I ask Mr. Considine to introduce his officials and for his permission to publish his opening statement.
Implementation of DIRT Report Recommendations.
Mr. Considine
I am accompanied by Ms Brigid McManus, assistant secretary in the budget and economic division whose brief covers tax policy, Mr. Colm Gallagher, assistant secretary dealing with draft legislation on the Oireachtas Commission, Mr. Cathal O'Loghlin, assistant secretary in the budget and economic division with overall responsibility for economic forecasting and budget co-ordination, Mr. Jimmy Doyle, principal officer in the banking, finance and international division with responsibility for the draft legislation on the single regulatory authority, and Ms Marie O'Neill, assistant principal.
I ask Mr. Considine to read his opening statement.
Mr. Considine
My statement is designed to bring the committee up to date on developments since the Department's report of 11 January 2002 on the implementation of the recommendations in the final report of the Committee of Public Accounts Sub-Committee on Certain Revenue Matters and to elaborate on some of the points raised in our report. I do not propose to repeat material covered in the report.
The Office of the Parliamentary Counsel has for some months been working on the complex task of preparing the text of the Central Bank of Ireland Financial Services Authority legislation and Department of Finance officials continue to work closely with that office to finalise the text of the Bill. Consultations are ongoing with the Department of Enterprise, Trade and Employment and the Central Bank to finalise some remaining points and the Bill should be ready for submission to Government with a view to publication in the near future. The Bill will amend the Central Bank Act, 1942, for the purpose of reorganising and renaming the Central Bank of Ireland and amend certain other Acts consequential to this reorganisation. Structurally, this will involve the establishment of the Irish Financial Services Regulatory Authority, in particular, within the new structure of the Central Bank of Ireland Financial Services Authority. The draft Bill will also establish a Financial Services Appeals Tribunal to provide an independent forum for resolving any disputes concerning penalties imposed on financial institutions by the regulatory authority. The draft legislation will provide the framework for the ongoing development of regulation so that regulatory practice in this country can keep up to date with the constantly changing issues facing this complex industry, while also providing an appropriate focus on issues of concern to customers.
A second piece of legislation is being prepared which will establish a statutory financial services ombudsman and consultative panels for the Financial Services Regulatory Authority. It will also make provisions arising from the Government response to the recommendations in relation to the financial sector of the report of the review group on auditing. The intention is to publish this second Bill in the second half of this year.
As committee members will be aware, the Minister and the Government have considered the sub-committee's recommendations on the governance structure for revenue and, in line with the recommendation contained in the final report, a copy of that report was given to Mr. Justice Moriarty. That was done because it is recognised that under its terms of reference the Moriarty Tribunal is specifically charged with making recommendations with regard to the independence of Revenue. The findings and recommendations of the Moriarty Tribunal are, therefore, relevant to the work on the legislation and for that reason it is considered advisable to await Mr. Justice Moriarty's report before proceeding with the publication of draft legislation. Decisions dealing with the composition of the board of revenue will, therefore, fall to be made in the context of the content and timing of the report of the tribunal. Nonetheless, a considerable amount of preparatory work is being done on the basic legislation. In addition, considerable progress has been made in implementing recommendations on organisational changes below board level which do not require legislation.
As mentioned in the Department's report of 11 January, the Minister and the Attorney General have decided that the most appropriate way to carry out the detailed study of the benefits of a revenue court and a fiscal prosecutor recommended in the final DIRT report was to refer the matter to the Law Reform Commission. I confirm that has been done. A number of alternative ways of carrying out the study were considered, but it was concluded that the Law Reform Commission was the most appropriate approach. The commission has staff with the necessary expertise in legal research to examine the constitutional and other legal issues referred to by the sub-committee.
The DIRT sub-committee also made specific recommendations relating to penalties for tax evasion. In the Department's report of 11 January 2002 we indicated that these recommendations were being considered for inclusion in the forthcoming Finance Bill. I now confirm that has been done. The sub-committee was concerned with the disparity between the fixed sum penalties which could be imposed on a body for failure to deduct a fiduciary tax - for example, the deduction of DIRT by a bank - and the tax geared penalties - for example up to 100% of the unpaid tax where there is neglect and where a person files an incorrect income tax return. The sub-committee was also concerned that a six year time limit applied to imposition of penalties in the DIRT situation, while there was no time limit in the case of evasion by a person of his or her own tax liability.
The sub-committee's recommendations in this area are being implemented in the Finance Bill, 2002, by bringing any future failure, arising from fraud or neglect, to deduct DIRT or dividend withholding tax within the scope of section 1053 of the Taxes Consolidation Act - this will automatically remove the six year time limit and apply tax geared penalties - and equalising the amount of fixed sum penalties as between individuals and companies.
