Dáil Éireann díospóireacht -
Thursday, 29 May 2014

Vol. 842 No. 3

National Treasury Management Agency (Amendment) Bill 2014: Second Stage

Minister of State at the Department of Communications, Energy and Natural Resources (Deputy Fergus O'Dowd)

I move: "That the Bill be now read a Second Time."

First, this legislation will establish the Ireland Strategic Investment Fund, ISIF. This is one of the key elements of the programme for Government and the medium-term economic strategy published last December. The ISIF will take over the assets of the National Pensions Reserve Fund, comprising some €6.9 billion in the discretionary portfolio at the end of the first quarter of the year, to be used for commercial investment in the economy to support economic activity and employment and some €13.3 billion representing the directed investments in the pillar banks, together with related cash balances.

Second, the legislation will put NewERA, New Economy and Recovery Authority, on a statutory basis. The core role of NewERA is to provide financial and commercial advice on commercial semi-State bodies for shareholding Ministers. NewERA's role also involves, where requested, advising on the disposal or restructuring of State assets. In addition, it works with relevant stakeholders to develop proposals for investment in energy, broadband, water and forestry projects. It has been operating as a business unit within the NTMA and the Bill defines that function in legislation.

Third, the legislation will restructure the corporate governance of the NTMA and its associated entities. The Bill will streamline and simplify the governance structure of the agency and its associated entities which are now relatively complex as a result of the assignment to it of additional functions since it was first established in 1991 as a single function agency responsible for funding and debt management. The reconstituted agency will be directly responsible for funding and debt management, the Ireland Strategic Investment Fund, NewERA, the functions of the National Development Finance Agency, NDFA, and the State Claims Agency. There will be no change in relation to NAMA which will continue with its own board and to which the NTMA will continue to provide business services and staff.

Fourth, the legislation will put the legal costs unit within the State Claims Agency on a statutory basis. The NTMA is known as the State Claims Agency when dealing with claims against State agencies. The legal costs unit deals with third party costs such as those arising from the Mahon and Moriarty tribunals of inquiry, with the aim of minimising the financial exposure of the State and achieving significant savings for the Exchequer.

The Bill comprises seven Parts and four Schedules. Part 1 deals with the preliminary and general provisions, including the Short Title. Part 2 contains provisions relating to the governance structure of the agency. I trust Deputies will bear with me while I set out as clearly as possible the current governance structures in the NTMA.

The NTMA was established in 1991 under the National Treasury Management Agency Act 1990 to borrow on behalf of the Exchequer and manage the national debt. The agency was established outside normal public sector structures, with operational freedom to negotiate market competitive salaries. Information on these salaries is available in the annual report. This business model was designed to enable the NTMA to compete with the private sector and attract and retain specialists in mid-career who would not normally be attracted to working in a public sector environment.

Subsequently, a number of additional functions were assigned to the NTMA. As with debt management, these were also commercial and market-facing functions where the agency's business model gave it the flexibility to attract and retain staff with the necessary expertise and experience.

The agency took over the management of personal injury and property damage claims against the State in 2000, and is known as the State Claims Agency when doing so.

The National Pensions Reserve Fund was established in 2001. The agency is the manager of the fund. The National Development Finance Agency, NDFA, was established in 2003. Its role is to provide financial advice to State bodies undertaking major public investment projects and to procure and deliver public-private partnership projects in sectors other than transport and local authorities. It also procures non-PPP schools on behalf of the Department of Education and Skills. It acts through the NTMA.

The NTMA, acting through its NewERA unit, provides advice to shareholding Ministers in regard to commercial semi-state bodies. The NTMA also provides staff and business and support services to NAMA. Turning to the governance structures underlying these functions, the NTMA does not have a board, although it does have an advisory committee whose role is to advise on matters referred to it by the agency. The chief executive is directly responsible to the Minister for the performance of the functions of the agency. The chief executive reports directly to the Minister on the NTMA's funding and debt management, State Claims Agency and NewERA functions. To that extent, the agency is more like a Department than a State agency.

The NTMA is responsible for claims management and risk management on behalf of State agencies and is known as the State Claims Agency when doing so. A committee advises on policy and procedures in regard to that work.

The NPRF, the NDFA and NAMA - all of which were established under their own governing legislation - all have their own boards. The NTMA acts as the executive in respect of the NPRF and the NDFA. It assigns staff to NAMA and also provides it with business and support services and systems. The NTMA chief executive is an ex officio member of the NPRF commission and the board of NAMA and is ex officio chairman of the NDFA. A director of the NTMA acts as CEO of the NDFA. The NTMA has a number of other functions, such as providing a central treasury service to State agencies and managing various funds, but these are not affected by this Bill.

That is the current position. The agency has carried out the functions it has been assigned with skill and dedication. The governance structure under which it operates has become unwieldy and complex, as my speech indicates. As we put NewERA, the ISIF and the legal costs unit on a statutory footing, we are taking the opportunity to simplify and streamline the governance structures of the NTMA to ensure it is governed in a way that reflects best practice and that will assist it in working in an integrated manner towards the achievement of its objectives.

The legislation will convert the agency into a body with members, effectively a board. It will have nine members in total, six appointed by the Minister for Finance, serving a five-year term, and, ex-officio, the chief executive officer of the NTMA, the Secretary General of the Department of Finance and the Secretary General of the Department of Public Expenditure and Reform. The Minister for Finance will nominate one of the appointed members as chairperson. All these people will have to have specialist skills and knowledge in the areas in which they are operating.

The reconstituted NTMA will continue to be directly responsible for the borrowing and debt management functions, as well as the State Claims Agency and various other functions such as the central treasury service, just as it is now. In addition, it will now be directly responsible for the Ireland Strategic Investment Fund and NDFA functions, rather than acting on behalf of other statutory bodies, and it will have NewERA.

No changes are proposed to the existing arrangements in respect of NAMA. NAMA will continue to have its own separate board and the existing arrangements whereby the NTMA assigns staff to NAMA and provides business and support services, including HR, IT, market risk, finance, compliance and treasury services, will also continue. On foot of the changes outlined, the NTMA advisory committee and the NDFA and its board will be dissolved, as will the State Claims Agency policy committee. The NPRF commission will also be dissolved as soon as practicable.

