I wish to share time with Deputy Crowe.
Investment Funds, Companies and Miscellaneous Provisions Bill 2005 [Seanad]: Second Stage (Resumed).
Is that agreed? Agreed.
I already aired the more substantive themes relating to company law changes and the changes in proposed consumer legislation in this Bill. I want to finish by raising a concern of the Green Party about the Government seeming to want to ride two horses at the same time with regard to the further progress of the financial service industry here. On one hand with our tax favourable status we seem to want to compete with the Channel Islands, the Isle of Man, Luxembourg, Liechtenstein and, God help us, irony of ironies, the Cayman Islands. At the same time we are sending a message, which this Bill seeks to reinforce, in terms of having higher standards of corporate enforcement.
We seem to be sending mixed messages to the movement of global capital that this is a country that will treat their tax status favourably, but we will enforce the highest possible standards in terms of corporate compliance. I am not sure we can do both, but if the Government is confident it can, I wish it well. I am not sure this legislation will establish the confidence that needs to exist, not only internationally but internally in terms of our indigenous financial service companies.
The increases in penalties for white collar crime and fraud in this Bill are welcome. We have seen a trend in recent legislation to improve the levels of prosecutions that might result from the new legislation in terms of company law. Unfortunately, this has not been matched with prosecutions within the courts system. We still have a notorious double standard with regard to people caught for white collar crime and whether they are prosecuted and penalised for it.
This contrasts markedly with the Government's most recent public relations announcements on Operation Anvil and dealing with criminal law in the greater Dublin area. While there is widespread agreement in society that the level of crime needs to be tackled and dealt with promptly, there seems to be a great reluctance to do this among regulatory agencies and authorities which should identify and prosecute those who commit white collar crime. Until there is equivalence in terms of the type of crime being committed and until there are as many people in our prisons or suffering high fines and severe loss of status as a result of defrauding the State as ordinary criminals, our economically unequal society will continue to exist in our criminal and civil codes.
Many sections of the Investment Funds, Companies and Miscellaneous Provisions Bill are being introduced to prepare the ground for the transposition of EU directives. It is interesting to note that the State is far quicker to implement EU directives relating to matters of this nature than it is to implement EU directives relating to environmental issues, for example. It often drags its feet on such matters. This State was one of the first EU member states to implement a directive relating to undertakings for collective investment in transferable securities, known as the UCITS product directive. It was also one of the first member states to transpose the UCITS management company directive.
The Bill gives the Irish Financial Services Regulatory Authority the power to regulate the borrowing requirements of non-UCITS common contractual funds. It also regulates the assets which can be dealt with and the manner in which they can be dealt with.
I welcome Part 7 which amends certain aspects of consumer legislation to increase the maximum fines which can be imposed on conviction. I also welcome Part 4 which enacts provisions which need to be enacted in primary law to ensure the effective transposition of the EU market abuses directive, which relates to insider dealing and market manipulation. The public good must be protected in the market economy. The free market must be reigned in and market abuses such as insider dealing and market manipulation must be stamped out.
The debate on this Bill offers a timely opportunity to comment on the Government's enterprise, tax and pensions policy. For too long, consecutive Governments have considered the development of indigenous enterprise to be less important than the promotion of foreign direct investment. The Minister for Enterprise, Trade and Employment recently announced that approximately 100 jobs will be created in a multinational financial services company. Perhaps the Minister thinks such jobs are more glamorous than the jobs created on a daily basis by entrepreneurs in small and medium-sized enterprises. Much more needs to be done to promote the development of such enterprises. We should recognise that most employment stems from them.
This country's over-reliance on foreign direct investment makes it more vulnerable than other European economies to a global economic downturn. When one considers the unstable nature of global markets and global capital, it is clear that such an over-reliance is dangerous. The quality and quantity of resources which are made available to inward investors should be made available to indigenous enterprises. We should guard against the destabilising effect of short-term capital inflows, for example, by ensuring that we have a strong indigenous enterprise sector and strong regulatory institutions in the banking and financial sectors.
This State's economic and taxation policy should be underpinned by the objective of making the economy serve society, rather thanvice versa. We need to ensure that the revenue generated by our economic stability is used to provide the highest quality of essential services and to vindicate everyone’s socio-economic rights.
The development of the International Financial Services Centre was achieved after the Government imposed the lowest business tax rates in Europe. Such low rates have undermined this country's capacity to tax some of the most profitable companies in the world, including those involved in the financial sector. I do not know why a large chunk of the economic activity that takes place in the State is overlooked when the tax burden is being assessed. The low-tax model adopted by the Government is not adequate to provide European norms of public service and infrastructure.
This country has a low level of public sector provision. The low level of provision offered is heavily over-subsidised by high VAT, which hits the poorest sectors of society most heavily. The increase in the gap between rich and poor in the wake of the Celtic tiger years is evident when one contrasts the economic circumstances of those working in the IFSC and those living in the north inner city communities which surround it.
The State's tax base is too narrow to fund the social objectives I have mentioned. Personal taxes are not particularly out of line with the desired level, but that cannot be said of business taxes, wealth taxes, property taxes and tax shelters for the rich. That taxation policy has been focused on reducing the overall tax burden has benefitted those with resources rather than maximising benefits for all.
According to CORI's justice commission, the State has generated sufficient resources to take every man, woman and child out of poverty, but its resources have not been focused on producing such an outcome. That is clear when one examines the Government's expenditure on social protection and its taxation policy, for example. The economic growth we have experienced over the last decade has not been primarily targeted, much to the State's shame, at reducing the gap between rich and poor or at bringing Ireland's level of social protection in line with EU levels.
UCITS and non-UCITS common contractual funds are vehicles for the management of pension funds. The debate on the Bill before the House represents a timely opportunity to make a number of comments on the pensions situation in this State. The Government hoped that the introduction of personal retirement savings accounts would be the main instrument to be used when trying to ensure that 70% of those in employment have pensions cover.
The PRSA scheme has not been particularly effective for a number of reasons. It was proposed as a means of making it easy for workers on modest incomes in jobs where occupational incomes do not exist to save for their retirements. It was intended that it would be compulsory for employers to facilitate employees who are establishing PRSAs, for example by making deductions from wages if they were asked to do so. Workers on modest incomes do not have enough money to invest in their pensions. They must service huge mortgages because of inflated house prices. Even if they understand the importance of investing in pensions, they might not have the money to do so. It should be borne in mind that being offered a tax offset is much more of an incentive for people on higher incomes than it is for those on lower incomes.
The wiping of billions of euro from the value of pension funds following the collapse of the global market did not help to increase the level of enthusiasm for taking out pension plans. The popular interest in such plans was also damaged by revelations about the large-scale abuse of construction industry pension schemes. SIPTU claims that up to 50% of building workers are not covered by the pension scheme for construction federation operatives because many cowboy employers have failed to make compulsory contributions. SIPTU has called on the Minister for Social and Family Affairs, Deputy Brennan, to introduce a centralised collective system for pension contributions by builders.
Experience in Britain and the United States shows that PRSA-type pensions work only if employers also contribute to them. The Irish Congress of Trade Unions has proposed that employers should be required to pay a minimum of 10% of salaries to defined contribution schemes. It has also suggested the introduction of an employee 6% tax. Such suggestions deserve to be examined and considered.
I welcome the opportunity to speak on the Investment Funds, Companies and Miscellaneous Provisions Bill. I commend the Minister of State on introducing the legislation.
We are reminded from time to time of the success of the International Financial Services Centre, an initiative that was launched in 1987. The Government of that time received a great deal of criticism because it was felt that the centre would be a white elephant. It was claimed that we would all regret the folly of constructing such a monstrosity on the banks of the River Liffey where it would be in full view of foreign visitors. Within a few years of the construction of the IFSC, it was clear to all concerned, including some Departments which might not have been too enthusiastic in their support for the project, that it would be successful. Most importantly, it was clear to those involved in the financial, banking and insurance sectors that the Government which was in power in 1987 had made a progressive and enlightened decision.
A great deal of legislation has been necessary since 1987 to cater for the unique nature of the IFSC development and to accommodate the changing needs of the financial services sector. The authorities in this country — I refer in particular to Dublin — have been applauded for the initiative that was taken in 1987. The IFSC template used in this jurisdiction at that time has been copied by a number of countries and cities where similar centres have been constructed. The Department of Finance is regularly asked by ministries in other countries to explain the reasons for the success of the IFSC initiative.
The Bill before the House is part of a raft of up-to-date legislation that is needed on an ongoing basis if we are to compete successfully with other countries. Ireland faces serious competition from other players in the financial services sector. Apart from the changes to the laws relating to investment funds, a number of other changes to general company law are proposed in the Bill, many of which will directly or indirectly impact on at least some aspects of the operations of companies used as investment companies.
