Amendment No. 1 in the name of Senator Joe Doyle is out of order as it involves a potential charge on the Revenue.
ACC Bank Bill, 2001: Committee and Remaining Stages.
Sections 1 to 3, inclusive, agreed to.
SECTION 4.
An Leas-Chathaoirleach
Amendment No. 1 not moved.
Question proposed: "That section 4 stand part of the Bill."
While I accept your ruling, I find it difficult to understand because all I was asking was that we delete "for the benefit of the Exchequer" and substitute "National Pension Reserve Fund". I was given to understand when the National Pension Reserve Fund Bill was going through the House that the proceeds of the sale of any further State assets would be put into that fund. Will the Minister of State indicate for what these funds will be used?
This issue has arisen before. The proceeds of all these sales go to the Exchequer. I would make the point that the sums being paid into the National Pensions Reserve Fund at the moment are far in excess of what may potentially arise out of the sale of the ACC Bank. It is at the discretion of the Minister and the Government how these funds are spent. That is normal practice and it is satisfactory.
Question put and agreed to.
SECTION 5.
An Leas-Chathaoirleach
Amendment No. 2 in the name of Senator Joe Doyle is out of order and as it involves a potential charge on the Revenue.
Amendment No. 2 not moved.
Question proposed: "That section 5 stand part of the Bill."
Mr. Ryan
What is the meaning of section 5(3)? I appreciate I should have done a search but if one looks at the list of legislation repealed here, it would have taken me quite a while. What is the import of section 5(3) which reads: "This section does not apply to a sale or transfer under section 4 or section 11(6) of the Agricultural Credit Act, 1978, of shares held by the Minister.”?
Section 5(3) means that the Minister provides that this section shall not apply where the Minister is transferring shares to the ESOT or providing a director of ACC Bank plc with a share. In line with the Government's decision to dispose of the State's interest in ACC, the subsection provides that the Minister may dispose of his shares in the bank in such a manner and upon and subject to such terms and conditions as he may determine. It is envisaged that the Minister will sell his shares to the purchaser of the bank. However, the subsection also provides that he may exchange, transfer or otherwise dispose of them in order to allow him full flexibility in this matter. Section 5(3) is obviously concerned with the ESOT and to make sure that it is ring fenced
When bidders make an offer for the ACC Bank they will do so under prevailing market conditions and also on the basis of the condition in which the bank is. When the ICC Bank was put on the market there was little trouble because it had a good financial record. As we know from last week's debate, the ACC Bank is in a different situation. I had to rely on one of my Sunday financial newspapers to tell me that of the bad debts provision of £7 million made in the accounts related to the Four Seasons Hotel. In view of the difficulties the bank has experienced in relation to DIRT repayments and its underwriting of bad debts, which were substantial – I think the provision for bad and doubtful debts was £14 million – is the Minister of State concerned about the value of this bank when it goes on the market?
As I emphasised to the Senator on the last day we spoke about the ACC Bank, we are not involved in a fire sale nor are we trying to get rid of the bank immediately. The reality is that market conditions will determine what offers will come in for the bank as well as the state of the bank, its financial capacity and how its stands at a particular time in the market. I assure the Senator the Government will not sell the bank for the sake of selling it. We will obviously ensure that the State's asset, the ACC Bank, and its value will be maximised to the fullest possible effect in any sale. Whether the bank will take some time to sell remains to be seen. It is certainly not a rush by the Government. We want to be in a position, as we were with other legislation, to ensure that if a very substantial and suitable offer comes in for the bank, the Minister would be in a position to dispose of his shares in it.
I would like to ask a couple of questions which I think I asked on Second Stage, but in maybe a little more detail. There are several ways in which the Minister can dispose of shares. I have very little quarrel with the options he will have. He is not going to tell us which option he will take because I do not believe he knows at this stage. There is a provision here that whatever the method of disposal, a fair number will go to an ESOT trust. Apparently when these shares are disposed to the ESOT, a deal is done. The deal is between the workforce and the Government, the owner. Some 14.99% will go to the employees in this way. It is fully understandable that the Minister, for reasons which have precedent and which I do not want to quote again, is going to do this.
