JOINT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate

Business of Joint Committee.

Chairman

Apologies have been received from Deputy Ó Caoláin. The first item on the agenda is the minutes of the meeting of 10 November. The draft minutes of the last meeting of the joint committee have been circulated. Are the minutes of the meeting agreed? Agreed. Are there any items arising from the minutes? No.

The main items on the agenda today concern correspondence. We have a reply from IFSRA to the committee's recent letter regarding the authority's examination of the endowment mortgage market. It is clear that IFSRA's examination is still ongoing and we have already included it as an item in our work programme. Perhaps we should await completion of IFSRA's work before we take the issue any further. I propose we note the letter.

Deputy Bruton

I do not have the letter in front of me, but I understand it did not give the impression the committee had invited IFSRA to make a presentation. In that context, the letter does not state that IFSRA believes it premature to consider the issue until its study is complete. What were the terms of the letter sent by the committee to IFSRA?

Chairman

We did not invite it to make a presentation.

Deputy Bruton

We should indicate that the committee is interested in assessing the issue and inquire whether it is timely for the authority to come before the committee, rather than just assuming that because it has not yet completed its study, it is not. Much of the data is already available in that the UK authorities have already worked much of this ground; much of the same promotional activity was undertaken. The Minister has already indicated the number of people who hold these accounts. Therefore, much of the work is already done.

Chairman

All we asked about in the letter to IFSRA was the status of its investigation. Is that sufficient?

Deputy Bruton

The general consensus was that we would like to hear the views of IFSRA. We should indicate that we are anxious to hold a hearing.

Chairman

Should that be after completion of its investigation?

Deputy Bruton

No. It should happen before its completion, if IFSRA feels it is in a position to talk to us.

Chairman

We can agree on that.

Deputy N. O’Keeffe

This is a very important item. A number of people who have endowment mortgages with British or Scottish life companies contacted me to inform me they were performing well. We should invite the companies to come before the committee to hear what they have to say as well as IFSRA.

Chairman

I do not want this committee to turn into a PR operation.

Deputy N. O’Keeffe

We can cherry-pick a number of the major companies involved in providing endowment mortgages. There is a huge Irish market for Scottish life assurance companies, which fact we cannot ignore.

Chairman

We will begin by inviting IFSRA. As part of its examination, it should hear the views of the committee.

Deputy Bruton

If IFSRA feels that such a meeting would be premature, that is fine.

Chairman

We will invite the authority and await its response.

The next item concerns ongoing correspondence regarding the settlement with the Revenue Commissioners. At our meeting of 6 October, the committee agreed that I, along with Deputies McGuinness and Ó Caoláin, should meet the Ombudsman and the chairman of the Revenue Commissioners to see if a resolution could be reached in the case of a taxpayer who was dissatisfied with the result of his dealings with the Revenue Commissioners and the Ombudsman.

On 28 November, Deputies McGuinness,Ó Caoláin and I met the chairman of the Revenue Commissioners. On the same day, Deputy McGuinness and I met the Ombudsman, which meeting Deputy Ó Caoláin was unable to attend. It was clear from our meeting with the chairman of the Revenue Commissioners that they still believe the position they adopted initially in the case was justified. However, they felt the settlement was reached as an appropriate recognition of the Ombudsman's position. The Department of Finance concurred and approved the making of an ex gratia payment to the taxpayer.

The key issue in this case is whether the taxpayer in question had given his consent to the settlement which was made by the Ombudsman on his behalf with the Revenue Commissioners. At the meeting with the Ombudsman, it became clear from the contemporaneous records of the Ombudsman's office that the taxpayer in question had consented to the settlement. It appears, therefore, that the correct procedures were followed and that the complainant was fully involved with and consulted in the resolution of the case.

Members will recall that the Ombudsman Act 1980 allows the Ombudsman to make special reports to the Oireachtas where he or she is dissatisfied with the response from a public body to a recommendation he or she has made. The mechanism was used for the redress of the taxpayer's case. The legislation reserved to the Ombudsman the right to initiate the procedure and there is no provision for this committee or the Oireachtas to request a special report from the Ombudsman.

One of the issues which arises from the case which Deputy McGuinness and I raised with the Ombudsman is the public perception that recommendations of the Ombudsman are enforceable against public bodies. Arising from our discussion, the Ombudsman undertook to examine the way in which her recommendations are communicated to complainants, with a view to ensuring that the limits to her powers are clearly understood. It is important to recall that the Ombudsman sees the fact that her recommendations are not enforceable as a strengthening rather than a weakening of her role. I believe the committee has exhausted all options available to it on this matter and has no further role to play.

The Revenue Commissioners are satisfied with their position. They indicated that they only agreed to a part payment out of recognition and respect for the role of the office of the Ombudsman. The Ombudsman's office has a detailed note of a telephone call with the taxpayer and the investigator the morning after the proposed offer was communicated to the taxpayer. The note suggests he indicated by telephone that he was accepting the offer. He subsequently came to the conclusion that perhaps he should have held out for more. It is clear from the Ombudsman office's records, which were not available to us until we got to the meeting, that he had spoken with the Ombudsman and had consented to the offer of €300,000. This committee has no further role in the matter.