As members of the Committee of Public Accounts know, the Finance Bill has been approved by the Dáil and will be considered by the Seanad this week. I might also mention that Revenue powers and penalties are being strengthened in a number of other areas in the Finance Bill. For example, tax evaders will no longer be able to escape tax geared penalties simply by failing to make a tax return. Revenue's power to obtain a court order to get information from financial institutions is being extended to make it more easily available in customs and excise investigations. The range of records which can be accessed in a tax audit is also being expanded.
I would like to refer to the recommendation relating to the Houses of the Oireachtas commission. Since the progress report of 11 January, the Bill to establish the commission has been the subject of a number of drafts from the Office of the Parliamentary Counsel. These drafts reflect many of the recommendations brought forward by various interested parties in the course of the consultation process established by the Government. The principal features of the Bill correspond broadly to the scheme of the Bill approved by Government on 26 June 2001. A specified sum of money will be a charge on the central fund to meet the current budget requirements of the Office of the Houses of the Oireachtas for three years. The management of the Office of the Houses of the Oireachtas will be entrusted to an independent commission consisting of the chairmen of both Houses, a Minister's representative, four Members of Dáil Éireann and three Senators, with the Clerk of the Dáil. We are now at a stage where we expect to bring the Bill to Government with a view to publishing it before Easter.
In tandem with this, the international benchmarking consultancy has been ongoing in the Office of the Houses of the Oireachtas. Members of my Department have also participated in the office steering group. The consultants are now close to providing a final report on which the future resourcing of the commission can be based.
This is just a brief overview of some of the issues covered in the DIRT inquiry's final report. I will be happy to address any further questions.
Thank you, Mr. Considine. I have just one query, after which Deputy McCormack will open the question and answer session. In the course of your address you stated, "Consultations are ongoing with the Department of Enterprise, Trade and Employment and the Central Bank to finalise some remaining points and the Bill should be ready for submission to Government with a view to publication in the near future." I am talking about the Central Bank of Ireland (Financial Services Authority) Bill. What sense of urgency has arisen from the Ludwig report on Allied Irish Bank? Has it influenced you in trying to progress and expedite the Bill as soon as possible, before the Dáil goes into recess for Easter and we begin heading into a general election?
I assume we can publish the contents of document No. 2 which just contains the recommendations.
Mr. Considine
Yes, Chairman.
Thank you.
Mr. Considine
We have been striving to give the Bill as much priority as we possibly can. We cannot do any better than that. It is very complex legislation in which the issues involved have proved difficult to resolve. As regards the Ludwig report, the principal function of the Minister for Finance in relation to banking supervision and the supervision of financial institutions generally is to provide the appropriate legal framework. I have not seen anything in the report that suggests that the legal framework in Ireland is in any way deficient in so far as what transpired at Allfirst is concerned. Obviously, the Central Bank of Ireland, as regulator of the AIB, is involved with the primary regulator of Allfirst in the United States, the Federal Reserve, and local regulators.
The Central Bank will in due course evaluate all that has happened. Should there be any weakness in the legislative framework in Ireland, mobviously it will report to the Minister and it will be a matter for the Government to correct it. I have to emphasise that I have seen no evidence that there is any such weakness. Therefore, this Bill does not necessarily appear to be required to correct anything in the legal framework in so far as the Ludwig report is concerned.
The reason I addressed that point was that the Central Bank has a certain responsibility with regard to advising banks on the type of audit policies to be adopted. Am I correct in saying that it is up to the bank to implement these policies?
Mr. Considine
As I said, the legislation requires the Central Bank to conduct the regulation of banking. In doing this, it has a number of functions, including the granting of banking licences, as well as certain functions in relation to the quality of people involved at a senior level in banking. As part of its regulatory functions, the Central Bank looks at how banks are managed and the systems in place. That is the normal function of a regulator. In the case at which we are looking, Allfirst is located in the United States. Therefore, the job of regulating the local Allfirst branch falls to the Federal Reserve and local regulators. Obviously, because group headquarters is located in Ireland, the Central Bank has an interest in it and is taking an active interest in what is being done in the United States. When the whole matter has been evaluated, the Central Bank will look to see if there is any problem with the legislation in Ireland, but, as I said, I do not see how that could be a factor.
I have two final points. First, even if the single regulator comes into place under the provisions of The Central Bank (Financial Services Authority) Bill, it will not make any impact on the Ludwig-Allfirst-AIB situation or any similar situation that might prevail in that direction in future. Second, on the basis of what you have said, this regulatory authority legislation is unlikely to come before the Dáil before it goes into recess.
Mr. Considine
It looks that way. The best that can be done is to have the Bill published before Easter, but even for this to happen it will have to tie with the various pieces of legislation in the pipeline.
