Oireachtas Joint and Select Committees
Thursday, 12 July 2018
Public Accounts Committee
2016 Annual Report of the Comptroller and Auditor General and Appropriation Accounts (Resumed)
Chapter 23: Accounts of the National Treasury Management Agency (Resumed)
National Treasury Management Agency: Financial Statements 2017 (Resumed)
9:00 am
Seán Fleming (Laois, Fianna Fail)
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We will return to the National Treasury Management Agency. Did Mr. Breen want to comment?
Mr. Ciarán Breen:
I wanted to provide clarification for the committee. I know Deputy Jonathan O'Brien is not here but I want to put on record for the committee that I was informed over the lunch break about the case we were referring to. Although the file that I examined had no indication that the person had any contact with CervicalCheck, since her claim was made against a general practitioner, GP, and a hospital, arising from a colposcopy issue, I can clarify that she is one of the 221 women. She had been to CervicalCheck to get her smear tests done but her claim did not relate to that at all.
Seán Fleming (Laois, Fianna Fail)
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The original claim?
Seán Fleming (Laois, Fianna Fail)
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I appreciate that. When the meeting is over, I will ask the secretariat to convey that directly to Deputy O'Brien in the event that he does not hear it, so that he is aware of that. Deputy Kelly asked a question. Mr. Breen knows not to mention any names in public. I do not have to remind him of that.
Mr. Ciarán Breen:
Of course. Deputy Kelly kindly gave me the name so I made inquiries over the lunch period. Although the title of the letter which looked for the record indicated the name of the person, when we carried out a search, having received that letter, we had no record whatsoever of anything about cervical cancer with regard to the particular person. We did not retain any record about that and there is no notification of an incident or a claim.
Alan Kelly (Tipperary, Labour)
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I understand that in an item of Mr. Breen's correspondence, he says he has a record.
Alan Kelly (Tipperary, Labour)
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The point still stands. Why is Mr. Breen not giving this information to the family?
Alan Kelly (Tipperary, Labour)
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Mr. Breen is wrong. I have it here in front of me. I also have all of Mr. Breen's correspondence which he signed himself. It refers to the immediate release of all documents of any nature whatsoever held by the State Claims Agency, its servants and agents regarding the late individual. It does not say CervicalCheck.
Alan Kelly (Tipperary, Labour)
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Mr. Breen wrote back to the family solicitor on 22 May.
Alan Kelly (Tipperary, Labour)
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It states that having undertaken searches, one record was located.
Alan Kelly (Tipperary, Labour)
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Okay. Can I get back to the principal point? This causes concern and worry. Why is Mr. Breen not releasing the information to the family? The family of the deceased woman looking for information are entitled to it. Why is Mr. Breen not giving it to them?
Alan Kelly (Tipperary, Labour)
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The State Claims Agency is going to charge them €30 to appeal it.
Alan Kelly (Tipperary, Labour)
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Why did the State Claims Agency not provide it? Why did I have to raise this in the Committee of Public Accounts to force the State Claims Agency to release a record tomorrow when the decision maker, who I will not name, said that the agency will not release the record? Why was this information-----
Alan Kelly (Tipperary, Labour)
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This is obviously the whole family.
Alan Kelly (Tipperary, Labour)
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Mr. Breen is telling me that the agency will release the information.
Alan Kelly (Tipperary, Labour)
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I suggest that Mr. Breen looks at the agency's freedom of information processes. It should not take a family contacting me through their solicitor to raise it in the Committee of Public Accounts for the State Claims Agency to release documents which it should have released in the first place.
Seán Fleming (Laois, Fianna Fail)
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The point is well made and Mr. Breen is going to release it. Deputies Catherine Murphy, Catherine Connolly and Kate O'Connell had indicated. I will have some questions myself. I will let members in for a second round and I will be working with a set of financial statements.
Catherine Murphy (Kildare North, Social Democrats)
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I will come back to something I touched on this morning relating to contingent liability. There was a Supreme Court case in 2017. The court ruled, with regard to the 1%, that claims for future loss should be calculated at a real rate of return of 1.5%. This results in a higher net percentage value being placed on projected future cashflows. There has been an increase as a consequence of that. Is that a real cash increase? Does it have an immediate impact? How does it play out into the future?
Mr. Conor O'Kelly:
There is a real increase. I will let Mr. Breen take the question. It is a fundamental question about the rate of return that is assumed and used with regard to lump sum payments, in particular, and to calculate what that lump sum should be, one has to have an implied future rate of return that could be earned on what is called a risk free or low risk rate. That rate has been set higher and therefore any lump sum payment would be made higher. Even in retrospect, as I know Mr. Breen will refer to, there were many cases which were settled with potential adjustment to any future change in the rate of return.
Catherine Murphy (Kildare North, Social Democrats)
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If somebody was made a ward of court and a payment went into a fund for investment, is this in addition to that or is it how amounts are projected into the future?
Mr. Ciarán Breen:
It is how one projects the amounts into the future. It had immediate effect. When that case was decided, pending the case going to the Court of Appeal, we agreed with families that we would pay them the difference between the old rate of 3% and the 1% and 1.5% in the event that the Court of Appeal decided that was the appropriate rate.
In 2017, therefore, we paid out €25 million in what we refer to as "catch-up payments". That was the difference between what we settled at, 3%, and the new rate of 1% and 1.5%.
Catherine Murphy (Kildare North, Social Democrats)
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Is there a further catch-up or is that it, following which the projection involves new claims on the 2.7% estimated to be contingent?
Catherine Murphy (Kildare North, Social Democrats)
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Does it have an impact on the projected contingent liability? I presume that is why it has gone up.
Catherine Murphy (Kildare North, Social Democrats)
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I turn to a particular aspect of the investment in housing. A reason has been given, but we had been expecting €400 million of the proceeds of the sale of Bord Gáis to be placed in an off-balance sheet entity and applied to housing. However, that did not happen. We were told that it did not prove possible to devise a model which would be capable of utilising the €400 million on an off-balance sheet basis. I understand it probably had to be used in that way. It was a very small amount, given the amount realised. It was almost a political sweetener to indicate that some money would be used in that way. Why was it not possible to make that off-balance sheet arrangement, given that we have tier 3 housing associations? There are mechanisms which do not directly involve local authority housing whereby guarantor arrangements could have been made, for example. Why did it not prove possible to do this?
Catherine Murphy (Kildare North, Social Democrats)
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The NTMA was not managing it.
Catherine Murphy (Kildare North, Social Democrats)
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Irish Water features in the loans. There is a loan of €450 million. Initially, it was €300 million and then €150 million. The only income Irish Water has apart from commercial water charges is from the Exchequer. Is it really a loan facility in that case? It does not appear that Irish Water has an income from which it can discharge loan repayments. It has been extended for one year. What, if anything, is the intention for the loan?
Mr. Eoin Dorgan:
I am not sure of the exact time involved. Following on from the Oireachtas committee on the future of water policy, the Government decided that the commercial loans would be refinanced through Exchequer debt. The ISIF is one element of it and there is a further €800 million in commercial loans, on which work is ongoing. Within the coming six to nine months we are working on refinancing it through State debt for which the NTMA will provide. Irish Water will then be borrowing from State sources, rather than from commercial lenders and the ISIF.
Catherine Murphy (Kildare North, Social Democrats)
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I presume it will be at a favourable rate.
Catherine Murphy (Kildare North, Social Democrats)
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Responsibility for an additional 17 section 38 organisations and others was taken over by the State Claims Agency. There was an 18% increase in settlements in 2017, resulting in a figure of €218 million. Was that exclusively because of the additional agencies or was the profile of claims different?
Mr. Ciarán Breen:
No. The portfolio is growing all the time, depending on the number of cases we settle in any one year and the higher values associated with some of them. For example, every year our projections for what we will spend normally go up because we settle a greater number of cases and cases of greater complexity. It is related to value, the number of cases and their maturity.
Catherine Murphy (Kildare North, Social Democrats)
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We know that there is a difference in the cost of settling cases when there is a clinical issue involved. How do we compare with other countries where the agency's counterparts settle claims in terms of the profile and extent of claims?
Mr. Ciarán Breen:
The nearest comparator in a common law jurisdiction is NH Resolution which used to be known as the NHS Litigation Authority. Its volumes of clinical claims and claims generally are so much higher that it is not a perfect comparator. On the non-clinical side, the level of damages in the United Kingdom is lower than here. The personal injuries commission is looking at this issue as a result of the work of the working group on the cost of insurance. Non-clinical claims for whiplash are being looked at, for example, because damages in the United Kingdom are so much lower than here.
Catherine Murphy (Kildare North, Social Democrats)
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Does the agency have a way to measure clinical cases?
Mr. Ciarán Breen:
Clinical cases tend to be very serious. In the United Kingdom damages for catastrophic injuries are, in fact, somewhat higher than here. For example, I had a meeting yesterday with a reinsurer who told me that he had seen £30 million paid out on a catastrophic injuries claim in the United Kingdon, while in another case the figure was £35 million. The highest we have paid out in a catastrophic injuries case is approximately €19 million.
Catherine Murphy (Kildare North, Social Democrats)
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I am not talking about individual cases but numbers. I am trying to get to a question I asked Mr. Breen earlier about looking at causes and which he answered.