Some of the detail is rather technical but I understand from the Minister's opening statement that the Bill has been introduced to keep Ireland competitive and at the forefront of international finance. It is fair to state that Irish banking and Irish banks are competitive and profitable, as is suggested by recent reports on the two main Irish banks. It is important that the banks remain profitable. The last thing we want is a situation similar to what arose in Japan last year, when a number of high profile banks collapsed or had to be bailed out by the Japanese Government. It does nothing for the confidence of the general public or the commercial sector, local or international, in a country's banking system to see intervention by departments and governments to help out large financial institutions, banks in particular. While some sectors criticise the vast profits made by our indigenous banks, their profitability demonstrates a healthy state of affairs and shows that the economy, as run by the Government, is healthy and continues to grow. Growth rates of 5% per annum are not to be sneezed at and many fellow EU member states would be more than pleased to claim such growth rates.
The current position is in marked contrast to that of 15 years ago, when there was poor growth and a poor outlook, as well as unemployment rates of up to 18%. There has been a sea change in many aspects of Irish life since then — long may that continue. However, the area of regulation is of concern to some organisations. There is a school of thought that we have become over-regulated and the Government should consider this area. A raft of legislation seems to come from the European Union, which puts a great deal of pressure on companies to comply with regulations.
I question the wisdom of some of the regulations being introduced to Ireland. At some stage, we might be forced to turn away foreign direct investment due to the level of regulation with which companies and others must comply. While we have not reached that stage yet, public representatives and Oireachtas Members are fully aware of all the legislation with which they must comply. The Minister for Enterprise, Trade and Employment must bear this in mind. I am sure he is listening to similar concerns about the level of regulation being expressed by companies that wish to set up in Ireland, particularly foreign companies.
I am concerned by the slowdown in the number of companies looking at Ireland as a good base to set up operations. My home town of Carlow has an industrial and technology park that has lain vacant and unused for the past two years. IDA Ireland has invested more than €11.5 million in this facility but to date there is little interest among overseas companies in locating there.
Due to the success of the economy, we have moved from having a low wage, low skilled workforce to having a high skilled, well educated workforce, which demonstrates the progress we have made. The focus for jobs must be in the high skill area.
Last year the Department of Enterprise, Trade and Employment stated that Ireland had experienced net immigration of workers of approximately 55,000 to 60,000 workers, and that this would continue into 2005 and beyond, which is positive. For the economy to continue to prosper and grow, we need a high level of foreign labour. In some sectors of industry, employers find it increasingly difficult to attract suitable employees. This is reflected in higher prices, in companies having to cut down on overheads and make savings, and, in some cases, in the restriction of the expansion of indigenous industries. The service sector, where there has been huge change, probably has most experience of this. Anybody who visits a restaurant or bar will know of the change in the nationality of many of the staff providing services, be they counter staff or waiting staff. It is something we will have to get used to because it will be part and parcel of Irish life and society in years to come.
The success is based on a number of factors. However, a point we often lose sight of, and which is relevant in the context of a Bill that deals with investment funds and international financial companies, is that such companies would not have set up in Ireland but for its first-rate telecommunications systems. Many Members will remember the situation in the late 1980s when one of the most important issues on politicians' desks related to the difficulty for individuals in acquiring a telephone line. Young entrepreneurs of today would laugh if some of the issues common at that time were highlighted.
Major investment took place in the late 1980s under the then Minister for Post and Telegraphs, Mr. Albert Reynolds. There was criticism even at that stage of the level of investment in telecommunications infrastructure. Thankfully, the investment went ahead and, following from that, we succeeded in attracting a number of well known international companies, which set up backroom telemarketing operations here. At a time when a large number of young people were on the unemployment register, such developments were welcome and took up much of the slack when little other employment was available.
The Bill should ensure that the employment content of the international financial services centre will continue to be of significance. The sector is a significant employer, with a total of more than 51,000 employees, of whom more than 17,000 are engaged in the provision of wholesale or international services. Ireland has been very successful in this area. We must continue to update our legislation, the way we deal with international companies and the way we interface with the European Union if we are to stay competitive in a very competitive market.
A recent IDA Ireland report, commissioned by the Department, identified a number of opportunities regarding Ireland becoming the major European centre for specialised debt and financing products. Ireland was also identified as a world-class location for marketing global and regional banking products. There is a general acceptance in the financial sector that Ireland is a good place to come and work. While it is increasingly more difficult to commute in and out of Dublin and throughout the city, it still attracts our European neighbours. The people I have met in the financial services sector enjoy their work in Ireland and the evidence of this is that so many have remained, settled down and become part and parcel of our society.
In a recent statement, the Minister for Enterprise, Trade and Employment referred to the success of social partnership and industrial stability. We often forget how stable are our workforce and industrial practices. Last year was a record year in that strike statistics were the lowest in terms of days lost since 1923. That is an incredible feat when one remembers the events of the past 20 years when we seemed to go from one crisis and strike to the next. In addition, 2004 had the lowest number of disputes — nine — since 1923, which is also a noteworthy record.
A number of factors have influenced the trend of relative stability in industrial relations, including the implementation of the provisions of the national partnership agreement, Sustaining Progress. There has been some criticism of the programme, but in time it will be regarded as another successful strategy on the part of this Government. The Sustaining Progress agreement provides an enhanced role for the Department's dispute resolution agencies, the Labour Relations Commission and Labour Court, when dealing with disputes regarding compliance with the terms of the pay agreement and rights to bargain. Both agencies have a good track record with more than 80% of cases settled at conciliation stage by the Labour Relations Commission and the vast majority of Labour Court recommendations are accepted by the parties.
This Government set up the Personal Injuries Assessment Board and while it is still in its infancy it has had a sobering effect on insurance claims and litigation. The PIAB was established as a direct response to consumer needs with regard to insurance costs. The cost of insurance escalated over the past three years and something had to be done. I commend the former Minister, Deputy Harney, for the initiative and on her single-minded determination to establish the board. Since July 2004 all motor, public, employer liability and personal injury claims must be referred to the PIAB before legal proceedings may be issued. The legal profession is anything but happy about this development. However, if it succeeds in reducing the cost of insurance to the general public, industry and the commercial sector it is a worthwhile project and will be regarded as such in time.
The establishment of the PIAB was one of the key initiatives in reforming the process of the delivery of compensation in personal injury claims. Using the Book of Quantum as an aid, the amount of compensation received by claimants will continue at a level equal to that awarded before the establishment of the board while delivery costs and time frames will be greatly reduced. This will benefit the consumer, claimant and public in general. The PIAB has made its first awards within the nine-month period required by legislation. This is a major improvement for accident victims who previously waited years for compensation. We have all heard of claims that went on for three, four or five years. Some of the claimants were dead before the case eventually came to court.
While compensation levels have remained constant, the cost of delivering the awards and the time lapse involved have been significantly reduced, by years in some cases. The awards were made within nine months of the claims being made to the board. Excessive litigation has been removed as the processing costs for claims are, on average, €1,250 in the PIAB process. Claimants may choose to be legally represented at their own cost, which is important to note. The injured party receives fair and prompt compensation. The fact that 80% of awards have been accepted illustrates a high level of satisfaction with the process. The more we put into this the more the public will see the benefit of using the system.
I commend the Minister for bringing this legislation before the House and I hope its passage is speedy.
I welcome the opportunity to speak on this very complex Bill, which proposes to make a number of changes to the existing law with regard to investment funds and general company law. It will pave the way for a smooth transition of certain EU directives. In addition, there are some amendments to consumer law and it will increase the level of maximum fines that can be imposed on parties found guilty of breaches of specific consumer legislation. The Bill aims to consolidate and build on the success of the Irish Financial Services Centre while tightening the regulatory regime relating to market abuses and increasing the fines for certain consumer protection legislation.
The industry has been calling for this legislation for some time and the Government's way of dealing with the matter is lamentable. More than 17,000 people work in the IFSC and there is little room for complacency when it comes to improving the environment, although Government parties appear guilty in this regard. Not only are they complacent about having one golden goose, they are also laid-back with regard to the future of these companies. However, Fine Gael welcomes the legislation, which sets out a high standard of regulation in that the consequences for abuse could be catastrophic.
