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Seanad Éireann debate -
Thursday, 17 Jul 2014

Vol. 233 No. 6

National Treasury Management Agency (Amendment) Bill 2014: Committee and Remaining Stages

I welcome the Minister of State, Deputy Simon Harris, to the House and extend my congratulations to him on his appointment.

Sections 1 to 7, inclusive, agreed to.
SECTION 8

Amendments Nos. 1 to 4, inclusive, are related and may be discussed together, by agreement. Is that agreed? Agreed.

I move amendment No. 1:

In page 11, line 22, after “has” to insert “appropriate qualifications and”.

I welcome the Minister of State, who hit the ground running the other day, as the phrase has it. What he is trying to do in this Bill is most important in that we are trying to set up a new institutional framework to repair what happened to us in the past. It has to be a new beginning and he certainly has my support in that regard. If the amendments are of assistance, that is fine, as we discussed earlier with the Minister, Deputy Noonan.

The amendments concern “appropriate qualifications". With regard to the exercising of functions which were heretofore within the Department of Finance, the Wright report at page 6 states that the Department: does not have critical mass in areas where technical economic skills are required; has too many generalists in positions requiring technical economic and other skills; is more numbers driven, than strategic; does not have sufficient engagement with the broader economic community in Ireland; often operates in silos, with limited information sharing; is poorly structured in a number of areas, including at the senior management level; and is poor on human resources management.

Later, he complained that, of 542 staff, just 39 had qualifications in economics at masters level or above.

He compared us unfavourably with Canada, where the rate for those with such qualifications is approximately 60%.

This is a new and important task, for which we need the human capital. That is the reason the amendments have been brought forward. The NTMA needs this expertise, particularly in view of what Mr. Bob Wright said in the report about how these decisions had been made previously. The context, as we said on Second Stage, was that we remove from a very high debt-to-GDP ratio what the banks had cost us. As not much of it is represented by the current budget deficit, it leaves the balance in the area of capital investment appraisal, which is what the NTMA sets out to do. It is important for everybody that the agency succeed and has the human capital it needs to succeed. We need higher level qualifications which traditionally were not present in much of the work done in this area.

I thank the Senator for bringing forward his amendments. On the first amendment, I appreciate that he is concerned to ensure members of the agency are well qualified and suitable for appointment. I assure him the Minister for Finance shares that concern. It is because we share that concern that we have included a detailed list setting out relevant areas in which potential appointees must have expertise and experience at a senior level. However, I must put it to the House that we cannot be overly prescriptive because if we take, for example, the area of investment - the first area of expertise mentioned - we are likely to find that there are perfectly suitable candidates who came to it with a background in engineering, mathematics or the liberal arts. We should not, therefore, be too prescriptive in legislation in this regard. We are clear on the expertise we need, but our concern is that the Senator's amendment would be overly prescriptive.

The Senator also proposed reducing the requirement for expertise in "economics and economic development" to "economics". I am not persuaded by this proposal. I can envisage a situation where a person could have a useful background, not necessarily in conventional economics but perhaps in working with a development bank at a senior level. That individual might have first hand experience of investment and working with developing economies which could be very useful to the Ireland Strategic Investment Fund, ISIF, in terms of investment strategies. Again, a person with that background would have to have expertise and experience at a senior level.

In regard to the proposal to expand the phrase "corporate finance" to "corporate finance and appraisal", I do not see how this would add to the area of expertise. If we are looking at someone with expertise and experience at a senior level in corporate finance, I would be very surprised to find that that person did not have expertise in appraising the finances of a corporate body or its activities.

The Senator's rationale in moving the amendments is that he does not want senior civil servants to be eligible for membership of the agency. That would unnecessarily exclude potential worthwhile appointees. The provision is wider than departmental civil servants, being civil servants of the State, and includes persons working in other organisations such as a utility or energy regulator. It is important to note that the Civil Service is much more open than it was and we see people being recruited at all levels, right up to Secretary General level, from outside the Civil Service. Therefore, if we look at the roles of the agency, it could well be that a civil servant, whatever his or her career background is, who has particular expertise in an area such as public capital projects would be a very good fit for the ISIF which has the potential to invest in public infrastructural projects just as much as it does in SMEs, provided the investment is on a commercial basis. I am satisfied that the provisions within the legislation cover the qualifications required to be a member of the agency. The provisions are reasonable and should remain as they are. I respect the Senator's view, but that is my rationale for not accepting the amendments.