Mr. Ciarán Breen:
Perhaps I might help the Deputy by saying the following. We have asked our actuaries, for the purposes of our strategy committee in the agency, to carry out the kind of examination for which the Deputy has just asked, to look at the cost of claims here relative to the cost in the United Kingdom in both clinical and non-clinical cases. Certainly, the value is lower here for clinical claims than in the United Kingdom. The rate of claims is proportionate both here and there.
Catherine Murphy (Kildare North, Social Democrats)
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I wish to follow on from what Deputy Catherine Connolly asked this morning about the investment in housing within the private sector. There is ethical investment in other areas. Would the NTMA fund the construction of developments wholly run by REITS? They may well be foreign investors that are subject only to withholding tax. Does the NTMA look at for whom buildings are likely to be built?
Catherine Murphy (Kildare North, Social Democrats)
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That is what I am worried about. Not only are they able to achieve very high rents, they also pay very little tax. To understate it, it would be very undesirable to invest public funds to build where such an advantage would accrue to the investors.
Catherine Murphy (Kildare North, Social Democrats)
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The pensions reserve fund stands at €8.9 billion.
Catherine Murphy (Kildare North, Social Democrats)
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The one which was not called the pensions reserve fund. We used most of it, around €19 billion to bail out the banks at the time, or it was not quite a bailout. That was initiated a long time back and was building up. There is a real pensions time bomb. The fund is now a portion of what it was almost eight or ten years ago. Has the NTMA done projections about what the requirements will be? I presume that fund is being invested to try to get the maximum return. Is that something for the NTMA or is it at policy level?
Mr. Conor O'Kelly:
It would be a policy issue in respect of pensions. I know there is a lot of discussion around pension reform, auto-enrolment and areas like that. As of now, no policy has been finalised that would come to us for potential participation or assistance in terms of execution. To go back to the Deputy's earlier point, if we put back in the value of the shareholdings in the banks plus the €8.9 billion, we are getting back up to €23 billion or €24 billion, close to where it was at its height, notwithstanding that it could have been invested in the meantime.
Catherine Murphy (Kildare North, Social Democrats)
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Considering that there was €5 billion to invest and it is now €8.9 billion, that is potentially a sizeable difference if things had remained as they were and there was no further money invested into it. When we talk about the pensions time bomb and the adequacy of the provisions, is that something the NTMA projects or is it done at departmental level?
Catherine Murphy (Kildare North, Social Democrats)
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Is this money there to be used for that sole purpose?
Mr. Eoin Dorgan:
The Government's decision in 2011 was to refocus the remainder of what at the time was the National Pensions Reserve Fund into the ISIF to be invested in Ireland, in adherence with the double bottom line in terms of commercial return and economic impact. At present, the entirety of the National Pensions Reserve Fund is either in the directed portfolio, which is effectively the bank shares, or the discretionary portfolio, which is the €8.9 billion that is being transitioned into investment in Ireland.
Catherine Murphy (Kildare North, Social Democrats)
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Right. On the pensions time bomb and the ageing population, while I wish we could hold the time back, when are we getting into serious trouble in terms of funding pensions?
Mr. Seamus McCarthy:
The Department of Public Expenditure and Reform is best placed to answer that and it will be before the committee in October. Separately, the Department of Employment Affairs and Social Protection just last year completed a projection of what State pension costs will be into the future. The figures certainly are very concerning. When it presents the Social Insurance Fund accounts for 2017, it will be referencing that and the document will be available to the committee for examination.
Catherine Murphy (Kildare North, Social Democrats)
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I thank the Comptroller and Auditor General. The NTMA said it would issue so-called green bonds. I believe Poland and Belgium have done so. How does that work? Is it separate money and a separate process? Does it require a policy initiative or can the NTMA itself initiate it?
Mr. Conor O'Kelly:
It is something we are talking to the Department about right now. Essentially, it is fungible with the other debt so it is segregated. Investors will invest in so-called green bonds, provided the money is being used for sustainable investment processes. It could be new electric trains, water upgrading systems or any environmentally friendly projects the Government has on its books, and the Government has many. Once the projects are earmarked and it is decided the money will be spent and is ring-fenced for that purpose, a different pool of capital can be accessed, which is quite good news for us. Whatever money we then raise is used to finance those programmes. They get reported on every year. Investors will look for an independent report every year to see that money is being spent on that basis so it has been very successful. It is a growing pool of capital and, for Ireland diversifying, from a selfish NTMA point of view in terms of debt, getting access to new pools of capital is very attractive. It also provides a dedicated pool for investment in green projects that has to be fulfilled.
Catherine Murphy (Kildare North, Social Democrats)
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Is this all private money or is there some Government money associated with it?
Catherine Murphy (Kildare North, Social Democrats)
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How does that work with the general government debt?
Catherine Murphy (Kildare North, Social Democrats)
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It is just using the money differently.
Catherine Connolly (Galway West, Independent)
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Am I right that about €19 billion of the national debt is savings?
Catherine Connolly (Galway West, Independent)
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Is the figure for savings rising over the years?
Mr. Conor O'Kelly:
It has risen, but interestingly, it has remained at about 10% of total debt. Our debt has gone up fourfold from €47 billion to more than €200 billion. The figure for retail savings was €4.7 billion or 10% back in 2007. It has stayed very steady at about 10% of the total national debt. Retail savings comprise State savings, prize bonds, and the post office savings, all done through An Post.
Catherine Connolly (Galway West, Independent)
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What was the national debt just before the crisis started?
Catherine Connolly (Galway West, Independent)
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Is it €200 billion now?
Catherine Connolly (Galway West, Independent)
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I am not going to dwell on this but I am right that there is an investment committee that advises on investments?
Catherine Connolly (Galway West, Independent)
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Yes.
Catherine Connolly (Galway West, Independent)
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Does that investment committee have external members?
Catherine Connolly (Galway West, Independent)
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I am reading in the document that one of them is Ms Julie Sinnamon, CEO of Enterprise Ireland. Then we have Mr. Mark Ryan, company director and former manager-----
Seán Fleming (Laois, Fianna Fail)
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To what page are you referring?
Catherine Connolly (Galway West, Independent)
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It is on page 56 of the annual report. Mr. Ryan is former managing director of Accenture Ireland. That is not the same company - perhaps the Chair can correct me - that came up in respect of IT, is it? I do not want to get a company's name wrong. I may have mixed this company up with the company for the IT for the Garda station. It is a different company, is it?
Catherine Connolly (Galway West, Independent)
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Is that spelled A-C-C-E-N-T-U-R-E?
Catherine Connolly (Galway West, Independent)
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Is that one and the same company about which questions have been raised in respect of IT and the Garda Síochána?
Catherine Connolly (Galway West, Independent)
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That was the responsibility of the Garda Síochána in respect of procurement, but did it happen to be the company that benefited and got the roll-on contracts without procurement?
Seán Fleming (Laois, Fianna Fail)
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The contract was not renewed in accordance with compliance. That is the company.
Catherine Connolly (Galway West, Independent)
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That is the same company. Okay. I just wanted to clarify that. Then we have a member of the investment committee connected with Grant Thornton. Who chooses the external members?
Catherine Connolly (Galway West, Independent)
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Who chooses them initially?
Seán Fleming (Laois, Fianna Fail)
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Who comes up with the names to send to the Minister?
Mr. Eoin Dorgan:
I think it is a combination between the agency and ourselves and the Minister is consulted on the appointment. The agency, I think, proposes. If I am wrong, I will correct that. The agency proposes and the Minister is consulted and agrees on appointments to the investment committee.
Catherine Connolly (Galway West, Independent)
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I got distracted because I am due to speak in the Dáil. I apologise. Will the Chair allow me to defer the rest of my time until after I come back?
Seán Fleming (Laois, Fianna Fail)
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I am sure we will be here for at least half an hour. I said "at least".
Kate O'Connell (Dublin Bay South, Fine Gael)
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Following on from that, in the context of borrowing money to invest in sustainable projects on behalf of the State, we have historically low interest rates at present. Perhaps this question was asked in my absence earlier. I would expect an increase in interest rates. I assume there is contingency built in to deal with that so that these projects can continue if we get a rapid rise in interest rates. Has that been factored in?
Kate O'Connell (Dublin Bay South, Fine Gael)
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What happens if more money is needed in order to continue a project? Does the NTMA borrow all the money to see the project to the end?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Okay, it does. What would happen if extra money was needed unexpectedly because something happened?
Kate O'Connell (Dublin Bay South, Fine Gael)
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On the NAMA surplus, is the approach to crystalise it and to have a once-off gain?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Yes.
Seán Fleming (Laois, Fianna Fail)
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Could the witness from the Department of Finance respond because it is not part of the NTMA?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Is Mr. Dorgan allowed to have a view on whether it is a good idea to crystallise it in a once-off move or to split it and hedge one's bets?
Mr. Eoin Dorgan:
The division that deals with NAMA is a separate division and it will be talking to the Minister and the Government on that.
Kate O'Connell (Dublin Bay South, Fine Gael)
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We will have representatives from the Department of Finance before the committee in September.
Seán Fleming (Laois, Fianna Fail)
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For the benefit of the Deputy, when we had the Department of Finance in some time ago, we asked that specific question on the ultimate surplus. The representatives from the Department stated it had not made any decision or proposals on the matter. We asked then what were the EU rules in respect of this because the Government's general position is that any money recovered from financial assets goes towards the reduction of debt. That is the general position on the sale of bank shares, for example. Some people in the Department of Finance indicate that the surplus might be used to reduce the national debt.
