Dáil Éireann debate -
Tuesday, 26 Jan 2010

Vol. 700 No. 1

Leaders’ Questions.

Deputy Enda Kenny

I am aware of the sensitivity and importance of the discussions taking place in Northern Ireland, which I hope can be brought to a successful conclusion. As I have pointed out on many occasions in the past, the Government has the full support of the Fine Gael Party and I am sure all Opposition parties in reaching a successful conclusion to the matter. I wish those involved in the talks well.

Today, Standards & Poor's has downgraded the rating of the Irish banks. I wish to raise the issue of lending capacity and ability to extend credit to businesses. Every business in the country now has a difficulty with the banks. When the National Asset Management Agency legislation was passed we were told it would be the panacea for all business ills and would sort out the problem of lack of credit facilities for businesses. The directors of banks have told the Oireachtas committee that they have no intention of lending back bonds given to them as credit for business. Most of the valuations are now being conducted and are being transferred to NAMA and on to banks. What is the Government's estimate of how much more will need to be invested into the banks in the form of recapitalisation from the taxpayer following the €11 billion invested last year? Having access to information from NAMA and from the banks, the Government should be in a position to ascertain the extent of the black hole that will need to be covered by the taxpayer in the form of extra recapitalisation.

The Tánaiste

I welcome the comments made on the ongoing talks in Northern Ireland between the Taoiseach, the British Prime Minister and all parties. We are all hopeful that as the discussions continue they will reach a fruitful outcome. As the House will appreciate, it is the reason the Taoiseach is not here this afternoon to answer questions.

On the issue of lending capacity and access to working capital in particular, this is subject to ongoing discussion and I am acutely aware of it as Minister for Enterprise, Trade and Employment. I have been working closely with my colleague, the Minister for Finance, in this regard. Both the first and second Mazars reports have been helpful in looking at the lending capacity of the banks and what has been happening within business. I have had occasion to meet with the Governor of the Central Bank in order to have access to new agreed measures on how we may determine real lending.

The issue as to what type of real lending was being made to business was raised here in the House. That has been agreed between Forfás, the Department of Finance and me and we are looking at the issue of access to credit. A credit supply clearing group has been set up by my Department, and we are working through it, between business, IDA Ireland, Enterprise Ireland, county enterprise boards and the banking and lending people to determine how we may create openness and awareness about the needs of business. On that basis I have transferred personnel from Enterprise Ireland into the two major banks, Bank of Ireland and Allied Irish Banks, and this is working quite well. We are continuing to work and address the issue of access to working capital for people within business. In the context of the budget and NAMA a new appointment has been made to arbitrate on differences of opinion between the banking institutions and businesses who believe they are entitled to working capital.

I am not completely satisfied that the amount of working capital being made available is sufficient to furnish the needs of the business community. On that basis I am again working with the banks and the business community so that we may establish the absolute necessity for a change of attitude within the banks and move them away from their reliance heretofore on construction to an expertise on business so that they may take on board the need to take particular risks in the context of supporting people within business.

On the issue of recapitalisation of the banks, the Government would be more comfortable with access to funding from the private sector, but we are not in a position to make a final determination on the needs of banks as that matter has not been finalised by the Minister for Finance.

Deputy Enda Kenny

There has been a change of attitude on the part of the banks. I dealt with seven businesses yesterday that had been called in by the banks. These were legitimate businesses, well run, where nobody had stepped out of line and they borrowed the money on a variable rate. They were called in along with their accountants. The banks make projections as to what the income of those businesses will be for 2010 and then decide how much to impose on top of the borrowing rate. People who have run their businesses well and took the risk in borrowing at variable rates are now being screwed by the banks, as the Tánaiste is aware, since some of them have been in contact with her.

Is the facility for declined cases operational in the Department of Finance? It was supposed to be, but I cannot find any trace of it. Does the Tánaiste not agree that there is a real crunch with Irish business in respect of working capital and if so, given her close relationships with the Minister for Finance and the Central Bank, can she name three initiatives the Government is taking to help small business get credit?

Does the Tánaiste see any relevance now in the proposal put forward by Deputy Richard Bruton for a national recovery bank which would inject a new stream of money into the Irish system, as has happened in other countries — with the chief executives coming before the Oireachtas committee and saying they will not lend any facilities they receive through NAMA back to Irish business? I know the Tánaiste is acutely aware of many businesses that are on the line because they cannot get working capital. I asked her what extra money the taxpayer will have to provide in the context of bank recapitalisation. Some €11 billion was injected last year. Will it be €5 billion, €6 billion, €7 billion or €10 billion since rumours are floating around about the vast sums that will have to be put up as recapitalisation? The Tánaiste is talking to the Central Bank and the Minister for Finance and the Government has to have a view on this.