Confusion was caused by the type of letters issued by the Ombudsman's office. When issuing a formal recommendation, that office quoted a section of the Ombudsman's Act under which the formal recommendation was made. An ordinary person reading that letter would be entitled to think the recommendation had legal effect, given it quoted the section under which that recommendation was made. The Ombudsman has agreed to alter the information literature and how the office corresponds with people in terms of explaining that the recommendations do not have a legally binding effect. There was a general misunderstanding in that regard. We have exhausted every possible option and cannot request the Ombudsman to produce a special report. The Ombudsman has indicated she has no intention of doing so. The case is now closed. We will now move to the next item on the agenda.

Members have been circulated with two sets of documents on decentralisation received from the Department of Finance. One is the first of the monthly reports on the implementation of the Government's decentralisation programme requested by the committee from the Department of Finance. The Department has also sent a set of reports and a recent press release concerning the implementation programme. Is the report noted?

Senator O’Toole

Is this the general report?

Chairman

Yes. It is several weeks old.

Senator O’Toole

I want to make clear that in requesting monthly reports, the committee wanted not an elaborate report but a figure. We now know the figure has been reduced from 10,000 to 3,000. What we want to know now is what is happening each month. We want an update in terms of buildings and numbers and not anything comprehensive. We do not wish to put the Department of Finance to the trouble of producing 24 page reports. We require only two paragraphs in relation to each meeting in terms of what new buildings have been acquired, where they are and how many people have moved.

Deputy P. McGrath

We might want to add to that. The Budget Statement last year included a clause which stated that for any new property acquired in provincial Ireland the Department would need to have leased or sold corresponding property in Dublin. I would like included a reference to that in each case. I do not think the Department is adhering to that clause which struck me as being part of the deal.

Chairman

We will ask for that information to be included.

Senator O’Toole

We do not wish to put extra work on the Department. A tabular statement regarding buildings sold, bought or acquired will suffice.

Deputy Bruton

What is the Chairman's intention regarding hearings?

Chairman

We have completed the discussions.

Deputy Bruton

Will the committee issue a report?

Chairman

We can. I have not taken any action in that regard. We have completed, for all practical purposes, the hearings. It would be excessively repetitive to continue the process. People are aware of the position in that regard and are receiving regular reports. We can compile a report if members so choose.

Deputy Bruton

It would be appropriate to make time towards the end of spring, perhaps before Easter, to hear again from Mr. Flynn on how the implementation process is proceeding. We could devote a session to getting an overall update on the decentralisation process, including from the Minister responsible.

Chairman

That can be agreed.

Deputy Finneran

We have now moved into what might be part of our work programme for the coming year. We have given much of this year to discussing decentralisation, some of it for political purposes. An item which has not yet made the agenda and on which I have spoken for two years is the strategic management initiative, SMI. I would like time to be made available for a debate on that issue some time in the near future.

Deputy N. O’Keeffe

I support Deputy Finneran's request. We have moved into the first stage of decentralisation which is running smoothly. It is possible decentralisation will be completed before the next general election. I do not believe we should clog up the committee's agenda with further discussions on decentralisation. A number of other important reports await discussion by this committee, such as the Irish Financial Services Regulatory Authority, IFSRA, and Competition Authority reports.

The Minister for Finance, Deputy Cowen, gave an excellent speech on budget day and produced an excellent budget. We should consider the tax breaks granted in that regard.

Deputy Bruton

We could play a video.

Deputy N. O’Keeffe

The committee should investigate the compliance with those tax breaks, some of which are in doubt.

Deputy Burton

If we are drifting into the work programme in general, my response to decentralisation was in the context of it having been raised. We have yet to discuss the ERI report on the economic evaluation being carried out by different Departments. I do not wish to bog members down with initials but the ERI is intimately linked to the SMI in the sense they both relate to better performance from the Civil Service. Of major concern to those who read the report was that significant areas of the public service appear to have abandoned such evaluations. The Office of Public Works, OPW, officials felt the report did not reflect the type of work being done by it. I support Deputy Finneran's call for a debate on SMI. I also reiterate my proposal some time ago that we establish a sub-committee on the issue. Given Deputy Finneran's dedicated interest in the subject, perhaps he might take responsibility for that sub-committee. That suggestion has fallen on deaf ears before but it is an issue which ought to be attended to. Is the Chair indicating agreement to that proposal?

Chairman

No.

Deputy Finneran

This is, as far as I am concerned, a merry-go-round. The issue of decentralisation has been discussed by this committee for the past two years. The Deputy's proposal was put before the committee but there was no agreement. It was decided that one meeting per month be set aside for SMI. I do not think we should change horses again. SMI is an issue which comes within the remit of this committee. We should be in a position to afford one meeting to discussing it. I suggest one of our first meetings in 2005 be set aside to discuss a programme on SMI.

Deputy Bruton

I support Deputy Finneran. We need to establish a sensible programme in regard to SMI and, perhaps, look at its operation in individual Departments rather than taking an omnibus look at it. The Department of Health and Children has a strategic statement in place and has set out objectives and so on. It is manifestly not delivering on those objectives. That is not exclusively the fault of Ministers. It is a fault of the link between the objectives set and strategic management in Departments. If we are to do something meaningful, it must be at departmental level. I presume the committee has the authority to call people in.

