Other Questions
6Deputy Joan Collins asked the Minister for Finance based on current Government projections for GDP, debt, the structural deficit and growth, the fiscal adjustments that would be necessary to meet the targets of the fiscal treaty in the first, second and third years following our exits from the current EU-IMF programme if the provisions of the treaty were to come into force at that time; and if he will make a statement on the matter. [25660/12]
Amharc ar fhreagraThe Deputy will be aware that Ireland is scheduled to exit the EU-IMF programme of financial support at the end of 2013. Our general Government balance targets, GGB, for 2014 and 2015, were agreed with the ECOFIN Council in December 2010. The maximum GGB permitted is minus 5.1 % of GDP in 2014 and minus 2.9 % in 2015. On the basis of the macro-economic and fiscal projections set out in April's stability programme update, my Department is currently forecasting that both of these targets will be met or marginally bettered. This is based on the agreed budgetary measures. Therefore, as I have previously said, there is nothing in the stability treaty that requires us to do more than we are already doing, over the period to 2015.
The growth forecasts set out in the recent stability programme update, SPU and the consolidation amounts outlined in last November's medium-term fiscal statement, are consistent with a general Government balance of just under minus 3% of GDP in 2015. As discussed in the SPU, the exact size of the structural component of this is, of course, uncertain. Not only do technical estimates differ, depending on the approach used, but it is also the case that estimates of the structural balance further out the forecast horizon are not fixed. Policies being implemented at present, together with future measures, can be expected to impact positively on the figures.
As I have said on a number of other occasions, reducing the structural element of the deficit will require policy action, though not necessarily taxation and expenditure adjustments. Other options are available and it is the Government's intention to pursue these. Such measures include labour market reforms, together with investment in technology and infrastructure. By boosting the productive capacity of the economy, the ambitious programme of micro-economic reforms that is already under way is expected to help reduce the structural element of the deficit by the middle part of the decade.
Additional information not given on the Floor of the House.
Under the Stability and Growth Pact, when a country is in excessive deficit, the focus of the fiscal effort is on reducing the headline deficit to below 3% of GDP. In our case, the time path to achieve this objective is end-2015. Once a country comes out of excessive deficit, the focus is on bringing a country's public finances into line with its agreed medium-term budgetary objective.
As I mentioned earlier, Ireland's medium-term budgetary objective, MTO, currently stands at 0.5% of GDP. This objective was set under the Stability and Growth Pact and well in advance of the stability treaty. Furthermore, as noted above, estimates of the structural deficit vary in an Irish context. What I can say is that we are making progress towards the achievement of our MTO, and further progress will be made in the post-2015 period on a phased basis, in accordance with a timeline to be agreed.
In terms of the debt correction rule, Ireland and the other member states currently in excessive deficit on the basis of the deficit criterion, are not subject to this at this time. For us, the priority is to stabilise our debt-to-GDP ratio. After coming out of the current excessive deficit procedure, and as a programme country, we will then be able to avail of a three-year transition period before the full one twentieth rule will apply. This means that Ireland will not be fully bound by the rule until 2019, though in the 2016-18 period, we will need to make sufficient progress in terms of reducing our debt ratio.
Lastly, I would stress again that, when it comes to meeting the debt requirement, it is reasonable to expect that economic growth will do most of the heavy lifting.
It is true that there are a lot of variables when we are trying to project future growth rates, inflation and so on. However, I think the Minister is covering up the facts about what we have to do to meet these targets because of the impact that might have on a vote on the fiscal treaty. If inflation was rising significantly or if there was a significant prospect of growth in excess of the forecast on which the Minister based his budget, then he would be right.
A question please, Deputy.
Is it not the case, however, that all the variables are moving in the opposite direction? That means it is more likely that the Minister will have to make even bigger adjustments, namely cuts, in order to meet the targets when the treaty's provisions come into force. That fact has been confirmed by Professor John McHale, chairman of the Fiscal Advisory Council. Professor McHale wrote that in the event that nominal GDP growth were to end up 1% weaker per annum, over the period 2012 to 2105, than envisaged in the budget 2012, the debt to GDP ratio would not stabilise by 2015 without additional discretionary measures. In other words, matters would be worse. Since those words were written, the growth projections have been significantly downgraded. Growth forecasts are worse, thus making the possibility of having to inflict brutal cuts to meet the fiscal targets more likely rather than less. It is about time the Minister admitted to the Irish public that that is a real possibility arising from the provisions of the treaty.
