Oireachtas Joint and Select Committees
Thursday, 4 July 2019
Public Accounts Committee
2017 Annual Report of the Comptroller and Auditor General
Chapter 21 - Accounts of the National Treasury Management Agency
National Treasury Management Agency Financial Statements 2018
9:00 am
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
This morning we are meeting the National Treasury Management Agency, NTMA, regarding the NTMA financial statements 2018 and the Comptroller and Auditor General's Report on the Accounts of the Public Services 2017, chapter 21 - accounts of the National Treasury Management Agency. There will be two parts or sessions to our engagement with the NTMA today. We will deal with all matters in the accounts with the exception of those relating to the State Claims Agency for the first two hours approximately. In the second part of the meeting, we will deal only with matters related to the State Claims Agency and we will be joined with representatives from the HSE and the Department of Health for that part of the meeting. I wish to remind members that we will meet in private session this afternoon to conclude discussion on our periodic report, which we will launch next Tuesday afternoon.
We are joined this morning by, from the NTMA, Mr. Conor O’Kelly, chief executive officer, Mr. Ian Black, chief financial officer and Ms Sinead Brennan, director of human resources and organisational development; and from the State Claims Agency, Mr. Ciarán Breen, director, Ms Catherine Tarrant, executive head of claims, clinical indemnity scheme, and Mr. Pat Kirwin, deputy director and head of enterprise risk. We are also joined by Mr. Eoin Dorgan, principal officer of the Department of Finance. I remind members, witnesses and those in the public gallery that all mobile phones should be switched off and not just put on silent mode as that can interfere with the recording system.
I wish to advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009 they are protected by absolute privilege in respect of their evidence to the committee. If they are directed by the committee to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the provisions of Standing Order 186 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies. Although we expect witnesses to answer questions asked by the committee clearly and with candour, witnesses can and should expect to be treated fairly and with respect and consideration at all times, in accordance with the witness protocol. There will be a five-minute suspension before we move to dealing with the State Claims Agency.
For the benefit of those watching the proceedings, I wish to outline the role of the NTMA. Mr. O'Kelly will also do so and all members understand it. We are dealing today with the financial statements of the National Treasury Management Agency, including its administration account, the management of the national debt of Ireland, the Post Office Savings Bank Fund, the State Claims Agency, the Dormant Accounts Fund, the Ireland Strategic Investment Fund, ISIF and the NTMA's management of the Apple escrow account. These are the type of issues that will arise.
I call the Comptroller and Auditor General to make his opening statement.
Mr. Seamus McCarthy:
As members are aware, the National Treasury Management Agency is a complex organisation with multiple functions that extend beyond its original and core role of managing Ireland’s national debt. The set of financial statements before the committee this morning reflects the various statutory obligations of the agency in respect of its financial reporting. The NTMA’s primary function is to manage borrowing on behalf of the State. The results of that borrowing activity are reported in the national debt account. At the end of 2018, the gross national debt stood at slightly more than €205 billion. This was an increase of more than €6.5 billion on the gross national debt at the end of 2017. Total debt servicing costs in 2018 amounted to €6 billion. This was 4% less than in the previous year, reflecting the impact of refinancing of debt at prevailing low interest rates.
Other key functions and services of the NTMA that are accounted for separately include management of compensation claims on behalf of certain State authorities in its capacity as the State Claims Agency, management of the Ireland Strategic Investment Fund and provision of procurement and financial advice in respect of certain public private partnerships and other large capital projects in its capacity as the National Development Finance Agency.
The financial statements of the State Claims Agency indicate claims settlements on behalf of State agencies in 2018 amounting to slightly more than €250 million, with associated expenses of €104 million. This expenditure, totalling €354 million, was recovered from the State agencies involved and represented an increase of almost 12% on the 2017 level. The agency’s estimate of the value of claims liabilities outstanding at end 2018 was €3.15 billion, up 18% from the estimate of €2.66 billion at the end of 2017. As members are aware, almost three quarters of the estimated claims value outstanding relates to clinical claims.
The financial statements of the ISIF show a reduction of €3.6 billion in the value of the fund assets between the end of 2017 and the end of 2018. The loss in value that occurred in 2018 is related to a significant fall in the value of the fund’s shareholdings in AIB and Bank of Ireland, which comprise a portfolio invested in by the fund at the direction of the Minister for Finance. The audit report on the ISIF financial statements draws attention to the NTMA statement on internal control, which discloses a weakness in controls relating to foreign currency hedging that resulted in a loss of €721,000 in the year. The agency has since introduced enhanced controls in that area.
The NTMA assigns staff and provides certain other support services, on a reimbursement basis, to certain independent bodies, including the National Asset Management Agency, NAMA, the Strategic Banking Corporation of Ireland and, since 2018, Home Building Finance Ireland. These are governed by separate boards and the NTMA is not accountable for their activities. The NTMA also provides staff on secondment for the Department of Finance’s banking unit, with the costs in that case being carried by the NTMA.