Kate O'Connell (Dublin Bay South, Fine Gael)
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It is €200 billion. Would we pay down some of that?
Seán Fleming (Laois, Fianna Fail)
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Yes. The next question we asked is whether the use of the NAMA surplus would require EU clearance because it would have to be done within EUROSTAT rules and we were told that no discussions had taken place with Europe yet. We asked what Europe's position was expected to be. The Department said that there is no other NAMA or anything like it in Europe so it does not believe Europe has even addressed the issue yet. I suppose the bottom line is that discussion has yet to take place. I am giving the Deputy the benefit of information obtained at a previous meeting.
Kate O'Connell (Dublin Bay South, Fine Gael)
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I thank the Chairman very much.
Seán Fleming (Laois, Fianna Fail)
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NAMA will be before the committee on the first occasion on which we meet after the recess.
Kate O'Connell (Dublin Bay South, Fine Gael)
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Does Mr. Dorgan have a view on the disposal of bank shares? Does he think it is a good or a bad idea at this point? Although it was necessary at the time, I do not think it ideal for the State to have any involvement.
Mr. Eoin Dorgan:
The programme for Government commitment is that the maximum sale of shares in any institution is 25% and that has been reached with the AIB transaction. The Department, the Irish Fiscal Advisory Council, IFAC, the European Commission and the NTMA in particular have all highlighted the high debt levels. Share sales will very much have to be a decision for the Minister in due course.
Kate O'Connell (Dublin Bay South, Fine Gael)
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With regard to the previous session of questions, do any of the witnesses know if the State has purchased any buildings recently? I was told before lunch that it is not Government policy to buy buildings. Perhaps it is not appropriate for me to ask it here and we can get the answers somewhere else. I was trying to look into that but I cannot see such information.
Mr. Seamus McCarthy:
It is an OPW policy area. The OPW is scheduled to come before the committee at the beginning of October. I am aware that it has taken leases on a significant number of buildings. It would be reasonable to expect that there is a value for money evaluation underpinning that policy. That is a question for the OPW.
Kate O'Connell (Dublin Bay South, Fine Gael)
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Before lunch, I was trying to ask a question about the €1 million per floor per year. The fee for facility management and maintenance is more than €500,000. It just seems like a great deal of money per year to service a building. Is it the job of Mr. McCarthy to respond about value for money?
Kate O'Connell (Dublin Bay South, Fine Gael)
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So is it the Department of Finance again?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Has the Department of Finance been in contact or has the Comptroller and Auditor General spoken to the OPW to see about the €1 million per floor plus the maintenance fee? Do we know if that was ever considered?
Mr. Eoin Dorgan:
This is a decision for the agency. However, in order to be of assistance, in terms of the purchase of buildings, people must remember that, under EU fiscal rules, this would impact on one's expenditure benchmark so it does have a very sizeable impact if one is looking at one-off expenditure in terms of how much is available for ongoing current day-to-day expenditure. That may have informed that policy decision in terms of purchasing. In terms of the NTMA premises, that would be a decision for it.
Mr. Seamus McCarthy:
Going back to Deputy O'Connell's point about why we are buying in the centre of Dublin as opposed to more low-cost locations, they are policy questions that are and should be amenable to analysis. It should be possible for the OPW to demonstrate that there is something underpinning its decision.
Kate O'Connell (Dublin Bay South, Fine Gael)
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Financial logic.
Kate O'Connell (Dublin Bay South, Fine Gael)
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I look forward to meeting representatives from the OPW after the recess.
Seán Fleming (Laois, Fianna Fail)
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I will ask a few questions myself. I use the word "few" lightly.
I will start with the national debt. I have the report in front of me. I will ask Mr. McCarthy to confirm some information that is out there and we can comment on it. I want to give the people who are watching a full and clear picture. They get bits and pieces from different questions but I like to give the overall view.
The gross national debt at the end of 2017 was €198.7 billion, almost €200 billion. That is on page 7 of the accounts. I thank Mr. O'Kelly for the extra briefing information supplied. Essentially, we have one big problem when one looks at the chart on page 12 of the accounts where it is indicated that the percentage of our debt to GNP is quite low, at 68%, which is moving towards the EU fiscal rules target of 60%. However, everybody knows - and we have discussed it with the Department of Finance - that this is not a real measure of what happens in Ireland at all because it is totally distorted by the presence of multinationals. It is not really income to the country. We have moved on to gross national income, GNI, and now we have GNI*, which Mr. O'Kelly referenced. The gross Government debt to GNI* ratio is probably a far better indication in reality. Mr. McCarthy mentions that in the document and he shows that chart. From that perspective, there is still a worryingly high level of debt.
Even allowing for the fact that the agency uses GNI* as a measure, although it is helpful to use both such measures, the national debt is still at a very worrying level. Is that a fair comment?
Seán Fleming (Laois, Fianna Fail)
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Moving on to page 13, the debt, cash balances and gross debt are shown. I note the cash balances the agency is holding seem to have declined in recent years. In 2012, there was €50 billion in cash balances. All the figures are not given on that page, but I note from the chart the cash balances now held are only half of that amount. It would probably cost the agency to hold cash reserves but it would give a little more flexibility. Why have the agency's cash reserves declined in recent years?
Mr. Conor O'Kelly:
During the crisis there was a question mark over our access to the markets and now we are talking about the price we pay when we access the markets. They are two different things. If we have a question mark over our access to the markets and are not able to fund such moneys, we would need to have very high cash buffers because we would need to be able to fund the State. Given Ireland's improving credit rating, we are now talking about the price of the credit we can access. There is not an issue about Ireland's capabilities of accessing the markets. Thankfully, that is behind us. The question now is about the price. When we decide what cash buffers to have, we make an implied view on interest rates also and whether this is a good time to lock in those rates, and that determines it. We have some very big maturities coming up.
Seán Fleming (Laois, Fianna Fail)
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I will come to those.
Seán Fleming (Laois, Fianna Fail)
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That is 5% of the agency's debt?
Seán Fleming (Laois, Fianna Fail)
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When we had a difficulty accessing the market, essentially during the three years when the troika were here, 2011 to 2013, we were sitting on in excess of €50 billion in cash reserves. The agency thought we needed to have that because we might not have been able to raise such funds down the road. The troika came for a three-year period. Mr. O'Kelly might tell me if I am right in my reading of that.
Seán Fleming (Laois, Fianna Fail)
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Cash balances or other assets.
Seán Fleming (Laois, Fianna Fail)
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What are the "other assets" referenced in page 13? The light green segment of the chart states "cash balances or other assets". Does that refer to bank shares?
Seán Fleming (Laois, Fianna Fail)
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This is an NTMA document. The witnesses must be able to tell me to what that chart is referring.
Seán Fleming (Laois, Fianna Fail)
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The bank shares would have been worth very little. What does Mr. O'Kelly mean by liquid assets other than cash? This is the agency's chart. There seems to quite an amount shown in the green segment of it during 2012 and 2013.
Seán Fleming (Laois, Fianna Fail)
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The agency needs to come back to us on this. This is its annual report. The witnesses should know these charts off by heart given that they have inserted them in it. I ask that they send us a detailed note explaining that. If a member of the public's reading of this report was similar to my reading of it, they would take from that chart that we were awash with cash all during the troika period.
Seán Fleming (Laois, Fianna Fail)
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I am reading-----
Seán Fleming (Laois, Fianna Fail)
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From 2012 the figures go from €150 billion up to €200 billion. There is at least €50 billion in debt in that. We had the National Pensions Reserve Fund, NPRF, at that time. Will Mr. O'Kelly come back to us on this and explain that? On the face of it, it looks as if we had far more cash when we all thought we were broke.
Seán Fleming (Laois, Fianna Fail)
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I have turned over the page and in respect of funding and maturities, it looks as if approximately €50 billion in funds are due to mature in the period from 2018 to 2020 and €10 billion has been included there. Is Mr. O'Kelly comfortable the agency can meet that? There is quite an amount in maturities coming up in 2019 and 2020.
Seán Fleming (Laois, Fianna Fail)
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Mr. O'Kelly spoke about rising interest rates.
Seán Fleming (Laois, Fianna Fail)
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Okay. Is that the current cash balance? I know this annual report covers up to the end of December last year. Has the agency's cash balance gone up a lot this year?
Seán Fleming (Laois, Fianna Fail)
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Mr. O'Kelly needs to send us a chart in respect of the period of the chart on page 13 of the annual report showing us the cash balances then and the current cash balances.
Seán Fleming (Laois, Fianna Fail)
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Mr. O'Kelly said the agency's cash balance has increased quite an amount in the past six months.
Seán Fleming (Laois, Fianna Fail)
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Mr. O'Kelly might send us that information in order that we would have a reasonable understanding of it.
I read an article carrying the headline "Gordon MRM keeps €480k PR deal with NTMA". It states "Gordon MRM has beaten away competition to retain the prestigious public relations account with the National Treasury Management Agency". What does it do for that €480,000? That probably covers a five-year period. The journalist who wrote that article probably indicated that amount covers a number of years.
Mr. Conor O'Kelly:
The contract is nothing like that amount. That firm has a contract with the NTMA and it has an additional contract it won with the National Asset Management Agency, NAMA. It could be the two of those combined, but we will come back to the Chairman with the value of that contract.
