Seanad Éireann debate -
Tuesday, 10 Jul 1990

Vol. 125 No. 16

National Treasury Management Agency Bill, 1990: Second Stage.

Question proposed: "That the Bill be now read a Second Time".

Minister for Finance (Mr. A. Reynolds)

I opened the Second Stage debate in the Dáil with some facts about the national debt which might bear repeating in this House. Total employment in this country is about 1.1 million and each of these persons is on average paying out of his and her pocket almost £2,000 each year just to meet interest on the debt. Half of that sum is going abroad. The debt is £25 billion and represents almost £23,000 per head for each person at work here. These figures are growing. Our aim in this Bill is to do everything possible to minimise this burden.

I said in my budget speech earlier this year that the Government had decided to establish, under statute, an independent office for the management of the national debt. My statement referred to the fact that debt management has become an increasingly complex and sophisticated activity, requiring flexible management structures and suitably qualified personnel to exploit fully the potential for savings. The purpose of this Bill is to provide for the establishment of the new office, to be called the National Treasury Management Agency.

The Bill enables the Government to delegate my statutory borrowing and debt management functions to the agency, but my responsibility as a member of the Government will be unchanged. In other words, the Minister for Finance's powers are not being diminished in any way. This new agency will act on my behalf as Minister for Finance and under my control. An advisory committee is being established to advise and assist the chief executive of the agency. The chief executive will be directly responsible to me as Minister for Finance and will be the accounting officer for the agency.

As is clear from what I have said, debt service costs have become a major burden on the Exchequer. It has become obvious as well that the executive and commercial operations of borrowing and debt management require an increasing level of specialisation and are less appropriate to a Government Department. The Department of Finance, who have been dealing with borrowing and debt management up to now, are basically a policy Department. The function of borrowing money by the Department in the name of the Minister for Finance began with the issue of national loans in the early days of the State. In those days it was a relatively straightforward function. Despite the huge growth in borrowing by the Exchequer, including the breaking of new ground in the international capital markets, the Department continued to adapt and coped very well with these increased responsibilities. But we cannot ignore what has been happening in the past five or six years, and in particular the loss of financial expertise from the Department, about which I will say more in a moment. Exchange controls have been all but eliminated. Cross-Border capital flows have increased. Deregulation has grown. Markets have become more complex. There has been rapid growth in new debt management instruments. The function of borrowing money in the 1990s and of managing debt, particularly active management, is increasingly specialised.

In GNP terms Ireland's national debt remains one of the highest among the OECD countries at over 120 per cent of our GNP at end 1989. Interest payments alone come to over £2.1 billion this year or 9 per cent of GNP. This is a huge burden and is almost equivalent to the total yield from income tax in the PAYE sector. It is about 60 per cent greater than total Exchequer expenditure on the health services and about 60 per cent greater than total Exchequer expenditure on education. At its most fundamental, of course, these huge debt servicing costs can be tackled only by continuing to reduce borrowing and to limit or stop the rise in our debt, but shrewd management of that debt can also yield savings and contribute to an improved budgetary position.

Debt management is essentially about managing risk. As I have said, our debt is enormous and the range of borrowing and debt management instruments used, both at home and abroad, is large, varied and complex. Out of the total debt of £25 billion, over £9 billion is in foreign currency. It is subject to exchange rate variation vis-à-vis the Irish pound, particularly in regard to currencies outside the EMS such as the US dollar and the yen. Out of the total foreign currency debt, about 40 per cent is at a floating rate of interest and is subject to movements in international interest rates. It is obvious, therefore, that adverse trends in exchange and interest rates can cause a severe rise in our debt servicing costs. Debt management must, in the first place, minimise the effects of these adverse trends by switching between the currencies in the debt portfolio and by varying the proportions at fixed and floating interest rates having regard to projected movements in interest rates generally. In addition to those strategic risk management techniques there are several ways of covering interest rate and exchange rate risks in the short-term.

All these techniques can make valuable savings as well as averting risks. My Department have been examining the potential for savings on the national debt portfolio in consultation with a number of leading international banks and are satisfied that significant savings are available while following a risk-averse debt management strategy. I should emphasise here that savings on the national debt are available across the board and are not confined to the foreign debt portfolio. Opportunities also exist in the domestic market and an active approach can secure savings in the switching between fixed and floating interest rates, between long and short maturities and between different forms of debt instruments.

The domestic gilt and bill markets alone total almost £14 billion so that the potential savings from even small, but active, shifting of the portfolio are significant. I should also mention that non-residents now hold about £4 billion of this figure. Adding this to the foreign currency debt, the net result is that non-residents hold over half of our total debt and we are spending each year about £1 billion in interest payments to non-residents.

What is vital if we are to get the most benefit from all borrowing and liability management opportunities is to have a professional and specialised team to do the job and that they should operate in a stable working environment. It is readily acknowledged that financial institutions are only as successful as the people working in them. In our dealings with foreign banks we have seen many instances of key personnel leaving. Ultimately if these people are not replaced quickly and effectively, the services offered by their former employers deteriorate and their profitability suffers. There is no reason a treasury management operation should be any different. It cannot operate effectively while constantly losing staff or knowing that its staff can be readily poached. That is what has been happening in the finance division of the Department of Finance. The increasingly specialised and complex nature of the work has been unfortunately matched by a constant drain of people to the private sector, attracted by better rewards and career prospects.

People leave for all kinds of reasons and sometimes it can be too costly to retain them. But it is unrealistic not to be able to make an appropriate response in terms of financial rewards or career opportunities in order to retain valuable staff. This is especially so in what is an active seller's market for their services. Even more fundamentally, the size of the national debt, the complexities of its management and the huge burden which it places on the national economy make it a very significant part of our public finances and mark it out as a special case. The Exchequer's debt represents by far the largest portfolio in the country and it is inexcusable not to devote the best possible expertise to its management.

The choice for the Government and for me as Minister for Finance is whether we can allow Ireland's national debt management operation to continue to lose experienced and qualified people and expect that somehow the Department of Finance will cope or whether the risk of letting our debt management lag behind other treasury management structures, either in Ireland or elsewhere, is too great and the consequences too costly. We tried to recruit suitably qualified people into the Department of Finance but this was not successful.

I said in the Dáil that we must be realistic about our situation, however painful that may be, and accept that we are not going to be able to get and hold the best type of people that we need in a Civil Service environment. We have got to pay market rates for the right people and devise an organisational structure which they can be encouraged to join and to give of their best in the interests of us all.

I have already said that our interest payments come to over £2 billion annually. Even a small percentage saving can yield a significant reduction in our budgetary expenditure. If these savings are feasible, and it has been demonstrated that they are, then we must commit the necessary resources and the management structures to ensure that they accrue. That is why the Government are satisfied that establishing an agency as provided for in this Bill is the right solution.

I would now like to outline for the House the basic structure of the agency. The Agency will operate under the general control of the Minister for Finance; the chief executive of the agency will have a direct reporting relationship to the Minister; there will be no board of directors between the Minister and the agency; instead there will be an advisory committee to whom the chief executive can refer; because the national debt is such a large and complex part of our public finances the present carefully constructed controls involving the Comptroller and Auditor General and the Exchequer system of accounts will continue; accountability will be enhanced by making the chief executive formally accountable to the Dáil through the Public Accounts Committee for the financial affairs of the agency; there will be flexibility as to pay and conditions so that key staff can be recruited and retained; in return, they will be assigned clear levels of responsibility and must perform to these levels; and the agency's staff will not be civil servants.

Turning to the Bill itself, I would like especially to mention the key provisions in sections 4 and 5. Section 4 states that the principal functions of the agency will be those delegated to it in section 5. Section 4 also makes it clear, as I have indicated already, that the agency will operate under the control of the Minister for Finance and subject to whatever directions and guidelines he may give.

Section 5 enables the Government by order to delegate to the agency the borrowing and debt management functions of the Minister for Finance. These functions of the Minister are contained in the legislative provisions identified in the First Schedule. The principal such provisions are listed at (g) in the Schedule, viz section 54 of the Finance Act, 1970, as amended in particular by section 118 of the Finance Act, 1983. These allow the Minister to issue debt and to engage in debt management operations. Most of the other references to the legislative functions of the Minister for Finance refer to the operations of the Post Office Savings Bank, and small savings generally.

An order made under section 5 will be annulled if either House of the Oireachtas passes a resolution annulling it within 21 sitting days of the order being laid before it. Section 5 also sets out in some detail the subsidiary functions of the agency. These deal with matters such as the borrowing programme to be undertaken by the agency each year, as well as the submission to, and approval by, the Minister of the annual estimate for expenditure arising out of the national debt. Also included are various advisory and other ancillary functions to be performed by the agency.

Another provision of the Bill to which I would like to draw particular attention is section 9 which deals with the establishment of the advisory committee. The intention here is to engage the knowledge and experience on a part-time basis of senior people with a proven track record in financial services. It might be possible that some of these would have an international background and would, if necessary, be headquartered outside Ireland. This would not only reflect the international arena in which the agency will operate but offer a useful background of experience and advice for the agency's operations.

Section 12 is also worth mentioning in particular. This provision effectively nominates the chief executive of the agency as the accounting officer for the management of the national debt. This will allow the Dáil, through the Public Accounts Committee, to engage in a detailed examination of this large item of expenditure.

I should also say something about section 14 dealing with the disclosure of information. A number of Deputies in the Dáil expressed concern at first about the minimal nature of the £1,000 fine for unauthorised disclosure of information. As I said in the Dáil, however, the fine is deliberately low in order to have access to the District Court and seek summary conviction following which the perpetrator can be dismissed without delay. The alternative would be to proceed by way of indictment which would take longer. Dismissal is not the only deterrent of course. A non-disclosure clause will be written into the contracts of employment, a breach of which can be pursued under the civil law and, finally, the Official Secrets Act will apply under which stiff penalties are applicable.

I commend this Bill to the House.

Mrs. Doyle

The Minister is welcome here this morning with what effectively is a Bill to head off the headhunters. That is what we are talking about. We can put nice words on it, we can discuss the many and varied problems that surround our national debt and the management of it but we are talking about how the Minister for Finance will head off the headhunters in the financial arena where our people in the Department of Finance, who are trying to manage the national debt for us all, happen to be working.

Basically, I have no difficulty with the concept of the agency. It is quite a novel one, but on reflection, perhaps it is one that could be applied to other sectors in the public service as well. The board of ERAD immediately comes to mind. I am sure if we look at this as a template for handling niches or specific problems in the public sector we could even extend it.

In order to head off the headhunters the Minister has to be in a position to increase the pay and generally improve the conditions of those who manage our £25 billion debt. They must be put on a par with conditions and pay in the private sector. There are increasing career opportunities in the private sector generally for the expertise that we have in the Department of Finance, particularly in the debt management sector. One has only to look at the financial services sector and the opening up of that whole area. With the relaxation of exchange controls I think we will automatically see a total relaxation of financial controls and that adds another layer of sophistication to the already very difficult job of debt management. That, in itself, will bring the need for more expertise or for anchoring the expertise we have already got to be sure they are not head-hunted for the private sector.

Apparently the Minister has been trying to attract more personnel with expertise and qualifications to the debt management sector or to the Department of Finance generally over the last year but rather unsuccessfully. Whether those who applied were not suitable or did not have the experience he wanted or whether the salary and conditions did not attract them I am not sure but the venture I understand was unsuccessful. If the private sector can organise their debt management, their treasury management generally, and if every other country in Europe and further afield can have the best and the brightest working on behalf of their taxpayers, there is really no reason we cannot do the same in Ireland.

We could spend a long time attributing blame as to why we are talking about a debt of £25 billion. Basically, we would all have our own views on that but the facts we are faced with are that we have a debt of £25 billion at the moment. This continues to increase, although at a much reduced rate than heretofore. We are looking at interest payments of £2.1 to £2.4 billion a year. That money has to be found from the taxpayers of Ireland. We have to borrow, we have to live within our means but, above all, we have to ensure that the spiralling debt which was out of control for so long no longer returns. We have got to reduce even further the debt-GNP ratio from the present position. I think the Minister used the figure of 120 per cent of GNP at the end of 1989. I think it could be somewhat lower at the moment. I think we might be looking at around 117 per cent. That has to come down. While we have public opinion conditioned to accepting the medicine, in a reasonable way we must ensure that we achieve our objectives in this area.

I think, it was during our debate on the Finance Bill or the budget that the Minister responded rather sharply to my suggestion that it was a budget of missed opportunities, that with the support of the Tallaght Strategy and with the support of nearly all sides of the House—not all sides, I accept, but with the support of 80 per cent of both Houses — for getting our finances in order we should not let out of our grasp an opportunity to do so. Slowly but surely, public opinion is now accepting that the medicine was needed, that financial rectitude is the order of the day and has to be the order of the day. If the public generally, if vested interest groups and lobby groups get back into a position where they will all look for whatever they feel they need for their sector, we will not be able to keep the reins that were there. The Minister has majority support from both Houses to resolve the problem. I felt the budget was a budget of missed opportunity. The Minister rebuked me rather sharply at the time.

Mr. O'Keeffe

He has been proved to have been correct since.

Mrs. Doyle

That remains to be seen.

Mr. O'Keeffe

I will elaborate on that later.

Mrs. Doyle

I am sure you will, with little notes passed over to you by the Minister.

(Interruptions.)

Mrs. Doyle

I await your contribution eagerly, Senator. We have talked on several occasions in the past six months in this House about the economic situation generally. I think we debated the NESC report before Christmas. We had a long debate on the budget and we had a debate on the Finance Bill. The Industrial Credit (Amendment) Bill provided another opportunity to get into this area and here we are again this morning. I think the facts are well known to all sides of the House. We might have a different interpretation but that does not get away from what the Minister is about this morning which basically, is, how do we put in place the personel with the expertise and experience to manage in the international arena that they now operate in the financial services sector our £25 billion national debt.

The Minister has brought this Bill to the House, a measure to head off the head-hunters as I mentioned. The agency should be in a position to offer the best and the brightest the appropriate pay and conditions. This should also help to attract from the private sector to the public sector the expertise we now need in this very sophisticated and complex job of managing our debt.