How many recommendations of the DIRT inquiry report will be implemented and how many will be rejected outright? Will all of them eventually be implemented?
Mr. Considine
Going through them, clearly, much of the work on the single regulatory authority has been done. As I said, we are at the stage where the Bill is almost complete and ready for submission to Government with a view to publication. A huge amount of work has been done on the performance indicators for Revenue. The chairman of the Revenue Commissioners reported to the committee in October 2001 and another report is due shortly. Having read it, my understanding is that significant progress has been made on the matter.
Significant work has been done on the governing structure of Revenue. There is a particular issue in which the sub-committee took an interest, that is, the structure of the Revenue board. This issue is also of interest to the Moriarty tribunal which, as part of its terms of reference, has a requirement to look at the independence of Revenue. Pending the outcome of the Moriarty tribunal report, an awful lot of work is being done on two areas. First, work is being done on the preparation of a new Bill for Revenue. An awful lot of this work can be progressed ahead of the Moriarty tribunal report. The second point relates to the structure of Revenue below board level. This does not require any legislation. A huge amount of work has been done and significant progress made in relation to implementing it.
The Revenue court fiscal prosecutor has been referred to the Law Reform Commission for examination and the outcome will depend on its findings. Work is under way on creating a statutory base for the appeals commissioner. It may be part of the Revenue Bill or a separate one. A final decision on the matter has not been made.
The appeals commissioners are considering the resources they have available to them. They expect to have the exercise completed in time for the 2003 Estimates. For the moment the Minister for Finance has decided not to proceed with legislative change on the cost of the Revenue inquiry. There are arguments for and against this. It is a matter of judgment. As I said in my opening statement, the penalties are included the Finance Bill, which has been passed by the Dáil and is going through the Seanad.
Work on the Oireachtas Commission is well advanced and a Bill almost ready for submission to the Government and publication. The commission to review tribunals and other forms of inquiry has been referred to the Law Reform Commission. The outcome will determine what happens as a result. These are all the recommendations.
Will any of the necessary legislation come before this Dáil?
Mr. Considine
The penalties have been passed by the Dáil and will go through the Seanad later this week.
Is that all that will come before this Dáil?
Mr. Considine
Yes. I do not see, as a matter of practical reality, how it would be possible to put through other measures, but do not rule it out.
It is regrettable that the legislation will not come before the current Dáil because the members of this committee and the sub-committee, who undertook such exhaustive work on this issue, may not be here when the matter comes before the new Dáil.
Mr. Considine
The sub-committee on the DIRT inquiry did a great deal of work and made far-reaching recommendations, which, in fairness, required a lot of work. Much work has been done which, as I have outlined, is at a particular stage. I can say no more other than to point out the time in the parliamentary cycle.
I will stop digging.
With regard to the Central Bank's responsibilities on governance and policy, I note your point that the United States authorities would have the major role in monitoring practices as they were carried out in another jurisdiction. However, I am concerned about this. For example, there could be major exposure for an Irish financial institution with overseas involvement, investment or activity to the extent of putting it in serious danger. Surely there must be some method or procedure to ensure the degree of exposure does not take place to the extent of endangering the original parent body, investors and the financial structure in this country. For example, the projected losses are €750 million, or whatever. Could they have been greater? Surely the Central Bank would need to develop some kind of procedures that would alert it to the ongoing activities, trading, marketing or otherwise of the subsidiaries of Irish financial institutions in other jurisdictions.
Despite the fact that the other jurisdiction may have the primary responsibility in bringing people to justice, the original parent institution could find itself very seriously at risk as a result of activity which we are not in a position to monitor from this country. If that is the case, there is a serious void still in the system, despite all the activity of the DIRT sub-committee inquiry and past experience. Without rehearsing old ground, I would cite instances in the past where the activities of subsidiaries of Irish financial institutions got involved in procedures to endanger, to a greater or lesser extent, the financial viability of the parent institution. I do not want to scaremonger and may be hypothesising, but it could happen. If, for instance, the degree of activity was doubled or quadrupled, there would be a very serious problem for the parent institution. It is necessary for the Central Bank to keep a close eye on the overseas activities of the financial institutions which come within its control.
Control is the issue. Where there are major investments overseas, especially by financial institutions, they must surely incorporate a procedure whereby the parent body is accountable to the financial controls systems operative in the parent country. In view of what the Secretary General has said regarding the Central Bank's responsibilities and capabilities, I am very worried that such situations may arise. It could render a huge liability on Irish investors. Their financial arrangements could collapse through no fault of their own but that of the authorised or unauthorised activities overseas with or without the approval of head office in the absence of appropriate or sufficient control systems. Control systems are the key to the issue.