Seán Fleming (Laois, Fianna Fail)
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I saw that newspaper article written by a reputable journalist recently. I note it states "The contract represents a impressive double win ... earlier this year the firm retained ... [the NAMA] ... contract". It probably covers a few years.
Seán Fleming (Laois, Fianna Fail)
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Probably. Mr. O'Kelly might forward us the information on that.
Seán Fleming (Laois, Fianna Fail)
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I am not suggesting it is the annual fee. That is the headline. I want a breakdown of that. The firm is doing a good job for the agency. The witnesses appear before this committee every year and every time they do or they talk or give a press conference, they give the a good impression of the agency to most people in terms of how much it is has refinanced and that the interest it has on new loans it is taking out, that is replacing old debt, is less than 1%. If people were to listen to the agency, they would assume it had most of this under control, but it transpires this morning that Mr. O'Kelly said that in the past three and a half years the agency has only replaced €50 billion, which is 25% of the debt, a quarter of it. If only €50 billion was replaced during those years, that amounts to €15 billion per annum, which is only about 7% of the agency's total debt. The agency does a good deal of selling information on how much it is replacing the old debt, but when we examine what the agency does and break it down, that accounts for only 7% of the agency's debt in any one year, on average. We only hear about 7% of its debt. The witnesses never tell us about the other 93% of it. They sell a good story. If one were to believe the information they put out, one would think we nearly had all the financing of our debt down at 1% or 2% at this stage. That is the only story we hear from them, but it transpires it is only 7% of the debt that benefits from such announcements. Does Mr. O'Kelly get my point?
Seán Fleming (Laois, Fianna Fail)
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Is there any mechanism, internationally, to offer some incentive to bring forward debt that is not due to mature for some time?
Seán Fleming (Laois, Fianna Fail)
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Does the agency look at that?
Seán Fleming (Laois, Fianna Fail)
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Every day?
Seán Fleming (Laois, Fianna Fail)
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That is the chart I would have loved to have seen in the annual report. Will Mr. O'Kelly give us the €200 billion debt broken down in terms of how much of it is being financed at under 1%, now that some of it is under 1%, how much of it is being financed at between 1% and 2%, how much of it is being financed at between 2% and 3%, and all the way up? Is there much of the older debt on which we are paying interest at over 6%?
Seán Fleming (Laois, Fianna Fail)
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So there is nothing out there that is more than 6%.
Seán Fleming (Laois, Fianna Fail)
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In 2019-2020. Will you send us on that chart because-----
Seán Fleming (Laois, Fianna Fail)
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Many of them are at 4% and 5%, and then they drop down to 1.7% and 2%. Perhaps Mr. O'Kelly could give us the full breakdown of the 200. That is a good indicator. That is the only information I am looking for in that regard.
I will move on to the Ireland Strategic Investment Fund. A figure of €526 million for residential housing is referred to on page 17 of the financial statement. The statement says that at the end of 2017 the Ireland Strategic Investment Fund had committed €526 million to residential housing investments in response to the national housing crisis. Can Mr. O'Kelly tell the committee how many houses were built by the fund at the end of 2017? I note all the commitments and so on but how many houses were actually built with the €526 million? How many actual houses can be counted, that is, there are 50 there or 300 there? At 31 December 2017, how many houses were built from that €526 million?
Seán Fleming (Laois, Fianna Fail)
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That is for units built. Will Mr. O'Kelly try to get us the figure for the end of December 2017 to which that €526 million relates? We hear the big figure and for €526 million, we have 1,000 houses so far, and I know there are a lot to come. We are here to talk about delivery but has not happened in spite of the amount of money provided. Perhaps Mr. O'Kelly could give the committee an estimate for how many houses it expects to complete this year, next year and the following year from that €526 million. This is a reasonable question. People are now talking about delivery.
I will go through the annual report systematically. In regard to the global portfolio managers, was there a change of those managers during 2017 and what criteria are there for rolling over the contracts? What are the procurement arrangements? Do they get the contract for a two year or three year period? Talk to me about the general nature of the contract for companies such as Goldman Sachs Asset Management, J.P. Morgan Asset Management, Irish Life Investment Managers, Amundi Asset Management, Blackrock Investment Management, Deutsche Asset Management and so on? What is the typical arrangement the NTMA has with these companies and how does it procure the services?
Mr. Conor O'Kelly:
We have a panel of investment managers that we can use. We have the panel system and then we tender as we need them. We monitor their performance. No fund manager has been removed or changed in 2017, but sometimes we may add or subtract to the number of fund managers and between different managers, depending on the performance of the manager and on the strategy that may be pursued at the time.
Seán Fleming (Laois, Fianna Fail)
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If one has 20 fund managers on the panel, inevitably there would be five, six, seven or eight who are very good while some of them are okay. There must be some managers who are not as good as others. What does the NTMA do about dropping those? Why would one use the bottom third performers if one knew there were others who are consistently doing better? I am aware that the NTMA can probably reduce the amounts that are placed with them.
Seán Fleming (Laois, Fianna Fail)
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Is there much movement in that regard? Consider the market value of the investment of the six. Perhaps the witness can take the market value figure under the management of each of those companies for 2017, which is on page eight of the financial statement, and take it back two years to the same figure for 2015, with an explanation for why there is a significant change. We want to get a feel for this because these people are looking after the investment portfolio of taxpayers' money worth €6.5 billion. Will the NTMA give the committee an indication of why those figures moved, rather than going back just one year?
In one of the documents supplied to us by the NTMA it shows there are some 146 public bodies - correct me if I am wrong-----
Seán Fleming (Laois, Fianna Fail)
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Yes, under the State Claims Agency; not under the NTMA. Will Mr. Breen from the State Claims Agency please forward to the committee a list of the 146 bodies, and what significant bodies do not come under the remit of the State Claims Agency? Do the local authorities come under the State Claims Agency?
Seán Fleming (Laois, Fianna Fail)
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Okay, that is one. What other big organisations are covered? Are third level colleges included?
Mr. Ciarán Breen:
The larger bodies are the HSE - with regard to its clinical and non-clinical exposures - and after that the main bodies are those such as the Irish Prison Service, the Department of Defence, An Garda Síochána and so on.
Seán Fleming (Laois, Fianna Fail)
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Does the State Claims Agency deal with the section 38 agencies?
Seán Fleming (Laois, Fianna Fail)
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Have they all agreed?
Mr. Ciarán Breen:
Yes. Most of the agencies that have come into the scheme are from the disability sector.
Seán Fleming (Laois, Fianna Fail)
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Will Mr. Breen explain why this is and why some of the services are in the scheme and not others?
Mr. Ciarán Breen:
Most of them were originally covered under conventional insurance policies and their premiums were going up, as members will be aware through the costs of insurance working group, which had been dealing with the issue. Many of the agencies transferred to the pay-as-you-go system for their public and employer liability exposures.
Seán Fleming (Laois, Fianna Fail)
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Did the section 38s transfer to pay-as-you-go?
Seán Fleming (Laois, Fianna Fail)
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Was the HSE happy that these organisations were paying out €4 billion per annum because they did not have insurance and were on a pay-as-you-go system?
Seán Fleming (Laois, Fianna Fail)
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Who carried that out exercise?
Seán Fleming (Laois, Fianna Fail)
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How long ago was this?
Seán Fleming (Laois, Fianna Fail)
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I ask that this report is forwarded to the committee. I am aware that some of it might be confidential but please forward what is possible.
Seán Fleming (Laois, Fianna Fail)
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It is news to me, but obviously not news to others, that these organisations did not have insurance and were in a pay-as-you-go situation-----
Seán Fleming (Laois, Fianna Fail)
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That issue has never crossed the desk of the Committee of Public Accounts before now. It is interesting.
Seán Fleming (Laois, Fianna Fail)
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The local authorities have a separate insurance system, the name of which escapes me just now. I believe it is mutual insurance under the Irish Public Bodies, IPB, insurance company. Has the State Claims Agency ever thought of doing an exercise for it on the same basis or is it on a pay-as-you-go basis also?
Seán Fleming (Laois, Fianna Fail)
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If the section 38 agencies, which get at least €3 billion per annum, believed it was better to come into a scheme with the State Claims Agency on a pay-as-you-go basis, and if the entire budget for the local authority is also in that bracket of €4 million - and one could include capital expenditure of €5 billion or €6 billion - they would be a similar sized group of organisations in terms of turnover. If it is valid for section 38 agencies to come into the State insurance scheme, then somebody should run the numbers to see if it would be valid for local authorities to come in on the same basis. Maybe the claim profile of the local authorities is completely different but it would be interesting to see. There appears to be two agencies handling insurance claims - one for local authorities and one for all the organisations under the State Claims Agency. Can we talk with the Department of Public Expenditure and Reform about this? Somebody needs to look at it. I am not suggesting there should be a change but if it has worked with others, and the State Claims Agency has come to this conclusion regarding section 38 agencies, then the same exercise could be examined for local authorities, given that it is all taxpayers' money and savings could be made.
Seán Fleming (Laois, Fianna Fail)
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As a result of today's meeting, the committee will write to the Department of Public Expenditure and Reform separately.