The Minister pointed out that it costs those of us at work over £2,000 per annum to service the debt alone. That is a lot of money when you think that there are only 1.1 million people at work in our country. We all should be concerned about how this job is done, we all should be concerned that the Minister cannot hold the expertise he now has and that he cannot attract the further expertise he feels he needs. Despite the progress made in relation to our debt and our financial management in recent years, we still have in GNP terms one of the highest debts of all the OECD countries. That is a salutary thought. We can get carried away with the progress made and think the debt is not still rising or that we do not have a problem at all. There is a view out there that the problem is now solved, that better and brighter times are here. I hope they will be here and I hope the country is facing better and brighter times but the problem is not solved and will not be solved unless we have in place debt managers of the right calibre and expertise doing the job for all of us. I suppose we could remind ourselves that they are not doing the job just for the Government, they are not doing the job for the parliamentarians, they are doing the job for the entire country.

The new agency's job apparently will be to negotiate loans at home and abroad. The Minister pointed out that over £9 billion of the debt at the moment is in foreign currency. They will have the job of balancing our debt portfolio and of managing risk generally. I suppose the emphasis the Minister gave in the Dáil and in this House was to the management of the risk and to the expertise which can effectively manage the risk involved. The foreign currency debt of £9 billion is subject to exchange rate variations and indeed the volatile situation that is there now. We do not quite know the effect of a united Germany on the liquidity position generally and the demands that will be on them from other sources. We now have to pay more attention than ever to the US dollar and to the yen and generally it is a much more sophisticated and risky business than perhaps it was in the past. The old traditional sources of money cannot be taken for granted. We cannot assume we can always keep going back and repay a few loans and take out a few more. We cannot be sure that we, or indeed others, will be as welcome because they have to deal with different situations than previously.

Apart from the exchange rate variations in relation to the foreign currency debt, we have the international variations in interest rates. The job of the debt managers and the new agency, and indeed the job of our debt managers at the moment and for a while, has been to balance the borrowings as between fixed and floating interest rates. I understand there is about 60 per cent of our foreign debt at the moment at fixed interest rates and about 40 per cent in round terms at floating interest rates. There, again, with the variation in the floating interest rate there is considerable risk and to balance the amount of loan in the different areas, between the different countries, demands considerable responsibility and here the pay and conditions should be commensurate. If we have the best and the brightest they should be paid and rewarded for the job they do.

Apart from the foreign borrowings and the balance that is needed generally between fixed interest rates and floating interest rates, there is also the balance needed in domestic borrowing. If £9 billion represents our foreign borrowings of £25 billion, then I think in round figure £4 billion represents non-resident borrowings in the country. The balance, therefore, of £12 billion is what is borrowed directly from the Irish market. If a saving of even 1 per cent can be made by this agency it would represent a saving of over £20 million a year, a very considerable saving. The Minister had a figure of £35 million per annum in his budget speech which he hoped this new National Treasury Management Agency would provide. In responding, could he point out whether that figure is likely to be reached this year? Is that £35 million an ongoing annual ball part figure or does it represent 50 per cent of this year and pro rata next year? You can only tighten down so far. When you are playing on the financial services sector, as these people will be doing, you will have good years and bad years, but I wonder how, in this computations, in terms of his budgetary figures, the Minister is arriving at a figure of £35 million per annum. Is it a little bit loose at the moment and can that be pruned or tightened down immediately, or does he think the agency he is setting up is going to attract a particular expertise we do not have at the moment that could produce a saving of £35 million? How did the Minister come to this particular figure? Can we compute it each year for some years in our budgetary arithmetic or will it be a once off? I would be pleased to hear exactly what is the status of this £35 million the Minister referred to in the budget?

The Minister indicated to us how the agency would be structured — a chief executive officer supported by an advisory committee. There will be no board of directors as might have been assumed. By whom will the advisory committee be appointed? Exactly what will be looked for from this advisory committee? I read — it may have been in the Minister's Dáil speech or in some of the press commentary on this proposed agency — that some may be international advisers and may not even be located in this country. Is it correct to assume that they will all be part-time advisers, or will they be experts on an annual retainer that we will be calling on in the different areas when and if needed? We are not looking at a physical committee located in the Department of Finance, but perhaps some of them will be present in the Department of Finance on a full-time basis. Could the Minister elaborate on how this advisory committee will be structured and what their terms of reference will be? That is very important because done properly, as I am sure it will, it could be of enormous benefit to the CEO and to the Department of Finance generally.

Apart from a minimum salary hike of at least three times what personnel in the public sector could be expected to have at the moment there are many other carrots on offer from the private sector as the Minister knows only too well. I read recently a rather harsh term — perhaps it is because of an association of ideas that I do not like the term — where those who had jumped ship from the public sector, to the private sector had been referred to as "departmental defectors". I find that slightly harsh. I am quite sure if I found myself in the Department of Finance and if I was lucky enough to have the ability and/or the expertise to do the job some of them are doing, I would have gone long ago. I still find the expression "departmental defectors" slightly harsh. In a nutshell, it expresses the urgency of the need for the legislation we have here this morning. Effectively that is what people have done, totally understandably. The Minister's job is highlighted by that expression and by the whole difficulty of the new expanding financial services arena of the head hunting that has been going on. On offer to departmental defectors there are hello money, share options, cheap house loans, a stake in the company concerned and company cars, apart from a minimum of a three times increase in salary, and it could increase to any level after that.

The private sector is quoted to be hungry for experts combining trading expertise, a knowledge of financial strategy and Government contacts. How right that is. I have no doubt that is exactly what the Minister is up against. One browse through this book from the Financial Services Industry Association that arrived on my desk, and I am sure other Senators' desks, in recent weeks spells out exactly how strong the carrot must be in terms of attracting from the public sector this expertise into the private sector. This Financial Services Industry Association — the FSIA — of which I knew little until I read this, is a regulatory advisory group which decides just about everything — it is all divided into committees under one title or another — for the development of the financial services in Ireland generally. Apparently the association is unique in Europe in providing a single forum for the industry within which issues of common concern can be identified and resolved. It is a very formidable body and I quote from it:

The Association was established in December 1984, within the Confederation of Irish Industry, and it has a membership base of over 120 financial services companies. These include banks, building societies, insurance companies, fund managers, venture capital companies, leasing companies, charge card companies, stockbrokers, accountancy practices, management consultants and other providers of financial services.

From a quick glance through the various lists of executive committees, management and so on, it is hard to find any influential group in the financial services sector in Ireland that is not party to this. It is a very formidable body and I congratulate the CII and those who spearheaded its establishment. The objectives are outlined and what interested me more than anything was on page 11, Work Programme 1989-90, under the director's report. I will read a few miscellaneous paragraphs. They are very pertinent to what the Minister is doing here this morning.

The FSIA participates actively in the Taoiseach's International Financial Services Centre Committee (IFSCC) chaired by Mr. Padraig O'hUiginn, Secretary of the Department of An Taoiseach.

The FSIA report on Manpower and Training Needs was discussed by the IFSCC in July and it requested the FSIA to establish appropriate training courses. The Committee has offered strong support in pursuit of a number of initiatives. An MSc programme in Investment & Treasury designed by the FSIA in conjunction with DCU and the Society of Investment Analysts was launched in January 1990.

Hard at it. Train the people. Get the best and the brightest and get going.

The FSIA was also involved in attempting to simplify and reduce Stamp Duty and other related costs of doing business in the IFSC.

A few talented bodies from the Department of Finance who knew their way through the bureaucratic system would be a wonderful asset in this arena.

The group held a number of meetings with officials from the Revenue Commissioners and the Department of Finance to discuss issues and substantial progress was made in clarifying and simplifying existing procedures.

Those Revenue Commissioners and members of the Department of Finance would be of extreme value to the private sector. Anyone who would have contact with them would know exactly how to get through the massive bureaucracy and have the contacts on the inside in the public sector needed. There is nothing wrong with that. I am just stating facts. The report states:

It is hoped that this initiative and dialogue can be maintained and strengthened during the coming year to deal with such issues as the taxation of financial instruments and other related taxation issues.

Under a heading "Partnership with Regulators" it states:

Another major initiative of the RAG (the Regulatory Action Group of this body) is to develop an ongoing partnership with the regulators (the Minister, his colleagues and the Department of Finance). A number of members of the RAG met with representatives of the Central Bank, the Department of Finance and the Department of Industry and Commerce during the last year to explore ways of developing this partnership.

It might be also to find out who is the best and the brightest there, who knows what they are talking about, and then snapping them up afterwards. It continues:

In addition, there have been a number of informal contacts with regulators.

These are the people behind the scenes running the show for the Minister and he is running the show at the moment for all of us, being the Minister for Finance in the Government. It continues:

It is expected that this initiative will be pursued in the coming year.

They would be mad if the Private Secretary did not pursue the contacts, formal or informal, with those charged with managing the debt in the Department and with the considerable financial expertise that exists in the Department. There is no way the Minister, without the type of structure he is bringing here today, could expect the considerable expertise that he has in his Department that has developed over the years and decades, to stay while he sees what is on offer from the private sector at this juncture with 1993 around the corner, with deregulation in this whole area and the urgency to collect the best brains together to run the show.

At this point I would like to compliment, on behalf of all of us, those in the debt management sector of the Department of Finance who have been running the show in terms of managing the national debt for so long, particularly over the past few difficult years. Mr. Michael Somers and his team deserve all our thanks and credit for a very difficult job well done. Indeed, instead of paying £2,000 per annum for my tax bill as my contribution as one of the 1.1 million people working in the country towards the interest repayments on the national debt, it could be double or treble that if they were not doing a good job at the moment. Those who are doing a good job should be in a position to be able to stay because the choice between staying out of loyalty to the job or improving their family situation and their general personal prospects is an invidious one and they should not have to make it. We should pay on par with the private sector for the expertise we need, the expertise we now have and the expertise we need to attract in the future.

The debt management team in the Department at the moment have done such a good job that we are now, by the rating agencies, considered AA rating rather than A rating as in the past. I mentioned a 1 per cent saving that could be achieved which would relieve the interest bill of £20 million. In fact, if we consider moving from A to AA rating this in itself means the difference between 0.25 per cent of the interest bill, which is another £5 million if we accept that £20 million represents 1 per cent. Immediately the change in rating saves this country that amount of money. That rating would not come and we would not enjoy confidence abroad and at home if we had not the debt management in the hands of those who knew what they were about and who were doing a good job. I suppose the greatest compliment to them has been the confidence in Ireland Incorporated at home and abroad as reflected by the good rating we now get from the rating agencies.

There is another point I must mention, namely, we cannot forget how the political situation affects economic confidence in this country. We sometimes choose to forget it generally.

Mr. O'Keeffe

I agree with the Senator.

Mrs. Doyle

The Senator might when he hears what I have to say. He cannot agree with me until I finish speaking. I am referring to the enormous damage done to Ireland Incorporated after the IRA outrages generally in this country. Perhaps this aspect of those outrages does not hit us immediately. The horror is across our front pages and on our TV screens, but we never really stop and analyse the financial impact this type of behaviour is having on our country, particularly the difficulty it is imposing on those trying to manage our debt because of the lack of confidence it creates in the international arena. Therefore, to get the political situation stable, to establish the fact that lunatics do not operate on behalf of any of us, and to get them off the stage altogether, if at all possible, is critically important to a stable, economic situation in this country. That aspect is one we do not reflect on often enough. Yet, it is one the debt managers have to handle quietly in their offices while the rest of us rage and rant on about different outrages.

There are a couple of points I would appreciate the Minister's response to, when he is winding up. I have indicated one, to elaborate on the advisory committee, the terms of reference and exactly who, what and where it will be and how it will relate through the CEO back to the Minister.

Another point made concerns the freedom which will be given to this agency in terms of the pay and conditions. I have little problem in paying the best and the brightest what they need to be paid, commensurate with the private sector but I would like to know exactly is it just carte blanche, will there be certain guidelines or how will that be structured? Will it just be up to the Minister or will it be up to the agency to determine its own pay and conditions and on what basis, will the agency be in a position to increase the conditions applicable in certain cases or vary them depending on who they want to attract? I would like the Minister to develop that point in relation to this agency.

With regard to the relationship between the political issues and the policy issues of the day, the Minister is ultimately responsible as he has pointed out for the debt management and the agency will be responsible for the economic issues and economic questions involved in debt management but how will that work? Apart from the political issue I referred to earlier on, there is the broader political scene, the policy-making and changing. What will be the reporting procedure in terms of changes in legislation and of answerability between the policy-makers of the day through the Minister back to this agency? Exactly how is that tied down?

In the First Schedule there is reference to the functions of the Minister which may be delegated to the agency, referring back to sections of various Acts. One would want several days, not just an hour, to really comprehend what that means. Could the Minister give us a synopsis of exactly what that means and in layman's terms indicate what the First Schedule holds? I find that fairly complicated and, without literally looking back through all the legislation it refers to, it would be very hard, unless one made a study of it, to grasp quickly what is involved there. We need to know exactly what functions the Minister will delegate and under what terms he may delegate those functions. If he wants to take some of the functions back into his own responsibility, what procedures is he allowed to use to do that?

All sensible Members of both Houses are agreed that we cannot continue to mortgage our children's future. As a former colleague of mine said once, "to spend on today's generation what has to be repaid by tomorrow's is not stealing; it is, in fact, caring". I believe the key people, at the moment, in terms of managing Ireland Incorporated, are those charged with our debt management. Controlling of debt and reducing the penal rate of taxation which will come with the further controlling of the debt, will get more people back to work, will increase the incentive of those already at work to work harder and will generally achieve what we all have been asking for for so long. I have no major objections to the principle of what the Minister is trying to achieve today. Perhaps we can ask more specific questions on Committee and Report Stages but I would appreciate, in return for the co-operation the Minister may get from this House, if he would expand on these matters in his response and answer the queries we have which may head off protracted Committee and Report Stages.