Chairman

My understanding, as Chairman, is that this committee's role extends only to the Departments of Finance and the Taoiseach.

Deputy Bruton

A discussion on SMI on those terms would be frustrating and wasteful of our time.

Chairman

It has its own SMI for its own Department

Deputy Bruton

That is the only level at which one can make an impact. One might bring in someone and say to that person that he or she has set the objectives, then ask how they are to be delivered. There are no objectives for the Department of Finance.

Deputy N. O’Keeffe

If there are members of this committee who want to participate in that on a sub-committee basis, we could set it up. It would place no extra burden on us and clearly there has been a merry-go-round for some time.

Chairman

We have been on that merry-go-round before with regard to establishing a sub-committee and we agreed that because of the difficulty of getting a quorum on a sub-committee, matters might be better kept on the main agenda on a limited number of occasions, rather than hiving matters off to a sub-committee. We decided not to take the sub-committee route last year but certainly the issue should be one of the first items to be considered in 2005,

Deputy Bruton

Could the Chairman on our behalf seek authority to bring in individual Departments and look at SMI processes within them? If that were in place, it would not be a waste of our time.

Chairman

This committee has an overarching role regarding SMI and the Department of the Taoiseach to ensure that the policy is in place, but the detailed implementation of SMI within the Departments is not within our remit. The Department of Finance has a particular role.

Deputy Bruton

We are not management consultants. We will not be second-guessing processes. All we can scrutinise is delivery with regard to objectives, and what is being done regarding delivery.

Chairman

This committee has not got the authority to control that with regard to all the Departments.

Deputy Burton

Could we go back to what we talked about, the fact that a number of committee members have a specific interest in the matter? An indication was made that some people would be willing to come to specific hearings on a Monday or Friday, which would not clash with full Dáil days, and that the Chairman, if he were not available for those days, might facilitate the deputy Chairman of the committee to step in. This is the only way to address the matter. Otherwise we will be discussing it again in another year's time.

Deputy Finneran

I do not think we should side-step the matter again. I appreciate the point made by Deputy Burton but we took a decision on this after some consideration and we should stick with it. We have changed our minds twice already.

Chairman

We will keep the matter on the main agenda.

Deputy Finneran

We should at least have a meeting. I agree with Deputy Richard Bruton. We should not meet merely for the sake of meeting but a programme should be agreed.

Chairman

We will have it on our work programme for the first meeting in 2005. We will prioritise the programme rather than having a list of perhaps 20 items we might like to consider.

Senator O’Toole

Will the Chair give me some guidance on the work programme? During the summer holidays the High Court inspectors issued the NIB report. That report outlines serious, significant, systematic and endemic tax evasion aided and abetted by named people in senior positions in that bank. There has been no Oireachtas discussion on the matter. As I recall, the report was referred to the Revenue Commissioners, to IFSRA and perhaps to somewhere else. Nothing has happened.

NIB is now in the process of being sold or bought. It will make a handsome profit of about €1 billion. It is entitled to that. However, the new owners will not be responsible in any way for what happened before. The NIB bankers are flying the coop while we sit around. The matter has not even been discussed by the Oireachtas. If anyone should discuss it, it should be this committee. Discussing it in the new year when the bird has flown will not be very useful to any of us.

Serious issues are involved. I raised the matter informally with the Chairman and we agreed that we should look at the matter, which now needs to be urgently addressed. A Member of the Oireachtas was implicated. The report named people. It did everything which we criticised the recent report on AIB for not doing, so to speak. We have taken the matter no further. We have had a systematic breakdown with tax evasion aided and abetted by a licensed bank under the jurisdiction of the Central Bank and all the authorities. We have not discussed the matter. We do not know if we have learned anything from it. We do not know if matters have changed. How can we give an assurance to anyone?

We should deal with this as a matter of urgency. It is a serious issue in our laps, yet we cannot see it. I do not know what the Chairman's view is. As a member of the committee I have to take as much responsibility as anyone else. I am not holding the Chairman since because this has happened very suddenly. I presume we were waiting for a response from IFSRA or the Revenue Commissioners or someone else, but it will not look well for us if we do not do something about this report such as looking at it, responding to it, making recommendations and at least being able to reassure people, if we can do so, that systematic tax evasion is no longer happening in NIB, that new compliance structures are in place. We need to know all that.

Chairman

Whom does the Senator suggest we invite to the committee?

Senator O’Toole

We can either invite representatives from the bank or from IFSRA, which is dealing with the matter. They are the only people who come to my mind. I do not imagine that there is any great value in inviting the Revenue Commissioners. We should at least examine the report. There is as much of importance to the consumer, taxpayer and to ourselves in the NIB report as there was in the AIB report. The issue seems to have vanished, to have fallen below the skyline. It is not currently on anyone's screen.

Chairman

I concur with the Senator.

