund for this purpose. While the current budget deficit will be higher, the capital deficit will be correspondingly lower than anticipated, because issues to the social insurance fund are treated as current expendituures in the Estimates Volume, but the proceeds of the scheme are classified as an Exchequer capital inflow.

The general Government deficit will also be unaffected. Under the accounting conventions from which this deficit is derived, on a standardised basis for each member state, loan and equity transactions are not counted as either receipts or expenditures — these international conventions view such transactions as "financial" or balance sheet transactions. It follows that the proceeds of this scheme will not appear on the revenue side of the general Government accounts. However, the accounting conventions also provide that benefit payments should be treated as attributable to the year in which the liability was due — that is, on an accruals basis. The primary benefit payments accrued due over the years 1985 to 1993, when the women concerned did not receive their full entitlements under the EU Equal Treatment Directive, and the benefit payments are thus spread back over these years, rather than recorded in the years in which they are actually being paid. To present the full picture, I should add that the court also determined that in addition to the arrears of primary benefit due, the women were entitled to compensation for the delay in payment. This latter element, which is calculated as representing some £65 million of the total £260 million liability, is not spread back. It is treated in the accounts as due in 1995 — the year in which it was determined by the court.

There is a commitment by Government to limit expenditure increases to 6 per cent in 1995. The exceptional £140 million being issued this year breaks that limit. However, because of the Government's commitment to fiscal discipline, the once-off £140 million has been excluded from the base for the purpose of calculating the 2 per cent real increase for 1996. If it were not excluded, the spending limit for 1996 would accordingly be increased by £146 million.

In addition, I would draw attention to the provisions of section 2 of the Bill. That section provides that should a future Minister for Finance wish to fund expenditure by securitising more of the assets of the Local Loans Fund, the approval of the Dáil must be obtained. I would stress that I have no plans to approach the Dáil for this purpose.

The Bill is designed to facilitate the development of this particular securitisation scheme. Of necessity, because there is no precedent, we must make provisions for all eventualities and not be too restrictive. However, we are being cautious and keeping tight control on the operation of the scheme.

Section 1 of the Bill is a definitions and interpretation section.

Section 2 specifies the purpose for which the provisions of the Bill can be brought into effect. The immediate proposal is for the financing of part of the social welfare equality arrears payments. As I do not wish to restrict freedom of action in the future I have also included provision that the Bill, if enacted, can be used for other purposes, but only with the approval of the Dáil. As I said earlier, this will act as an assurance that this scheme will not be abused or lead to a weakening of our commitment to our budgetary targets.

Section 3 refers to the existing power under section 14 of the Housing (Miscellaneous Provisions) Act, 1992, whereby a local authority, at the direction of the Minister for the Environment, shall transfer, sell or assign mortgages. This power is now defined as including assignment of the debt secured by a mortgage and it is provided that such an assignment shall be deemed to be an equitable assignment. The SPV will not have any right of enforcing the debt directly against the individual borrower. There will be no circumstance in which the SPV can give notice to, pursue, or otherwise deal with the individual mortgagor.

Section 4 gives the Minister for Finance the power to designate the body which will, in return for a lump sum, receive the assigned payments and to arrange for its management. The management of this designated body is a function which will be delegated to the National Treasury Management Agency under section 12. Provision is also made to allow the Minister to own a company as the designated body. This provision, while it will not be utilised for this securitisation, is included to ensure flexibility in the future should a Minister wish, or need, to establish a company for this purpose.

The existing local loans fund legislation provides that the fund will have a lien on the general revenues of local authorities in respect of borrowings by the authorities from the fund.

Section 5 excludes the amounts assigned by local authorities to the SPV from the general revenues for the purpose of that lien. This provision ensures that these revenues are "ring-fenced" in favour of the SPV and that the Exchequer can have no call on them.

Section 6 provides that any payments made by a local authority for the purposes of the Bill to a designated body will have the same effect as a payment directly to the local loans fund. In this way there will be no change in the arrangement for making their biannual payments to the local loans fund. The local authorities will make their payments, as at present, directly to the local loans fund. It is only at that point that the allocation of payments due to the designated body will be made.

Section 7 provides for a guarantee by the Minister for Finance of the amounts assigned by a local authority to the designated body. The reason for this provision is that the SPV is barred from recourse to the mortgagor. In a straight commercial securitisation, this recourse is the ultimate security for the bondholder. In the absence of this recourse in the present case, the Bill provides for a Government guarantee as the ultimate security for the bond.

Other sections deal with related matters, such as the tax treatment of the designated body and securities issued by it; delegation of powers to the National Treasury Management Agency; management of the assets and liabilities of a delegated body; provision of information by local authorities and expenses incurred by the Minister in the administration of the Bill. The accounts of the designated body will, under section 16, be audited by the Comptroller and Auditor General.

I am sure Deputies will have much to say on this Bill. This innovative scheme is designed so that there will be no change in the position of the mortgager or the local authority. It is designed in effect to broaden and deepen our capital markets. All Deputies, I am sure, are conscious of the need to observe the budgetary parameters, but, at the same time, meet the once-off costs of the social welfare equality payment arrears.

I commend the Bill to the House.

In keeping with the spirit of the Ethics in Public Office Act — I do not know whether it is operational — I wish to declare an interest. I am, probably, one of the few members of this House who has an SDA loan taken out, I think, in 1974. In the past week I have received a letter from Kildare County Council in connection with this Bill and assuring me that there will be no change in the arrangements following the enactment of this Bill.

I am impressed.

If Kildare County Council or any other local authority failed to issue such a letter, the charge would be levelled at the Government that it was not being open and transparent, but I still anticipate that the Department of Finance, the Department of the Environment and the local authorities will receive some flak because it will be thought that something dramatic has happened. One cannot win in certain circumstances.

I trust the Deputy will reassure them.

I will, but I must declare an interest so that I am seen to be open and transparent.

Fianna Fáil welcomed the Government's decision to pay the arrears due to many women on foot of the court decision regarding equal treatment. This issue has bedevilled many administrations for over a decade and, as a former Minister for Social Welfare, I am glad that this saga has come to an end.

These payments arise from the 1979 EU directive on equal treatment and the decision of the High Court earlier this year that the terms of the directive must be implemented to the letter. It is estimated that approximately 70,000 married women will receive back money as a result of this decision.

This is not the appropriate occasion on which to revisit this episode — the delays on the part of successive administrations, the Irish High Court and European Court cases or the dramatic political aspects of events of almost a decade ago — suffice it to say that, the entire mess should be prescribed reading for any student of public administration and an abject lesson to any future administration on how not to go about implementing an EU directive.

This saga has, unnecessarily, cost the taxpayer many millions of pounds. This is not meant as a criticism of well meaning politicians and civil servants at the time; no one was trying to do anyone out of their just entitlements. The merits or otherwise of this sorry mess are a matter for another day, but the spindoctoring by some politicians and by at least one political party is not ad idem with the facts. The equal treatment directive is exceptionally complex and its complexity has inhibited proper debate. As a result of some political posturing, the incorrect message has come across that the State is not honouring its responsibilities. This saga is far more complex than that, but in the end many millions of taxpayers' money has been wasted unnecessarily. What is now at issue is the method being used by the Government to make these payments.

Will the Minister indicate the total cost involved to the Exchequer? A sum of £260 million has been mentioned. The Government of which I was a member put over £20 million aside in each of the years, 1992, 1993 and 1994. I calculate that the final figure will be between £400 million and £500 million. When the Government of 1983-87, of which the Minister, Deputy Quinn, was a member, tried to grapple with this problem in 1986 it was subjected to political pressure from this side of the House and its own backbenchers and came up with the idea of transitional arrangements. If the EU directive on equal treatment had been implemented in full many social welfare recipients would have lost out while others would have gained because of the way adult dependant allowances etc., are calculated, but this was not an option the then Government could consider.