Mr. O'Keeffe

In discussing this Bill this side of the House have to have recourse to the past, in particular the fact that the national debt doubled in actual terms between 1984 and 1987 which time, ironically, coincided with a Labour-Fine Gael Government. The Government debt stood at 83.5 per cent of GNP in 1981 but by the time the Coalition had left office it had reached 135 per cent of GNP, thereby doubling that debt in those four and a half years.

With the advent of the Fianna Fáil Government in 1987 we saw a tight-fisted approach in public sector spending with the result that over a three year period public spending was cut by a massive 11.5 per cent, a significant achievement. With tax yields surging and the public spending suppressed total Government borrowing contracted sharply. In that period public sector borrowing declined from something like 15 per cent of GNP in 1986 to 3.3 per cent of GNP last year. One can only say that as the Government cut their annual level of borrowing they were reducing the current addition to the existing stock of debt that was before them.

Again, falling interest rates between 1986 and 1989 cut the annual cost of the interest bill on the national debt and the strength of the exchange rate of the Irish pound eased the cost of the country's debt also. It is interesting to note that between 1980 and 1985 the Irish pound's effective exchange rate plunged by almost 16 per cent, while last week the pounds' exchange rate was 18.5 per cent higher than in 1985.

The stabilisation and the subsequent reduction of the debt-GNP ratio must be seen as representing a policy achievement of major significance which ensured the stemming of the rising tide of debt as a necessary precondition to converting a short-term economic pick-up into a sustained economic recovery. Thankfully, this would appear to be what is happening at the moment. To place it in perspective, while we have rounded the corner there is obviously a long distance to travel before Ireland returns to economic solvency. I will outline the reasons why this is the case.

First, it can be seen that despite the improvements effected last year the national debt remained in excess of 120 per cent of GNP and that is half as high as the debt-GNP ratio experienced in the 1980s. Secondly, Ireland remains deeply in debt if we compare it with other EC member states. The debt-GNP ratio, as I understand it, averages 50 per cent, so Ireland is still more than twice the European average in terms of foreign debt. Thirdly, the Irish economic performance remains particularly vulnerable to higher interest rates because of the scale of the indebtedness. Directly high interest rates increase the annual cost of debt service, and this year the service debt is estimated at £2.3 billion or 10.5 per cent of GNP.

While we can be very thankful for good, sound, stable Government, it is not the time for self congratulation. Rather it is a time when much more has to be accomplished and much more remains to be done. The introduction of the Bill must be seen as an acknowledgement of this fact and a commitment on the Government's part to tackle that headon. The Minister has indicated that employment stands at 1.1 million persons. That means it is costing £23,000 per head for each person at work and with half of this sum going abroad it is absolutely essential that it is minimised.

Debt management nowadays is an increasingly complex and sophisticated activity and it requires flexible management structures and also suitably qualified persons. The Department of Finance in the past as admitted by Senator Doyle, have been doing an excellent job in negotiating loans and achieving a well-blanced debt portfolio. The total debt of £25 billion, £9 billion of which is in foreign currency, and of that 40 per cent at a floating rate of interest, can cause a severe rise in our debt servicing cost. The Government are convinced that by following what the Minister termed a risk adverse strategy following on discussions with personnel in international banks, significant changes or savings can be made. Obviously it is correct that that should be pursued. Similarly, the Minister has pointed out that the domestic gilt and bill markets alone total almost £14 billion so that the potential savings from active shifting of portfolios can equally be significant in the domestic market.

I can also point out that the creation of semi-State bodies is not a new concept. In fact, since 1927 we have been adopting different models and we have been hiving off areas of public service administration from the concept of ministerial responsibility. Given the functions which will be transferred by this Bill the mode adopted is right and proper. It would be inappropriate to follow the traditional State-sponsored body model in setting up an agency to deal with the national debt. In the other House the Opposition asked if we could not accommodate this within the existing staffing structures of the Civil Service. The Minister replied adequately to that in that some personnel in various departments are obviously very highly regarded; they have excellent specialist knowledge and in many instances that is recognised outside and is being paid for outside. It is important, therefore, that in setting up this agency the Minister has cognisance of that, recognises the talents that are available and arrives at a clawback situation within the public sector itself.

We must live in the real world and understand that in the financial services sector young people can now command starting salaries of £50,000 plus, and in many instances some of them are in receipt of £100,000 plus. It is again suggested that the Minister could obtain the expertise he is seeking from inside the Civil Service by adjusting the scales within the Civil Service itself. Everybody is now accepting that that position does not stand up to argument. If you were to pay a salary of 50 per cent more to a principal officer at the Department of Finance it begs the questions why would a principal officer in any other Department not get a similar rise. It would also have repercussions vis-à-vis the trade unions and the Programme for National Recovery. All of us who had any involvement in trade unions in the past will know of the consequences of relativity claims on the Exchequer in the seventies.

Quite rightly, the Opposition have asked the question, if the Department of Finance can handle medium and long term economic planning and forecasting, why could they not manage the debt within the Department? It must, again, be readily admitted that the debt management function is so specific nowadays that it can be readily hived off and the Minister, in appointing a chief executive officer and an advisory committee, is in fact going along the right road. In reality the Bill creates a semi-autonomous agency, which is fully under the control of the Minister and the Minister and the Government will retain the responsibility and be answerable for the national debt and how it is to be handled.

I would like to refer to a number of points raised by Senator Doyle relative to the advisory committee. The Minister is bringing together the best experience and skills in the financial services sector to advise on how the debt should be managed. It begs the question: what is wrong with having the best brains available at home or abroad to help out in this task? That is something that should be welcomed.

Another important element is that this is an advisory group and their role is totally to advise. The Minister has spelled out quite clearly that any remuneration paid to them will be relatively small in the overall context. He has in place a chief executive officer who will make decisions based on the advice given by people who have a knowledge of and access to the World Bank and the European Bank. The Minister, with the co-operation of his officials in his Department, can make suitable decisions on the advice being given to him.

I was amused to hear Senator Doyle refer to the Finance Bill. I had not anticipated that she would do so because some of the prognostications made by Senator Doyle in debating that particular Finance Bill related to the budget and one of them was an over-reliance on buoyancy. She said that it raised serious questions on meeting targets this year. I am sure, at the end of June, the Senator will have read the outturn and will be pleased that the Minister is very much on target. She was quite concerned about the high level of interest rates and was dubious about the Minister's forecast on interest rates coming down at that time. She must also be pleased at this stage to note that they have come down by 1 per cent. The Minister forecast a further decrease of 1 per cent before the end of the year. It is interesting and indeed welcome to hear the CIF mention that our inflation level could be as low as 2 per cent by the end of the year. All of these facts indicate that the Government are on the right track and any decisions they have taken to date have proved to be correct. I have no doubt that with this Bill they are also adopting the correct approach. As such, I recommend it to the House.

Mr. Ross

I would like to welcome the Minister to the House but I do not particularly want to welcome his Bill. I found, initially, that there was some difficulty in considering this Bill because, instinctively, I might have been in favour of setting up a body of this sort to manage the national debt but when I thought about it I felt the Bill was totally unnecessary. When I read the Official Report of the Dáil and the reasons given by those on the Government side for setting this agency up, I have to say that I found them extremely unconvincing.

The Bill is based two false presumptions. First, for those who are not directly involved in the financial world and financial services, in taking decisions of this sort there is some appallingly difficult intricate mystique attached to the decisions people in that world make. The first thing I should say, having been involved in this area for many years, is that most of those people who hold highly paid jobs as dealers, who take decisions which involve millions of pounds every day, have very few qualifications for actually doing that job. It is most extraordinary that they have some training in that area but their qualifications are virtually non-existent for taking decisions of that sort. They are involved in a world other people do not understand and because of the size of the debt, the size of the figures and the size of the transactions, people outside feel that they have a magic wand and some magic expertise which entitles them to high salaries, to the respect of those outside and therefore, to be put on some sort of pedestal. They have the power to move vast sums of money, that has to be recognised, but they do not necessarily have any greater expertise using that money than anybody else.

We have to ask outselves if the job these people are doing is really that difficult, or is it something which an ordinary intelligent person could do with a minimum of training. You only have to read a book like "Liars Poker", a bestseller issued recently, which specifically mentioned Solomon Brothers, a merchant Bank, to see the vast sums being moved about by young people with virtually no experience, with three or four weeks' training, having a major effect on people's lives, on institutions, on funds and, in some cases, on the pensions of people around the country I recommend this book because it is a very good read apart from being very frightening. Many of these people simply had no experience in the field in which they were operating. Many of these people were losing vast sums of money day in, day out; they were also making vast sums of money day in, day out, but the basis on which those decisions were taken are never apparent.

I do not think anybody on the Government side should say, with their hand on their heart and with conviction that, as the Minister said in his speech, these people have tremendous expertise and experience and it is getting harder and harder. That is not necessarily the truth. Out there in the private sector, with which the Minister is trying to compete in this Bill, there are people operating who should not be operating in this particular field because they do not have the expertise to do it. That is the first point I should make — we should recognise that these are not necessarily particularly skilled or able people.

The second point I would like to make — I am sure it has been made by other speakers both here and in the Dáil but it follows from the first — is that this Bill is an explicit criticism of the civil servants in the Department of Finance. I believe they have been performing well enough, but if the Minister and the Government thought the civil servants had been performing up to scratch, this Bill would not have been necessary. This Bill is saying, "these people are not good enough; they are not doing the job well enough; we need people who know what they are talking about and who are flexible enough to do the job in the Department." In other words, the civil servants do not have the necessary expertise. If we are gong to say this implicitly or explicitly, we need specifics.

I should have liked to have heard from the Minister or from Government speakers in the Dáil where money could have been saved but was not or where money had been lost in the past where that should not have happened. How many people are involved in this and what size of losses could have been prevented? I know those sort of things are not very easy to quantify. I know you cannot say if they had taken X decision, X would have happened, because that is jobbing backwards but if we have a Bill like this brought forward, we are entitled to specific areas of weakness, specific areas where losses have been made and specific areas where advantages could have been taken but were not.

I started off in the financial world and dealing in Government stocks from the other side of the table, when part of the game was to second-guess what the Government broker and, therefore, the Department of Finance and Central Bank were doing. From my limited experience I must say what whereas they did make mistakes from time to time they were very quick indeed to remedy them and it was very difficult to outsmart them in this area. They were efficient and shrewd; they were fairly ruthless; they ran a very well-organised market at that time. I must say, from the other side of the operation, it was difficult to criticise them in doing their job. To those of us who were trying to invest maybe at a cheap level or at a certain speed or to do switches in Government stocks or in spotting anomalies, they were frustrating in their efficiency. Quite honestly, I find the implicit criticism of the Department and of those who have been running this area, in particular the Government stock area which is the largest part of the Government debt, unjustified. I find that their past record on this is extremely creditable and has served the State very well.

The same principles attach now in that area as attached then and I see no reason whatever for bringing in people from the private sector to "improve" the performance in the national debt here. Without doubt, those who have run the national debt, those who have made decisions on the national debt in the past, certainly over the last 20 years, have a first-class, creditable record and it is wrong that this Bill implicitly criticises them.

The second way in which the Bill is flawed is the premise that somehow not only is there a mystique about the financial world, which there is not, but somewhere in some way there are experts in the financial world whom we can pay to make the right decisions. That mystique should be removed and stripped and we should realise that the people involved are extremely fallible, that they do not contain any particularly great talents that many of them have had little training. It is frightening how little training they have had having regard to the amounts of money they move around.

I want to question also who these experts are and what was their performance like. We only have to read the Sunday Business Post this week to see that on the stock market in Dublin six so-called experts were asked at the beginning of this year to pick their shares for this year that would out-perform the market. These were people for the best stockbroking sides, stockbroking houses, people from the major financial institutions and investment houses in Dublin. They were asked to pick their particular shares to out-perform the market.

People in the stockbroking world have to make, as the Minister will well know, decisions being similar to the decisions that will be made by those involved in the National Treasury Management Agency. They have to look at interest rates, at money trends, at the basic economy at industry and how it is performing, they have to look at foreign exchange trends and all the fundamentals that people in this agency will be involved in. Then they have to make the decision. I am speaking from memory — it can be checked immediately — but five out of six of them under-performed the market and, in fact, they under-performed the market extremely badly. These are exactly the sort of people that the Minister will be trying to recruit for this agency.

I would bet — I may be wrong — that all six of these people are paid vast salaries to do exactly that job. I would bet that they are all earning at least £50,000 a year and many of them are earning more. Yet they cannot even out-perform the Irish stock market. You would forgive them if they were just line ball. You would expect because of the salaries they are getting that they would out-perform the market because that is what they are paid for. But they could not do it. They had a dismal record. This was a crosssection picked at the beginning of the year. There was no smart alec backward looking by the Sunday Business Post saying, “We found six people who are paid vast sums of money who cannot do it.” They were just six people picked at random who could not out-perform the market. We should seriously question the ability of people to have some sort of mystical expertise to out-perform the market.

It is the same principle which applies in this agency which the Minister is setting up because people in this agency could be trying to out-smart international interest rate trends, international foreign exchange trends and other areas of that sort. I am not sure that there is any particular expertise attached to this beyond some very fundamental knowledge of how you do the transactions involved, how you hedge, how you switch, how you look at interest rates.

Not very long ago I saw a survey of fund managers in America who are making similar decisions. I took a far bigger sample than the last one. In that sample the conclusion was drawn, having looked at the transactions that the fund managers had done, at the commissions which they paid, the margins which they paid, the spreads they made in every transaction, that they would have been far better if they had done absolutely nothing, that, the costs of transactions and the fact that the pluses and minuses virtually balanced out, left them in a situation where they would have been far better if they had not moved money at all during a long period of time.

There is a great deal of fallacy attached to this expertise in the financial world which is attributed to them only by those who are not in it. It is very easy and a very human failing for those of us who see people who are supposed to be expert in certain areas about which we know nothing, to say that they know an awful lot and, of course, they are very credible. When we get into their area — it is always happening — we find that in fact their knowledge is possibly quite great but the area itself is not particularly difficult.

Mrs. Doyle

Methinks the Senator is trying to settle old scores.

Mr. Norris

Ciúnas más é do thoil é. Éist leis an Seanadóir Ross.

