Dáil Éireann debate -
Tuesday, 9 Feb 2010

Vol. 701 No. 3

Leaders’ Questions.

Deputy Enda Kenny

I offer my sympathy to the 760 workers of Bank of Scotland (Ireland) which has just announced its intention to close its Halifax operations in Ireland with the loss of 760 jobs by end July 2010, which is devastating news. In that context, I put the following question to the Taoiseach. The Taoiseach will be only too well aware that the Irish taxpayer has had to write the biggest ever cheque of €54 billion in respect of NAMA. The proposition put by Government before, during and since NAMA has been that in return for our taking the huge risk of relieving the banks of their reckless loans and property deals credit would flow to Irish business. Throughout the NAMA debate last year the Government and Ministers indicated that the tens of billions of euro provided by Irish taxpayers through NAMA to the banks in respect of their toxic developer loans would be used to finance new Irish businesses by way of lending and so on.

I recall that the Taoiseach stated that his sole motivation in setting up the controversial agency was to get credit flowing into the economy. The Minister for Finance told the Dáil on 16 September last that NAMA would ensure that credit flows again to viable businesses and households. He also stated in The Sunday Tribune at that time that a wall of cash from NAMA could help restore credit flow and get the economy growing again. This is in complete contrast with what was stated at the meeting held with the IMF, namely, that it does not believe that NAMA will result in a significant increase in bank lending in Ireland. Why was this relevant and fundamental fact withheld from the House? The IMF is the international reputable body in respect of banks and banking issues. It now transpires from information obtained under the Freedom of Information Act that it told Government that NAMA would not result in a significant amount of credit flowing to Irish business. Why was this fact concealed from this House during the NAMA debate when it was made known to the Taoiseach and Government?

The Taoiseach

Nothing relating to these matters was concealed. The IMF supports the establishment of NAMA. As regards the issues arising from information contained on the Department of Finance website, a specific paragraph relates to the fact that NAMA will result in a significant increase in bank lending in Ireland. This is on the basis of our encouraging the adoption of a NAMA-type initiative even if the Minister had not already announced the initiative. The suggestion that the IMF was not in favour of the establishment of NAMA or indeed that we could proceed with a NAMA is not correct.

The note on which yesterday's newspaper report was based contains an endorsement of NAMA by the IMF. That particular part of the note did not make it into yesterday's reports. It is clear that the IMF fully backs the Government policy on the banks and the establishment of NAMA. The remarks made on bank lending in Ireland were made in the context of the Minister for Finance, Deputy Lenihan, assuring the IMF that the Government did not wish to see a surge in lending designed to re-inflate the property market to near boom levels. That discussion took place at a meeting last April. We did not then and do not now regard such an outcome as desirable. The IMF agrees with us in this regard.

Since the meeting referred to in yesterday's newspaper report took place we have had an intensive debate about NAMA inside and outside this House. That debate culminated in the passage of the NAMA legislation which allows the Minister to issue guidelines to the participating institutions to facilitate the flow of credit to SMEs. The inclusion of that provision in the legislation arose directly from the concern expressed on all sides of the House that credit be available in this economy. Let us be clear, the intention of the guidelines is not to return to a credit splurge but to ensure that viable businesses and households can access funding.

The purpose of NAMA is to cleanse the banks' balance sheets of toxic loans so that we can create a healthy banking system. The role of the banks in the economy is to make credit available to viable, sustainable businesses and households. It is the Government's view that NAMA is the best way to achieve that aim. The IMF delegation agrees with that view.

Deputy Enda Kenny

The point I made was that the information given by the IMF was that there would not be a wall of cash as referred to by the Minister for Finance arising from NAMA, a fact that was not disclosed to this House by the Taoiseach or Ministers during the debate on NAMA in this House. The assertion made by Fine Gael that NAMA would not result in a return to significant lending to Irish business has been vindicated by what the IMF stated. It was further vindicated by Mr. Sheehy at an Oireachtas committee meeting in November last when he stated that if people believe that the day after NAMA is established the country will be awash with money, they are wrong — that is not going to happen.

Yesterday, the Governor of the Central Bank, Professor Patrick Honohan, criticised bank lending policy in terms of their facilities for extending credit to Irish businesses. Thousands of Irish businesses, including retail and manufacturing industries and so on, cannot get credit from banks. The Irish taxpayer has been duped by Government into writing a cheque for €54 billion in return for a wall of cash which will not be evident. This means thousands of jobs could be lost as a result of credit drying up.