On one famous night a former Minister and close friend of mine found himself in considerable difficulty in deciding which way to vote on a Private Members' motion dealing with this issue. He finally voted with the Government. It was these transitional arrangements which got us into this fine mess. As the Minister pointed out, I did away with those transitional arrangements finally in 1992, which comprised one of the "dirty dozen" cuts which became an issue in the general election of that year. My advice was that I would receive considerable political flak for doing so, yet, if I had not done so, that mess would have been carried forward, creating even more problems in 1993 and 1994. While they had been reduced over a period, no Minister seemed willing to finally bite the bullet. While it may not be a matter of great interest to the House now nonetheless, despite questions tabled to the Minister of State at the Department of Social Welfare in the last Government and the present Minister for Social Welfare, none of those decisions of mine was reversed.

Although I do not recall the Minister for Finance criticising the issue of equal treatment, I object to the fact that since the overall complexity of this issue has been a minefield of legal actions and counteractions in Departments, there may be only ten people nationwide who understand all its legal complications and the reasons for losing certain court cases. For that reason it has been easy for certain political parties to give the impression that successive Governments had been deferring the payment of the arrears of equal treatment payments to married women, whereas the true position is far removed from that.

It is dangerous for a Member on any side to refer to it as most people and the majority of politicians are unable to understand it, but the limited few who do know my portrayal of it to be correct. Nonetheless, the constant political charge being levelled — particularly this year when the good, shining white Minister for Social Welfare came along — was that these arrears had to be paid. The issue is not at all simple as portrayed. It is not popular to say so because one risks being again criticised in the media for standing out against the matter. It has been an unmitigated disaster because those funds of some £400 million to £500 million, instead of being paid to a small number of people, could have been allocated to general social welfare increases which might have been more advantageous to a greater number of people.

My fear is that in future people will have forgotten what the issue was really about, when what may well be portrayed will be the fact that for a period of nine or ten years successive Govenments never faced up to the difficulty, but rather attempted to deprive married women of their just entitlements, whereas it is not as simple as that.

Having accepted the court's ruling that sums in the region of £260 million should be payable by the Exchequer, the Government went about raising those funds in a strange manner. The 1995 budget included an amount of £60 million for these arrears as it was assumed that their payment would be spread over four years. I do not recall any objections to this proposal from any quarter but, presumably due to pressure on the part of the Minister for Social Welfare, the Government decided to pay another £140 million this year.

I have no difficulty in accepting the Government's right to take the decision to pay those arrears in one year but I reserve the right to question whether that was the most prudent policy. I have strenuously objected to the Government, at the outset, endeavouring to delude the electorate on the method of financing those payments. By sleight of hand the Government attempted — in all its publicity and press statements earlier this year — to create the illusion that the payment of £140 million would not break the 6 per cent increase in Government spending for 1995 as against 1994.

Furthermore, the Government attempted to create the illusion that the proposed method of financing the securitisation of part of the local loans fund would not break the Exchequer borrowing requirement — thus leading to illusion versus reality; they are very different but can often become clouded in the machinations of any Government. The illusion on the part of the Government was to attempt a form of creative accountancy to give the impression it was living within its own financial parameters outlined in A Government of Renewal.

A little history lesson on how the local loans fund operated in its application to these types of mortgages will illustrate my point. Until 1986 mortgages of that kind were advanced by local authorities. Money would be advanced to the local loans fund by Government borrowing; a certain sum by way of loan, at an appropriate interest rate, being allocated to each individual authority, dependent on demand; an individual borrower would obtain a loan from the relevant local authority at a rate of interest equivalent to the rate at which the tranche was borrowed by the local authority from the local loans fund, plus a small excess to cover administration costs.

The reverse procedure applied to repayments, the borrower repaid the local authority and the latter remitted the sums periodically to the local loans fund.

To follow that repayment procedure to its logical conclusion, if part of the local loans fund is to be securitised and an SPV created, as the Minister pointed out, that involves a change in how it will affect Government borrowing. Before this proposal, the funds received from all local authorities on foot of repayments to the local loans fund and on foot of repayments of individual borrowers would have led to the fund being set off against the original amount borrowed and would have been shown in the national accounts as a capital receipt. Henceforth this proportion of income to be paid into the SPV will not appear as a capital receipt. Therefore, as my mathematics teacher in Gormanston College used say, there is a change there.

I have no objection in principle to securitisation of the mortgage book relating to these loans but it is not correct to state, as the Government did earlier this year, that this had no effect on its own self-imposed financial criteria. As my earlier example will have shown, the Government has now decided to sell off a future income stream to obtain capital to pay for current expenditure. This nonsense was the essence of the economics of self-delusion practised by all Administrations in the 1970s and 1980s until 1987. The money raised by securitisation of these mortgages should not be used to pay these equal treatment arrears, the latter being deferred current expenditure.

My antipathy to the foregoing style of economics is well recorded in the public domain, my objections are not deep-rooted in any ideology but are purely pragmatic; it never worked in any economy and the long-term problems created were greater than any short-term gains, even political gains.

Yes, the equality treatment arrears must be paid; yes, the Government is within its rights to take the decision of paying those arrears in one year; yes, there is nothing wrong in the principle of securitisation of the local loans fund, but not for this purpose. The Government is not within its right to attempt to delude the electorate and certainly has no right to use long-term capital to finance current expenditure. The hard facts are that the public finances were in order at the beginning of this year. As we can all acknowledge, the Fianna Fáil-led Administration left our economy and national finances in fine fettle at the end of 1994 when confidence throughout the country was high and things generally improving.

The firm public financial control of the previous Administration, under the then Minister for Finance, Deputy Bertie Ahern, was set aside by that first, major decision of the new Government on the payment of equal treatment arrears. The hand on the steering wheel clearly began to slip early in the year and has been slipping ever since.

There is a direct correlation between lower public expenditure and taxation reform. There is no point in advancing grandiose schemes in areas of public policy costing millions of pounds and, in the same breath, advising the electorate that taxes will be cut, the electorate know that controlling public expenditure is a necessary prerequisite to lower taxation. This is why I am particularly scathing of the present Government which has let off the brakes on public expenditure. The real increase in the cost of public services in 1995 over 1994, comparing like with like, is of the order of 10 per cent plus.

From day one of our current period in Opposition, I and my party colleagues have highlighted the mistake of returning to the bad old days of budget deficits. The Government did not listen. Ministers only began to take notice when the annual OECD survey on the Irish economy hit their desks with a resounding thud during the summer. The OECD survey stated that the economy "continues to face high levels of public debt and unemployment... tighter control on public expenditure appears to be necessary in order to sustain progress in reducing the debt to GDP ratio as specified in the Maastricht Treaty and to make room for a further reduction in the tax burden".

It is amazing that the Government had to wait for the OECD survey before taking notice of lax controls on public spending. It did not need an outside body to tell it what the Opposition and independent economists had been stating for months.

Good economic management is hard to find, and it was many years before any administration succeeded in doing so. The question now is why it was lost so quickly. Perhaps old left wing socialist reasoning dies hard, notwithstanding the economic lessons of the past 20 years and the failure of socialist driven economies world-wide. There is always a hankering for the good old socialist rhetoric of the 1960s and 1970s among the left wing parties of this Dáil.

