Dáil Éireann díospóireacht -
Tuesday, 20 Oct 2015

Vol. 893 No. 2

Proceeds of Sale of Aer Lingus: Motion

Minister for Finance (Deputy Michael Noonan)

I move:

That Dáil Éireann approves the payment by the Minister for Finance, pursuant to section 46(1) of the National Treasury Management Agency (Amendment) Act 2014, from the Central Fund to the Ireland Strategic Investment Fund of €335,272,562.50 (three-hundred and thirty-five million, two-hundred and seventy-two thousand, five-hundred and sixty-two euro and fifty cent) being the amount of the funds derived from the proceeds of the sale of the State's shareholding in Aer Lingus.

In May, the Government decided to sell the State's minority shareholding in Aer Lingus. This decision was made on the basis of it being the best means of securing and enhancing Ireland's connectivity with the rest of the world and also to help maintain a vibrant and competitive air transport sector in Ireland. The sale also served the interests of the travelling public, Aer Lingus and its employees, the tourism sector and the economy as a whole. The sale culminated with the lodgement of the €335 million proceeds with the Exchequer on 2 September last. Today, we are not here to debate the decision to sell but rather to debate how these funds will be used.

It has been the consistent policy of the Government that proceeds received from the sale of assets should be used to support and sustain economic recovery and employment creation. However, under EUROSTAT rules, the proceeds arising from the sale of the State's shareholding in Aer Lingus, representing the sale of a financial asset, will have no beneficial impact on Ireland's general Government balance and, therefore, will not provide any capacity for additional Government expenditure on a general Government balance neutral basis.

It is for this reason that the Government also decided as part of the decision in May to allocate the proceeds to a special connectivity fund, which will operate on a commercial basis and, therefore, will not constitute Government expenditure, but will facilitate the re-use of the proceeds for productive purposes under the connectivity rubric on a general Government balance neutral basis. The connectivity fund will be a sub-portfolio of the Ireland Strategic Investment Fund, ISIF. Given that the proceeds came from the sale of the State's stake in a transport asset, the fund will be dedicated to enhancing connectivity both within and for the State.

ISIF will continue to develop and refine the definition and range of investments suited to investment by the connectivity fund. A working definition for the initial stage of deployment is that connectivity assets are those that "enhance, develop or sustain the physical and virtual connectivity of Ireland as an island nation". The connectivity fund will operate on a commercial basis, providing support for commercial investment projects with a connectivity theme, such as the development of ports or airports, including access to these transport assets. It will also be open to provide support for projects that involve a wider definition of connectivity, including, for example, data connectivity such as broadband, fibre optic cables and interconnectors, and energy connectivity such as energy inter-connectors and other energy related projects. These wider connectivity requirements are becoming increasingly important elements of our core infrastructure and will be extremely important to a more balanced regional development.

The decision to set up the fund within the ISIF is a sensible one as the fund already has the appropriate governance arrangements in place. The investment criteria used to assess investment opportunities for the connectivity fund will be entirely consistent with the ISIF mandate, which is to invest on a commercial basis in a manner designed to support economic activity and employment in the State. The success of the connectivity fund will be measured by both investment returns and economic impact achieved. The connectivity fund, like the ISIF, will be a long-term fund deployment on a phased basis, driven by the investment opportunities identified, and returns are likely to accrue over the medium and longer term.

As a small and open economy, Ireland is dependent on the international marketplace to sell our goods and services. The connectivity fund can be used as an important tool to provide links with our international trading partners. The fund will also be used to improve regional infrastructure to promote balanced regional development.

The decision to use the proceeds from the sale of Aer Lingus for productive investment in connectivity-related projects will provide an opportunity to: enhance our regional connectivity; improve our attractiveness and competitiveness in the tourism sector; and promote investment and enhanced opportunities for growth.

Under section 46 of the National Treasury Management Agency (Amendment) Act 2014, I am empowered to bring a resolution to the Houses of the Oireachtas setting out the proposed payment to the ISIF. I urge the House to support this resolution.

Deputy Michael McGrath

I welcome the opportunity to speak on the motion related to the establishment of a connectivity fund within the Ireland Strategic Investment Fund using the proceeds from the sale of a stake in Aer Lingus.

