Seanad Éireann debate -
Thursday, 6 Oct 2011

Vol. 210 No. 11

Adjournment Matters

National Asset Management Agency

Senator Thomas Byrne

I thank the Cathaoirleach for permitting me to raise this matter. I thank him also for allowing me to raise the issue I raised yesterday. I understand he had to apply some pressure to get the appropriate Minister here. We do not have any problem with Deputy Noonan, as he has always made himself available to the Seanad.

I am sure the Minister will not take what I say as an attack on the Government, but I have a serious concern with regard to NAMA. On the record of the Oireachtas committee on finance and on television programmes involving certain developers, the impression has been put abroad — and I think confirmed — that the principle of developers paying back all they owe is not being adhered to by NAMA. What the former Minister, Brian Lenihan, envisaged for NAMA and what he spoke about in legislation was that developers would pay back all of what they owe or that we would do as much as we could to get them to pay back all they owed. That is the basis on which I would have supported NAMA at the time.

At least one developer has publically stated that all he has to pay back is what NAMA paid for his loans. That is concerning on a number of levels because the principle should be that the developer owes what he or she borrowed at the start and that NAMA should be able to make a profit. There is some evidence that NAMA bought loans at a very low value and it has made profits. It is of serious concern if NAMA is only enforcing the lower values of developers' loans. It is not the basis upon which I supported NAMA. The public rightly are annoyed about this because they do not see their mortgages reduced yet developers are on chat shows saying that they only have to pay back what NAMA paid for the loan. They have received a major write-off.

I can see the point of NAMA working with developers but they should do this to achieve the best possible financial return to the State. This is one of the purposes of NAMA in section 10 and section 11 of the Act, which I have mislaid and do not have in front of me. The overriding purpose of NAMA was to achieve the highest possible return to the taxpayer. It is within the power of the Minister to issue guidelines and directions to NAMA and I wonder whether it is appropriate to assuage the public mood and show sympathy to those with mortgages who are not receiving a reduction. It will also be the right thing to ask NAMA to go after these guys. That is what the Legislature intended when it passed the NAMA legislation. It is certainly what the Minister would have asked for although he opposed the legislation at the time. It is absolutely what the Fianna Fáil Party asked for, namely, that these developers be pursued "to the ends of the earth" in the words of the then Minister, Brian Lenihan. We now see developers on television in a relaxed frame of mind, owing a fortune and saying that they will not have to pay back the full amount. In some cases they receive a bonus if they pay back more than what NAMA paid. It is of serious concern. Under the NAMA legislation, the Minister has it in his power to do something about this. If an amendment to the legislation is required, the Minister should consider it and he will receive the full support of the Fianna Fáil Party because this is causing considerable disquiet among my colleagues. It is not what we envisaged.

Minister for Finance (Deputy Michael Noonan)

I thank Senator Byrne for raising this issue. Section 10(2) of the National Asset Management Agency Act provides that NAMA shall obtain the best achievable financial return for the State with regard to its operations. NAMA assures me that it is fully focused on doing just that. The chairman of NAMA recently informed the Joint Committee on Finance, Public Expenditure and Reform that it remains the policy of NAMA to pursue developers for the full amount they owe. A misconception seems to have arisen because the agency's minimum target is to recover what it has paid for the loans, as well as any other moneys advanced as working capital or for development, plus interest on these moneys. This does not mean, however, that NAMA will stop at that threshold. NAMA remains as focused as ever on pursuing each developer for the full amount owed.

Nevertheless, this goal must be rooted in reality and the reality is that a large proportion of the nominal value of the loans purchased will not be recovered. If one looks back at the NAMA business plan published on 30 June 2010, it is clear that full recovery of the nominal value of the total loan book was not envisaged. That is why the loans were purchased at a discount.

Within that reality, NAMA assures me that it is determined to recover everything that can be recovered, in order to generate the best achievable financial return for the State. Where a debtor cannot demonstrate viability or is not co-operating with NAMA, the agency takes enforcement action against the debtor concerned. By end-August 2011, NAMA had approved the appointment of receivers in 84 cases.

The alternative to enforcement is to work with the developer, which may seem unpalatable in many cases. Indeed, the chairman of NAMA recently said that he would love to be able to tell us that the agency could throw out all 850 developers and get someone else to run the businesses. However, he had to point out that while that could be a very popular decision, it would not make commercial sense because, regardless of what they have done, they are the people who know the business. Unfortunately, when NAMA decides to work with developers, developers have to be given some incentive to work with NAMA. Otherwise, they could decide to let NAMA foreclose, with the result of a diminished return for the taxpayer.