Within two months of assuming office the Government decided to breach by a huge margin its public expenditure limits as set out in its programme for renewal. It is difficult to understand why budget decisions were so suddenly relaxed. The breaching of expenditure limits is grossly irresponsible. It undermines the credibility of Irish financial policy by putting a question mark over the ability of the Government to stick to limits set by it. Increasing expenditure and borrowing also reduces the scope for relieving the tax burden in years to come. The Government's priority has been to maintain the scope for spending increases, with tax relief coming a very poor second.

The priority accorded by the Government to the plight of thousands of long-term unemployed has come too late. The recent news of the establishment of a task force on the long-term unemployed is yet another case of proposals and publicity over substance.

A massive slice of our community are caught in a poverty trap. Only now is the Government slowly turning its attention to those caught in almost inescapable poverty. Apparently it will consider tax incentives and employer subsidies among a series of proposals to be examined by another newly established task force. There are so many Government task forces that an association of task forces should be the next step; Croke Park is the only venue which would accommodate such large numbers. Perhaps these task force members could be joined in an annual jamboree by all the members of State boards, agencies and the many other quangos. Committees used to be the salvation of any Government or Minister in difficulties; now the buzz word is "task force". I confess that the administration of which I was a member was not behind the door in establishing task forces, but I am tired of them. Perhaps Deputy Rabbitte could be entrusted with the job of coming up with a name other than "committee" and "task force."

The proposals emanating from the task forces cost money, and these proposed costs fly directly in the face of the plaintive call from the Minister for Finance for cuts of the order of £630 million in Estimates already submitted by Government Departments.

Despite calls from many Ministers to the Minister for Finance for funds, it is critical that this administration should get back to a sound financial strategy and stick to the Maastricht criteria. The targets set out in the Government's programme of renewal for increased spending and inflation of 2 per cent plus are too generous. In this period of good economic growth, there is a strong case to be made for financial prudence. Any faltering on the Maastricht route will affect Ireland's chances of gaining entry to the European Monetary Union at the first entry date. However, I have no confidence that the Government will manage the public finances, and this Bill will remain a legacy of its financial incompetence.

I begin by celebrating Deputy McCreevy's speech and wondering how he managed to survive for so long with the people he accurately describes. It is worthy of celebration that he should express himself as he did.

I had to stage manage it.

There are many roads to Damascus, obviously.

The Progressive Democrats have no objection in principle to the enactment of legislation which would permit the Government to realise now the discounted value of future cash flows which are secured on assets such as housing. It is, when boiled down, an exercise in asset management. Any large institution faced with immediate requirements for capital would be wise to consider disposing of future cash flows.

The problem with this Bill, however, is not that what is proposed in its text is wrong in principle but that its practical effect will be to convert a capital asset in the hands of the State into liquid cash in order to defray what is in effect an accumulation of unpaid current expenditure.

The sum of £260 million which the State is now liable to pay to married women by reason of our failure to obey the laws of the European Union is an enormous amount. It ought never to have accumulated. If the Department of Social Welfare had been properly administered and advised, this huge bill to the taxpayer would never have accumulated. These arrears could and should have been paid over many years as current spending. We should have made provision for such payments within the Estimate of the Department of Social Welfare on an annual basis. Given that we have no option but to pay the moneys which, as a matter of European Union law we owe, the question which arises is whether it is right for a Government to liquidate capital or to borrow against future revenues to defray accumulated current expenditure liabilities.

It is the view of the Progressive Democrats that we should not be facing this dilemma, but given that we do face such a huge bill we ought to have paid the amounts in, say, five instalments as a current liability funded by current receipts. Securitising mortgage payments is no more sensible a means of defraying current expenditure liabilities than, say, using the proceeds of the privatisation of Telecom Éireann, Aer Lingus, or the ACC Bank for that purpose.

If this principle is now established, can we expect a sale of further assets to pay, for example, for future unexpected current liabilities, an example of which would be the fines which the European Commission proposes to impose on this State because of the incompetence of the Department of Agriculture in managing and supervising the intervention system? What will be sold to pay those fines which are proposed at approximately £110 million? It is wrong to use capital disposals to fund current spending. There is no essential difference between borrowing to pay for current spending and selling assets to pay for it, especially when our national debt is approximately £30 billion and is growing at the rate of £1 billion per year.

While the Progressive Democrats Party has no objection in principle to a Bill which is designed to enable the State to discount and capitalise future cash flows into the Exchequer, we should have no illusions about the propriety of the motives which lie behind this measure. Ireland is disinvesting capital assets to pay what are in essence current expenditure liabilities. If these assets in the form of future loan repayments were being realised either (a) to repay debts or (b) to reinvest in a genuine capital investment there could be no principled objection, although some might argue that debt repayment makes more sense than many of the so-called capital projects now undertaken by the State.

As originally proposed, this centre left coalition defended the sale of State assets on the grounds that the purchaser could be a semi-State body. The National Treasury Management Agency or the Housing Finance Agency were mentioned in this context. One of these bodies was to borrow the purchase price of the loan portfolio from the banks. The excuse offered for this transaction was, on the face of it, ludicrous. If the State borrowed the money directly from the banks it would show up in the Exchequer borrowing requirement figures. By using a semi-State agency such as the National Treasury Management Agency or the Housing Finance Agency the borrowings would not be counted in the EBR but would only appear in the less sensitive public sector borrowing requirement. This sleight of hand economics fools nobody but it would have permitted the Minister to disguise public indebtedness as semi-State indebtedness. This House should reject such cosmetic accounting practices. If the Government proposes to sell off future cash flows it should sell them to the private sector directly and up front. If a State guarantee is needed so be it but there was never any excuse for disguising what is happening here.

Given our huge protfolio of capital assets, some profitable, others loss making, some valuable and others worthless, it is remarkable that alone of the economies west of the Urals we behave as if we belong to COMECON, the former Iron Curtain economic pact. Our Government, thanks in particular to the presence of the Labour Party, stands alone in the OECD countries as being unwilling to divest public ownership and control over transport, communications, ports, airports, banks, broadcasting, oil refining, energy production and transmission. We have a Government with a Warsaw pact economic mentality in office. The Tánaiste, Deputy Spring, and the Minister for Social Welfare, Deputy De Rossa, would put the reformed communists of Eastern Europe to shame for their revisionism. We have full-blooded no nonsense socialists in control whose desired political constituency is apparently a cohort of grey faced apparatchiks of the State and semi-State. The Minister for Finance, Deputy Quinn, poses as a somewhat reconstructed house trained socialist and we are told that the "Ho Chi Quinn" days are gone, while the Minister for Transport, Energy and Communications, Deputy Lowry, poses as a reformer of the semi-State sector. Even by their own standards, they have achieved very little reform. The only recent transaction which vaguely resembles privatisation is the proposed sale of Irish Steel which is only being "sold" with a huge golden hand shake because it has negative work in accounting terms. For the left of centre Government, Irish Steel has become more embarrassing to own than to sell.

It is abundantly clear that the Govenrment has neither strategy nor commitment in relation to the management of State owned assets. On the contrary, it is driven by a political imperative to keep the red flag flying over the commanding heights of the economy. It is a sad reflection in an economy which is crying out for major strategic change that the only proposal put before the Dáil for the management of the State's assets is one which proposes to convert the capital asset of future cash flow into liquid form for the purpose of paying current liabilities. Sadly, that is the measure of the Government's collective incompetence and confusion.

Deputy O'Malley was halfway through his contribution when I came into the House. I was taken aback for a second as I thought I had walked into The Workers' Party Ard Fheis. I attended many of that party's and fheiseanna and I know the script well. Even though it was being delivered by the other side, the words, passion and venom were the same.

Is that why the Deputy left The Workers' Party?