In that context and in view of the fact that this materially fundamental information was withheld from the House and that the Government would have discussed this matter at some length with Government officials, will the Taoiseach tell the House what moneys, in his estimation, will be available to banks for lending to Irish business in what is now a crisis situation for thousands of small businesses. What is the Taoiseach's estimate of the amount of money that will be available to be loaned to Irish businesses all over the country which are now in crisis?

The Taoiseach

Deputy Kenny has again misquoted the situation. Professor Honohan in his statement stated that the overall thrust and macro economic policy and the pace and scale of budgetary adjustments appeared to him about right as a basis for building a sustained recovery. He also stated that interest rates on Government bonds are much lower than they were only a few months ago because of the degree to which foreign confidence is building in Ireland's ability and determination to restore the public finances and its clearly defined strategy as exemplified by the relatively tough measures already taken.

Deputy Kenny continually suggests that we are writing cheques of €54 billion in respect of NAMA operations. However, what we are doing is presenting Government bonds to the European Central Bank for the purposes of losses being taken primarily by the banks and those who own the loans, which is at great variance to how Deputy Kenny characterises the operation being brought forward.

Deputy Enda Kenny

It is still €54 billion.

The Taoiseach

Deputy Kenny continues to misrepresent the situation. The Deputy is suggesting the Government is writing a €54 billion cheque but it is not.

Deputy Denis Naughten

It is an IOU.

Deputy Enda Kenny

It is the biggest cheque ever written by the Irish taxpayer.

The Taoiseach

We are presenting to the Central Bank bonds which will be backed by assets on the basis of the reduced value NAMA will pay for them. The first losses will be taken by the banks and creditors. No matter how many times the Deputy says it, I will still keep saying what the true situation is.

As regards the question of how we deal with providing sufficient credit to the economy, it is by taking the decisions we have taken. Reducing the cost of Government debt, first of all, has reduced the cost to taxpayers. International confidence in the direction we are taking is providing funding to the Irish banking system on an ongoing basis. The fact that NAMA will be operationalised will provide further evidence of the Government's determination to proceed along the lines we have outlined. It is clear that by using the NAMA mechanism and bringing those distressed assets on to NAMA's books, we will be in a position in which banks will be able to obtain funds on international markets in addition to whatever capital they have themselves.

As we have outlined, there will be a recapitalisation programme involved. We will deal with all of that comprehensively. That is the only way we will get to a situation where we have a pathway to recovery and where banks get back to the core franchise of providing loans to the productive sector.

Deputy Pat Rabbitte

That is theoretical.

The Taoiseach

Unless we operationalise NAMA and arrange for those assets to be transferred, the Deputy's argument is a circular one because we will never get out of the trouble we are in unless we proceed as we have set out.

Deputy Eamon Gilmore

Some 760 jobs are to go in the Bank of Scotland (Ireland), while yesterday it was announced that 175 jobs are to go at Boston Scientific in Galway. That is almost 1,000 jobs in two days, on top of the 436,000 people who are already out of work as we saw from last week's live register figures. The biggest and most urgent issue currently facing this country is to get the economy repaired and recovered, and to get people back to work. I was interested to hear the comments made last night by Mr. Craig Barrett, the businessman credited with bringing Intel to Ireland. According to one report, he deconstructed the notion that Ireland could recreate its Celtic tiger economy simply by cutting costs. He advocated a prescription in three parts: smart people, smart ideas and the right environment.

We have been hearing a lot from the Government about the smart economy. In December 2008, the Taoiseach announced an innovation task force, but did not set it up until June 2009. It was supposed to report by the end of 2009, but it has not done so and we do not know when it will report. Last year, the Taoiseach promoted another good idea, which was to establish an international content services centre. The Labour Party agrees with that idea and in pursuit of it Deputy Quinn tabled a question to the Tánaiste and Minister for Enterprise, Trade and Employment, since seemingly her Department is responsible for initiatives to promote job creation. We were a bit surprised to receive a query on foot of the parliamentary question asking us to explain what we meant by an international content services centre. Can the Taoiseach say what progress has been made towards establishing such a centre? When and where will it be established? What budgetary investment will be provided for it by the Government and what is the estimated number of jobs it will create?

