Dáil Éireann debate -
Wednesday, 14 Oct 2009

Vol. 691 No. 4

Leaders’ Questions.

Deputy Enda Kenny

I congratulate the Ceann Comhairle on his first day in office. I notice he has dispensed with the English prayer and this may be a new precedent he is setting. He will get used to the words in the vernacular after a while.

In the last period we have had a number of what I consider to be very sizable severance payments and golden handshakes to people in this country. Yesterday, there was the announcement of the €70,000 bonus to the chief of the Health Service Executive. This may be the norm or what the Taoiseach considers to be the norm but it is certainly not the norm for people outside.

I return to the severance package given to the former director general of FÁS, Mr. Rody Molloy. On 25 September at a press conference in NUI Galway when asked a question about this matter, the Taoiseach stated in respect of the additional golden €1.1 million package for Mr. Molloy that the matter was dealt with in accordance with established guidelines from the Department of Finance. I understand from newspaper reports and internal e-mails from November last, released under the Freedom of Information Act, that three officials in the Department, all with expertise in the pension area, referred to this enhanced package and stated it was outside the guidelines issued by the Department of Finance. In fact the letter sent from the Department of Finance to the Department of Enterprise, Trade and Employment on 26 November stated:

I note that the terms offered by your Department to Mr. Molloy are not fully in accordance with those of the circular letter of 26 May 1998 from this Department to all heads of Department. Nonetheless, I am to convey sanction to the proposed terms and conditions, that this is an exceptional case and that your Department is satisfied that these terms are appropriate in the circumstances.

Does the Taoiseach still stand by his comment that the additional package awarded to Mr. Molloy is in accordance with the Department of Finance guidelines, or does he wish to correct the public record in that regard?

The Taoiseach

The situation as has emerged has not changed the position in respect of this matter. The correspondence simply reflects the fact that the FÁS director general's severance arrangements were informed by what he could have claimed under the 1998 guidelines if his contract had been terminated. It has been quite clear all along that the terms he received were broadly in line with what he might have sought if the contract had been ended by the FÁS board.

Deputy John O’Mahony

He offered to resign.

The Taoiseach

That was the issue that arose. It was clearly the case that it was regarded as in the best interests of the organisation that the change take place. Therefore, as far as the board was concerned the arrangements made were analogous to those if the contract had been extended. If one considers the guidelines in place, they relate to the severance arrangements whereby people have an entitlement to increased severance arrangements where their contract ends before the termination of the contract itself.

In the exceptional circumstances of this case, that is, the need to allow FÁS to move forward, the severance arrangements were approved by the Departments under the provisions of the Labour Services Act 1987 which covers the DG's remuneration and superannuation terms.

Deputy Pádraic McCormack

They threw in a car and all.

Deputy Enda Kenny

I have examined the guidelines and I am still not clear as to how this happened. The guidelines to all heads of Department on 26 May 1998 state at No. 3: "It is not, therefore, appropriate to make payments where the initiative for the termination of a contract comes from the CEO concerned". That is very clear and in this case Mr. Molloy was not sacked. The Taoiseach himself clarified that there was no threat of legal action. Mr. Molloy resigned. According to the guidelines issued in 1998 it was not appropriate to make that payment.

On 26 November an official stated:

I understand from news media that Mr. Molloy resigned voluntarily from his job in FÁS. If this is correct then the terms set out in the draft letter are outside those permitted in the letter of 26 May 1998 regarding severance and early retirement for chief executives of State sponsored bodies.

Correspondence from 26 November states:

I understand that Mr. Molloy has resigned voluntarily. If that is the case then our letter of May 1998 regarding severance terms for CEOs does not apply.

A further e-mail of 26 November states: "Given that the terms are different from the delegated sanction under the 1998 letter, should we not get this package referred to Government for approval where we deviate from the terms?" Clearly, this was the situation in so far as Mr. Molloy was concerned. There were three senior Ministers involved, namely, the Taoiseach, the Minister for Finance and the Tánaiste and Minister for Enterprise, Trade and Employment. All three were involved in some form or other in dealing with this——

Deputy Pádraic McCormack

Sweetheart deal.

Deputy Enda Kenny

The point is this was clearly outside the guidelines referred to in the letter from the Department of Finance and yet it was given sanction in what was deemed to be an exceptional case. If this was deemed to be an exceptional case why was no Government decision made to authorise it? If it did not go to Government who overruled whom? Clearly, the Department of Finance stated this was not appropriate. However, someone gave a direction that this would be deemed to be an exceptional case without the matter going to Cabinet. I wish to find out who that person was, or on whose instructions this was given. The Taoiseach may be able to answer that.