With respect to the Deputy, he is mixing up the structural deficit with the nominal deficit.
I am not.
He is. He is talking about the target for 2015 of getting below 3%, which is the nominal deficit. Of course, the pace of growth and inflation has an influence on that. The advice to me at present is that we will meet that target provided we meet the targets of adjustment that were set out in the programme. Before the Deputy came into the Chamber, I quoted what Professor McHale said about the structural deficit. Last night on "Prime Time", he said that no additional consolidation will be required to meet the structural deficit target. He is basing that opinion on very conservative growth assumptions. It is now May 2012 and if one looks at the projected deficit figure for 2015, 2016 or 2017 it is a forecast being made today for a point in time. It is being made on the assumption, however, that there is no policy change of any sort. If there are structural flaws in the economy, any self-respecting Government will try to address them. On the basis of fixing the flaws the structural deficit goes, and the nominal deficit is taken care of after 2015 by modest growth assumptions.
Really and truly, I think the Minister is trying to blind people with science.
A question, please.
Is it not the case that the Minister's own figures show that even if those growth projections had held up, we would have been looking at approximately €5 billion to €6 billion to meet deficit targets post-2015? Several billion would also be needed to meet the debt-to-GDP ratio targets contained in the treaty unless there is significant growth in the economy, which there is not because the growth projections are being downgraded. The Minister seems to be suggesting that we can have a €200 billion debt and a 3% structural deficit, and it will not cost us anything to reduce that to 0.5% or 60% of GDP. How can one make those sort of repayments and adjustments without it costing billions in cuts for ordinary people?
The latest set of forecasts was published this week by the OECD, which said that the world is working its way out of recession. It named some of the bigger economies that are doing well. It also said its estimate of growth in Ireland for 2012 is 0.6%, and 2% for 2013. That is actual growth, not nominal growth. One must put inflation on top of that when one looks at the figure on which the budget is based. The Deputy can talk about being bamboozled with facts, but that is the latest forecast. The OECD might be right or wrong because forecasts are very inexact as circumstances change. All we are giving is the best possible information. On the basis of the best information I have, we will be on target at the end of the year on this budget, and will be below the target of €8.6 billion in the deficit. We will have to make a correction next year to get below €7.5 billion. If there is 2% growth in real terms it will be quite helpful in forming next year's budget. That is not to say that it will not be tough. I appreciate the stress it puts families under but there is no point in trying to undermine the basis of the figures. I am trying to explain to the Deputy how things will be constructed. It is difficult enough for people without exaggerating the difficulties.
Can the Minister confirm that his Department's structural deficit projection of 3.5% takes on board the €8.6 billion of adjustments he is planning to make over the next three years? Can he also confirm that Professor John McHale - whom the Minister appointed as chair of the Fiscal Advisory Committee - has issued two reports calling for additional adjustments, which will be tax increases and cuts, in the budget, and that the Minister has ignored them? If we do not meet the medium-term objectives for the structural deficit, it will trigger an automatic mechanism that will have to be legislated for in the Oireachtas. Can the Minister explain what that automatic mechanism will be?
My question, which was tabled by Deputy Collins, is straightforward and concerns the fiscal treaty. Will the Minister deal with this question of a veto that the "No" side continues to raise. What is the advice available to the Minister?
That has nothing to do with it.
It does actually.
It has nothing to do with the question.
The question is about the fiscal treaty.
I have not read them all.
Can I finish with one sentence?
The Deputy has the floor.
What advice is available to the Minister concerning whether Ireland has a veto over the establishment of the ESM in terms of Article 136 of the treaty on the functioning of the EU?
If there is a "No" vote, what budgetary impact will it have post-2013 with regard to the fiscal treaty?
There are two very good boys in the class today.
There is no veto and that has been explained several times.
Parliament has a veto.
The Deputy does not have to turn to me or the Department because the Commission has explained all this. If he looks to the Commission's advice, he will see how it is explained.
The Commission has said that Parliament has a veto.
As I have explained, the estimate of the structural deficit, which the Deputy is using, is the European Commission's estimate. We have used that in the figures we have published. However we have now got written confirmation from the European Commission advising us that Ireland and other eurozone countries can use their own methodology and set of assumptions when estimating the structural deficit.
