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Seanad Éireann debate -
Thursday, 25 Jun 2009

Vol. 196 No. 6

Financial Measures (Miscellaneous Provisions) Bill 2009: Second Stage.

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

I welcome the Minister of State at the Department of Finance, Deputy Mansergh.

This Bill is a miscellaneous legislative package and contains a number of distinct and individually important provisions. Broadly, it may be broken down into four distinct parts, namely, a provision to give effect to the continued operation of existing direct debit mandates after the introduction of the single euro payments area direct debit scheme; provisions for the transfer of assets of certain pension funds to the National Pensions Reserve Fund, including the pensions funds of the Institute of Public Administration and the ESRI, included through a Dáil amendment; a provision to allow the Minister to extend the period for which financial support can be provided under the Credit Institutions (Financial Support) Act 2008; and a number of amendments to other Acts.

Section 17 of the Bill is an enabling provision to allow in the near future for the extension of the guarantee contained in the Credit Institutions (Financial Support) Act 2008 beyond the current expiry date of 29 September 2010 by ministerial order. I emphasise that the implementation of this enabling provision is not unfettered and includes a number of important oversight mechanisms. First, in making an order to provide financial support on an extended basis, the Minister must be satisfied, following consultation with the Governor of the Central Bank and the Financial Regulator, that the circumstances set out in section 2 of the Credit Institutions (Financial Support) Act 2008 continue to apply. In addition, EU state aid approval is required for any financial support provided under the Act. Moreover, the Minister, in making a scheme to provide financial support in the form of a guarantee, must secure the positive approval of both Houses of the Oireachtas in accordance with section 6(5) of the Credit Institutions (Financial Support) Act 2008. In other words, the current bank guarantee scheme cannot be extended using the provision in the Bill, unless a new scheme is approved by the Oireachtas. Senators will recall that the Minister signalled on a number of occasions, in particular on 7 April in his supplementary Budget Statement, the Government's intention to revisit the current guarantee, subject to European Commission approval and consistent with EU state aid requirements, in ways that would support banks in Ireland to access longer term finance. EU state aid approval only will be available for financial support measures that are limited in time and scope and which include a remuneration mechanism for any aid granted by the State.

I wish to address the details of each section of the Bill in turn. Part 2 pertains to direct debit instructions and mandates. Section 2 of the Bill provides for the continued operation of existing direct debit mandates after the introduction of the single euro payments area, SEPA, direct debit scheme. The SEPA direct debit scheme will be introduced from November 2009 and will be a major step change in the development of a single EU market in payment services. It will enable customers of any EU bank to set up a direct debit on their account, no matter which country they are living in, and has the potential to make travelling and working in other member states much more flexible in terms of paying utility bills, for example. A major hurdle in the introduction of the SEPA direct debit scheme is the need to ensure existing direct debit instructions continue to be valid. The Bill will enable the Minister for Finance to make regulations to provide for the continuing validity of existing direct debit instructions and for the regulations to make provision that customers be informed of the fact that their direct debits will be transferring to the SEPA direct debit scheme.

Part 3 of the Bill pertains to the transfer of assets of certain pension funds to the National Pensions Reserve Fund. Sections 3 to 14 in Part 3 contain provisions to allow the transfer of pensions funds in the universities and certain non-commercial semi-State bodies to the National Pensions Reserve Fund in return for the Exchequer taking over responsibility for the payment of pensions under these schemes which it would do on a pay-as-you-go basis. The Bill provides that the value of the assets transferred will count against the Exchequer's obligation to make a contribution equivalent to 1% of GNP to the National Pensions Reserve Fund each year. The funds to be transferred are set out in Schedule 1 to the Bill. They are the pension funds of the five older universities — Trinity College, University College Dublin, University College Cork, the National University of Ireland, Galway and the National University of Ireland, Maynooth — and a number of non-commercial semi-State bodies — Forfás, Shannon Development, FÁS, Bord Bia, the Arts Council, the Institute of Public Administration, the Economic and Social Research Institute and Fáilte Ireland's regional tourism authorities. The fund for former CERT employees is also covered. Actuarial valuations of the schemes' assets and liabilities were carried out at the end of 2008 at the request of the Department of Finance. The relevant figures will be set out later when I refer to the general government balance implications of the fund transfers.

I propose to set out the background to the measures provided for in Part 3 of the Bill. The five older universities, like certain non-commercial State-sponsored bodies, have particular characteristics that have given rise to the need for the State to take over their pension funds. They are unique in terms of their structure and relationship with the State. It is recognised that the pension funds of the non-commercial semi-State bodies concerned which are part of the public service are ultimately the responsibility of the State. These pension liabilities must be seen in that context. I am conscious that some Members of the House represent the university sector. The universities covered by the Bill have part-funded pension schemes. Retirement lump sums and basic pensions are paid from these funds, while post-retirement increases are paid by the State on a pay-as-you-go basis. This is different from the position in respect of the pensions of the newer universities and in respect of entrants to the older universities from 2005 onwards. In such cases, benefits are paid on a pay-as-you-go basis, using the core grant provided by the State. Universities were required under the Universities Act 1997 to introduce new pension schemes based on the public service model. Since 2005 the funded schemes are no longer available to new university entrants who are subject to the new arrangements in line with the public service model.

The minimum funding standards under EU law require public service funded schemes to meet the standards set in the IORPs directive, unless they are exempted by having a State guarantee, for example. The universities concerned must be able to show that their schemes are in a position to meet the potential liabilities arising. Alternatively, the State could clarify its supporting role to give the cover required. The situation was examined some time ago by a Higher Education Authority working group which recommended that the best way forward was for the State to initiate discussions with the trustees and administrators of the funded pension schemes in question who would then consult their members with a view to winding up these schemes and having the State take over the assets in the funds. The liabilities of the schemes would then be met on a pay-as-you-go basis in the future, with the assets transferred to the National Pensions Reserve Fund. It is not possible to predict whether the assets will eventually prove to be sufficient to meet future liabilities. This will depend on how they perform over time.

The transfer of the assets of pension funds in the universities and certain non-commercial State bodies to the National Pensions Reserve Fund, where the assets will be managed as part of the reserve fund, is the most efficient way of dealing with such pension funds. Rather than having a number of relatively smaller funds attempting to manage their deficits, while at the same time meeting current pension benefit outgoings, it is preferable to have the assets become part of the overall investment portfolio of the National Pensions Reserve Fund. As Senators are aware, the purpose of the reserve fund is to meet as much as possible of the cost to the Exchequer of social welfare and public service pensions from 2025 on. As no drawdowns are allowed before 2025, the National Pensions Reserve Fund can accept periods of volatility as a trade-off for achieving a long-term return that will make a meaningful contribution to Ireland's future pension costs and the sustainability of the pension system.

The summary on page B12 of the document setting out the recent supplementary budget measures states:

It is proposed to transfer to the Exchequer the assets and liabilities of certain pension funds in Universities and non commercial State agencies. The liabilities of the funds at the end of 2008 are estimated to be approximately €3 billion with the assets valued at €1.7 billion at that time. The current classification of these funds under EUROSTAT rules is such that the transfer of the assets of the Universities' funds and the SSB funds established under Trusts would impact positively on the General Government Balance (GGB) when received. The initial revenue and subsequent investment return would be offset in the future by the payment of pension benefits which would be recorded as Government expenditure at the time of payment.

In line with that announcement, Part 3 of the Bill provides for the transfer of the assets of the relevant funds to the National Pensions Reserve Fund. It includes an undertaking that the State, through the individual bodies, will meet the pension liabilities on a pay-as-you-go basis as they arise, under the same scheme rules that currently apply to members of the funded schemes. A transfer order will be made by the relevant Minister, with the consent of the Minister for Finance, to give effect to the transfer of each pension fund on the conditions set out in the Bill and to set the date of effect of the transfer. The transfer order will list or otherwise reference all of the instruments or documents which comprise the scheme rules. No subsequent amendments to the pension schemes can be made without the approval of the relevant Minister and the Minister for Finance. In the case of the universities, the approval of the Higher Education Authority will also be required under the Universities Act 1997.