The Taoiseach

The Deputy is wrong in the contention he makes. The arrangements were that the FÁS board would discuss the matter with the outgoing CEO at that time, refer it to the Department of Enterprise, Trade and Employment, and obtain the approval of the Department of Finance. That was the arrangement that was made and followed in this case. There was no other arrangement required in that respect.

Second, as I have already said, severance arrangements were approved by the Department under the provisions of the Labour Services Act 1987, which cover the remuneration and superannuation terms. We are talking here about moving the situation on and a change at the top of the organisation. The issues that arose and to which the Deputy is referring, concern the fact that had the outgoing chief executive decided to stay and the FÁS board decided subsequently to terminate the contract——

Deputy Pádraic McCormack

He offered to resign.

The Taoiseach

Excuse me. Will the Deputy let me explain the situation?

Deputy James Reilly

I do not think the Taoiseach can.

The Taoiseach

Had they decided to terminate the contract, under the terms and conditions of employment he would have been entitled to seek those increased severance arrangements. That is the point. In the interests of the organisation, both were coming to the conclusion that this was the right thing to do. He was prepared to go on the basis of being dealt with, as he would claim, fairly. Had the contract been terminated he would have been entitled to those enhanced severance arrangements as well.

Deputy Enda Kenny

Who signed off on it?

The Taoiseach

The signing off was by the Department of Finance and the Department of Enterprise, Trade and Employment.

Deputy Enda Kenny

If they say that is not appropriate, it should have gone to the Cabinet.

The Taoiseach

Excuse me, I have explained to the Deputy that one has got to move on with the correspondence.

An Ceann Comhairle

The Taoiseach, without interruption, please.

The Taoiseach

The severance arrangements were approved by the Departments under the provisions of the Labour Services Act 1987. That was the legislative basis upon which the decisions were taken. It was under that legislation that the remuneration and superannuation entitlements of the director general applied.

Deputy Pádraic McCormack

The decision should have been taken by the Cabinet.

The Taoiseach

The Deputy is talking about the normal practice of any office in discussing the pros and cons of issues as they are debated. However, the issue emerged that it was in the interests of the organisation that it be moved on and that it would be decided under the terms of the Labour Services Act. The point I was making about the Department of Finance guidelines was that if the contract had been terminated the enhanced severance arrangements, in line with those guidelines, would have been applicable in this case.

Deputy Enda Kenny

They were 1998 guidelines.

The Taoiseach

They were applied in this case.

Deputy Pádraic McCormack

God save us.

Deputy James Reilly

That is contradicting the correspondence.

An Ceann Comhairle

We must move on to the second question, and I call Deputy Gilmore.

Deputy Eamon Gilmore

Later today, the Government will put through the House the Second Stage of the National Asset Management Agency Bill. This will be the most expensive piece of legislation ever to pass through Dáil Éireann whereby the State will be expected to put up €54 billion to take bad loans off the banks. Even in a best case scenario it will mean the taxpayer is putting up a premium of about €7 billion for these bad loans. Meanwhile, tens of thousands of householders are facing the prospect of having their homes repossessed by the same banks who will benefit from this arrangement. In a report last week, the ESRI estimated that by the end of next year 35,000 households will not be able to repay their mortgages. It is well known that the banks are just waiting for the NAMA legislation to go through before they open up in a very serious way to seek repossession——

Deputy John Cregan

Is there any evidence for that?

Deputy Eamon Gilmore

——of homes from people who are in serious trouble. One of the biggest problems I hear from Labour Party public representatives all over the country concerns the difficulties of repaying mortgages and the fears people have of losing their homes. The biggest fear people have at the moment——

Deputy John Cregan

Is that the Deputy will be in Government.

Deputy Eamon Gilmore

——is the fear of losing their homes. I want to put a suggestion to the Taoiseach, which I ask him to take up before the NAMA legislation is enacted. Deputy Joan Burton will put down an amendment on Committee Stage proposing that there should be a moratorium on home repossessions for a period of time. This is perfectly reasonable. The people who are having difficulty today in repaying their mortgages are those who had good jobs a year or two ago, and certainly at the time they took out the mortgage. Hopefully, they will have good jobs again when we come through the economic difficulty. However, while the economic recession lasts, while there is an employment downturn and while business is difficult, many of these people will have problems repaying their mortgages. Instead of having their homes repossessed, an arrangement should be made whereby they can retain their homes and continue to live there. All kinds of arrangements could be made through the banks which would allow that to happen. It would make more economic sense because ultimately the State will have to pick up the tab if people's homes are repossessed. It also makes sense from a social and family viewpoint if people are allowed to stay in their homes. I want an assurance from the Taoiseach in this respect. I know he will probably tell me that there are codes of practice, but all these codes are doing is buying time for people. They are just postponing the evil day. There needs to be an assurance given to people who are worried about losing their homes that there will be a moratorium on home repossessions. I ask the Taoiseach to implement that before the NAMA legislation is finally enacted.