Deputy Burton

I wrote to the Chairman regarding the recent AIB report. I made the point that the AIB report says that the regulator, IFSRA, is reviewing fitness and probity requirements for members of boards and senior managers of banks, and that it is currently preparing a consultation paper which it promises for early 2005. In early January we should have a discussion with the regulator in which he might outline his thinking in relation to the fitness and probity requirements because in a way they cut to the heart of the recent AIB and NIB reports. That is part of the issue which needs to be discussed.

I know that my letter will be discussed separately later on.

Chairman

We will consider it now, since the Deputy has raised the matter.

Deputy Burton

Fine. One of the points I make in the letter is that it is important that we get a sense of these fitness and probity tests. On the one hand, the fitness and probity issues are very important in terms of consumer confidence in banking but if findings of lack of fitness and probity were to disbar someone from serving as a director or senior manager in a financial institution, that is also in effect a serious penalty applied by the regulator. This needs to be discussed.

Basically we have had a series of running bank scandals, some related to tax and overseas accounts, some to actions in the bank. In my letter I also write of something I feel strongly about, namely, that very little media attention was given to the Faldor issue in AIBIM when the IFSRA report was presented. My understanding is that the Faldor issue was passed to the Revenue Commissioners because of the tax issues arising for the individuals who may be affected by that. That is fine, but the consequence is that once passed to the Revenue Commissioners, a veil of secrecy is effectively thrown over it because it becomes an individual issue for the people involved. From a banking point of view, the critical issue is that AIBIM is one of the largest pension fund managers in this country and people at the top of that AIB subsidiary were involved in actions which involved dealing with clients' accounts and moneys. This affected some clients positively, namely, those involved in it, and affected other client accounts adversely.

Pension fund management is very important to a great swathe of people who have worked in Ireland and whose funds vis-à-vis pensions are partly managed by trustee companies owned by major banks. That did not get much scrutiny in the recent report but in terms of governance, and confidence in the banking system, it is a major issue.

I have referred in my letter to the other issue in the report that there were seven opportunities for making known the issues that arose concerning foreign exchange. Those opportunities were not taken and early this year, between January and April 2004, there was an attempt at a cover-up by reducing the charge to the correct level so that the matter would effectively not be disclosed. That is another serious action. We rely on the regulatory system and IFSRA to maintain public confidence in the banking system which employs approximately 50,000 people in this country. Public confidence in and the probity of National Irish Bank are very important. I therefore propose that early in January we should arrange to have one or two days of hearings on NIB and the recent AIB report. We should also ask the financial services regulator for his opinion on the probity issues in the context of fitness to practise or fitness to be involved in banking at senior and board levels.

Chairman

In terms of forthcoming issues to be dealt with, IFSRA, the strategic management initiative, SMI and decentralisation have been mentioned. The committee will deal with decentralisation later in the year. We must decide whether we are to bring in IFSRA in early January to deal with NIB and the most recent AIB report.

Deputy Burton

Will we have a series? Should we have IFSRA deal specifically with NIB, as Senator O'Toole has suggested, and with the AIB report? We would also need to hear its initial thinking on the fitness and probity questions.

Chairman

That could all be done in the one day. NIB could be dealt with separately and we could then move on to——

Deputy Burton

It could be done over two days and three modules or sessions.

Deputy Bruton

What are we trying to achieve? I would like to know.

Chairman

I do not know. It is about the NIB report which has been issued and action is to be taken against staff members. We will have to wait for the outcome of these actions. I do not know the value of any initiative the committee may take in this regard. Mechanisms are in train by the bank and it is not going to be able to discuss the issues in case this prejudices any action.

Senator O’Toole

The question raised by Deputy Richard Bruton is important, as regards what exactly the committee is doing. In terms of NIB, the committee needs to do what was done with AIB. We want to hear what system changes have been put in place. That is clear.

Chairman

Every individual who was involved no longer works for the bank.

Senator O’Toole

Yes, but it is the systems that are important.

Chairman

I am saying that no individual who was involved works for the bank any longer.

Senator O’Toole

I am not interested in individuals. I am interested in the taxpayer, the consumer and the committee. I want to see what has changed within the bank so that this is on the record. We have not heard that. As regards the other matter, AIBIM and Faldor, perhaps I am wrong but I have read and re-read that small section of the report and I do not understand how it was done. They talk about artificial receipts. Was trading being done and if there was what happened to the pieces of paper? Is this a common occurrence and does it happen in terms of pension funds? This ties into endowments in another way because it reverts back to the same people who are dealing with the money invested in this area. There are enormous issues here and if we can at least bring some clarity to them, that would allow the committee to decide on the next step.

Deputy Bruton

We need to be clear on what we know. We know IFSRA has not been able to establish that AIB had any knowledge of the establishment of Faldor. Neither has it been able to establish that there was any sanction of the manner in which it appeared to benefit certain executives. So IFSRA has failed to uncover evidence of that nature. We also know that, prior to 1995, the law in this area was defective and there was no legislation governing what was going on. We have a dog in the form IFSRA and we do not always need to do the barking ourselves. Perhaps the best way to tackle this issue is to call in IFSRA and ask it to account to the committee for these aspects of its investigation of NIB and to indicate what it has overseen in terms of change within those agencies. If after talking to IFSRA the committee decides other issues need to be taken up with the institutions concerned, we should move on.