The following is an example of how NAMA incentivises a debtor to repay more than the minimum target. Where NAMA has paid €50 million for a debtor's loans which aggregate to €100 million nominal value, NAMA might set a minimum repayment target of €55 million for the debtor. If, by year seven, the debtor reaches that minimum repayment target, an incentive arrangement will apply whereby thereafter, the debtor will be allowed to retain 10% of any excess sum realised. If a total of €60 million is realised, therefore, this is an excess of €5 million over the minimum target and the debtor retains €500,000. In such a case NAMA's profit will be €9.5 million over the amount paid for the debtor's loans. This is an example and different repayment targets will apply to different borrowers depending on the particular circumstances of each case. The key factor in determining what NAMA pays for any debtor's aggregate debt is the current market value of the underlying property securing that debt. Therefore, if NAMA pays €50 million for the loans, as in the example, it is likely that the value of the underlying property is of the same order.

Some may see the incentive scheme as being a cash reward for paying back loans. Unfortunately, if a debtor is not incentivised to exceed a minimum target set by NAMA, the agency believes it will get very little over and above that target. The objective of the incentive is to get the debtor working not so much for himself or herself but for the taxpayer and NAMA. NAMA's overarching objective is to maximise the return to the Irish taxpayer. It assures me that it is determined to achieve that objective as provided for in the NAMA legislation. Introducing amending legislation to deal with this issue would not generate any additional benefit because legislation cannot force payment from a debtor who cannot pay. I conclude by reminding the Senator that if all NAMA debtors were capable of repaying the full amount of their loans, there would be no need for NAMA in the first place.

Senator Thomas Byrne

An international banker is examining NAMA and I urge the Minister to get him or her to consider this issue. Not only are these builders and developers in negative equity, they will be in positive equity if they exceed a certain point. The negative and positive is a mathematical impossibility but the taxpayer will pay for it. The Minister is proposing that a developer will get a bonus of €500,000 after providing a very small amount more than what NAMA sets as the minimum target. I urge the Minister to look at this and change it if possible. I hope that NAMA has set out the rationale and evidence for this. NAMA has said that it is the best way to get money back for the taxpayer but it seems reprehensible to me and it is unsatisfactory to the ordinary taxpayer. Where is the evidence and analysis that shows this? I hope the Minister has such evidence because, otherwise, this has happened on the Minister's watch.

Deputy Michael Noonan

NAMA is independent under the legislation that established it. Senator Byrne tabled a question on the Adjournment and NAMA provided me with the information on the point raised by Senator Byrne. It is not correct to say that NAMA does not try to realise the full amount owed by any debtor. The intention is to get 100% but we know that that is unrealistic in many cases.

Senator Thomas Byrne

We accept that.

Deputy Michael Noonan

NAMA must do its best. It is using market forces to recover as much as it can. The alternative is to appoint receivers, which costs €180 an hour, and there is no incentive other than to run down the business, sell the assets and give whatever is left to the creditors.

An Cathaoirleach

Is the Minister responding to other Adjournment debates?

Deputy Michael Noonan

No, just this one.

Senator Thomas Byrne

It is within the power of the Minister to issue guidelines.

An Cathaoirleach

There is no provision——

Senator Thomas Byrne

I am not giving out to the Minister but I want to make the point that it is within his power to give guidelines and instructions to NAMA in certain cases. I urge him to examine this to see if he can find a way to do it.

Deputy Michael Noonan

I hear what the Senator is saying. There are many unsatisfactory aspects to the situation of the past 12 months.

Senator Thomas Byrne

We never envisaged that.

Deputy Michael Noonan

These are new ways of dealing with unprecedented crises and they must be adjusted in light of experience. We will take the views of the Senator into account.

Vocational Education Committees

Senator David Cullinane

I welcome the Minister to the House. I raise this matter to discuss with the Minister of State the decision to place the headquarters of the new amalgamated Waterford and Wexford VEC in Wexford and not in Waterford city as many people would have hoped for and anticipated. This issue has been in the public domain for some time and Government representatives from Fine Gael and the Labour Party were quite vociferous that proper sustainable planning and proper spatial strategy should be adhered to. As a gateway city, Waterford should have been respected as the best and most appropriate place for the headquarters and administrative centre to be placed.