Mr. Honan

Where has he been for the past week?

Mrs. Doyle

He has been in the Gaeltacht.

Mr. Ross

The Minister will agree with me because even this year we had a situation where all the experts in the economic field were saying that interest rates were going to rise again and the Minister was almost on his own, and it is to his credit, when he said up to recently that interest rates were going to fall. The Minister who, with the greatest respect, is not a technical expert or so-called technical expert in this field, although he is a very good Minister for Finance, took on all the experts in that field. He got it right and they all have egg on their faces. It is important that the Minister should recognise that, as an amateur, he took on the experts and beat them, that if he employed people in this area they would have taken a different decision and either he would have been in conflict with them or they would have won through because they are experts and it would have cost the Exchequer an awful lot of money. That is indicative of the point I am trying to make. The mystique should be removed. The salaries are too high.

The next point I would like to make about the Bill is that it is too vague. The Bill is giving the Minister and the Government a blank cheque to set up this agency. It does not happen very regularly in legislation but I would much prefer if the Government could come to us and say, "We are setting up this agency. It will cost X. We have no indication as to how much it will cost. The chief executive will be paid so much. The advisory body will do the following. It will consist of so many members who will be paid so much." There is nothing tangible in the Bill as to how much it will cost us or whether it will be worthwhile. It is too much to ask the House simply to say, "Go ahead, pay them what you like, because that is what the Bill says — pay everybody what you like and give them unlimited expenses." We should be told how much the chief executive will be paid, within a certain range, how much the advisory body will be paid, how big the staff will be, what they will be paid and the cost to the Exchequer. I have no indication from the Bill as to what it will cost. It is reasonable that we should know the size of the operation and the cost to the Exchequer.

In passing, it is worth asking the Minister whether it is intended that this body will regulate the market in Government stocks. I presume that will be one of its principal purposes, that in managing the national debt it will also regulate the issue of tranches of Government stocks when they are offered, when they are bid. It may be that it will have specific instructions to regulate this market in a far more flexible manner than is being shown at the moment.

From the point of view of the Exchequer, the market in Government stocks at the moment is being run on an extremely efficient basis because none of them is available. That suits the Exchequer tremendously because it means that they do not have to issue tranches and they do not increase the national debt that way. In the short term that suits the Exchequer because the national debt stays absolutely solid. I assume — and it happens in most countries — that there is also an obligation on Government to conduct an orderly market in Government stocks. That is not happening at the moment. That has been a matter of some concern to the financial community for many months now. I made this clear on the Adjournment some time ago. People cannot buy Government stocks at the moment even in very small amounts. I would suggest that the Minister should give the agency specific instructions to make a fair market in Government stocks but, above all, to make a market in Government stocks, to make them available even in small amounts. Any good commercial dealer can sell Government stocks at a premium and can lay them off some place else. If people want them badly enough he will be able to sell them at a low enough interest rate which he can cover somewhere else. I cannot understand why the Government do not do this at the moment but I am sure it is for the very good reason that they do not want to increase the national debt.

I would like to know the Minister's view on that. I would also like to know what his view is on the relationship between the new agency and the Government stockbroker. Will the Government stockbroker be given any spontaneous power? Will he be allowed to make large discretionary decisions or will the new agency simply be instructing him on what to do, what Government stock to let out and what Government stock to take in, what tranches to issue day by day? In other words, will the agency have complete control over this area and will it control it in a more orderly, more organised and more flexible way than has been the case in the last few months?

What the Bill emphasises more than anything else is the real difficulty about the difference between the public and the private service competing with each other.

This is obviously a classic problem which we have had to face in the past and will have to face in the future. Here we have public service people doing what the Minister, I think, regards as private service work. As a result, we have the public service and the private service competing. This has presented us with many problems in the past and will in the future, not least in regard to the pay scales of those involved. It presents other problems.

We saw it last week in the Industrial Credit Bill where there is the Government owned bank competing with its hands behind its back, and has to come to Government every time it wants to borrow over a certain amount but has to go out to the marketplace and compete with the private sector. So, it is working at the disadvantage of being hampered by the limitation of its involvement with Government but, on the other hand, it has the advantage of Government backing and a Government guarantee.

All along it is not a level playing field — which is an expression I do not like — there is a situation which is very difficult for both sectors involved. This Bill is a result of that difficulty. I understand the Minister's problems with pay. The Bill is really all about pay, all about not being able, apparently, to attract people at the right level who will take the right pay.

I find it a little strange and it is difficult to work out why it is in this sector that there are particular difficulties. It is true in other areas the Civil Service has been able to attract people of great expertise and great ability who can compete in terms of ability and talent with the private sector. There are undoubtedly first class accountants in the Revenue Commissioners. There are undoubtedly people in that area who could command enormous salaries in top accounting offices but choose not to. There are undoubtedly first class solicitors and barristers in the Attorney General's office who could go down to the Bar Library or go into private practice as solicitors and could command very large salaries there. That particular line presumably could be extended to every single Department of Government.

They choose — let us have no doubt about it it is by choice — to take jobs in the Civil Service with lower salaries and lower expectations than to go out into the jungle. That is a choice they have made. I cannot believe that in the financial services sector there are not also many people who have the expertise the Minister has been talking about who do not want to stay in the Civil Service at lower salaries. There are great attractions in the Civil Service for people of a certain age. There are great attractions for them in having jobs which are steady, salaried, pensionable and, to a large extent safe. That is the single greatest benefit of being in the Civil Service and attracts a certain sort of person who may well have an expertise in the area the Minister has been talking about.

The private sector attracts people who are not so interested in those benefits. The private sector, especially in the financial services area, attracts people who are interested in taking risks, who are not so worried about the tenure of their jobs. It is extraordinary that people still go into the private sector and the financial services area when they see year after year stockbroking houses in Dublin, London and New York laying off people who one year were earning £100,000 plus and the next nothing. That happens all the time. The private sector attracts people who are prepared to take that chance. I cannot believe there are not other people who have the expertise in that area who would rather not take the risk of walking into £100,000 a year job and being on the dole next year, but would rather take a lower salary doing the same sort of work and being in the Civil Service. It seems to apply to every other Department as well. I really do think there is nothing special about that sector.

The Civil Service has had, and continues to have, the top brains in the country who rise to the top of the Civil Service. There is not any enormous exit from the Civil Service in other Departments. I would be interested in what the Minister will have to say. I understand he says people have left. I know of people who have left the public service for the private sector in the financial areas and who have gone back to the public service at lower salaries. I know people who have left and want to go back because they do not like it out there. I would have thought that what we would like to see is an exchange of these people who eventually settle down in the area that, psychologically and mentally, suits them best.

I am not very happy about the safeguards in the Bill. If we are to have those who manage the national debt saving sums of money on our behalf and on behalf of the Government, they are undoubtedly in order to do that. They will have to take risks on our behalf. The Minister spoke very eloquently about risk-averse policies. That is a very nice phrase but I notice that he did not say "risk-free" policies, "risk-free" decisions or "risk-free" strategies because there is, as he would recognise, no such thing as a risk-free strategy of this sort. "Risk-averse is simply saying "as little risk as possible" but if you are going to be taking as little risk as possible you are going to get as little gain as possible. The risk-reward ratio is well known. You get rewards only if you take risks in this area.

I would be worried that the people who come in from the private sector, where they have been used to taking major risks in this area, because that is their job in the private sector, would also be performance-orientated and the moment you are performance-orientated — and all people in the financial services sector are performance-orientated — you are under pressure to perform better than the next man. The only way that this can be done in this area is by taking chances and by taking risks, by switching in and out of currencies, by buying currencies when they fall in the hope that there will be a recovery and by taking chances, because you are looking for a particularly good performance at the end of the year or at the end of the quarter. The only way you can do this is by taking a chance and the more chances you take the better chance you have got of actually making more money for the State and looking better in the eyes of your employer at the end of the day. I do not see in the Bill any precaution to stop that.

I know the Minister will be taking an overall look at this agency. However, the people who are employed in this area and who have been brought from the private sector, because they feel it is incumbent on them and because of the obviously large salaries they will receive, will have to take risks with the State's money. That is a real danger. The Bill should include some safety measures to prevent that. It should contain some real guidelines because it is not inconceivable, in fact it is likely, that if the Minister talks about a saving of £35 million the other side of that is a loss of £35 million. It is as simple as that. If anybody can save £35 million for the Exchequer, he is undoubtedly taking a risk of losing £35 million or much more on the other side. I ask the Minister to consider that point.

It is very difficult to set up something that is, after all, very similar to another semi-State body. It is a body which will be sitting somewhere in the middle, in no-man's land. It will not be independent as other institutions are, but neither will it be totally dependent. The people employed in it will constantly be looking at their employer, which is the State, and their brief which will, to some extent, hamper their freedom of movement. On the other hand, it will not be completely dependent so they will be subject to the sort of pressures they feel in the outside private commercial world. It falls between two stools. I genuinely feel that the management of the national debt would have been better left in the hands of those who are running it at the moment but that the system by which they are appointed and paid could have been improved.

Mr. Foley

I am very pleased to have this opportunity to contribute to the Second Stage debate of the National Treasury Management Agency Bill, 1990. The Minister has made some very interesting facts available concerning the national debt. Total employment in this country is about 1.1 million. On average, each of these people is paying out of his or her pocket almost £2,000 each year just in order to meet the interest on the debt. Half of that sum is going abroad and the debt is £25 billion which represents almost £23,000 per head of population at work. These figures are growing. The aim of the Bill is to do everything possible to minimise the burden. Servicing the national debt is the largest item of expenditure after wages and salaries, which is the largest expenditure, and social welfare which is the second largest.

In acknowledging that this is an important Bill, let me say that it was first mooted in 1987 when my party were in Opposition. It has been accepted for some time that our national debt warrants special consideration. The Exchequer is paying an enormous amount of money each year in order to service it. I believe the figure is in the region of £2 billion per annum. This is a great drain on Exchequer resources. The efforts being made by Government to reduce this massive burden are to be welcomed. A reduction in the annual service cost of the national debt and the investment of the money saved in good projects such as tourism and industry, will help in the creation of jobs. In that way we can continue to achieve progress during the nineties.

From the statistics available we are on the threshold of substantial and sustained net job creation over the next number of years. The significant achievements in net job creation during the past two years were based on sound Government policy which was brought forward with courage. We have seen that this policy enabled the economy to grow at a steady pace, enabled various sectors in the economy to contribute and made it possible for Government to continue to work closely with the social partners who recognised that our finances were in an extremely precarious state and made an overall contribution towards putting them in order.

It is accepted for the purpose of the Bill that the best expertise available should be recruited. This will be appreciated by the general public. In this way we can be assured that the agency will achieve substantial savings over the next four to five years.

At this stage, I would like to congratulate the Minister for Finance, Deputy Albert Reynolds. Since taking over his portfolio he has done a tremendous job. Senator Ross suggested that the Minister is not a technical expert. That may be the case but certainly I would like to see a few more like the Minister, particularly with regard to this agency. I would also like to congratulate the many officials in the Department of Finance who over the years have looked after the national debt.

Sitting suspended at 2 p.m. and resumed at 2.30 p.m.

Mr. Foley

Before the lunch break I referred to the tremendous work done by the officials of the Department of Finance in relation to the national debt and I availed of the opportunity to congratulate them for that work. They would be the first to recognise and acknowledge that the time has come for an independent look at the state of our public debt. In this regard I welcome the steps outlined in the Bill. The professional management of the national finances is a feature of many world democracies and its success has been proved more than once. I am satisfied that the general public have shown a very keen interest in this Bill and the benefit of the proposed agency will be seen in future years.

The way in which the national debt has increased over the years has been most unfortunate for our economy. It has crippled employment opportunities, caused widespread emigration and many job losses. The doubling of the national debt between 1982 and 1987 was the greatest blow to our people since the foundation of the State. I welcome the concern expressed across a wide political spectrum with regard to the national debt.

The progress of the new agency will be monitored with interest. I recommend that we should consider having the Comptroller and Auditor General as a member of the advisory committee. I say this as a result of my long experience as a member of the Public Accounts Committee, and I know the Leas-Chathaoirleach shares my concern. The Comptroller and Auditor General would be a tremendous asset to the agency with his in-depth knowledge of the public finances. His position as a member of the agency would serve a twofold purpose. We have seen in the private sector where specialised financial personnel have proved cost effective and created massive savings and we should avail of that in the public sector.

I understand the intention is to engage the knowledge and experience, on a part-time basis, of senior people with a proven track record in financial services. It might be possible that some of these would have an international background and would, if necessary, be headquartered outside Ireland. So be it. This would not only reflect the international arena in which the agency would operate, but would offer a useful background of experience and advice for the operations of the agency. We must make it attractive for the right personnel.

This agency is being set up to ensure that we can, without public service restrictions, recruit and attract people with expertise to work under the Minister for Finance, but with increased flexibility. The new agency, however, will be working under the control of the Minister and he will delegate to them power to manage the debt without diminishing any of his responsibility in this area. The Minister has made reference to the significant relative savings that can be made and he said even 1 per cent shaved off our interest payments would yield £20 million per year in savings.

I welcome the basic structures of the agency. It will operate under the general control of the Minister for Finance and the chief executive of the agency will have a direct reporting relationship to the Minister. As already pointed out this morning, there will be no board of directors. Instead there will be an advisory committee to whom the chief executive can refer. As the national debt is such a large and complex part of our public finances, the present carefully constructed controls involving the Comptroller and Auditor General and the Exchequer system of accounts will continue. Accountability will be enhanced by making the chief executive formally accountable to the Dáil through the Committee of Public Accounts for the financial affairs of the agency. There will be flexibility as to pay and conditions so that key staff can be recruited and retained. In return, they will be assigned clear levels of responsibility and must perform to these levels. The agency staff will not be civil servants. It is important that that flexibility would be seen to be there because, as we have seen in the past, some of the best brains have been recruited from the Department of Finance and we would not like to see a repetition of this. I referred to the 1 per cent saving earlier. There is no reason this 1 per cent saving cannot be increased over a period, eventually to reach maybe 5 per cent, which would mean a saving of £100 million per year.