I am not asking that an investigation be done but that the matter be considered and the Department's thoughts given to us. We will come back to it because at €2.6 billion on the SCA's balance sheet for claims, or closer to €3 billion, I have no idea what is out there against the local authority.
I am moving on to page 36 and NewERA. Why did the VHI come in? I can understand NewERA started in the energy market and now some new organisations have come in. Is this the full list of the new organisations - An Post, Córas Iompair Éireann, CIÉ, the Irish Aviation Authority, IAA, the Dublin Airport Authority, DAA, and the VHI?
Seán Fleming (Laois, Fianna Fail)
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That is fine.
Seán Fleming (Laois, Fianna Fail)
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The NTMA might send us a note on the new designated bodies under its wing and how that came about.
Seán Fleming (Laois, Fianna Fail)
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It might be helpful for us to have a list of those organisations done in the last 18 months so that we know what is happening. I am moving on to those on page 38. These are the portfolio companies.
Seán Fleming (Laois, Fianna Fail)
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I have to note the contrast between the two debates happening in the Oireachtas today. The Fossil Fuel Divestment Bill passing in the Chamber is asking the NTMA's Ireland Strategic Investment Fund not to hold any shares in fossil fuel companies while the NTMA is also the principal adviser to the Minister who has shares in the ESB. Moneypoint must be the biggest CO2 emitter in Europe perhaps but certainly in Ireland. How do the two sides of the house sit together in the NTMA? One arm is saying let us keep bringing in millions of tonnes of coal from Colombia on each ship that comes in every month. The other arm then is saying that we should not be investing or holding shares in fossil fuel companies. There is a dichotomy that Mr. O'Kelly might explain to me or perhaps we created that?
Seán Fleming (Laois, Fianna Fail)
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I could not avoid noting the contrast between the two debates.
Seán Fleming (Laois, Fianna Fail)
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Is Moneypoint safe?
Seán Fleming (Laois, Fianna Fail)
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We will let someone else talk to Mr. Dorgan about that. I am moving on to the State Claims Agency legal costs on page 41. I have often raised this before. This is the "good public relations" that is done. On legal costs, "in 2017, the SCA settled 440 bills of costs received from third parties for €55.2 million - a reduction of 48% on the €106.9 million claimed". One would be forgiven for thinking that great work had been done in reducing the payments on legal fees but when we turn over the page we see that is an artificial figure being compared. It is comparable to saying someone sent in a bill but I did not pay it and so saved money. We will look at the details on page 44 of what actually happened beyond that headline.
I am looking on page 44 where the cost of claims resolved from 2013 to 2017 are detailed on a chart. I refer to the average cost per claim. The clinical claims are dealt with first. I am referring to the legal fees for the State Claims Agency and the plaintiff, to the average cost per claim set out in the second column down. The average cost per claim for the SCA for clinical claims is stated to be €23,000 and the legal fees for the plaintiff were €41,000. That means that €62,000 on average was paid per claim. Mr. Breen is reading the same chart. The award was €130,000. In other words, legal costs in respect of awards in 2017 were 49% of the legal awards. For every €100 of settlement to the individual there was an additional 49% in legal costs. Is that correct? That is correct.
I will go back to 2004 and I could go back to other years. In 2004, €48 million was paid out in legal fees on settlements. A sum of €48,000 was the average legal fee on the average settlement of €93,000, which is 48%. There has been no real reduction in legal fees. The SCA's percentage of legal fees, as long as I am sitting here, is running at approximately 50% of the settlements. If I look at the previous page of the report, it is stated that there was a 48% reduction in legal fees. Misleading is the most generous word I would put on that. The SCA has not reduced anything. These are the SCA's own figures.
I will go down then to the general claims, the column below the previous one. It is the same situation. I will not read the figures out loud. I have looked at the money for 2017. The legal fees paid out were €13.6 million which is 55% of the award of €24.7 million. That is 55% and that was the rate the previous year and in 2014. In respect of the payments, and we have been told about the payments increasing, the percentage of the legal fees is fairly static at in or around 50% for years. Yet the SCA is telling us, and the public would believe it if the details were not looked into, that legal costs have been reduced by 48%. That is the SCA's big chart on page 41. It does not gel. Does Mr. Breen get what I am saying? That is not a real headline, it is a public relations job.
Mr. Ciarán Breen:
No, with respect, those are two different things. We have a legal costs unit which was established in 2013 within the State Claims Agency. It handles tribunals' bills of costs arising from third parties appearing before those tribunals. What we are showing on page 41, and the big figure we are indicating we are saving, are actual bills of costs sent in by third parties that we examined. In order that the Chair will know, we go out to the solicitor firms. The Comptroller and Auditor General might comment on this as well. If it is one of the big firms representing a third party, we go out and we look at all of their boxed files. We examine them and then we begin to negotiate by saying we are not allowing this, that and so on and that we are reducing them. It can be seen that we have had really good reductions in the order of more than 40% over the years. That is on one side and those are actual savings made on the bills of costs.
Then if we look at what is happening on the tables the Chair has just been through, which is the other part of our business-----
Seán Fleming (Laois, Fianna Fail)
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Which is the bigger end of it?
Seán Fleming (Laois, Fianna Fail)
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Then perhaps a page or a chart on the tribunals could be put in the report.
Seán Fleming (Laois, Fianna Fail)
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It is on page 46.
Seán Fleming (Laois, Fianna Fail)
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That is fine and good for the tribunals but the main point I was raising was on the settlements and compensation, where the legal fees are consistently running above 50%.
Mr. Ciarán Breen:
That profile is slightly lower for us than a conventional insurer dealing with these types of claims. We actually do better and the reason for that is because we control our own costs better. We procured, for example, our barristers and solicitors and we imposed caps on them. We do all that we possibly can.
Seán Fleming (Laois, Fianna Fail)
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I appreciate that but the public will find it a little hard to take that for €1,000 paid out the solicitors are getting €500 on top of that, yet the SCA is saying it is doing great internationally. That is what I am being told. It does not feel great.
Seán Fleming (Laois, Fianna Fail)
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The State Claims Agency has no control over it.
Seán Fleming (Laois, Fianna Fail)
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We understand that.
The next page deals with mass actions. According to the annual report at the end of 2017 there were 34 active thalidomide related cases, 70 narcolepsy related cases and 92 active Shine abuse cases, none of them settled during the year. There are also 1,636 active in-cell sanitation cases relating to the prisons at the end of the year, only one of which was settled.
Seán Fleming (Laois, Fianna Fail)
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Without disclosing the agency's hand, why is the process so slow?
Mr. Ciarán Breen:
There are groups of cases where there are significant liability of causation at law type issues or statute of limitation issues involved, for example, with the exception of the in-cell sanitation which the Chairman spoke about. In regard to in-cell sanitation, there was a lead case. The lead case went to the High Court. The High Court did not award any damages, as it happened. It did find that there was a breach of privacy and that is now on a leapfrog appeal, which was only recently accepted by the Supreme Court. Until such time as we get a determination in that particular case, the other cases simply back up and wait their place.
Seán Fleming (Laois, Fianna Fail)
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Is the appeal in respect of the breach of privacy?
Seán Fleming (Laois, Fianna Fail)
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The whole case.
Seán Fleming (Laois, Fianna Fail)
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There are effectively 1,635 cases waiting to be dealt with.
Seán Fleming (Laois, Fianna Fail)
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Mr. Breen has no idea what the outcome will be. I take it the State Claims Agency has made provision in its accounts in this regard.
Seán Fleming (Laois, Fianna Fail)
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We will not ask Mr. Breen to disclose that for obvious reasons.
I will move on now to page 52. There are nine staff in the organisation on salaries of over €300,000. Are the witnesses worth it?
Seán Fleming (Laois, Fianna Fail)
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I do not want to get prurient on the issue but it was important to make the point.
I am moving on now to the NTMA's financial statement, page 92 which deals with the income and expenditure for the National Treasury Management Agency. Staff cost is €94 million and operating expenses is €21 million, which means the organisation costs about €116 million per annum.
Mr. Ian Black:
To be clear, that is on a gross basis because it also includes the staff cost for the National Asset Management Agency, NAMA, and the Strategic Banking Corporation of Ireland, SBCI.
Seán Fleming (Laois, Fianna Fail)
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What is the level of expenditure for the NTMA and is it set out in the accounts?
Seán Fleming (Laois, Fianna Fail)
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On what page?
Mr. Ian Black:
Operating income is at the top of page 92. We recover €58 million from NAMA and SBCI and others. It is in note 5.
Seán Fleming (Laois, Fianna Fail)
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Mr. Black is saying that the NTMA's operating cost is approximately €50 million.
Seán Fleming (Laois, Fianna Fail)
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-----the National Development Finance Agency, the Ireland Strategic Investment Fund and the NewERA. That is good.
I am moving on now to page 147. Perhaps Mr. Black would explain the difference between the discretionary portfolio and the directed portfolio. I think the directed portfolio are investments directed by the Minister, which are related in the main to bank shares. I ask Mr. Black to explain it for the viewers.
Mr. Ian Black:
These are investments where we act under the direction of the Minister for Finance. There are only two investments, the State's shareholding in Allied Irish Banks, plc, and its shareholding in Bank of Ireland. Directed investment is made under the instruction or direction of the Minister.
Seán Fleming (Laois, Fianna Fail)
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The NTMA sold the 25% of the State's shareholding in AIB.