Investment funds contribute to the economy but their activity is centred on the IFSC. The investment funds sector employs just 1,000 people outside of Dublin and this low figure will be augmented by yesterday's announcement that PFPC International will create 490 fund administration jobs in Wexford and Navan. Jobs are welcome in these areas, but I hope in future some of these jobs might be created in my region of the mid-west. We have lost many jobs in the area in recent times, particularly in manufacturing industry. Deputy Nolan said earlier that much of the manufacturing industry appears to be going to countries such as Morocco, India and so on where labour is much cheaper. Ireland must change in terms of the types of jobs we attract. We will also have to have a more educated workforce. I am aware the jobs announced yesterday were specifically for graduates. That is an indication of the importance of the role universities play in educating young people for today's economy.
I referred earlier to PFPC. That company has recognised the position in which Dublin now finds itself. We all know Dublin is overcrowded, congested and expensive. It is difficult to recruit and retain well qualified workers in Dublin. I recognise the attractions of Wexford and Navan. The mid-west has major attractions also, particularly in terms of infrastructure. I assure the Government there are equally attractive locations in our area west of the Shannon. I highlight in particular the importance of Shannon Airport and the role it plays in job creation along the western seaboard. It is said that 40,000 jobs depend on the airport. Shannon is an engine for growth in the western seaboard region.
It is important that the airport continues to have a full daily transatlantic service to serve the industries located in the industrial estate. More than half the companies in the industrial estate in the Shannon Free Zone are American and the importance of a direct transatlantic service to the United States, where many of those companies have their headquarters, cannot be underestimated. Such a service is important because if a breakdown occurs in a company, spare parts can be brought in as quickly as possible to the industries in Shannon thereby allowing work to continue. The Minister of State, Deputy Ahern, is a Munster man, being from Cork, and I ask him to ensure that transatlantic service continues on a daily basis, regardless of what happens in terms of the open skies policy and whatever deal is brokered in the future because the service is imperative to the region.
I note that the Minister for Enterprise, Trade and Employment, Deputy Martin, has urged other financial services companies to do as PFPC has done in Navan and Wexford, namely, examine the reasons behind that company's decision to choose a regional location. I assure him there are many more areas outside Dublin and the east coast where these jobs would be more than welcome. I read a report inThe Irish Times some time ago on job creation which indicated that more jobs were being created on the east coast than on the west coast. That would be unfortunate if it were to happen. I am aware the Minister is doing his best in that regard and, as Minister with responsibility for trade, that the Minister of State is doing the same. Investment follows infrastructure, not the other way around, and the Irish Financial Services Centre project, in fairness to its founder, is proof of that.
The Government parties' fascination with large, over-priced road projects appears to be preventing it from seeing the bigger picture. It is not just about a second terminal at Dublin Airport, which is necessary, but also about Shannon and Cork Airports. It is not just about motorways but also the information superhighway. It is not about keeping in with the horsey set at Punchestown. It is also about investing in regional rail services and developing new spurs that are important for industry.
The Minister of State's colleague, the Minister for Transport, Deputy Cullen, was in Mayo last week to announce the Government's support for the western rail corridor. It is unfortunate he did not announce a timetable for that, which is necessary. I am aware the Government is committed in terms of a ten-year programme. The Taoiseach made it clear in the Dáil that he is committed to reopening the western rail corridor. If that line were reopened, it would be very important for industry in the western region. Railways are the way forward for the future. The damage being done to roads throughout the western region by trucks carrying cargo for companies is unbelievable. There is continual road restoration work on motorways because of the damage articulated heavy goods vehicles cause. I hope the Government will see the light — I know it is committed in this regard — and publish a timetable to open the western rail corridor, particularly linking the cities of Galway, Limerick and Cork. Opening the Ennis to Athenry line would create that link which would be important for industry in the western region.
The spur line I mentioned earlier would be important also. To be fair, there is a very good road network in Clare, particularly the N18 and the new motorways into Shannon Airport. As the Minister of State is aware, a bypass is being built around Ennis. It is an ongoing project which is due to be finished in the next two years, but there is a great deal of traffic in the town which makes it an unattractive place for industry. One cannot fly a company director into Shannon, assuming one can get a flight into Shannon, and bring him into Ennis on a Friday evening because of the traffic gridlock in the town. Ennis is not an attractive place at present but I hope when the bypass is completed in the next two years it will become an attractive area for industry to base itself in.
Last month, the Ennis information age park was opened. I went to see it the other day and it is a fantastic structure. It has many bays and is very attractive for foreign investment, particularly in the telesales and financial services sector, the subject of the Bill being debated. When the infrastructure is in place, I hope that IDA Ireland, Shannon Development and Enterprise Ireland will try to encourage companies to move into this area, which is very important.
Broadband is vital for industry and for financial services, especially in rural areas. The lack of broadband is not helping industries to set up in rural areas. When trying to access the Internet, there is no comparison between the ISDN line in my constituency office and the broadband available to us here in Leinster House, although I understand they will be changing that later in the year. Technology is moving ahead quickly and we must move with it.
The failure to bring broadband to rural areas is highlighted by the contrast in the success of broadband in Northern Ireland which, through a public private partnership scheme, has enabled the introduction of broadband access to every household and which will offer access to 100% of the population by the end of the year. Having broadband in one's home is an excellent service. There are more broadband users in the North than in the Republic. I hope the northern venture will be a success and that we have the imagination to examine what Northern Ireland has done in regard to broadband. We must be competitive in that regard if we are to attract international industry. The Republic's record on broadband access is not good. Notwithstanding the success of the IFSC and the general financial services sector, it cannot continue to limp along with an antiquated communications infrastructure.
Shannon town was built in the 1960s as part of the development of the regional economy, but despite having the distinction of being the only State created town it still awaits 19th century infrastructure. It does not have a rail link, which would be important not only for the town itself and the industrial estate but also the airport, particularly with the new services announced recently by Ryanair. The rail link is years down the road. A study has been done and I know the Minister for Transport supports the rail spur into Shannon, and the route has been sterilised by Clare County Council so provision has been made for it. The success of the Ennis-Limerick railway line has surpassed the expectations of Iarnród Éireann as industry and workers use it. We also still await integrated broadband access.
Despite these infrastructural gaps, Shannon has made some headway in attracting financial services companies. Some 16 companies are directly involved in the financial services in the Shannon Free Zone and they employ approximately 800 people, which represents 10% of overall employment in the zone. These companies work in asset financing, treasury management and trading in intellectual property rights. Disappointingly there is no financial assistance provided for this sector. The main benefit of locating in Shannon is the availability of the low corporate tax rate. Although the IFSC is the fourth largest re-insurance centre in the world, companies in insurance and re-insurance underwriting have found their way to Shannon and eagerly await the bridging of the infrastructural deficit.
Unfortunately Ennis, the vibrant capital town of Clare, has become more of a dormitory town than an industrial town because of the fact that major industry has not located there over the past 14 years. Last week a successful company, Organic Lenses, took on 100 more people. We are hopeful that the Ennis Information Age Park will attract financial services companies.
In 1997 or 1998, Ennis was designated by Eircom as the information age town. Since then Eircom was privatised and there has been no job creation in the area. A lack of foresight is all too apparent in the late appearance of the Bill. The Government must genuinely look beyond Dublin for job opportunities which cannot be allowed to pass. Everybody recognises Ireland has developed into a significant international centre for the administration of international investment funds and as a major international funds jurisdiction. Unfortunately, this development is largely in Dublin and I will continue to highlight that throughout my contribution in this debate. The financial services industry should be spread to the west coast but to do this we need infrastructure and communications.
The funds industry directly employs approximately 6,500 people and approximately 1,750 people in direct support services along with indirect employment in the IT industry and elsewhere. With employment levels in fund companies projected to grow by 15% this year the arrival of this Bill into the House is well overdue. The funds industry informed the Department of the pressing need for this legislation many years ago. When it is enacted it will provide the framework for the pooling of assets by institutional investors, a system which would also help those in other jurisdictions. Investment companies, two thirds of which comprise international fund companies, will benefit from the long overdue provision for segregated liability where investors in sub-funds will be subject to the appropriate risks and liabilities, and the facilitating of cross-investment between sub-funds under the same umbrella.
The Bill will provide the framework for a regulated investment fund structure allowing for the pooling of assets by institutional investors and will bring legislation in line with best international practice. It builds on the foundations on which the funds industry was built, a legal and regulatory framework which when it is adopted will change the need for industry in this country. I welcome the opportunity to speak on the Bill.
I commend the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Michael Ahern, on the introduction of the Bill. It represents a significant development in the international investments funds business in Ireland. There are multiple reasons that leading global financial institutions have been attracted to Ireland but the most notable are the attractiveness of the fiscal and regulatory environment and the availability of highly skilled and educated workers. It is a duty of Government to maintain such attractiveness as the reward is substantial. Ireland has a thriving financial services sector, which employs 51,000 people and contributes at least €700 million to the Exchequer annually. I commend IDA Ireland and the Government on seeking to boost Ireland's attractiveness as a leading location for financial services. I also recognise the major role played by former Taoiseach, Mr. Charles J. Haughey.