Turning to the detail of the governance changes, section 8 of the Bill amends the NTMA Act 1990 to provide that the National Treasury Management Agency will be a body with a chairperson and other members. The members will in effect form a board that will be responsible for oversight of the agency and will report to the Minister for Finance. As I mentioned earlier, there will be nine members, with six appointed by the Minister, in addition to the chief executive of the agency, the Secretary General of the Department of Finance and the Secretary General of the Department of Public Expenditure and Reform. The Minister may appoint as members only persons with expertise and experience at a senior level in a number of specified areas, such as investment, treasury management, economics and accounting. The Minister is required to ensure that there is an equitable balance between men and women, as far as practicable. The chair of the agency is appointed by the Minister.

Section 8 inserts a new Schedule, Schedule A, into the NTMA Act 1990. This sets out the detail in relation to the members of the agency. Appointments will generally be for five years, but the term of office of the initial members will be staggered so that they do not all end at the same time. This is in the interests of continuity. A member may not serve more than two consecutive terms of office. Terms and conditions of appointment will be set by the Minister for Finance. The Schedule also contains ancillary provisions, covering such areas as disqualification from office and filling of vacancies. Any remuneration of board members will be published in the annual report. There will be total transparency.

Section 9 inserts a new section 3B in the NTMA Act 1990 to provide for the procedures of the agency, the detail of which is set out the Schedule. This sets out rules for the quorum for meetings, electronic meetings and the seal of the agency. The agency will be able to hold incorporeal meetings and pass resolutions by majority without a meeting. This sort of flexibility is essential for an agency which has a central role in the financing of the Exchequer in order to allow speedy decision-making.

Section 10 inserts new sections 5A and 5B in the NTMA Act 1990 to establish an investment committee, which will be a committee of the agency and, under the authority of the agency, will be responsible for the investment of ISIF, and allow the agency to establish other committees, respectively. The investment committee will have up to seven members, two members of the agency and up to five persons who are not members of the agency but who have substantial relevant expertise and experience and are appointed with the consent of the Minister for Finance. The chair of the investment committee will be a member of the agency and will be appointed by the agency.

Section 11 amends section 6 of the NTMA Act 1990. It sets out the role of the chief executive, reflecting the reconstitution of the agency and the change in reporting relationships. The chief executive will be appointed by the agency with the consent of the Minister for Finance.

Section 12 inserts new sections 6A and 6B in the NTMA Act 1990. They provide for the chief executive to appear before the Committee of Public Accounts of Dáil Éireann and for the chairperson and chief executive to appear before other Oireachtas committees, respectively. There will be direct accountability to the Oireachtas in that context.

Section 13 effectively updates section 10 of the NTMA Act 1990 so that members of local authorities, as with members of the Oireachtas and European Parliament, may not be employed by the agency. If an employee of the agency becomes a member of a local authority, the Oireachtas or the European Parliament, he or she will stand seconded from the agency.

Section 14 amends the provisions concerning the accounts of the agency pursuant to section 12 of the NTMA Act 1990 to take account of the new structures. The accounts are to be signed by the chief executive and an appointed member of the agency. The chief executive will be the officer accountable for the agency.

Section 15 inserts new sections 13A and 13B. These sections cover the disclosure of interests by members of the agency and committees of the agency and members of staff of the agency, respectively.

Section 16 inserts a new section 13C which provides for the indemnification of members of the agency, members of a committee of the agency, members of staff of the agency and members of the National Pensions Reserve Fund Commission, where the agency is satisfied that duties have been discharged in good faith.

Section 17 replaces section 14 of the Act, covering the disclosure of confidential information. It updates the existing provision to take account of the new structures proposed for the NTMA and developments with regard to the disclosure of confidential information since the NTMA was established. The existing provision is very strict: it is an offence for a person to disclose information obtained in the course of carrying out his or her duties on behalf of the agency. The new section is more nuanced. It will continue to be an offence to disclose, without the consent of the agency, information obtained while performing functions on its behalf. This is essential, given that staff of the agency will have access to information which is very sensitive commercially. However, it will not now be an offence to disclose confidential information in certain circumstances, including disclosure to the Minister for Finance or An Garda Síochána where the information may relate to the commission of an offence. These qualifications to the legislation mean that there is a route available for individuals who believe they should raise issues outside the confines of the agency. Given the pivotal role of the agency in financing the State, while sensitive commercial information is protected, it is also essential that individuals should be able to bring justifiable concerns to an outside authority without risking committing an offence.

Part 3 deals with the New Economy and Recovery Authority, NewERA, which is already up and running as part of the NTMA, providing financial and commercial advice on certain commercial semi-State bodies for shareholding Ministers. This part of the Bill puts NewERA on a statutory basis. The idea behind NewERA is that it will help to oversee the financial performance, corporate strategy and capital and investment plans of commercial semi-State bodies. It will provide a dedicated source of corporate finance expertise for Ministers taking a commercial approach to the oversight of semi-State companies, with an emphasis on return on capital. It will also work with stakeholders to develop structures and proposals for investment in energy, broadband and water projects to support economic activity and employment. Its role will also involve, where requested, advising on the disposal or restructuring of State assets.

The NTMA will be responsible for the performance of the shareholder advisory functions and known as NewERA when performing these functions. Section 18 sets out the designated commercial semi-State bodies on which the agency will provide advice. These are the ESB, Bord Gáis, Bord na Mona, Coillte Teoranta and EirGrid. The Minister for Finance, after consulting the NTMA, the Minister for Public Expenditure and Reform and relevant shareholding Ministers, may add other State bodies to the list by order. This enabling provision will allow other shareholding Ministers to benefit from NewERA's commercial expertise.

Section 19 defines what NewERA does. It provides financial and commercial advisory services on request for Ministers in respect of the commercial semi-State bodies within its remit. This covers advice on a wide range of issues: a Minister's statutory role, exercising rights as a shareholder, the governance of a semi-State body, expected rates of return, dividend policy, corporate and investment strategy, acquisitions and disposals, as well as appointments and the remuneration of directors and the chief executive. NewERA will also be able to provide project management services and for oversight of acquisitions and disposals and restructurings, at the request of the Minister.