Where existing approved scheme rules have provided for trustees or bodies to have discretionary powers, provision is made for the continuing exercise of these powers by the relevant Minister and the Minister for Finance. The Ministers may, in certain cases, delegate that discretion to the bodies — to the Higher Education Authority in the case of the universities — if they deem it appropriate to do so. A measure is also included in the Bill to provide that the value of the assets of the funds transferred to the National Pensions Reserve Fund will be offset against the Minister's obligation under section 18(2) of the National Pensions Reserve Fund Act 2000 to make annual contributions, equivalent to 1% of GNP, to the reserve fund. That matter arose during discussions that took place in a different context earlier this year. A similar provision was included in section 6 of the Investment of the National Pensions Reserve Fund and Miscellaneous Provisions Act 2009 which was passed earlier this year. That provision relates to investments in listed financial institutions made by the reserve fund under direction from the Minister for Finance.

Section 3 of the Bill defines terms used in Part 3. It clarifies that the assets to be transferred do not include assets covering additional voluntary contributions on a defined contribution basis. Following the transfer, the funds of additional voluntary contribution schemes will be held in a separate trust for the contributing members.

Section 4 provides an interpretation of the phrase "relevant pension scheme" both before and after the transfer of the assets in relation to a covered pension fund. This provision is important in the context of continuing the benefit structure of each scheme member following the transfer.

Section 5 provides that the relevant Minister may, with the consent of the Minister for Finance, make an order transferring the assets of a covered pension fund to the National Pensions Reserve Fund. The transfer order in respect of a particular fund will determine the date of effect of the transfer of the fund. It will also confirm the instruments and other documents underpinning the "relevant pension scheme" referred to in section 5. A transfer order shall be laid before each House of the Oireachtas with a notice published in Iris Oifigiúil.

Section 6 provides that the effect of a transfer order made under section 5 is to transfer the assets of the fund subject to the transfer order to the National Pensions Reserve Fund. It also provides that any trust deed relating to the assets of the fund is terminated and that the trustees and bodies cease to be liable for anything done in relation to the fund on or after the date of effect set out in the transfer order.

Section 7 provides for the continued operation of any pension scheme for which a transfer order has been made, subject to the provisions of the Bill. It also provides that, following the transfer, the board of directors or governing body of the State body or university in question becomes the administrator of the pension scheme. This section also makes provision for the continuation of scheme membership for those who were members on the date of transfer.

Section 8 provides an exemption from any form of taxation for any assets transferred under a transfer order. Section 9 provides that a transfer order has effect, notwithstanding any provision in the Pensions Act 1990. It also provides that, following the date of a transfer, the 1990 Act will continue to apply to a relevant scheme to the same extent as it did prior to that date in order that the protection of the Act will apply to members following the transfer. I refer to the right of appeal in the event of a dispute, for example.

Section 10 provides that assets transferred to the National Pensions Reserve Fund pursuant to a transfer order shall be taken to be in satisfaction or part-satisfaction of the obligation of the Minister for Finance under the National Pensions Reserve Fund Act 1990 to make contributions to that fund.

Section 11 provides that any discretion contained within a covered pension scheme in relation to rights and benefits of members, either individually or collectively, shall, after the making of the transfer order, be exercised by the relevant Minister and the Minister for Finance, who in turn may delegate the exercise of the discretion. Section 12 provides, subject to the provisions of this section, for the continuation of obligations of members and employers to make contributions to the scheme and for the bodies to pay benefits relating to the scheme in relation to any covered scheme after a transfer order has been made. Section 13 provides that section 25(7) of the Universities Act 1997 and the Fifth Schedule to that Act, which provide for the approval of the terms and conditions of any university superannuation scheme, continue to apply in relation to a covered pension scheme after a transfer order has been made.

Section 14 provides that nothing in Part 3 of the Bill or in any transfer order affects the jurisdiction of the Pensions Ombudsman or procedures relating to internal dispute resolution established under section 132 of the Pensions Act 1990. If a relevant pension scheme confers on a Minister the function of settling disputes, the relevant Minister continues to have that function after the making of a transfer order.

Part 4 deals with guarantees by the Minister for Finance. Section 15 deals with construction of certain provisions when the Minister for Finance guarantees non-equity securities, etc. Section 15 amends the Prospectus (Directive 2003/71/EC) Regulations 2005 and the Investment Funds, Companies and Miscellaneous Provisions Act 2005 to protect the Exchequer by removing any legal liability on the State as guarantor of certain debt securities for the accuracy of information contained in prospectuses that relate to the guarantor and the guarantee.

In regard to the amendments of other Acts, section 16 provides for an amendment to the Central Bank Act 1989. Section 16 is an amendment required to give full effect to the transposition of the assessment of acquisitions in the financial sector directive of 2007. The directive establishes a harmonised legal framework, setting out the procedure to be applied by competent authorities when assessing acquisitions on prudential grounds in the EU-EEA. The amendment in section 75(1) of the Central Bank Act 1989 disapplies the existing regime for acquisitions in the case where the regime created by SI 206 of 2009 now applies, thus ensuring that the directive is transposed correctly and that there is no dual acquisitions regime in the State.

Section 17 provides for an amendment of the Credit Institutions (Financial Support) Act 2008. As Senators will be aware, Ireland was the first EU member state to make a guarantee available to its financial sector at the end of September 2008. Many other EU countries have since implemented bank guarantees such as, for instance, Denmark, France, Finland and Sweden. Our guarantee is a blanket two-year guarantee to 29 September 2010. Guarantee schemes in other member states in contrast apply to longer-term debt issuances. To level the playing field, it is proposed to extend the guarantee set out in the credit institutions guarantee scheme for a period which will allow banks to access new, longer-term funding and which will make a significant contribution to further strengthening of their financial standing and overall stability.

The House will understand that, as the term of the guarantee proceeds, the importance of providing scope for extending the term of the guarantee increases, so it is appropriate to provide scope for addressing the issue in this Bill. Section 17 therefore amends, via the Schedule to the Bill, the Credit Institutions (Financial Support) Act 2008 to allow for the extension of the period of financial support beyond 29 September 2010 by ministerial order. Access to longer-term funding, in line with the recent mainstream approach in the EU, will contribute significantly to supporting the funding needs of the banks and to securing their continued stability. As stated earlier, the implementation of this enabling provision is not an unfettered power and includes a number of important oversight mechanisms, not least Oireachtas approval of a draft guarantee scheme.

The purpose of the amendment of Acts in sections 18 and 19 is to address a regulatory gap in existing legislation. Currently, under the Insurance (No. 2) Act 1983, the Financial Regulator can only present a petition to the court for an order for the administration of a non-life insurance company and the appointment of an administrator. Such a petition cannot be presented for a life insurance or a reinsurance company. The option of appointing an administrator is an important regulatory tool for the Financial Regulator as it permits it to intervene when it feels that the business of the insurer is being or has been conducted in such a way that inadequate provision has been made for its debts, including contingent and prospective liabilities. In the absence of such a provision, the regulator is quite limited in what it can do when a life insurance company or a reinsurance company is in difficulty, thereby explaining why we need to make this amendment. This proposal also ensures a consistent treatment of all insurance companies, whether they be a non-life, life or reinsurance company, in relation to the appointment of an administrator.

Section 20 amends the Netting of Financial Contracts Act 1995 to insert a new definition of "party" in that Act. This amendment clarifies the application of that Act for netting agreements where one party agreement has created a security interest in favour of a third party. The Netting of Financial Contracts Act 1995 encompasses only bilateral netting agreements. However, the creation of a security interest by either party to a netting agreement could result in an interpretation that the agreement is between more than two parties. In such a scenario, the protections afforded by the Netting of Financial Contracts Act in the event of insolvency may not apply. The amended definition of "party" clarifies that it does not include any person in whose favour a security interest has been created.