Maintaining a competitive edge requires continued review and reform because the global market continues to evolve and dwelling on past success is not an option. Based on my experience in business before I entered the Dáil, one must innovate almost on a daily basis. The Government must continue to be innovative to ensure continued progress and the legislation has been introduced with this in mind. Speaking in the Seanad the Minister of State, Deputy Ahern, outlined the importance of the funds industry and its growth over the past 15 years. He also detailed the legislative change that has occurred pertaining to funds vehicles.
As the Minister of State, Deputy Ahern, stated, the Bill seeks to provide the greatest flexibility to the funds industry while maintaining appropriate controls. The legislation will therefore make a number of important changes to existing law and it proposes a number of other changes to general company law, including some important and welcome provisions.
The Bill provides the general legal framework for the dedicated asset pooling structure, the common contractual fund, CCF, and for a new investment vehicle. It introduces segregated liability at sub-fund level for investment companies and it provides for the cross-investment between sub-funds and investment companies. I particularly note the new contractual fund, a highly tax-efficient scheme for the pooling of pension fund assets. Tax experts have predicted that the new pension fund will be attractive for a wide range of investors and hedge funds. The pooling of pension funds promotes cost savings through economies of scale, particularly for smaller pension funds which benefit from a reduction in administration costs as well as custodial and management fees.
Nowadays, one cannot pick up a newspaper without reading about the importance of creating a pension fund. This initiative will help individuals to start such funds. The Bill is further evidence of the continuing evolution of Ireland's legal and regulatory environment as it responds to and anticipates the needs and trends of the global funds industry. This legislation will reinforce Ireland's position at the forefront as a jurisdiction of choice for domiciling investment funds.
The Bill is also proof of the continuing benefit of the unique partnership arrangement in Ireland whereby the Government and the financial services regulator work together with industry without compromising their individual mandates to ensure that Ireland remains the location of choice for the international funds industry.
Given that the legal environment provides the tools with which the investment funds industry builds its products, this Bill will enhance the attractiveness both of the products and product range available from the jurisdiction. In addition, it will further enhance Ireland's attractiveness as a domicile for investment funds.
The objective of the investment funds provision is to give the greatest flexibility to the funds industry, while at the same time keeping appropriate controls in place. The previous speaker, Deputy Pat Breen, referred to this point but the Minister of State has ensured that such controls are in place, which is welcome. The industry is anxious to have a portfolio of fund vehicles available which is as broad as possible to improve further Ireland's attractiveness as an international location for the establishment of investment fund companies.
The Minister of State, Deputy Michael Ahern, has indicated that the Government will continue its support of the funds industry by responding appropriately to the new challenges which are presented by this ever-changing global marketplace. The funds industry is operating in a highly competitive environment and I urge the Government to continue to give all the necessary support so that the industry can prosper while at the same time offering its clients appropriate safeguards which are of the utmost importance.
The Bill seeks to ensure the continuation of conditions that have encouraged the industry's growth to date. These include openness, flexibility, competitiveness, co-operation and an internationally focused legal and regulatory framework. The legal framework represents the bricks and mortar with which the industry creates its products and services. However, with the pace of change, the evolution of product structures and the drive for efficiency, only an appropriate legal framework will satisfy today's demands. To anticipate and reflect tomorrow's considerations, the Government has decided to establish a dedicated section within the Department of Enterprise, Trade and Employment with responsibility for developing the investment funds legal framework.
The impact of this development has been immediate with the publication of this Bill. I am pleased that the Minister of State is proposing to increase penalties for persons convicted of corporate offences, including insider trading and making false statements on a prospectus. This is intended to provide greater protection to consumers and investors. This is of the utmost importance to the public which is, on the one hand, encouraged to invest but, on the other, is fearful of corporate mismanagement and corruption.
The Bill's key provisions include increased penalties for the misuse of price sensitive information. The Bill provides for penalties on conviction for serious market abuse offences of fines to a maximum of €10 million and-or ten years in prison. A person who breaches the insider trading laws will be liable to compensate parties involved in the transaction who did not have access to the information and suffered loss as a result. In addition, he or she will be required to account to the company for any profit made from the transaction.
Certain persons involved in the issue and promotion of the prospectus and the offer of the securities, including directors of the issuer, promoter of the issuer and those who guaranteed the issue of the securities or authorised the issue of the prospectus, will be liable to compensate investors who suffer loss as a result of any untrue statement in a prospectus.
The Bill also provides for an increase in the maximum penalties imposed under various Acts for breaches of consumer protection laws. Legislation such as this, combined with the expertise developed and experience gained over the last decade, will continue to attract inventive and visionary people. The legislation will also ensure a place for Ireland in the infrastructure of an increasingly competitive global funds industry.
The Government showed the legislative and regulatory foresight necessary to ensure that Dublin has become a premier financial player. This Bill shows a clear commitment to build on those sound foundations, thus ensuring that we will remain a key investment fund jurisdiction. If we succeed in this respect, the opportunities will be manifold.
Deputy Pat Breen said earlier that telecommunications is an important element in attracting foreign investors, and I agree with him. The former Taoiseach, Mr. Albert Reynolds, began work on modernising the telecommunications sector while holding the communications portfolio. He made great inroads into that business. Before being elected to this House, I worked with Telecom Éireann which was later renamed Eircom. I recall that when I worked in that sector, my colleagues and I spent most of our time explaining to people who had been waiting for telephone lines for seven or eight years why they could not get them. Thankfully, that situation has changed and I compliment Eircom on its work in that regard. The availability of modern telecommunications, including a modern telephone network, was a key factor in attracting foreign investment. Such modern facilities constitute a priority for investors who wish to transact their business on a global scale. I pay tribute to the former Taoiseach, Mr. Reynolds, for having brought that about.
I thank the Minister of State for having introduced this innovative Bill which I commend to the House.
I welcome the opportunity to speak on this Bill which represents a major development in the international investment funds business in this country. Ireland's exceptional success over the past 18 years in attracting international financial services companies has received worldwide acclaim.
The list of international companies with operations here is a veritable who's who of the international financial services sector. They include Citigroup, JP Morgan Chase, ABN AMRO, MBNA, Merrill Lynch, HSBC, Bank of New York, ING Group, Unicredito and AIG, to name but a few. These companies were attracted to Ireland for a variety of reasons, including our attractive fiscal and regulatory environment as well as the availability of a highly skilled and educated workforce. One of the country's biggest assets is its willing workforce that, for the most part, has been educated to third level. Foreign investors spotted that fact which, in turn, boosted our financial services sector. We had the necessary product which was ready for the market.
There were also the distinct advantages of political stability, a telecommunications infrastructure that was considered robust at the time, 18 to 20 years ago, and an effective marketing strategy. The telecommunications infrastructure may now be considered somewhat out of date, but we are moving in the right direction to modernise it.
Few would dispute that the global financial services industry is undergoing a process of major change. Advances in technology and the impact of globalisation have resulted in radical changes in business models and European Union initiatives, such as the financial services action plan, have been partly instrumental in the European market becoming more integrated.
In the past seven years Ireland's attractiveness as a location for international financial services has also undergone major change in a favourable corporate fiscal environment. Returning emigrants from the United States and United Kingdom and immigration from countries which recently joined the European Union have helped to supplement the availability of skilled labour. Although people fear that Ireland will be flooded with immigrants, we need to continue to attract skilled labour from the new member states.
The Bill provides for the continuing development of the investment funds business. The administration of funds domiciled in other jurisdictions and asset management and custody services are instrumental in the growth of the funds sector. The domiciling of investment funds here will be facilitated by the legislation which reinforces Ireland's pre-eminent position in this area.
The International Financial Services Centre has been the focus of significant growth and progress for almost 20 years and employs upwards of 17,000 people. Approximately one third of the workforce in the centre is employed in the funds industry which has a throughput of several billion euro per annum. Since the early 1990s, extraordinary growth has been achieved in the funds industry, undoubtedly as a consequence of Dublin's international reputation for funds administration, management and servicing. Annual growth in funds has been exceptional, with an increase of 20% recorded for 2004 over 2003 and a phenomenal increase in non-domiciled funds in 2004 of more than 40%.
While few envisaged that the growth of the IFSC would scale such dizzy heights when it was built in 1987, it was recognised at the time that there was a niche in the market and this has been filled beyond the expectations of most people. When the market opportunity was identified in those far-off days our legislators did a good job by quickly drafting the enabling legislation. The rest is history. No one could have envisaged the degree to which we have been inundated with business. Financial services continue to evolve at a rapid pace and our legislation must be constantly adapted to keep abreast of developments, hence the necessity to effectively regulate all new products and activities in the market and reform existing ones.