As many other Members of this House wish to contribute, I will conclude by again congratulating the Minister on this Bill. I have no doubt that this agency will be a tremendous success and will be of great benefit in getting to grips with the problem of our national debt. I commend the Bill to the House.

Dr. Upton

I am all in favour of the State having the best advice possible on the management of Exchequer funds and the national debt. I am also in favour of people in the public sector who work in this area being paid the going rate. We are now talking about establishing a new agency with nominating power under the control of the Minister for Finance and I would be quite concerned about that because it seems to be a vote of no confidence in the Department of Finance to manage the national debt. I do not accept that. They are as good as anyone else. That is the reason I am very concerned at the introduction of this Bill.

There are other factors as well. First, there is no statement as to what this agency will cost or how many people will be employed. In many ways what is being proposed is something of a blank cheque. We have to believe that the Minister will look after everything and do everything for the good of the country. I have no doubt that the Minister will do his best but control is very important and we seem to be giving him something of a blank cheque.

The Minister said there would be a saving of £35 million arising from the work of the agency. If there is, it begs the question: why have we waited until now to establish such an agency? What has been happening all the years while the national debt was so great? Why have we waited until how to save £35 million? Of course, the reality is that when the Minister says there will be a saving of £35 million a year that is speculation. It is also possible that there will be a loss of £35 million a year. Whether there will be savings or losses will be very much determined by a variety of factors including the expertise of the people who manage the finances but there will also be factors over which this country simply will have no control. I have great difficulty in accepting the idea that there will be a saving of £35 million just like that. If it were as simple as that, what was the Minister for Finance doing over the past few years? He should have made this saving.

I am also concerned at the confidence which seems to be placed in the capacity of financial experts to deliver and I have great difficulty in believing that financial experts outside the Department of Finance have anything extra by way of expertise over those who work in the Department. I am also somewhat sceptical of financial experts in general. Senator Ross quoted from a sample of six experts from The Sunday Business Post, a gazette I read from time to time because I like to keep an eye on how the other half of the world operates. It is useful to read through that paper to see how the thinking processes are going.

Mrs. Doyle

You need not justify the fact that you take that paper.

Dr. Upton

It is quite expensive — 85p or 90p. Five of the experts seemed to come out on losers, if I remember Senator Ross correctly and indeed it is my own recollection of a two second read of that page. I felt I had enough of financial expertise for that Sunday morning. If that is the case, there is a bland assumption that we will bag £35 million by setting up this agency.

Playing the markets is a hazardous business. The extent to which one will make savings depends on the degree of risk taken. The trouble about risk is that you can come out the wrong side of it. What happens if we do come out the wrong side of the risk-taking process? Where are we then and how far down the road can we got with that risk? How long will the risk run for; how long are we going to be in for? This is something like the thinking processes that punters and bookies engage in. There is a notion of risk and how long that risk will hold for. Do we go in losing for one, two, three of five years? What is the time scale? Will each year be taken in isolation? Are we talking of a five or ten year period? That is not made clear. I have doubts in relation to this whole area. In many ways there is a strong element of gamble in it.

I am worried about the notion that outside experts working to different criteria can do better than the tried and trusted people in the Department of Finance. From time to time I have a difference of views with the Department but I would not accuse them of being reckless. They are anything but reckless. They are extremely cautious and prudent in the way they manage their business. While in many ways we may have reservations about that from time to time, there is a lot to be said for it in terms of playing the money markets where if you get it wrong it can be absolutely disastrous.

As regards advisory experts and so on, there is nothing intrinsically wrong with having people from outside advising the Government but you would have to keep an eye on whether there was a conflict of interest in relation to how they gave advice and so on. If these people were big bankers or big players in the money market and were playing around with Government funds, to some extent they would be playing with money which was not really their own and, in many ways they might not have to answer for it as directly or as strictly as if they were dealing with an individual client.

Another aspect that occurs to me is that the establishment of this agency provides the Minister for Finance with a delightful, political escape route. If things go wrong and if the national debt management does not work in the way it should then the Minister can say the agency got it wrong; he can adopt the attitude of "a touch of the mistakes here and there folks, but I am actually doing a jolly good job myself". Ultimately, the Minister for Finance is responsible and if he carries the can then he may as well carry it straight up rather than at a distance through this type of agency. I do not think it is a solution. For those reasons the Labour Party, who have confidence in the prudent management of the national debt by the Department of Finance over the years will be opposing this proposal.

Professor Conroy

I welcome the Bill. It is imaginative, well thought out and a very interesting endeavour to deal with a problem which besets us not only in this country but also in many national treasuries throughout the world. How do you deal with national debt? For some countries this has been an horrific problem which they have not been able to cope with. Some countries which were quite prosperous at one time used oil revenues to excess, assuming that the price of oil was going to go on moving upwards towards $90, $100, even $200 a barrel. They borrowed accordingly and now find themselves in an almost impossible position.

One sees it in a very different respect in Third World countries where financial institutions, the international banks and so on lent them money and that money for one reason or another was spent in a way which turned out to be unwise, perhaps emphasising heavy industrial development as opposed to emphasising agricultural development. In Africa, for example, the debt is one of the twin scourges of that continent, the other being AIDS. They are both very difficult matters to deal with. It is related to the appalling starvation there and so on. We are very fortunate in that our national debt does not have such horrific implications. It is worth while focusing our minds on the possible implications and on the necessity of having the best possible advice and management of our national debt.

It would be nice to follow Senator Upton's comments but it does not really relieve Governments either of responsibility for the national debt or indeed of responsibility in the sense that their policies may well impact on the debt. It does not matter what the technical people do on the actual day-to-day or month-to-month management if Government economic and financial policies cause an increase in the national debt.

It is not unusual for us to have some body associated with the Government. Again, in the case of petroleum we had a relatively recent example where we deliberately recruited people who are specialists in that area to advise the Department of Energy. They play a very good role and some of them were people from outside this country. Equally well and on a much more long established basis we have a body such as the Geological Survey, which is separate from the ordinary Government Departments and yet which has recruited many distinguished and able people and plays a key role in advising the appropriate Departments on a number of matters. It is not a totally new idea but it is an essential one in another practical respect, that is in the down-to-earth mundane business of recruiting and retaining the appropriate people.

Our Department of Finance have a very distinguished record with some of the most brilliant brains in this country being associated with that Department. Indeed, a former Member of the Seanad, Dr. Ken Whitaker, wrote one of the postwar papers which people know affected this country greatly and affected international finance in a very beneficial manner. That was his booklet on "Financing by Credit Creation". We have a record of ability in the Department of Finance which is second to none but in a sense this has brought about a problem in that the recognised ability and brilliance of so many members of the Department of Finance has naturally meant that outside financial institutions — there has been an exponential growth in financial services over the past few years — had an obvious field of recruitment. It is high time we organised ourselves so that these people can continue to work for the Government and give them the advice they need on this essential matter. The Government would be negligent if they did not tackle this problem and I do not see any very feasible way of tackling it other than the method which has been adopted.

This Bill is imaginative, innovative and, quite frankly, necessary. The Minister mentioned the size of our debt, £25 billion or thereabouts, 120 per cent if you take it up in GNP terms. He also mentioned that £9 billion of this or 36 per cent is in foreign currencies and that is by no means the whole story. This, in turn, relates to interest payments which, though horrific at £2.1 billion, represent very good work on the part of those who were involved in keeping them down to £2.1 billion on a total debt of £25 billion.

Since this Government came to office we have made enormous strides in relation to the management of the debt. We have restored confidence in the country and we have restored financial confidence but, as the Minister has said on more than one occasion, we have really only made a beginning. It is important that we do not begin to relax because we happen to have made very good initial progress. There is a long way to go and a national debt of £25 billion is a very large debt indeed. A lot of work still needs to be done in financial and fiscal matters generally in relation to Government policy over the next few years before we are out of the wood as opposed to simply making the first very critical, very difficult but very essential steps.

Risk management has been mentioned. This is a very technical subject in itself. It is not a simple matter. We need people who are experienced in that field and who are able to give the appropriate advice.

There has been a revolution in financial services over the past few years starting with the Euro bond market. It is an enormous market in itself. Since then many of our financial and banking colleagues, unless they have kept very much up to date, would find it very difficult to relate to some of the changes which have taken place. In the course of these changes some extraordinary things have happened. We have seen a financial grouping come together in the UK and become one of the largest financial institutions in that country or, indeed, in the world and then suddenly collapse. Dealing in financial services is a very serious and difficult matter as is dealing in risk management.

Mention has been made of things like hedging in ordinary business. If you are hedging against a currency that you expect is going to fall, you immediately take a position on it and hedge against it. On the other hand, if you believe that the currency is going to rise you may take somewhat different measures or even hold for quite some time. This may seem a very simple matter but predicting foreign currency variations is enormously difficult. Some £9 billion of our debt is in foreign currencies. We tend, perhaps, to think in terms of the German Mark something like 50 per cent of our national debt is in non-EMS currencies and you can have enormous changes very rapidly. What might seem like a relatively modest depreciation of our currency could lead perhaps to an increase of £0.5 billion or £1 billion in our foreign debt and this has happened in the past. Take one simple elementary level of foreign currency dealers in banks — the chaps who are at the end of the phone. It is one of the most difficult, demanding jobs in such an institution. The people involved are usually very young and they are often paid very high salaries but they usually burn out within about 18 months or two years of doing the job. There are a lot of aspects to this which are not simple by any means.

The idea of an advisory committee is very interesting and imaginative. The chief executive may refer to that advisory committee, he does not have to. Presumably he has to refer to the Minister. It is essential that there be a very close working relationship between the head of this agency, the Secretary of the Department of Finance and the Minister for Finance because if there is not we will not get all the benefits that might otherwise accrue from setting up this agency. For example, in relation to the balance of foreign and domestic borrowing, the type of debt instruments and so on, presumably this agency will decide on the type of debt instrument but will it consult on such matters as the relative balance of domestic and foreign borrowing and whether we are to encourage non-resident borrowers? If we look at domestic as opposed to foreign borrowing, domestic borrowing has the difficulty that it tends to raise our interest rates. You do not have that problem in the same way with foreign borrowing. On the other hand, if we increase our proportion of foreign borrowing that will impact on our exchange rate. Is the sort of balance that is intended something the agency will determine absolutely in its own right or will there be consultation with the Department of Finance and the Minister?

Foreign borrowing has the effect of injecting spending power into our economy. It can have an enormous effect on the economy whereas with domestic borrowing it is merely a question of transferring resources within our own domestic economy. To what extent will the agency take responsibility for this? Will it be the absolute responsibility of the agency to determine these balances or is it going to be done in consultation? If so, who takes the final decision? Exchange rate risks — again what is going to be the balance there? Is there going to be consultation in relation to the proportion between EMS currencies and non-EMS currencies? Is there going to be a question of the agency or its chief executive taking an absolute decision on that matter? I cannot believe that it is because they are strategic policy matters as opposed to the actual tactical management of the debt and hedging and so on.

We have the rather unusual, if not totally unusual, position of perhaps about £4 billion of our foreign debt being now held by non-residents of this country. This is a fairly substantial sum of money and in many ways it is a great vote of confidence in our economy and in our political system, but it also could have a very rapid and very considerable effect on liquidity as such non-resident owners of funds in many circumstances tend to move them and move them at relatively short notice. In this respect we are perhaps rather fortunate in that a very considerable proportion of our non-resident debt holders are, as I understand it, German nationals who have a tradition — fortunately for us — of tending not to rapidly change but having once taken up a given currency, unless there is a strong reason or a given debt, to hold on and maintain that debt.

In a sense there has been a knockon effect here and I am very concerned about the lack of liquidity within our Dublin domestic market. Is this new national agency going to look at this matter and decide it, or is it going to be a Government decision? What interaction is there going to be between the Department of Finance and the Government generally? There are a lot of matters here which are of absolutely crucial importance. I am astonished that we have so few speakers on this matter.

Mr. Norris

I sat and listened to a good deal of this debate. I was not here for all of the Minister's speech, the reason being that I took it away to read with some care. It was out of no disrespect for the Minister who is a man for whom I have a very healthy and lively respect.

I was here to hear some of the speakers however earlier in the day, including my colleague, Senator Shane Ross, whose speech I found quite revelatory — very clear, very interesting and accessible to me, a layman. The first point he made was about the mystique that surrounds these particular kinds of financial expertise. He was quite correct to say that that mystique can be penetrated by the average citizen, given a chance. I have to say — with, I hope, due modesty — that I consider myself here representing the average citizen reading the Minister's script and looking at what I see as some accessible points that interest and concern me.

I must say that it does concern me, not that I am suspicious of the Minister himself at all, but in the light, for example, of the Broadcasting Bill, which in its original form seemed to me to be nothing other than an attempt to perpetrate a fraud on the Irish people and to transfer large sums from the taxpayer to particular persons. I must say that I approached this Bill with a degree of scepticism, scepticism both in principle and in particular.

It seems quite clear to me, from having read the Minister's speech and from having listened to contributions around the floor, which certainly contributed to my education, that at least part of what the Minister is engaging on is a form of rather high class gambling. He makes this really clear when he talks about risk. He says: "But shrewd management of that debt can also yield savings and contribute to an improved budgetary position. Debt management is essentially about managing risk". It may be that the management of risk is necessary, and I understand a little about currency fluctuations as they have an impact upon our national debt.

I quite recognise that movements in currency outside this jurisdiction can artificially swell what we already owe. It is for that reason that I assume the Minister will be unable to answer the question posed to him earlier this morning, before I left the Chamber, by Senator Doyle when she asked for a figure. She quoted £25 million or £35 million and was looking to see if this figure was likely to remain stable or if it was a particular percentage or proportion. I do not believe that the Minister can give that kind of information, because, as I understand it, interventions by this particular kind of agency can only crop up, opportunities only present themselves, at specific times and the fluctuations in currency can be either small or very considerable.