What is the Government's estimate of the figure needed for further recapitalisation of the banks that will have to be put up by the already downbeaten taxpayer?

The Tánaiste

A person has been appointed who will adjudicate on cases that have been declined. I have facilitated that person's accommodation in Enterprise Ireland, although the role is independent of that agency. I am also providing secretarial and administrative assistance to allow that work to commence.

On the issue of attitudinal change, I am aware of a number of companies that have come forward on the basis of increased rates of interest, for example, changes by which people have obtained access to overdrafts, etc. My Department, the agencies and I have been working with the banks to facilitate such people who have the bona fides as regards trading successfully through difficult times. It was on that basis that I introduced the stabilisation fund which is working very well. Some €56 million has been allocated since the end of last year. The employment subsidy scheme is supporting people to keep them in work and has been used as an enormously beneficial way in which we can support companies with trading difficulties, where there are viabilities and vulnerabilities. These are being supported by all of the agencies.

As the Deputy is aware, a second tranche has been advertised and I hope we will very quickly have a final determination on those who will be supported. That work is being done by Enterprise Ireland. We are investing in the stabilisation of many of these concerns, supporting these companies in the context of providing new opportunities for them. That is the work being done by the agencies under my remit and that of Údarás na Gaeltachta. On the issue of recapitalisation or the capital supports that may be needed in the context of financial institutions, these will not be determined by picking a number off the top of one's head. It will be done in an analytical way and, as I have indicated, clearly our preference is for that capital to be raised from private sources in the first instance. There has been no final determination by the Minister for Finance or the Government as to what those capital requirements will be.

Deputy Eamon Gilmore

I join with the Tánaiste and the leader of Fine Gael in expressing the hope that the talks in Belfast will reach a successful conclusion. On behalf of the Labour Party, I want to say we support the efforts of the Taoiseach and the British Prime Minister in trying to bring about a resolution to matters, in particular the long-awaited devolution of the policing and justice powers to the Northern Ireland Assembly.

I want to ask the Tánaiste about pay. By the end of this week every employee of the State will have his or her pay cut for the second time in less than a year. Workers in the public sector earning €25,000 a year will have their pay cut by €160 a month, the pay of a garda or teacher in the middle of his or her scale will have been cut by €400 a month and that of a staff nurse with ten years experience will have been cut by €560 a month.

Does the Tánaiste appreciate the level of anger among such State employees? That anger has been compounded by the sweetheart arrangement which the Government made with senior civil servants to limit the impact of the pay cuts on those senior officers. We are now beginning to see pay cuts in the public sector being used to drive down levels of pay in the voluntary and private sectors. I have a circular which was issued by the HSE to agencies and charities it funds, directing them to cut the pay of their staff by the same amount as cuts in the public sector, even though there is no legislative basis for that. In addition, those staff are not public servants and were not included in the legislation passed by the Oireachtas before Christmas.

Over the weekend we saw reports of plans by the Government to provide for an inability to pay provision in respect of some categories of workers who are covered by legally enforceable minimum rates of pay. There have been repeated reports that it is intended to cut the national minimum wage.

I have three questions for the Tánaiste arising from that. First, what assurance, if any, can she give to workers who have had their pay cut not once but twice over the last year that they will not have their pay cut again? Second, can she tell us on what legal basis the HSE, or any other public authority for that matter, is issuing directives to agencies funded by it that they have to cut pay the same as for public servants? Third, will the Tánaiste rule out cutting the national minimum wage?

The Tánaiste

I acknowledge the Labour Party leader's comments on the talks in Northern Ireland. We all agree on wishing those involved well.

As regards the pay reductions that have taken place within the public service, all of us who work with public servants daily are aware of the anger, disappointment and distress these have caused. It is equally important to say that these difficult decisions had to be made on the basis of the economic difficulties the country has to grapple with currently. Dealing with the stabilisation of our public finances is one of the parameters by which we can return to economic growth. We are aware that notification has been given of industrial action. If necessary, the Government will certainly be open to any opportunity to discuss those issues with the relevant representatives. However, all of that would have to be in the context of meaningful engagement and the creation of conditions for meaningful engagement would be equally important.