Section 21 deals with amendments to the Taxes Consolidation Act 1997. In the context of the transfer of the pension funds' assets, there are a number of amendments to the Taxes Consolidation Act in Schedule 2, Part 6. These amendments are technical in nature and clarify that the assets of the National Pensions Reserve Fund, in addition to the NPRF Commission, are also exempt from Irish tax.

As outlined, the issues addressed in this Bill largely relate to some important, albeit technical, issues. The Bill will also address a number of technical reforms to various Acts falling within the Minister's remit. I trust, therefore, that the House will be amenable to a positive and constructive consideration of the Bill's provisions. I commend the Bill to the Seanad.

When this legislation was going through the Lower House it was opposed by Fine Gael because considerable concern was expressed that information on the proposed extension of the guarantee had not been made fully available to the Opposition for it to be able to decide genuinely whether what the Government is doing is a good or bad move. There is a sense from Government that money is limitless from some source when it comes to dealing with this crisis. Two years ago when the current Government was re-elected for a third term the country was in debt to the tune of approximately €130 billion. Now, two years later, the approximate debt of the nation is approximately €260 billion or will be that figure by the time the National Asset Management Agency is fully functioning, and a further €400 billion of bank deposits are guaranteed by the State. This is not all debt but we are heading towards the Government being responsible for nearly €750 billion in moneys owed or guaranteed. It is an unbelievable change in such a short space of time. The Government is still borrowing at least €1.5 billion every month and is now guaranteeing loans for the foreseeable future for banks that want to extend their credit lines beyond two years. It may or may not be a good idea but it is difficult to say whether it is a good one.

The Government is very much acting in a way that we on this side of the House should be compliant and do what we are told because those in government know best. In some respects, they are the same individuals who got us into this mess. They were the ones who were championing Government policy for a number of years that led to the present-day scenario.

People may have understood an interesting point covered in recent media reports where a developer was being sued by a bank for his own personal assets and concern was expressed that this might undermine NAMA. There was good reason for such concern. The banks are anxious to avoid these types of cases. When the banks go after someone and appoint liquidators, some of these toxic assets have to be sold off or valued properly by the courts. We have found there have been write-offs of between 50% and 70% of the value of these assets. One can understand why the banks want to offload these toxic assets onto the taxpayer. What surprises me is that the Government believes it is its duty to take on this huge burden on foot of the fact that we are threatened by a systemic crisis. However, there has not been an adequate debate on how much of what is being done is affecting us and what will be the potential outcome five or ten years from now. The banks are quiet in respect of this matter and cannot wait to offload the problem.

If the Government is serious about this legislation, the original version of which was passed last year, the bank levy should take effect immediately, not when NAMA decides that the difference cannot be made up. The legislation states a levy will be imposed on the banks if for any reason NAMA loses money. It does not take a rocket scientist or an economist to work out that NAMA will lose money. That is a certainty.

I wish to comment on the concept of chasing developers for their personal assets or money they have salted away. I am of the view that the percentage of developers who have been smart enough to protect their private assets or move certain funds into places where they will be protected from confiscation by the Government or NAMA is quite small. Most developers have gone broke and the people NAMA is pursuing will not have many private assets — other than their houses and a few luxury cars — of the sort the Government is seeking. Ours was a bubble economy and it has burst wide open. Assets previously valued at €100 million are not worth more than €30 million or €40 million now. We must face up to the fact that there has been a huge haemorrhage of value out of the economy.

It is for the reasons I have outlined that we require a debate on the direction NAMA will take. If we are serious about NAMA, the bank levy should be in place from day one. However, questions arise as to whether NAMA will actually work. Despite the guarantee and the many billions spent so far, the flow of credit within the banking system has only marginally improved. In the light of the massive cost to the taxpayer and the State, the benefits to date have been minimal. I accept some disastrous consequences may have been avoided, but we will never know what might have happened.

We must engage in a serious debate on what we are doing to the nation. The Minister of State has indicated that the legislation will allow the Government to take control of private pension funds of universities and certain State organisations. Private sector pension funds have been decimated. A report published in recent days indicates that people in this country with private pensions are worse off than their counterparts in Iceland which was for some time held up as being the worst with which other countries could compare themselves. However, Ireland has now assumed that mantle.

Government representatives continue to speak as if there is no great crisis. Nothing could be further from the truth. The pensions of those in the private sector who are due to retire in the next decade have been decimated. However, the Government does not appear to accept there is a problem in this regard. It seems to hold the view that it only has an obligation towards and a responsibility for public sector workers who are due to retire. It cannot abandon those in the private sector whom it encouraged to invest in private sector pension funds, particularly in view of the fact that these individuals might otherwise have invested their money elsewhere. It cannot hang them out to dry as a result of what has happened. Public sector pension funds have lost in excess of €30 billion in value, but the Government does not appear to be paying any attention to this fact.

People who are losing their jobs or who are in a difficult position financially resent the Government's plan, which is supported by the IMF, to introduce a property tax. Those to whom I refer were encouraged by the Government to purchase houses at inflated prices. The Government received up to 40% of the value of these properties in VAT and other taxes from the resultant transactions. People who bought houses for €250,000 have seen their value drop to €150,000 or €160,000. They have seen the Government take a massive cut from the amounts they paid for their houses — the value of which has collapsed — and that Government which led them up the garden path in the first instance now proposes to impose a property tax on them. At the same time, it is wantonly throwing around billions to finance loans, guarantees and bailouts.

Those in power do not seem to understand they must do better in explaining what they are doing, not just to the Opposition but also to the people who see themselves as being hammered at every turn for a Government policy that has been bankrupt for a number of years. The Government is responsible for this self-inflicted crisis. Most Members of this House and the Lower House were present when this was happening. I was a Member of the Lower House when Charlie McCreevy and the current Taoiseach, Deputy Cowen, introduced various budgets and their sense of arrogance, over-inflated opinions of themselves and belief they were doing the right thing were difficult to take. The fact that the Government still does not accept it led us into this crisis is also giving rise to a significant level of anger among a large number of people. If the Government is determined to continue using huge amounts of taxpayers' money to guarantee the banks, etc., and to commit every citizen to take responsibility for the debts of the banks, it must be much more open in its debate on these matters with those in opposition.

The IMF's report is frightening. It indicates that the economy is going to contract by 13.5%, that unemployment will rise to 15.5% and that the losses incurred by the banks could eventually amount to €35 billion. It also refers to the billions in loans we have taken on board and the guarantees we have provided. It goes on to state we must examine the position on public sector pay and numbers, increase taxes and bring to an end the system of universal payments.

This country has never been very good when it comes to universal payments. The Government has stated people with a certain level of wealth should not have access to medical cards and tried to remove such cards from certain individuals over 70 years of age. Every person north of the Border has access to free GP health care. In the Republic, however, less than one third of the population is entitled to such care. In addition, a huge range of charges apply to those seeking care in the public health system. The lack of confidence among the people in that system is evidenced by the fact that until recently 70% of them held private health insurance. Government policy has been to oblige people to rely on private sector health care rather than tackle the significant structural and human resource difficulties within the public health system. This policy has failed dismally because people have either lost their jobs or taken massive wage cuts and can no longer afford private health insurance. They are being obliged to fall back on a public health system that is not working efficiently.

When the legislation was dealt with in the Lower House, the Government did not accept any Opposition amendments. If it really wants to make the legislation work and the general public to buy into what it is doing, the first ones to whom information should be given and to whom respect should be shown are those in opposition.

I welcome the opportunity to contribute to the debate on the Financial Measures (Miscellaneous Provisions) Bill 2009. By way of brief rebuttal, Senator Twomey was not present last week when many of the points he has just made were made by Senator Cannon on his behalf. Governments do not operate with the benefit of hindsight; they operate in a real-time environment. We previously enjoyed a period of unprecedented growth, but circumstances have changed to a fundamental degree in the past two years. We had an economy that certainly was over-reliant on a property boom and there is a price to be paid now. Many anticipated a soft landing. Fine Gael in its proposed programme for Government anticipated growth levels in the region of 4% per annum and predicted a range of services would have been introduced based on these figures. Throughout my seven years in the House I recall Fine Gael on many occasions calling for more expenditure on project A or more pay for sector B, but the reality is that circumstances have changed fundamentally.