Yes, and it is also the reason I will never join the Progressive Democrats. If we are pilloried by the left for not being left enough and crucified by the right for being too left then obviously there is no room for independent discussion or rational thought. I was very worried when I heard Deputy O'Malley's speech and I will have to read it in the Official Report to see what exactly he said.

I am glad I made an inpact.

I listened to the debate from the beginning on the monitor as this is probably the only time we will have the opportunity to discuss under an obscure heading the biggest pay out in the history of the State for married women who stayed at home for medical reasons. The reasons put forward by many people for not paying this money are astonishing. Deputy McCreevy said the money should not have been paid because the legislation is too complex and is only understood by ten people. If the Deputy had received the phone calls I received over the past year he would know that virtually all the women who are owed the money fully understand what happened, and this despite the attempts by Fianna Fáil to confuse people so that they would not understand. Even though the matter was very clear cut the method used to finally arrive at the decision to pay the money may not have been so clear cut.

That is what Deputy McCreevy said and the Minister agreed with him.

By their very nature, EU regulations and directives and Court of Justice decisions are couched in technical language. Nevertheless this should not be used as an excuse for not explaining to people their rights and entitlements.

The local loans fund is the ideal way of ensuring that the 70,000 women denied these entitlements for the past ten years are paid their money. This fund is inactive and simply takes in money as opposed to giving out loans. The Government proposes to sell a portion of this fund in the same way as a business man would sell his debts. As the method used for giving the loan in the first instance cannot be altered this is an ideal way to pay the money. Deputy McCreevy said that the £260 million could have been spent in a better way——

The Deputy would sell her house to pay her shopping bills and then rent it back——

Given all the people who have been calling to it, Deputy Cullen would be better off selling his house at this stage.

The Deputy would have a longer history in, and greater of, those kind of matters than me.

The Deputy in possession, without interruption.

The Deputy is attracting very unsavoury visitors to his house, and I am not talking about the guys outside the door.

The people who benefited from the money were ordinary women who had to stay at home due to illness. From my experience the money is being spent to provide necessities for their families. No matter what is said, this money was owed and regardless of the delay, it had to be paid.

I have heard people say that it is impossible to understand the issue but the organisation in Cork, Married Women for Equality, played a greater part in educating others about this than any politician. These ordinary women set about informing themselves on EU legislation and European Court decisions. They did not keep the information to themselves but disseminated it to other women throughout the country. This morning a woman from Cavan rang me inquiring whether she was entitled to this money. In spite of Deputy McCreevy's assertions, Democratic Left does not have a representative in Cavan.

It never will.

The campaign was widespread and ordinary people, not merely Democrative Left, campaigned on behalf of ordinary people and were extremely successful. It is wrong of Members to suggest that the money should not have been paid.

Nobody is disputing the right of people to be paid and it is disingenuous of the Deputy to suggest that.

I appreciate what has been done on behalf of the ordinary people as the majority need the money. I am glad this Government put this matter at the top of its agenda and settled it. It had been ongoing for ten years. Had any other sector of society been involved it would not have been hanging over us for so long.

Let me reassure people with housing loans from the local authority that this will have absolutely no effect on their loan as they will still pay what they owe to the same people and will be treated in exactly the same way. The mortgages will not be increased or sold on and those with loans from the local authority have as much security as they every had. We should reassure people that the Government has paid its debt without placing undue strain on the system.

This Bill gives effect to a real measure but what worries me is that so few are offering to speak on it.

There is no shortage of speakers over here.

This is the largest payout to ordinary people in the history of the State, yet no one is applauding it. This good news should be celebrated rather than some Members saying the money should not be paid.

Deputy Lynch referred to a woman from my constituency of Cavan-Monaghan ringing her. Perhaps she will be able to help me with regard to another woman who when she inquired what she should do was told that she should go to a solicitor in Cork — a long way from Cavan-Monaghan. Having done that, she rang the Department of Social Welfare to ask when the arrears might be paid but she was told that she could not be paid when she was consulting a solicitor in Cork. I would like Deputy Lynch to talk to the Leader of her party and ask him to get rid of this nonsense and ensure that people are paid. This happened in the past week and I have tabled a Parliamentary Question on it to be answered next week.

I agree with Deputy Lynch that few are offering to speak but I would have thought that the Leader of Democratic Left, as Minister for Social Welfare, would speak on this Bill. He made a great fuss about this issue when in Opposition but he might explain why he is appealing a somewhat similar case to the courts in regard to people with disabilities. If he believes it is right for women to be paid their arrears — and we all agree with that — how can he take a directly opposing view with regard to people with a disability?

This Bill arises from the 1978 EU decision on equal treatment for women. The money should have been paid by 1984 but that did not happen. Following a series of court cases a decision was made on 3 February 1995 and the Government decided to pay the arrears forthwith. We fully support that decision. It is grossly unfair that a Member should claim that the Opposition had suggested the payment should be delayed or should not be made. Our party is very particular that the money should be paid as a matter of urgency.

The difficulty I have with this Bill is that I believe the Minister could have taken a different route. The point has been well made this morning that we should not sell off a capital asset to pay a current account. Deputy Lynch takes an alternative view and thinks it is an ideal way to fund it. I do not think it is necessary to sell off a capital asset. We do not have the right to sell off capital assets to pay current bills. If we have to sell off capital assets, the proceeds should be used to pay some of the national debt. In a year when the economy is buoyant surely funds could be found in some other way.

During the budget debate we pointed out that we did not agree with the course the Government proposed to take. It inherited a surplus of £15 million but it budgeted for a £310 million deficit. We believed it was wrong and that the Government should have lived within the 4.5 per cent increase in expenditure outlined by the Fianna Fáil Party Leader, Deputy Bertie Ahern, when he was Minister for Finance. It was not prudent to increase expenditure by 6 per cent, particularly when the Government had inherited a budget surplus and a buoyant economy. We have all seen what happened between 1982 and 1986 when the national debt doubled from £12.5 billion to £25 billion and borrowing was at an unprecedented level. Unemployment almost doubled in those years and this is a path we certainly want to avoid. Since 1987 all Governments have made an effort to control public finances. It is important this Government does likewise. The Minister stated this decision would not increase the Exchequer borrowing rate, but it will increase the public sector borrowing rate. Will the Minister deal with that matter in his reply? It will increase the budget deficit and break the 6 per cent limit the Government set for itself, which was too high in the first place.

We take credit for the buoyant economy because of what we did from 1987 onwards. When the economy is buoyant there should be no borrowing or budget deficit. The time has come to make an effort to pay off our national debt. The money raised as a result of this legislation should go towards reducing that debt. We owe that to the public. While the equal treatment payments should be made, in a buoyant economy the Minister should have been able to come up with the money to pay them. The seeds of this difficulty were set in the budget.

We should make an effort to pay off our national debt because the Minister for Finance at the time of the next downturn in the economy — the economy works in cycles — will experience great difficulties. I hope we will not have to face that downturn for a long time. We must also provide for the difficulties we will face in 1999 when only part, or perhaps none, of the country will be given Objective One status. That is another reason for tightly controlling our finances and we should be prudent in managing our finances when the economy is booming.

It is wrong that under the legislation we will make current account payments from a capital asset. We are spending approximately £2.5 billion to service our national debt, approximately ten times that spent on our county roads annually and much more than we spend annually on our health and education services. As that is an enormous amount of money, the matter should be addressed. We do not have a right to provide a level of public service for this generation and make our children foot the bill. The Government has a major responsibility in this regard. While the Minister indicated he will not do so, under section 2 the Minister for Finance can come back to the Dáil with another proposal in this regard. I hope if that happens the proposal will not involve the funding of current spending. We must get away from that.