The committee could be sucked further and further in the direction of High Court inspections etc. I believe the committee's primary responsibility is to oversee IFSRA and ensure it puts procedures in place that protect the public. We need to ensure the regulatory authority is sufficiently robust and that it has proper systems in place for spot-checking and penalties, which I do not believe it has because, with spot checks, the penalties must be draconian. Perhaps this is the best approach. The sheer thickness of the NIB report is daunting if the committee is to attempt to rework the ground in some way.

Senator O’Toole

I do not object to proceeding in that way and in that order starting with IFSRA. However, what Deputy Burton said is correct. There is more to it than that and it may well be that we should begin with IFSRA. My concern is a simple one and perhaps I am the only member of the committee disturbed by this. It is that a group of people is hightailing it out of town with €1 billion in profits that it has made in this country as part of a systemic and systematic taxation fraud. This is a fact, no one is taking any notice of it and we do not know what changes are taking place on account of it. That is it —simpliciter. There may be a great deal more, or less. I do not have a problem with what Deputy Richard Bruton proposes as regards IFSRA.

Chairman

Is the bank not now tax-compliant?

Senator O’Toole

I do not know. Can the Chairman say what changes have been inserted in the system to ensure it does not happen again? Is this the only time it ever happened in terms of doing this deal for Faldor people or has it occurred before? Have we checked it?

Chairman

As Deputy Richard Bruton said, it is the job of the committee to ensure IFSRA does what the Senator is talking about. It is not the committee's role to do what he is talking about.

Senator O’Toole

I accept that. I do not disagree with the Chairman.

Deputy Finneran

Serious matters have been raised by Deputy Burton and Senator O'Toole. We have all spoken on these issues in recent times both in the House and in public. However, I support Deputy Richard Bruton's suggestion that the committee calls in IFSRA initially. We should hear what it has to say and it should explain to the committee its reasons for not being able to get to the bottom of certain matters. Many of us believe there is a major cover-up of the activity of AIB and I believe that much more has to emerge, regardless of whether IFSRA brings this about this or whether matters become the responsibility of this committee later on.

Senator O’Toole

The Chairman has a different view, I believe.

Deputy Finneran

There has been much public comment on it. We have a report compiled by IFSRA on AIB and there are questions many of us want to put to the authority about it. Deputy Burton has raised another matter concerning NIB. I go along with much of what she has said in this regard and so does Senator O'Toole. We can put questions about those matters as well. IFSRA is the financial regulator, it has brought forward a report and the committee should hear from it first. I second or at least go along with Deputy Burton's proposal.

Deputy N. O’Keeffe

I wish to comment on what Senator O'Toole had to say about the Danish institution taking over and leaving a profit of €1 billion to NIB. The NIB report has been around for some time and appears to have remain unnoticed by the committee for one reason or another. If any company gets into trouble like that, is it simply a case of selling off its assets and walking away from the problems it leaves behind it? That is exactly what has happened. NIB, as an institution, became very embarrassed, sold its business in the North and the Republic and made a massive profit of €1 billion. The people who have been messed up by this situation will be forgotten about. I do not believe this is fair and we as Oireachtas Members and legislators have a role to play. This committee has a role to play in inviting NIB and other bank officials in for questioning. The committee seems to be acting unfairly and is not being even-handed in naming only one institution which was not a major problem as such. Another institution which was up to all types of mischief has been let off.

Chairman

Is it agreed to invite IFSRA to the committee to hear its comments on NIB and the most recent AIB report? Agreed. Having heard from the regulatory authority, the committee will decide what to do then.

Deputy Burton

I support that, but the situation on fitness and probity will be very important later on. It will affect everyone who works in the banking sector. It is important that ISFRA members should tell us their thinking on this. Professor Ray Kinsella has written extensively on the issue of ethics in banking. Apart from these reports which we will examine, we should sign off on the fitness and probity issue before IFSRA. We should hear what IFSFA is thinking and have someone like Professor Kinsella inform us of how other countries manage it. I agree with Deputy Ned O' Keeffe. At the end of the day, we are all concerned about a sound banking industry in Ireland, with good employment and a strong international reputation.

Chairman

I agree with that, but we will start with IFSRA.

Senator O’Toole

I have to leave for a vote, but I would like to comment on something further down the agenda, which is an item of correspondence on mutuality. I have always supported the concept of mutuality. When the Bill on mutuality was going through the Houses ten years ago, I believe Deputy Finneran was in the Seanad. The concept of mutuality is a crucially important one in terms of house prices and variety within the financial institutions. It would be appalling if we were left with no mutual society. I do not begrudge shareholders who are in it for the profit because it is good that we have a variety. However, we should do everything in our power to protect the concept of mutuality. The way things are currently going, the EBS is probably the only mutual society that will be left. That is very sad as it was never the intention. These mutual societies were set up because the financial institutions let the ordinary people down. Recent years have shown us that we cannot depend on financial institutions. Yesterday's report by the Competition Authority on the banks showed that the banks are not even looking after small businesses. We need mutual societies owned by the people.

Chairman

I want to move on to the next item of correspondence. We know what we are doing in January and we will have to set a date for a meeting.