Does it factor in the €8.6 billion in cuts?
The Minister has the floor.
It is not our estimate, it is the estimate-----
Does it factor in those cuts?
Please, Deputy Doherty.
It is impossible to answer if the Deputy keeps shouting at me.
An answer would be nice.
Tell that to your gang on Leaders' Questions.
Are they a bit unruly?
This is Question Time.
I am sorry. What did Deputy Lawlor ask me?
I asked what would happen if we voted "No".
The sky will fall.
If we vote "No" we will reach the back end of 2013 and we will have no money. We will need €16 billion or so for the following year and we will have no money. The Deputies opposite will then be whingeing, shouting and roaring about cutbacks in health services, education and everywhere else because if we get no money we will have to make the adjustment in one year. If we spread it out over several years it is easier on the people. That is what will happen if there is a "No" vote.
We need to move on. The next question is No. 7 and it and Question No. 12 are being taken together.
7Deputy John Halligan asked the Minister for Finance if he will report on the recent Ecofin meeting; the issues he raised and in particular any measures that were raised to promote economic growth in Europe; and if he will make a statement on the matter. [25658/12]
Amharc ar fhreagra12Deputy Richard Boyd Barrett asked the Minister for Finance if he will report on the recent Ecofin meeting; the issues he raised and in particular any measures that were discussed to promote economic growth in Europe; and if he will make a statement on the matter. [25656/12]
Amharc ar fhreagraI propose to answer Questions Nos. 7 and 12 together.
I attended the meeting of ECOFIN on 15 May 2012 at which the following were the main points. Ministers reached agreement on two legislative proposals to amend existing EU rules on capital requirement for banks and investment firms. The objective of the proposals is, inter alia, to ensure that the effectiveness of the regulation of credit institutions and investment firms in the EU is strengthened and that financial stability is enhanced. These proposals also aim to transpose into EU law the agreements reached by the Basel Committee on Banking Supervision, that is the Basel III requirements, as endorsed by the G20 leaders. The Danish Presidency can now start negotiations with the European Parliament, the aim of which is to reach agreement, if possible, by June.
Ministers also discussed a draft Council decision to authorise the Commission to begin negotiations with five non-EU third countries - Andorra, Liechtenstein, Monaco, San Marino and Switzerland - to revise agreements with those countries on the taxation of savings income in order to ensure the continued equivalence of measures in those countries with the EU savings tax directive. While unanimous agreement on a mandate for the Commission was not reached, work will continue on this issue before the Presidency reports on tax issues to the European Council in June.
Council conclusions on the sustainability of public finances in light of ageing populations were adopted, as were Council conclusions on fast-start financing of climate change measures.
On its presentation of the draft EU budget for 2013, the Commission highlighted the importance of the EU budget as a driver of growth and jobs. During the subsequent exchange of views, the importance of the EU budget as an instrument for promoting growth in Europe was highlighted.
The Taoiseach has been very strong on supporting and advancing pro-growth measures at EU level. In preparation for the late-June European Council, President Van Rompuy is hosting an informal meeting of EU leaders this evening to discuss how growth and jobs can be boosted across the EU.
We all agree that a strong resumption of growth is critical for Ireland. I would point out that fiscal sustainability and measures to promote economic growth are not necessarily incompatible. My view is that measures to boost the economic growth rate can play an important role in addressing the current crisis in the EU. During a discussion on growth policies at ECOFIN I drew attention to the recent programme review mission during which we sought to strengthen the focus of our programme on growth measures. Working with our troika partners, we will continue to stress the importance of the growth agenda to the overall success of the programme.
Furthermore, I am continuing to explore all options that can enhance the growth agenda. In the margins of ECOFIN last week the Minister for Public Expenditure and Reform and I met senior officials from the EIB to explore mechanisms to access additional funding for investment in the Irish economy. All options are being explored to secure support for appropriate projects, for example, primarily schools and primary care centres. These projects will help generate jobs and growth in the economy.
We have committed to a substantial capital programme of €17 billion for the period 2012-2016 already. The intention is to complement this programme with additional projects funded through various potential sources - funds from the EIB, proceeds from the sale of state assets and use of some of the remaining funds of the NPRF. Significant progress has been made on many fronts specifically on the use of proceeds from the sale of State assets to be used for a domestic stimulus package. The Government is committed to getting the economy back on track and taking every opportunity to explore all options to advance the Government's agenda of jobs and growth both domestically and at EU level.