We must do things differently. Mr. Bob Wright referred to problems such as people operating in silos and projects not being properly examined, leaving us with a project that did not generate a return, with the debt incurred mounting up all the time. There must be a radical change. I was pleased to hear what the Minister of State had to say because we cannot have a repeat of what happened in the past. For years, the public capital programme was just a wishlist, with nothing being available on the economics to indicate why one project was a better investment than another. We are all aware of areas where that was the case. For example, engineers dominated in many infrastructural projects and this accounts for many of the difficulties the country faces.

The lack of expertise in economics was noted in the Wright report. I hope we can get the number up in that regard to compare with Canada which had neither a banking nor a public finances crisis. Some 60% of Treasury staff in Ottawa are qualified to Masters level and above in economics; perhaps that is not a bad idea. I am nervous about promoting from silos and people not keeping up with fast developing subjects. The Minister of State mentioned liberal arts graduates. I am nervous about the culture of generalists in the public service. It served us well in the past, but the country collapsed in 2007-08, which is why we are looking for something new.

I am pleased with the discussion, but it is a major issue for the Minister for Finance, the Minister for Public Expenditure and Reform and the Minister of State that the standard of presentation of the public capital programme heretofore would not satisfy a second year undergraduate. There are further concerns. Recently the Institute of Public Administration which was publishing a book on expenditure appraisals asked me to include an article in it. I said the article had whiskers on it and asked if there was anything more modern that could be included, but there was not. If we spent a fraction of the budget on appraising and publishing it in advance to have it assessed by Ministers, the Houses and independent economists, this would be a significant improvement. That is the culture from which I presume the Bill is trying to move away and it is in that spirit that the amendments have been proposed.

My concern is that people will say the Bill passed through the Seanad on the second last day of the session and that nothing needed to be changed. A lot needs to change. I am delighted that the Minister of State who is in office for just a couple of days is here to promote it. We must do better than we did in the past and this is part of the reform agenda. Reform is happening, but perhaps it might have been done on the first day of this Seanad three years ago. I will not push the amendments, but economics is a serious subject. Mr. Wright found that only 39 out of 582 working in NAMA were qualified at Masters level. This is about large amounts of public money. We cannot depend on wishlists in the hope that it will all work out well on the day. This is about part of an economy that had to be rescued by the IMF. That is the spirit in which the amendments have been brought forward.

I thank the Minister of State for his response to Senator Sean D. Barrett's comprehensive amendments. I understand from where the Senator is coming. He has been critical, particularly of the Department of Finance, about what went on in some areas during the years the economy collapsed and beforehand. However, it is important to recognise that the NTMA was set up in response to some of these concerns and that it has proved to be a responsive State agency. I do not believe the difficulty arises in the evaluation of projects but in turning the train around. Too often in the past, it has been impossible to move, derail or turn the train in any other direction. We must acknowledge that there has been a significant change of culture in the public service in the past few years. There has been an important change in values within the Civil Service and the wider public service. We have made significant progress.

Like Senator Aideen Hayden, I understand from where Senator Sean D. Barrett is coming on this issue. He has been championing the cause of the need for reform of how we do business in this country and how the public services operate. The point made by Senator Aideen Hayden is one I wish to reiterate in the first days in my new position.

I have just come from the OPW's head office in Trim and I noted the level of change in management there in what must be acknowledged as an extremely difficult environment for public servants. We have had a discourse in which the public sector has been pitted against the private sector. There has been significant change, but a great deal more change is needed. I acknowledge that the reform agenda is far from finished. Public procurement, which is my new area of responsibility, is an exciting area in which we must seek to get value for the taxpayer in public projects. It is important to note that we have a Department with responsibility not only for public expenditure but for reform. The job of reform is never done, but I do not believe the way to do it is through these amendments.

In the context of these amendments, we discussed the issue of qualifications and, in particular, the qualifications of people within the Department of Finance. It is important to note that for the past few years it has been recruiting on the basis of qualifications for which there is a perceived need in the Department. Even in times of a moratorium on recruitment, when numbers in the public sector are decreasing, it is important to note that the Department of Finance has tried to recruit in the areas of economics, finance and accounting, and I am sure this is a policy that will bear fruit in the culture within our Departments.

Senator Barrett also raised the issue of appraisal of public expenditure projects. Obviously, the Department of Public Expenditure and Reform is responsible for this.