The NTMA’s administration account shows gross expenditure on administration costs totalled €127.2 million in 2018. Of this total, €46.7 million or 37% was recovered from NAMA and the SBCI. Overall, staff costs accounted for around 79% of the expenditure in the year. All staff are employees of the NTMA, including those assigned to work for the supported agencies. As explained in note 7.3 of the administration account, the agency operated a voluntary redundancy scheme during 2018 at a cost of €2.6 million. This is separate from the voluntary redundancy and retention scheme operated for NAMA staff, which cost a further €1.8 million.
The audit report on the NTMA administration account draws attention to expenditure of €5.9 million in 2018 relating to contracts that were not publicly advertised. The NTMA’s statement on internal control provides explanations for the procurement approach adopted in relation to those contracts.
Pursuant to section 28 of the National Treasury Management Agency (Amendment) Act 2000, the Minister for Finance delegated to the NTMA a range of functions in respect of the Ireland Apple escrow fund, including the production of annual financial statements, which are subject to audit by me. The first set of financial statements for the fund were prepared for the period 17 May 2018 to 31 December 2018. These are published separately from the other NTMA accounts. Between May and September 2018, Apple paid amounts totalling €14.285 billion into the escrow fund. The net assets of the fund at year end were €14.269 billion, representing a decline in value of €16 million. Operating expenses of €2 million were incurred during 2018 in respect of investment management and other fees and expenses. The remainder of the loss in value in the period of account is attributed to the current negative interest rate environment.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I thank Mr. McCarthy and call Mr. O'Kelly to make his opening statement.
Mr. Conor O'Kelly:
I thank the Chair and committee for the opportunity to present before it.
The committee has received my opening statement, which I do not intend to read. We have also provided some slides which I will use only for the discussion of the national debt, if that is all right. It would probably be easier to go through that with the slides in front of us. I will give a quick overview of some of the businesses in Vote 2018, our outlook for the markets and what is informing our views of strategy and decision-making at the current time. I thank the board of the NTMA and, in particular, our former chairman, Willie Walsh, who stepped down at the end of 2018 having been there since the beginning of 2015 on the newly constructed board. I thank him for his contribution. We have seven excellent non-executives and a new chairman, Maeve Carton, former chief financial officer of CRH. We are very fortunate to have this quality of non-executives, who give us plenty of support and challenge. I also acknowledge the Committee of Public Accounts and the challenge it has given us, particularly in the areas of diversity, tobacco and fossil fuels. It is fair to say the committee has kept those issues high on our agenda over the last few years. We have made some progress there and we still have plenty to do. I wanted at the outset to acknowledge the contribution and challenge of the committee in that regard.
I will start with the Ireland Strategic Investment Fund, ISIF. The key fact is that for 2018, the ISIF lost 1% in value. Members will be aware that 2018 was one of the worst years for stock markets since the early 1920s. The S&P 500, the US index, was down 6% and the Irish stock market was down 22%. Virtually all asset classes lost money and were in negative territory in that year. The ISIF exposure to global equities meant that overall it lost 1% of its value. I am glad to say that markets have recovered very significantly in 2019 and all of that loss - and then some - has been recovered. In total, since the ISIF was first instituted, a total of €850 million in investment gains have been added to the value of the portfolio. That is a return of 2.3% annually on the money, which is invested across Ireland with some exposure to global markets, as that cash remains to be invested in the mandate. A 2.3% return when we are borrowing money at an average of less than 1% is pretty good business for the State to date.
One of the other key features of the ISIF is that we always co-invest in any of the investments we make. The €4.4 billion we have committed to the Irish market since inception has been matched by €8.1 billion in private investment. That means a total of €12.5 billion has been invested in the Irish economy right across all the different sectors and regions. I do not want to outline all the investments we made this year; they are listed in the annual report. Investments were made at a rate of about one every two weeks in total, with over €700 million deployed in the year. I will come back to the rate of deployment a little bit later on. Investments included MilkFlex, a fund which provides financing to dairy farmers, Shannon Airport, the Port of Cork, Green Isle Foods, Donegal Catch and Vectra, a company which uses artificial intelligence to provide cybersecurity and which has set up a Dublin office. Vectra has already employed more than 40 people following our investment. We invested across the alternative energy space in 2018, backing a fund called Temporis Capital, which is set to commit and develop alternative energy, as much as 1,000 MW, which is almost 25% of Ireland's total requirement in that space. We have also backed a solar energy company in the last 12 months. Another feature of the ISIF to which I referred springs from legislation enacted by the Oireachtas in respect of fossil fuels. The ISIF has divested of the 38 holdings it had in fossil fuel stocks and additionally has produced an exclusion list of 148 stocks in which it is precluded from investing under the Act.
