(Limerick East): It is also hoped that the morale of certain officials will be raised by making them employees of an agency rather than civil servants. Finally, it is hoped that a combination of the three factors already mentioned will provide a better debt management service than at present, and that savings in debt servicing of about £35 million will be made this year.
The action by the Minister in this Bill is fire brigade action arising from the fact that he can neither maintain in the Civil Service or recruit to the Civil Service persons with the desirable level of expertise to manage the national debt. It is also a symptom of a wider malaise in the Civil Service. Morale in the Civil Service was never lower; there was never such a feeling previously among civil servants of being ill-used, overworked, underpaid and treated in a manner which communicates a view that the real players in the economy are in the private sector, and that civil servants, though necessary, are not to be held in high regard.
Action by the Minister to ease the problem in areas where the shoe is pinching tightest, such as in this Bill, is ignoring the wider problem. The Minister, if he continues to ignore it, may seriously damage public administration in this country.
Our national debt is very high. It is big in actual terms and in comparative terms. At present it is about 117 per cent of GNP and stands between £25 billion and £26 billion. It has risen every year in living memory and will rise again this year. It costs over £2 billion to service the debt. This servicing consumes an enormous amount of tax revenue and if this was available for the provision of services or for the reduction of taxes, the consequences for the country would be dramatic.
The national debt has enormous consequences for all of us in this country. Therefore it follows that the management of the national debt is one of the crucial tasks of Government, and in particular of the Minister for Finance. Most of us in politics are general practitioners. I know of no Minister for Finance in recent times who himself had the expertise to run the national debt portfolio. All Ministers have had to rely on the expertise available within their Department to do so and have been well served. The problem of the national debt has to do with its size and the rate at which it is increasing rather than with the management of the portfolio. If the circumstances are now such that the Minister cannot maintain or recruit the level of expertise necessary and desirable to manage the national debt, changes must be made to ensure that such expertise is available.
In addressing the problem he faces, the Minister has decided to reconstitute the debt management section of his Department, as an agency responsible to himself, staffed by non-civil servants and paid for out of central funds. This arrangement will enable the Minister to provide higher pay and better conditions to the same people, to do the same job, and the organisation model used will prevent the pay increases from running through the public service in relativity claims.
This is the long and the short of the situation and attempts by the Minister to dress up the Bill in "brave new world" language is decorative but not relevant to the main purpose of the Bill. Nobody knows this better than the Minister.
I would now like to deal with the manner in which the Minister is dealing with the problem which I accept he is facing. First, he uses an unusual organisational model in addressing the problem.One would have thought that the State agency model would be the one used, whereby one would set up an agency similar to the Industrial Development Authority, Córas Tráchtála or any of the other agencies, with the Minister and the Government appointing a board who in turn would select a chief executive who would be responsible to the board. The Minister is not going to do this and it is worth looking at the reasons why.
First, it would probably be unconstitutional for the Minister to attempt to proceed along those lines and, second, it would require greater changes in statute law that he contemplates at present. If the Minister were to do so he would no longer maintain the responsibility he has to Parliament and I have no doubt we would all get those letters from the Ceann Comhairle's office which we all enjoy very much which state that the Minister has no direct responsibility for the day-to-day workings of the agency and that we could not pursue matters of key importance to the economy and national life, such as the management of the debt, in this House. Therefore, for legal reasons and reasons of parliamentary responsibility, the Minister could not proceed along that road and has had to look for an alternative model.
It seems that the model he has is the Minister of State model, whereby there is a delegation of responsibilities to an agency in exactly the same way as a Minister would delegate responsibility to a Minister of State, with the Minister holding all the delegated responsibilities in his own persona. Therefore, there will be an allocation of certain functions to an agency without diminishing the totality of the responsibility of the Minister. This on the face of it looks like a good compromise.The only model we have to go on is the one where a Minister delegates responsibilities to a Minister of State but I do not think that this model has worked very well under any administration, in that there may be problems of personality and function but even when full delegation orders are made I would question whether the precedents available for the construction of this agency are such that they will convince me or anyone else that this is an appropriate model for the agency.
How will it operate? A chief executive will be appointed and he will be responsible to the Minister. In the context of managing the debt that would seem to be the appropriate way to go, in that day-to-day decisions will have to be made. Each time we have put down a question on the national debt it has been indicated that there is a variation in the portfolio which encompasses the total debt. The real problem with the national debt is not the expertise available in managing the debt but rather its size, to a lesser extent its composition as between domestic and foreign borrowings and, to a greater extent, the rate at which it may increase or decrease.