I must put it to the Minister that yet again deception is being exercised on our people, particularly in advance of the vote in the referendum on the fiscal treaty. Members of the Government are talking about and using the word "growth" a good deal. We have heard its use again by the Minister, the Taoiseach uses it a good deal and there is good deal of talk about it around the European Council summit. However, in practice, we get austerity.
According to the German newspaper, Der Spiegel, at the ECOFIN meeting referred to in the questions, the Minister was reported as having berated the Greek Government for failing to robustly enough impose austerity on the Greek citizens. These are the same Greek citizens who have been massacred with cuts under austerity-----
A question, please, Deputy.
-----and whose economy has been destroyed with the imposition of that austerity. Is it not the case that this taken alongside the insulting comment the Minister made about feta cheese, which was insulting to the Greek people who are suffering, are not only insulting to the Greeks but indicate the Minister's Government is still, along with Angela Merkel, promoting the austerity agenda, which has crippled growth and done such damage to the lives of ordinary citizens here and across Europe, instead of seriously addressing the question of growth, which requires an end to the austerity agenda and real investment in putting people back to work? The Minister is playing something of a double game in talking about growth on the one hand and arguing for austerity on the other hand, particularly when he is over in Europe with his EU partners.
The comments attributed to me in Der Spiegel are totally and completely untrue. The Greek Finance Minister came up to me after my contribution and thanked me personally for my support in the course of the meeting. I do not know who did the spinning but it was the opposite of the views I expressed that appeared in Der Spiegel.
On the other issue about the level of trade between Ireland and Greece, to which the Deputy referred, if one is communicating to an international audience, as I was at a Bloomberg conference when everything was going out live online, and one runs a bundle of statistics at the audience, they do not know what one is talking about. I made a very simple point that it is unlikely there will be contagion from Greece to Ireland because the links between Greece and Ireland are very limited both on imports and exports and in banking. I used an image as there were many people in the audience. I said that if one is in a supermarket how many items produced in Greece would one have in one's shopping basket? I think that is a reasonable way to get an image across, especially to an international audience of investors, particularly in the United States, who quite frequently put Greece, Portugal and Ireland all in the one category. As we have said on several occasions, there are very little similarities between the Greek economy and the Irish economy. If one looks at the statistics, our exports to Greece are less than 0.5% of our total exports and our imports from Greece are less than one tenth of 1% of our total imports.
I ask Deputy Boyd Barrett to be brief as two of his colleagues wish to contribute.
Does that analysis not show a very simplistic and inaccurate understanding of what the consequences would be if there was a Greek exit from euro pushed by the austerity that has been imposed by Europe? All the commentators, even the person who negotiated the Greek write-down of debt, have pointed out that we could face a much deeper recession if Greece is forced out of the eurozone to the degree that output across Europe could drop by 5%. To suggest that the only impact would be sales of feta cheese is utterly simplistic, trivialises the issue and not to mention is insulting to the Greek people who are suffering so much. Is it not the truth and a more accurate analysis that if Greece were forced out of the euro because of the determination of Europe to shove more austerity down its throat, that it could plunge Europe as a whole from recession into depression and trigger contagion right throughout the periphery and into the core of the Europe economy?
I have dealt with all those issues as well. If the Deputy looks back at an interview I did in Brussels on Monday, which he can pull down on the RTE website, he will note that I dealt with all the wider issues. While I was not as alarmist as the Deputy was, I acknowledged the fact that there is a major problem in the eurozone at present because of the situation in Greece, but I was dealing with a different agenda at the Bloomberg conference - I was showing that the economic and banking connections between Ireland and Greece are very limited. I was doing it at a point where our nine year bond rate was moving up to 7.5% because there was a perception of a direct contagion effect. The effect is not a direct contagion one; the effect on Ireland is the consequences of a crisis in the euro because of the situation in Greece, and I have dealt with that. I understand the position in so far as anybody understands it, but the Deputy should not ascribe to me views which I do not hold.