The overriding consideration must be to keep our investment environment competitive to attract more companies to establish operations here. In contrast to many other areas which are regarded as havens for hot money, Ireland has developed an enviable reputation for integrity in the financial services field, which has enhanced our competitive position. In sharp contrast to the position here, some other locations are constantly open for business and welcome hot money with no questions asked. We have learned recently of cases in which other countries were used to set up money laundering and similar operations. Thankfully, we do not have a reputation in this area which is reason to be proud.
It is important that IFSRA, with its vital policing role, is given resources to carry out its function in the most effective manner possible. Many consumers rely on brokers and financial institutions for advice about investing money. In many cases, consumers' savings are invested on their behalf in funds to generate an income on retirement. It is vital that such investments are properly regulated on behalf of consumers, particularly as large reputable insurance companies have mis-sold products on which tax was paid in the past. With a Revenue deadline of 23 May imminent, it is essential that we avoid a recurrence of this type of mis-selling. People invested their pin money, profits from cattle sales or grant payments in an insurance policy, the value of which grew. The insurance companies may have collapsed or been acquired by another company in the meantime, which has left people unable to provide evidence of the source of the initial sum. Some elderly people aged in their 70s or 80s cannot sleep at night due to anxiety about explaining their position to the taxman, even though they know they were clean and not in the tax net at the time of their investment. Such tragic cases must be avoided in future. I propose that the ceiling of €20,000 be raised to €100,000.
The individuals in question will have nothing to explain if they were not in the tax net.
The difficulty is they have no way of proving they were not in the tax net. A small group of vulnerable people is affected by Revenue's plans in regard to insurance investments. Some of them cannot eat or sleep because of what is happening. As we have not yet reached the deadline, I propose that action be taken to address the issue because it will send people to an early grave.
A recent case of failure to refund insurance premia when loans were repaid early was brought to public attention by IFSRA's consumer section. This was another example of the authority's important role in highlighting abuses. The company law provisions in the Bill appear to be realistic and eminently reasonable. It is self-evident that changing circumstances require regular consolidation of company law. The rate of development nowadays is such that consolidation of company law will need to be revisited more frequently than has been the case hitherto. The accepted timeframe for consolidation of taxation law is ten years. It would be reasonable to take steps to make company law more accessible and understandable to foreign investors.
The sections dealing with market abuse and the penalties involved go a long way towards beefing up our laws on money laundering and insider dealing. Insider trading laws were initially introduced after the stock market crash of 1929. Examples of circumstances in which insider dealing occurs include projections of future losses or acquisitions; mergers or tender offers; news of significant sale of assets; changes in dividend policies; and impending bankruptcy or financial liquidity problems. In short, the practice can occur when material information becomes available which could reasonably affect the price of the stock. Given that the 1929 laws have not prevented insider trading, further legislation is necessary but new ways of circumventing this type of legislation will require us to continue to review penalties to discourage the practice.
The line between legal and illegal trading remains murky and this will probably continue to be the case because it suits certain quarters. For example, a person who overhears two company executives discussing a deal on an aircraft or discovers a company memorandum left behind on a seat, neither of which is an unlikely scenario, may use this information to trade to his or her heart's content because he or she would be exonerated in any subsequent investigation.
Maximum penalties of €10 million and-or ten years' imprisonment for transgressions in this area, while new to Ireland, are somewhat conservatively pitched when compared to penalties for similar offences in the United States. In this context, one recalls the junk bond scandal in the mid-1980s when Ivan Boesky and Michael Milken were fined $100 million and $47 million, respectively, in addition to receiving long stretches in prison. In more recent times, the case of Martha Stewart, America's trend setter in domestic matters, captivated the US public when she was jailed for five months and fined a paltry $30,000. Her crime was to offload $225,000 of shares in a biotech company, ImClone Systems, in December 2001, just one day before federal regulators turned down a review of a cancer drug developed by the firm. The judge took into account her loss of freedom, reputation and prestige in arriving at the penalties imposed.
Insider dealing is regarded as a white-collar crime and this Bill sets out certain penalties to deal with it. More adequate treatment for such offences would be that anyone found trading on inside information must pay the Government an amount equal to the profit made in addition to other penalties. Anyone found guilty of lying, misleading or providing false information to a market abuse investigation should be subject to heavy penalties. EU directives in this matter bind us, however, and our legislation must comply.
The Bill provides the legislative framework for an Irish-authorised and regulated investment fund structure that will allow for the pooling of assets by institutional investors. Pension schemes are operated by multinational companies in different jurisdictions for the benefit of employees in those jurisdictions. Economies of scale result in cost savings being made when these local pension funds are pooled, including a reduction in management fees, administration costs and custodial fees. Also, the pooling of assets permits smaller, individual funds to diversify their risk by using a larger number of investment managers than if they were operating on a stand alone basis.
It was emphasised that this Bill is designed for the financial services sector in Dublin. It is important, however, to remember that smaller business parks exist in rural areas, such as the Lough Egish business park in County Monaghan. If an international investor looked at the situation in that business park, he would see it does not have broadband and there is no way he would give it a second's consideration. Heroic efforts are being made to expand broadband across the State, with almost every town being dug up to lay broadband cable and this will prove to be a fantastic service. In Lough Egish, however, 12 companies are operating successfully and expansion is possible but it will not happen without broadband. If consideration was given to bouncing the signal from point A to B, we could overcome such difficulties.
In smaller towns, a small number of jobs would mean a great deal if they had adequate encouragement and support. It would give real meaning to decentralisation. Early this year we heard a great deal about decentralising but there are major difficulties with the project, although the intentions are good. The concept however, is to be welcomed. We could start by developing small centres. MBNA has offices in Carrick-on-Shannon and there is no reason we could not encourage such a business into an area like Cavan and Monaghan.
That is what decentralisation will become: international companies locating in small towns. An educated work force will be willing to move to them and that would then make them more attractive for Departments from Dublin. These issues must be addressed.
The IDA and Enterprise Ireland should not forget rural areas. We should ask about the number of jobs those agencies have attracted and how we will rebuild rural areas. We talked about hub towns and gateways but no real meaning was given to them. It was a nice strategy that got a week or two in the news but it has not delivered. Those ideas are good but they must be backed up.
I welcome the opportunity to speak on this Bill. We would all wish for the best for our own areas and we all know how many jobs the Irish Financial Services Centre has brought to Dublin. That is the problem — the west has not been offered the employment opportunities that exist in other areas.
I have often spoken about the need for a tax incentive scheme for the west, particularly Knock Airport. The Government is talking about the number of people using Dublin Airport increasing to 38 million from the present figure of 17 million, and discussing a third terminal. There is a terminal on the west coast at Knock Airport that is strategically located and could take many of those people away. It is projected that 500,000 will use it this year, compared to 17 million using Dublin Airport. It does not make sense to build more terminals at Dublin Airport, it would be better to develop the terminal at Knock Airport and think about building a second terminal there.
The situation in Knock should be recognised by Government, with investment there underpinned by a tax incentive scheme. There should be a financial services centre at Knock Airport to achieve balanced regional development.
I do not condone tax dodging, everyone should pay his or her fair share. There is, however, currently an anomaly where people in their 70s and 80s are being unfairly included in a trawl by the Revenue Commissioners where their aggregate investment in insurance company schemes exceeds €20,000. This Bill deals with provisions for investment funds but it is connected with people who invested in good faith. In many cases the initial investment was very small, around €2,000, but the fund grew over the years due to re-investment in other insurance companies by the investment manager. He took this money and moved it around on people's behalf. The small investment grew rapidly in the late 1970s and 1980s, with gains of 30% per annum. The accumulation of money from that re-investment by investment managers has driven many thousands of older people into the tax net who would not be liable based on the original amount invested. In many cases the original amount cannot be traced due to many of the original insurance companies going out of business, such as Norwich Union, Royal Life and Abbey Life.
While everyone must pay his or her share of tax, it is grossly unfair that the Revenue Commissioners are going back 25 years to go after small people who invested small amounts of money. No tax may be owed but, as is often said, old people who have no tax worries are the ones who worry most. Older people tend to worry about money and making ends meet. Now this terrible load has been put on them. It will be argued that if they have no tax to pay, they have nothing to worry about.