The fund has had a review and tries to be adaptable to economic conditions. It was set up in 2015, when the economy was in a different position and there was more of a shortage of the kind of capital that we have. We have been adapting over those years and always look to be flexible in terms of moving with the times. We are not there to replace other capital that is available; we have to go where capital does not flow as easily as that is the purpose of the fund. That is what we call the dead weight test. If other capital is available, we will not invest. As the economy has recovered and there is a lot of capital available, we have found ourselves more in the space of tenure, meaning the term of the investment we are prepared to make. There is lots of private equity and investment capital for a term of five or seven years, but going out to ten, 12 or 15 years there is very little capital available. We find ourselves now engaged in projects that have a much longer-term horizon and focus. That is probably where the committee is going to see more of our activities over the coming year to 24 months. I also suspect we will deploy less capital than we did in the initial four years of the fund, when we deployed between €700 million and €800 million per annum. The size of the projects is beginning to decline. Many of the projects that were pent up from the crisis have come into our portfolio. As we normalise and as other capital is becoming available, I see the deployment rate declining somewhat. This is a good thing. If there is other capital available, that is good news and probably reflects where we are in the cycle. We do not have to spend the money. We are not anxious to spend it. We only want to invest the money if it is good value for the State and makes that economic impact. If the money is not invested, it is still an asset of the State and sits on the balance sheet as an asset.
There has been excess surplus in the fund, which stands at €9.4 billion now. There is €4.4 billion in Irish investments, which leaves us with €5.1 billion. As the committee is aware, €3.5 billion of that has been reallocated by the current Government, with €1.5 billion going into the rainy day fund, €750 million allocated to Home Building Finance Ireland, HBFI, and €1.25 billion to the Land Development Agency, LDA. That sum has been taken away, as it were, as excess reserve to be used elsewhere by the State, reducing the overall size of the ISIF. The €4.4 billion will already start to recycle because some of the investments are already yielding returns in the shape of dividends and even capital to the fund. The idea is that it becomes an evergreen fund and funds itself to be able to grow and invest long into the future. That is the ambition.
The National Development Finance Agency, NDFA, provides advice in respect of most big projects and particularly public-private partnerships, PPPs. We have had a lot of discussion of PPPs at this committee over the years. We had probably the most significant year of real challenge and stress in respect of the collapse of Carillion in the UK, one of the biggest liquidations of a project management construction firm in that country's history. It has had a devastating effect across many projects in the UK. Carillion was only involved in one project in Ireland, which we call "schools bundle 5". That was the building of six schools in Wicklow, Wexford and Meath. It was an interesting test of the PPP model. One of the discussions around PPPs is whether the risk transfers to the private sector; does the private sector really take the risk or, when something happens, does the State ends up picking up the tab. In this case, four of the schools are already open although they were a year delayed. The rest of the schools will open this September but there will be no additional cost to the taxpayer. That PPP contract has completely stood up and remained intact. From the taxpayer point of view, no additional cost has been incurred. The equity providers and financiers of that PPP contract have lost all their equity money and have had to take a lower return. That is the purpose of that contract when we transfer risk, and there is a cost associated with it. The idea is that in theory, when a stress event occurs, they do own the risk. It is an interesting real-life example where the PPP contract stood up. At a time when we have many projects to construct, it is worth reflecting on the robustness of that contract in that particular live situation.
I will touch on NewERA, which is in many ways the in-house corporate finance adviser to the State. It has advised on 132 different projects, acquisitions or disposals of commercial semi-State companies. NewERA tries to bring together all of the assets owned by the State under one umbrella in the context of the shareholder so that the State has consistent analysis of investment criteria, return on capital and dividend policy. NewERA brings them all to account in a similar and consistent fashion. The mandate that the team is being asked to deliver advice on continues to grow. There were 132 advisory projects done on behalf of the State for different Departments and clients this year. That figure is up from 81 in 2017.
Representatives from the State Claims Agency are with us and I know we have a separate session on that work but I will touch on it. There are 146 State bodies with more than 200,000 employees. Considerable footfall goes through there. Earlier, the Comptroller and Auditor General mentioned that the vast majority of the 1,500 claims are clinical in value terms. The provision is €3.15 billion. This is the current estimated liability and 74% of that is provided for the clinical sector.
We deal with and have dealt with many sad and difficult cases in the State Claims Agency. That is the nature of the mandate. However, we have never before had a situation like we have had in 2018. I know we are going to discuss extensive technicalities and legal positions today but it has to be seen in the light of the extraordinary devastation and grief caused to so many women by this situation. There are no good outcomes. We and the team try to walk that line as sensitively as we can but it is not an easy task. It all pales in comparison to the grief and devastation caused to the women involved in the overall issue.
Apple has been mentioned. The first financial results for the Apple fund were announced yesterday and released by the Department of Finance. As committee members are aware, the National Treasury Management Agency was directed by the Minister to establish the escrow fund to essentially look after those funds while the legal case is going on. Apple and the NTMA jointly have an investment policy. A sum of €14.2 billion sits now in an investment account of which the NTMA and Apple have oversight. The easiest way to describe it is as a conservative cash box of sorts. The purpose of the fund is a return of capital rather than a return on capital. That is the focus of the fund. It is about capital preservation. The fund has been established and it is currently operating satisfactorily.