The Taoiseach

I understand that Bank of Scotland (Ireland) is to make the announcement this evening. I regret the fact that those workers will lose their jobs. I understand that redundancy terms will be offered. It is part of a bank restructuring worldwide, with institutions pulling back from markets which are not profitable for them. I am pleased that a substantial part of the business of Bank of Scotland (Ireland) will remain with 850 jobs involved. This decision should not affect other players in the market. I have been assured that all customers of Bank of Scotland (Ireland) will be looked after and will not be disadvantaged by the changes.

Boston Scientific has informed IDA Ireland that 175 people on temporary contract will be released from their contracts. That is against a background where Boston Scientific continues to employ 3,000 people in Galway. It has a large number of temporary employees to facilitate a ramp-up-ramp-down process as volumes dictate.

As regards the Deputy's question on the innovation task force, I told him last week during parliamentary questions that the penultimate meeting was last week and it was likely that a report would be available by the end of this month. That is a month or six weeks later than expected, but a number of groups have been working on it. That valuable work will be beneficial.

The international content services centre will be worked on through the digital hub in liaison with the IDA. They will be working hard to see in what way we can bring that particular project forward. It is part of a number of projects concerned with identifying new areas, including Internet technologies, internationally-traded services, the green-clean tech area and the food industry. In such areas, the IDA and Enterprise Ireland can prepare a jobs strategy even in the context of this year when we expect unemployment to peak, although jobs will still be created. The churning of jobs between losses and gains continues. There is no doubt that the public finance position we are bringing forward is the best way, and a prerequisite for ensuring that we get more jobs into the economy. In that manner, these projects can obtain support and be brought from concept to fruition.

As I understand it, those are the four points the Deputy raised in his question and those are the answers.

Deputy Eamon Gilmore

Unfortunately, that answer does not tell me any more than I already know about the international content services centre. The programme for Government states that budgetary support is being committed for six priority areas in the knowledge society report, one of which is the establishment of an international content services centre in co-operation between the digital hub and the IDA. The Labour Party supports that, but what level of budgetary support is being provided for the international content services centre? When will it be established?

In a report dated 23 July 2009, the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, announced that the international content services centre would be established in 2010. Will it be established this year? If so, where will it be located and how many jobs will it generate? I am inclined to agree with the Minister, Deputy Ryan, when he says that it has the potential to create thousands of jobs. It is an IFSC-type idea for digital content and has huge potential. The only problem is that we have not seen much evidence of the Government doing anything to follow through on it. Can the Taoiseach answer those questions? What level of budgetary support has been, or is being, provided for this? Will it be established in 2010 and, if so, where and what is the estimate for the number of jobs it will create? Is anything being done about it?

The Taoiseach

As I just explained to the Deputy, it has the potential to create many thousands of jobs.

Deputy Eamon Gilmore

Potential, yes.

The Taoiseach

The IDA is leading that project and is working with the digital hub. IDA personnel are working on that matter and when it emerges, if they can bring forward a proposal for consideration by the board, it will of course obtain budgetary support though the IDA's grant-in-aid and all the other facilities we have available to assist enterprise supports. We are providing over €200 million this year for enterprise supports. When a mature project is brought before it, the board will consider it in the normal way. It is not a question of picking something out of the air and deciding "Here's the international content services centre". One must sit down and work with partners to see in what way one can bring forward experts in this area, in addition to the expertise we have identified at home ourselves. It is not a question of sitting back on any of these projects.

The work of seeking new opportunities for the IFSC is ongoing. As regards all areas of activity, Enterprise Ireland and the IDA are devising strategies based on the new situation we are in, including identifying the areas I have just mentioned. The IDA has been looking at high-level manufacturing and pharmaceuticals — areas with which we are all acquainted and where we have some strengths. Despite worldwide foreign direct investment being down by 30%, it was up 4% here last year, which was the worst year we ever had.

Deputy Eamon Gilmore

The Taoiseach does not know the first thing about it.

An Ceann Comhairle

Deputy Gilmore, please.

The Taoiseach

The Deputy does not want to hear anything because his view is——

Deputy Eamon Gilmore

The Taoiseach knows nothing about it.

An Ceann Comhairle

Deputy Gilmore, please.

The Taoiseach

The Deputy has a typical approach which says that it has protected 5,000 jobs so where are the 5,000 jobs. Work must take place for that to happen. IDA Ireland, which is far more qualified than the Deputy in bringing forward foreign direct investment to the country, is actively pursuing that project. Those on the other side of the House were sceptical about other major projects introduced by Fianna Fáil-led Governments; we will prove them wrong on this one as well.

Deputy Joan Burton

Like the developers and the building industry.