The Taoiseach

It is important to recognise that the level of mortgage arrears which results in house repossessions by the lender is, thankfully, still very low in this country. In previous discussions we have had on this matter, I have stressed the need for people who are not in a position to pay or who have temporary difficulties, to make contact with the lending agencies. There are codes of practice in place which must be respected when people get into such difficulties.

As regards the specific question raised by the Deputy, in the revised Programme for Government we have further strengthened our commitment to assist mortgage holders who are under pressure due to changed economic circumstances. The programme refers to introducing new measures to protect families who are experiencing difficulties with their mortgage repayments. The existing statutory code on mortgage arrears and the recently agreed protocol between the Irish Bankers' Federation and the Money Advice and Budgeting Service on debt default will be further reviewed with a view to expanding the options available for dealing with debt. These include, for example, the use by banks and other lenders of more flexible mechanisms to avoid foreclosure in appropriate circumstances. These could also include reduced rates, longer maturity dates, rolling up of outstanding interest, banks taking equity in the house, and banks taking ownership and leasing back to the resident with payments coming off the loan.

Deputy Kathleen Lynch

They will not.

The Taoiseach

With reference to the measures adopted in other jurisdictions, the Government will examine ways of expanding its own mortgage measures. A range of options and efforts will be made to assist in every way possible. As regards a moratorium being put in all cases concerning mortgage repayments, it is a question of being able to distinguish between those who are not in a position to pay and those who are refusing to pay, despite perhaps having an ability to pay or pay an amount of it. That issue would have to be considered in the context of any amendment that is put forward, to ensure that, on the one hand, we seek to protect people in difficulty while, on the other, not compromising funding support for those institutions on an ongoing basis.

Deputy Eamon Gilmore

There are two requirements that have to met here, but the approach the Taoiseach is taking does not meet either. I have been talking about the necessity for a moratorium on home repossessions for some time. On a number of occasions, the Taoiseach has responded by saying the banks are being spoken to, codes of practice are being introduced, and all kinds of approaches are being recommended to the banks. The first problem with that, however, is that it is being left to the goodwill and generosity of the banks. Whatever disposition the banks may have now to be generous and to respond to the invocations of the Government to deal sympathetically with mortgage holders, as soon as the NAMA legislation is passed and the banks have their money and their bad loans off their books, they will have a free hand to do as they please. The Government must include a requirement in the legislation for a moratorium on repossessions. I do not refer to people who default on their loans through their own fault, who have the wherewithal to repay a mortgage and are negligent in doing so, but to people who are stuck because they have lost their job, their business has gone bad or their circumstances have changed and they need a break. Just as the banks are looking for a break from the Government, householders also need a break. Unless that is done before the NAMA legislation is passed, the Government will tee up a situation where the banks will be able to go after householders with a free hand and the world and its mother knows that is what they are planning to do. The ESRI estimates 35,000 householders are in their sights.

The second thing that needs to be done is the Government needs to take the fear of the loss of one's home out of the psyche of the country. The Taoiseach has invited the trade unions and employers for further discussions. The first item he needs to put on the table before he commences social partnership talks is a guarantee that people will not lose their homes in order that those who have endured jobs losses or the loss of their business will not find themselves in a situation where they have to uproot from their neighbourhoods, leave the homes they have been living in and take their children out of the local school and so on. This would mean they would, at least, have that peace of mind and the issue of the rescheduling the repayment of the mortgage and all the options outlined by the Taoiseach, with which I agree, could be bedded down and made part of a moratorium that could be enforced for the period of time we are going through these difficulties.

The Taoiseach

The Government parties have in their revised programme indicated that they want to enhance protections for mortgage holders who have a genuine problem. Nobody in the House is at variance on the need to maximise protection in this regard. We need to do so in a way that meets the objectives of what the House is seeking which, at the same time, does not use a mechanism that can have an adverse impact on the funding of the banking institutions.

The Deputy has made certain points about the NAMA legislation. It is not about giving a free hand to anybody. It is about restructuring and having a viable financial system that will be able to continue to provide mortgages to those who seek them, as we seek to revitalise the housing sector and to make sure the funding arrangements for the banks are such that people who get into difficulty are dealt with appropriately, sympathetically and proportionately in view of their circumstances. The question of the best way of achieving that, therefore, can be further discussed in the context of the NAMA legislation and continuing economic debate in the House.

However, in the context of discussions I have in the House or outside the House with other social partners, the purpose of the Government's commitment in the programme for Government is seeking to achieve precisely that. How do we protect those in genuine difficulty temporarily who would have the capacity to reply and who need a period of time to reorganise their commitments? We have set out in some detail how that may be done. That is the Government's intention. We are setting out that objective and further discussion on it can take place in the House.