Seán Fleming (Laois, Fianna Fail)
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That is fine. The Minister for Finance is the shareholder. Page 211 sets out the breakdown of the State's shareholding. The AIB shareholding is valued at €10.4 billion and the Bank of Ireland shareholding is valued at just over €1 billion. What is the percentage shareholding in each of those institutions?
Seán Fleming (Laois, Fianna Fail)
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Given that the job of the NTMA is to manage the debt and part of the debt has been incurred by acquiring those shares, from Mr. O'Kelly's point of view - I am not talking about policy - is it economically advantageous to continue to sell those shares? I am not talking about the politics of doing so. People will have views on that. I agree with Deputy Kate O'Connell that the State should not be in this business any more but Deputy Catherine Connolly might have a different view. We will stay out of the politics. The job of the NTMA is to advise on the management of the debt. We have incurred a debt in acquiring the bank shares. From a professional financial advice point of view, should we continue to hold those shares or should we continue to sell them?
Mr. Conor O'Kelly:
We have made our position clear. It is less our position than the position of investors who lend us the money. Our debt is very substantial. Their preference is that the State would, within the right timeframe, sell the shares and use the proceeds to pay down the debt which is still very substantial. We do not have very many opportunities to pay down the actual amount of debt. Our debt is four times what it was in 2007. That is a legacy of the crisis. There are very few opportunities to reduce that debt. Selling any liquid assets such as bank shares is one such opportunity.
Seán Fleming (Laois, Fianna Fail)
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What is the value of the AIB shares today versus the per share price when they were sold last year?
Seán Fleming (Laois, Fianna Fail)
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It was a little bit better, even if the NTMA was to sell some more this year.
Seán Fleming (Laois, Fianna Fail)
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Mr. O'Kelly is saying in retrospect we did well to get what we got at the time compared to current value.
Seán Fleming (Laois, Fianna Fail)
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Mr. O'Kelly should say that because some people probably think we sold short. Would Deputy O'Connell like to comment?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Yes.
Seán Fleming (Laois, Fianna Fail)
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I have a few wrap-up questions to ask but I can ask them later if there are members who would like to come in at this point.
Kate O'Connell (Dublin Bay South, Fine Gael)
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I am fascinated by Mr. O'Kelly's answer in regard to the shares, which I was not afforded to the same extent as the Chairman has been.
Kate O'Connell (Dublin Bay South, Fine Gael)
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The Chairman got a far more comprehensive answer on the view on the sale of the bank shares than I did when I asked the question but perhaps I am just-----
Catherine Connolly (Galway West, Independent)
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We will have to leave the questions to the Chairman.
Kate O'Connell (Dublin Bay South, Fine Gael)
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Yes, if we want answers.
Seán Fleming (Laois, Fianna Fail)
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I waited to ask my questions when everyone else had had an opportunity to speak.
Kate O'Connell (Dublin Bay South, Fine Gael)
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The Chairman asked the same question but the approach to the answer was quite different. Maybe I just got out of the wrong side of the bed this morning.
Kate O'Connell (Dublin Bay South, Fine Gael)
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There appears to be a difference in how the witnesses are answering the Chairman's questions.
Seán Fleming (Laois, Fianna Fail)
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Does Deputy Connolly want to come in?
Catherine Connolly (Galway West, Independent)
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I was in the middle of-----
Kate O'Connell (Dublin Bay South, Fine Gael)
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I thought the Chairman was not finished.
Seán Fleming (Laois, Fianna Fail)
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I am not finished but I will pull back and allow in anyone who wants to speak. I will allow Deputy O'Connell now followed by Deputy Connolly.
Kate O'Connell (Dublin Bay South, Fine Gael)
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Page 101 deals with wages and records Mr. O'Kelly's salary at €480,000. Table 7.3, sets out his performance-related pay. Is Mr. O'Kelly afforded performance-related pay in addition to his net salary?
Kate O'Connell (Dublin Bay South, Fine Gael)
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That is okay. By the looks of things, the NTMA does a good job in terms of returns on investments. Arguably, it is handy enough to do a good job when everything is in upward trajectory, the challenge being when things are in a downward trajectory. Earlier, Mr. O'Kelly mentioned 500 staff. Will he briefly outline the portion of staff in employment in the NTMA that are on the average industrial wage? Is there anybody in the NTMA earning €37,500 per annum?
Kate O'Connell (Dublin Bay South, Fine Gael)
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How many?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Can Mr. O'Kelly tell me the number of people on more than €200,000 per annum?
Kate O'Connell (Dublin Bay South, Fine Gael)
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There is no breakdown for those earning under €50,000.
Kate O'Connell (Dublin Bay South, Fine Gael)
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How many women in the NTMA's operations are earning in excess of €100,000?
Mr. Conor O'Kelly:
I will have to come back to the Deputy on that. The female-male breakdown is 50:50 at the bottom of the pyramid. As we go up, there are fewer women in each management category which is quite traditional, unfortunately.
At the top in the management team of nine, we have four women. Three of them are currently in place and the other, the new head of the NDFA will join us in the middle of August. We are working hard to address imbalances when they occur. We will go public with our pay gaps in next year's accounts.
Kate O'Connell (Dublin Bay South, Fine Gael)
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Can the NTMA show us its plan to address this imbalance?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Will the NTMA do it in the next year?
Kate O'Connell (Dublin Bay South, Fine Gael)
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When a position becomes vacant in the organisation, are there any issues with filling posts? There are issues in the HSE, for example, with hiring staff. Are there positions which the NTMA cannot fill for long periods?
Kate O'Connell (Dublin Bay South, Fine Gael)
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That is not surprising when the wages are quite generous.
Is the reason the NTMA is moving its headquarters from Dublin 2 to Dublin 1 due to the fact the Dublin 2 building is not energy efficient? Is there another reason?
Kate O'Connell (Dublin Bay South, Fine Gael)
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By whom?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Who did the assessment?
Kate O'Connell (Dublin Bay South, Fine Gael)
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That was mentioned earlier on. How long has the NTMA been in the building in Dublin 2?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Has it been refitted a few times?
Kate O'Connell (Dublin Bay South, Fine Gael)
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I am not saying it is not but it is a factor.
Kate O'Connell (Dublin Bay South, Fine Gael)
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What is the figure for the fit-out cost for the new building?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Is this for 500 staff?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Was the NTMA paying €1 million per 20,000 sq. ft. in the old building?
Kate O'Connell (Dublin Bay South, Fine Gael)
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That comes to 40,000 sq. ft.
Mr. Ian Black:
We are operating on a third floor which is partly occupied by NAMA. It is a shared floor but it is physically divided.
Kate O'Connell (Dublin Bay South, Fine Gael)
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Why does the NTMA need so much more space?
Mr. Conor O'Kelly:
It is about capacity. We will sign a lease for 25 years. We probably only need half of that space while another 20% of it will be made available to NAMA, the Strategic Banking Corporation of Ireland, SBCI, and other agencies. There is talk about the NTMA being given different mandates. Accordingly, we left ourselves some flexibility. We can sublet those other floors and get some rent back to offset the costs.
Kate O'Connell (Dublin Bay South, Fine Gael)
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The NTMA is getting into the business itself. I do not see the logic in this. I can understand having flexibility but not to that degree. Is the NTMA sure it will be able to sublet this additional space?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Has somebody done their sums on this?
Kate O'Connell (Dublin Bay South, Fine Gael)
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Would Thurles have done?
Kate O'Connell (Dublin Bay South, Fine Gael)
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I am deadly serious. After looking over it at lunchtime, the site in Dublin 1 appears to be the most expensive place in Ireland.
Kate O'Connell (Dublin Bay South, Fine Gael)
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Can we have the specification that was put out for the tender?
Kate O'Connell (Dublin Bay South, Fine Gael)
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The committee should visit the new headquarters sometime.
Catherine Connolly (Galway West, Independent)
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I refer back to the State Claims Agency. I raised the issue of rents this morning and I asked for a note on it. I am not blaming the witnesses as it is Government policy.
Catherine Connolly (Galway West, Independent)
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I will come back to that. I want to stick to the rent first, then the investment committee and then the SCA.
Is it Government policy that the NTMA must rent its headquarters?
Catherine Connolly (Galway West, Independent)
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I am failing to grasp this. I do not blame the witnesses. However, every week I sit here looking at rents for, say, Caranua at the Department of Education and Skills. Foras na Gaeilge did a business case which pointed out it was cheaper to buy a building and have a mortgage. There is something seriously wrong with the Government's policy in this regard. It is actively colluding in keeping market rents at the deep end. It is now put in language where it is adding to the new financial area in the city. Language is being used in a way to conceal. I do not expect the witnesses to answer this. However, I despair of the Government's policy on this at a time Galway city has a major housing crisis. Galway has been waiting since 2002 for a public housing programme. I agree with Deputy O'Connell. There is no reason other areas in the country cannot be looked at for locating headquarters.
On the investment committee-----
Catherine Connolly (Galway West, Independent)
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Yes, up to five external people can be appointed. Only three external people have been appointed. Who appoints them? I was interrupted.
Catherine Connolly (Galway West, Independent)
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They are appointed by the board of the NTMA.
Catherine Connolly (Galway West, Independent)
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Those appointments are subject to approval by the Minister.
Catherine Connolly (Galway West, Independent)
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What criteria are used for appointments?