I will turn to the slides to discuss the debt. It might be easier to talk through from slide 16. The slides cover the positives and negatives or challenges. I will touch on each of these in turn. On the left hand side of the slide we are looking at the positives of the national debt and the servicing of the debt. Committee members can see the so-called chimneys or refinancing stacks of 2018, 2019 and 2020. We have talked about these at the committee during previous years. It is fair to say at this point, when we are exactly half-way through the refinancing period, that we can safely put the refinancing risk that has existed behind us because of what has happened. I will come to that in more detail in a moment. The debt has been smoothed out in terms of the future profile of maturities. There are no such refinancing cliffs ahead in the foreseeable future. That is important from a debt management point of view; it is important to have a smooth profile.
The interest bill continues to fall. I will come back to that again. The interest bill has fallen from €7.5 billion in 2014 to a projected €4.5 billion next year. I will come back to the reasons that saving has been so dramatic. It is largely due to the interest rate environment we are in.
I want to touch on diversification. Ireland issued its first green bond in 2018, becoming only the fourth European sovereign country to do so. I will come back to the rationale behind that as well.
The debt is still elevated though. That is still a significant issue. It is four times what it was in the 2000s before the financial crisis. We have paid a very significant amount of interest. People may have heard me say that we have paid €33 billion in interest over the past five years. This interest bill is enormous. We paid €60 billion in interest over the last decade. That compares to €20 billion in the previous decade. That is all to do with the elevated amount of debt rather than the rate of interest, which many people concentrate on. Some may suggest that since rates are so low we should borrow more etc. We have to remember that it is the stock of debt that is really significant in this regard for Ireland.
We rely on foreign capital for the largest portion, 90%, of our borrowings. That is unusual versus other European and global sovereigns. It makes us slightly more vulnerable than others to financial markets. Of course there are significant external risks on the horizons of which committee members are well aware.
Before 2018 we talked about the refinancing chimneys to the tune of €60 billion. In the first instance we repaid the International Monetary Fund and that reduced the size of the chimneys. Since then, we have repaid the 2018 bond that matured. That was a €9 billion bond and it matured in October 2018. We have also repaid the €7 billion bond in June, some weeks ago. There is another maturity of €6 billion in October. There is a €10 billion maturity coming early next year. Then there is a final maturity of €6 billion in October 2020. That will remove the chimneys completely. However, given the cash we have already raised and the repayments we have already made of those maturities, we can say now for the first time that the refinancing risks of those chimneys is now behind us. This is because of what we have already repaid and the cash we have already raised at today's market rates. The key thing about the coupons that we have been repaying is that a total of five large bonds fell due over a short period. The range of coupons was from 4.4% to 5.9%. They are the really high coupons and they are all retiring. We are replacing them with debt that is 1% and under. That is where the big savings come from. That is why the savings really start to fall post 2020. It is why this refinancing period was so important for us. It was important for us to be able to try to lock in today's interest rate environment while we had that significant need. We can now put that risk safety behind us.
Let us consider the profile now. The debt manager normally looks three or four years ahead. We were looking at 2018, 2019 and 2020 in 2015, 2016 and 2017. Now we are looking ahead to 2022, 2023 and 2024. Committee members will see the smoother profile of maturities. That represents a far lower risk profile from the point of view of the State in terms of maturing debt over the long period and looking out to the future.
Earlier I said the interest bill was €7.5 billion and is down to €4.5 billion. There are three reasons this has occurred. First, and most important, is the interest rate environment created by the European Central Bank quantitative easing and the extraordinary low interest rate environment. Committee members do not necessarily watch financial markets in the same way that we do, but since Christine Lagarde's potential appointment as the ECB President, interest rates have fallen dramatically during the past 48 hours and there has been a dramatic move lower in bond market yields. She is considered to be a dovish ECB President potentially versus some of the alternatives. The market has reacted and moved rates even lower. The interest rate environment looks like it will remain low at least for the foreseeable future. This extraordinary low interest rate environment happened at a time when Ireland had its greatest refinancing needs and at a time when the credit rating of the country was improving. These three things came together and this environment has enabled Ireland to save so much interest.
Those high coupons all fall away and get replaced by lower ones. That is why the savings are so significant. I will revert to why that will not always be the case in a moment.
Some of the Deputies are interested in the topic of the green bond. While it is good news from the point of view of leadership and ensuring that sustainable projects get delivered and identified, the NTMA has a slightly narrow way of looking at it. This is the fastest growing pool of capital in the world. We are accessing new investors by issuing green bonds. From a funding perspective, that helps to diversify the risk. One of the few ways we can diversify and mitigate our risk is to widen the investor base that owns Irish bonds. When we issued our first green bond, more than 50% of the investors who bought it and loaned us money had never invested in Ireland before. Besides the ability to finance sustainable projects, that was the attraction for us.