The Minister for Public Expenditure and Reform will have power to give directions to NewERA on the performance of its functions. He or she must first consult the Minister for Finance and any relevant shareholding Minister. This mirrors the ministerial power of direction over other NTMA functions. Any such direction must be published.

An important aspect of the role of NewERA is that it is required, under subsection (4), to have regard to the effective and efficient application of capital by commercial semi-State bodies taken as a whole. The point is that commercial semi-State bodies should not be looked at in isolation, one from another. Rather, a portfolio approach should be considered with a view to optimising the deployment of capital.

Section 20 provides that the agency may provide financial and commercial advisory services, as well as project management and advisory services, in regard to other bodies and assets if requested by the Minister with responsibility for the body or asset.

Section 21 requires NewERA to submit a report on the financial performance of each of the commercial semi-State bodies within its remit to the Minister for Public Expenditure and Reform and relevant Ministers each year.

Section 22 provides that the agency, in consultation with relevant Ministers, may develop proposals for investment to support economic activity and employment in energy, water, telecommunications and forestry projects. The Minister for Finance, having consulted the Minister for Public Expenditure and Reform and other relevant Ministers, may specify other sectors by order. A successful example of work in this area was NewERA's work with the Department of Communications, Energy and Natural Resources on the recently announced launch of the €70 million national energy efficiency fund backed by London and Regional Properties and Glen Dimplex.

Section 23 requires Ministers to provide NewERA with the information it requires to carry out its functions. Ministers must have regard to the advice provided, but this does not constrain them in any way.

Section 24 provides that NewERA is to establish procedures for seeking and providing advice, in consultation with the Minister for Public Expenditure and Reform and relevant Ministers. The protocols agreed will streamline interactions between the agency and Departments and ensure NewERA will achieve its full potential.

Part 4 gives the agency responsibility for the role currently carried out by the National Development Finance Agency, NDFA, in regard to infrastructural projects. The NDFA was established on 1 January 2003 under the National Development Finance Agency Act 2002 to provide financial advice for State authorities on capital projects over a certain size - at present €20 million. It also procures and delivers PPPs other than in the transport and local authority sectors. As I said, it is currently a stand-alone corporate body which discharges its functions through the NTMA. It is proposed that the NDFA and its board be dissolved and its functions be assigned directly to the agency.

The two National Development Finance Agency Acts of 2002 and 2007 are repealed by section 6 and this Part, in effect, restates the provisions of these two Acts in so far as they relate to the NDFA's functions, with one exception. The 2002 Act provides that the NDFA can borrow and advance moneys in respect of infrastructural projects, but this power is being removed because the revised rules on Government accounting treatment, as issued by EUROSTAT in February 2004, deemed such transactions to be "on" the State's balance sheet and, consequently, this provision was never used.

Section 25 defines terms used in this Part. Section 26 gathers together the functions of the NDFA under the National Development Finance Agency Act 2002, the National Development Finance Agency (Amendment) Act 2007 and the Education and Training Boards Act 2013. These are as follows: providing advice on the optimal financing of public investment projects for State authorities which are defined in Schedule 3 to the Bill and which broadly mean Departments and non-commercial semi-State bodies; providing a specialised procurement delivery function in respect of PPPs, with the exception of road and rail projects, for which the NRA has responsibility; and providing a procurement service in respect of non-PPP schools on behalf of the Department of Education and Skills.

Section 27 provides that the agency shall have regard to policy directions and guidance issued by the Minister for Public Expenditure and Reform to State authorities on the financing of public investment projects and PPPs. Section 28 provides that a State authority shall seek the advice of the agency before undertaking a public investment project, subject to guidelines that may be issued by the Minister for Public Expenditure and Reform. Section 29 provides that the Minister for Public Expenditure and Reform may specify State authorities, in other words, bodies which the NDFA can advise.

Under section 30, the NDFA recoups its costs from the State bodies for which it provides its services.

Part 5 establishes a legal costs unit within the State Claims Agency function to look after costs awarded by tribunals of inquiry. Part 5 sets out the detail of how the agency is to operate when managing claims for costs. The Government will delegate to the agency claims in respect of specific tribunals. The National Treasury Management Agency (Amendment) Act 2000 and subsequent delegation orders delegated to the NTMA a range of functions in respect of the management of personal injuries claims, including bullying and harassment and third-party property damage claims, and their associated risks, against specified State authorities. The agency is known as the State Claims Agency, SCA, when performing these functions.

The SCA has already started to advise on costs awarded by the Mahon tribunal on planning matters and the Moriarty tribunal on payments to politicians. Setting up the legal costs unit within the SCA is being done to minimise the State's exposure and deliver significant savings to the Exchequer as it is recognised that third-party costs represent the major portion of the costs of tribunals. These costs are awarded by the tribunals and their amounts are drawn up in retrospect. The legal costs unit will provide specialist advice in this area and will assess and-or challenge third-party costs claims in order to ensure the costs to the Exchequer are reasonable.

Sections 31 and 32 define terms used in this part. Section 33 provides that the agency will manage delegated claims for costs to ensure that costs and expenses are contained at the lowest level achievable. Section 34 empowers the Government to delegate the management of claims for costs to the agency. Section 35 specifies that when managing claims for costs, the agency will do so on behalf of the Attorney General. Section 36 sets out the arrangement which will apply in respect of the payment of legal costs and professional fees. The agency will make such payments out of advances from the Post Office Savings Bank Fund and will subsequently recoup the amounts from the relevant State authority.