I will read into the record the official points that must be gone through. Prior to approval in principle of public projects, a cost benefit analysis should be submitted to the Department of Public Expenditure and Reform for its views. In particular, the central expenditure evaluation unit will provide an assessment of the robustness of the appraisal based on compliance with the principles and methodological norms of the public spending code.

I accept the sentiment expressed by Senator Hayden that a significant amount of reform has taken place in our public services in very difficult circumstances. The purpose of this Bill is to make sure we have people with the right qualifications, background and experience in the agency, but we do not wish to be overly prescriptive for the reasons I outlined.

Senator Barrett, is the amendment being pressed?

I thank the Minister of State for his response. I would point to two words beginning with A, "analysis" rather than "advocacy". A great number of the project appraisals I have looked at have been prepared by the promoters. I am glad the Minister of State has put in that extra layer. They may be good, but let us not give them a free run at the Exchequer. Just because somebody in a spending agency would like to spend more does not necessarily mean it is always good to do so. I thank the Minister for his reply. I will not move the remainder of those amendments. The discussion we have had has been useful in the context in which this development is taking place.

Amendment, by leave, withdrawn.
Amendments Nos. 2 to 4, inclusive, not moved.
Section 8 agreed to.
Sections 9 to 18, inclusive, agreed to.
SECTION 19
Amendment No. 5 not moved.

I move amendment No. 6:

In page 26, to delete lines 21 to 26.

I will be brief in my comments. This amendment deals with some of the main concerns we have with the legislation. The NTMA should not be used as an adviser on how to get rid of State assets. It is doing a good job at what it currently does. The paragraph that we propose to delete has the potential to turn it into a facilitator for the selling of State assets. This amendment would rule out that role for the NTMA. It should not be used for that function.

I thank Senator Reilly for her amendment. In response I would point out that it is important to note that NewERA does not have any executive functions in its own right. It is being established in an advisory capacity as a source of dedicated, corporate finance expertise which will be available to relevant Ministers. The Minister can request NewERA to provide project management services or to oversee the acquisition or disposal of an interest in or assets of a designated body or any winding up, reorganisation or restructuring of a designated body. Ministers will continue to be accountable to the Oireachtas in the normal way for the performance of their executive functions. That is where I would disagree with the Senator on the need for this amendment, because this is not conferring executive powers on NewERA; it is merely establishing NewERA to carry out the important role of providing advice. The policy and executive decisions remain very much with the Minister.

With respect to the disposal of an interest in a designated body, the commercial semi-states are all established under legislation in a variety of ways and they have statutory functions and obligations. There is no one simple answer to the question of whether a Minister could dispose of an interest in a commercial semi-State body. I will give the House a few examples. The State companies generally have legislation permitting the disposal of assets or shares in certain subsidiaries, subject to ministerial consent. The ESB, for or example, has been able to sell individual power generation assets without the need for additional primary legislation. The sale of Bord Gáis Energy, however, required primary legislation because the business we sold - namely, the supply of gas - was a statutory function of Bod Gáis. In regard to Bord na Móna, section 16(3) of the Turf Development Act 1998 provides that the Minister for Public Expenditure and Reform "shall not, unless authorised by Dáil Éireann by resolution to do so, reduce his or her holding of shares to less than a majority of the issued shares". There is a clear obligation in that instance for the Minister to seek the authorisation of the Dáil. Given that the commercial semi-State bodies on which NewERA will advise are all established under statute, it is very difficult to imagine a situation in which any of the designated bodies could be sold without amending the underpinning legislation. A critical point here is that a potential buyer would inevitably seek legal certainty before committing to acquiring a designated entity.

I must emphasise the point that while Ministers may request that NewERA provide property management services or oversight in relation to the disposal of an interest in a designated body, NewERA cannot do so in its own right, and a Minister can ask NewERA to do only things that he or she has power to do already. Ministers will remain accountable to the Oireachtas and will need to bring required legislation through the Oireachtas and justify it there in the normal parliamentary way.

The effect of this amendment, ironically, would be to take away from the Minister the possibility of seeking further expert advice from NewERA where it is proposed to acquire or dispose of an interest in a commercial semi-State body or to wind up, restructure or reorganise a semi-State body. Without this provisions Ministers would ask their Departments to look after the proposed acquisition or disposal in the normal way. They might even hire consultants to do so. This provision means that Ministers will be able to draw on the expertise of a dedicated public service entity instead. That seems to be a good thing.