I do not believe it is possible to predict with any level of accuracy, particularly in the prevailing economic circumstances in Europe and throughout the world in the money markets, with any degree of precision what this profit is likely to be. On the other hand, it is true what Senator Ross had to say about what may be a profit of £35 million. I found it very interesting that he spoke about his own profession of stockbroking and indicated that on the record of one of the Sunday newspapers it was clear that some of these people with international financial expertise came a bit of a cropper where they were not able to outguess the market in any satisfactory form, so that there is a possibility that we could be confronted with a debt of the same proportion as a result of their operations, in other words, it is a gamble.

Could I put another little refinement or development on this argument, because when we are employing these people we are employing them apparently at highly commercial rates. Even supposing that they have the capacity to break even, which was not demonstrated by financial experts, according to the Sunday newspaper quoted by Senator Ross, the taxpayer actually loses as a result. Apart from anything else, we are paying by this time well above the odds, I presume, for these gentlemen, or gentlepersons, because perhaps some of them will be women.

I am a little concerned that the Minister appears on my cursory reading of the Bill to be inviting us to write him a blank cheque. There is not, in fact, any ceiling placed on the remuneration for these people. In fact, there is very little indication as to who they may be. One would like to think that they would not be friends of the Government, and perhaps they will not be, but if the Minister has people in mind, perhaps he would be kind enough to let us know.

I am a little concerned about the kind of background that he is prepared to provide for these gentlepersons, because he says:

We have got to pay market rates for the right people and devise an organisational structure which they can be encouraged to join and to give of their best in the interests of us all.

In its way that is an admirable sentiment. I know a little about fund raising and I have rolled my eye around the international market on more than one occasion. People have been recommended to me, I have spoken with them and I have subsequently followed their careers. I was rather glad that I had not, in fact, engaged their services because my experience would have been of their frailty and their fallability as I followed their record, even though they had very considerable recommendations.

The Minister continues his description of these people — as I say, it is in some ways vague and in other ways worrying — by saying: "The intention here is to engage the knowledge and experience on a part-time basis of senior people with a proven track record in financial services" it might be possible that some of these would have an international background and would, if necessary, be headquartered outside Ireland. Again, I am speaking purely as a layman and I am sure the Minister and his advisers may be capable of producing a logical, rational explanation, and something that would satisfy a doubting Thomas like myself, but I am a bit worried that we are going outside the range of expertise that we already possess in the Department of Finance. We are looking for people who have this capacity to gamble, which appears to be very difficult to assess, to quantify and to determine, and we are prepared to look outside the country for it, indeed to people with headquarters outside the country. I wonder is this wise.

I had better not name people, but I would be very concerned indeed about that, partly on the basis of principle and partly because the whole thing concerns me as a result of its impact on the Civil Service. I do not actually think it is intended as a slight on the Civil Service. I have to say that because that was said this morning. I do not believe the Minister had any intention or desire to cast any slur on the Civil Service, but I have to ask what is the impact going to be on those who remain in the service of the Department of Finance?

I had some dealings with them, partly as a result of the intervention of a previous Minister, Mr. Ray MacSharry, and partly as a result of the intervention of Deputy Albert Reynolds, the present Minister. I found them, in fact, bewilderingly expert. They floored me on my first meeting in the most courteous possible way. Then, when I persisted and drew out a line of argument with the assistance of some people from outside the immediate world of politics who had financial expertise, they were both courteous and prepared to accept the argument. I came away with a high regard for the people I encountered in the Department of Finance. I wonder what the state of their morale is going to be if the Minister feels it necessary to go outside for this particular form of expertise. I feel they must be undercut in their confidence if they are paid substantially less than people who are brought in from outside.

I would also like to ask if the Minister could explain to me if there is something special about the Civil Service in the area of the Department of Finance that requires this particular drawing in of fresh blood from the free market economy. I am not quite sure what that is, except for the extremely worrying size of the national debt — for which, I may say, a plague on both sides of this House. Fianna Fáil tried to plant it firmly on the Fine Gael people but it seems to me that they were equally disastrous in managing the finances of the country. I think there is very little indeed to choose between the two aspects of our Government. I have a number of concerns as a layman.

I would like to ask also — and it may be that there is a regulation for this — if the Minister, and under what circumstances, has the power to dismiss or to fire or to suspend the members of this new debt management committee. Of course I accept that there is a genuine concern, worry and anxiety on the part of the Government. We have all seen these figures before but there is no point in — if it is not an unparliamentary word to use — bellyaching about them. We are stuck with them but, as a PAYE taxpayer myself, it does not give me any joy to read from any Government — and I accept that there is a kind of common responsibility — that all the money that is painfully extracted from the PAYE section goes to service the national debt. In other words, we do not even have the satisfaction of feeling that these penal rates of taxation do any good in terms of reducing the debt. That is a very frustrating psychological condition for people in this country to be in.

As I say, I have a number of real concerns because of the general framework, because of the general philosophy of the Bill, because of the element of gambling that is involved in it very clearly, because of the unpredictability of the success— and I wish it success. It will clearly pass into legislation, there is nothing I can do about it, I can just raise a few little layman's queries over it, but I wish it success.

I think, however, there is an element of risk in it and I think the Minister is surrendering very considerable powers to these people. I note his comment that "Section 5 enables the Government by order to delegate to the agency the borrowing and debt management functions of the Minister for Finance". Those are probably among the two most significant powers the Minister for Finance has; and these it is proposed to delegate, at least in part, to persons who may be friends of the Government, as we have seen in the Broadcasting Bill. I have no knowledge of this, by the way, so I am not attempting to spread scandal. The track record of the Government is not good. It is not good at all and I am a bit worried about that. They may even be people like dubious financiers who are also involved in international arms dealing. One reads about them constantly in the American and international press. It appears that these persons would be regarded as fit. Apparently they are not even required to be Irish citizens, or are they? Perhaps the Minister could give me some light on this. Are they required to be Irish citizens because they are clearly not required to be domiciled in Ireland? They can be offshore. Again, as a layman, the phrase "offshore" raises a few questions in my mind about the appropriateness of the whole operation.

I have one or two further questions. In fact, it may boil down to just one, if I can read what I have been scrawling on the Minister's script, and that is where he says — and Senator Conroy referred to this in a way I found very interesting and pointed out some of the dangers —"Total employment in this country is about 1.1 million and each of these persons is on average paying out of his or her pocket almost £2,000 each year just to meet interest on the debt. Half of that sum is going abroad". Senator Conroy dealt very expertly and very interestingly with the half that goes abroad. I am interested in the half that stays here because I think that is also an interesting area.

I did plead my ignorance when I started off. I am sure a lot of this is in Government stock and so on; perhaps all of it. I wonder have the Government borrowed, have they taken loans from any of the Irish commercial banks? I do not know that. Perhaps they have or perhaps it is not possible for them to do that. Perhaps the Irish banks have considerable holdings in Government stock out of which they may be in a position to make a profit. I would like to say that when this agency comes into being, as, even despite my slight demurs, it undoubtedly will, perhaps the Minister would ask these gentlepersons from all over the world or offshore or wherever they are from to have a look at the capacity of the banks to repay some of what they owe the Irish taxpayer.

For example, we hear about level playing fields and all that kind of thing, but we have a situation where the banks in this country give continually dwindling services to their clients while the rates consistently climb in interest terms. They then engage in the commercial market, in investing in things like the Insurance Corporation of Ireland, and when as a result of bad commercial decisions they get their fingers burned, they reach into our pockets to bail them out. So, if the banks are investors in Ireland Incorporated, which is now apparently to be managed as an offshore entity, perhaps the directors of Ireland Inc. could be advised by our new financial gurus as to how we can abstract a little bit of the money that some of the great banking institutions in my opinion, morally if not legally, owe to the Irish people.

Éamon Ó Cuív

I would like to welcome the Minister and also welcome the introduction of this Bill. Perhaps my first reaction was that, first, it was a pity that we are in this mess regarding our national debt and, secondly, that it would seem the only practical thing to do is to go outside Civil Service structure to deal with this enormous problem. I have spoken many times in this House about the fact that in the long term the only solution to our problem, particularly regarding day-to-day borrowing, is to ensure that the money that we spent on day to day expenditure is raised from day to day taxation, etc. However, it is a fact of life that we now have a debt of £25,000 million and that no matter what progress we make in bringing this debt down — and when we think of the reality that this had grown to £25 billion by 1987 it is obvious that very significant work has been done in stabilising this debt over the last few years — it is a reality that it is going to be here for a long time to come.

Where there is a debt there is a servicing cost. At the moment this cost is in excess of £2 billion per annum. It is quite obvious that for every minor saving that can be made — for example, a saving of 1 per cent. — you are talking in the region of £25 million saved per annum. With that kind of money a lot of good could be done and a lot of services could be provided to those people who need them.

It is, I accept, an innovation to hive off such a central part of the management of finance to an agency of this type. However, I cannot see, when one stands back from what is being done and looks at it clinically and coolly, any significant difference in principle between what is being proposed in setting up this agency and, for example, Governments hiring barristers, etc., to defend or prosecute cases in court. The principle is the same: you make available to yourself at the best cost you can the most cost efficient system for handling the problem on behalf of the people. In this case I feel that the ends will definitely justify the means.

If by setting up an agency and attracting into it people of ability, people who have skills in this particular field, we can make significant savings in the debt servicing cost of our national debt, I think we would be selfish to say that this should not be done. The reality of the world we live in, the reality of the free market economy we live in, is that if you want to have that type of person working for you, you would have to have them in an agency whose terms of reference will be more flexible than the normal Civil Service terms of reference and whose remuneration would be greater than that normally available under Civil Service regulations.

However, I think it is also fair to point out that there is a quid pro quo involved here too regarding staff in as much as one of the other provisions being made, for example, is for the hiring of part-time staff, the hiring of people on a part-time basis, that people would not be permanent, that people could be hired on contract, etc. Therefore, in the event of them not performing, in the event of them not effecting the type of savings being sought by the Minister, they would not have the normal security of tenure that would be available to civil servants.

Here I think we have to strike a very nice balance between control and giving people the freedom to get on with the job of saving money. I have always believed that you will not get an effective operation unless you give a reasonable amount of freedom to people to get on with the job and make decisions. Whereas I accept that the Minister is ultimately responsible, I think there is not a person in this House who does not recognise the reality that most decisions on a day to day basis are made by people at various stages down the line. By formalising that in the creation of an agency whose annual estimates must be presented to the Minister beforehand and who are answerable to the Committee of Public Accounts, is just giving a reasonable time span for people to perform. I think it would be very important that it would be made clear to those people who would be employed by this agency that their tenure would be totally dependent on the effectiveness with which they carried out their remit, that peformance would be demanded of them and would be the only way that they could justify the salaries that would be paid to them.

I would hope that by bringing in this Bill considerable savings can be made, that at last not only will we stabilise the national debt but that also we will begin to reduce it, because in the long run it is only when we get to the stage of reducing this debt will we be able to do all the things we would like.

I have had a great concern all my working life for the disadvantaged and the under-privileged. To me personally high wages do not hold any attraction, but I am a realist and I do realise that to hire the type of people needed for this particular job the type of salaries that would have to be paid would be in excess of those available. I would feel that we would be reneging on a responsibility to the disadvantaged if we did not make the savings that are possible under this agency. I would look forward to the debt coming down and to more money being available in the long term to provide services to the disadvantaged, to provide the houses we need, to improve social welfare and to provide more job opportunities for the young people.

I suggest that this agency could in time be expanded to provide on a consultancy basis debt management to our semi-State bodies. It is a fact that outside of the Exchequer borrowing there is a considerable amount of debt accumulated across the semi-State bodies. It would seem that if such an agency is successful in handling the national debt, as it is called, it might also be made available to provide services and advice to the semi-State bodies in such a way that they too would be able to improve their debt management services and reduce the amount of money, a lot of which is leaving this country annually, which we now spend on debt servicing.

Finally, I think the very necessity of this Bill should serve a sharp reminder to us that the money we borrowed now has to be repaid and that the debt accumulation that occurred in the seventies and eighties is going to be paid for in the nineties and in the decades of the new century. We must never again yield to the temptation to borrow on current account. In saying that I repeat what I said: I make a very clear distinction between borrowing for necessary infrastructural development that is going to be there in the future and borrowing on current account. I look forward to the day when our main debt structure would be on the capital side and that we would be able to account for and point to developments that were carried out and that are providing new services, new infrastructure, new development from borrowings that would be made in the future and that we would never again raid what I call the kiddies' piggybank to pay ourselves and to provide services for ourselves out of what our children will have to pay for in the future.

I welcome the Bill. I hope this agency is successful in saving the type of money the Minister has outlined and that we will continue to see a vast improvement in the debt situation.

Mr. Costello

The Labour Party have very strong reservations about the consituation, the necessity and the validity of this legislation. In the Title the Bill refers specifically only to borrowings and to management. There is no reference whatsoever to a reduction of the national debt. The Minister in his introductory speech says:

Debt management must in the first place minimise the effects of these adverse trends by switching between the currencies and the debt portfolio and by varying the proportions at fixed and floating interests rates,

One can imagine our agency staff, our advisory committee and our chief executive as high rollers gambling with the various bills and securities and pushing paper between different portfolios as the market seems to move one way or another. This is a limited vision of dealing with out debt and certainly it is something that the Minister can distance himself from and say the agency is dealing with the matter, that everything is in hand. It is the nation's money that is being dealt with, or not being dealt with by the Department of Finance but put into the hands of an agency which will, under these terms, be allowed apparently very wide latitude.

The national debt like so many other matters originated in Britain. When the country got its independence we took on a proportion of the national debt in 1921-22. That, I believe, was traded away in the context of the Boundary Commission in 1925. The real problem came in the last two decades where borrowing for current expenditure took off at an unprecedented rate. That was when the major problem came into being. I refer specifically to the 1977-81 Fianna Fáil Government where the cost of servicing the national debt mushroomed and more than doubled from £400 million to £1 billion. That was the greatest single unprecedented expansion in the context of the national debt and borrowing for current expenditure.