Many of these older people who took out insurance policies must make a declaration to the Revenue Commissioners by 23 May. A quarter of a century ago, people would put aside a few bob for a rainy day. Those individuals are now expected to account for all the original investment. How many Members can remember transactions from 25 years ago? This is unfair treatment of older people in their 70s and 80s, particularly when the Government will use the statute of limitations. It will impose a limit of six years for its liability to limit payments to older people while still engaging in a tax trawl of 25 years to investigate older people for minimal investments.
In the mid-1970s when these investment type products were launched, the largest supplier and market leader was the State-owned Irish Life Assurance. Before 2001, the glossy brochures stated under the heading "tax" that all returns from the product were taxed at 24%. Irish Life claimed it paid the tax for the client. When the product was cashed in, there was no other tax for the client to pay. After 2001, the brochures stated that due to changes to exit tax provisions by the former Minister for Finance, Mr. McCreevy, the tax due was calculated at a standard rate of tax applicable at the time of encashment plus 3%. Hibernian Life and Pensions Limited stated in its brochure that it would deduct this tax and pay it to the Revenue Commissioners on the client's behalf. Many elderly people, particularly in the west, find themselves in this situation. The Government did well out of these products as it received the tax on the gains over the years. However, now it is pursuing the initial investment. This money was used in these investments to build property on the east coast. The Government has already got its pound of flesh out of older people.
I am not in favour of letting anyone who avoids tax off the hook. I do not condone the actions of those who invested large sums of money to avoid tax. However, the thousands of small investors, thinking of the rainy day, have been treated unfairly. They are being treated in the same way as the large tax dodger with the same penalties, possible prosecution and naming and shaming. These are the small farmers who supported Fianna Fáil in the past but will no longer do so.
The Deputy is simply twisting the facts.
Many of them were on the farmers' dole and, therefore, not liable for tax. Some got a few bob from a headage payment and put it aside for a rainy day or for the education of a son or a daughter. They have paid their taxes over the years, as claimed in the brochures. Before 2001 it was taken out of returns on the investment. After 2001, it was taken out as an exit tax. The Revenue Commissioners do not understand or even care that there is an inherent unfairness in this process. People do not have the money to pay and are worried sick and desperate that it will wipe out their life savings. For those deceased, their estates will be liable.
I accept that in some cases there is tax owing, but at the time so many people were not in the tax net. Whose fault is that? It is hardly the fault of the older people. Some 25 years later the Government is seeking this money from people, scared out of their lives, who are in their 70s and 80s. While some have telephoned the Revenue Commissioners' helpline, the majority are afraid to do so. In six days time, these people must make a declaration to the Revenue that they have not paid tax on their insurance investments or else face increased penalties, naming and shaming and possible prosecution. Many are not sure if they paid the tax when opening the investment and many companies involved have gone out of business. I ask the Government to intervene in this matter. Why should the trawl go back 25 years when the Government has limited its liability to six years? Why should the lower limit for the threshold be £20,000 or €14,000?
The Bill is also concerned with penalties. The Department of Enterprise, Trade and Employment has incorporated new provisions to raise the level of penalties in the core consumer legislation enforced by the Office of the Director of Consumer Affairs in sections 68 to 74, inclusive. Legislation includes the Sale of Goods and Supply of Services Act 1980, the Consumer Information Act 1978, the Package Holidays and Travel Trade Act 1995, the National Standards Authority of Ireland Act 1996, the Restrictive Practices Act 1972, the Prices Act 1958 and the Consumer Credit Act 1995. Penalties ranging from €127 to €1,905 are to be increased to €3,000, with the amounts for continuing offences and convictions also increased proportionately for breaches of consumer protection legislation.
The Director of Consumer Affairs raised the issue of the low level of penalties in consumer legislation in two consecutive annual reports. It was felt that dealing with this issue was a matter of urgency that could not await the outcome of the current review of consumer legislation. The section concerning the Package Holidays and Travel Trade Act 1995 was recommended by the Director of Consumer Affairs and the Department of Transport. It will be welcomed by holidaymakers as it increases the timescale within which a prosecution may be taken from 12 months to two years. This takes into account that since the original legislation was enacted, holiday brochures are published earlier and consumers, likewise, book their holidays earlier.
Many in the west believe the Government has given up the ghost in securing manufacturing industry there. IDA Ireland is charged with securing manufacturing jobs but it has been an abysmal failure in the BMW region. In County Mayo, IDA Ireland factories have been sold off to retailers such as the one in Ballina which is now a magnificent car showroom and the Volex factory in Castlebar which is another car showroom. What about those still involved in manufacturing? These companies are being induced to locate in China. However, they have given commitments to the area and provided employment. Many of them would love if the Government had confidence in them to continue their investments in the west. Manufacturing, fishing and agriculture are all in decline, leaving only services. However, jobs are needed to support the services.
Everything will be depressed in the west with all this negativity.
In rural villages in the west, small businesses find it impossible to make ends meet as their overheads are so great. However, their overheads are on a par with businesses in O'Connell Street in Dublin, with the same insurance, heating and staffing costs, and regulations to enforce. They must ensure the fire officer, who can be very hard to please, is kept happy. These factors and costs put a major onus on these small businesses, particularly those in the tourism industry, which has a short season. In the west, the tourism season is even shorter. A special concession should be given, or perhaps a special VAT rate, to provide people with some semblance of equality, particularly in the west in small villages like Achill where people find it hard to survive. It does not make sense, because balanced regional development cannot work if people are leaving the area, and half our graduates must do so because they cannot find work in the west. They must go to the greater Dublin area, which puts more pressure on that congested area. If Dublin were a boat, it would now be submerged under the ocean — the east coast would be submerged.
To develop Knock Airport, for example, makes great sense. Some €30 million is needed this year for a category 2 landing system at Knock. This would reduce the number of diversions, which is small, and would also put the airport on a level playing pitch with Dublin, Cork and other airports which have such facilities, and give Knock flights rapid turnaround times. The airport needs the space and investment. Jet aircraft, which are getting larger all the time, can land at Knock Airport, which has a runway second to none, but the turnaround time is limited because the apron is inadequate for those aircraft. Government investment is needed in the airport. That would be more logical than pouring more money into Dublin, which is already congested.
Industrialists are now finding out the truth of the matter. US-owned financial services group PFPC International moved from Dublin originally because it found it very difficult to hire and retain people in the Dublin market. It said its decision to invest outside Dublin was motivated by the availability of workers rather than cost considerations. The biggest factor was that it wanted to continue to grow.
Government must wake up. The CEO bells are ringing. Dublin is so congested that it can no longer move. Traffic is reduced to ass and cart pace and people find it impossible to get in and out of the city. The same is true of Dublin Airport, where queues of people wait. One has to allow another hour or two when flying from there. It does not make sense, when Knock International Airport lies almost fallow in a very strategic location in the BMW area and serves 13 counties. Why not put an international financial centre there? That could do the same for the BMW area as it did for Dublin. There is a great need for proper investment in the west and this would be one way of providing it.
A sum of €365 million for the western rail corridor is a pittance compared to what has been spent and will need to be spent to sort out the congestion of Dublin and the chaos people face trying to get in and out of the city. The Government is now thinking of establishing a third Dublin airport terminal in a city where the numbers going through the airport will reach 38 million annually by 2025. That is an astounding figure when one considers that 500,000 people will pass through Knock Airport this year and more than 17 million will go through Dublin Airport. It does not make sense to leave half the country virtually fallow and underdeveloped while continuing to plough money into the attempted relief of the congestion problems in Dublin.
More companies will move out of Dublin. Should the IDA and the Government be providing money to coax industry to Dublin, a totally congested city? Why not remove those grants, or double them for companies coming west? That would be a positive move. The current decentralisation is not helping. There are wonderful companies in the west, such as Allergen in Westport which manufactures ocular lens solutions. These companies have proven themselves. They have put up with the existing infrastructural deficit and proved that in the west they are second to none as manufacturers. Why does the IDA not encourage people to go west when one considers that in the north and west Mayo area, 1,000 jobs were lost in the past few years? That is a great number of jobs. The situation does not make sense.
I congratulate past Governments on the success of the Irish Financial Services Centre, which boasts annual premiums of €13 billion, making it the fourth biggest reinsurance centre in the world. Surely that money could be spread around and not just kept in Dublin. I support the Bill but I hope that Government will take on board what I have suggested.
I am delighted to speak on this important Bill. Deputy Cowley has made a great case for a west of Ireland Taoiseach.
That was in Private Members' time.
I have no doubt that when the vote is taken for Taoiseach, he will endorse the Mayo man for that job. One can see the huge imbalance between east and west. I fully agree that there is a lack of development on the west coast compared to the east coast, and a lack of investment in Knock Airport, with its potential as an international airport. Given the potential of low-fare airlines, I will be calling on Ryanair to include in its hub Knock Airport, where there is an extensive runway and substantial capacity. As Deputy Cowley asked, why build a second terminal in Dublin when passengers could be brought to the west, to Shannon Airport but preferably to Knock Airport?