Following on from the exchange I had with Senator Barrett on the need to broaden the pool of advice and to be able draw on new expertise, in that sense, the addition of NewERA as an advisory body to a Minister when he or she is considering any of these issues is, in my view and the view of the Minister for Finance, a good thing, and for that reason I will not be accepting the amendment.

Senator Reilly, is the amendment being pressed?

Amendment, by leave, withdrawn.
Section 19 agreed to.
SECTION 20

Amendments Nos. 7, 8 and 16 are related and may be discussed together by agreement. Is that agreed? Agreed.

I move amendment No. 7:

In page 27, between lines 21 and 22, to insert the following:

"(c) any expenditure under the Public Capital Programme.".

This is an enabling section. It provides that "[t]he Agency may [provide, at] the request of any Minister of the Government ... advisory services or project management services". Would it be of use to the Minister if we were to add in the words "any expenditure under the public capital programme"? It might do so informally anyway; it might have acquired such a reputation for expertise that people might say, "Let us give these people a call; they have a useful contribution to make." It would not tie any Minister's hands, but if we are building up the expertise, let us use it comprehensively, rather than just in specific areas. We use to boast that our public capital programme was about twice the size of any other such programme the European Union. Perhaps they knew something more about it than we did in that they decided to do much less of it, but that is an aside. Is this proposal of use in the working of the new agency? Is it of use to the Minister and his Government colleagues that the agency can provide this kind of advice and project management services?

I thank Senator Barrett for his amendments. I think it is actually quite a big jump to add in expenditure under the public capital programme and I will outline the reasons for saying that. NewERA has been set up to provide financial and commercial advice to shareholding Ministers on designated bodies and also, at the request of other relevant Ministers, advice in relation to other State bodies that have not been designated.

Amendment No. 7 would allow Ministers to request NewERA to provide advisory services or project management on expenditure under the public capital programme. I have a basic reservation about this proposed amendment. We have defined - I refer to my exchange with Senator Reilly - NewERA's primary role as an adviser to Ministers on commercial semi-State companies. We further built upon that to say that NewERA can provide project management or oversight in relation to acquisitions and disposals of State assets and winding up and restructuring of State bodies generally where a Minister has an interest. However, it is a big jump to extend the remit beyond that to advise and project manage in relation to the public capital programme generally. We have already done something like this with the National Development Finance Agency. As Senators will be aware, the NDFA procures public private partnerships on behalf of the Exchequer and provides financial and risk advice on capital expenditure projects in excess of €20 million. Its remit was extended further in 2013 to allow it to procure schools directly from the Department of Education and Skills, because it was realised that additional resources were needed to ensure that the extensive programme of school building was delivered successfully. We can redirect resources when needed, but we would not be inclined to do so unless we felt there was an immediate need.

In respect of amendment No. 8, in the name of Senator Barrett, it goes without saying that one of the foundation stones for NewERA is improving the rate of return on public investment. That is why we want to bring together this expertise and that is the reason we want to have an option for Ministers to engage and seek advice from such expertise. Senator Barrett proposes to insert the phrase "improving the rate of return on public investment" in section 22. While we may not have used that precise formula of words, I think it is clear from section 19, which defines NewERA's core advisory role, that it refers to NewERA advising on the "financial and commercial operation, including the rate of return on capital expected for the designated body and the appropriate dividend policy for the designated body".

Subsection 4 requires the agency to have regard to the objective of seeking the effective and efficient application of capital by the designated body taken as a whole. I think it is fair to say that improving the rate of return on public investment is part of what NewERA is about and I feel it is adequately addressed in those sections.

Turning to amendment No. 16, we are carrying over the NDFA provisions from the NDFA Acts 2002 and 2007, adjusted to take account of the dissolution of the NDFA board and the fact that the NTMA will be taking over the NDFA function directly. The role of the NDFA is to provide a financial advisory service to State authorities in respect of capital projects over a certain size, at present €20 million. The third Schedule to the Bill lists the State authorities to which the agency in its NDFA role provides advice and financing on public investment projects. The list is quite extensive, covering Departments, local authorities, colleges, transport bodies and harbour authorities - in short, the public bodies that one would expect to have significant capital expenditure. This list is carried over directly from the National Development Finance Agency Act 2002 and section 29 of the Bill provides that the list of bodies can be added to by order of the Minister for Public Expenditure and Reform. Given that the NDFA provides advice on projects costing more than €20 million, it does not seem necessary to extend the list of bodies to include any public body that has money to spend under the public capital programme. It is a straightforward procedure to add bodies to the list and the Department of Public Expenditure and Reform is vigilant in ensuring that public bodies have access to the financial expertise of the NDFA where appropriate. Therefore I feel it is adequately addressed in that Schedule, and I do not propose to accept these amendments.