The decision to place the headquarters in Wexford and not in Waterford was a political decision because a Minister is based in Wexford, and I make no apologies for stating this. It is quite interesting that representatives from Fine Gael who were in Waterford yesterday and today attacked the Labour Party Minister. Is this what we in Waterford and the south-east region will have to put up with for the next number of years? If a health issue arises will Labour Party representatives attack Fine Gael and if an education problem arises will Fine Gael representatives attack the Labour Party? There is collective responsibility for what happened and for Government decisions but we have this hand washing and Pontius Pilate-like attempt by Fine Gael to remove itself from what was a political decision.

Yesterday, a spokesperson from the Department of Education and Skills stated the criteria — these famous criteria about which we are now being told — had to take into account issues such as: the distance employees had to travel; the availability of accommodation; the number of schools and education facilities in the area; and the budgets of the VECs. I do not know who evaluated the criteria but I wonder whether these individuals had any idea of the geography of the south-east region. If anybody believes placing the administrative centre in Wexford was the best decision geographically and in terms of people having to travel, they failed to look at the map and realise people who must travel from west Waterford and Waterford city will have to travel the longest distance. Anyone who has to travel must travel the longest distance. It would have made perfect sense for the centre to be located in Waterford.

In recent weeks, many Ministers came to Waterford on the back of job losses and spoke about the pain which Waterford is experiencing at present. They sympathised and empathised and spoke about enterprise agencies and other Departments and agencies which were failing Waterford and the south east. However, the Government made a political decision which is a clear slap in the face to the people of Waterford and Waterford city and goes against the national development plan and the national spatial strategy. Why on earth is Waterford a gateway city if it will not be given the tools? Why does the Government continue with the policy of the previous Government of making political decisions? All I can say is that it learned well from the previous Government. We had it with the previous Government and herewe go again. Political decisions are being made which are not based on sound principles,sustainable planning or regional development but on where a Minister of the day resides. This is wrong.

It is also wrong for the Government to cry crocodile tears for Waterford and speak about our problems and empathise, when it has proven itself to be part of the problem and not part of the solution. It is not only me who states this. Members of Fine Gael in Waterford, the local Fine Gael councillors and the two Fine Gael Deputies from the constituency have been very vocal on this matter. The Government representatives and the Fine Gael representatives cannot wash their hands of this and simply point the finger at the Labour Party, no more than the Labour Party can point the finger at the Fine Gael representatives in respect of hospital closures or ward closures. There is collective responsibility and it is about time the Government did what it said it would do and depart from the old way of making political decisions based on parish pump parochial politics and start making the right decisions for the people of the country. With this decision the Government has let down the people of Waterford and the south-east region. This is about sustainable and balanced regional development.

Minister of State at the Department of Education and Skills (Deputy Ciarán Cannon)

I am taking this Adjournment matter on behalf of my colleague, the Minister for Education and Skills, Deputy Ruairí Quinn.

I welcome this opportunity to outline to the House the rationale for the decision taken by the Minister earlier this week to locate the headquarters of the newly-amalgamated county and city of Waterford and Wexford VECs in Wexford with sub-offices in Waterford and Dungarvan.

In January this year the Department invited submissions from all of the existing VECs on possible headquarters locations when the mergers took place. In responses received, no existing VEC was prepared to suggest a headquarters location other than in its own locality. Some did suggest there should be a headquarters in one location and a sub-office in the other. However, any VEC making such a proposal did not suggest the sub-office might be in its locality. All VECs which made further submissions subsequent to the decision on the revised configuration decided by the Government in June continued in similar vein.

In January, to facilitate submissions the Department gave the following guidance to VECs on the selection of the headquarters locations:

While a number of considerations may come into play a fundamental requirement will be the need to ensure that the location of a VEC headquarters will, to the greatest extent possible, facilitate the distance requirements under which staff to be redeployed to that location can be redeployed under a redeployment scheme, allied to the need to operate at lowest cost having regard to the accommodation available in existing locations.

These key criteria on redeployment and cost-effective accommodation solutions continued to be dominant in considering the locations that were finally determined by the Minister this week. However, as the commercial property market is likely to remain weak for the foreseeable future the likelihood of achieving savings that might defray any costs incurred in consolidating into one single headquarters have become less significant for the short to medium term.

In terms of redeployment, the distance between Waterford city and Wexford exceeds the45 km distance agreed under the Croke Park agreement on mandatory redeployment. This will preclude redeployment of staff currently employed in Wexford to either Waterford orDungarvan. Consequently at least one sub-office would be required.