The next slide shows the other side of the balance sheet with the negatives and challenges. This is our gross debt, which has effectively remained unchanged since the crisis. As the Comptroller and Auditor General stated, it stands at €205 billion currently. Let us just call it over €200 billion. It is four times what it was in the 2000s. I describe this as a mountain of debt, and there is only one way to get down a mountain, that being, very slowly and carefully and without taking alternative routes or going back up the mountain. We must try to find a way to reduce this debt over time. That will only happen slowly, but we must stick to the path and do that. The risks to the country of having very high debt levels are the risks that any of us would have as individuals, householders or businesses in the event of a downturn, in that we would obviously be more vulnerable. It is no different for a sovereign.
Regarding debt, by comparison with our European peers and other countries, we rate poorly in some of these statistics. The European average is shown at the bottom of the table. I draw members' attention to our debt-to-Government revenue figure, which is still at 251% and one of the highest in Europe. Although our interest bill has reduced as a percentage of Government revenue to 6%, it is still way higher than our European peers. Even at today's interests and with the savings we have made, that is where it still ranks among our European peers. Ireland is not in a good position from a debt point of view. We must continue to bear that in mind and be vigilant.
The next slide shows the interest bill dating back to the mid-2000s. I showed how it was falling from €7.5 billion to €4.5 billion, but that will still be three times what it was in the 2003-08 period. Even though interest rates then were 4% and are less than 1% today, our current interest bill is three times what it was in that period because of the size of our debt.
I will show how challenging that will be in future. Consider the bonds that are now going to mature. I mentioned bonds maturing with high coupon rates. One of the bonds that will mature in 2022 was issued by us in 2017 and has a 0% coupon. The chances of the NTMA refinancing that bond in 2022 at a lower interest rate are slim. That is why we will be refinancing through low-coupon bonds and unlikely to make savings in future.
The next slide shows the investors from whom we borrowed this sizeable amount of debt. They are all overseas, which is unusual. There is not a large domestic savings market for our bonds. This makes us particularly vulnerable. These investors can change their minds quickly, move away and charge us more. Our reputation, creditworthiness and positioning in the marketplace are important. Obviously, we are quite exposed.
I will not necessarily go into the challenges ahead that are listed on the next slide in any detail, although we can take some questions. Our investors are telling us that they are worried about Brexit and corporation tax changes. The financial markets are concerned and are looking at Italy and some of the challenges it faces from a debt perspective. The spreads in Italy are volatile at the moment.
That concludes my presentation. I am happy to take members' questions.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I thank Mr. O'Kelly. Since we will have two sessions, there will be a lead speaker in the first session - Deputy Cullinane, who will have 20 minutes - and all other Deputies will have ten minutes each. In the second session, the lead speaker will also have 20 minutes and other members will have ten minutes each. Members have indicated for this session in the following sequence: Deputies Cullinane, Murphy, MacSharry and O'Connell.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I will ask a quick question. When Mr. O'Kelly discussed risks, he referred to corporate taxation. Are the investors worried that some corporates are not paying enough tax?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Are they worried about the sustainability of the tax base or that corporates could be taxed more?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The sustainability of the tax base.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
What is the precise figure for the mountain of debt? Mr. O'Kelly said it was €200 billion.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
How does that break down? I imagine that some of it is legacy debt from before the crash. Then there was the bank recapitalisation. We also had to borrow money for day-to-day revenue spending during the austerity years. Even in broad terms, does Mr. O'Kelly have a breakdown of what constitutes the €205 billion? How much of it is the legacy of the austerity years as opposed to the crash?
Mr. Conor O'Kelly:
I will talk in very broad brush terms. The Comptroller and Auditor General has done a great deal of work on this matter, so the precise numbers are available. Going from €40 billion to €200 billion in terms of the debt size, the banking crisis probably accounted for €60 billion originally, although one would have to net off the value that we got from any bank sale, which would probably bring that figure down towards €30 billion. The rest of the €100 billion incorporates interest that we are paying on our borrowings from the very long time when we were funding deficits. When the crisis happened, the majority of the difficulty came from the gap between our revenue and our Government cost. We ran very large gaps for-----
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Before the crash, was the debt approximately €40 billion? It is now €205 billion.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The vast majority of it is crash or austerity era related either through bank recapitalisation or servicing State expenditure.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
When revenues collapsed. Is that correct?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Mr. O'Kelly mentioned the banks. Two banks that received a great deal of taxpayers' money were Bank of Ireland and AIB. How much went into both? Is there a breakdown of how much went into each or does Mr. O'Kelly only have the figure for what went into the banks overall?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
In terms of Bank of Ireland and AIB, we got a return in shares.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
How much did we put in and what have we got back in share value?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
What is the figure? I am sorry, as it is not up on the screen yet.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
What is our total share value in both banks?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
What about in monetary terms?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Was there a drop in the share values of AIB and Bank of Ireland in the last year?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
By how much did it reduce our-----
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
We put all of this money into the banks and got shares back, but in one year alone the value of the State's shareholding has dropped by over €3 billion.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
It might reflect the market, but it also reflects the fact that the taxpayer lost €3 billion because these companies' share prices dropped. In current value terms, is the State potentially down €3 billion because the share prices of both banks dropped?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I understand that; I am just saying in plain and simple terms that we are down €3 billion because the share prices dropped.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
There is now a concern about bank stabilisation in other countries. We are hearing stories about the possibility that banks in other countries will need to be recapitalised again. Has the Comptroller and Auditor General done any work on the issue of bank stabilisation to look at this area, in particular, and what the State put into the banks and then at whether the share value has gone up or down? In essence, what people want to know, having put in X amount to get Y amount back at the end, is whether we will get back more than we put in, the same amount or less? Is that something at which Mr. McCarthy has looked?