I have rather held back on getting involved in these amendments as Senator Barrett is such an expert in this area. I wish to add my support for his amendments. The term "the agency may on the request of any Minister" is worthy of consideration. I am not suggesting it will happen now, but I think it is something that should be open for consideration in the future. I know the Minister has explained that the bodies can do that anyway, but it would appear that this is worthy of consideration at some point in the future in whatever manner we can do it.

I thank the Minister for his response. I will not be pressing these amendments.

Amendment, by leave, withdrawn.
Section 20 agreed to.
Section 21 agreed to.
Amendment No. 8 not moved.
Section 22 agreed to.
Sections 23 to 25, inclusive, agreed to.
SECTION 26

Amendment No. 9 is in the name of Senator Barrett. Amendments Nos. 9 to 11, inclusive, are related and may be discussed together by agreement.

I move amendment No. 9:

In page 29, line 18, after “to” to insert “or from”.

This refers to the functions of the agency to enter into a public private partnership arrangement with a view to transferring the rights and obligations under such an arrangement to any State authority. I wondered if the Minister would on occasion need to go in the opposite direction. At present, what is proposed is a one-way street. Should the Minister wish to exit or reduce such an arrangement, he will need flexibility, and providing that flexibility in the operation of this section is the purpose of my amendment.

Section 26 of the Bill replicates the provision of the Acts under which the NDFA operates. It is important to say that we are not seeking to assign any new functions to the NDFA; we are seeking simply to transfer the NDFA's functions to the NTMA. Section 26 (c) provides that the NDFA may enter into PPPs on behalf of a State authority and transfer the rights and obligations under the contract to the State authority once the PPP arrangement has been put in place. In simple terms, the NDFA is a centre of excellence working with relevant State authorities to put PPP commercial contracts together in a standardised and consistent way before they are handed back to the State authorities. The contracts will then be administered directly by the State authorities rather than the NDFA on the authorities' behalf. PPP arrangements do not contemplate the transfer by a State authority of its rights and obligations under a PPP to a third party, and this makes the amendment proposed to this subsection unnecessary. Section 26(d) provides that the NDFA may act as an agent of a State authority in entering into a PPP contract. The contract for the PPP will include provisions for exit from or termination of the PPP, and therefore we find it unnecessary to make such specific provision in legislation.

Amendment, by leave, withdrawn.
Amendments Nos. 10 and 11 not moved.

Amendment No. 12 is in the name of Senator Barrett. Amendments Nos. 12 and 13 are related and may be discussed together by agreement.

I move amendment No. 12:

In page 29, line 27, after “Reform” to insert “and the Comptroller and Auditor General”.

In performing its functions under this Part, the agency shall comply with all guidelines and instructions that the Minister for Public Expenditure and Reform may from time to time, with the consent of the Minister, issue to the agency. That is the body of expertise, as the Minister has said, that we are building up. We wished we had more of it in the past. There is also a body of expertise on projects in the Office of the Comptroller and Auditor General, and the Comptroller and Auditor General is an officer under the Constitution. I often feel it is a pity that his reports are so far after the event, so that his expertise does not help us in advance of project selection. Sometimes I feel the reports gather dust. If there are lessons in there, which are added to by the Committee of Public Accounts, let us bring all of that wisdom to assist the Minister in making difficult choices. We are facing scarce resources for a long time ahead.

The purpose of this amendment is to avail of the expertise in addition to the departmental knowledge that the Minister has mentioned. There is the body of knowledge represented by the Comptroller and Auditor General, which is what the Committee of Public Accounts gets to grips with. As Members of the Oireachtas and representatives of the wider society, we all need to be involved in this. We need to help the Minister in the really important task of choosing good projects in the years ahead.

I thank Senator Barrett for his amendment. As a member of the Committee of Public Accounts from my election to the Dáil three years ago until two days ago, I was very interested in these amendments, as I have seen at first hand what I believe to be the excellent work that the committee can do collectively and on a cross-party basis.