What is the quid pro quo of this deal? What is being given back specifically by the employees? In other words, there has to be consideration in all cases for the disposal of shares. I presume in the case of 85% of it, it will be money but in the case of 15%, some 4.99% will be given to employees and I imagine they will pay a certain amount for the balance with soft loans if precedent is to be followed. What are the terms likely to be but, more specifically, will loans be given for the balance after the 5% – the 9.99%? What work practices will change in exchange for this gift of 5%?
As I said to the Senator the last day – I do not want to repeat myself ad nauseam– this is under negotiation at present between the bank and its staff. As regards the ESOT, as in the case of other companies which were disposed of on the same basis and where the workforce got a specific part of the company, that is, 4.99%, the rest of which was purchased, the conditions the company believes are necessary to meet in terms of redundancies, change in work practices and change in security from a State bank to a private sector company are some of the obvious areas in which one would expect fairly standard agreements to be reached between the management and the workforce in the context of selling the company.
The terms of the ESOT are being negotiated as I speak. I am not, nor is the Minister, party to those negotiations. I cannot be any more specific than that. Issues such as the number of redundancies involved, the substantial changes in work practice, as would be dictated by any potential customer in terms of how the new structure may affect them, and the movement of employees from a State company and the certainty that brings with it to what prevails in the marketplace will need to be negotiated. They are the areas where one would seek agreement to change. There may be some specific detailed issues which I am not aware of because I am not privy to the negotiations which are taking place.
I understand the Minister of State's reply as far as it goes and the point he is making regarding redundancies, although I presume that means that those who are made redundant on a voluntary basis will not receive shares.
Perhaps it might be helpful if I outlined for the Senator the specific terms involved in the case of the TSB.
Yes, that would be useful. Presumably, those who are made redundant will not receive shares. They will accept voluntary redundancy under a separate package. There is no point giving them shares because they would then also receive the benefit of the incentive.
I am interested in work practices. This has been put on the long finger in the case of Aer Lingus and was spoken about in relation to TSB and Eircom. Perhaps the Minister of State will identify the work practices in ACC which the Government specifically feels require changing. What do these people have to give up to get their shares? What do they have to change? Where is the need for change? Where are the problems?
Senator Ross has raised a fair question. It is not correct to compare Aer Lingus or Eircom with the bank. There are fundamental and very obvious differences between them. There is room and a demand for substantial improvement in the operation of the ACC Bank given its outturn for last year. That will involve everybody in the bank.
Management.
Obviously at management level and downwards. One could deduce there would be better use of systems in the bank which might determine better judgment in the context of decisions being made regarding loans and the way the bank has developed. That is only stating the obvious. There is a need to improve efficiencies. Senators will be aware that flexibilities which exist within the private sector regarding work practices are more restrained, confined or restricted in the State sector. There is a need to co-operate with change. This would lead to greater efficiencies thus ensuring the bank develops new channels of delivery. Staff will need to be flexible and adaptable regarding new products. They will be required to accept new products as part and parcel of their existing brief rather than requiring incentives to change work practices to embark on the delivery of new products within the system. All these issues come under the heading of flexibility.
Merging with the new owners in the organisation will be an important issue. Staff must be prepared to co-operate and assist with the planning and implementation of the merger and the integration of new strategies. The ACC Bank will no longer function as it is and any purchaser would have in mind a strategic view of the potential of the bank which would see it grow as an asset within any new scenario. Changes will also be required if that is to happen.
The reduction in staff numbers will be an issue. New technology to keep those in the financial sector at the cutting edge, nationally and internationally, is being introduced almost monthly. The use of technology is an area in which staff wish to be involved. A new system may involve a change in job roles, with changes in responsibility which staff may not have had heretofore. All these issues need to be negotiated when developing ESOT.