Mr. Considine
As banking is an international business, essentially there is an international framework for regulating banks. There are divisions of responsibility which must be recognised because otherwise everybody would be second guessing everybody else. We are concerned with a situation regarding a bank's subsidiary in one of the most developed countries in the world - if not the most developed - with strong systems of regulation in place through the Federal Reserve board and so on. It is accepted that the regulation of subsidiaries is the responsibility of the local regulator. As with all auditing, this requires one to take certain matters on trust, though not entirely.
The standards set by the Central Bank are that it must be satisfied that executive directors and senior executives are fit and proper persons and have appropriate competence and experience in banking and financial services to enable them to fulfil their duties and that non-executive directors are fit and proper persons and have suitable relevant experience. All appointments to the board of a credit institution and its subsidiaries are subject to the prior approval of the bank and, in the case of board appointments, detailed CVs are requested in each individual case and so on. The function of the Central Bank in this regard is to make sure that the quality of the management of the group is of the highest standard.
Inevitably, one will get cases where things go wrong. I cannot deal with speculation about how wrong things might go, but ultimately one has to rely on the quality of the management at group and local level and the fact that there are regulators with responsibilities in the other country. These are all part and parcel of the situation. Obviously, in this case things did not work out like they should have in that there was a breakdown of internal control within Allfirst leading to losses of nearly €700 million. There has been an internal report, the Ludwig report, into the matter, on foot of which action has been taken by the AIB Group. As I understand it, the regulators in America are conducting their own investigation in which the Central Bank is taking a close interest. When the whole matter has been concluded, the bank will form its own views and if it requires any change in legislation, it will make an appropriate recommendation to the Minister for Finance.
I am reassured by the last part of the statement. However, one of the issues which arose repeatedly during the course of the Public Accounts Committee DIRT tax inquiry was the lack of adequate controls and procedures at various levels with regard to the various bodies involved. While I do not want to be alarmist, we should face reality. Arising from your comments, it appears that while the Central Bank has adequate control in relation to the running of a bank's affairs in this country, where a financial institution has subsidiaries overseas, the Central Bank has no such control of their activity. With modern technology, it is possible in a very short space of time for people to do things not necessarily in accordance with procedures and circumnavigate the system to such an extent that it has a major financial impact on the parent institution.
I am suggesting that it is incumbent on the Central Bank, given the degree of financial freedom we have in terms of the movement of funds both in Europe and worldwide, to take account of previous history and the current position and evaluate as a matter of urgency, without waiting for recommendations from any quarter, the extent to which it should enhance its control system to ensure the activities of a subsidiary do not jeopardise the parent structure. I emphasise previous history because it is not the first time this country has faced a situation in which the activities of a financial institution abroad have created problems for the parent institution. I hope it will be the last. Surely this is the role of the Central Bank. It is important that, if a certain level of a financial institution's activities take place through a subsidiary outside this jurisdiction, the matter should be examined to ascertain the extent to which the financial institution could be put in jeopardy as a result of, for example, malfeasance abroad.
Mr. Considine
I understand the Central Bank has written to all credit institutions within its remit to re-emphasise the need for compliance with best international standards of management and control and that it has asked that there be independent verification that these controls are being operated. At the same time, there is a system of international banking with regulatory rules which apply here and in other countries. The banks of many countries have subsidiaries in this country, of which, because of the IFSC, there are quite a number. Our Central Bank has the job of regulating them. Part of the reason we are so successful in this area is that we are seen to have a very good system of regulation.
Apart from what the Central Bank has done already, one has to live with the international system of rules governing banking regulation. If we were to regulate all subsidiaries in other countries, it would put us outside the framework of accepted practice. The way to proceed is through domestic rules and ensuring the quality of management and so on is up to the required standard and that we keep pressing the boards and managements of these institutions to do whateveris necessary to have best practice in relationto all the internal controls described by the Deputy.
Surely it is incumbent on the parent body, the financial institution, which in this case is located in this country, to ensure there is sufficient control of its overseas activities to keep it happy in the knowledge that the process is operating satisfactorily. For example, if one has an American Express card, the company will very quickly control one's spending and inform one within 24 hours whether one is, for example, solvent. I cannot understand how this could happen to a major financial institution operating to the standards and procedures set down by the Central Bank, which while apparently adequate in the past, may not be adequate now because of the shift in the degree of international business being carried out. This places a greater responsibility on a body such as the Central Bank to ensure it establishes the procedures needed to ensure there is no repetition of the kind of event we have just witnessed. Failure to do so would be extremely worrying given the degree of exposure of some of our other financial institutions. The same applies to international financial institutions. The other major bank scandal in the past five or six years which did not involve Irish institutions should have highlighted the necessity to introduce safety measures.