During my time on the committee - I believe this is historic - there was never a division except the day we had to elect the chairperson and that election was between two Opposition Members. Therefore, the committee works in a collective and bipartisan fashion which is healthy. However, I cannot accept these amendments and will outline the reasons I do not believe they are appropriate.

The role of the Office of the Comptroller and Auditor General is: to audit and report on the accounts of public bodies; to establish that transactions of public bodies are in accordance with the legal authorities governing them and that funds are applied for the purposes intended; to provide assurance on the systems of internal financial control put in place by each body; to examine whether each body administers its resources economically and efficiently and has mechanisms in place to evaluate the effectiveness of operations; and to authorise the release of funds from the Exchequer for purposes permitted by law.

The two amendments would require that the NTMA, when carrying out its functions as the National Development Finance Agency, complies with instructions and guidelines issued by the Comptroller and Auditor General and with policy guidance set out in reports of the Comptroller and Auditor General and the Committee of Public Accounts. While I understand that Senator Barrett is trying to add further scrutiny and a further pool of expertise, I am not sure that it is particularly appropriate. For a start, the role of the Comptroller and Auditor General is to issue recommendations. Those recommendations are then examined by the relevant Departments including the Department of Public Expenditure and Reform and they may issue guidelines or instructions to State bodies. That process is in place already. Similarly, in relation to amendment No. 13, the concept of policy guidance is too vague. Any such policy guidance issued by the Comptroller and Auditor General or the Committee of Public Accounts would, if accepted, normally be implemented via a communication from the Department of Public Expenditure and Reform or the Department of Finance, as appropriate. This process creates a single point of responsibility for issuing guidelines and clarity for the NDFA in adhering to guidelines in force. It is important to note that reports of the Committee of Public Accounts are not necessarily policy. They are laid before the House and debated. It is up to individual Departments to consider that. For those reasons I do not propose to accept the amendments.

I thank the Minister of State and will not press the amendments. What I had in mind is a large single hospital. The unease is not about its medical functions which are widely supported by Senator John Crown and others but the last time we built a huge hospital what did the Comptroller and Auditor General and the Minister of State's predecessors on the Committee of Public Accounts say and to feed it in. I appreciate what the Minister of State has said. It is important that we do not make the same mistakes. If there is a body of expertise which has observed in dealing with the X, Y, Z supplier of services that it did not work on a previous project, it will be a marker or else we will make the same mistakes which we cannot afford at this stage.

Amendment, by leave, withdrawn.
Section 26 agreed to.
Amendment No. 13 not moved.
Sections 27 to 38, inclusive, agreed to.
SECTION 39

I move amendment No. 14:

In page 40, between lines 32 and 33, to insert the following:

"(c) the social and environmental benefits.".

This amendment involves an issue I raised on Second Stage. It is about the type of stimulus we believe there should be. One of the problems with the Bill, apart from NewERA issues, is the narrow focus under which ISIF will be able to act. This amendment seeks to add some much-needed balance whereby the fund would consider the environmental and social outcomes of their investments. That issue was raised on Second Stage by many speakers. Social housing would be more likely to be built if this amendment was included in the Bill. A purely economic driven focus could be too narrow and might miss the point of the wider economic benefits of such investment. Its addition to the legislation would be of huge benefit.

I thank the Senator for her amendment which I cannot accept, the reasons for which I will outline. I simply do not believe it would work. The assets of the National Pensions Reserve Fund will be transferred to the Ireland Strategic Investment Fund and they will then be invested in Ireland in a manner designed to support economic activity and employment. However, it is clearly not practical to expect the agency to invest the full €6.9 billion available to it in Ireland the day the section is commenced. Subsection (3) of section 39 allows for this. The agency can invest on a purely commercial basis, in other words, not focusing on the employment and economic benefits to the extent that it does not have investment opportunities that meet the economic and employment criteria immediately available to it. This will allow the agency to hold on to existing investments pending the identification of suitable investments consistent with the mandate of ISIF. The NPRF is currently invested on a commercial basis in Ireland and outside of Ireland.

The proposed amendment would, on the face of it, mean that these investments would have to be sold to the extent that they do not take account of social and economic benefits. This would contradict the purpose of the subsection and I cannot accept the amendment on that basis.