In the past few days I tabled a parliamentary question to each Minister requesting the amount of the reduction in public spending in their Departments as a result of the Government decision announced by the Minister of Finance on 8 June 1995, the number of new posts established in their Departments and agencies under the aegis of their Departments and asking them to make a statement on the matter. Three or four Ministers answered the questions asked but the majority did not. The reply from the Minister for Transport, Energy and Communications is typical of most others. He stated:

The purpose of the Government announcement was to stabilise staff numbers and this has been achieved in my Department. While public expenditure levels are always under scrutiny, it is not possible to attribute any specific reductions in such expenditure to the Government announcement referred to by the Deputy.

That does not answer my question or give any useful information. For a Government that promised openness and transparency, it is not appropriate to answer a parliamentary question in that manner. We are entitled to more useful information. Approximately 15 per cent of Ministers answered the question asked and the others waffled around it. That is not good enough. There was a reference on the Order of Business to information not available to Members appearing in the newspapers. It is in the interest of all Members that useful information is made available.

I sympathise with the Minister. In the past we had two-party coalition Governments under which it was difficult to operate.

It is even difficult to operate with one party.

There is no difficulty with one party Governments. Good minority Fianna Fáil Governments performed extremely well. We have not had a coalition Government with more than two parties since 1947. I sympathise with the Minister on having Democratic Left in Government. Three parties, with different ideologies, in Government make the task almost impossible. It will be interesting — I hope we will all be alive — to read the debate on this legislation in 30 years' time.

It is regrettable that Deputy Lynch has left the House. She indicated that Members were not coming in to speak on this Bill. That is not the fault of the Opposition as we want to speak on this important legislation. While it deals with the equality payments, it adopts a new approach to the area of securitisation, a new and developing issue. We may be one of the first in Europe to go down this road. It is disappointing, therefore, that the Government does not have speakers to contribute.

In spite of what Deputy Lynch stated, the Minister accepts that we do not object to making equality payments. Deputy McCreevy, who is very know-ledgable on this matter, outlined the sequence of events in this sorry saga. On principle, the payments should be made. The Minister will recall that when this issue arose prior to the budget and the question of the local loans fund began to get currency, I indicated that in spite of statements by the Government these payments should have been made over three or four years. Those due the payments did not pressure the Government into making immediate payments or threaten that it would face enormous difficulties if it did not do so. Time will prove that the Minister was wrong to use this issue to put himself on a pedestal. Apart from those in Cork who pursued the matter and will follow this debate there is not much public interest in it. People see this as a windfall.

We are taking a capital asset and using it for current expenditure due. It is wrong to create such a precedent. Future Governments will cite this as an opt out clause if serious problems arise in the context of current expenditure. It is an undesirable development. There are many State capital assets which could be used in an imaginative way. Privatisation was the only way mentioned for many years and I supported that, but I have broadened my view and see the possibilities of a mix between public and private. Rather than let State assets lie dormant we should look for imaginative ways to create new structures and capital investments within the State system that may in years ahead create a current stream themselves. This is important in a State such as ours with a relatively small economy in international terms and few natural resources. I welcome the option of securitisation as a possible way forward.

As regards the equal treatment payments, we are conveying an image to the public that the Government is picking up the tab and it will not affect the taxpayer. The reality is the taxpayer will pick up the tab. There is nothing wrong with that in principle but I object to the way in which this matter is being handled. It is only through our combined contributions that we will continue to develop a competitive economy, efficiency in the work place and high living standards. The message must go out to the unemployed and others that, no matter how minimal the contribution, it is important that it be made. I object to the Minister's sleight of hand in dealing with this issue and the portrayal of the Government as being able to accomplish this with no costs attached when what is involved is a transfer of money from those who pay taxes to those who are due equality payments. The tragedy of dealing with the issue in this way is that the State loses an income stream over the next few years and an opportunity to use the fund for capital investment. I object to the use of capital assets for current expenditure.

The cutbacks demanded by the Government have been well handled by the Government PR team. People say the Government is under great pressure and ask where it will save £640 million. In preparing the Estimates Ministers were over-zealous in their demands and the Minister for Finance rightly said that the spending requirements put forward were out of court and could not be tolerated. They were beyond the 2 per cent increase in real terms for 1996 which the Minister spoke about. However, the issue was portrayed as if the Government was struggling to cut back and save £640 million. It is not saving £640 million but cutting back the demands made for excessive expenditure.

In the past Governments made severe cutbacks in the interests of the economy. That was real and painful and we suffered in our constituencies as a result. It is disingenuous to suggest, when the economy is booming, that what this Government is doing is similar.

It is simply greed on behalf of many Minister who, if given the opportunity, would squander the fruits of the last few years and therefore when conditions demand that we prime the economy we would not be in as good a position to borrow. In view of the fact that the economy is doing so well, as is evident from yesterday's figures, we certainly do not need to borrow now. I am sure the Minister is happy, as we all are, that the economy is doing well. However that is not as a result of this year's budget but of good government in the last five or six years. It takes 18 months or two years to see the effects of a budget and of decisions taken in the Department of Finance on changes in fiscal policy. We are now seeing the real benefits of the work of our party Leader, Deputy Ahern, as Minister for Finance.

He got some help.

I hope the Minister will be successful in ensuring the maximum allowable increase is 2 per cent in real terms, taking into account the original figure of 6 per cent rather than the increased figure. That would make a substantial contribution to the development of the economy. I am not satisfied with the level of spending this year and the fact that the limit has been exceeded, something the Government has endeavoured to conceal.

I wish to refer to a point in the context of the Maastricht Treaty and European Monetary Union. As a result of our approach to the Maastricht Treaty it is not anticipated that the conditions pertaining in the Irish economy and generally in the European economy, which are very favourable, will change very much in the next few years. This week in France the new government faced difficulties in regard to European Monetary Union. It hopes to get the French franc back on track so that it will be in a position to join the European Monetary Union, and that is welcome.

In anticipating that circumstances in 1999 will be similar to those at present, Ireland should make it clear that, irrespective of what Britain does, it will be among the first countries to join the European Monetary Union. The Government should have the courage to say to Irish business that since we have been involved in Europe for many years and are committed Europeans, we will be among the first countries to join. That would give industry three or four years to prepare. It could consider options that would be available at that time, where it would buy raw materials, future markets and so on. It could make decisions that will minimise whatever effects may result from Britain not joining the European Monetary Union. From attending seminars and from talking to people recently, I am aware that clarity in that regard is required.

I have raised this question with the Minister during Question Time, and I am sure IBEC, the unions and business would agree that a national forum should be set up to consider this matter. Another speaker referred to task forces, but there is certainly need for a forum involving Irish industry, business, agriculture, trade unions, Government and Opposition who would discuss this issue and tease out the difficulties. Leadership will be required. A much more dangerous strategy would be to wait until 1999 to make a decision on the matter. The opportunity to plan is now available to companies.

I do not know the Minister's view on this issue but I suspect that the effects of Britain not joining the European Monetary Union are not as great as some might like us to believe. Some people are putting pressure on Government to postpone making a decision in principle, but those people have other agendas. There should be a response now on this matter, and if something dramatic happens in two or three years' time we will consider the matter further at that stage.

I wish to refer to the matter of Structural Funds raised this morning by my colleague, Deputy O'Hanlon, on which I take a slightly different view. I have a copy of the very interesting speech made by the Commissioner on this matter last week, in which she spoke about Ireland's future in the CSF. I have no doubt that post-1999 Ireland will be the recipient of EU funds. We should stop saying that we will no longer be entitled to funds; we will receive aid under many headings, and it is time this House put out that message. We are damaging our cause by saying otherwise. I accept there may be substantial changes in the allocation of money, but the Cohesion Fund may be enhanced post-1999.