Last week, on referring to Ireland as being in the eurozone, the Minister of State, Deputy Mansergh, rightly corrected me on my use of the term, "fatal flaw". I shall correct myself and say that if there is a flaw as regards the single currency, it is that eurozone members do not control their own interest rates and aspects of fiscal policy. We had a scenario where money was available at a figure of 2% and we had 8% growth, which led in a major way to an overheating of the economy. We were all party to this. With the benefit of hindsight, had we anticipated the difficulties both nationally and internationally, certainly things would have been done differently. I dare say there has hardly been a government in the history of the world that would not have looked back on certain aspects of its performance and said, in effect: "Considering how things have played out, we would have done certain things differently." However, that is not possible. One of the few options that would have been open to us on the property side was an increase in stamp duty, as I mentioned last week. At the time I recall a lobby, to which almost everybody was party, seeking a reduction of stamp duty. We did not control our own interest rates, but we should have been sneaking them back up to cool things off at a particular time. However, we were not in a position to do this. Perhaps that is a flaw of the single currency.

The Minister of State mentioned NAMA. During the attendance of Mr. Brendan McDonagh, NAMA's interim managing director at the Joint Committee on Finance and the Public Service, as well as Dr. Peter Bacon, we were given an insight as regards the direction it was taking. Clearly, it will be in the business of pursuing work-outs. It will not be in the business of gathering properties in the way the Resolution Trust Corporation did in the United States in the 1980s, with the Savings and Loan fiasco, and having a fire sale. Early indications are that over a 20-year period we will have the facility of securing a land bank and ensuring we get the maximum possible return on behalf of the taxpayer for whatever assets are available. I very much hope this will be the case.

As the Minister of State mentioned, the main provisions of the Bill encompass the need to ensure legal certainty, with direct debit mandates amounting to more than €100 million a year being transferred to the new single euro payments area direct debit scheme before 1 November. This is being done to prevent major disruption to cash flow for utility companies and others, including insurance companies and mortgage providers. The Bill also seeks to transfer the assets of certain pension funds to the National Pensions Reserve Fund. As the Minister of State mentioned, the Government plans to transfer pension funds from universities, as well as those of a number of semi-State companies, to form part of the National Pensions Reserve Fund. The Minister of State went into considerable detail in outlining this provision in the Bill.

The Bill gives the Minister the power to extend the period for which financial support can be provided under the Credit Institutions (Financial Support) Act to extend the bank guarantee past 2010 with the approval of the Oireachtas and in line with EU state aid requirements. This is a very important provision in that it is vitally important that the banking system is not placed at a competitive disadvantage in accessing longer term money. This is in line with EU guidelines. As the Minister of State said, it will not be a unilateral ministerial initiative but will require a positive resolution of both Houses of the Oireachtas to give it effect. The Minister for Finance said in the Dáil yesterday that it was essential not to extend the entire guarantee but rather to modify it to ensure our institutions were not put at a competitive disadvantage. He also said it would contribute significantly towards supporting the funding needs of the financial institutions to secure their stability and enhance their potential to discharge their central role in facilitating economic activity, which is certainly to be welcomed. I heard Deputy Bruton welcome this also on the airwaves in the last couple of days. While he had some reservations about the level of scrutiny provided for, in the knowledge that it will require a positive resolution by both Houses of the Oireachtas, I am sure he and his party feel more at ease.

The Bill seeks to close loopholes in the insurance Acts. As the Minister of State said, life insurance and reinsurance companies are included in the legislation, whereby the Minister can present a petition to the courts on the place in administration of a non-life insurance company and the appointment of an administrator.

The series of financial measures we have been debating both this week and last week are all part of a step by step plan being followed by the Government to ensure economic certainty, stabilise the banks and ensure the Irish banking system can get credit flowing again. I reiterate that these steps are being welcomed elsewhere in Europe and that we have been assured we are taking the right steps decisively. The guarantee scheme extension will have to be agreed to by the Dáil and meet EU state aid requirements. Ireland is being joined by many other European countries in extending its bank guarantees. From the outset many of them had covered a period longer. Banks have to be able to compete on a level playing field with their competitors throughout the world. It is about restoring confidence in the banking system and getting credit flowing again. The extension of the guarantee will allow banks to give first-time buyers loans and to grant loans to small businesses, which is what we all want to see in these difficult times. This is essential if we are to achieve economic revival. Having the provision to extend the bank guarantee will send a positive note to investors, particularly those investing in medium term five-year bonds, and help to instil confidence in them. The Minister confirmed in the Dáil yesterday that the State was already effectively liable for the liabilities of the pension funds being transferred from the universities and said these funds did not constitute an additional liability as a result.

I welcome the IMF report. As the Minister said in the other House, it offers a realistic assessment of the situation in which we find ourselves. It is encouraging to see that the IMF's view concurs with ours and that we are taking the appropriate policy decisions at the right time. It is also encouraging that the IMF has welcomed the NAMA approach. I welcome the fact that it has made a number of suggestions on how we might continue to pursue the NAMA project, as well as others in terms of public sector pay and numbers and prioritising cuts in expenditure rather than focusing on higher taxation. These suggestions are to be welcomed as they are in line with much of the work already done by the Government and the matters under consideration. There is obviously the report of the Commission on Taxation to come, as well as the review of public sector numbers and the recommendations of an bord snip, which are imminent.

I welcome the Bill. I am glad the Government is continuing on the right road, a fact underlined by the IMF yesterday. I look forward to the further measures that clearly will have to be taken, however painful they might be for all concerned, to ensure we come through these difficult times.

I wish to share time with Senators Bacik and Mullen.

My first point might antagonise to some extent the Minister of State, Deputy Mansergh, for whom I have great admiration. This is a very important Bill which should have been fitted into the Minister's timetable because it is a reflection on the Seanad and its Members that we do not have the real McCoy here when debating an issue as serious as this. The competence of the Minister of State is not in question; nor is his ability to understand or explain the Bill to us. When the guarantee was granted, and he may correct me, the Minister of State, Deputy Mansergh, was not there. He is not key to the important meetings that happened during the giving of the bank guarantee and this banking crisis. It is not possible for him to answer the sort of questions we ask with the fluency, knowledge and ability the Minister, Deputy Brian Lenihan, has. If the Government is serious about giving information to the Seanad, which I suspect it is not, and taking these Bills through the Seanad with a serious intent to listen to what people have to say, we should have arranged a time which suited him, if necessary, or vice versa. I do not blame the Minister because he has engagements. These things have to be done at short notice, but this is important. From a Minister of State we will get what we always get, notes passed to him by civil servants and him replying that way. I do not blame Deputy Mansergh.

The Senators will get a bit more than that and they always do.

We may get a bit more than that, but the point is that Deputy Mansergh is not there when the important things happen, nor is he privy to all the information the Minister has. That gives the Minister a knowledge and ability to impart that information with an authority which, unfortunately, the Minister of State, Deputy Mansergh does not have. I do not want Deputy Mansergh to take this personally because he is a very competent person, but in this area he should not be here. The Minister, Deputy Brian Lenihan, should be here, or we should accommodate him.

I say this with a strong opinion that the Minister, Deputy Brian Lenihan, is making tremendous strides in a very difficult situation. He has personally made an extraordinarily good impression overseas in this crisis and he has managed it with an increasingly strong authority, which we should welcome. This is all the more reason why he should be here. As everybody in this House will know, he helped the sale of the bonds this week and a few weeks ago because of how he sold the Irish story in Europe. It was quite easy for the NTMA to raise, admittedly limited, amounts of money on the bonds markets because of the Minister's performance and because he projected and proposed a plan which people believed was well thought out and that he had a commitment there. That makes it all the more important that he should be here. Those are the optimistic signs. He is attempting to remedy a situation not of his making, so it is extremely difficult for him.

Today we are talking principally about the guarantee and its renewal, although it is symbolic of what is happening. My instinct is that they have to do it because they have to do it. To send out any signals that the guarantee would not be renewed — it is only next year — would cause an appalling run on the banks. We do not need a Bill. We know that commitment must be made and is being made.