I note what Senator Kathryn Reilly is trying to achieve but it does not work to tell the agency that everything has to be invested in certain ways without taking into consideration commercial circumstances and would have the reverse effect of what is intended by risking potential benefit that could be used for employment and economic benefit.

Amendment, by leave, withdrawn.

Section 39 agreed to.
Sections 40 and 41 agreed to.
SECTION 42

I move amendment No. 15:

In page 43, between lines 2 and 3, to insert the following:

"(5) The Minister shall notify directions to make investments under this section to the Oireachtas Committee on Finance, Public Expenditure and Reform.".

This amendment concerns the provision whereby the Minister, following consultation with the Central Bank, can direct the agency to make certain investments. Subsection (4) provides that the agency shall comply with such a direction. I am always nervous of directions in this regard. The one I have in mind is the new airport terminal which was issued by direction to then compel airport prices to rise by 44% in order to pay for it in retrospect. I am seeking that, in order that Ministers do not direct projects and force the agency to comply, there should be some parliamentary participation, hence the reason I included the Oireachtas Joint Committee on Finance, Public Expenditure and Reform. I am uneasy about directions with which people have to comply, even if the agency states that all its advice is that a particular project is not a good one, one can be compelled under subsection (4). I suggest a useful stopgap would be to run it through the Oireachtas committee to assist in better decision making. It arises from the fear that the ability to issue directives can lead to spectacular waste of money. There is an anti-democratic element in it also.

I understand where the Senator is coming from. While there is no requirement to publish directions to make certain investments, under section 42 directions made will be public knowledge by virtue of the fact that they will be detailed in the NTMA's annual report. Section 49 of the Bill provides that the NTMA will provide a detailed list of the assets of the fund in its report at the end of each year. Stepping back from this formal requirement for the agency to report on its investments through that manner I would also expect that directed investments would become public information very quickly. The Minister for Finance can direct the agency to invest in financial institutions only if necessary and in the public interest to remedy a serious disturbance to the economy and or to prevent potential serious damage to the financial system. It is highly unlikely that the Minister would direct investment in financial institutions if those institutions have access to other sources of private capital. In that scenario it is likely that it would also be in the public interest to make a directed investment public knowledge in order to restore confidence in the financial system. For these reasons I am satisfied that the directed investments will be public knowledge and, therefore, I do not propose to accept the amendment.

I thank the Minister of State. I will not push the amendment.

Amendment, by leave, withdrawn.
Question proposed: "That section 42 stand part of the Bill".

The section allows the Minister to bail out banks. The National Pensions Reserve Fund, NPRF, should not be liable to be raided any time a bank gets into trouble, regardless of the circumstances. The Minister of State referred to the public interest but this is not an appropriate fund for such money to come from. We should not have a section that has the potential to drain money from the fund. I, therefore, oppose the section.

The National Pensions Reserve Fund Act 2000, which set up the NPRF to pre-fund the burden of pensions on the Exchequer from 2025, was amended in 2009 to allow the Minister for Finance in certain circumstances to direct the NPRF commission to invest in financial institutions. This was the mechanism used to recapitalise the banks following the financial crisis. I acknowledge why the Senator proposes the deletion of this provision but I do not propose to accept that. We are carrying over an existing provision into this legislation with the difference being that the Minister would give direction to the agency rather than the commission. We do not foresee ever having to use the provision again but we have retained it in statute as a precautionary measure. A large amount of new capital has gone into domestic banks in recent years and significant work has been done by the Central Bank, including the balance sheet assessment in the fourth quarter of 2013, which assessment confirmed that, having recognised additional provisions, each of the bank's capital ratios was above the minimum regulatory requirement.

This provision cannot be used lightly. The Minister for Finance must first consult the Central Bank and decide if it is in the public interest to invest in financial institutions to remedy a serious disturbance and prevent potential serious damage to the financial system and to ensure the continued stability of the financial system.

Question put:
The Committee divided: Tá, 29; Níl, 5.

  • Bacik, Ivana.
  • Burke, Colm.
  • Byrne, Thomas.
  • Coghlan, Eamonn.
  • Coghlan, Paul.
  • Comiskey, Michael.
  • Conway, Martin.
  • Cummins, Maurice.
  • Hayden, Aideen.
  • Healy Eames, Fidelma.
  • Higgins, Lorraine.
  • Keane, Cáit.
  • Kelly, John.
  • Landy, Denis.
  • Leyden, Terry.
  • Moloney, Marie.
  • Moran, Mary.
  • Mulcahy, Tony.
  • Mullins, Michael.
  • Naughton, Hildegarde.
  • Noone, Catherine.
  • O'Brien, Darragh.
  • O'Keeffe, Susan.
  • O'Neill, Pat.
  • O'Sullivan, Ned.
  • Quinn, Feargal.
  • van Turnhout, Jillian.
  • Wilson, Diarmuid.
  • Zappone, Katherine.