I want to try to get an answer to this question. I asked about the report on more cuts and tax increases and reference was made to the chairman of the Irish Fiscal Advisory Council, Professor John McHale. I asked about the structural deficit given the plans to make an €8.6 billion adjustment over the three years. In particular I asked what the automatic correction methods would entail. The Minister did not answer any of these questions. The Minister speaks about growth and about Greece. It did not do him any justice at the Bloomberg conference to laugh about putting feta cheese in shopping baskets. If it was intended to have an effect it did not work. Last night another rating agency put Ireland on negative watch. Investors are not stupid.
The Minister spoke about growth and mentioned infrastructure projects and schools. How can the Minister speak about this? Last year he and his colleague, the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, announced that €7.2 billion would be taken from the capital budget between now and 2016. The Minister speaks about €17 billion with regard to capital but he forgets to state this is a reduction of €7.2 billion.
How much of the €300 million we lent to Greece does the Minister expect the country to get back if Greece exits the euro?
If I understood the Minister correctly, he stated the EU Commission would allow this country to work out its own method of arriving at what the structural deficit will be. What will it be in 2015 and onwards? With regard to growth, the Minister mentioned many structural adjustments and mentioned 150,000 former construction workers who should be retrained to find their way back to work. I concur with this but does the Minister agree unless major investment is made in the economy these workers can be retrained to a high degree but they will not find jobs? This type of investment is critical. Does the Minister agree corporations are sitting on €2 trillion of uninvested profits in Europe and this is a massive problem? Public investment is required. What will the EU do about this?
For the sake of clarity the Minister should correct what he stated earlier. Does he acknowledge that Article 3 of the ESM treaty means any country whose crisis could destabilise the eurozone will have access to funds and this will take precedence over a recital? In particular the Minister should correct the fact he stated the Irish Government does not have a veto over the ensconcing of the ESM treaty in EU law. Why did the prime ministers and presidents come up with an amendment to Article 136 of the Treaty on the Functioning of the European Union to do just this if it is not required?
We all welcome the renewed focus on economic growth and measures that can emanate from Europe to assist us in this regard. However, the question as to where is the beef will arise very soon. What are we looking at in practical terms from European initiatives rather than from the proceeds from the sale of State assets? Will it involve expanding the role of the European Investment Bank or additional Structural Funds for Ireland? How will Ireland benefit in a tangible way from the European discussions on the growth agenda?
My view is that the talks in Brussels will not conclude tonight because, as the Deputies are aware, French parliamentary elections will take place in June and the party of the French President will campaign on the basis of a jobs and growth agenda and any agreements with colleagues in Europe will be arrived at after the elections. I believe this is how it will play out. I see Deputy Higgins smiling, but he understands politics as well as I do.
Pie in the sky.
The Minister can give his colleagues in the Labour Party a few tips.
What I am saying is not pie in the sky. There has been a change in the debate in Europe and it is being driven by France. It is impossible to state at this point what the tangible results will be. There certainly has been at a minimum a huge change in emphasis and a very strong commitment to pursuing a jobs and growth agenda in parallel with balancing budgets in the member countries.
When Deputies speak about growth the bit they always leave out is that it must be sustainable growth. If we had €4 billion tomorrow we could get the economy growing through establishing building projects throughout the country in a Keynesian intervention. One would not quite dig holes and fill them up again, as Keynes said on one occasion, but one could find projects. However, when the money ran out they would stop and those employed would be unemployed. It would be boom and bust, and the boom and bust model has been tried in Ireland time out of mind. We need sustainable growth whereby we get the conditions for growth right and grow for 12, 15 or 20 years. This is the type of model which has been successful in other countries. We must get away from the boom and bust model. This means examining every project in the stimulus package and investing only in those which actually contribute to enhancing the infrastructure to allow the economy to grow stronger. One does not invest in projects which are purely employment creation projects.
It is not happening. Where is the investment?
This is how the growth and jobs agenda will be developed and this is what the Government will do.
On a point of order I have asked five questions to which I have not received an answer. I am trying to make the questions quite simple. I do not want to be shouting over the Minister and I am sure he does not want that either as people are probably listening to this debate. I ask the Minister to try to answer the questions. This is supposed to be Question Time.
The Ceann Comhairle and I have stated previously that any issues must be taken up with the Ceann Comhairle's office. I will say no more than this.
The Minister should make a note of the questions as they are asked. He remembers only the final one.
I remember them alright but I am constrained by time. If I have time to answer only two I cannot answer 20. It is simple arithmetic.