Catherine Connolly (Galway West, Independent)
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I do not see a range of experience. I immediately think of the map of regional economic impact on page 24 of the annual report. Mr. O'Kelly had a reason for that. If we look at Connacht, 4% of the jobs created by ISIF were there, 6% of ISIF capital was deployed there and 4% of gross value added was in the region. It stands out as being very low in comparison with the other regions. Dublin's percentages for the same values were 50%, 56% and 43%, respectively. I look at this with my limited knowledge of finance and ask who is advising and what is going on. Údarás na Gaeltachta is not represented on this advisory board, nor is the co-operative movement. There is no range of people outside the same people who were there at the time of the crisis. There is the same type of skill set and the same type of consensus mentality. Why are the co-operative movement and Údarás na Gaeltachta not represented on this committee given their key roles in investment in the Gaeltacht? Is that a question for Mr. O'Kelly? I do not mean to put him on the spot. Should it be a question for the Minister or for the board of the NTMA?
Mr. Conor O'Kelly:
It is a reasonable question. There is only a certain number of people one can have around any one table making investment decisions so one must cut one's cloth to a certain degree. Julie Sinnamon has wide experience as CEO of Enterprise Ireland. To categorise her in that way is not really fair to her. Richard Leonard of Grant Thornton is from Limerick and his regional expertise has been extremely valuable.
Catherine Connolly (Galway West, Independent)
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I will take my comment back if I was personalising anything. I will stick with Údarás na Gaeltachta. It has a serious remit, among others, in respect of the Irish language and economic development of the Gaeltacht areas. It is nowhere to be seen.
Mr. Conor O'Kelly:
I encourage the Deputy and Údarás na Gaeltachta to share any proposals for which they seek the investment of ISIF funds. We are very anxious to invest in the regions. In his recent ISIF review the Minister asked us to renew our focus on the regions and we are happy to do so, but we need investment opportunities to be brought to us in order to invest. We do have the capability to invest in the regions.
Catherine Connolly (Galway West, Independent)
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The NTMA has the capability, the capacity and the money.
Catherine Connolly (Galway West, Independent)
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In the meantime, the Gaeltachts are seriously under pressure. There is serious unemployment and serious black spots which are creating major problems and has serious implications for Galway because people are moving to the city. This is because of an unbalanced approach to investment. Mr. O'Kelly is saying he is wide open to change on that.
Catherine Connolly (Galway West, Independent)
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Okay, that is lovely. On the State Claims Agency, the SCA - and I want to stay general on this matter - I thank the witnesses for the information. With regard to the cervical smear testing, the lessons the SCA learned, when it became aware of the issue and how it will avoid similar issues in the future, how did it happen that the matter did not go on the risk register sooner?
Mr. Ciarán Breen:
We only take the cases as they arise. That is really a matter for the HSE. It is the owner of the problem, so to speak. We are, it is to be hoped, part of the solution to the problem.
Catherine Connolly (Galway West, Independent)
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The SCA has a role in feeding information back, however. It has a serious role in pointing out risky areas. That is the role on which I want to focus. Let me say that I found Mr. Breen very open. He gave the facts and I welcome that. I am not interested in personalising it. He has come forward, bona fide, and given us as much information as we have asked for.
Mr. Ciarán Breen:
I thank the Deputy. She is right, the SCA has a clinical risk management role with all of the services and hospitals. This issue was not known to us. How could we have found out about it? We did visit the CervicalCheck screening service at the time. I indicated that it was in March 2017. The problem with notifying women did not come up. We only got to know about this for the first time after the Vicky Phelan case, as I told the committee previously. To give the Deputy some reassurance, in the meantime we have visited all of the screening services to pick up all of these topics about disclosure and about notifying matters to us and making sure that these things are being put up on the national incident management system, NIMS. That was one of the issues we had with CervicalCheck. It was not putting the incidents up at the time. I assure the Deputy that we have addressed these issues with the screening services, most recently in the last two months, and we will continue to do so. That is one of the lessons learned.
Catherine Connolly (Galway West, Independent)
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NIMS is being rolled out. What is its full name again?
Catherine Connolly (Galway West, Independent)
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That is still being rolled out. Is that not right? It has not been rolled out completely.
Catherine Connolly (Galway West, Independent)
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Page 45 of the annual report is most interesting to read. It lists the range of abuse cases and other cases which reflect failures of governance and systems failures. These are the mass actions. We have the in-cell sanitation cases. There are 1,635 active claims under that heading. Is that right?
Catherine Connolly (Galway West, Independent)
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There are 146 claims relating to school abuse following the Louise O'Keeffe judgment.
Catherine Connolly (Galway West, Independent)
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I will come back to ask about the status of that. We then have the cases relating the abuse by Michael Shine at Our Lady of Lourdes Hospital, of which there are 92. I presume they are all women, are they?
Catherine Connolly (Galway West, Independent)
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Is there a mixture.
Catherine Connolly (Galway West, Independent)
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They were made by males.
Catherine Connolly (Galway West, Independent)
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There are 92 such cases.
Catherine Connolly (Galway West, Independent)
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We have the narcolepsy-----
Mr. Ciarán Breen:
I am sorry; I do not mean to interrupt the Deputy but on the Shine abuse cases, I have to tell the committee that there is an insurer that was the insurer of the Medical Missionaries of Mary, which had ownership of that hospital at the time. Therefore, the State is not the only actor in that regard.
Catherine Connolly (Galway West, Independent)
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Liability will be somewhat shared.
Catherine Connolly (Galway West, Independent)
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I will not go through them all. There are 47 cases relating to Lariam and 35 relating to symphysiotomy. There are also the thalidomide cases. The thalidomide cases are still ongoing.
Catherine Connolly (Galway West, Independent)
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Why is that?
Mr. Ciarán Breen:
They are complex cases. The thalidomide survivors also have complex needs. As part of the mediation process, the State paid for experts to examine the thalidomide survivors. For example, they were looked at by cardiologists, orthopaedic surgeons and vocational rehabilitation consultants. It takes a long time to get all of these reports together.
Seán Fleming (Laois, Fianna Fail)
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In what age group are these people now?
Seán Fleming (Laois, Fianna Fail)
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They are no older than 60.
Seán Fleming (Laois, Fianna Fail)
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It has taken all this time. Is there any statute of limitations involved in this?
Seán Fleming (Laois, Fianna Fail)
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We have to wait until people are 65 to tell them that. Are many of the claims not proceeding due to all these medical assessments saying that it cannot be proved that thalidomide is the cause?
Mr. Ciarán Breen:
I do not know if the Chair is aware of this but, following a report I did a number of years on the thalidomide issue, there was a scheme whereby the State offered all of the survivors a sum of approximately €62,500. A number of the thalidomide survivors took that. Other thalidomide survivors decided that was not what they wanted to do. They wanted to go to court with their cases.
Catherine Connolly (Galway West, Independent)
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Have those involved the 34 active cases already received some payments?
Catherine Connolly (Galway West, Independent)
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They have received nothing.
Catherine Connolly (Galway West, Independent)
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That is separate. In the context of the case they are bringing-----
Mr. Ciarán Breen:
-----and Grünenthal, which is the original manufacturer. The Deputy is probably aware that Grünenthal and that particular scheme in Germany brought in a particular proviso whereby it increased the amount of money it was paying on a monthly basis but in order to join it up with every other place, it had a similar arrangement. It said that for a country making payments to it, those payments would be offset against any payments Grünenthal would pay at the much higher rate. That was a German law that came in, I believe, a couple of years ago.
Catherine Connolly (Galway West, Independent)
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What about the 34 cases that are still active ? Under those proceedings, those involved have received no payment. Those proceedings have not come to fruition.
Catherine Connolly (Galway West, Independent)
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Under a separate scheme, yes.
Catherine Connolly (Galway West, Independent)
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When will the 34 cases that are active be resolved?
Catherine Connolly (Galway West, Independent)
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Does Mr. Breen envisage that they will be resolved?
Seán Fleming (Laois, Fianna Fail)
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The NTMA is not covered by that.
Seán Fleming (Laois, Fianna Fail)
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An action by a German company should not decide-----
Seán Fleming (Laois, Fianna Fail)
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Is it in the NTMA's interest-----
Catherine Connolly (Galway West, Independent)
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It seems to be brought against the German company that produced the drug and the State.
Seán Fleming (Laois, Fianna Fail)
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Mr. Breen is telling us that the German company will be walking off the pitch quite soon.
Seán Fleming (Laois, Fianna Fail)
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If the NTMA does not get it solved soon, we will end up paying it all rather than getting a share of the-----
Catherine Connolly (Galway West, Independent)
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If both are tried together-----
Catherine Connolly (Galway West, Independent)
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That they brought their cases too late.
Seán Fleming (Laois, Fianna Fail)
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Where is that case in the courts? Is it before the High Court or the Supreme Court?
Seán Fleming (Laois, Fianna Fail)
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It could possibly go to the Supreme Court.
Seán Fleming (Laois, Fianna Fail)
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While the Deputy was out, we asked about the cases relating to in-cell sanitation in prisons. Mr. Breen indicated that there is one case before the Supreme Court and that this will be a key element. When that is dealt with by the Supreme Court, the 1,635 can then be dealt with one way or the other.
Seán Fleming (Laois, Fianna Fail)
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Sometimes we have to wait for just one case to come through the system.