They could come to Cork Airport too.
The capacity is there on the west coast. Deputy Cowley's point is valid. Dublin's capacity does not compare with that of the west, so why not have low airfare flights to the west, allowing people to travel from the west if they wish to go to Dublin or to go south. That would allow a real choice and a spread of wealth. When Deputy Kenny is appointed as next Taoiseach, I am certain that the level of imbalance will be corrected.
The level of debate about the Dublin Airport terminals is astonishing. Even Michael O'Leary——
A convert to Fianna Fáil policy.
I am disappointed that Michael O'Leary would not look at the development of his airline business on the west coast. This is a very small country and people would travel from Knock all over the country. This would enhance the development of the western region.
Regarding the West on Track movement, I hope the report due from Pat McCann will ensure that we will not get a piecemeal approach. I hope we will get investment in the railway line all the way from Sligo to Limerick. It seems there is a possibility that the job might only be done in stages. It would be quite extraordinary if the railway line did not come via Knock Airport when the Minister for Community, Rural and Gaeltacht Affairs, Deputy Ó Cuív, is opening his Department at Knock Airport. I would be astonished if the line were to merely stop at Claremorris and not come via Knock, Charlestown, Tobercurry, Collooney and Sligo. That is what is needed. The potential railway cost of €365 million is not a great deal when one considers that the cost of Luas was underestimated by €300 million and cost almost €1 billion. There is an opportunity to open up the entire western coast. We are talking of investment funds, but regarding investment in the west we no longer need lip service. We need action and investment. Coming up to the next general election, over the next 12 or 18 months, people do not want a plethora of promises and commitments that the fund will be provided. We have heard such promises before. On this occasion the electorate will not be fooled. People want signed contracts, a guarantee that the work will commence and that the western track from Sligo to Limerick will be firmly committed to, along with a development timescale.
Deputy Cowley made an important point about Knock Airport.
It is a fantastic facility which is under-utilised. It has huge capacity and is run by an excellent general manager, Liam Scollan, and a good board. I am astonished that some of the main carriers would not take a vote of confidence in the west and land aeroplanes in Knock, Shannon and Cork. All development need not take place in Dublin.
Ireland has become an attractive and competitive location for financial institutions and services. I support this Bill. I believe it will benefit the sector and, ultimately, the economy. Companies find Ireland appealing because of our highly skilled and educated workforce, our political stability and the attractive fiscal and regulatory environment we offer. To remain attractive, however, Ireland must remain competitive on the international scene. We simply have no other choice.
Our regulatory environment is a key component of our competitiveness and international reputation. Our low tax rate is also an important factor. Our highly educated workforce and low tax rates have been most beneficial for the growth of the economy. However, it is imperative that we strike the correct balance between innovation, supervision and protection. If we move too far on the side of draconian requirements, the funds industry will move elsewhere. If the regulatory regime is too light or lax, we run the risk of facilitating rip-off investors. Our reputation is at stake with every Bill we introduce so we must keep our international competitiveness to the fore when introducing new legislation.
The financial services industry is a key employer. More than 51,000 people work in the sector, of whom more than 17,000 provide wholesale or international services. The Irish Financial Services Centre has proved pivotal in our development and the development of our workforce. Since it was launched in 1987, it has become the centre of the State's financial services sector. It has been extraordinarily successful. The IFSC initially concentrated on developing sectors such as banking, corporate treasury and insurance. These sectors have expanded and are now the cornerstones of the centre.
Ireland has boomed in the 18 years the IFSC has been in operation and with that boom has come the expansion of the centre. Dublin currently plays host to half of the world's top 50 banks and is one of Europe's main locations for insurance, mutual funds and corporate treasury. This is something of which our nation can be immensely proud and we must strive to stay at this level. Institutions such as JP Morgan Chase, Merrill Lynch, ABN AMRO, NatWest and Citibank are now located in our capital. Not only do these companies provide employment, they also train our young people. This creates a highly skilled workforce in areas such as fund management, investment management, securities trading, assurance, asset financing and leasing, and broking.
A recent report by Deloitte management consultants, which was commissioned by IDA Ireland, reviewed future options for the international financial services sector in Ireland. This report concluded that there are still excellent opportunities to develop the sector based on innovation, skills and expertise. What particularly stood out was that the report identified areas in which Ireland could become a major European centre. These include specialist debt financing products and securitisation, managing global and regional banking products, developing and enhancing Ireland's position as a major centre for asset servicing, building scale in asset management and the positioning of Ireland as the pan-European location for insurance products.
The report was promising and we have much to look forward to in this sector. In fairness, I compliment the Government on the financial climate in which this economy has grown. It is important that we retain this level of growth and that changes in legislation are balanced and do not jeopardise it. The fact that Ireland has the most successful economy in Europe does not mean we do not still have major obligations to fulfil, particularly with regard to the development of critical infrastructure. Investment in the west must be considered.
We must play our cards right and ensure the necessary legislative controls are in place. It is important to introduce legislation but it is also important to police it. Week after week legislation is introduced in this House but the level of control in its implementation is another issue. It is similar to a business — one can introduce regulations but there must be management to supervise their implementation and make cross checks. In the marine sector, for example, there is a raft of legislation but the issue is implementing and policing it and providing the necessary funds to do that. Will the Minister indicate whether enactment of this legislation will impose a financial requirement on the State when implementing it?
A flexible, responsive and business focused regulatory system has been the cornerstone of Ireland's development and the Deloitte report recommended that we continue on that path. Our regulatory environment is a key component of both our competitiveness and our international reputation.
The funds industry has played a crucial role in contributing to our growth. The past decade has seen the industry experience rapid growth and today there are over 50 international funds administrators and more than 20 custodians in Ireland. This amounts to 7,600 people directly employed in the industry, with at least another 1,500 people indirectly employed with legal firms, accountancy firms and listing brokers. These companies are currently servicing 3,771 Irish domiciled funds and sub-funds with net asset values of €445 billion. Another €220 billion is under administration in non-domiciled funds. Dublin's reputation as a major international centre for funds administration and servicing lies at the centre of the sector's growth.
In 1987, when the IFSC was launched, the number of legislative vehicles that were available to the industry was rather limited. There has been much legislative development in that time but the legislative provisions proposed in this Bill are required as a matter of urgency to maintain Ireland's position as a centre of excellence and allow the IFSC to maintain its leading position. This legislation will provide the framework for an Irish authorised and regulated investment fund structure, which will allow for the pooling of assets by institutional investors. It will introduce a new type of investment fund vehicle. It also provides for the introduction of cross investment and segregated liability for investment funds. These are important measures.
With regard to segregated liability, we must strive to achieve an ideal, that an investor who puts money into a particular sub-fund should be in the same position as if that sub-fund were itself a limited liability company. We need to focus on the needs of the investor, and security is naturally top of the list. Investor confidence is critical. The investor should be subject only to investment risks and liabilities incurred in the pursuance of the investment strategy connected with the sub-fund in which he has invested. He should not be exposed to potential liability as a result of activities in other sub-funds. Failure to implement segregated liability sub-funds would severely impact on Ireland's competitive position.
In this instance, we must look abroad and follow successful examples. France and Luxembourg have two of the largest fund markets in the EU and they have already introduced amendments to their legislation to provide for segregated liability for sub-funds. Our EU partners are important figures to look to for direction. EU directives, of course, also heavily steer us. It is to be welcomed that in this Bill the companies legislation is being amended in anticipation of the transposition of two EU directives, the directive on market abuse and the directive dealing with prospectuses.
We saw what happened with the collapse of Enron in America and the big corporate cover-up that took place in Wall Street whereby people signed off on false accounts and made money on the accreditation of top accountancy firms. Good corporate governance is most important. The EU prospectus legislation will make it easier to raise capital in Europe and increase transparency and market integrity. This is imperative for a secure industry.
Market abuse and insider dealing are also dealt with in the Bill. Both have always been elements in the sector. It was critically important that the activities that took place in America, which were signed up to by banks and accountancy firms, were exposed.
A number of necessary provisions and amendments to the Companies Acts are also proposed. They arise from difficulties with the practical operation of existing provisions. These provisions will help to facilitate operators using electronic technology, which is important. We are continually advancing ourselves on a personal and business level through technology and it is crucial that the State recognises this in law. The proposed amendments will also help to address difficulties with the Companies Act, which only became apparent post-enactment.