The Minister in his speech on the budget last January indicated that he was going to set up such an agency, that that agency would be in operation by mid-1990 and that that agency would result in a saving of £35 million in that year. He gave no explanation how that money was to be saved. Was it a once off saving? What savings were going to be made in the context of our national debt at the time that would justify that figure? Did he pull that figure out of the air? Is it a different figure now seeing that more than six months of 1990 have gone by and the agency is not in existence yet? The agency will itself be a burden on the Exchequer. Will it lead to another cost on our national debt, thus increasing it?

This legislation is peppered with expenses, remuneration, benefits in kind and so on. This is a major part of this legislation. It is a guise whereby extra funding can be put into the hands of certain people to do a certain job. So, in itself, it will be a cost on the Exchequer. We have not got any clear indication of where those savings are supposed to come from; The figure of £35 million is very small in the context of a debt of £25 billion. What exactly will be the cost of this highly paid chief executive officer, the staff and advisory committee of this agency? Is this a once off target? Does the Minister expect to save £35 million in the second half of this year? Does that mean that he expects to save £70 million next year, or is it geometrical progression or a declining figure? Could the Minister indicate what the targets are and how they are to be achieved?

The national debt itself which the agency will manage seems to be a very mixed bag of State liabilities totalling in all some £35 million. The Minister in his speech gives us quite a chilling account of the extent of the national debt. He says the total each year to each individual employee is £2,000 just to meet the interest on the debt. Half of that sum is going abroad. The debt is £25 billion and represents almost £23,000 per head for each person at work. The figure is growing. That is a colossal figure.

He also said that in gross national product terms Ireland's debt remains one of the highest among the OECD countries over 120 per cent of our GNP. Interest payments alone come to over £2.1 million this year or 9 per cent of our gross national product. It is an incredible figure that we are facing. It includes — and we do not know precisely what the breakdown is — diverse sums in saving certificates and prize bonds, Government stock, Exchequer bills, land bonds and foreign loans.

I notice from the Central Bank Quarterly Report that a total of £4 billion of this debt is quoted as miscellaneous or due to other sums. What is a miscellaneous figure in the context of £4 billion of the national debt, almost a quarter? Could we have some clarification from the Minister of what that miscellaneous figure actually means in practice?

Clearly there is a need for more information on the composition of the debt. How was it accumulated? In what form is it at the present time? We need a breakdown of how this came about and what are the various forms it is in at the present time. We need a more coherent statutory scheme for addressing the debt. That is part of the major problem of this legislation.

Schedule I of the Bill lists the functions of the agency. These functions are in a wide rag bag of legislation. They cover such diverse areas as regulating deposits by the Post Office, the Savings Banks and Trustee Savings Banks, Saving Certificates, Prize Bonds and securities. If the agency, is to have any meaning, it should be in a position to examine the existing legislative framework for public finance and debt and to recommend amendments and reforms to the legislation. Otherwise we will end up with an ad hoc piece of legislation, an ad hoc agency operating in a confused fashion. In the explantory memorandum there is no information given on the areas to which it applies. It simply refers to sections this and that of the finance legislation.

There is nothing in the Bill in relation to debt policy, should the debt be dealt with, should it be located on the domestic scene or should it be dealt with through foreign sources? Should it be dealt with in the EC countries or should it be further afield? From the Minister's speech we see that out of the total debt of £25 billion over £9 billion is in foreign currencies, that the domestic gilt and bill markets alone total almost £14 billion and the non-residents now hold about £4 billion of this figure. As Senator Conroy quite rightly point out, we can never be sure in a situation like that what is the liquidity position. That money may be withdrawn at any time.

The other major problem is the currency exchange. What has been the policy of the Department in relation to borrowing and what should be the policy in the future? We are talking about currency in various forms. We are talking about domestic currency and non-domestic curencies and the proportion of each. Have we not got a policy on that? Will the agency have a policy? Should it be reducing this high level of borrowing in non-domestic currencies? The agency itself will be powerless to affect the size of the debt and that is a major problem. It is concerned with debt management and not debt reduction. That gives the impression that the situation is being dealt with and that the Government have solved the problem but, of course, the problem remains with us, the national debt is still growing and there is no prospect of it reducing. We are not dealing with a solution here, we are dealing with an ad hoc approach to a problem.

Perhaps more than anything else there are problems in relation to the public sector and the public service. If we set up an agency here then the Bill as a result will most likely have the effect of transferring people out of the Department of Finance who, as the Minister has said, could be poached and go to areas of the private sector or to a separate State agency, which will operate totally different pay and conditions of employment. The implications of that are enormous, where we have just one agency set up specifically to enable large salaries, very good conditions, superannuation, expenses and so on to be given to people in the Department of Finance so that it is giving money in another guise. What will be the implications for the morale of the public service generally when we have one agency which has created a structure where people who would formerly have been civil servants can now be employed through the agency for its purposes and salaries given which would not compare with the normal rates in the Civil Service.

In 1985 John Boland produced a White Paper called Serving the Country Better in which he recommended the setting up of quasi-autonomous units in the various Departments to achieve more effective decision-making. If that had been properly carried out across the board, this might be regarded as creative reorganisation or at least could contribute to a creative reorganisation of the public service, but the problem is that if it is only a once-off thing all it will do is to demoralise the Civil Service, which sector will compare itself adversely with other sectors of the public service. John Boland's White Paper was scrapped, and indeed the Department of the Public Service has been subsumed into the Department of Finance and there seems to be no movement by the Government in relation to the implementation of any policies for reform in the public service.

I see this once-off agency, which is going to have a considerable degree of independence, particularly in the recruitment of people it regards as experts — and there is a great mystique about expertise in relation to finance — leading to a situation where other sectors of the public service and of the Civil Service will be adversely affected. It could lead to a severe degree of demoralisation. This is not the proper way to go about this.

What we have here is something of a quango which is presented as a way of dealing with the problem, and indeed of providing a solution to that problem which, of course, it cannot do. It is something I believe is not necessary. Expertise can be acquired on a different basis. It can be contracted. Under this agency it can be contracted on a part-time basis. Many of the functions of the Department of Finance will be duplicated. It will introduce an element of gambling in the operation of the management of the national debt and that will not be properly monitored in the context of the Department of Finance. I do not think that is the way to do proper business.

The implications in relation to the public service have not been very well thought out. I would certainly like to see the situation arising where there could be a full-scale debate on the operation of this particular agency in a short space of time. The Labour Party will not be supporting the National Treasury Management Agency Bill.

Mr. O'Toole

The key to this discussion is in the Minister's speech when he talks about the better rewards and career prospects in the private sector that are available to the quality personnel of the Department of Finance. In reality, what we are looking at here is the privatisation of the Civil Service, or at least an attempt towards the privatisation of the Civil Service. It is a contradiction in terms but then the whole operation in a sense is a contradiction in terms.

The arguments put forward by the Minister, whatever the underlying truth, are certainly not based in the real world. We cannot have a free market outside and a non-free market inside. If we talk about the argument for the free market, let us also apply it to those operating in the public and semi-State sector. That is the real difficulty we are having here. We are having to deal one more time with the inherent contradiction that when the people who are working for the State are doing too well we simply move the action away from them. We do it in RTE; we do it in Aer Lingus, we do it anywhere you care to mention. What we are really doing here is we are compensating for the exodus of brain power.

Look at any of the pension funds. Look at any of the managed funds. Look at any of the unit trust loan agencies and you will find out who is managing the most successful agencies. If you ask where they got their training they will say they got it in the Department of Finance at the taxpayers' expense, and when they were good enough they were sold to the private sector. Headhunting by the private sector has dropped us into a mess where the Minister is now able to say that the level of sophisticated specialisation required for the management of the national debt is no longer available in the Civil Service. If it is not where has it gone? Many of the people who were in the Civil Service are doing the job now in the private sector. Why? The reality is we have not paid them enough to hold on to them. The reality is that with the false non-market based restrictions on the ability of those people in the Civil Service to do this job they have been persuaded, motivated or bought out of it. That is the reality. In this legislation we are now going to look at the people who have been headhunted out of the service by the private sector and we will bring them back as consultants.

It is a well-worn path at this stage and we are now beginning to institutionalise it. I have no difficulty with putting together the best brains in the country, internationally or otherwise, to manage the national debt. I think it makes a lot of sense but what does not make sense to me is having to institutionalise it outside the Department of Finance. The Minister said that debt management has become an increasingly complex and sophisticated activity, requiring flexible management structures and suitably qualified personnel to exploit fully the potential savings. This is what we need and to say that we no longer have this capacity within the Civil Service says an awful lot and is an indictment of the personnel in the Department of Finance. However, I intend to come back to that later.

I do not understand the emphasis on inside or outside Ireland. To me non-resident means offshore and I certainly need to have it explained to me why we need to make this distinction between inside or outside Ireland. A number of fundamental issues have been raised and one which I certainly want to put to the Minister and I would like to have explained in some detail is — and this is my understanding — that under the Ministers and Secretaries Act the accounting officer for the Department of Finance is the Secretary of that Department. I do not understand how the function of accounting officer which as of now rests not with the Minister for Finance but with the Secretary of the Department of Finance can now be shifted and diverted to the chief executive of this new agency. I do not understand how that can be done without changing some very basic structures in the State as they stand at the moment.

I would also like to know what the precise relationship is between the chief executive of the new agency and the Secretary of the Department of Finance. In dealing with those two people I would also like to have some indication of the salary levels not for any narrow reason — I do not object to people being paid top dollar for the job they are doing, in fact I always approve of that as the Minister knows well but I want to know the relationship between the salaries and the status of both those people for the very simple reason that, according to the Bill, if that person who is reporting directly to the Minister is paid a higher level of salary than the Secretary of the Department of Finance, then that says it all. That, in effect, means that not just a section of the Department of Finance but indeed the total Department including the Secretary has been bypassed, passed out, with a structure put in above the Secretary's head. I want to know the relationship between the Secretary of the Department of Finance and this new body we are setting up.

I think the Minister well understands that to try and convince me that the specialisation required to operate this body is far too sophisticated and not appropriate, to use the Minister's own word, to a Government Department is an outrageous comment and it does not fit in with anything this Minister has ever said before in this area. I know that the views he has expressed in dealing with any aspect of financial services have made it clear that the Department of Finance has to be as bright, sophisticated, able, ready, responsible and flexible as any of the groups in the financial services.

Are we now saying that we are going to have a Department of Finance where, for instance, we will not have the expertise to deal with the extravagant and sophisticated movements of, let us say, an international commodities market? Are we going to have the sophistication within the Department of Finance to deal with the movements, bargains, buys and sophisticated and complex arrangements of a futures market? Are we going to say that in the Department of Finance no longer will there be people who can follow the movement of capital to various banks and countries, because that is precisely what we are saying here.

If we have not got the expertise in the Department of Finance to deal with the management of the national debt how are we going to have it to deal with other things and to ride shotgun, as it were, on the other operations of the financial services? This is how we have been caught out time after time down through the years. It seems to me that the Department of Finance need the most sophisticated expertise in order to be ahead of the posse and ahead of the thinking in all these areas.

The Minister might have made some reference in the course of his contribution to the extraordinarily good results achieved by his Department over the last decade. I do not care whether this is taken in real terms or in percentage terms, they have both been left out of his speech. The movement in a most difficult time internationally and internally has been nothing short of extraordinary. Somebody worked it out and either in percentage terms or in real terms the improvement, whether in relation to GNP or any other marker, in the national debt has been extraordinary. I do not care whether we give credit for that to the Government of the days we are talking about, but it is with the "permament Government" at the end of the day that the responsibility of the nuts and bolts will lie. I think it is important to place on the record as well that their record in this area has been second to none over the past decade.

I find it a bit much to be faced with the argument one more time that the total PAYE bill goes to service the national debt. We have slightly changed that argument to almost all the PAYE taken is used to service the national debt. The reason for that is that we do not have an equitable tax system, and we know that very well. It has to do with spreading the tax burden, taking it in in other places and getting a more equitable payment from those people with wealth.

I would also like to have thrown into the equation the movement of money in and out of the country and how much repatriation of profits might yield were we to have a serious look at taxation. Nobody knows how much money is repatriated out of this country year by year, but I can say £2 million, and no one will contradict me because it is much higher than that, which seems extraordinary at this stage.

I believe what we are really looking at here is the public v. the private sector. Who is going to do this? Who is going to manage this? In his speech the Minister referred to discussions with international banks. I would be more than surprised if there were not also discussions with some well known agencies in this country. I think whatever happens, there will be a watching brief that these posts will not be handed out to people who are very close to Government. I will say no more than that except that it has been put to me very strongly in other places that this might well be the case.

I worry when we try to do down the public service. I do not care how we go about doing it, but we have seen it in many different forms over the last number of years and it does not become the marketplace attitude of this Government. In 1987 when the former Government came into office they seemed to be of the opinion that you could use the marketplace philosophy, but, of course, that was something we allowed as long as the public or semi-State area was not able to compete. As soon as it is, the Government either take it from them or sell it off. Their record in that area is abominable. We have seen what happened with RTE radio; if the Government thought they were making too much money they stopped them. We saw it in Aer Lingus last year when, after they put all the money into sorting out routes, the Government took three routes from them. We have seen it in the ESB when they are not allowed to pay their rates.

An Leas-Chathaoirleach

I am sorry to interrupt, but I understand that on the Order of Business today discussion on this issue was to conclude at 4 p.m.

Mr. Wright

If the House is agreeable we will continue for a half hour to conclude the Bill. I understand that Senator O'Toole is the last speaker and there is an amendment. The Minister, obviously, would be keen to have the Bill concluded.

Mr. O'Toole

We are now reaching a stage in the relationship between the public and private sectors which worries me. I believe that whether it be public or private it should be able to exist in the marketplace. It worries me that all the better parts of the semi-State, or now of the State or of the Civil Service, the expertise and the successful areas are being hived off. That does two things: first, by passing legislation not to allow the semi-State sector to compete and second by taking away from State industry those aspects which are successful, we succeed in giving a bad name to semi-State and State industry.