Developments may take place in the next few years and it should not be suggested that we will experience a huge problem. Some problems may arise but we should concentrate on the opportunities that will result from a further programme of funding between 1999 and 2005. The European Monetary Institute recently issued a statement about making definite commitments in the run-up to 1999. In 2003 there will be a change in all sovereign currencies. The European Union must ensure that countries such as Ireland reach the standards required to make sure the Union works. It will not work if decisions are made that will disadvantage some countries. It is important to put across the message that EU funding will not be discontinued in 1999; it will most certainly continue. The Minister has a responsibility in that regard. I hope he listened to what I said. Something should be done to put across those messages and I am interested in the Minister's views on that. It is time we had a debate in the House on Europe, the Structural Funds and monetary union and it would be most useful.

It is highly amusing that Deputy Cullen, a member of the Fianna Fáil party, a former member of the Progressive Democrats Party should talk about his concern about trends in public expenditure since public finances began to run out of control again during the period those parties were in Government together. It is only in the past year or two and under the present Minister for Finance that we have brought them under control; at least the trajectory is in the right direction.

I would argue that with the Deputy.

Deputy Cullen may not agree, but the facts prove it. During the period when the Progressive Democrats were in Government with Fianna Fáil, the two parties with which he has been associated most recently, growth in public expenditure resumed.

It was necessary to catch up on payments due over the years.

What Deputy Cullen said about the Cohesion Funds underlines something that is basically wrong here. We appear to want to be in a position where we are disadvantaged and entitled to subsidies.

I did not say that. I did not suggest we wanted to be disadvantaged. I said we are entitled to play our full role in Europe. The Deputy should not misquote me.

If the Deputy is as good at listening as he is at talking he will learn something. The Deputy argued in support of an attitude that would lead us to continue to depend on subsidies and grants from the coffers of Europe. The reality is that Cohesion Funds have been voted to us to help us attain a standard of living equivalent to the European average. The average per capita income is hovering at about 80 per cent.

We should also be aware of the average household income here. It is now 95 per cent of the average in Europe, 1 per cent behind the UK. As the decline in the birth rate leads to a fall in the population, per capita income will increase regardless of any increase in wealth. We will not, nor should we, readily seek grants. Our main objective should be to create wealth under our own steam to provide a standard of living for all our people comparable to the best standard in the other 14 member states of the European Union. We should realise that the grants are available to assist us in attaining that standard where the momentum is such that we will create our own wealth to provide a standard of living comparable to the best in the European continent.

I was reinforcing the points made in the Commissioner's speech last week.

The main way to achieve that is to increase employment. It is heartening that jobs are coming onstream now although not in sufficient numbers. Not only does the labour force survey indicate that, but the evidence on the ground supports it. I was delighted to attend a recent meeting in Bally-fermot during which officials in FÁS told me the placement rate was such that they needed additional trainees. If we can break through the barrier preventing us using economic growth to substantially reduce the numbers on the unemployment register, we will be on to a good thing. We have had a low inflation rate for ten years and we have had the lowest interest rates in the European Union for a long time. We have had a balance of trade surplus for ten years and a balance of payments surplus for nine years. Mortgage interest rates are low and except for the level of unemployment economic indicators are favourable.

There has been progress in recent budgets in dealing with the poverty trap and tax on employment. I hope the Minister for Finance will be able to do more next year than he did last year to reduce taxes on employment but that may involve sacrifices. Because of my absolute committment to reducing tax on employment — the present position is preventing economic growth from being turned into jobs — I favour the retention and extension of the property tax. If we are honest, we will admit that we overtax everything dynamic and undertax everything static. Tax on property is one of the least avoidable taxes. The present property tax discriminates against a certain category of people and property owners in Dublin where property values are higher but we should not throw the baby out with the bath water because aspects of the property tax are unfair. We should reform and extend property tax on the basis that any increased amount raised will be directly and proportionately offset against income tax, PRSI or both.

I agree with Deputy Cullen regarding his support for our continued determination to be part of the European Monetary Union.

The Deputy, like the previous Deputy, may be straying from the issue before us.

My point is relevant. One of the criteria for joining the European Monetary Union is the reduction of our debt-GNP ratio to 60 per cent. I agree that we should continue to pursue a policy of joining the European Monetary Union while acknowledging that such membership may pose problems for us in the UK market even assuming that the Labour Party in Britain when it comes to power — which I believe is inevitable — will not embrace the idea of European Monetary Union. It would be easier for us if the Labour Party comes to power in Britain in the next few years and if it was more pro-European than the present Government and decided to join the European Monetary Union.

I was heartened to read in a newsletter on what is happening in Europe that 90 per cent of British business want Britain to stay in Europe and a high percentage favour it joining the European Monetary Union. However, we must plan on the basis that it is more likely that if and when European Monetary Union becomes a reality Britain will not join it. That would cause problems for us but at least we have a lead-in time to make preparations to cope with that and to ensure that our joining the European Monetary Union will not disrupt the economy. That will require a continuation of the existing disciplines if not a further tightening of them.

I hope the concerns expressed by Mr. Attley and Mr. Somers of the Irish Congress of Trade Unions which are casting doubt on a further national agreement can be addressed and that the much improved industrial relations atmosphere which is so helpful to the economic well-being of this country will continue beyond next year. One of the criteria for our joining European Monetary Union is that we would get down to a debt-GNP ratio of 60 per cent. In recent years and months certain questions have been raised about the veracity of our national statistics. Some people query whether the economic growth figures are true, if the unemployment register is a true indicator of unemployment and whether our trade surplus, as reported, is accurate. Although statistics cannot be absolutely precise, are they as accurate — plus or minus a reasonable percentage — as they should be?

Acting Chairman

It is very difficult to relate the Deputy's remarks to the Bill before the House.

This Bill is relevant to the national debt. Is there a question mark about other economic indicators? If so, there is also a question mark about the true level of the national debt as highlighted by this Bill. Here the State borrows money to pass it on to mortgage holders but the Bill proposes only to use a portion of the mortgages lent to fund the social welfare equality payments. The Minister may want to go further.

To get an accurate measure of our national debt, as compared with other countries, we should compare like with like. For example, the UK, with which we are most familiar, has sold off a great number of its State companies and the money raised reduced the level of borrowing there. The level of borrowing as represented in the UK seems much lower than ours. Yet, we still have in State ownership the greater part of what was the State empire. We have only disposed of a small number of State companies.

I raised the question before as to whether, without selling off State assets, it would be reasonable to put a value on those assets and offset them against the national debt to get a more accurate picture for comparison purposes. I will be interested to hear the Minister's observations on that. If that is a reasonable course of action, we may be nearer the target of 60 per cent than we realise. If we are to write off a portion of State assets to make the social welfare equality payments, without increasing the national debt, what is wrong with using the value of all our State assets to reduce the national debt? In reality the State is only a vehicle, it is not the true borrower. Should loans by the Irish Permanent Building Society, Irish Nationwide or the First National Building Society be included in the national debt? Of course not. Similarly, lending by local authorities, through the local loans fund, should not be part of the national debt because it distorts and exaggerates the level of national debt.

Some people accuse the Government of creative accountability but whoever thought up this means of paying the once off bill of equality payments deserves to be commended. It helps us also to address the true level of our national debt when we discount the value of assets that we still retain, assets which have already been sold by some member states in the European Union.