It was an interesting idea from the IMF to introduce nationalisation and NAMA, but I will put them to one side for a minute. The banks are being given this guarantee and the bankers may begin to regard it as a licence to renew not necessarily their old practices, because I do not think that will happen, but their old power. I can see the signs already, before the bankers are properly kicked in the teeth and told where they went wrong, and in some cases penalised for going wrong, which has not happened, I can already see the signs of them regrouping. This guarantee, which is a sign to them that things are normal, underlines the fact the Government is co-operating with them in this policy.

We need action which is far more radical than saying we will fill the boards of the banks with our own people, will see they do not get up to what they were doing before, and will let them go on their merry way. I have talked to directors of banks recently, and I am sure other people have, and there is a very definite message getting through that they are independent of Government. There is a definite tension and battle between them and Government as to who is in control. It seems control is already passing from the Government, which never really seized it, back to the banks.

The Minister, who has done a magnificent job in removing the chief executives and chairmen of the banks, sometimes helped when they committed career suicide, seems with the Government to be stopping at that. It is not too difficult to get rid of these guys but when it comes to replacing them it is more of the same, which is an indication that we are just trying to get over this hump rather than thinking of anything radical. In Bank of Ireland they have replaced the chief executive and chairman with old Bank of Ireland people. The person they have put in as governor of the Bank of Ireland is extraordinarily able but is deeply imbued with the old Bank of Ireland culture. I cannot understand why the Minister did not put him into AIB if he was serious about changing. There was a vacancy there. Instead, he put two people from the AIB board and raised them up to chairman and deputy chairman of AIB. That is not a change. These are insiders getting jobs. The chief executive of Bank of Ireland was the favourite insider and he got the job. They are regrouping, eyeballing the Government and successfully staring it down.

We need to think more radically. The Minister speaks frequently and eloquently about the systemic danger which is there. He is right about Anglo Irish Bank, AIB and all these banks being systemic. Would he think that had Anglo Irish Bank, which maybe he could have let go, although I suspect not, been much smaller there would not have been such a problem? I would have thought they should be thinking that since we have only two or three big banks, we could split them and make them much smaller.

Instead of these big mergers people are talking about, AIB and Bank of Ireland getting together, IL&P getting together with EBS and all the others, why do they not make them smaller? This way there are no systemic banks, so if one behaves like Anglo Irish Bank, AIB or Bank of Ireland have behaved, they are so small it does not really matter. If they go out of existence the rest survive. This would remove the need for these blanket guarantees because one could let them go. They would be much less likely to go, but they could be let go.

I would be very interested to hear the Minister's comments, specifically on what is happening between Irish Nationwide and one of its debtors. I do not understand what is happening here. Irish Nationwide is apparently to sue one of its debtors for a large amount of money. That presents a serious challenge to NAMA and the whole banking system. I cannot see where it is going. There is a real danger of a domino effect because those who owe Irish Nationwide money, which says it will sue more people, owe vast and bigger sums to other banks. If Irish Nationwide puts them into liquidation or bankrupts builders, presumably the other banks will have to get onto that story almost immediately. What will happen then? There will be a collapse in property prices before NAMA even comes into existence. In effect it would gazump NAMA. We are entitled to know whether the Minister has given particular riding instructions to his own directors on the board of Irish Nationwide Building Society on this. If they persist in this, what is Government policy on it? Will it allow it to happen with a kind of domino effect resulting?

I wish to share time with Senator Quinn.

Is that agreed? Agreed.

I am always somewhat wary when I see a Bill arriving in this House with the words "miscellaneous provisions" contained in the title. It tends to be an amalgam of different issues, some merely technical, but usually with a little nugget of something more controversial buried within it. We have had several Criminal Justice (Miscellaneous Provisions) Bills which have had some rather dangerous provisions buried within them. I am reminded of a phrase used by a British political adviser about a good day to bury bad news. A miscellaneous provisions Bill is a good way to bury bad laws in some cases. I am not necessarily saying that is so in this case. However, it is always unfortunate to have a range of different issues bundled together in one Bill.

Having said that, I welcome Part 3. The provisions providing transfer of assets of certain pension funds to the National Pensions Reserve Fund are welcome. Regarding the university pension funds in particular, as one of the university Senators we had a very useful briefing from representatives of the universities about the provisions of Part 3 which we understand gives statutory form to an implicit State guarantee that already existed. I am grateful to the Irish Federation of University Teachers, IFUT, which also briefed us on the matter. Senator Norris and I attended the IFUT annual general meeting in Trinity College last week during which the matter of the Bill was raised. The provisions of Part 3 are welcome not only as they apply to the pensions of the five old universities but also to certain named non-commercial State bodies.

I want to focus on the provisions of section 17 and the extension of the guarantee that was passed by these two Houses in September. I voted against the Bill that provided for the blanket guarantee because I was wary of the nature of a blanket guarantee extending to cover what the dogs on the street knew to be a range of bad debts in particular banks, notably Anglo Irish Bank. Events have subsequently proved right those of us who were wary and concerned about the prospect of giving a blanket guarantee to all banks, in particular Anglo Irish Bank but also other banks with shabby practices that have since come to light. It would have been very dangerous to give the Minister any open-ended power to extend the period of the guarantee. Although the Bill provides for an extension to the blanket guarantee, I am glad there are oversight mechanisms as stressed by the Minister of State. Notably the Minister must secure the positive approval of both Houses of the Oireachtas were he to extend the term of the scheme. However, I reiterate that I am concerned about the blanket guarantee.

I am not sure whether the Minister of State has ever attended a "Leviathan Political Cabaret". While economics is not usually the subject of light entertainment, the Minister for Transport, Deputy Dempsey, attended the "Leviathan Political Cabaret" last night. It was chaired by David McWilliams who has been one of the economists to argue against the nationalisation of Anglo Irish Bank and for letting it go. Senator Ross has already mentioned the idea of letting go banks that are not of systemic importance. Last night I was very persuaded by David McWilliams's argument that Anglo Irish Bank could have been let go because it is not of systemic importance. I would like to hear the views of the Minister of State on this. The stakeholders in Anglo Irish Bank, the pension funds, would have been covered against losses and the main debtors were, as we now know, a mere handful of large developers. What would have been the risk in letting Anglo Irish Bank go? Why have we simply nationalised the worst of the bad banks? Why do we not instead consider temporary nationalisation of the banks that are of systemic importance to us as ordinary taxpayers?

I thank Senator Bacik for allowing me a few minutes to speak on the Bill. I wish to quote from yesterday's IMF report which stated: "The proposed National Asset Management Agency is potentially the right mechanism to separate the good from the bad assets." The Government is right to think it is moving in the right direction because the IMF also suggested that risk sharing measures be considered on pricing bad loans so that "the taxpayer does not bear a disproportionate burden of the costs cleaning up the banks". It appears to be going in the right direction and the Government can take some credit from that.

I share Senator Bacik's concerns over a Bill with "miscellaneous provisions" in the title. The fundamental problem is that the Government now wants to extend the bank guarantee without performing any investigation into what went wrong with the banks and why. It wants to introduce measures so that such a catastrophe will never happen again. The Government seems to have no long-term strategy in this area. I accept it is taking time to introduce NAMA and perhaps it will do all that. The Government is ploughing ahead with NAMA and yet it has not had that investigation into the banks. How does that read to the international community?

In essence it seems that the banks cannot survive without some support. It may be correct that it was wrong to rescue Anglo Irish Bank. In a recent article in The Irish Times Brian Lucey pointed out the Government seems to have the European Central Bank over a barrel over the threat to the euro and as a result is counting on indefinite support for the Irish banking system. When will the Government address our banking problems head on and admit that perhaps they will need to be nationalised? I would hope that will not be necessary. However, the IMF has suggested that they may need to be nationalised for a few years. That is what I have been hearing from people with decades of real experience in banking. To those of us without the same experience it seems as if we are going all the way to 2012 with half measures so that the stigma of bank nationalisation would be avoided even though that may be the outcome we need to face up to in the end.