I will now move on to Part 6. In September 2011, the Government announced its intention to establish the Strategic Investment Fund, which formed part of the programme for Government published in March 2011. The intention is that the Ireland Strategic Investment Fund, ISIF, will channel its resources towards productive investment in the Irish economy and leverage its resources with private sector co-investment and target investment in areas of strategic significance to the future of the Irish economy. Part 6 of this Bill establishes the ISIF. The ISIF will replace the National Pensions Reserve Fund, NPRF, with a mandate to invest on a commercial basis in Ireland so as to support economic activity and employment. The NPRF was established in 2001 as an investment fund to build additional resources to support the Exchequer from 2025 onwards when it was projected that the burden of social welfare and public service pensions would have increased significantly. The NPRF is controlled by the NPRF commission. The NTMA is the manager of the fund and is essentially responsible for investing the NPRF as approved by the commission. In 2009, amending legislation was introduced to allow the Minister for Finance to direct the NPRF commission to recapitalise the banks in order to support the banking system. These are called the directed investments. The value of the NPRF holdings in Irish banks together with related cash balances was €13.3 billion at the end of March. The value of the fund's other investments was €6.9 billion at the end of March. This is what we call the discretionary portfolio which is managed and invested by the NPRF commission.

While the State must continue to be aware of the future budgetary implications of social welfare and pension obligations, fostering economic activity and employment in Ireland is a greater priority in the current circumstances and the resources of the NPRF should be redeployed accordingly. As the Minister for Finance has stated, the best way to ensure that the State is in a position to meet its future obligations is to ensure the economy is growing. The ISIF is to be invested on a commercial basis. This will put the fund in a position to leverage its resources by attracting private sector co-investment, recycle its resources in order to make more strategic investments over time and ensure the public assets entrusted to the fund are not frittered away. The primary point of the exercise is to enhance economic activity and increase employment in Ireland which in turn will support the Exchequer.

The agency will be responsible for setting the overall investment strategy for the ISIF. When determining and reviewing the strategy, the agency must consult the Ministers for Finance and Public Expenditure and Reform, who may consult other Ministers, and must have regard to their views.

Acting Chairman (Deputy Derek Keating)

The Minister is approximately two thirds of the way through his speech so it would take a considerable amount of time to read it.

Deputy Fergus O'Dowd

I have about 15 pages.

Acting Chairman (Deputy Derek Keating)

There is a good ten minutes left of his speech.

Deputy Fergus O'Dowd

So I cannot read it? Okay.

Deputy Michael McGrath

I am glad to have the opportunity on behalf of Fianna Fáil to speak to Second Stage of this Bill and to state at the outset that we welcome the broad thrust of this Bill and will be supporting its passage on Second Stage and will be considering appropriate amendments on Committee Stage. As the Minister of State knows, on a number of occasions, I have raised the issue of the lengthy delay in getting this legislation brought forward with him and the Minister for Finance. It was back in September 2011 when the Government first announced the establishment of a strategic investment fund so this Bill is very much overdue but I welcome its publication and the fact that we are finally getting to discuss it.

The NTMA has undergone a remarkable process of development since its original establishment in 1990 when Albert Reynolds followed through on a budget commitment to establish, under statute, an independent office for the management of the national debt. The impetus for its establishment was the fact that debt management had become an increasingly complex and sophisticated activity, requiring flexible management structures and suitably qualified personnel to exploit fully the potential for savings. Albert Reynolds also pointed out that with the growth of the financial services sector in Dublin, the Department of Finance had been losing staff that were qualified and experienced in the financial area and it had not been possible to recruit suitable staff from elsewhere. The then main Opposition spokesperson on finance, who I believe was a certain Deputy Noonan, said that the action by the Minister in setting up the NTMA was a fire brigade action arising from the fact that he could neither maintain in nor recruit to the Civil Service persons with the desirable level of expertise to manage the national debt. That was 1990 though and since then, the NTMA has developed from a single function agency managing the national debt to a manager of a complex portfolio of public assets and liabilities.

This Bill looks to rationalise and simplify the governance structures at the NTMA to enable a more integrated approach to the performance of its functions which have expanded significantly over the past 24 years. The agency will be reconstructed as a body with a chairperson and other members who will have overarching responsibility for the agency's existing debt management and State Claims Agency functions, its function in respect of infrastructure projects currently carried out by the National Development Finance Agency, NDFA, and the ISIF and NewERA.

There will be no change in the relationship to NAMA. Under this legislation, the NPRF will become the ISIF and in that regard, it will have a statutory mandate to make commercial investments domestically that sustain jobs and growth. We very much welcome this. It also has a role in the NewERA project and will be known as such in this regard and may also bring forward suggestions for investment in particular sectors of the economy. The Bill also establishes a legal costs unit within the State Claims Agency function to deal with third-party costs arising from certain tribunals of inquiry. Three years ago, we suggested leveraging private pensions and the NPRF as a means of supporting infrastructure investment. I know other Opposition groups have made similar proposals. The Government is now belatedly coming round to this idea. However, given its failure to deliver on existing promises, there must be considerable doubt over whether forthcoming announcements will actually produce the tangible benefit they have the potential to deliver.

When the Government announced in September 2011 that it would establish a strategic investment fund, we understood that the legislation would be brought forward quickly, which simply has not happened. While the merit of maximising non-Exchequer capital investment is universally recognised, the Government's plans lack ambition and are likely to be of limited impact as currently devised. In our pre-budget submissions in recent years, we have proposed a mandatory total investment of 1% per annum for the next three years from private pension funds and a matching investment by the NPRF from its discretionary portfolio. This gives a potential €4.2 billion for investment on a commercial basis in infrastructure opportunities, would be separate from the public capital programme and could complement the investments that will flow from the ISIF.

The size of the fund could be further enhanced by making investment in it available to regular savers in a manner similar to the national solidarity bond as well as additional market funding where available. Earlier this year, following a successful bond sale in which the NTMA raised funds under 3%, we called for consideration to be given for action by the NTMA to significantly reduce the current interest burden of the national debt.

Currently, for example, the average interest rate on our national debt is 4%. This is made up of both market and official funding under the EU-IMF programme. We pointed out that there are two options that the NTMA could consider. First, there is the option of an open market buy-back of some of the more expensive debt funded from either the cash reserve we currently hold or by issuing new debt at the current lower rates. Second, while the interest rate on our EFSF-EFSM funding was reduced and the term extended we are continuing to pay 4.1% on our loans from the IMF. Refinancing these loans at even 1% lower than the current rate would save us €225 million on an annual basis. We need to secure the agreement of the European Commission and the ECB for this to happen. Given the European authorities have stated that they wish to enhance the sustainability of the Irish economic recovery, agreeing to allow us pay off our more expensive loans would be a practical demonstration of this commitment and we call on the Government to pursue that option. It is essential that the Minister for Finance works with the NTMA to bring this about.