The Minister could have corrected himself on the ESM.
I had already answered that question. There is no point in answering the same question twice.
You answered it wrongly.
You did not like the answer and you want me to give a different one.
I explained to you why you were wrong.
8Deputy Seamus Kirk asked the Minister for Finance his views on the best use of the substantial cash reserves on hand with the National Asset Management Agency; and if he will make a statement on the matter. [25595/12]
Amharc ar fhreagraI am advised by NAMA that it plans to invest substantial funding over its lifetime in preserving and enhancing the assets that secure its loans, including significant investment in assets located in Ireland, and that a substantial portion of its cash reserves will be used for this purpose. In fact, the chairman of NAMA today announced plans to invest €2 billion by 2016. By the end of March 2012, the agency had invested more than €1 billion in the preservation, enhancement and completion of property assets underlying its loan portfolio. More than €500 million of this had been committed to assets in Ireland and this is helping to secure the direct employment of thousands of employees in small and medium trading businesses located throughout the country, in addition to substantial additional direct and indirect construction and property related employment in general building works including re-fit, refurbishment and upgrade of NAMA-controlled properties. NAMA advises me the other significant area in which it will employ its cash reserves is the repayment of the senior bonds which NAMA issued to fund the acquisition of its assets. NAMA has already repaid €1.6 billion of this debt and I am aware the agency is firmly on course to meet the target of reducing NAMA debt by €7.5 billion cumulative by the end of 2013. NAMA will achieve this target from interest and principal receipts from its loan assets and from the proceeds of asset disposals by its debtors. Under the Act, NAMA is required to consult with me on any proposed tranche of debt repayment.
In addition to repaying NAMA's debts and advancing working and development capital to enhance its assets, NAMA will use its cash reserves to meet the agency's ongoing funding requirements and operational expenses. In this context I am advised the NAMA board considers it will not require additional resources from the Exchequer over its lifetime.
Additional information not given on the floor of the House.
In managing its liquidity needs, NAMA must ensure that it has available liquidity over the medium term to meet all of its contractual obligations as they fall due. Such obligations, as outlined, include its day-to-day operating costs, coupon payments due on its bonds and derivative contract payments. It also includes the advances to debtors for working capital and project funding which are often required at short notice. I am advised that updated liquidity projections, based on these various expected inflows and outflows, are reviewed on a monthly basis by the NAMA board.
In terms of cash management at the agency I am advised cash is either on deposit with approved counterparties or the Central Bank or invested in qualifying liquid assets such as short-term Irish Government securities. The Deputy will be aware that €3.06 billion of NAMA's cash reserves was utilised in facilitating a short-term bridging transaction relating to the IBRC promissory note payment due on 31 March 2012. I am advised by NAMA the rate earned on this facility is within the range of returns achieved on NAMA's short-term investments.
The agency has also advised me that cash balances tend to fluctuate for a number of reasons, including the scale of NAMA's business, the fact the timing of loan and property sale transactions is not readily predictable and the time lag between cash receipts from debtors and NAMA senior note redemptions.
I thank the Minister for his reply. I welcome the statement made by NAMA today, in so far as it goes, on the investment of €2 billion over the next four years. NAMA has access to up to €5 billion to invest in working capital and the completion of projects in its remit. The key test is whether the €2 billion it is to invest will add more than €2 billion in value to the assets in which it is investing. That can only be judged over time. On 27 March the Minister confirmed to me that NAMA had cash reserves on hand of €4.3 billion and it was earning a rate of 1.1%. As NAMA needs immediate access, it invests in liquid assets, which is just as well given that a few days later it was required to hand over €3.06 billion in respect of the bond that was issued instead of the promissory note.
NAMA has proposed providing up to €2 billion for vendor financing. Will that also come from its cash reserves? Potential buyers will essentially be lent money by NAMA to buy NAMA assets. Will that in any way reduce its ability to reach €5 billion in terms of investing in projects and working capital?
It is not the same €2 billion, but an additional €2 billion.
I know that.
NAMA feels it can fulfil this commitment and-----
Is it from the €5 billion, which is the ceiling?
----- it has the resources to do it.