We need to address our banking crisis with much more vigour and implement a proper investigation into the banks. That is how we can begin to regain the necessary confidence in banking. I urge the Government to carry out that investigation and state it recognises what went wrong. If it was the fault of the Government of the time, let us admit it. However, let us ensure we regain that confidence as quickly as possible.

The Bill deals with pensions, direct debit mandates, institutions, non-commercial State bodies and the National Pensions Reserve Fund. I cannot let some of the things mentioned by previous speakers go unchallenged. I heard Senator Bacik mention that we should have allowed Anglo Irish Bank to go. Every Member of the House has a responsibility to the taxpayer. We need to make decisions in the best interests of the taxpayer. Once we introduced the guarantee for bank deposits we were committed totally to the taxpayer. On that basis it would have cost the taxpayer €60 billion if we had allowed Anglo Irish Bank to go. The argument to save it is compelling. The IMF agrees that the Government is taking the correct action and that NAMA is the right vehicle to deal with non-performing debt. Of the €90 billion, some €55 billion is performing. This means that NAMA would be financially sound even with a return of 2% interest on the €55 billion. That would ensure NAMA was functioning and not costing the taxpayer. NAMA will look at an investment of between 12 and 15 years and it is reasonable to expect that land prices would have risen substantially over that period. They may not get back to exactly where they were, but they will certainly improve. Some 30% of indebtedness to this country is outside the State, including America, the United Kingdom and Europe. I think we will see an upturn in land banks coming first from America, followed by London as a key mover in terms of land. Europe will probably be third on the list. We do not have all our investment in land at home, which is a good thing. We must examine how we will manage our pension funds. Hopefully, we will deal with them through this legislation and ensure they are properly managed. I would like to see pension funds being invested more in green domestic energy projects. Energy is one of the sectors that we will be dealing with in the coming months. As an important part of the economy, it will make us more efficient and will ensure that a new industry comes on stream for energy alone. The offsprings from that sector could create over 80,000 jobs.

I commend the Bill to the House. It forms an important aspect of the corpus of legislation that has already been introduced and which we are now fine tuning. I am glad to see the insertion of a provision whereby decisions can be made on the Minister's behalf, which is vitally important.

Given that the Leader suggested I do so, I will use this opportunity to raise one issue with the Minister, that is, to discuss the benefits that are supposedly accruing to Irish businesses from their significant investment in our banks. From my point of view and that of the business people with whom I speak regularly, there have been few benefits, if any. We have invested €7 billion in Bank of Ireland and AIB, but one would have expected at this point that some of that money would have found its way down to small Irish businesses in the form of credit. It has not, however, and it is never likely to.

The best method for assessing how the business sector is being supported by our banks is simply to pick up the phone and talk to those involved in small business. I have been doing that regularly in recent weeks. If the Minister was to argue that a sample as small as this would not be an accurate method of gauging the performance of our banks, surely he should have regard for the words of ISME's chief executive, Mark Fielding, who said that 83% of Irish companies are finding it difficult to get credit. Mr. Fielding also said the Government should stop "pussy-footing around" with the banks and force them to free up this badly needed credit. Following the announcement of 460 more job losses yesterday, ISME reiterated its call for the banks to loosen their purse strings and free up credit for Irish businesses.

When I make contact with business people, the news is not good. I have heard nothing but despair, anger and a real sense of disillusionment with the way this Government has handled the banking crisis. Take,for example, the blocklayer I spoke to last Monday. He had not received one request for a quotation from last August until two months ago. To his surprise he then received six requests, mostly from young couples seeking to build their first homes. When he reverted to these couples with a quotation, he found that all six had been refused mortgages by their respective banks.

What about the retailer I spoke to last week who had an overdraft facility of €2,000 with a bank he had done business with for 20 years? He asked the bank to increase the facility to €5,000 so he could trade through the difficult months ahead. He was, of course, refused the facility and now faces the real prospect of closing a business that has been in his family for three generations. Or how about the announcement yesterday by one of the biggest car dealers in this country that it was to cease trading with the loss of 200 jobs? The owners of that company had employed a major accounting consultancy to produce a survival plan that would see the company trading back to profitability within three years. The accountancy firm believed the plan would work. Three different national car distributors with a combined experience of over 60 years in the motor trade, also believed the plan would work and they committed to a continued supply of cars to this dealer. However, our friends in the two major banks took a different view and refused to row in behind what was a credible and laudable effort to save 200 people from the dole queue.

I do not know how the Minister of State or I would expect anything different from our banks. Behind the soft focus TV ads with smiling families, soothing music and assurances that bankers are "on our side", one can see nothing more than the bottom line, the need to profit above all else. I do not believe for a moment that the needs of this State and its workers are foremost in the minds of these banks' board members when they sit down to discuss the future; they most certainly are not. If the Minister of State believes that Government-appointed directors will make any difference in these affairs, he is sadly mistaken. When one becomes a director, one's primary fiduciary duty is to the company itself, not to shareholders or fellow directors and most definitely not to the Irish people.

While our board nominees will be on the inside, they will not be able to report any information back. They will be more than aware of what is going on in the banks' boardrooms, but they will not be able to report it to anyone outside the boardroom, not even the Minister or the Minister or State.

When the Minister for Finance recapitalised our banks he secured a commitment to increase lending capacity to small and medium enterprises. Compliance with this commitment is to be monitored by the Financial Regulator. Will the Financial Regulator report on this commitment and, if so, when? We should already have had the first, comprehensive, in-depth report on the real extent of lending to small Irish businesses. I believe that such a report would not make for pretty reading.

As Mark Fielding said, it is time to stop pussy-footing around. It is time to force the banks to play their role in our nation's recovery. We need comprehensive and regular reporting on the level of banking support for Irish businesses. We also need legislation to allow Government-appointed directors to act in our best interests and to allow them to report directly to the Minister. We need real action and, most certainly, we need it now.

In the dark days of October 2008 the Government response of extending the guarantee to financial institutions was met with a knee-jerk reaction that it was wrong. In retrospect it can be seen as the right approach, not only in the settling effect it had domestically but also in the way it was accepted and built upon in other jurisdictions. Listening to the Bill being debated in the other House, I was saddened to hear some of those shibboleths being maintained as objects of legitimate political debate, and that somehow there is an agenda whereby people are benefiting from decisions that have been made or from how they will be made in future.

This legislation outlines courses of action that need to be followed because alternatives are not available to us. The financial and economic security of the State demands that these approaches be taken. I hope that from now on debates of this nature will deal with the organisation of how this is done, rather than putting across an innuendo-laden approach to our politics, which does none of us any credit.

The guarantee which is now being extended, together with the power now being given to the Minister to extend it further, must be put in place. Those who followed the Irish example of last October went beyond what we originally envisaged in terms of a two-year guarantee. Five-year guarantees are now in place in many jurisdictions. Flexibility needs to be given to any Minister for Finance to reflect on what the international climate allows. The Bill is enabling legislation and deserves sufficient support to allow this to happen.

I listened to Senator Cannon's contribution and there is no doubt that we need to have a continuing debate on the efficacy of Irish financial institutions and where they are going individually.

The due diligence that will be completed on all institutions as a result of future legislation on the National Asset Management Agency will show that some of the smaller institutions have acted in an utterly inappropriate way in the past. The public demand to find out how the situation has come to pass must bring about appropriate action for those who were in charge of those institutions, ultimately through the legal process. Rather than talking about specific individuals and institutions, I will let those matters lie there.

The original criticisms of the introduction of the guarantee mentioned the risk that was involved to the Irish taxpayer being about €400 billion. If every institution was to go belly up immediately, that is the risk that exists. The successful operation of the guarantee to date means that this risk has been put aside. The insurance aspect of the guarantee has been very successful. The fact that it must be paid for by the institutions concerned means there is money coming into the Exchequer to allow the scheme to operate effectively. It has been unfair political and media comment to state that the €400 billion mentioned in October 2008 is money that has already been spent. The problem with this debate is that we have heard figures mentioned left, right and centre that have bamboozled the Irish voter and have no bearing in reality. There have been subsequent actions that caused the State to nationalise Anglo Irish Bank, and we could have a very detailed debate about the efficacy of that particular institution. If framed in the context of the original deposit guarantee that existed before October 2008 and had the bank then gone out of business, the cost to the Irish taxpayer would now be far greater than any sums that have been put into that bank since to provide stability to that institution and to Irish financial services.