I must reiterate at the outset that Fianna Fáil opposed the opportunistic bid by IAG for Aer Lingus which was tabled just after the restructuring of the company's pension scheme. It is important to recall that the retired and former staff members in the IASS pension scheme were treated very badly. No sale would have been possible without the pushing through of the restructuring of the pension scheme. My colleague, Senator Darragh O'Brien, has worked with others in leading the fight on behalf of the current and deferred pensioners and he has consistently made the important point that the State Airports (Shannon Group) Act 2014 was the first time in the history of the State that a Government introduced legislation to change a specific private pension scheme. The legislation reduced pensions and payments to retired members by six weeks per annum and long-term deferred members' pensions by up to 60%. It also transferred existing members to an inferior pension scheme. The Fianna Fáil Party will continue to push for a fair and equitable solution to the IASS pension dispute.

In addition, there remains serious doubt about the Government claim to have extracted legally binding connectivity commitments. It remains to be seen if these stand up in practice, particularly if the IAG group runs in to future difficulties.

I agree with the Minister that this is not a rerunning of the debate on the sale of the stake in Aer Lingus. However, today's debate can change neither the reality of the sale of Aer Lingus nor the fact that the Aer Lingus sale price of €2.55 per share was 15% less than the €3 per share value suggested by independent analysts. This follows similar poor outcomes in terms of value for money in the sale of Bord Gáis Éireann, Irish Life and the partial disposal of Bank of Ireland.

The Government has consistently sought to avoid scrutiny of the impact of this privatisation programme on consumers, employees, the long-term interests of the State and how the proceeds are deployed. The Oireachtas needs to be able to evaluate the impact of the sale of State assets once the dust has settled. For example, the sale of the national lottery licence was notionally to fund the construction of the children's hospital but this has been subject to one delay after another. We cannot allow this to happen again on this occasion.

Now that the Aer Lingus sale has been completed, it is imperative that the funds raised are put to the best possible use. We probably should be grateful that EUROSTAT rules do not permit the Government to spend the proceeds in one fell swoop. Were that possible, they would surely be tempted to engage in pre-election spending.

Investment in our national infrastructure is vital to sustaining economic recovery, particularly at regional level. The capital budget has been cut too far and has been reduced to dangerously low levels. The proposed connectivity fund will go a small way towards addressing this. The fund is limited by the commercial mandate to which it must operate and, therefore, is not a replacement for direct Exchequer funding for much-needed communications infrastructure projects. It will, therefore, be important to establish the evaluation process which the fund will use for projects. In so far as possible, clear investment guidelines are needed to ensure stakeholders clearly understand what can and cannot be done by the fund. It cannot be allowed to turn into a fund to re-elect any party or Government.

The fund should report as regularly as possible on the projects it is undertaking and the returns they are generating. The fund will make commercial decisions independently. We need never forget that the value of Aer Lingus was built up over generations. The proceeds must be used responsibly and accordingly. The regional airport network is particularly important to balanced regional economic development. The sheer dominance of Dublin Airport has put other airports, including Cork and Shannon, at a serious disadvantage. The fund should be deployed as strategically as possible to give these airports and Knock Airport a fighting chance of competing commercially. This will enhance the ability to attract and retain industry throughout the country.

The national broadband network also has significant problems particularly in rural areas and 4G mobile phone coverage needs to be considerably improved. This should and can also be addressed in a commercial manner by the connectivity fund. While it is not a life- changing amount of money, it is a significant sum. It is important that it be spent wisely. It may be some years before we know for sure if this has happened. I wish the NTMA and the Ireland Strategic Investment Fund well in their endeavours and I am sure they will use the fund wisely to improve on our connectivity across a number of different aspects.

Deputy Dessie Ellis

First, I will comment on how the debate has been scheduled. The provision of just five minutes per speaker on such an important topic is very disappointing, particularly given that it will pass through the Seanad without even any nod to a debate. The discussion on the distribution of €335 million from the controversial sale of the State's share in Aer Lingus warrants a real debate. Aer Lingus was, and remains, an important link with the rest of the world. Aer Lingus is a strategic asset which the Government chose to sell for a fraction of its true value. The decision was made well before any real offer was made back in 2012. From then, it was a matter of time.

Connectivity is essential for Ireland as an island nation. The idea that a one-time pay off into a fund will do the same job Aer Lingus did for many years is hard to swallow. It is particularly hard to swallow now that we know it was not true that Aer Lingus's Heathrow slots were protected indefinitely. It was said to have been a major success in the negotiations over the sell-off of the State's stake. Although we were told Ireland's connectivity through Aer Lingus was secured by the agreement, it is clear that the retention of the slots is time limited. Ireland will still be an island nation in seven years. That it will be a nation with access to slots in Heathrow and other airports on which we depend is less certain. Given Willie Walsh's desire, which he repeatedly stated, to have more Heathrow slots for the Far East and South America routes, it is very doubtful that we will retain the slots.