Deputy N. O’ Keeffe

I got a text this morning about the Taoiseach's questions on the Order of Business. Can we meet on non-sitting days, when we might be more committed to what we are doing?

Chairman

The January meeting will take place on a non-sitting day.

Deputy N. O’Keeffe

I have strenuously objected to Wednesdays, as Wednesday is the busiest day in the Dáil. We have deputations and meetings and we are running back and forth. Wednesday should be excluded for committee meetings. Maybe it is only my problem, but others should have the same problem if they are dealing with their constituents.

Chairman

That is a fair point. We can talk about the timetable of our meetings in January, but there are not sufficient members here to achieve a consensus.

The next item of correspondence is EU scrutiny document reference No. 38. The sub-committee on European Scrutiny has sent this committee a list of documents on proposals considered and decisions taken at its meeting on 26 November. The sub-committee has drawn our attention to one proposal in particular, but has not recommended that we scrutinise it. That document, COM (2004) 733, details a Council decision concerning the signature and conclusion of the agreement between the European Community and Monaco providing for taxation of savings income. Is it agreed, in line with the recommendation of the committee, that the proposal does not warrant scrutiny by the committee? Agreed.

Some time ago, the sub-committee on European Scrutiny drew our attention to document SEC (2004) 593, but did not recommend that we scrutinise it. The proposal involves a preliminary draft budget for the surpluses resulting from the implementation of the EU budget for 2003. The committee has sought and received a briefing note concerning the relationship between savings on the 2003 budget and the contribution by member states to the budget for 2004. We had agreed to finalise our consideration of this matter after the meeting of the budget committee in the European Parliament. I raised this issue at the meeting in Brussels and was informed by the chairman of the budget committee that there had been a dramatic improvement since 2003 in the way the potential budgetary surpluses are managed. In accordance with the sub-committee's recommendation, I propose that we formally agree not to scrutinise the original proposal. Is that agreed? Agreed.

On 6 October, the committee agreed not to scrutinise document COM (2004) 468, which concerns VAT on services provided in the postal sector. The Joint Committee on Communications, Marine and Natural Resources is examining the proposal. The clerk was asked to inquire whether that committee had reported on the original proposal. I understand that it did not do so and I suggest that we note this position. Is that agreed? Agreed.

The committee received a number of statutory instruments. Under our orders of reference, the committee has power to consider such statutory instruments the Minister of Finance made and laid before the Houses. The time limit within which the House can annul a statutory instrument is often limited by statute to 21 sitting days after it has been made. The first statutory instrument is SI 31 for 2004. The Department had received two statutory instruments made under the Ethics in Public Office Act 1995. One is SI 698 of 2004, which concerns the disclosure required applicable to certain designated positions of employment in public bodies. The other statutory instrument, SI 699 of 2004, extends the scope of the Act to a number of additional public sector bodies. The 21 day review period applies to both statutory instruments. Can I take it that we do not wish to consider the statutory instruments? They are only routine matters. Is that agreed? Agreed.

The Department of Finance has received three other statutory instruments. SI 693 of 2004 makes regulation for the transparency of the financial dealings of public bodies. As these regulations are made under the European Communities Act 1972 they can be annulled by the Houses up to one year after they are made, but there must be a recommendation to annul them from the Joint Committee on European Affairs. If this committee was to form a view that regulations should be annulled, it would have to persuade not only the Houses, but also the Joint Committee on European Affairs. Can we take that we do not want to consider this statutory instrument? Is that agreed? Agreed.

The next statutory instruments are SI 707 and SI 708 of 2004. They require the commissioner of valuation to evaluate relevant properties occupied by Waterways Ireland and Iarnród Éireann for the purposes of the calculation of rates. The 21 day review period applies in this case. However, the committee sought and received briefing notes earlier this year on the way such valuations are carried out. We were satisfied with the information received at the time and decided not to consider a number of statutory instruments which were similar to these before now. Can I take it that the committee does not wish to consider these statutory instruments? Is that agreed? Agreed.

The next item is the expenditure review initiative. The first formal report of the Minister for Finance by the expenditure review central steering committee has been circulated. The objective of that committee is to analyse spending by sector in a systematic manner and to provide a basis on which more informed decisions can be made. I propose that we defer consideration of this matter, or do we wish to note it?

Deputy Bruton

This is an important report. In its three year review, the Government set out to look at 143 areas of expenditure review. More than two thirds of the way through, we find that only 20 areas have been completed, 45 have been abandoned and the progress in many areas is ridiculously slow. The Office of Public Works has abandoned all review because of decentralisation. The Department of Education and Science has abandoned the review of the primary and second level building programme, which is a deplorably managed programme by any standard. There are very important issues here. The Department of Education and Science also abandoned its review of the targeted interventions to address educational disadvantage at primary level. It would have been extremely useful to conduct a review on that. It is not acceptable that Departments are unilaterally abandoning the obligation to have expenditure programme reviews. The committee should take an extremely strong view on this, stating that it is not acceptable. The intention of the ERI is that the entire Government programme be subjected to review in a three year cycle. The Government's ambitions fell way short of that in the first place, but it has fulfilled only 14% of its ambitions. This is a serious matter. Deputy Finneran who, unfortunately, is not here raised issues about SMI. This matter goes to the heart of that process. SMI is a joke if people in responsible positions are not willing to have their work reviewed against performance indicators and, thus, are not willing to approach the spending of public money in that responsible way. I do not agree that we should defer consideration of this matter. This should be given a high priority in our programme for the new year. We should put the fear of God into Departments that refuse to do what this committee believes is the core of their responsibilities.