In determining Wexford as a headquarters location the Minister therefore took into account the following additional factors. The 2011 budget for County Wexford VEC is €34.3 million, which will increase given the opening of the first post-primary school in Gorey on 1 September. In contrast, the combined budgets of Waterford city and county VECs for 2011 is €32.61 million. County Wexford has eight VEC post-primary schools, while the two Waterford areas combined have four post-primary schools as well as the college of further education in Waterford city. An assessment of the enrolment of these schools and college indicates approximately 2,860 students are within the County Wexford VEC operations, in comparison to approximately 2,640 within the operations of Waterford city and county VECs. County Wexford VEC is also a joint trustee of two additional schools which cater for more than 2,050 additional students.

According to the 2011 census data, 145,273 people are resident in County Wexford, compared with 113,707 people resident in County Waterford, comprising 46,747 in Waterford city and 66,960 in Waterford county. In addition to this, Wexford saw a population increase of 10.3% between 2006 and 2011, while Waterford saw an increase of 5.3%.

The Minister has decided to maintain sub-offices in both Waterford city and Dungarvan. I thank the Senator for affording me the opportunity to respond to the House on this matter.

Senator David Cullinane

The Minister of State spoke about potential redeployment from Wexford to Waterford and the criteria with regard to 45 km, but what about redeploying people from Waterford to Wexford? As the same criteria could apply, this is a red herring. The spokesperson for the Department stated the final choice was between Dungarvan and Wexford town. Waterford city was not even considered despite the fact that it is a gateway city and the administrative commercial capital of the south-east region. When will the Government learn that if we do not build up Waterford city as the capital of the south-east region, the south-east region will continue to underperform. If Waterford city performs well the region performs well.

Deputy Ciarán Cannon

The redeployment issue has been covered with the decision to retain two sub-offices in Waterford and Dungarvan. It is important to note that during the process whereby the VEC headquarters were decided, a number of decisions nationwide came down to a knife's edge and little separated a number of locations as to which would be the eventual headquarters. In this instance, the decision was taken to locate the office in County Wexford. Those factors to which I alluded played into the process. It is important that we acknowledge that this was the best decision for the region and that we move on and allow the amalgamation to occur, as that amalgamation will better serve those who avail of VEC services across the nation.

There is no reason to revisit any of these decisions. They have been taken and we will move on.

Juvenile Offenders

Senator Ivana Bacik

I thank the Minister of State, Deputy Cannon, for attending. The Minister for Justice and Equality, Deputy Shatter, is detained in Geneva dealing with the UN periodic review.

Ireland has been criticised for our continued practice of detaining children in St. Patrick's Institution, a medium security prison dating back to 1850 on the Mountjoy Prison complex. It has long been officially designated as unfit for the accommodation of children. The Government's commitment is to close the prison to 16-17 year olds and end the practice of detaining children there with immediate effect. However, events in Geneva today show that Ireland continues to be criticised for detaining children in the institution.

I am grateful to the Irish Penal Reform Trust, IPRT, for forwarding me figures. On 10 December 2010, 38 boys aged 16 and 17 years were in the institution. In 2009, a total of 227 boys aged 16 and 17 years were committed to the institution. It is an institution where male offenders between the ages of 16 and 21 years are detained. Boys and girls under 16 years of age are detained in the children detention schools, but boys over the age of 16 years continue to be detained in St. Patrick's Institution. The Ombudsman for Children, the Children's Rights Alliance and the IPRT have consistently called for an immediate end to the detention of children in the institution. The UN Committee on the Rights of the Child, the European Committee for the Prevention of Torture and, recently, Thomas Hammerberg, the Council of Europe's Commissioner for Human Rights have all called for an end to this practice.

In answer to previous questions and in light of the commitment in the programme for Government, the Minister has stated that he intends to move boys aged 16 to 17 years to a new building at the Oberstown detention school in Lusk. My concern and that of Deputies who raised this matter in the Dáil is that the Minister has given no timeframe for the closure of St. Patrick's Institution to children and for the removal of the children to Lusk.

In light of the commitment to move children to Lusk and the lack of a timeframe, Commissioner Hammerberg recommends in his report that the authorities should start phasing out St. Patrick's Institution immediately for children by moving a pilot group to Lusk and by integrating that experience into the planning process for the enhancement of the detention schools.

Will the Minister of State cite a specific date by which the unacceptable detention of children in St. Patrick's Institution will end? If there is to be a further delay, will he outline a timeframe? In the short term, will the children who continue to be detained in the institution be given access to the complaints mechanism of the Ombudsman for Children? Paragraph 9 of the Commissioner's report was highly critical of the fact that children detained in St. Patrick's Institution, unlike the children in detention schools, do not have access to the Ombudsman for Children, which means they cannot raise complaints about specific aspects of their detention.