These are the real questions and they are policy questions for the Minister for Finance and the Government. These are not matters which are going to be vested in the agency. Therefore it seems, even though the Minister is going to delegate the day-to-day functions of debt management to the agency, that at the same time he will have to maintain a parallel group of experts to advise him on policy matters within his Department so that on the one hand he will be in a position to evaluate the advice given to him by the agency and, on the other, he has experts available to advise him on all those very serious matters pertaining to the national debt which are not being delegated to the agency.
The best illustration I can give is as follows. When we put down Dáil questions on the level of the debt, we find that about two-thirds of it is domestic with the remaining one-third foreign. When we probe a little deeper we find, as the Minister said in his speech, that over IR£4 billion of what is supposed to be domestic debt is foreign investment in the domestic market. This forms a major portion of the debt. It will have a major effect on the total portfolio and the management of the debt, but the key factors which will decide that portion of the debt have much more to do with the level of interest rates and exchange rate policy than with the day-to-day management of the debt. The Minister's advice on exchange rate policy and on interest rates will not be coming from the debt management agency but from other areas of his Department.
While on the face of it the model the Minister is using — what I would call the Minister of State model — is a more desirable model than the State agency model and looks on the face of it to be the model which would be effective, it is difficult to see how it will work out in practice in a manner which will separate the functions of the agency from the functions of the Department of Finance. Debt management is after all one other macroeconomic tool and there are many others which will still remain vested in the Department of Finance. In many cases it is impossible to separate them. The fact that there is over £4 billion of German money in the Irish domestic market is something over which the debt agency will have limited control. The main decisions which will determine whether that decreases or increases, moves out or remains, will not be vested in the agency but elsewhere in the Department of Finance. I would ask the Minister to clarify this. How does he see the policy roles operating and the balance being maintained between the people who will advise him on the one hand and the agency on the other hand.
I now turn to the narrow function of the agency and the management of the portfolio. The mechanism is that the chief executive of the agency will make certain recommendations to the Minister which he will accept or reject. It seems that the Minister will not be in a position to evaluate the recommendations of the agency without a parallel group of experts within his Department. I said in my preliminary remarks that most of us in politics are general practitioners. I do not say this in any slighting way. It is our job to range over a whole area of public life. There is not enormous financial expertise in this House. I know of no Minister for Finance who on his own had the capacity or expertise to manage the national debt portfolio. I do not say this in any slighting fashion since it is not his job. His job is to see that it is done properly, but he is dependent on advice. If those who have been given the job of managing the debt in a new agency have to report to the Minister, how is the Minister to evaluate the advice? Until now it has been within the Department and the checks and balances of the Department have applied. Once it is taken outside the Department and vested in an agency, how does the Minister fulfil his constitutional and statutory obligations and his obligations to this House in evaluating the advice given to him unless he has a parallel group of experts within the Department? If he has such a group of experts within the Department, will not the same problem arise again? How does one keep them there at present levels of pay and conditions when they can do far better elsewhere because their expertise is in such strong demand both in the national economy and internationally? I would raise serious questions about the nature of the organisational model being used and I should like the Minister to deal with these points. He might also explain in detail how he sees his Department advising him and interacting with the agency when decisions are being made.
The Minister might also explain the status of the people employed in the agency. The Bill states in two places that the chief executive cannot be a civil servant and that the employees of the agency cannot and will not be civil servants. If they are not civil servants, what is to happen when the Bill becomes law? Will they all resign as civil servants and be reinstated the following day as public servants or State servants paid out of the central fund or as employees of the agency? When civil servants were moved into the employ of An Post and Telecom there were transition provisions in the legislation to clarify their status as they moved from being full civil servants to employees of an agency. No such provisions are in this Bill.
Will pay be a matter for the agency or for the agency and the Minister for Finance? Will pay levels be subject to the Gleeson reports? Since the Devlin committee there has been a tradition that the pay of chief executives of most agencies and their assistants is vested in Gleeson, but there is no mention of Gleeson here or in the Minister's speech. It seems from the omission that the Gleeson committee will have no role to play in this matter. The Minister is setting up an agency which will be totally outside the controls governing pay and conditions provided internally within the public service or outside through the Gleeson committee.Perhaps the Minister would clarify this point.