We also believe that savings that are achieved should be deployed to support investment in infrastructure and job creation. The importance of the Government and the NTMA maximising savings is also underlined by comments of former Taoiseach and Minister for Finance, John Bruton, who has spoken of the possibility of another ten years of budget adjustment. He cited the EU fiscal compact treaty, which commits us to reducing the debt-GDP ratio from 120% to 60% and highlighted the fact that the Department of Finance's figures showed that budget surpluses will have to be run to get the debt down. The Minister might indicate his assessment of Mr. Bruton's contribution to this debate. The NTMA in its May investor presentation is forecasting that the budget will be in balance by 2018. That is the year revenue and spending will finally meet, yet, if Mr Bruton is to be believed, there will be another six years of consolidation after that. We need to know the Department's assessment of his contribution.

Clearly we have to maximise growth over the next decade and with that in mind, it is vital that in making investments the focus must be on boosting Irish business and jobs rather than just generating profits for asset management companies in the private sector. We heard earlier this year of a fund to make €6.8 billion of commercial investments to boost Irish business and that 13 investments have been made by the entities into which the NPRF has put hundreds of millions of euro as part of its drive to stimulate the economy. The NPRF made cornerstone investments totalling €375 million in three entities with which it has partnered, respectively, and the funds have different objectives, with one focused on healthy businesses seeking to grow, another focused on underperforming businesses and a third on originating and acquiring loans to larger SMEs. The theory is that these funds will benefit the SME sector but sometimes it seems the fund manager will see the real benefit.

The State has a proud record of making investments which serve otherwise unmet economic and social need over a prolonged period. Companies such as the ESB, Coillte, Bord na Móna and Aer Lingus were pioneers in their time meeting critical needs in the country and at the same time providing employment and a significant return to the State by way dividends over the years. The aim for the ISIF should be similarly ambitious in terms of the needs of the 21st century. The ICT sector is one that offers particular opportunities for both an investment return and also significant employment benefit.

There is a huge need for capital investment in the economy. The investment component of GDP is the one that fell most dramatically by up to 60%. The private sector has not as yet, nor is likely to, be able to restore levels of investment to pre-recession levels. There is, therefore, an obvious need for the State to step in. The much vaunted 1,000 jobs a week growth in employment is beginning to tail off, according to the recent CSO figures; it is now not much more than 1,000 jobs a quarter. Every job that is gained is to be welcomed. The Minister may regret stalling on bringing forward this measure, as it is not likely to result in a practical benefit for more than 12 months, other than the raft of announcements similar to that which we had in the run-up the recent local and European elections.

Everyone agrees that the original intent with respect to the NPRF was a good idea - setting aside 1% of GNP annually to provide for public sector pensions from 2025. In the run-up to the last budget, we warned that the Government was ignoring major long-term issues such as future pension provision. While the Bill is welcome as an economic stimulus measure, a comprehensive plan is still needed to ensure the huge and growing future pension liability is met. The performance of the ISIF should be benchmarked against similar investment funds on an annual basis in order that we can make an assessment of how it is progressing.

The legislation establishes a legal costs unit within the State Claims Agency to deal with third party costs arising from certain tribunals of inquiry. In its role as the State Claims Agency, the NTMA also manages personal injury, property damage and clinical negligence claims brought against certain State authorities, including Ministers and health enterprises. It also has a risk management role, advising and assisting State authorities in minimising their claim exposures. Total legal costs for the agency increased by €3.6 million between 2012 and 2013. It had legal costs totalling in excess of €39 million in 2012 and almost €43 million in 2013. Those figures are inclusive of €21.9 million in fees to solicitors in 2012 to defend claims managed by the agency, which increased to €24.3 million last year. Public liability cases currently take an average of three years to complete, an increase from 2.4 years since 2011, while employer liability cases take 3.7 years, down from 4.1 years in 2011. Third party property damage cases take 350 days, up from 335 days in 2011, while clinical claims take an average of four years, up from 2.9 years. Clearly, the lengthy time period which it takes to deal with claims is contributing to the high legal costs that are being incurred.

While the Bill has no impact on NAMA, it is worth noting its annual report published this week. When we voted to set the agency up five years ago, there was enormous scepticism about its operation, yet it is clear now that it will fulfil its mission, hopefully ahead of target. The agency expressed increasing confidence that it will complete its work earlier than 2020, as originally envisaged. Subject to the outcome of portfolio and asset sales currently under way, it aims to have as much as half of its senior debt repaid by the end of the current year, two years ahead of schedule. As the chairman of the agency pointed out, this is an important achievement for taxpayers. NAMA paid €31.8 billion for the loans it acquired and €30.2 billion of this comprised senior bonds guaranteed by the State, which is a contingent liability on taxpayers. When the agency was set up, many expressed outright disbelief that it would succeed and claimed it could cost the State additional billions of euro but it is likely it will not cost the taxpayer additional money and may well generate a surplus over its lifetime. It must be acknowledged that when the agency purchased the loans from the banks, significant losses crystallised on their balance sheets and this gap was plugged by the vast recapitalisation of the banks by the State at the time. NAMA looks set to at least break even in the context of its own liabilities and that has to be welcomed.

When the late Brian Lenihan passed away, the Minister for Finance generously acknowledged that his predecessor had done the heavy lifting on the public finances and the establishment of NAMA and its success to date will be a positive legacy of the former Minister, notwithstanding the issues the agency needs to address in the context of, for example, improving the transparency in the way in which it operates. Along with others, I have raised many issues of concern regarding the agency's operations and will continue to do so but, overall, it is critically important for the State that the agency does well in its financial performance.

I refer to the Government's recently announced construction stimulus plan. It seemed to be little more than an election stunt.