We on this side of the House have no problem with the Government ensuring it is able to meet its legal responsibility in making equality payments and dealing with the sorry saga of equality arrears. Clearly this should have been done in the mid-1980s and we would not have to deal with the problem that confronts us today in finding large sums of money which, if paid over 14 or 15 years, would not have had a significant effect on current expenditure. It would have avoided the legal wrangle and some of the pain associated with it for the people who have to wait so long for the Government to discharge its responsibility. The principle of ensuring that these payments are met, as quickly as possible, is not argued.

The second question concerns securitisation. I have no difficulty with the principle of securitisation. As a former Minister of State at the Department of Energy, with special responsibility for forestry, I was astonished that the forestry service had a policy for over 50 years of not disposing of any property. It would be obvious to anybody looking at the landscape, particularly land in the ownership of the forestry services, that there were tracts of land close to urban settlements which could be extremely valuable for alternative purposes. I saw to it that policy was changed. The one proviso missing from this Bill is that the resources from disposal of assets should be used either to pay off a part of the national debt or to reinvest in capital expenditure. In the case to which I have referred, it was easy to go out to different regions and purchase ten times, 15 times, 20 times the land space for the funds. Asset management, how the Government approaches what it owns, a sensible approach to disposal and reinvestment are not issues we argue against on this side of the House.

While I was Minister of State at the Department of Energy, the shares in Tara were disposed of in circumstances in which we had not received any significant return from State investment, mainly because international companies are able to do their accounting, their reinvestment and so on in a way which makes it difficult to leave the surplus available to meet the State's requirements and a natural return for the shares. In that case funds were directed to reinvestment in alternative energy security areas.

We would argue with the Minister in regard to the main thrust of securitisation and the idea of having funds to meet equality payments. Following many years of prudent management of the State finances where we continued to have a surplus in our balance of payments — increased exports, income, tax receipts and an overall improvement in buoyancy — and having had, over six or seven years a variety of different Governments, comprising different parties but headed by Fianna Fáil, which had equal commitment to managing the State's finances, we produced that situation but this year the successful tradition of ensuring the funds raised by the disposal of State assets do not go towards current expenditure appears to have been broken. The Minister must explain more fully why he has taken this move this year to meet current expenditure.

Could it be possible that the Minister for Social Welfare, Deputy De Rossa, was so anxious to deal with the matter he was happy to live with the paltry increase granted to old age pensioners, the lowest in 30 years, provided he got his way? This is despite the fact that the Minister for Finance did not see how he could meet the outstanding payments in one year and may have preferred to deal with it over a number of years, thereby ensuring it would not be necessary to sell the family silver to meet the payments.

Even in those circumstances, why did the Minister not take the route of the Housing Finance Agency? The Minister will recall two provisions in the Housing Act, 1992, one of which foresaw the securitisation of local authority housing mortgages as a potential source of income for future investment and how private Irish financial institutions could be involved.

It would have been State guaranteed borrowing.

We could argue the point but, having served with the Minister in Government, I would prefer if we did not play around with figures.

Members with business experience are aware that if one owes money, it is possible by a sleight of hand to produce a scenario where, even though one owes the amount, it can be paid by somebody else or figures can show one does not owe it. The principle of economics is that we are all in the ship together, irrespective of whether it is Government or semi-State borrowing.

It would be as easy to present the exact position to the public, rather than trying to persuade ordinary taxpayers that the figures for public sector or State borrowing look better because amounts have been transferred to other areas. It is still State borrowing. The Bill is more cumbersome and may be more expensive in the long run. Guarantees have been given to the mortgage holders and it is claimed there will be no effect on local authority finances. However, will that be the position in the future? The Housing Finance Agency may have been a better route.

Deputy Mitchell tried to present a scenario where the national debt could appear less than it is often portrayed. It would be extremely serious if a Minister for Finance took any heed of that argument. A sum of £2.5 billion must be found just to pay the interest on the loans. The National Treasury Management Agency has done fantastic work in recent years in managing the debt. It has been instrumental in making significant savings for the State. It has been fast off the mark in understanding the trends of international markets and this has made the task of successive Ministers easier.

However, it would be extremely serious to consider the national debt as anything other than a burden of astronomical proportions on the taxpayer and a major concern for Governments. It would be dangerous to play around with figures or suggest moves just because there is capital ownership of certain items from which loans are made.

Economists in the early 1970s said borrowing was the solution to high inflation. When the second oil crisis struck in 1979, economists again said the solution to high inflation and cost increases was borrowing. I shudder at that thought because the mistakes of those years, for which all parties must take responsibility, place a burden of pain on future generations to pay for what we enjoyed for nothing. It is quite foreboding if this matter is being considered as less than serious. In preparing the budget, I hope the Minister will take little heed of Deputy Mitchell's points in that regard.

It would be one thing if it could be said that borrowing increased employment, reduced inflation, resulted in the growth of capital assets and laid foundations on which new employment, social developments and other essential services could be improved. However, it was only when we started to cut public expenditure and take tough measures that investment in these areas increased and private finance institutions and other commercial companies became involved. We lost out on all counts in that sorry saga.

This is the basis of our fundamental objection to the Bill. We made mistakes and did not always believe the facts. I do not know the views of the officials in the Department of Finance. I had some tough arguments with them from time to time but I never doubted their integrity or that they wanted to ensure we paid our way. They wanted each Department run in a way which ensured borrowing for current expenditure was a thing of the past. I do not know how the officials view the legislation because it goes against everything they suggested.

The Minister can minimise the position or state it will not have specific effects but using capital assets or selling potential cash flows to meet daily spending requirements sends out the wrong signal. The Government has a majority but it does not appear willing to come to the House and show its support for the Bill in any principled manner. There is a dearth of Government Deputies in the House and the Minister for Finance is the only figure on that side. He has the votes of the three parties in Government but not their principled support for the Bill. We cannot defeat the Bill but I urge the Minister not to bring forward another Bill during the lifetime of this Government under which the sale of State assets and potential cash flows can be used for current expenditure.

If the survival of the Government is at stake — Democratic Left has made it a condition that this money should be paid in the one year in circumstances where old age pensioners have received a paltry increase — the least that we expect is a statement from the Minister that this is the last time legislation will be introduced to sell a piece of the family silver to buy a loaf of bread.

We are all aware of the reasons for the introduction of this Bill. This has been an ongoing saga since 1984 when the former Minister for Social Welfare, Barry Desmond, provided for the partial implementation of the terms of the 1979 EU directive on equal treatment.

I trust the Deputy will not attack a fellow Corkman.

I intend to praise him. If the Government had pushed for full implementation and the Opposition had raised the roof to have it fully implemented Democratic Left or Sinn Féin-The Workers' Party as it was then known would have objected on the grounds that hardship would have been imposed on those dependent on social welfare. In the light of this, the Government made a wise decision to provide for the phased implementation of the directive. Others who felt they were entitled to equal treatment saw an opportunity to secure a pay out to which they were legally entitled. Successive Governments decided to proceed by way of the legal process, perhaps, in an effort to keep the public finances under control.

A Cork Deputy based her political future on fighting this issue. Many other local representatives, including Deputies and councillors supported the case being made. However, she misrepresented the reasons the Fianna Fáil-Labour Government refused to pay and suggested that it did not want to pay the arrears, although it had no option but to proceed by way of due legal process. It would be wrong of any Government to illegally pay out taxpayers' money. There is a responsibility to ensure that it is spent correctly and wisely.

Deputy Lynch said this morning that some Members were of the view that the money should not be paid. I have yet to hear a member of any party say that it should not be paid, if it is legally due. It is wrong that a Deputy should make false statements about other Deputies.