Catherine Connolly (Galway West, Independent)
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I refer to the Louise O'Keeffe case.
Catherine Connolly (Galway West, Independent)
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There are a number of active cases following on specifically from that case. They are interpreting the judgment. Presumably, the State is interpreting it in a different way.
Mr. Ciarán Breen:
The Department is probably aware that the Department of Education and Skills has set up an ex gratiascheme which the State Claims Agency is managing. That has a judge of the High Court who sits, effectively, as a point of appeal. There were 49 applications to the scheme. We made determinations in 44 and we are awaiting further information on an additional five. Following our 44 determinations, we understand there are 21 appeals to the retired judge of the High Court.
Catherine Connolly (Galway West, Independent)
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That is separate from the 146 active cases that are here.
Catherine Connolly (Galway West, Independent)
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Finally, the contingent liability is astronomical. When I read the Comptroller and Auditor General's chapter, I discovered that the amount for 2016 was €2.2 billion. Mr. O'Kelly said that it is nearly €3 billion now.
Catherine Connolly (Galway West, Independent)
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Rising.
Mr. Ian Black:
To be clear, that figure represents the number of claims made. It does not represent those incurred but not reported. In terms of a child born with a catastrophic injury, that case will not be claimed against for quite a number of years. It is an estimate of the liability in respect of claims made, not in respect of claims that have incurred but about which we have not been notified.
Seán Fleming (Laois, Fianna Fail)
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I have some final questions. I refer to page 12 of the information notes the witnesses submitted. Representatives from the Department of Finance were before the committee a while ago. People think the country is fine - and it is - but we forget about the debt. It does not cross people's kitchen table, so to speak, and they do not think about it. However, as a person from the Department of Finance stated, people in Ireland are the most heavily indebted people in the world, next to Japan, when the State debt and the personal debt are added. That is nothing to do with the witnesses but to go back to the topic I mentioned earlier, looking at the chart on page 12, which is headed "FUNDING AND DEBT MANAGEMENT", the figure for gross Government debt to gross Government revenue, and Mr. O'Kelly signalled this at the outset, is 264.2%. It is the fourth highest next to Greece, Portugal and Italy. We are the fourth highest in that category, which he said is a worrying figure. He also mentioned the figure on the right of the chart for gross Government interest to gross Government revenue and 7.6% of total revenue goes on paying interest. That figure is only below those for Portugal, Italy and Cyprus.
Seán Fleming (Laois, Fianna Fail)
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Those are four countries we thought we had separated from financially but when we drill into the figures for Government debt to Government revenue, we are not far away from that group. In terms of a percentage of our total income going on interest every year, we are the fourth highest in the European Union on both of those charts. That has to be a worrying trend.
Seán Fleming (Laois, Fianna Fail)
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I presume that, from a professional perspective, if there is a sale of bank shares or something like that, Mr. O'Kelly would like us to start reducing that type of figure.
Seán Fleming (Laois, Fianna Fail)
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Finally, I was very pleased to see an advertisement from the State Claims Agency in all the newspapers about two weeks ago. The advertisement in question requests submissions to the expert group to consider alternative mechanisms to the core process of resolving clinical negligence claims. That is fantastic. Item No. B in the advertisement refers to considering whether there may be alternative mechanisms to the court process to resolve clinical negligence claims. Did it take the CervicalCheck issue for the State Claims Agency to come to a position it should have come to years ago?
Seán Fleming (Laois, Fianna Fail)
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Yes, Mr. Justice Charles Meenan.
Seán Fleming (Laois, Fianna Fail)
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I was giving the witnesses credit for the advertisement. I see it is the Departments of Health and Justice and Equality, but this is fundamental to the work they do.
Seán Fleming (Laois, Fianna Fail)
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They seem to be doing work on alternative mechanisms, mediation and the cervical cancer issue because of the time issues involved in some of the cases, but why have they not moved to deal with more of that on the other cases?
Seán Fleming (Laois, Fianna Fail)
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Okay. Give us the figures so that the public can appreciate what Mr. Breen is saying.
Seán Fleming (Laois, Fianna Fail)
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It would be helpful for people to hear this.
Seán Fleming (Laois, Fianna Fail)
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Does Mr. Breen have a figure? What was the quantum of money relating to those? Was it a lot or a small amount?
Seán Fleming (Laois, Fianna Fail)
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Would it have been €1 billion?
Seán Fleming (Laois, Fianna Fail)
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Mr. Breen might send us something on that because the 122 is a small number in respect of the 10,000 but it might be big when it comes to money.
Mr. Ciarán Breen:
It would be wrong to leave the public with an impression that we have just done mediation as a reaction to the cervical cancer cases. It is our stated practice in respect of medical negligence cases in particular.
We also do it in other cases. For example, bullying and harassment cases are very amenable to mediation. It is our preferred way to go. Sometimes we find the obstruction comes from plaintiffs' lawyers who do not like the mediation process because of a cost issue.
Seán Fleming (Laois, Fianna Fail)
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We mentioned the 50% legal fees already. We all understand that. Who are the mediators the State Claims Agency uses? Are they State Claims Agency staff or is there a group of arbitrators? Tell me about the mediators.
Seán Fleming (Laois, Fianna Fail)
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There is a qualification in mediation.
Seán Fleming (Laois, Fianna Fail)
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They are not all qualified mediators.
Mr. Ciarán Breen:
All the people we use as mediators are qualified mediators. They are completely independent in their function. When we talked about this very briefly the last day when we talked about confidentiality I said one area where there is confidentially in the process is within mediation. It is a confidentiality imposed by the mediator. The reason for that is he wants people to be able to freely put things through the mediation and in the event the mediation fails, people will not be faced with a situation where things can be relied on in a later trial or whatever. They follow a very definite process.
Seán Fleming (Laois, Fianna Fail)
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How many mediators does the State Claims Agency have? Does it have a panel? Will Mr. Breen explain the process? How does one become a mediator? Is the position advertised?
Mr. Ciarán Breen:
The Chairman or I could become a mediator by doing any of the recognised mediator courses. One gets certified. One body that certifies a lot of mediators in Ireland is a group from England called CEDR. A lot of people qualify as mediators and then become known by virtue of that qualification and how good they are.
Seán Fleming (Laois, Fianna Fail)
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I have two very small questions. If Mr. Breen does not know the answer off the top of his head, he can come back with a note. It is an unusual question. A number of years ago, a number of raised bogs in natural heritage areas were designated. As a result, people could not cut turf and lost turf-cutting rights. They asked the State to buy them out. Some people did not get through that system. I have a parliamentary question from 26 September 2017. There are 14,061 ha of land now being de-designated out of that process. The people are now being told they can cut their turf again. There was a buy-out scheme when the designation was first made and people were not able to cut their turf during that period. People who lost money during the period of designation are being told the designation has been lifted and they can cut turf again. They have lost quite a bit of money. Has the State Claims Agency had any claim from any of those concerned?
Seán Fleming (Laois, Fianna Fail)
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This is the Minister for Culture, Heritage and the Gaeltacht.
Seán Fleming (Laois, Fianna Fail)
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What types of claims does the State Claims Agency handle? The cases I mentioned would involve compensation claims against the State.
Seán Fleming (Laois, Fianna Fail)
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I thought the State Claims Agency would handle those. What does the State Claims Agency handle then?
Seán Fleming (Laois, Fianna Fail)
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I thought the State Claims Agency did everything.
Seán Fleming (Laois, Fianna Fail)
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If somebody falls on a State property or State land.
Seán Fleming (Laois, Fianna Fail)
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Mr. Breen mentioned bullying. That means there is injury-----
Seán Fleming (Laois, Fianna Fail)
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That is how bullying cases get to the State Claims Agency.
Seán Fleming (Laois, Fianna Fail)
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In a case like the one I mentioned, a person would have to sue the Minister directly.
Seán Fleming (Laois, Fianna Fail)
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Mr. O'Kelly mentioned Carillion. We have reported here regularly on the total number of PPPs and the commitments under all of them. Some of the projects are under construction and some are well into operation. With regard to the key companies involved, is there an overexposure to any one organisation? Maybe nobody thought of doing the sums. If somebody has too much on hand, maybe the State is increasing its risk. Mr. O'Kelly flagged that issue, which I was conscious of. In the schools sector, I can list two or three companies that seem to build every school in Ireland. It seems to be a very limited market. Even Sammon, which was the subcontractor for Carillion, is a major school builder in its own right and it was working on its own projects. As a result of Carillion going bust, Sammon had to go into liquidation and not just on the sites it was working on for Carillion. Its liquidation affected myriad other schools. The pool is too small. What are Mr. O'Kelly's thoughts on who will look at this? The National Development Finance Agency should examine the issue.
Seán Fleming (Laois, Fianna Fail)
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We will raise the matter with the Department of Public Expenditure and Reform again in the autumn to make sure somebody works on it. We do not want the ripple effect. I have given an example. Mr. O'Kelly understands the issue as much as I do. I thank the witnesses for their time. It has been a long day. The NTMA is a very important organisation which is why we wanted to go through all of those issues. Some of them are very topical and current. Aside from that, there is important business to be dealt with by the witnesses every time we see their financial statements.
I thank the representatives of the NTMA, the officials from the Department of Finance and the Comptroller and Auditor General. I thank the secretariat and the committee members for all their work during the course of the year.