In any case it contained neither measurable jobs targets nor any real measures to tackle the housing shortage. When one strips back the spin and takes a second look at the 75 actions in this document, it is plain that there are no details on how the shortage of new housing units will be addressed, there is no new investment in social housing and no apprenticeship scheme to help construction workers to qualify for new jobs in the future. Indeed, the document bore an uncanny resemblance to the lofty promises in the NewERA document of some years ago, which pledged to provide 100,000 new jobs. Three years later we are struggling to see any evidence that these jobs have been realised. Just as the job promises in the NewERA document evaporated in a matter of weeks, it is legitimate to fear that the 60,000 jobs promised in this document will suffer the same fate.

The plan promises investment of €50 million in social housing nationally, but Dublin City Council has been forced to halve its investment in social housing, reducing it by €40 million this year, due to budget cuts imposed by the Minister for the Environment, Community and Local Government, Deputy Hogan. If the social housing spend is down by €40 million in Dublin city alone, the new investment of €50 million in this document goes nowhere near what local authorities have already been forced to cut from their social housing budgets.

We support this Bill. We believe in intervention by the State where there is an investment vacuum. However, we must be both ambitious and careful in how we act. That is a balance which is often difficult to achieve. I reiterate my concerns about pension funding into the future. Allied to this are projections for a massive jump in the number of Irish people over the age of 85 years and all that entails for care budgets. While this Bill is welcome as an economic stimulus measure, we still require a comprehensive plan to ensure that the huge and growing future pension liability is met.

My final point relates to the directed portfolio within the NPRF, which includes our shareholdings in Bank of Ireland and AIB. Will the Minister address that point further in his reply to the debate? Is it still the intention of the NPRF to sell those shareholdings to the European Stability Mechanism, ESM, as part of any retroactive recapitalisation deal concerning the Irish banks? It is important that the Government clarify the role it sees itself playing for State companies generally in the future. Currently, it appears to view the commercial semi-state companies as a cash cow to plug the gap in the State's finances, not as a long-term asset to be protected and nurtured.

Deputy Pearse Doherty

I am sharing time with Deputy Tóibín.

Ar dtús báire, ba mhaith liom fáilte a chur roimh an reachtaíocht seo. Mar atá ráite ag an Teachta McGrath, tá seo fógartha le blianta fada agus níl a fhios agam cé mhéid uair atá sé ardaithe agam leis an Taoiseach, an Tánaiste agus leis an Aire Airgeadais, ná cé mhéid uair a d'fhiafraigh mé cén fáth an raibh moill á chur ar an reachtaíocht seo.

Bhí dhá phíosa reachtaíochta faoi leith fógartha ag tús na bliana, ach nuair a fheicim an reachtaíocht seo, tuigim go bhfuiltear curtha le chéile anseo, ach ní fheicim réasún ar bith cén fáth go raibh moill de thrí bliana curtha ar an reachtaíocht seo a thugann deis dúinn infheistíocht chuí a dhéanamh san eacnamaíocht. Seo infheistíocht atá á chuartú ag go leor den phobal agus ag gnólachtaí agus tá daoine ag scairteadh mar gheallair. Ar an drochuair, idir an trí bliana sin tá go leor daoine a d'fhág an tír seo mar nach raibh na deiseanna ann dóibh agus mar nach raibh an infheistíocht déanta agus mar go raibh an eacnamaíocht chomh lag sin nach raibh poist ar fáil. Ar an drochuair, b'fhéidir go bhfuil siad ag éisteacht leis an díospóireacht seo in áiteanna mar Cheanada, na Stáit Aontaithe nó An Astráil.

I am glad we are finally discussing this Bill today. It must be the most announced legislation this Government has introduced, but we can finally get down to the detail and cut through the spin now that the legislation has been published. The creation of a strategic investment fund was first announced in September 2011. It was re-announced a number of times, and again in June 2013. Now, in May 2014, more than three years after the Government came to power, it reaches us for the start of the legislative process. On the second announcement I said it was long overdue; now it is just very late. Billions have been squandered from the National Pensions Reserve Fund on zombie banks in the intervening period. This is not just a political point but a real criticism. Three years have passed without any of the type of State investment that is required in the appropriate measure. At a time of emigration and high unemployment the State needed to step in and invest, but the Government sat on its hands and allowed the economy to shrink, our young to leave and our public services to deteriorate. We must compare how swiftly the Government was prepared to legislate to cut civil servants’ pay and remove the protection of the family home with how long this legislation has been in preparation. That is the story of where this Government’s priorities lie. Investment is an afterthought, something to consider three years later.

My party has always argued for, and shown how, investment in a stimulus package, coupled with a fairer way of adjusting the budget, could put us on the road to recovery and help us to reduce the deficit as required. I therefore welcome this conversion to the principle at least, although the detail shows how the conservative hand means in practice that this new vehicle will be severely limited in how it can kick-start our economy. Stimulus has always been part of the solution and I am glad the Government is coming around to that Sinn Féin position. It must be a well-directed and effective stimulus, but I fear that is where this Bill is not as good as it should be. We will seek to amend the Bill on Committee Stage to improve it and to make is as useful as it must be if the full benefits of stimulus are to be realised. While this Bill marks a positive step towards sensible economic planning, it still bears the hallmarks of a conservative and austerity-addicted mentality in many ways. It also bears the fingerprints of the troika squeezing out the potential for a positive State-led economic initiative. I doubt it met much resistance from this Government.

Sinn Féin has shown how we would leverage the available NPRF to make a real impact in the economy. We would have had it up and running by now, investing on the necessary scale. This Bill is frustrating for those of us who wish to see a real stimulus package put in place. The concept of a strict adherence to the need for a commercial return is one with which we are uncomfortable. It is a measure of how much we remain under the thumb of EU law that the act of investing in our economy has become such a tortuous exercise. In fact, the rules are so fixated on proving a commercial return that the potential for real and immediate impact is blunted. Where is the guarantee of actual benefits to the real economy if each project must be vetted through committees and must find a commercial partner in times of economic hardship?