I am not negotiating internally on behalf of the bank between management and staff. The Minister for Finance has overall responsibility as the shareholder and guardian of the taxpayers' interest in this area. Obviously he would wish to ensure that the bank is put on a very successful footing and is in a position to deal with any issues raised by an intending purchaser to ensure a much stronger, profitable and brighter future for the bank.
Mr. Ryan
I intervene in this debate between two of the most committed capitalists in Leinster House and remind both of them that there has not been a business yet, particularly one which deals with consumers, that did not have workers. Workers are not just an inconvenient addition to the equation, they are a very central part of a company's function.
That is what the ESOT is about.
Mr. Ryan
I did not interrupt the Minister. I hope he will not interrupt me again.
I do not object to selling off State banks any more than I do to keeping them in State ownership. It is motive and purpose which troubles me. It is the myth of private sector efficiency which gets up my nose. Senator Ross, in another capacity, is particularly good at pointing out the degree of the myth of private sector efficiency.
It is not the State-owned post office that closes at 3 p.m. or 4 p.m. most days of the week, it is the big private sector banks which do so. They open at 10 a.m. and in some cases still close for lunch. This is not private sector efficiency. Post offices in most towns remain open until 6 p.m. six days a week. This is no longer the fault of the trade unions, it is the decision of management to restrict opening hours because it saves them money. There are certain things which the private sector does very well. One of the things it does best is sell the myth of its capacity to innovate. I was using e-mail in my place of work in the public sector for approximately five years before it was discovered by the private sector nationally and internationally. It was invented by the European Centre for Nuclear Research in Switzerland, a public-funded body which then had to persuade the ultra-efficient private sector of its merits.
I am tired of the ideological nonsense about the public and private sectors. They serve different purposes and each can learn from the other. The private banking sector can learn a great deal from the concept that when one is big in a small society one has a social purpose. As Marks & Spencers has discovered, it is not quite as easy as it thought to close businesses in civilised countries in Europe. It is only the least civilised member state of the EU, the United Kingdom, that still believes it is worthwhile to be able to sack people easily. The rest of civilised Europe, which is richer than the United Kingdom, does not share that view. The British ethos is to sack people and doing so is considered to be just a bit inconvenient.
What we are doing here is a sensible way of making progress. While we will probably have to dress up the 5% in new work practices, there is not a scrap of evidence that the work practices in the Agricultural Credit Corporation are anywhere near as antediluvian as the work practices in Independent Newspapers, out of which it has had to spend the past two years trying to negotiate its way, so far unsuccessfully. The issue is about old and conservative practices, not about public or private practices.
Senator Ryan was replying to a debate which has not even opened, so maybe we could close that chapter.
Mr. Ryan
I am in a hurry.
I did not hear any Senator, let alone the Minister of State, mention the private or the public sector.
Mr. Ryan
The Minister of State most certainly mentioned it while the Senator was here.
An Leas-Chathaoirleach
Has Senator Ross a question for the Minister of State?
I know there is a hurry.
An Leas-Chathaoirleach
There is no hurry.
I understand why the Minister of State has given me a general reply. The company is in negotiations on an ESOT, so he cannot give a specific reply. It is damaging his case for selling this bank, to some extent, to willy nilly hand over this 15%. Whatever Senator Ryan may say, and he may be right, there is undoubtedly a feeling abroad and among those who were considering the ICC Bank, which had an almost identical type sales pitch, that they would not buy it because they did not like the 15% provision and although the 15% was handed over, the practices, which they did not like and which the Minister of State refused to spell out, still existed and might still exist there.
The position is similar in Eircom. Anyone who works there would say, off the record, that the semi-State culture still exists there and has not been removed, that it has not been successful in changing the work practices and this 15%, 5% plus 9.99%, in exchange for work practices is a mere fiction. Nothing was given back or offered back and at the end of the day the Minister will get the worst of all worlds because he will not be able to sell this bank to many possible bidders because he will have given 15% of it away and he will not get anything back from the workforce where there are practices in place that are not particularly suitable or liked by the private sector. The Minister will give away 15% of the bank and no one will be able to spell out what will be given back in return.