I am very interested in, and wish I had more time to tease out and discuss those sections of the Minister's speech where he refers to two issues, the foreign exchange rate and the floating interest rate and the fact that roughly £9 billion is subject to foreign exchange rate and 40 per cent of it is at floating interest rate. It is extraordinary that the Minister can come in and, with a straight face, put this argument to me because the same Minister, two months ago, in this House, on national radio and television and in the Press was saying, "What do the private sector know about the interest rate? All they have told us about the interest rate is wrong". These are the people who suddenly are going to manage the national debt, the people who told us, for instance, six weeks ago that interest rates were going to go up by approximately 2 per cent because of the unification of Germany. At the time that the people who are going to run the national debt were saying that, the people in the Department of Finance have been proved to be correct. Would the Minister give his money to those people who were 2 percentage points wrong six weeks ago? What would that do to the national debt — £20 billion at 2 per cent? It does not take a genius to work it out. We are £1 million down before we start.

I do not understand the thinking behind this. This is the private sector. Six months ago they did not know where the game was at on the international scene. There were only the Minister, myself and the Department of Finance holding the line and telling them how little they knew. I could go further. In the intervening period the value of sterling has gone through the roof, and now the Irish pound is valued at nine-tenths of sterling. They are the same commentators who six months ago were telling us that the Irish pound would be trading at parity with sterling by the middle of 1990 and would continue to do so. The Minister will remember them. They were on television and making the headlines. Not only that but there were others telling us how it would affect our competitiveness. These are the people, who were one-tenth out in one case, who are to manage the national debt. I would not give them a bank to run, never mind the national debt. Hindsight is an exact science. They have never been right.

The major discussion at present about the UK is in connection with the EMS. I would go on the record as saying that if the UK are allowed into the EMS in the next six months we will experience real suffering. I have said this consistently. The reason was never the unification of Germany but that woman across the water has bolstered up sterling to an extraordinary artificial rate beyond its value and if they get into the EMS at those values we will all suffer.

Why does the Minister not grab the nettle and tie us in with the Deutsche Mark, and quick? I hope to hear the Minister's response. What will that do to the 40 per cent of the floating interest rate and to the foreign exchange rate movement of the £9 billion? Why do we not do what Belgium did? Belgium has tied itself into the Deutsche Mark. More worrying, what about Kohl's two-stage approach to the single European currency? I am worried about that because when I read his speeches there is a first stage and a second stage, there is a group of nations mentioned for the first stage and a second group mentioned for the second stage but, guess what? There is no mention of us anywhere. We should get our oar in. The two stage approach to the single currency is leaving us behind also.

The Minister would do a great deal more to stabilise the national debt if in regard to the international money exchange he were to take the chance, follow his nose and forget about the high fliers who are burned out at 30. He should tie us into the Deutsche Mark, do what Belgium is doing and save us a packet of money at no cost and no risk. I will run with the Germans on this one.

The people who are now going to run the national debt are those who gave us Black Monday. They set it up, they computerised it, it could not go wrong. The same people will be taking the same risks. I would prefer the approach we have had over the last decade.

I thought I would have had time to discuss where the national debt came from but that might be too political at this stage. We are now giving over the management of the national debt, the £2,000 per worker per year etc., to people who gave us Black Monday, who called the trading rate of the punt wrong six months ago, who called German unification wrong two months ago and who will continue to get wrong the impact of the EMS, of the single European currency and of European movement of trading. They have consistently done so. We have seen all the high fliers came down to earth wherever they happened to be.

I am not happy with this legislation, not because I have any objection to having the best people doing the job, or because I object to paying the best people for doing the job or because I have any inhibitions about the best possible and most productive involvement in financial services, but simply because the people we are going to ask to do this job have proven themselves to be inept time after time after time.

Minister for Finance (Mr. A. Reynolds)

I thank all the Senators who have contributed to the debate. Senator Costello and Senator O'Toole do not seem to understand what we are about here because I have no intention of calling in the people who called it wrong for the last six months to do a job. What I want to do, and what I want everybody to understand, is to hold on to the people and the expertise I have, something I have not been able to do for the last number of years because every time anybody was trained as Senator O'Toole rightly says, they ended up in stockbrokers' and financial management houses around the city. That is exactly what was happening. Everybody recognised the problem but I did not hear anybody here offer a solution anymore than I heard anybody in the Dáil offering one.

Senator Costello said we should look after it within the Civil Service. He and Senator O'Toole are good trade unionists and know as well as everybody else the relativities that exist within the system — the whole foundation of the EO system — but, if those people are now pointing in a new direction, saying let us forget about relativities, let us scrap all the linkages that exist within the system, let us have performance-related pay and build a new system, then I am here to listen. I would be only too delighted if these people would say that, but I do not hear anybody say that. I hope that was what Senator O'Toole and Senator Costello were saying. Otherwise, the House knows as well as I do that relativities and linkages exist and if somebody gets 5 per cent for this, somebody else has to get another 5 per cent; it is a merry-go-round and it never stops.

Special pay increases, linkages and the foundations are there all the time. The first attempt I made at that, starting at the top, was to delegate on a three year rolling basis the budgets of various Government Departments to let Ministers and Secretaries of Departments manage. The first stage of introducing performance-related pay will be introduced at assistant secretary level and, hopefully, if it is successful there, we will find our way to getting it down further into the system because I believe in it. I believe the public service should have it as much as the private sector should have it.

Mr. O'Toole

That was approved by the trade union movement, so, you will not have any difficulty.

Mr. A. Reynolds

I hope the Senator is right. I would be delighted to put it on the table for the next programme for national recovery.

Professor Conroy

The Minister has the assurance of Senator O'Toole.

Acting Chairman (Mr. Mooney)

Order, please. Much as the Chair enjoys this banter, I would advise Members to conform to the decorum of the House and allow the Minister to continue, without interruption.

Mr. A. Reynolds

I will go through the points raised by the various Senators, but a general comment was called for in relation to the last few speakers I heard.

Senator Avril Doyle asked if the £35 million saving will be reached this year. I can tell her that the answer is, yes. The figure is based on advice I received from leading foreign banks, not the people to whom Senator O'Toole seemed to refer or seemed to say were around town, very close to Government, who are called in to give advice and to get well paid for giving that advice. This advice did not come from that sector at all: it came from international bankers who specialise in this area and who have a small subsidiary in this town, but the people who did it for me were from outside the country. Therefore, the Senator should not have any worries in that regard. The £35 million saving will be achieved this year. With regard to savings for future years and targets to be set, they will be agreed with me, taking the advice of the new advisory committee that I will set up in conjunction with the chief executive.

I might say at this stage that members of the advisory committee will have honorary positions and will be drawn from the best available people, ensuring that there will be no conflict of interests in so far as that is humanly possible to detect. There are good Irish people abroad and at home in this area and it is such people that I would hope to bring from the international sector into the advisory committee. They will be paid no more than an honorary, small figure such as is paid in, say, semi-State bodies or something like that and, of course, it will be a part-time body. It will advice the chief executive who will make the decisions at the end of the day and the advice will also be available to me. They will advise me also on what they consider to be the proper remuneration for the new chief executive.

I pursued all possible avenues to try to resolve the problem within the system before embarking on this legislation. First, we advertised publicly in the press for people to join the system or, indeed, to come in on a contract basis and we failed to get any worth-while response. The people who responded were not suitable. I got many applications at a lower level, at graduate level, for training purposes, but at middle to senior management level I drew a blank; there was nothing available in that regard. Then I headhunted as the private sector do and again drew a blank. It is precisely for that reason that we ended up with the legislation before the House, every other avenue having been tried.

Senator Avril Doyle asked about guidelines for pay for the agency staff. The staff and recruitment of same will be a matter for the chief executive but the budget for the agency will be set by me and the agency will have to operate within that budget. The Senator also asked about the reporting procedure between the Minister and the chief executive as did Senator O'Toole. The chief executive will be reporting directly to me as Minister for Finance and not to the Secretary of the Department of Finance. I will lay down the directions and guidelines for him.

Senator Doyle also asked about the large number of Acts mentioned in the First Schedule. The Acts referred to in the Schedule can be dealt with on Committee Stage if the House wishes but the key functions are at (g) of the Schedule. The remaining references are, in the main, relevant to statutory authority for post office saving certificates and other small saving instruments. A summary of the legislation is available if the Senators want it, but basically we are talking in the First Schedule of section 19, for instance, of the 1930 Act which provides for the appropriation by the Minister for Finance for general Exchequer purposes of whole or part of excess interest accruing to the Post Office Savings Bank. This is the basic statutory function we go back to. Section 30(2) of the 1940 Act grants to the Minister for Finance power to make rules in relation to the issue of saving certificates. There is a long list of Acts from where the authority of the Minister for Finance derives.

What is happening here is that the Government are devolving the authority of the Minister for Finance to this agency to borrow money and to manage the national debt, and that is the procedure that is used. It is a similar procedure to delegation of a Minister's functions to a Minister of State as exists at the moment. It is not the same as setting up a semi-State body in which case the board of directors would stand between the Minister and the company. That is not the case here because the Minister for Finance has, at all times, to carry the responsibility and, indeed, the agency, at all times, has to be responsible to the Dáil, the Oireachtas, the Comptroller and Auditor General and the Committee of Public Accounts of the House. That is the way it will work and those are the procedures that will be followed.

Senator Ross criticised the lack of qualifications among dealers. I want to thank him for his generous words in regard to my ability to make better forecasts than the people outside who are paid large salaries. However, I shall not go up the blind alley as to who has qualifications and who has not. There are people out there with qualifications; there are people with no qualifications. There are people who would say that the people with no qualifications are more successful than the people who have, but I am not going up that blind alley either.

Mr. O'Toole

The Minister would need a heart transplant.

Mr. A. Reynolds

We are not talking about heart transplants here now. We are talking about keeping the nation afloat, not a particular individual. It is not just dealers we are talking about; we are talking about market analysts, economists and other people, some of whom have proved they have good financial judgment. Some people might feel that others have not been as successful as they but that is not what is at stake here. This is not intended and never was intended to be a criticism of people in the Department of Finance. In case anybody has any ideas about it, I want to place on record that this Bill is in no way a criticism of the people in the debt management section of the Department. It is well known — Senator O'Toole referred to it — that people have been poached out of that section of the Department of Finance the minute they were trained and had acquired expertise. That is precisely what we are trying to put into reverse. It is a recognition of the realities of the marketplace.

We probably have the largest portfolio in the country to manage. We are entitled to have the best people, to hold on to the best people and to pay the market-related rates so that we can keep the good team we have and add to it as we go along. It may well be that some people will come in from outside or some people in the existing section may decide that they want to stay within the Civil Service for their own reasons, and they are entitled to do that. They are also entitled to go if they wish. I do not want to see the situation deteriorate further than I have had to contend with over the past while.

We can all look at under-performers. We can all look at performers outside. For every six under-performers any of us could point to six performers who have reputations for financial expertise.

Senator Ross was concerned that they might get unlimited expenses. This will not be the case. The budget will be set by me and they will have to operate within those limits. In relation to the question raised by Senator Ross as to what the position will be with the new agency vis-à-vis creating an orderly market for Government stocks, the answer is yes, the agency will indeed be giving instructions to the Government broker. Again, I recognise, as Senator Ross said, that there are people who have been looking after this part of debt management in the Department who are doing an excellent job and it was good and efficient from the Government's point of view. We judge them as we see them. However, they will be responsible for, and will be giving instructions to, the Government broker in that regard.

It is true that if you want to make large savings you must take large risks, but the people we are talking about in this section have done an excellent job over the years, have shown that the strategy they have adopted is a risk-averse strategy and there will be plenty of safeguards and guidelines laid down in the policy guidelines given to the agency to protect against huge losses. I believe in a strong risk management section and I also believe that it will have to be part and parcel of the new agency.

Senator Upton spoke about the controls in this area. I repeat that the agency's affairs are under the control of the Committee of Public Accounts of the Houses of the Oireachtas and of the Comptroller and Auditor General, and the agency will work within those well controlled Exchequer accounting systems. Senator Upton also asked about risks involved. Again I emphasise that there are risks at present and any debt, particularly one as large and varied as the one we have, is open to large risks. In the new situation, hopefully, we will have more expertise to manage the risk, but the guidelines will be laid down.

Senator Conroy asked about strategic matters of policy, for example, a mix of foreign and domestic borrowing, fixed and floating interest rates and so on. I want to assure Senator Conroy and the House that there will be close interaction between the agency, its advisory committee and the Minister for Finance. Of course, I have my people available to me in the Department of Finance. I do not want people to get confused about this. The people in the debt management section may or may not decide to join the agency. I have a policy-making committee, the budget team, for instance, available to me for advice and that will continue to be the position.

Senator Norris asked if the Oireachtas is writing a blank cheque. The straight answer is no. The Minister of the day will decide the budget for the agency; the financial affairs of the agency will be subject to audit; and the chief executive officer is responsible directly to the Minister for Finance. Senator Norris also asked why go outside the country for advice in the international markets; Senator O'Toole seemed to think I was going offshore. There are many good people in very senior positions in financial services and financial markets around the world available who may or may not, but who certainly will be asked by me if they would be prepared to give of their time to advise in this situation. I remember in 1982 finding an excellent Irish native at the top of his profession in the oil business and I appointed him a director of the National Petroleum Corporation. The same idea will apply here. There are good people of Irish descent available in the European Investment Bank, in the World Bank and various other institutions around the world, who might be available to take on an honorary post like this, and be delighted to do it for the country. That is the kind of people who take on jobs in semi-State bodies as directors. The same situation, more or less, applies here.

Mr. Fallon

Senator Shane Ross is still there with a chance.

Mr. A. Reynolds

So is everybody else. He has a vested interest.

Senator Norris asked in what circumstances would the Minister fire members of the Committee: if, for example, a member became involved in a conflict of interest and refused to resign; they do not have to be Irish citizens. The sole criterion would be their proven abilities. What is wrong with that at the end of the day?

I have covered most of the points raised; the reasons for the Bill; the reasons we have brought it to this Stage. It is in everyone's interests that we get to work on it as soon as possible because it is all about savings and savings are devoted to reduction of income tax, which is a priority of this Government and a priority of taxpayers who feel they are paying too much. It is about managing affairs in a more efficient manner and applying the savings that we hope will come from this operation.

Question put and agreed to.

Agreed to take remaining Stages today.