Sinn Féin has put forward proposals that would produce an economic return on investment, but these rules appear to be crippling the possibilities. Simply put, building hospitals, schools and other infrastructure sometimes goes beyond a commercial return. The fund’s limits to economic activity and employment would appear to rule out social or environmental investments which in time would undoubtedly benefit the country. How is this fund going to help ease the crisis in social housing, for example?

The Bill lacks a vision. It is not an ideal vehicle for the type of stimulus Sinn Féin has envisaged and championed. The opportunity for a State–led strategic wave of investment is severely limited by the use of committees through which each project must be filtered. The strict requirement for a private partner, possibly up to the point of being a 50:50 partner, will reduce the effectiveness of any investment from the State’s point of view and, as we have seen previously, will benefit the companies rather than the State or society or those in need of work.

Last week, the Government announced it was establishing a strategic banking corporation - that is, a company. Those words are carefully chosen. It is a strategic banking corporation, not a bank. In a reply to me last night, the Minister for Finance, Deputy Noonan, admitted that the strategic banking corporation would not have a banking licence.

A bank without a banking licence is not a bank. As such, when will the programme for Government commitment to establish a strategic investment bank be met? One cannot simply set up a company and include the word "bank" in its name and call it a bank. A bank has a banking licence. That is the rule and as basic as it gets. This vehicle will not have a banking licence. Last week's plan amounted to a German bank paying into a fund from which money will be given to the banks in the hope that they will lend to the real economy. However, there is no safeguard to prevent the banks simply soaking up this money as they have been doing or to prevent it being drawn down.

I have noted already the complex and perhaps too rigid tests that must be passed before any investment can be made in the real economy. There is, however, a part of the Bill which allows the Minister for Finance to write a blank cheque. Section 42 permits the Minister to use the National Pensions Reserve Fund to bail out banks once again. If one wants to invest in the real economy, in broadband, housing, water or in the infrastructure our communities are crying out for, one must go through all of the rigorous tests and have a private investor in place. One must pass all the different committees and undergo the various scrutiny processes and there must be a return. However, if the banks come knocking on the Minister's door and, after consulting with the Central Bank, he or she deems the billions that have been raised by the Irish people should be squandered into this bank, he or she can direct the fund manager to do that. Section 42 is an appalling section and requires greater scrutiny and a proper explanation from the Minister as to what the Government is doing here.

I note that when one looks at the accountability of the chief executive officer, one sees that he or she is required to come before the Oireachtas committee and answer questions on any issues members raise. However, he or she is not allowed to make any comment on any policy or order from the Government or the Minister. If the Minister had to turn around and say "Listen folks, AIB or Bank of Ireland is in trouble and we need €4 billion of the €6 billion you were planning to invest in the real economy for the bank", the CEO cannot comment but must oblige the Minister's order.

Sinn Féin is opposed to putting NewERA on a statutory footing. We are opposed to what NewERA stands for. It is a vehicle for the privatisation of profitable State assets, including Bord Gáis, the ESB and Coillte. Putting NewERA on the footing proposed in the Bill is further proof that the troika mindset is still very much being in place in Government Buildings, Fine Gael and the Labour Party.

While we will deal in greater detail with many sections on Committee Stage, I wish to comment on the part of the Bill dealing with the State Claims Agency and the centralisation of claims made against the State. Claims have been made in the past and claims will emerge in future. They may result from institutional abuse, as happened in the case of the Magdalen laundries, or from tribunals of inquiry as we saw with the Moriarty and Mahon tribunals. Some of the costs associated with those tribunals have not yet been dealt with as court challenges continue in relation to the level of costs awarded. It is a matter to which I will return on foot of information I have received recently on the Moriarty tribunal in particular. An early section of the Bill provides that any order under the legislation must be laid before the Houses of the Oireachtas and there are then 21 days in which an order may be quashed by a vote in the House. The section in the Bill dealing with the State Claims Agency allows the Minister for Finance, following consultation with the Taoiseach and Attorney General, to direct - not order - the State Claims Agency to cease paying claims in any directed area. That is a matter of concern given our past. For example, it emerged in October last year that €635,912 had accumulated in third-party costs for the Fine Gael Party in relation to the Moriarty tribunal. In the first quarter of this year, nearly €110,000 was paid for legal costs for the Haughey family.

I raise this issue because the Bill provides the Minister of the day with the discretion to direct the State Claims Agency, with which direction it must comply, to cease paying any type of claim. If the agency was to handle a tribunal in future, the Minister could direct it to stop paying any new claim. That is deeply concerning given the involvement of the political parties, particularly Fine Gael and Fianna Fáil, in benefitting from these costs in the past. One would not want a situation in which, if Fianna Fáil were, God forbid, in government again, it could say that payments should stop. The matter would not come to the floor of the House. We must examine this. It should be an order at the very least, not a direction, as that would mean it would be voted on in the House.

I have outlined the many concerns Sinn Féin has identified with this Bill. We recognise that it has the potential to act as an important element in an economic recovery. While it differs greatly from the stimulus vehicle we would have designed, it must be progressed. Enough time has been wasted by the Government. Let us get on with stimulus. The Bill at least marks a starting point in theory. The danger is that it will not amount to anything more. It may end up being a vehicle through which no lending occurs due to its strict nature. We will deal with this on Committee Stage but I want to see where the Government is looking at this. Will targets be set? We have had targets that were placed on AIB and Bank of Ireland in respect of lending into the real economy but those targets no longer exist. The banks did not meet them. It does not seem that even targets have been envisaged by the Government in terms of the investment of more than €6 billion, which will be at the disposal of the new agency, to help to kick-start the economy.

Deputy Peadar Tóibín

Ba mhaith liom buíochas a ghabháil le mo chomhghleacaí, an Teachta Pearse Doherty, as am a roinnt liom ar an mBille tábhachtach seo. Mar adúirt an Teachta, táimid go léir ag fanacht lenár gcroí inár mbéil le fada le rud éigin a chloisteáil maidir leis an infheistíocht seo.