An issue relating to ICI arose about 15 years ago and the most recent one is in relation to the same financial institution as was involved in that case. To ensure adequate public confidence in the institution concerned it is an absolute priority that some measures are put in place without waiting for recommendations from any quarter. The experience itself should clearly indicate that there was too much latitude and a lack of control. There was an inadequate reporting system which was not of sufficient frequency to ensure that everybody knew what was happening. That kind of information should be available on a weekly or fortnightly basis. It should not be the case that something continues for a year or more before someone decides to intervene.
Mr. Considine
I say again that there is no threat to the viability of any Irish financial institution. In the case of AIB while this amount of money is very large it is not in any way a threat to the fundamental strength of the organisation. The Central Bank and banks which have investments abroad must rely on a quality check on the boards of management of the organisations in order to ensure they are up to the required strength and competence. In this case a particular set of circumstances arose where a belief that there were proper systems in place turned out not to be correct.
The Central Bank obviously will evaluate that situation and see what lessons can be learned from it. The main function that the bank has is through the terms and conditions that it attaches to its licence and its efforts to ensure that quality boards and management of banks are in place. The Central Bank has written to the financial institutions to re-emphasise the need for compliance with best international standards of management and controls. The basic type of control that one would expect to see in banks would be the minimum that they would require management to have. The bank has also asked that there be independent verification that these controls are being operated.
On that point, the ordinary person in the street will say that if he has an overdraft the bank will very quickly remind him, and he finds it very hard to reconcile what has happened in Allfirst vis-à-vis AIB. People presume the single regulator was in place to supervise the institutions and for consumer protection. They will be disappointed by the text of your statement where it is stated that the single regulatory authority has no determining role with regard to this type of situation where an overseas bank is involved. You say that the Central Bank will write to these banks and will assess their methods and have independent verification. Will those banks in their correspondence with the Central Bank say that they have put the proper procedures in place and will the Central Bank accept the status of the internal quality control procedures in order to cope with the situation of an overseas bank? Has the Central Bank any control over the quality control procedures put in place by the banks? How can what happened at Allfirst be prevented from happening again?
Mr. Considine
They are asking for independent verification that these controls are being operated. It is not just a question of the Central Bank sending a letter. I take the point. I am sure that this was a huge shock to everybody involved, including the management of AIB. The system of controls that one would expect to operate in a banking environment should not allow such a situation to occur. This is an example of what can happen despite the best efforts to put quality boards of management in place. Action has been taken to deal with it. The Ludwig report has made a number of recommendations and I understand these will be implemented, including bringing in more outside expertise where that is required. When I say that the single regulatory authority would not have any role in relation to this, I mean it would not have a role that is any different from the role of the Central Bank at present, which is to ensure as best it can that the quality boards are in place and to ask that independent verification be given to it that the appropriate systems are in place and operating. It is very easy to have systems in place but the question is whether they are being operated. The Central Bank is asking for independent verification that this is so.
I accept entirely the independent verification and that the Central Bank is writing to the banks. Will the banks in turn be writing to the Central Bank saying that independent verification has been carried out and that controls are in place? Will they elaborate on the type of controls in place so the Central Bank is reassured that in future a similar situation may not happen?
Mr. Considine
The Central Bank is in a position to carry out on-site inspections so it is not a question of only writing letters. It may go into the individual banks and verify for itself by inspection of files.
Can the Central Bank go to overseas subsidiaries of the bank? Could it go to the United States?
Mr. Considine
They are in the United States at the moment. I do not know what the correct word would be but they are keeping a watching brief on the work being done by the US regulators. My understanding is that the primary responsibility rests with the US regulators and they would do the work. The Central Bank is out there and they are keeping a close eye on what is being done.
The committee of which I am Chairman published a report on the single regulatory authority legislation about four years ago. I do not think we will see this Bill until the next Dáil. I hope it will be introduced later this year because it will hardly happen before the end of this term of office. The detailed study of the benefits of a revenue court and a fiscal prosecutor was recommended in the final DIRT report. I note that you say this was referred to the Law Reform Commission. When will the Law Reform Commission issue its report?
Mr. Considine
It is not possible for us to say. It has a work programme and it is for it to fit it in.
Mr. Considine said that was the most appropriate way. The Minister and the Attorney General decided that. That was hardly a cop-out by the Minister.
Mr. Considine
No. This is very difficult. The Deputy probably recalls that when this was being debated by the sub-committee there were different views in relation to it. The general view from the people who appeared before the sub-committee was that the real problem was not the court. The real problem was getting the evidence. That was the issue. In a sense the views of all the insiders could be said to be known, so it is not a bad idea that this would go somewhere else and that a different view could be brought to bear on it.