The Minister talked about two of my least favourite words "integrating strategies", which mean nothing whatsoever and he knows that perfectly well. The word "integrating" means very little and the word "strategies" means anything one wants it to mean. The Minister told us not to worry, the bank will have integrating strategies. "Flexibility" was another word he used – flexibility my eye. Let us hear specifically what will be given back in return. I know we will not hear that, so I will give up on it. The Minister of State need not worry, I will not waste time on this. We will not hear what specifically will be given in return for this 5% because nothing will given in return. The bank will go up for sale and very few people will want to buy it because of that. That is the reality. The capitalists in the private sector – I may be right or wrong about this and Senator Ryan may be right in what he said—
Mr. Ryan
The Senator does not think I am.
No, but he may be. I am not infallible. The reality is that a large number of banks in the private sector will not want to buy the bank because of that.
Assuming the Minister will give away the 5%, which I presume he will, there is another 9.99%. What will that cost the employees and will they get soft loans on top of that?
I wish to deal with a few general points and then specifically with the Senator's last question. I would not like it to go out from here that it is my view that everything that exists in the private sector is perfect and everything that exists in the State sector is the opposite. As the Minister of State with responsibility for the Office of Public Works, I have learned a good deal about the practices in the public sector and how excellent they can be. The success of what that Department is doing is based on it having been able to marry a good deal of work between the public and private sectors and each sector has learned from what is the best in both. There are many elements in the public sector in terms of technique, etc., that are far ahead of those in some areas of the private sector. I have no difficulty saying that and have witnessed it first hand.
We are the first Civil Service Department in Europe, if not the world, to receive ISO 9002 accreditation on product management, which makes us the foremost company in the country in product management services, equal and better than any that exists in the private sector here or in Europe. I can fully subscribe to the view that not all that exists in the private sector or the public sector is best, that there are pursuits of excellence in both categories, which both should strive to achieve. I do not have the youthful ideological view I might have had ten or 15 years ago and one learns over the years, but that is not to say I can recognise difficulties in all situations.
As Senator Ross accepted, matters relating to the ESOT are under negotiation between the employers and the employees. From the point of view of management and the staff, it must emerge from these negotiations that the bank must be in a position when a potential purchaser submits a fair and substantial offer to present such a potential purchaser with an agreement in which the bank can have confidence in the context of redundancies, the range of work practices I mentioned and other flexibilities. That is not pie in the sky.
I note the Senator's view of the easy way one can use words such as "integrate" and "strategies" and, to a certain extent, I agree with him, but it is important that the bank should have an agreement in place that is worthwhile and stands up. If it does not, the chances of getting a potentially good purchaser, which can have confidence in purchasing the bank, integrating it into its organisation in a smooth, seamless way will that will lead to efficiencies and to the potential purchaser realising the bank's potential, then we are at nothing, so to speak. There must be a fundamental basic agreement in place that would be attractive to any potential purchaser.
The Senator tends to compare this company with other semi-State companies – one in particular on which he has a particular view – of a different nature. I will keep my counsel on that and not make any personal or public comment on it as it is not fair to compare the two.
I thank the Minister of State for his reply and I have dealt with that aspect of the section. A good summary was given on Second Stage of the current state of the bank, its profits and why it was making losses. It was a pretty sorry story. Given that the Minister is the owner of the bank I consider it a fair question to ask him to identify the principal problems within the bank.
Senator Doyle raised this issue on Second Stage. I am not in a position to deal with the specific bad debts the bank has incurred in relation specifically to customers. We are well aware of the role ACC Bank regarding DIRT and hope it does not happen again. I believe it will not. It has certainly allowed for a very substantial provision to be made in the accounts of the last year.