The impending arrival of the Bill has been announced by Ministers with such regularity over the last three years that we had all been expecting big things on this side of the House. Our disappointment when faced with the legislation before us can, therefore, readily be imagined. The economy is entering the second half of a lost decade. As he tried to explain the crushing defeat of the Labour Party in the local and European elections, Deputy Pat Rabbitte stated two days ago in the Chamber that the State was in the middle of the worst economic crisis since the Famine. One would imagine that the worst economic crisis since the Famine would necessitate the largest and most robust response by the Government to deal with it. We have 400,000 men and women languishing on the live register while 90,000 families are on the housing waiting list. Close to half a million of our people have been forced to emigrate since the start of the crisis. These issues alone should have motivated the Cabinet to respond proportionately.

What we are getting is a lukewarm response. Three years of the Government's term have passed and hardly 22 months are left. By acting so late in the economic cycle, the Government has deepened the trough and lengthened the duration of the recession. During the elections we listened to it promise a stimulus and during the fiscal treaty campaign the lampposts were festooned with promises of jobs. Throughout Europe we heard that a new approach would be taken and that we would see a stimulus. Sinn Féin has urged the Government at every point to tailor the response to match the size of the economic problem. We hassled and harried it to act with speed, but it has not happened, which is shocking. We did so for good economic reasons, including because investment in critical infrastructure increases productivity and investment opportunities. Targeted investment would have increased efficiency and created a competitive advantage. It would have made it easier for local businesses to survive the crash and thrive and made the country far more attractive to foreign direct investment. Centrally, it would have reduced significantly the level of unemployment in the State. It would have delivered a social dividend to the hundreds of thousands of families sinking into poverty. That this has not happened, three years into the Government's term, is a damning indictment. That we have had an insipid and inflexible response and investment mechanism is an opportunity lost for the people.

In response to the strategic investment fund Social Justice Ireland has expressed its regret that the Government did not take a broader perspective to assist investment in public services to facilitate socio-economic benefits that would far outweigh their cost over their lifetime. By deciding to limit the purpose of the fund to commercial investment, the Government is, in effect, excluding investment that would be of significant and immediate benefit to the people. We understand the vast majority of the fund’s investments are to be long-term, with the minority to be used to encourage employment creation. From the outset, the Government has hamstrung the ability of this €6.8 billion investment fund to provide the stimulus necessary to cause a significant number of people to go back to work in the short to medium term.

The CSO publication, Quarterly National Household Survey, communicated an extremely worrying picture showing that sentiment among businesses was not very strong. Jobs growth is grinding to a halt and we saw a meagre increase in the past quarter - 1,700 jobs in total. This shows that expectation and confidence are flat-lining. That the Government has not understood the reason behind it is shocking. It is seeking to rifle the pockets of families throughout the country through water charges. The retail industry is a good weather vane for expectations in the economy and in the past quarter the industry lost 5,600 jobs. Representative groups of SMEs have made negative comments on the Government's plans, stating they are frustrated with the Government.

The Small Firms Association warned that €500 million was a tiny fraction of the current €27 billion business banking market. ISME expressed concern that the bailed out banks would revert to form and divert loans to safer, larger businesses. Chambers Ireland has expressed a worry that the timescale is vague and disappointing. Real and ambitious stimuli are desperately needed and we have the Government tinkering around the edges. It has previous for such tinkering when real change is needed. We now have an ecosystem for funding small businesses that is going nowhere. Micro-finance, loan funds, the credit guarantee scheme and the seed capital scheme are not meeting the objectives set. They are not having the effect that we desire on the real economy. That the Government has used these measures to tinker around the edges rather than going to the centre of the problem - a banking industry unwilling to function in the real economy - is an example of the mistakes it has made, yet this investment fund is a similar measure.

While the Government has announced it is intent on setting up a State bank, no one in his or her right mind has confidence that it will deliver it, especially as it has changed into being a lame duck Government in recent days. Even if it gets its act together, the bank will be underfunded and lending will still be in the gift of banks that are desperately trying to deleverage. Currently, Irish businesses are being hammered by a number of cost disadvantages, one of which is the cost of credit. Under the Government's proposals, there appears to be no guarantee that the lower cost of funding or sourcing funds will be passed on to SMEs. As the Minister noted, a fraction of the strategic investment fund is to be directed towards SMEs, with just €375 million to be allocated to three new long-term funds providing equity, credit and restructuring investment for Irish small and medium-sized businesses. Successive budget cuts to capital expenditure have put tens of thousands of people on social welfare payments and have stalled investment, making the capital supply in the country desperately in need of new investment. To date, the Government’s policy has been anti-stimulus. The economist Mr. Paul Krugman recently described fiscal austerity as "a negative stimulus". He correctly observed that if European leaders, including the Government, had been right about the way the world worked, the austerity agenda imposed would not have had such a devastating effect.

In my three years as a Deputy I have learned that change is creepingly slow, but it does come. Sinn Féin has pushed the Government in small steps. It is welcome that it no longer sets its face against the concept of a State-supported stimulus. Despite accepting the need for a State-sponsored stimulus, it has turned its attention away from labour intensive and regionally spread projects and those that would increase Ireland’s competitiveness in the longer term. We need an ambitious social housing programme. Increasing the social housing stock in Dublin is important to cool down the market, improve competitiveness and reduce rents. We need to increase the level of employment and increase tax revenue. If the grand plan had come to fruition, cuts to Government expenditure and the refusal to invest in a stimulus package would have been offset by rising private spending, but the opposite has happened.

Austerity has delivered stagnant employment figures, in real terms, and a fall in investment by the private sector. The banks are still in difficulty, a fact borne out by the provision in the legislation to allow the fund to invest in banks should they need to be propped up again. Not only has the Government failed to secure a deal in Europe on Ireland’s legacy banking debt, it is also preparing to pump public moneys into bad banks. Ireland is a small open economy and it appears the Government is looking to emulate the United States. While the US Administration embarked on a state-sponsored stimulus programme, it was not enough. In the short term an ambitious stimulus programme acts as a defibrillator for a stalled economy, while in the medium term it improves competitiveness and creates an environment in which recovery can be maximised. What we have is a half-hearted, half-baked Government stimulus that is limited to a purely commercial programme. It will not create jobs within the necessary timescale and not get the economy out of the doldrums.

Debate adjourned.