With regard to the Houses of the Oireachtas and the commission that is being set up, what is the latest on the negotiations? Is it almost agreed?
As we have the Clerk of the Dáil, Mr. Kieran Coughlan, and his officials, Mr. Conan McKenna and Ms Elaine Gunn, here we should give Mr. Coughlan a chance to respond to the points made about the Houses of the Oireachtas in Mr. Considine's submission. Do you agree, Mr. Considine?
Mr. Considine
Yes.
I noted that Mr. Considine said the Bill would be published before Easter, which is within two weeks and we welcome that. We hope that will allow for the appointment of an interim transition staff that we are seeking to prepare for the introduction of the commission, which is crucial. It just cannot start up overnight without any resources. We hope that the publication of the Bill will be used as a trigger to release that initial tranche of staff, which is quite a minimalist one. It would be quite cost effective this year because the intervention of the general election will release some of our own staff. That was the main point we were concerned about, but we welcome the Bill itself.
I welcome this. It is the way forward for the Houses of the Oireachtas and it is very important for the staff of the Houses of the Oireachtas to have its own organisation rather than be dependent on the whims of other Departments.
On that point Mr. Considine, the Department of Finance was approached with a view to getting a modest advance of 28 posts to provide the additional resources recommended in order to continue with the restructuring and put specific functions in place in preparation for the commission. This response is dated 7 February 2002 and at that stage a response from the Department of Finance was awaited. Has that response been made and if not, when is it likely to be made?
Mr. Considine
It has been made and there has been correspondence with the Ceann Comhairle as well. The latest correspondence on this issue from the Minister to the Ceann Comhairle was today. Could I say a few words about this? There was an earlier organisation review conducted by the IPA, called the Cassidy report, in March 2000. At that stage the recommendation was a four-directorate model. That was accepted by the Department of Finance and the Minister. There was an extra directorate appointed on the strength of that. On foot of that report, the Minister sanctioned a further three principal officers - standard scale - three HEOs and three clerical officers to allow the Oireachtas to start implementing that report.
The Minister and the Department are very much in favour of the Oireachtas Commission. The Department of Finance proposed the outside benchmarking study would be done so that the commission could start off on a good footing. However, the Government has a very tight fiscal position in the current year and the result of that is that all Departments are subject to living within their budgets - nothing more, nothing less. Effectively, that means staff cannot be authorised unless it is in the Department's budget. When the Houses of the Oireachtas come under this new structure, they will be outside of the Vote system. Assuming the Bill is passed, there will be a block of money for them for three years and they will have a great deal of freedom to operate within that.
Just today the Minister for Finance confirmed to the Ceann Comhairle that in the meantime he is not in a position to make any exception in relation to the very strict rules he has on staffing numbers for this year. That is the position in which we find ourselves. It is very important in these matters for the Minister to be able to say to all colleagues, some of whom are under great pressure, that there are no exceptions to this rule. This is the way it is and everybody has to live within budget.
The original request was for 66 people to staff the administrative structure. The interim request is for 28. Do I take it the positions you said were outlined by the Cassidy report, etc. in the past were three principal officers, three higher executive officers and three clerical officers?
Mr. Considine
And one higher level principal officer.
So that makes ten people.
Mr. Considine
Yes.
When were those ten people approved?
Mr. Considine
They were approved in 2000, I think. The Cassidy report was published in March 2000, so it was some time subsequent to that.
Subsequent to that, 28 positions were requested, is that not so? What I am saying is that the ten people do not form part of the request for 28 people.
Mr. Considine
No - well yes. The latest request has to do with the benchmarking exercise, which is a separate additional request. That is right.
No, the benchmarking exercise said 66 and then it said: "The office has since approached the Department of Finance with a view to getting a modest advance, 28 posts, on the additional resources recommended in order to continue our restructuring and put specific functions in place in preparation for the commission." Are you saying that it is zero out of the 28 at this stage? Is that not the reality?
Mr. Considine
That is the reality.
Even though the goodwill extends to it, the goodwill will not be extended to manpower resources.
Mr. Considine
That is not the case. When the commission comes into being, it will be in a position to put all these posts in place itself.
How can the commission come into place without the 28 staff requested in order to prepare for the commission coming into place?
Mr. Considine
I know, but as I have explained to you, the problem is not with this particular request; it is with Government policy in relation to numbers.
If you say it is Government policy, I accept that. However this report mentions "recommendation of parliamentary inquiry, DIRT final report". This was a specific reference to the Houses of the Oireachtas. You said you agree totally with the spirit of what is intended, but you are also saying that because of an embargo the resources cannot be put in place to make it happen.
Mr. Considine
The resources cannot be put in place just now.