Senator Ross can read as well as I can and has a good view on many of the difficulties that have arisen. One difficulty, which I do not mind stating, is that the strategy the bank adopted on business other than its core business may not, in hindsight, have been beneficial to the bank's development. Last year the bank made the correct decision to make full provision for all contingencies that could arise so that a potential purchaser will see that the bank has a clean bill of health and has overcome the hangovers it may have had owing to bad debt, the DIRT liabilities, etc. The bank did that at the end of the year in a transparent manner. It is better to do that than hope to do something different in the future. It makes absolutely clear the future value of the bank.
I made the point, of which Senator Ross was very dismissive, that the operating profit of ACC Bank did rise last year. Some bad decisions might have been made and if the bank had had a crystal ball, it would not have made them. I can think of one instance which would have proved a very good deal for the client involved, but it did not work out. The bank has prepared itself so a potential buyer will know exactly how the company stands.
The ACC Bank has a strong future in the context of its core operations. For instance, its reduction in its branch network in Dublin and its rural spread throughout the country is strategically useful. It may have been obvious up to ten years ago that the bank should have been doing what its core reason for being established was in the first place, but the bank went in a different direction. It is easy for me to criticise those who made poor decisions, and doubtless they did so in good faith, but it is only with the benefit of hindsight that I know they were not the best decisions for the bank.
Question put and agreed to.
SECTION 6.
Question proposed: "That section 6 stand part of the Bill."
Mr. Ryan
On the requirement of the Minister to lay before the House a report on guarantees of borrowings, the explanatory memorandum states that the total cost of such guarantees was £489 million out of total borrowings of £2,469 million. Subsection (3)(b) states that “in case any payment has been made by the Minister under the guarantee during that year” the Minister must report “the amount of the payment and the amount (if any) repaid to the Minister in respect of the payment”. Has any payment been made?
None has been made.
Question put and agreed to.
Sections 7 to 13, inclusive, agreed to.
SCHEDULE.
Question proposed: "That the Schedule be the Schedule to the Bill."
Mr. Ryan
I am not trying to be awkward but I have two questions. Part of the Ombudsman Act, 1980, is to be repealed. Is the repeal because the Ombudsman used to have a brief to investigate complaints which is being revoked? Second, a paragraph of a subsection of the Criminal Justice Act, 1994, is being repealed. What was that paragraph? It is strange to see this in a Bill on banking.
The first repeal caters for the fact that the bank will move from public to private ownership. Obviously when the bank becomes private, in whatever guise, the remit of the Ombudsman will not apply to it in the way it would were it to remain in the public sector.
With regard to the Criminal Justice Act, 1994, I can only presume a similar provision is being made. I do not have the appropriate legislation in front of me, but I presume the repeal concerns the change of ownership and access and the conditions that apply to a State run bank as opposed to a private one. If I am incorrect, I will inform Senator Ryan.
Question put and agreed to.
Title agreed to.
Bill reported without amendment and received for final consideration.
Question proposed: "That the Bill do now pass."
I thank the Senators for contributing to the debate on the ACC Bank Bill. It was an interesting debate and the Senators expressed a variety of different and interesting views. It is an important Bill and the debate was helpful. I thank all the officials who helped me to prepare the Bill. Like all Members, I wish the ACC Bank success in the future and I hope the passing of this Bill will assist them greatly in their plans.
I thank the Minister of State for bringing the Bill to the House. It is the third legislation of this kind that we have had recently, the first two concerning the ICC Bank and the Trustee Savings Bank. Naturally, the ACC Bank is not in the same financial circumstances as the other two institutions, but I hope that, under the new management strategy, it will prove to be profitable and succeed in finding a buyer.
I also congratulate the Minister for steering the Bill through the House and dealing with Senator Ross's probing. I wonder if the management responsible for the Four Seasons Hotel investment will be receiving shares.
I am glad to see the ACC Bank may be going on the market and I hope it goes back to its niche market, which was small retail business primarily of an agricultural nature. I hope the bank will be reasonably lenient with the farming community given their current hardship. No doubt they will rise again in the same way as the bank.
Question put and agreed to.
Sitting suspended at 4.10 p.m. and resumed at 6 p.m.