St. Patrick's Institution is regarded as being wholly inappropriate for children because of its regime and the facts that children spend much of the day locked up and have family visits screened. There are uniformed officers and Victorian prison architecture. A large proportion of these children are held in protection due to fears for their safety. The widespread availability of drugs within the establishment and the high levels of bullying and inter-prisoner violence have been cited as reasons for not detaining children in the institution.

In the course of my criminal justice work, I have met children who were detained in the institution. They recounted appalling stories about the treatment they endured there.

Deputy Ciarán Cannon

I thank the Senator for raising this matter on the Adjournment. I am speaking on behalf of the Minister for Justice and Equality, who is unable to be present due to other business.

Responsibility for the development and provision of safe and secure accommodation for all children ordered to be detained by the courts rests with the Irish Youth Justice Service, IYJS. This service will shortly transfer from the Minister for Justice and Equality to the Minister for Children and Youth Affairs. The Children Act 2001, as amended, requires that children being detained in respect of criminal matters be detained in a children detention school as described in Part 10 of the Act. The commencement of the detention provisions of the Act in March 2007 brought a transition provision, section 156A, into effect allowing for the temporary use of St. Patrick's Institution to accommodate 16 and 17 year old males. It is the Government's intention that this practice will end when accommodation is available in the children detention schools in Oberstown, County Dublin.

Design work for the project to develop the additional capacity required to transfer the 16 and 17 year old age group currently housed in St. Patrick's Institution from the Irish Prison Service to Oberstown is well under way and planning approval is in place. It is intended that the project be delivered in phases to ensure the continued operation of the existing detention schools until such time as the new facilities are available. The steering committee has signed off on concept and sketch designs and the OPW design team is finalising the preparation of detailed specifications and tender documentation for the project. However, Government approval is required before tendering for the construction stage of the project. This decision will be made in the context of the review of capital projects under way across all Departments.

The Minister is of the view that all children in detention have right of access to an independent complaints mechanism. The Ombudsman for Children may receive individual complaints from children in each of the three children detention schools in Oberstown. St. Patrick's Institution accommodates young persons up to 21 years of age. The Ombudsman for Children does not have a statutory function relating to the inspection or investigation of complaints in St. Patrick's Institution. The statutory powers of inspecting prison institutions and hearing prisoners' complaints are vested in the Inspector of Prisons and Places of Detention and the prison visiting committees. The inspector makes announced and unannounced visits to all prisons, including St. Patrick's Institution, throughout the year. He has shown a particular interest in juvenile prison systems and has published inspection standards for juvenile offenders in St. Patrick's Institution as a supplement to his general inspection standards.

A commitment in the programme for Government "to end the practice of sending children to St. Patrick's Institution" will be achieved by carrying out the necessary redevelopment of the Oberstown detention school campus, subject to the necessary financial approval from the Government. By its nature, this project will take a number of years to complete. When this has been achieved, all children in detention will be in custody in Oberstown and will come under the remit of the Ombudsman for Children.

The Minister points out that there are ongoing contacts between the Irish Prison Service and the IYJS on the exchange of best practices for addressing the needs of the 16 and 17 year olds currently detained in St. Patrick's Institution. Senior managers of the institution have visited the Oberstown campus several times, most recently in September, and further information exchange visits are planned between the two institutions. As far as is practicable, the 16 and 17 year olds are kept in a separate wing of the institution with single-room accommodation.

The Minister is fully aware of the importance of this issue. He notes that it is not possible to make any announcement on the Oberstown project at this time, as to do so would prejudge the outcome of the current Government review of capital expenditure. The commitment in the programme for Government will be met at the earliest possible opportunity.

Senator Ivana Bacik

I am disappointed but not surprised by the response. The Minister of State does not have responsibility for this matter, but will he confirm whether the projected completion date for the new facility is mid-2013, as stated by the then Department of Justice, Equality and Law Reform in December 2009?

Deputy Ciarán Cannon

The only commitment that I can give on behalf of the Minister is that the one contained in the programme for Government will be honoured in the context of the financial projections being worked on by the Government. To make any commitment on a timeline would prejudge the outcome of the capital expenditure review. I undertake to pass the Senator's serious concerns directly on to the Minister.

The Seanad adjourned at 2.30 p.m. until 2.30 p.m. on Tuesday, 11 October 2011.