The Government had just set its limits on expenditure when this issue hit it. This caused great difficulties in context of the Maastricht Treaty guidelines on European Monetary Union. If the figure of £260 million was to be paid in full, the Government would exceed its guidelines and cause severe problems for us in progressing towards European Monetary Union. Some other method had to be found to raise the money. Some members of the Government would have preferred if the money had been paid over a number of years out of current expenditure. That would have been the wise course of action.

That was not a legal option.

I was under the impression that it was. This Bill provides the way out in allowing the Government to remain within its own limits.

I have no objection to the sale of State assets. I would prefer, however, if the proceeds were used to reduce the national debt and provide jobs. It should be used for productive purposes, but that is not what has been done on this occasion. I hope it will not become the practice to sell off State assets whenever there is a danger that the Government will exceed its expenditure limits.

As Members are aware, there has been a change in the legislation dealing with the payment of service charges on which councils and corporations depend. Some people are under the impression that they no longer have to pay them, despite the fact that if they refuse to pay they will be pursued through the legal system. In the meantime local authorities will find themselves in some difficulty because of the inclination of some to withhold payments.

I must refer again to Democratic Left who have called continuously, but especially in Opposition, for more State subsidisation. We must remember the State can obtain funds only from the taxpayer or borrow them. That leads me to question whether Deputy Lynch and her colleagues will support the service charges struck by their relevant local authorities within the next few weeks. If not, they will be in grave dereliction of their duties as public representatives at local and national level and will be doing the country a grave disservice.

Acting Chairman

The Deputy is straying from the subject matter of the Bill.

If they do not support the raising of such service charges they will be forcing the Minister to obtain funds from another source, by borrowing, increasing taxation or through the sale of additional national assets. I hope they will take the honourable, just and proper path rather than engage in political expediency, as has been their tendency over the years. It never fails to amaze me how some public representatives, when in Opposition, have been able to oppose local authority estimates but, once they become chairpersons of urban councils, support them; their mental gymnastics never cease to amaze me. I look forward to seeing whether their agility will continue in this and future years.

I agree with this Bill in principle. Its provisions allow the Minister greater scope to raise funds for badly needed expenditure. My objection is to their expenditure in areas which will not be of greatest long-term benefit to the country.

I welcome the tenor of this debate and express my appreciation of Members' contributions.

Let me address a number of points raised by various Members. The first was the rather censorious admonition that the Government was introducing some new kind of deviation, that we were selling the family silver or capital assets to pay for a current account liability. I do not want to engage in historical retribution but I must remind Fianna Fáil Deputies, and current and former members of the Progressive Democrats, that the sale of State assets — beginning with the disposal of what was then the Irish Sugar Company, now Greencore — was resorted to by the two parties opposite for current account purposes, there being a current account deficit at that time. Likewise, the disposal of Irish Life was used for current account purposes. Therefore, it will be seen that capital assets have been disposed of by various Administrations, including those of which I have been a member when in Government with Fianna Fáil.

The attempt by the Fianna Fáil Party to suggest that, for the first time, I am introducing the principle of disposal of a capital asset for the purposes of funding a current account liability is misleading; inadvertently they may be selectively presenting an historic comparison that does not accord with fact. Second, it is not true to compare a flow of income, which by definition will come to an end at a specified time, in the case of a capital asset, such as a company or, as in the case to which Deputy Michael Smith referred, a piece of land, as representing similar type capital assets. Since some types of capital assets, such as land, or a company, may be held in perpetuity the flow of income, by definition, does end at a specified time. Therefore, it is misleading to compare the two.

What we have done is capitalise that flow of income to meet a once-off liability. Deputy McCreevy put it most accurately on the record — I would not disagree with a word of what he said — or, to use a phrase of Deputy Michael Smith, it was a sorry saga. As Deputy McCreevy said, it should act as a salutary lesson for any future Administration on how not to deal with the problem, since every party in the House shares some responsibility for that mistaken course.

The total cost of this will be of the order of £300 million — we do not know precisely — but it will be of that order or possibly somewhat less. Were we to revert to the point in 1984 when the liability first commenced it would have been a much cheaper option, although perhaps unpalatable at the time, than that with which we are now faced. I think and hope that lesson will have been learned.

Deputy Michael Ahern suggested that perhaps this money could have been paid over a number of years, contending there had been an expectation of its being phased over a number of years. The fact of the matter is that, when the High Court ruling was handed own earlier in February this year, the Government took a decision, on the advice of the Attorney General, that its option of an appeal to the Supreme Court had little prospect of success and that the probability would be that not only would the Supreme Court find against the Government but the actual cost would be increased and the Government would have to pay out everything there and then.

As Members will be aware, the current amount of exposure is of the order of £260 million. I cannot be more precise on that because, with 70,000 people involved, each with different entitlements, it is not possible to be more accurate. The fact is we took a decision, correctly in my view, to accept the decision of the High Court to pay out the money. We had some room for manoeuvre in terms of phasing our payment, the largest constraint being the physical logistics of calculating individual entitlements for transference to its rightful recipients. I had made a budgetary provision for £60 million, the Department of Social Welfare having advised me of a balance of £140 million; in other words, a total of £200 million could be paid in the current year, which is what we are in the process of doing, the subsequent balance of £60 million to be paid in 1996 and 1997. I am happy to report that that money is flowing to its beneficiaries. I suspect the reason there is not that much interest in this technical Bill is that that money is already reaching very receptive households nationwide and, I understand, is being put to excellent use.

Members may ask why securitisation; why this particular mechanism? Deputy Michael Smith, a former Minister for the Environment — well briefed in the options relating to the Housing Finance Agency — raised a valid question on why I had not taken the HFA route. I propose to explain a number of questions pertaining to that in greater detail on Committee Stage. The primary reason I decided to take the National Treasury Management Agency route, as distinct from the HFA one was that, notwithstanding the merits of the HFA proposal, I wanted to use the expertise of the NTMA and endeavour to widen and deepen our capital markets.

The technical aspects of the nature of the debt, the manner in which the money is being raised; whether it represents Government borrowing, direct or indirect, or an independent, stand-alone, method of raising funds can best be clarified on Committee Stage. I had two purposes in choosing the route encompassed in the Bill. The first was to make it clear that this money did not represent another form of State borrowing, and I shall be quite happy to explain why that is the case. My second reason was to provide a new possibility for investment in our markets at present. Our national debt stands at approximately £32 billion, yet our total pension funds, and the resources contained therein, amount to almost £14 billion, practically half the national debt. Because of the fiduciary responsibilities on trustees and fund managers to invest that money in prudent instruments, there is a dearth of such instruments available to fund managers here, as a consequence of which we have the highest level of investment of Irish pension funds invested in savings outside this economy than any other European country and, possibly, worldwide.

This mechanism will provide a new opportunity for investment. On Committee Stage we can examine the way in which this special purpose vehicle will function and its relationship to the NTMA and the Exchequer.

Another point — and I am happy it has been made by Deputies across the House — is that the relationship between local authority tenants who have SDA loans, including Deputy McCreevy who is still, no doubt, faithfully and honourably paying it off, and the local authority which granted the loan will remain intact and will not be altered by the provisions of this Bill which will enable us to raise the money on a once off basis to fund this liability.

The Deputies concerned are no longer in the House, but having read the debate they may wish to raise on Committee Stage the fact that we have not included the additional expenditure of £140 million in our base figure for the purpose of calculating expenditure in 1996. It is deliberately excluded to enable us to maintain rigid discipline on levels of public expenditure in the economy. We have been open about that. In my opening comments on Second Stage, I stated clearly that the extra £140 million is in breach of the figure we set for ourselves because of a decision we took and legal advice to the effect that if we delayed payment of the £260 million arising from the High Court action we would probably have to pay more and all at one time. For that reason we have taken this road.

Question put and agreed to.