Mr. Seamus McCarthy:
I reported on that issue in 2014 and 2016. I am working on a chapter for inclusion in this year's annual report which will outline the position at the end of 2018. I reported on the issue previously and have the report here. As it looked at the end of 2016, the picture was that, overall, banking stabilisation had cost us €40 billion. As Mr. O'Kelly said, Irish banks-----
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Does that figure include the interest we are paying back?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
It is the net figure.
Mr. Seamus McCarthy:
There is a cost of capital with the investment we made and it is reflected in the interest rate for borrowings. As long as we have borrowing associated with banking stabilisation, we will have an ongoing cost. For the individual banks, our analysis at the end of 2016 which I realise is a bit out of date was that approximately €35.8 billion was the cost for the IBRC. The cost for AIB was approximately €8 billion and for Permanent TSB, approximately €1 billion. For Bank of Ireland, it is looking kind of positive, to the tune of approximately €1.8 billion. I will be updating the figures to the end of 2018.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
It is a restatement of what we already know, that Anglo Irish Bank was the noose around the State's neck when it was nationalised. Obviously, it came at a big cost. If the overall figure of what it is going to cost us in terms of what we put into the banks is €40 billion-----
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
-----the interest we are paying over five years is €33 billion. I do not need a response, but when people hear these figures, it sounds like Monopoly money. However, €33 billion is a huge amount of money when one considers how many hospitals and schools we need and the investment needed in and the pressures on public services. It is extraordinary that we have gone through that mountain of debt, but that is the legacy of the crash.
I will move on because I think I only have ten minutes today. The time has been reduced.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The Deputy has 20 minutes as the lead speaker.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
We received a briefing note from the Department of Finance on the Apple escrow account. The NTMA's presentation was excellent across all of the key areas. The Apple escrow account lost €16 million in value up to December 2018. While it might seem like a small figure in the context of the total sum of €14.269 billion in the fund, how did the loss occur?
Mr. Conor O'Kelly:
The investment policy is to invest in conservative assets. That has been agreed to by Apple and Ireland. As such, 80% of the fund will be in Government bonds, all of which will be AA-rated or higher, while 20% will be in high grade corporate credits which are A-rated or higher. The maximum maturity period in the portfolio is five years, while the average maturity period is three years. Even if one looks at the Irish sovereign bond market today, there is a negative yield to five years, with negative interest rates. We are in a negative interest rate environment and the portfolio, as constructed, in theory, will probably return a figure of -0.5% per annum. That is the expectation.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
There are only two potential outcomes. There is an appeal against the Commission's decision in the first instance. If the Commission sustains its original decision, the State will get the €14.269 billion and the question will be how it should spend it. If the Government wins and the taxpayer loses, I take it that Apple will get its money back. Will it only get what is in the fund? As such, does it share the risk?
Mr. Conor O'Kelly:
Correct. We are both sharing; the pot is the pot. The decision to be made at the outset is whether more of a risk should be taken with the money. One can increase one's risk appetite and go further out with maturities or into equities to try to get a return on the fund. However, one would have to take a significant risk. We have just talked about taking a market risk and how it can turn against us. One can lose money very quickly.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Does the NTMA have any sense of how long the process will take before a decision is made? I imagine it will impact on the type of investments to be made, will it not?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Has the NTMA been given any indication? Is it anything like "How long is a piece of rope"?
Mr. Conor O'Kelly:
It is really, but we have made some assumptions which suggest a maximum period of five years and an average of three. That informs our guess as to how long it will take, but we do not know. I do not know whether the Department has a view on the matter. We are to manage the money and decided that was the basis on which we would start. An average life of three years is the way we have constructed it. If things change, we can adjust the policy.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I refer to the voluntary redundancy scheme that operates within the NTMA. It is not something that is generally available in the public sector. My understanding - I might be wrong - is that one of the few other semi-State or Government agencies to run a similar scheme is NAMA, but there may be others. Why is there a voluntary redundancy scheme in place? It seems to be a very attractive scheme and obviously is very good for the staff. Why is it in place in the NTMA and not across the public sector generally?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
What does it entail?