Chairman

We should invite the chairman of the expenditure review central steering committee to attend the committee early in the new year.

Deputy Bruton

That would be a sensible place to start.

Chairman

We should start by doing that. This matter merits discussion and should be listed for discussion.

Deputy Bruton

This is a very black report on the matter.

Deputy Burton

The committee might specifically write to the commissioner of the OPW requesting him to comment on or prepare a short presentation for the committee on the report. There is a degree of dissatisfaction with the contents of it in terms of whether it fully reflects the work that has been done in some sections of the OPW. I have sense in terms of the report that if work done by various sections did not meet the standard outlined beside the box to be ticked, we ended up with a non-compliant statement. As the OPW is the mainline agency directly related to the functions of this committee, we should write to the commissioner of the OPW requesting him to advise the committee of his view on the ERI report.

Chairman

We will write to him requesting his views in writing first and if we decide to bring the chairman of the OPW before the committee, we can do so after that.

Deputy Burton

My understanding of this process is that it is a bit like poverty proofing and gender proofing. One is required to tick a number of boxes, but sometimes the questions to which the boxes apply are not drawn up in an appropriate way that reflect the activities of different sections.

Chairman

We are agreed that we will invite the chairman of the expenditure review central steering committee to attend before the committee as early as possible in the new year and in the meantime we will write to the commissioner of the Office of Public Works seeking a written response on the comment regarding the OPW in the report.

The next item of correspondence relates to the freedom of information legislation. We received a letter from the Information Commissioner who informs us that she has been unable to furnish a report to the committee under section 2 of the Freedom of Information Act 1997. Under section 32(2) of the Act the joint committee must review from time to time the operation of legislative provisions that either authorise or require the non-disclosure of record and report to the Houses on the results of any such review. Subsection (3) requires a Minister to report on these matters to the committee every five years.

As this is the fifth year since the last reports were furnished, the Clerk has received reports. A report was received yesterday from the Department of Health and Children. However, three reports are still outstanding. The three Departments involved have confirmed to the Clerk that their reports are being finalised and should be sent to the committee soon.

The committee agreed earlier this year that none of the reports would be circulated to members until all of them had been received. Section 32(5) of the Act requires the Information Commissioner, on request from the committee, to report to us on her opinion and conclusions on the reports from the Ministers. The Information Commissioner had originally intended to report to the committee by late September-early October. She now proposes to defer concluding her report until the remaining reports from the three Departments have been received.

The commissioner has asked if the committee would be satisfied with this approach. I suggest we confirm that this would be acceptable. We will look forward to hearing from the Information Commissioner when she has the report from three line Departments submitted to her.

Deputy Bruton

I accept what the chairman said, but he should write to the three Ministers involved advising that we are disappointed that they are holding up this matter.

Chairman

A letter can be sent in my name, as Chairman of the committee, to the three Ministers, and we will do that this week.

The next item is a circular letter received from Feasta, the foundation for the economics of sustainability, concerning the anticipated legislation which would allow for the Irish Nationwide Building Society to shed its mutual status. I understand that the legislation involved will be sponsored by the Minister for the Environment, Heritage and Local Government and, as such, is more appropriate for consideration by that committee. I suggest we note the correspondence because another Oireachtas committee will discuss this matter. I know a Senator referred to it, but there will be a forum in the Oireachtas committees for this matter to be discussed.

Deputy N. O’Keeffe

The legislation to provide for the building society becoming a plc will have to come before this committee.

Chairman

No, the Select Committee on Environment and Local Government will deal with it.

Deputy N. O’Keeffe

It is proposed that the building society will become a plc and that will be a matter for this committee.

Deputy Bruton

It would then become a matter for consideration by this committee.

Deputy N. O’Keeffe

Therefore, that legislation will be passed to this committee at some stage.

Chairman

The legislation has not been published yet, but such legislation will be passed to the other committee.

Deputy N. O’Keeffe

A member has questioned this proposed legislation and supported this letter, and we have more or less agreed with what he said.

Deputy Bruton

Perhaps we should examine the issue. The Competition Authority reported yesterday on the lack of competition in the banking sector and produced a poor report with very little new evidence. It is weaker than the material we assembled and weak in terms of its recommendations. The authority has invited submissions by 14 February. The committee has done quite a bit of work in this territory. We should seriously consider making a submission. In terms of the competitive structure, one of the issues is undoubtedly whether mutual societies or credit unions add a competitive dimension. It was noted in yesterday's report that they do not have access to the clearing system.

There is an opportunity for the committee to take a leadership role on an issue from which everyone seems to be standing back as if it were a hot potato, so to speak. This is the second Competition Authority report and the authority is now preparing a third. Everybody concerned seems to be backing away from it. It is time for us to show political leadership by saying what direction we want the issue of bank competition to take. We have assembled a considerable amount of material and spent a good deal of time conducting hearings on this matter. Perhaps we should put in our oar and make a proper submission.