Employees of the agency will also be paid out of central funds rather than out of the Vote of the Department of Finance.Effectively this means that the pay is a matter of confidentiality and secrecy. The Minister might justify this. I can see why the Minister cannot keep the expertise within his Department and cannot recruit alternative expertise. He has to use a model which will maintain the expertise. If he simply increases pay within the Department of Finance relativity claims could run right through the public service. He is trying to avoid that. He is trying to ring fence 25 or 30 people by giving them pay and conditions relative to what they would earn in the private sector. Is it necessary that we in this House should not know about it? There is reference to audited accounts being presented to the Comptroller and Auditor General in a manner laid down by the Minister. I presume there will be a single subhead governing pay and that individual levels of salary will not be addressed. Again I seek clarification. What the Minister is doing is necessary. He simply cannot hold the expertise in that section of the Department and certainly cannot recruit new experts. I am challenging the manner in which he is doing it. I wonder about the model he is using and whether it is necessary to proceed in what appears to be a rather secretive manner. I wonder what the effect will be on the wider Civil Service and what effect it will have on the morale of people who work in other very important sections of the Department of Finance but whose skills would not be in the same demand in the private sector. These are very serious questions which should be addressed by the Minister.
The Minister might also outline the basis of the savings shown. There is mention of saving £35 million by better management of the debt portfolio in the current year. Is this a once-off saving or is the Minister thinking in terms of on-going savings year after year? He mentions that even a 1 per cent saving on debt servicing would amount to £20 million but 1 per cent is a very serious saving in the context of interest rates of 8 per cent. By moving from one currency to another and by risk management savings can be made, but to make the savings further risks have to be taken. The greater the risk the greater the potential saving. Also greater losses can be made if there is more trading and there is greater exposure to risk.
I would like the Minister to state the basis for the £35 million he mentioned in his budget speech but which he has withdrawn from today suggesting that £20 million might be possible on a 1 per cent sale. It seems that is part of the decorative packaging for presentation reasons, that the agency are really being set up to manage the debt more effectively and efficiently so that we can save money. I do not believe that. People managing the debt in the Department of Finance are doing a fine job, no other group could do it better. The crunch issue is if you cannot pay them enough you cannot hold on to them and, secondly, because you cannot pay them enough you cannot recruit adequate expertise to supplement them. That is what it comes down to, and it is not a question of saving £25 million or £35 million, it is an attempt to hold expertise within a creaking State structure. The problem is there and has to be met, but I challenge the savings and would like to see where they come from.
It seems from the detailed provisions of the Bill that it is putting on an alternative statutory basis the functions which were carried out already by the debt management section of the Department of Finance under existing legislation. Some additional functions are being allocated to the debt agency on a formal basis but I presume the people involved were involved informally in the same activity up to now. For example, on the request of the Minister the agency can advise on the borrowing requirements of public service agencies and the timing of such borrowings. If CIE, the ESB or the IDA want to borrow more money the Minister can say he would like advice from that agency on that and on the best time to float the loan and so on. I am of the view that that kind of advice was available already from the Department of Finance on an informal basis, that some of the very same people were giving this advice anyway and it is simply putting on an alternative statutory basis something that was being done informally already.
On the Minister's request advice can be given on the sale of assets by the debt agency. That is a new departure in the sense that the sale of assets did not figure very highly in Government policy until recently. I wonder how that interrelates and interconnects with the request by the Minister to the financial sector to provide him with advice on the possible restructuring of the Industrial Credit Corporation, and with the Government's intent now to restructure the capital of Irish Life and to sell off a part of the Irish Life shareholding. Will the new agency have a function in these two areas? Does the Minister intend to involve the new agency in an advisory role on the sale of Irish Life or in the restructuring of the ICC, or is he simply thinking about selling off fixed assets such as property or land in the possession of the State or of its agencies? However, it indicates a certain direction in Government policy that this is included in the Bill. If we are to have a debt management agency it is a legitimate role for that agency. I see nothing at all wrong with that.
I notice that the staff complement will be decided by the agency. That is a fair departure from the practice of the last ten years. No embargo will apply to the agency, rightly so, but should the agency have the authority to decide their own numbers with no reference to the Minister for Finance who is also Minister for the Public Service? That seems a very wide departure from the practice which has pertained up to now. It is not as if the agency will be trading commercially or will be in a position to pay staff out of their profits. In the final analysis they will be a non-commercial State agency on the State model.
Some of the details of the structures are quite unusual. I would like the Minister to reply in detail on three points. First, how does he think the agency will interrelate with his Department in so far as on the one hand he will be advised by the agency on the management of the national debt and on the other hand he will be advised on all policy issues which will be vital to the national debt by other officials of his Department? What organisational mechanism has he in mind to gel the two sets of advice? Secondly, can he justify the savings shown? Thirdly, will he comment on the unusual freedom being given to the agency in the matter of pay, conditions and number of employees which the Bill envisages? Finally, I would like him in his reply to give some information on the First Schedule where the functions of the Minister which may be delegated to the agency are enumerated by reference to sections of Acts right back through the years. I do not want the trouble of having to go to the Library and search them out when I am sure he has the information to hand. He must have if he reads it into the record.