Dr. Sinead Brennan:
The terms of the redundancy scheme are the same as the terms of the Department of Public Expenditure and Reform. We offer three weeks' pay per year of service, plus two weeks' statutory pay, capped at €600. We opened a redundancy scheme in 2018. The organisation was going through significant change and we wanted to ensure we would have the right skill sets for the future. There were 33 participants in the scheme, at an overall cost of €2.5 million. As for the return, one third of the people who have left will not be replaced, one third are being replaced at a reduced cost, while one third are being replaced at a similar cost. Overall, we will recover the cost of the scheme in a two and a half year period.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I ask the Comptroller and Auditor General whether this is something at which he would look. If it is unique to the NTMA and not available to others across the public service, would the Comptroller and Auditor General comment on it in his report?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
When Mr. McCarthy says "draw attention to it", what does he mean? Is it simply to draw attention to it?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Okay. Given that attention has been drawn to it, what is Mr. O'Kelly's view of the scheme, given that it is not in place across the public service? What is the logic in having it available in the NTMA? Was it sought by it?
Mr. Conor O'Kelly:
The NTMA is a bit of a hybrid. It sits slightly outside of the public sector pay system. We do not have increments and are not subject to the usual public sector pay conditions. This was part of the legislation that established the NTMA. Contracts are drawn up individually. We have more flexibility than is available in the rest of the public sector. Our board agreed to put the scheme in place. It is about having mobility throughout the organisation and ensuring that we always have the right skill set. Obviously it must represent value for money. Under the Department of Public Expenditure and Reform's terms, three weeks per year of service is considered reasonable provided it can be demonstrated to a board - and our own board is very challenging in this regard - that it makes economic since and that it will result in a return. That is why, as Ms Brennan pointed out, it made sense for us in this case. We refresh the organisation, we add new skills, people move on and we save money.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I do not necessarily think it is a bad thing to have. It is something that could be looked at across the public service. It is included in the financial statement but perhaps we could get a more detailed note on how it works. That may be useful for us, given that our attention has been drawn to it. It seems to be unique although I believe NAMA and others operate similar schemes. Is that correct?
Mr. Seamus McCarthy:
Yes. The committee has previously discussed the need for the scheme with NAMA. The need to retain people and to have incentives through a voluntary redundancy and retention scheme is recognised because of the time limit on NAMA's activities.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That note can be sent to the Deputy through the committee.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
The note the committee got shows that in 2018, €13.4 million was spent on fit-out costs and professional fees relating to the new office accommodation at 1 Dublin Landings, North Wall Quay. We discussed this when the NTMA was before the committee previously. I estimate that, between 2018 and 2019, the fit-out costs are likely to exceed €25 million. Are those figures correct? It seems to be a lot of money to fit out a premises. Will Mr. O'Kelly talk me through the reasons for this expenditure? What is the background to this?
Mr. Conor O'Kelly:
We are in the process of moving out of our current premises as we speak. As many members will know, we moved into Treasury Building in 1991. We signed a 25-year lease for the building at that time. We took up some more space over subsequent years. Those leases have been coming to an end. In light of that, a few years ago we began thinking about finding a new home. We could either renew the lease on Treasury Building or look at other options. The board decided to look at other options. We received 18 submissions under an open procurement process. We ended up looking at four particular buildings in some detail. We ended up moving to North Wall Quay at a cost of €49 per square foot. Rent in the area of Treasury Building is in excess of €60 per square foot. The north docks is one of the cheaper areas of Dublin from the point of view of economic value. We decided to move beside the Central Bank. The cost for fit-out was budgeted at €30 million and is coming in at approximately €25 million in total.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Is there a breakdown of the total between fit-out costs and professional fees?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Yes.
Mr. Conor O'Kelly:
Every part of the fit-out has to be publicly procured. It is a high-specification building. The NTMA has some fairly sophisticated mandates. To put it in context, $1 trillion went through the NTMA's settlement system and treasury system in 2018 alone. There is significant cabling infrastructure to be put in place. It is reasonable value. The budget is set and a project board is in place which includes non-executives. We have remained on budget. The Comptroller and Auditor General has been looking at the numbers very carefully.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
We can all rightly be angry at the mountain of debt we have and at the massive social cost for citizens associated with it but it is also important to point out that we do not often have Accounting Officers before the committee who give us the level and quality of detail we have got today. The quality of the work of the NTMA is recognised across the political divide and outside it. It is very professional. It has managed our assets very well and has managed our debt as well as is possible. I put on record my appreciation of that work. The mountain of debt is of concern.
I may elaborate on my final point. Towards the end of his presentation, Mr. O'Kelly talked about risks. One was corporate tax but the other was Brexit. Will he talk us through the risks presented by Brexit in respect of the debt and the other elements of the NTMA's remit? What solutions are being put in place by the organisation to mitigate these risks and protect the State from Brexit as best it can?