You mentioned the end of the year.
Mr. Considine
That is the position but, if I may quote, the following is the Minister's reply to the Ceann Comhairle today:
Under the terms proposed for the setting up of the Oireachtas Commission, your Office would be funded directly from the central fund, thereby placing it under a visibly different regime and exempting it from the restrictions on staffing I have outlined above. You will understand, however, that we cannot make staffing enhancements under the proposed new arrangements until close to the date of enactment of the relevant legislation. I am also aware that the Clerk of the Dáil has written to my Department, suggesting that he would transfer certain staff on the dissolution of the Dáil, until it reconvenes, on the understanding that this Department would agree to make up the staffing shortfall raised under the Deloitte and Touche recommendations. Once again, I have to point out that, as this proposal could commit me to the possible provision of staff for the commission, at a date far in advance of its legislative existence, I could not agree to this proposal.
This is part and parcel of a wider Government policy on spending and numbers.
The commission is stillborn on that basis. If it is put in place, if the structures are changed as advised now, with the funding to come directly on the basis of a block of funding and tied resources, will that be compatible with extending to allow for 28 extra people? In other words, will there be a significant amount, in excess of what is currently going in, to make this happen?
Mr. Considine
When the commission has been set up and is being funded from the central fund——
I know that when the commission is set up it will be funded from the central fund but, with regard to the three years, will the central fund provide the excess amount to ensure that the required administrative structure is created?
Mr. Considine
Yes, it will.
If the amount remains static, nothing will happen.
Mr. Considine
It will. The reason we originally proposed the benchmarking arrangement was so that the calculation of what it would take to run the Oireachtas for three years would be done on the basis of the assessment of the resources required, the principal assessment being that of the outside people who will carry out the benchmarking.
I am confused, Chairman.
I am also somewhat confused.
I am confused and concerned, for a number of reasons. First, a number of things have happened since the committee made its recommendations in relation to the Oireachtas Commission. I should declare an interest - I am Chairman of the Joint Committee on European Affairs, which had certain other responsibilities forced upon it. In my view, it will be virtually impossible for that committee, whoever may be Chairman of it in the next Dáil, to carry out the job, because it has not got the resources and it does not seem likely it will get them. It has to await the Oireachtas Commission which, in turn, will have at its disposal a three year block of funding. I am unclear as to how that will operate and I have my suspicions in that regard. I would prefer to see an annual block of funding which could be amended to some extent.
I do not believe the proposed system will work. It cannot work unless, for example, the members of the Committee on European Affairs actually carry out the work of the Civil Service in future. We have not enough civil servants to carry out the task we have been given. This evening, two Members of the Oireachtas are travelling to Brussels for a meeting of the Convention on the Future of Europe. I have no idea how it will be possible for them to carry out their work, particularly in view of the impending general election and the inevitable disruption of normal business. Obviously, the rest of Europe will not wait around while we wring our hands and tear our hair while bemoaning the lack of resources. I am deeply disappointed by the indications that nothing will happen in the short-term and things will go on as before.
When there is another major issue, such as the rejection of the Nice Treaty by the people on the basis that they did not know enough about it, yet another report will be produced to the effect that "we need to do something about this." Perhaps that will happen eight or ten years from now, by which time we may well have ceased to be a significant factor in the European arena. There are serious problems which need to be dealt with in a much shorter time scale than what is envisaged in Mr. Considine's reply. I am not suggesting that he is at fault or that Government policy or the recommendations of the Committee of Public Accounts are to blame. What I am suggesting is that, at this critical stage in the evolution of Europe over the next two years, if we do not participate more effectively than we have done, due to a lack of resources, we will pay the price for that neglect.
I took part in the committee which dealt with the charter of fundamental human rights. We had only one clerk, not necessarily the same person at all times. Deputy Des O'Malley and I were to participate as fully as possible in the debate on that charter. Our opposite numbers from other countries had a staff of up to 20 available to them, as well as legal advice from senior and junior counsel and even the Law Lords. With the best will in the world we cannot compete with that. It is a matter of priorities and if this issue is not seen as a priority, there is a price to be paid. In the current debate in Europe, those who have the necessary resources to make their presence felt will be in the ascendancy by comparison with those who are unable to rise to the occasion.
Mr. Considine
To be absolutely clear, I do not see the timeframe in any way like that. First, the Bill is almost ready and, as I said earlier, subject to whatever might be in the pipeline I expect it to go to Government very shortly with a view to having it published. That is the first thing.
It will hardly go through the Dáil before the Easter recess.