Níl

  • Barrett, Sean D.
  • Crown, John.
  • Cullinane, David.
  • Ó Clochartaigh, Trevor.
  • Reilly, Kathryn.
Tellers: Tá, Senators Paul Coghlan and Aideen Hayden; Níl, Senators David Cullinane and Kathryn Reilly.
Question declared carried.

I welcome the newly-appointed Minister of State, Deputy Ann Phelan, to the Visitors Gallery.

Sections 43 to 54, inclusive, agreed to.
SECTION 55
Question proposed: "That section 55 stand part of the Bill."

I welcome the Minister of State back to the House and thank him for all his replies this afternoon. There are concerns about section 55, which provides that the appropriate Minister may issue guarantees or indemnities regarding public-private partnerships, PPPs. One misgiving is the issue of letters of comfort, which we discussed with the Minister for Finance, Deputy Noonan, earlier. Another is indemnities. Is it not time that the risks in PPPs were shared? That is the purpose of my opposition to the section. I would like to see some risk sharing. Is the State always the loser in PPPs, as in some of the motorway projects for which the contracts are so legally watertight they cannot be revisited? The former Minister for Transport, Tourism and Sport, Deputy Varadkar, examined them. Can we have protection against the State always bearing the losses and the private partner walking away without bearing some risk? I thought the purpose of PPPs was that private companies would take some risk on board. This is the last amendment I will propose today and I thank the Minister of State for his responses to all the others.

I thank the Senator for his amendment and for our exchange this afternoon. The section amends the State Authorities (Public Private Partnerships Arrangements) Act 2002 by adding a section that will allow Ministers to issue guarantees or indemnities in respect of PPP projects, with the consent of the Ministers for Finance and Public Expenditure and Reform. Such indemnities or guarantees have been essential in recent years in order to secure funding for projects from international financial institutions, such as the European Investment Bank, where a sub-sovereign entity, such as the National Roads Authority, NRA, is procuring the project. A ministerial guarantee may also be required to ensure an appropriate credit rating for a PPP undertaking in such cases. Such borrowing has been available to us at preferential rates and has enabled us to fund schools and roads projects that might otherwise have had to be put on the long finger.

The purpose of the proposed amendment is to provide a statutory basis for Ministers to issue letters of indemnity or guarantees to funders to PPP companies or in respect of PPP projects. The advice of the Attorney General has indicated that such a provision is appropriate if the practice of Ministers issuing such letters is to continue. The provision formalises an implicit State liability because a Minister providing the guarantee or indemnity will generally be funding the State authority through the departmental Vote. For roads, for example, the Minister for Transport, Tourism and Sport would vouch that he or she would be liable for the payment obligations of the NRA should the NRA fail to pay, as per the terms of the PPP. The Minister would vouch that he or she would make the payments to the NRA that he or she would have made anyway. I trust this explains why we included the provision in the Bill. It is to ensure we can access cheaper funding from international financial institutions for PPPs in particular. All Senators will be aware, as I am, of the importance of delivering critical infrastructure such as schools and roads, and this mechanism allows us to do so. I cannot, therefore, accept the amendment.

I thank the Minister of State for his reply. Maybe some time in the future entrepreneurship will occur and the private sector take some risk.

Is any limit on the ministerial guarantee envisaged? The last guarantee we exercised did not turn out for the very best.

It is limited by the obligations of the sub-sovereign entity.

Is there no monetary value to the limit on the guarantee?

It depends on the size of the project and the contract.

Question put and agreed to.
Section 56 agreed to.
Schedules 1 and 2 agreed to.
Amendment No. 16 not moved.
Schedule 3 agreed to.
Schedule 4 agreed to.
Title agreed to.
Bill reported without amendment, received for final consideration and passed.

When is it proposed to sit again?

At 2.30 p.m. on Wednesday, 17 September 2014.

I wish Senators a happy summer and hope none of them are attacked by any seagulls.

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