Any assurances on the future use of the Heathrow slots will disappear when the seven-year period has elapsed. When IAG shareholders' interests become paramount, the interests of the Irish people will take a back seat, at best. This also causes grave concern among Aer Lingus workers, who fear the prospect of compulsory redundancies. Registered employment agreements, REA, legislation has still not been put through the House, and I wonder whether it will happen before the Dáil is dissolved. The Nyras report still hangs over workers' heads in the context of new management, who have a history of mass sackings, as was seen in the case of Iberia. They are also, understandably, worried about the inevitable restructuring that will take place in Aer Lingus under the IAG umbrella.

We have seen in recent years how the private profit interests of shareholders left deferred pensioners reeling as they were forced to accept massive cuts to their pensions. The Government's applause is not enough to distract from the continuing unjust treatment of the deferred members of the Aer Lingus pension scheme. They have had no resolution, hope or recognition in this whole situation. The Minister is well aware of the issue, having met with representatives of the 1,500 deferred pensioners who had received letters of comfort from Aer Lingus. After great service, they were told their pensions and entitlements were secure, only to be betrayed. Their pensions have been halved, and this has been underpinned by legislation penned by the Government in the State Airports Act. These workers deserve better than this treatment, better than the Government.

The matter is unresolved. This unjust treatment goes on while the Government schedules for the House to plan the distribution of the spoils of the betrayal of the workers and Ireland's strategic interest in Aer Lingus. While there is no resolution to the deferred members pension scandal, there should be no move to spend these proceeds elsewhere. I oppose this and will call a vote.

Question put:

The Dáil divided: Tá, 64; Níl, 11.

Tá

• Aylward, Bobby.
• Bannon, James.
• Breen, Pat.
• Butler, Ray.
• Buttimer, Jerry.
• Byrne, Catherine.
• Byrne, Eric.
• Cannon, Ciarán.
• Carey, Joe.
• Coffey, Paudie.
• Collins, Áine.
• Collins, Niall.
• Connaughton, Paul J.
• Conway, Ciara.
• Corcoran Kennedy, Marcella.
• Cowen, Barry.
• Creed, Michael.
• Daly, Jim.
• Deenihan, Jimmy.
• Deering, Pat.
• Doherty, Regina.
• Dooley, Timmy.
• Dowds, Robert.
• Doyle, Andrew.
• Durkan, Bernard J.
• English, Damien.
• Farrell, Alan.
• Ferris, Anne.
• Fitzgerald, Frances.
• Fitzpatrick, Peter.
• Fleming, Sean.
• Griffin, Brendan.
• Harrington, Noel.
• Harris, Simon.
• Hayes, Tom.
• Heydon, Martin.
• Howlin, Brendan.
• Keating, Derek.
• Keaveney, Colm.
• Kehoe, Paul.
• Kenny, Seán.
• Kyne, Seán.
• Lawlor, Anthony.
• Lynch, Ciarán.
• Lynch, Kathleen.
• McCarthy, Michael.
• McGrath, Michael.
• McHugh, Joe.
• McLoughlin, Tony.
• Martin, Micheál.
• Moynihan, Michael.
• Neville, Dan.
• Nolan, Derek.
• Noonan, Michael.
• Ó Ríordáin, Aodhán.
• O'Donovan, Patrick.
• O'Dowd, Fergus.
• Perry, John.
• Rabbitte, Pat.
• Smith, Brendan.
• Stagg, Emmet.
• Stanton, David.
• Tuffy, Joanna.
• Twomey, Liam.

Níl

• Adams, Gerry.
• Broughan, Thomas P.
• Colreavy, Michael.
• Ellis, Dessie.
• Ferris, Martin.
• McLellan, Sandra.
• Ó Caoláin, Caoimhghín.
• O'Brien, Jonathan.
• Pringle, Thomas.
• Stanley, Brian.
• Wallace, Mick.

Tellers: Tá, Deputies Paul Kehoe and Emmet Stagg; Níl, Deputies Dessie Ellis and Jonathan O'Brien.

Question declared carried.