In supporting this Bill, I ask for a greater degree of honesty about the debate. We do not have any option as public representatives but to put in place measures that bring about greater stability of our financial services. There are other issues to be dealt with, which relate to the efficacy of individuals and financial institutions, but it requires an approach to legislation like this where we do not engage in the normal cut and thrust, and that we think more clearly about the national interest in the short, medium and long term. On those grounds, I am happy to support this Bill. I have confidence in the reason the legislation is being moved and is necessary and in those who will be enabled by the Bill to act in the national interest. On those grounds, I ask other Senators to think accordingly.

I would not speak with the same degree of financial expertise as some of my colleagues, but I have listened with interest to what has been said. At the very core of this debate is the attitude of the banking industry to its broad base of customers, and in particular the attitude of the banking industry to small business and enterprise. It is quite a few months since we had the all night session in this House, when the Government had to intervene to take emergency action. That was generally supported, and I think the general view of the majority of Members since then has been that we recognise the need to have a sound, secure banking industry in this country. We all deem banks to be a necessary evil, but without them, we cannot have the financial resources which we need to run our economy, so it is very important that we have a sustainable banking industry.

At all levels of society, there is great disappointment among lay people that there does not seem to have been reciprocal goodwill or generosity shown by the financial industry towards citizens working in the small enterprise side of the economy. Every politician comes across shopkeepers, publicans and entrepreneurs whose future is at the gravest possible risk as a result of the lack of finance. We must recognise that there is a particular financial equation in the banking industry and that money cannot be lent left, right and centre. However, there is a serious responsibility on our banks to respond to taxpayers' generosity by being generous in their treatment of customers and in how they look at the short-term funding of small and medium sized enterprises. I know the Minister of State has often heard this in both Houses, but I do not think we can emphasise the need for the Irish banks to respond to what is being done for them.

There are different domestic and international reports doing the rounds on Government economic policy, and we are not the final adjudicators on that. Some say the Government's policy is going in the right direction, while others will be concerned about it. The one part of Government policy that is certainly a failure is the selling to the public of the message that what is being done for the banks is necessary, and that somehow the taxpayer is getting a value for money return. On virtually every current affairs chat show, the argument is being put out that the Government is bailing out the banks but that the banks are not bailing out small industry. That is a very simplistic argument, but the Minister of State has a PR battle on his hands to prove that there is an equality of response from the financial world to what is being given to that sector of society by the taxpayer. The Government will have to redouble its efforts to ensure there is generosity shown by our banks, be it to homeowners or small business people. All the banking guarantees in the world will be of no long-term advantage to this country unless we can keep our economy ticking over at the minimum, and growing in the future.

We must avail of every possible political opportunity to pressurise the banks, which have a moral responsibility now. It is disappointing to see that in some sectors of the banking industry, there is a strutting, arrogant approach to their position. They have easily forgotten where they have come from and the decisions they took which landed the Irish economy in its current mess. We must move on and recognise that we have to work with the banks in order to preserve the economy, but an admission by the banks that they got it very wrong would be a positive step in the right direction. We could do with less of their arrogance and aloofness, and a little bit more of a positive and willing attitude to work with the Government, the taxpayer and enterprise and industry to keep Ireland Limited afloat.

I appeal to the Minister of State and the Government to keep the pressure on our financial institutions to respond generously to Irish taxpayers for what they have done for them. We need a modern, functioning and viable banking industry. Without it, we all go down the tubes. As part of the quid pro quo, it is not unreasonable to expect a little bit more generosity, flexibility and understanding from the financial institutions. We were very understanding towards those institutions last autumn.

I thank the Minister of State, who is a top attender from the Executive in this House on financial Bills and Adjournment debates. This miscellaneous provisions Bill covers a number of areas, including direct debit mandates following the Single Euro Payments Area direct debit scheme. It also includes provisions to transfer the assets of certain pension funds, including UCD, Trinity College Dublin and the Institute of Public Administration, to the National Pension Reserve Fund. The Bill includes a provision to allow the Minister to extend the period in which financial support can be provided under the Credit Institutions (Financial Support) Act. There are also a number of amendments to legislation.

The part of the Bill that has created some queries concerns the Credit Institutions (Financial Support) Act. The Minister signalled that this would be extended on 11 February and during debate on the supplementary budget on 7 April. Even though the Opposition parties derided the Government for its guarantee, questioned every aspect of it and some parties voted against it, it was copied and emulated in many European states. We are obliged to extend the guarantee so that our banks will not be at a disadvantage compared to other European banks. In other financial areas, some Opposition parties consider a crisis a time of opportunity. The Labour Party voted against the withdrawal of medical cards for millionaires, voted against keeping the institutions' depositors safe and voted against the nationalisation of banks. It makes one wonder what socialism is all about in 2009.

As the necessity to access long-term funding was inherent in the capability of the bank guarantee, it has become necessary to extend the time limit. Having done so, the Government has discharged its duty so that our banks will not be at a competitive disadvantage vis-à-vis other European countries. We have had a positive endorsement by the IMF of the steps taken thus far in respect of the banking sector. Every time an Opposition spokesperson comments on the banking sector the starting and finishing points are ground zero, the worst day of the crisis.

As Senator Butler said, there are positive signs about NAMA. One point endorsed by the IMF is that we now realise 30% of the assets are held abroad. We are conscious that the Irish economy may not start growing again until 2011. Up to 30% of assets are held in countries, including the US and the UK, where we can reasonably expect that the assets will show true value, as happened in other states that had similar crises such as Sweden and Indonesia. In such cases, the banking crisis was properly managed and the assets were taken over by those states at the correct rate. There have been damaging Opposition calls that this was done at the behest of Fianna Fáil developers. Where a bank has deposits of over €59 billion, such as Anglo Irish Bank, it is systemic to the economy. One cannot let it go under. It would be tantamount to saying we are no longer open for business. We could forget foreign direct investment and a "for sale" sign might as well go up at ports and airports. It would mean the Irish Government did not attempt to ensure the stability of its banking sector. Not only have we attempted to do so, we have ensured it and we have nationalised Anglo Irish Bank.

This Government prepared the State well during the good times. We had low national debt, the lowest tax wedge in Europe and the NTMA had billions of euro on deposit. Some ask us if we are joking and put it more crudely at times. In the House yesterday, an average comment was referred to as a Mad Hatter's comment. There is no point in being abusive in the House. I refer that to the Opposition Member concerned. It is unacceptable. We have made provision for the future. In 2002 and 2007 Opposition manifestos were in excess of the Government in an attempt to spend more money and tax less. How it can turn around with 20:20 vision and tell us that the Government should have known better when the Opposition did not is beyond me.

I thank all Senators who contributed to the debate. A large number of points were raised on all sides of the House. I will deal with two general points first. Since the emergence of the crisis last autumn, the Minister for Finance has been in this House from time to time. Enormous responsibilities are on his shoulders and it is not practicable that he could be in this House every week. Article 28.4.1 states the Government shall be responsible to Dáil Éireann. There has been a division of labour, whereby the Minister takes most legislation and motions in the Dáil, assisted by me, and I take most legislation and motions in this House, although he comes here from time to time. That is a realistic position.

When I speak on legislation and motions in this House, I set out the full position of the Government, as is done in the Lower House by the Minister. I hope I have access to the distilled wisdom of the Government and the Department of Finance. I have full access to its resources on any topic that may arise but I am speaking with delegated authority from the Minister.