Chairman

That is fair comment.

Deputy Burton

I do not know what yesterday's report was about.

Chairman

It was a consultation document, not a report.

Deputy Bruton

It should be one at this stage.

Deputy Burton

This process has been ongoing for two years. I would interested to know how much that report cost because it did not add anything to the sum total of the proceedings.

Deputy Bruton

We could sell it for half the price.

Deputy Burton

We could have written it on the back of-——

Chairman

Two big banks have 70% of the market.

Deputy Burton

The report is 200 pages. At the back of it there is a reference to a study by Indecon undertaken by the Irish Bankers' Federation which took up ten pages and was far more valuable and far more wide-reaching. It was a commissioned report for the Irish Bankers' Federation, which has a vested interest in the issue. I would be interested to know what the report cost the taxpayers and what value it is likely to be to them.

However, there are a number of areas known to inflate costs for the users of bank services. The report examined only current account costs and costs for SMEs. It did not examine the mortgage area, one that is very costly, particularly for young people getting into the housing market.

In fairness to the building societies and financial institutions, they have pointed out on a number of occasions that one of the reasons transaction costs on mortgages are so high is the cost the legal profession attaches to conveyancing.

The Competition Authority produced a report on competition in legal services a long time ago, as a consequence of which I do not believe anything happened. I agree with Deputy Bruton that perhaps we should send the authority a stiff note asking it when it intends to give value for money regarding its activities and what its activities in terms of that report cost. The report has been published too late. It was commissioned more than two years ago. Most of the ground covered in it has been well covered by other parties on a number of occasions since then.

Chairman

I understand that but where do we take it from here? Deputy Bruton suggests that we make a submission.

Deputy Bruton

Yes, if we could reach consensus on a few proposals.

Chairman

We can make the point made by the Deputy in the submission.

Deputy N. O’Keeffe

Would it not be better to invite the director of the Competition Authority to come before the committee and question him on the weaknesses of the report? He compiled the report and we were led to believe it would contain innovative proposals and suggestions for the banking organisations but there is little or nothing in it, aside from what members of the committee have put forward.

Chairman

Deputy Bruton suggests that we make a submission.

Deputy Bruton

It might not be possible to get all-party agreement but if there was such agreement on a set of four or five proposals, we might give the issue the momentum it has lacked.

Chairman

I believe that is the most straightforward way to proceed between now and February.

Deputy Bruton

We have done a good deal of work and we were about to make some recommendations or proposals.

Deputy N. O’Keeffe

I have a question about deregulation of bank charges. I have not read the newspaper report on it. What did he say about deregulation of the charges? If the charges were deregulated, bank charges would be cheaper.

Deputy Bruton

It proposes deregulating charges. Charges is the one area where Ireland is about one third of the cost in the rest of Europe. It is proposing deregulating the area where charges are cheap on the grounds that it will introduce innovation. However, one is asking consumers to buy a pig in a poke.

Deputy N. O’Keeffe

There will be better value for banking when the charges are deregulated. The Prices Commission was abolished a number of years ago and deregulation there resulted in higher rather than cheaper prices because they all worked to the same norm then.

Deputy Bruton

If one has what the economists call an oligopoly, deregulating does not mean lower prices. If two companies control a huge amount of the market, they can increase prices.

Chairman

We will try to proceed with a January meeting with a view to compiling a short submission from the committee.

Another item of correspondence is a copy of a circular letter from the IFA to farmer creditors regarding Tralee Beef and Lamb. The letter indicates that the creditors have been seeking a financial contribution from the Bank of Ireland to a creditors' fund. At our last meeting, we agreed to invite representatives of Anglo Irish Bank to meet the committee. An invitation has been issued to the bank and a reply is awaited. I suggest that we note the circular letter and pursue the question at the meeting with Anglo Irish Bank representatives. We will decide what to do about the situation after that. Is that agreed? Agreed.

Deputy N. O’Keeffe

What are you suggesting about the letter from the IFA?

Chairman

We have invited Anglo Irish Bank to meet the committee.

Deputy N. O’Keeffe

The other letter has broadened it.

Chairman

It has. It refers to Bank of Ireland which is banker to the group. We can put that point to Anglo Irish Bank. We have invited its representatives to come before the committee and we are awaiting their reply.

The final item is consideration of the report from the delegation which attended the annual meeting of the British and Irish Ombudsman Association in London in May. The report has been circulated. Deputy Finneran and Deputy O'Keeffe attended the meeting. Is it agreed to note the report? Agreed. The committee received a preliminary notice from the organisers of the conference informing members that next year's meeting will take place on 7 April 2005. A formal invitation will be put to the committee in due course. I propose that we note the preliminary notice.

A report from the delegation that attended the OECD high level parliamentary seminar on corporate governance in Paris in October has been circulated. Deputy Finneran and Deputy O'Keeffe also attended. Can we note that report?

JOINT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate - Wednesday, 15 Dec 2004

Business of Joint Committee.

JOINT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE debate -
Wednesday, 15 Dec 2004