Mr. Considine
No, but it will be a matter for the new Parliament and the Whips to schedule it and to decide the priorities. Just to make another point absolutely clear, the three year funding was intended to be calculated on the basis of the higher staff numbers. The whole idea, in the final analysis, is to remove the Parliament from the control of the Department of Finance and the Minister for Finance. An amount will be calculated, it will be for approval on a "take note" motion in the Dáil - assuming the Dáil itself is in agreement - and the amount will be given to the Minister for Finance for inclusion in his budget arithmetic. Essentially, therefore, the Dáil and Seanad will have a very high level of control over their expenditure compared to any Ministry. Regarding the three year period, if the money voted in the legislation runs out sooner than expected, for whatever reason, it would be for the Minister of the day to propose a new Bill. However, the essential purpose is to allow the Parliament itself to have an opportunity to review the situation at the end of a three year period. This is a major advance on matters as they stand.
Our point of view is that the Minister's restrictions are until the end of the year. Yet, Mr. Considine is saying that the new Administration, which will probably be in place in June assuming a May election, can look for the three-year period and get its increase. Why can the extra resources not be given now to put the structure in place? On the basis of what Mr. Considine says, it will happen.
Mr. Considine
I am saying that if the Act is passed, in whatever timeframe is reasonable, the resources will be provided in the second half of the year. The Minister cannot provide them now because this is part of a wider problem with controlling the public finances. This is less extreme than other situations which applied in the past in the sense that all that is being said is that Departments cannot have additional posts other than those that have been provided for in their budgets. There is no question of cutting back on existing posts or anything like that.
I am not saying this cannot be reviewed when it is clear that the Bill is about to be passed, but if the Minister makes one exception in relation to these matters the pressure will grow to make other exceptions. There is no shortage of people with compelling cases.
It is like a three card trick; now you see the lady, now you do not. We are doing this in another way.
Mr. Considine
Yes, it would be outside the system of controls when the Act is passed.
Will the Clerk of the Dáil elucidate on the impact of the requirements and the requests as presented, and the proposal as it now emerges? That might be a difficult question and I am sorry to ask it, but members expect an answer.
I did not want to be overly critical of the Department of Finance because we have a very good relationship with it and the Department worked very well with us with regard to the Bill. However, we need to take into account the Government constraints with regard to staffing this year of which we are all aware. Under our proposal, because we will be able to divert staff due to the Dáil election and committee staff coming on stream, we will not be looking for any staff until October which is quite a bit down the line vis-à-vis publication of the Bill. As the Chairman said, it would be a lame duck commission if proper preparation was not put into it. A shadow commission was in place for two years in Northern Ireland before it became finally effective. If, as Mr. Considine has said, they would not release any preparatory staff until the Bill was passed, then I do not think the Bill should come into operation for some time to allow that kind of lead-in. While we are looking for it now, it might be more realistic to say that the lead-in time would come after the Bill has been passed, if that is the way it has to be.
Mr. Considine
The management of the existing resources of the Houses of the Oireachtas is a matter for Mr. Coughlan and the Ceann Comhairle. The Minister has looked at this very carefully and he is very well disposed towards the business of removing the Houses of the Oireachtas from the control of the Vote regime. He has other issues with which to concern himself. I am saying, as the Minister said to the Ceann Comhairle, that as of now he is not in a position to breach Government policy in relation to numbers. However, once the Bill is passed, or if in the autumn it looks as if the Bill is about to be passed, this issue can be reviewed again.
We cannot go any further with this.
It worries me that in the autumn we could suddenly hear that things are not as good as we thought they might be, and we might have to postpone the whole thing due to financial constraints, particularly if the Bill is sufficiently far advanced to become effective in the current year. I mentioned the point about the activities of one committee with which I am quite familiar. It will have less than one year from next October to carry out the work which will chart Ireland's involvement in the European agenda for many years. We can shift around and set up a committee to look at things between now and next year, but nothing will happen. We will still be bystanders in the context of the debate that is taking place and that will be because we do not have the resources.
I fully accept the dictation of policy by the Department, but it must be recognised also that there are consequences coming from that which could have a serious impact on the national image and the influence we have, or are supposed to have, internationally. We should recognise that now.
We will leave the final word to Deputy Durkan.
Thank you Chairman, I always have the final word.
The agenda for the next meeting which is on Thursday, 21 March, is Campus and Stadium Ireland Development Ltd., financial statements for the period 10 December 1999 to 31 December 2000; and the 2000 Annual Report of the Comptroller and Auditor General, appropriations of the Department of Tourism, Sport and Recreation, the Department of the Taoiseach and the Office of Public Works - Vote 10 (resumed). We will adjourn until 21 March at 4 p.m. but I have the consent of the committee that if the room becomes available earlier on, the meeting will start at 2 p.m. I will notify the committee accordingly.
The Committee adjourned at 4.50 p.m. until Thursday, 21 March 2002.