The second general point is that this is a miscellaneous provisions Bill. In all areas of Government it is necessary to group together provisions that are not intimately related. Otherwise, there would be a proliferation of Bills and this would take more parliamentary time. There would be less legislation in terms of content, if not in the number of Bills. The Government is often urged by Opposition Members or Independents to use the opportunity of a particular Bill to insert something else. We do not go as far as the US Congress in the practice known as pork barrelling, where entirely unrelated subjects are tacked onto Bills. A miscellaneous provisions Bill groups in one Bill a number of broad aspects, but they are all related in one way or another to the problem we face.

I confess to being a little disappointed in that, although a major section of the Bill deals with universities which are represented by six elected Members in this House, there was almost no discussion of what is a very beneficial measure relating to university pensions and those of some non-commercial State bodies. Senator Bacik was alone in acknowledging the provision.

Senator Twomey spoke about private sector pensions being decimated. I declare an interest in that my son is employed in the private sector pensions business, but nothing I have to say will be influenced by this. As an employer, the State has an obligation to provide pensions for its employees. The Government is committed to dealing with the increasing cost of public service pensions in the context of its follow-up to the Green Paper. It has been acknowledged recently in regard to private sector pensions that there are very considerable difficulties which have been building since well before the full crisis hit last autumn. The Government has been working since publication of the Green Paper on pensions to bring forward proposals to help the pensions industry. The purpose of the measures introduced in the Social Welfare and Pensions Bill 2009 and the announcement this week of the establishment of a pension insolvency minimum guarantee scheme is to help trustees of pension schemes to respond to the challenge of maintaining the viability of a pension scheme or, where that may prove impossible, to assist them in enhancing the benefits to scheme members in the event of a wind-up. The pension insolvency payment scheme is another initiative taken by the Government, but in view of time constraints, I will not discuss it in detail.

There were a couple of general points made by Senator Twomey. On one side of the equation, he indicated that the bank levy should take effect now, although this is envisaged at a later stage, should it be necessary to do so when we have emerged from our difficulties. Listening to the Senator's contribution, one would be tempted to ask if Fine Gael was suggesting the Government should guarantee all private pension funds. Is it really Fine Gael's position that it is entirely against the introduction of a property tax? It was the Fine Gael and Labour Party coalition Government in the 1980s which introduced the residential property tax.

The Senator also made comments about the health service and implied that we should have introduced something equivalent to the National Health Service in Britain. Naturally, all of these elements would have very considerable cost implications. I am not convinced that the Senator is in any formal sense proposing any of these suggestions, but they are being dangled as alternatives. When in government, Fine Gael's position will not be as hinted by theSenator.

I agree with Senator MacSharry in his comments that if it were not for the current combination of circumstances — as much global as national — things would have been done differently. The pressures were entirely in the opposite direction and the mantra was that the country was awash with money and that the Government should have been doing far more than it actually was. If stamp duty had been lowered even more or abolished, as suggested, it would have made the bubble even worse; it would not have been a cure.

Much of the rest of the debate concerned banking issues. Reference was made to the report of the IMF which has endorsed the steps taken thus far by the Government in the banking sector. It commends our efforts at restoring financial stability through a step-by-step approach, involving the deposit guarantee scheme, recapitalisation and the creation of NAMA. The details of the NAMA legislation will be brought before the Oireachtas and debated in full. It is far more important to get the legislation right than for it to appear this week rather thannext.

The IMF report states that "If well managed, the distressed assets acquired by NAMA over time could produce a recovery value to compensate for the initial fiscal outlays". The Government agrees that the purchase price of assets will be key; that is why time is being taken to establish NAMA which will be using an evaluation formula approved by the European Union. The IMF has indicated that temporary nationalisation could become necessary, but it must be seen as complementary to NAMA. The Government has already nationalised a bank and made it clear that it would only nationalise other banks as a last resort.

Senator Ross raised the legal action taken by Irish Nationwide Building Society. The objectives of NAMA cannot be fully achieved if individual borrowers are allowed to opt out. Legislation will address this and many other detailed issues. It would not be appropriate to comment in the House on legal actions taken by commercial bodies.

Most speakers accepted and supported the decisions of the Government relating to Anglo Irish Bank. There is no serious question that Anglo Irish Bank is and was of systemic importance to the Irish financial system and, in turn, the whole economy. Even if one could argue about this in an intellectual way, the risk of getting it wrong was simply far too great. As Senator Boyle pointed out, if we had got it wrong, the burden on the taxpayer would have been infinitely greater.

There is an analysis of the problems of banks and has been a range of commentaries during the financial crisis, including major international reports such as the Turner and de Larosière reports, because obviously the problem is not confined to Ireland. The Minister for Finance appeared before the Oireachtas joint committee, on which this House is represented, and discussed the Bacon report and the creation of NAMA.

The purpose of the amendments to the Credit Institutions (Financial Support) Act 2008 is precisely to enable banks to access medium-term funding of up to five years. This strengthening of the financial structure of the banks is to enable them to perform their proper role of providing credit in this economy.

A code of conduct for business lending to small and medium sized enterprises was published by the Financial Regulator on 13 February and took effect a month later. This code applies to all regulated banks and building societies and will facilitate access to credit, promote fairness and transparency and ensure banks will assist borrowers in meeting their obligations or otherwise deal with an arrears situation in an orderly and appropriate manner.

The business lending code includes a requirement for banks to offer their business customers annual review meetings, to inform customers of the basis for decisions made and to have written procedures for the proper handling of complaints. Where a customer gets into difficulty, the banks will give the customer reasonable time and seek to agree an approach to resolve problems and provide appropriate advice. This is a statutory code and banks will be required to demonstrate compliance.

As part of the recapitalisation package announced on 11 February, AIB and Bank of Ireland reconfirmed their December commitment to increase lending capacity to small and medium-sized enterprises by 10% and to provide an additional 30% capacity for lending to first-time buyers in 2009. If the mortgage lending is not taken up, then the extra capacity will be available to SMEs.

AIB and Bank of Ireland have committed to public campaigns to promote actively small business lending at competitive rates with increased transparency on the criteria to be met. Compliance with this commitment is being monitored by the Financial Regulator and officials from the Department of Finance are in regular contact with the banks concerned in regard to their progress in implementing these measures.

The Tánaiste and Minister for Enterprise, Trade and Employment recently set up a clearing group, including representatives from the main banks, business interests and State agencies, which is chaired by officials in the Department of Enterprise, Trade and Employment. The purpose of the group is to identify specific patterns of events or cases where the flow of credit to viable businesses appears to be blocked and to seek to identify credit supply solutions. Obviously, any issues or questions should be directed to the Tánaiste.

An independent review of credit availability funded by the banks but managed jointly by the banks, Government and business representatives is under way and will be completed shortly. Among the issues covered by this review will be changes in bank lending repayment terms and a comparison with customer experiences prior to the onset of the financial crisis. This review, along with the quarterly reports of the recapitalised institutions, should give a clear picture regarding the flow of credit in the Irish economy which will inform future policy.

I believe I have answered most of the main points raised.

Question put.
The Seanad divided: Tá, 26; Níl, 15.

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Callely, Ivor.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • de Búrca, Déirdre.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Leyden, Terry.
  • MacSharry, Marc.
  • Norris, David.
  • Ó Domhnaill, Brian.
  • Ó Murchú, Labhrás.
  • O’Brien, Francis.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • Ormonde, Ann.
  • Phelan, Kieran.
  • Walsh, Jim.
  • White, Mary M.
  • Wilson, Diarmuid.


  • Bacik, Ivana.
  • Bradford, Paul.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Cannon, Ciaran.
  • Coffey, Paudie.
  • Cummins, Maurice.
  • Fitzgerald, Frances.
  • Hannigan, Dominic.
  • Healy Eames, Fidelma.
  • McFadden, Nicky.
  • Mullen, Rónán.
  • Ross, Shane.
  • Ryan, Brendan.
  • Twomey, Liam.
Tellers: Tá, Senators Déirdre de Búrca and Diarmuid Wilson; Níl, Senators Maurice Cummins and Liam Twomey.
Question declared carried.

When is it proposed to take Committee Stage?


Agreed to take Committee Stage today.