Sinn Féin has argued we should use NAMA's cash resources to stimulate the economy so I welcome today's announcement. I have not seen clarification on this matter in the NAMA statement. Will the €2 billion to be invested in coming years all be spent in Ireland? Of the €1 billion that has already been invested, more than half of it has been spent in Britain. Given that NAMA has €5 billion in cash assets for bonds that are not redeemable until 2020, will the Minister consider issuing a direction order for NAMA to invest in other projects on which it could get a return? For example on State projects it could get a return of 1.5% to 2% and not only on assets it has.
I am concerned about NAMA's bonus scheme for developers. As soon as it gets back the amount for which it bought the loans from Anglo Irish Bank or other banks, developers can keep a little bit extra. We need to ensure that this injection of €2 billion does not allow developers, who have left bad loans with Anglo Irish Bank, AIB or Bank of Ireland for which the Irish taxpayer has picked up the tab, to benefit from this.
I welcome that NAMA funds might be invested back into the economy to create employment and hopefully growth, which seems entirely sensible. I agree completely with the Minister's earlier comments. However, in what should it invest? Are the investment and employment sustainable? What are the long-term impacts of investing in particular areas? Is the Minister not concerned that NAMA's focus seems to be essentially on trying to refloat the property market, which was precisely what got us into trouble? While, of course, we need housing, I am concerned that the whole thing seems to be predicated on keeping as much as is possible the private developers, who helped us get into this mess, in business by paying them. They will often own the assets at the end of the process rather than us owning them and also the rental revenue coming back to us on a long-term basis, which would also be a way for us to control the property market in future and prevent the sort of speculative bubble market in property which caused the crisis in the first place. Should we not have more direct control by owning the assets that will generate revenue and wealth for the economy in the future?
On Deputy Doherty's question, based on this morning's statement by the NAMA chairman, Mr. Frank Daly, my understanding is that the money about which he was talking is to be spent in Ireland. The Deputy will be familiar with the types of projects already. For example NAMA invested in refitting the cinemas in The Square in Tallaght. They are now open and employing 80 people. Previously it was a piece of dereliction in The Square in Tallaght. It invested approximately €15 million into finishing a partially constructed shopping centre somewhere on the north side of Dublin - I do not have the centre's exact name. There is sufficient interest for all the units to be let. When those units are let, 280 people will be employed there.
IDA Ireland believes that modern computer-friendly office blocks are the advance factories of this generation and that we will not be able to drive our inward investment programme without them. It indicates that there is a shortage of them in Dublin and that by 2015 such a shortage will inhibit IDA Ireland's work. NAMA is in negotiations with a particular developer on the quayside adjacent to the Irish Financial Services Centre to build one of those office blocks.
Houses near the golf club in Dún Laoghaire have been completed with NAMA money and have been put on the market. As nearly all of them have been sold, permission has been given for more of them, which NAMA is also financing. Its mandate is to take over the impaired loans of banks and use the property portfolio in the best interests of the taxpayer. It can maintain, upgrade or dispose of assets. The bottom line is that it is acting not in the interest of developers or banks but in the interest of the taxpayer so that we get something back for the money that was used.
NAMA frequently gets knocked, but it must be remembered that it has many enemies. Many developers do not like what NAMA is doing. Some developers have converted resources to their own and to their families' benefit and NAMA is going after them. Other people are coming in with money and want to get a bargain without paying a decent price and they get offended when they cannot do a deal. NAMA is working in the interest of the taxpayer as it is required to do under law and I am not supposed to interfere with it. I can advise it on the general policy, but it is making the commercial decisions and so far I believe it is doing a reasonable job.
I have some concerns over NAMA's intention to use €2 billion of its cash reserves on vendor financing. In effect it will lend money to people or institutions to buy NAMA assets. While it might look good in terms of achieving its sales targets, given that the agency is trying to reduce the debts owed to it, adding to the debts by lending money to prospective purchasers may not be appropriate. I know it is a financing model that is well established and frequently used, but given that this is a State agency trying to reduce the money it is owed, I am not convinced of its merits.
It will be a question of how it works out. NAMA now has employees with significant experience in property development. It would be unreasonable to suggest just running the property portfolio and selling everything if by investing a few million euro it were possible to double the price that could be achieved on the sale. That should form part of what a property management company should do in the interest of the taxpayer thereby getting the maximum from it. The Deputy should call representatives of NAMA to appear before the Committee of Public Accounts if he wants a longer chat. Written Answers follow Adjournment.