In today's rip-off Ireland, it is imperative that we should continue to fight for our rights as consumers. People are being crippled by the heavy costs of goods and services, many of which are necessities. It is, therefore, welcome that this Bill will make necessary amendments to consumer law. It is proposed to increase the fines that can be imposed on conviction for breach of eight consumer protection Acts. It has been acknowledged for some time that the fines under certain consumer Acts were inadequate and the Director of Consumer Affairs has raised that point on several occasions. I, therefore, support this Bill for a variety of reasons and I hope it will be enacted because it will lead to a stronger economy and a stronger Ireland.
Ireland has been presented with a major investment opportunity through the enlargement of the EU. Many foreign workers are coming to Ireland so that full employment can be maintained and up to €48 billion is being collected in indirect taxation. The National Treasury Management Agency, under the careful management of Dr. Somers, is enhancing our reputation on the world stage, as it makes astute investments on behalf of the national pension reserve fund. The agency has a good track record. However, it is a pity the funds are not invested to address infrastructural deficits in the State, which could provide a return. Money is invested in foreign banks but it could be invested locally and a comparable return generated.
Public private partnerships provide a unique opportunity. If the NTMA invested in PPPs, it would provide a major vote of confidence. While Ireland has a wealthy economy, we all represent constituencies that experience significant deficits in services, for example, a lack of public transport in the BMW region. The growth in the economy is driven by demand for essential services and investment must be made in child care, hospital services and educational disadvantage. Exchequer receipts are unprecedented with €27 billion more being generated this year in indirect taxes than in 1997. There was never a greater opportunity for the economy to expand and it is important that financial institutions setting up in Ireland should invest.
Ethics in business are also paramount with appropriate corporate governance manifesting itself in total compliance with the laws of the State. Ireland is among the top five countries in which to invest safely. I congratulate the Minister of State on bringing forward the legislation. When the Bill is enacted, it will enhance Ireland's reputation. The establishment of the IFSC in 1987 was a brainchild of one individual and similar initiatives can be taken to create opportunities outside Dublin. Two thirds of the population live in the greater Dublin region.
There is an opportunity to develop Knock International Airport and the State should be obliged to assist in this regard rather than concentrating on Dublin Airport. The west presents a major opportunity for investment. Deputy Carty will advocate that the Government should invest €300 million in the western rail corridor, as proposed by the West On Track group. The line will connect Sligo, Limerick and Rosslare, and will not stop in Claremorris, as was suggested recently. The line should be extended from Charlestown through Tobercurry and Collooney into Sligo. Deputy Carty will endorse my position.
I will ensure the line goes as far as Charlestown and the Deputy can take it the rest of the way.
If the Deputy can deliver the rail corridor, he will top the poll in the Mayo constituency in the next election and, together with the election of a west of Ireland Taoiseach, we will all be happy.
I thank Members for the useful debate we have had on this technical but complicated Bill and I appreciate their valuable contributions. Many interesting questions have been raised and I will address as many as I can.
Ireland is recognised as the domicile of choice for investment funds as well as being a centre of excellence for fund administration. We have been exceptionally successful in attracting international financial services companies and we want this trend to continue. Financial services is one of the most innovative and rapidly evolving sectors with new products constantly being reduced. It is also a global service and new financial centres are emerging across all time zones in the new globalised economy. Ireland must be up there with the best of them and, if possible, it should be ahead of the game.
However, it must be ensured the correct balance is struck between innovation, supervision and protection because if we get it wrong and introduce draconian provisions, the funds industry will move elsewhere. If the regulatory regime is too light or lax, we run the risk of facilitating the rip-off of investors. In addition, Ireland's reputation as a well regulated jurisdiction will suffer irreparable damage. A flexible, responsive and business-focused regulatory system has been the cornerstone of Ireland's development. Our regulatory environment is a key component both of our competitiveness and our international reputation and we are satisfied the balance in the legislation is correct.
I refer to the queries raised by Members. Deputy Hogan supports the Bill and he referred to the need to enact it as soon as possible. He queried whether the legislation is tardy but similar legislation has not been introduced in many other jurisdictions such as Jersey. It has been introduced in Guernsey and it is on the way in Luxembourg. Ireland is not behind. Only one umbrella fund has been set up and, therefore, we are up to speed with what needs to be done to ensure inward investment is not lost. Deputy Boyle also referred to inward investment and I assure him we are paying close attention to the matter.
Deputy Hogan made reference to the section on compliance statements and expressed his delight that it had been referred to the CLRG. Deputy Burton also referred to compliance statements and seemed to believe that they related to small private companies or companies dealing with community groups. I assure her the compliance statement requirements relate only to public listed companies and large companies.
Deputy Hogan referred to the consumer strategy group, which was established in March 2004 to advise and make recommendations for the development of a national consumer policy strategy. The group was established against a background of concerns regarding the lack of a discernible national strategy, the increasing international focus on enforcement of consumer laws and perceptions on the part of certain groups of consumers, various media and economic commentators, that Irish consumers were not getting a fair deal. The group presented its final report to the Minister for Enterprise, Trade and Employment on 2 March 2005, which contains a significant number of recommendations involving a variety of different Departments and agencies whose activities impact on the interests of consumers. On 3 May 2005 the Government decided that the recommendations contained in the report should be examined by a high level interdepartmental committee, which will report back to the Government with a detailed implementation plan within three months. The Minister launched the group's report today.
In response to Deputy Hogan's comments on the groceries orders, I wish to point out that the restrictive practices groceries order of 1987 was made under section 8 of the 1972 Act on foot of a report of the then Restrictive Practices Commission. The order was put in place to curb anti-competitive practices such as low money and also to ban below cost selling, or net invoice price selling. The order covers all grocery goods as well as intoxicating liquor and other household goods ordinarily sold in grocery shops. It does not cover fresh fruit, vegetables or fresh and frozen meat and fish. Enforcement of the order is the responsibility of the Director of Consumer Affairs.
The groceries order is currently the subject of debate due to the recommendation of the consumer strategy group that it be revoked entirely. This recommendation is included in the report of that group, which was presented to the Minister and launched today. This is in contrast to the recommendation of the Joint Committee on Enterprise and Small Business, contained in its recent report on the impact of the grocery multiples, that the order be retained in its current form. The Minister has announced that he will consult with all interested parties on the groceries order before making any decision regarding its future and will appear before the joint committee to discuss the issue again. In this context, the section of the Bill providing for the increase in the maximum fines that may be levied on conviction of violations of the order was drafted to update the provisions for breaches of the existing legislation, which remains on the Statute Book and is enforced by the Office of the Director of Consumer Affairs.
I wish to inform Deputy Burton that the inquiries to which she made reference relate specifically to insurance matters, which now fall within the remit of the Minister for Finance. Deputy Burton also raised the need for appropriate regulations. The Irish Financial Services Regulatory Authority is the regulatory agency for all Irish investment funds, irrespective of their legal structure. All investment funds established in Ireland must be authorised by IFSRA and the investment manager of the fund must be approved as such by the authority. In addition, the other service providers to the fund, most notably the fund administrator and custodian trustee, must be based in Ireland, approved by IFSRA to act as such and are subject to the ongoing supervision of the authority. IFSRA regulates both the initial authorisation and the ongoing supervision of investment funds. The regulatory framework for investment funds is detailed in a series of Central Bank notices and related guidance notes. IFSRA notices and guidance notes do not distinguish between the different legal forms of investment funds.
In response to the concern raised by Deputy Burton about the need to protect consumers in the context of cross investment and segregated liability, IFSRA will ensure that there is no double charging and that full transparency is observed.
Deputy Boyle and a number of other Deputies made reference to future developments in company law, particularly regarding the consolidation Bill that is due for consideration shortly. A significant amount of work has already been undertaken by the Department, with the support and assistance of members of the company law review group, to implement the recommendations of that group on changes to company law. These recommendations, when implemented, will radically update and reform company law. In brief, it is proposed to divide the current provisions into three broad categories, namely, pure company law, market related company law and provisions related to investment companies currently contained in company law.
I thank Deputies who made many interesting points during the debate. Some points raised were not strictly relevant to the matter at hand, but they were interesting nonetheless. During the debate, a reference was made to foreign direct investment into Ireland that implied that it was falling. However, in the foreign direct investment area, IDA Ireland continues to win significant new green field and expansion projects, particularly in the areas of high technology, pharmaceuticals and medical devices. A total of 70 such projects was negotiated by IDA Ireland during 2004. Prospects for global foreign direct investment in 2005 and beyond are considered positive and despite a general decline in the volume of FDI available internationally, Ireland has managed to increase its share of both global and EU investment. Currently IDA Ireland has a healthy pipeline of more than 30 potential projects.
I thank those who took part in the debate and I look forward to the speedy progress of this Bill.