I note that the Deputy raised the HSE issue with the Taoiseach last week. Unfortunately, his letter to the Deputy has not yet been signed as he has not been available to do so. On the Taoiseach's behalf, however, I can say that following the matter raised by the Deputy, the HSE has advised that this circular was sent in error.

Deputy Eamon Gilmore

That will be a relief.

The Tánaiste

Professor Drumm has issued a clarification to those people in this regard.

It is important to reiterate the absolute necessity of having clarity on the minimum wage. Changes to the minimum wage, if any, will be done in the context of proposals that will come from the Labour Court. They are currently with the Labour Court and I am not in a position to make any adjudication until that matter comes to my desk. I must, therefore, be independent in making any determination on it. However, EROs and REAs have caused a slight mix-up in the media recently. That legislation is coming to this House today whereby an inability to pay clause will be introduced by the Government for consideration here. As the Deputy is aware, there is already an inability to pay clause in the minimum wage legislation, but from what I can ascertain it has never been used. This is being introduced in the context of representations that have been made by Members of this House and others, whereby an agreement has been made between employers and employees to reduce wages to keep people in work. That is legal in the context of REAs and EROs. On that basis, we have introduced a sensible approach to addressing issues of real concern to employers and employees so that they can remain within the parameters of the legislation and not work outside it. We are taking a sensible approach to keeping people in their jobs.

Deputy Pat Rabbitte

One will always have a job if one works for nothing.

Deputy Eamon Gilmore

I welcome the Tánaiste's statement referring to the letter that is on its way to me from the Taoiseach to the effect that the HSE circular was issued in error. Can I take it that agencies which do not comply with the stated wishes of the HSE to cut staff pay will not, as a result, have their allocations cut correspondingly by the HSE?

I note the Tánaiste has hedged her bets on the national minimum wage. As I understand it, that issue has been with the Labour Court since November 2008. We do not seem to be any further advanced on it. We hear every day that the Government wants to restore confidence, purchasing power and get retail activity moving again. However, it is difficult for people, particularly those on low pay, to make purchasing commitments if they do not know what their wages are going to be next year. It is time the Government came off the fence concerning the national minimum wage. It should give a categorical and fair assurance that the national minimum wage will not be cut.

I do not want to anticipate the debate on the Bill and the Government's amendment with regard to the inability to pay clause for EROs. However, I interpret what the Tánaiste is saying to mean that it will only apply on a voluntary basis. If that is the case, so be it, but let us see what is actually being proposed by the Government.

The one question the Tánaiste did not reply to was when I asked her for an assurance that workers who have taken a pay cut, and particularly those who have had their pay cut twice in the past year, would not have their pay cut again. At the weekend, we heard the Taoiseach's radio interview in which he spoke of the necessity for restoring confidence to the economy, all of which we agree with. However, if people are to have confidence in the economy and consumer confidence is to be restored, people need to have some certainty about their earnings. Will the Tánaiste give an assurance that the Government will not be going back a third time to cut the pay of employees whose pay has already been cut?

The Tánaiste

As regards the legislation before the House, the Minister of State will take on board the views expressed by Members of the Oireachtas. We are providing a statutory basis to allow an inability to pay clause for REAs and EROs. It has not been made available heretofore, but is available within the minimum wage legislation. It is a practical and pragmatic response to issues raised by Members of the Oireachtas, as well as by employers and employees in the context of keeping people in work.

On the HSE issue, the Taoiseach's letter indicates that the HSE issued an early warning notice to its grant-aided voluntary agencies, anticipating incorrectly that the pay reductions for public servants under the financial emergency measures would automatically apply to their agencies. In fact, grant-aided agencies funded under section 39 of the Health Act 2004 are not directly affected by pay adjustments provided for under the financial emergency measures. Therefore, as they are not public service bodies as defined in that Act, their employees are not public servants. That matter has been clarified for those employees. I can forward the letter to the Deputy when it has been signed.

With regard to assurances as to what will happen in the future, we have just completed the budgetary process and the Finance Bill has yet to be brought before the House. Therefore, nobody on this side of the House is in a position to predetermine what will happen in the context of budgetary adjustments next year. However, the Government is still very anxious to involve itself in public sector reform. That reform will create savings and will, therefore, have a positive effect on the need for any further financial adjustments in next year's budget.