Mr. Conor O'Kelly:
I do not mean to say this glibly but whether the issue is Brexit, Italy, corporate tax or some other challenge, Ireland is a small open economy which is heavily indebted and which relies on international investors for 90% of its borrowings, so Ireland has to be in the business of permanent contingency with regard to our debt. Something will end up hitting us. It may be Brexit, Italy or, more than likely, something which we cannot even think of today. People talk about whether the bond market or some other group is predicting a recession. I will give my prediction for a recession. The chance of a recession in Ireland is 100%. We cannot afford not to have a contingency in place. We have to remain vigilant to that and we do this by maintaining significant cash buffers at all times and by smoothing out the profile of the debt to minimise refinancing risks in the future.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Does the NTMA have any oversight over the so-called rainy day fund?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
It does. There is nothing in it at the moment but there will be €500 million going in this year.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
Is this one of the buffers about which Mr. O'Kelly was talking?
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
What other buffers are in place?
Mr. Conor O'Kelly:
One is the cash that we hold. We currently hold €20 billion but, because of the maturities coming up, we have significantly more cash than we normally would. I estimate that we would normally have approximately €10 billion in cash. We do not like to talk in these terms any more but in the old days people used to talk during the crisis about how much funding we had in terms such as a year's funding, 18 months' funding, or nine months' funding. These days our access to markets is not an issue; it is just a question of the price of that access. We do not anticipate Ireland having difficulty accessing the market, we just worry about the cost involved because that will change. The interest investors will charge changes depending on their assessment of our profile.
David Cullinane (Waterford, Sinn Fein)
Link to this: Individually | In context | Oireachtas source
I thank Mr. O'Kelly.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
I will pick up on the €33 billion. Housing is included as an area for investment but over five years, if one considers an average house price to be €300,000, this would build something like 33,000 houses. It puts in context the extent of what we cannot do, that is, the opportunity cost. Billions get confused with millions these days. It really does show the magnitude of the debt.
Mr. O'Kelly told us earlier that the two highest rates on our bonds at 4.4% and 5.9%, yet we see an interest rate of 6%. Am I reading that right?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
It is in the league table captioned "Despite progress, debt & interest remain elevated" in the NTMA's written submission to the committee.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
I misread that. The NTMA also says that the amount of debt is largely unchanged since 2014.
On a previous occasion we were told that some bilateral debts had been paid off and we obviously have paid off some others. There has been borrowing in the meantime. Does Mr. O'Kelly have a figure for which is residual debt and which is new? We need to take on debt if we are to invest in capital and, with inflation, it makes sense for us to do some of those things. Is there a separation?
Mr. Conor O'Kelly:
Not really. We are focused on what would be a primary surplus and an actual surplus. The primary surplus is the surplus of the Government's revenue over expenditure, not including interest cost. We have been running a primary surplus for quite some time, which is why debt is stable. When one goes into actual surplus, then one's debt starts to fall. The first time that Ireland went into actual surplus was 2018. That would be the first time when the debt started to fall in nominal terms. The Government could use sales of assets such as bank shares for a once-off payment. They would be the exception rather than the rule. Ultimately, for debt to fall, the Government has to run a budget surplus. There are significant capital expenditure and revenues to consider and that is a matter for the Government.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
With regard to the former Irish Bank Resolution Corporation, the bonds are being worked through. I do not know what the terminology is but the NTMA is changing them from promissory notes into-----
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Exactly, if we just use layperson's language. What is the profile of that from 2018 onwards?
Mr. Conor O'Kelly:
It is down from €25 billion originally to below €10 billion. We are retiring and exchanging those promissory notes, which are held by the Central Bank, to which we pay floating rate interest, and exchanging them for debt on the open market. A timetable was agreed with the Central Bank and European Central Bank to do that when the notes were originally issued. We would accelerate that because interest rates are so low. By doing that a bit faster, we lock in today's very low rates.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
How far ahead of schedule is the NTMA?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Will Mr. O'Kelly provide a note on that?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
The promissory notes were essentially an IOU. They have been turned into money. The NTMA is turning them into bonds and is trying to do it at the cheapest price possible.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
In the examples of the 2018 investment highlights, there are a couple of areas where one would think that tariffs would pose a risk in the future, such as in the context of Irish whiskey and the China-Ireland technology growth fund. Why does that not show up as a risk with the possibility of trade wars and State security issues with some of the technology that is coming from China?
Mr. Conor O'Kelly:
That is a live question for today. Whiskey was added to the list of tariffs that I saw overnight. We are included in tariffs which will potentially be imposed on Europe by the US. That is a risk and we will have to look at any other exposure that we might have. If there were to be issues with the China-Ireland fund, they are small venture capital companies and the amount of money involved is probably relatively low. Our exposure is €50 million in that fund along with China. It is a very early stage venture capital fund. It is not substantial exposure compared to the €9.1 billion of the ISIF. That is probably why it is not appearing at the top of our risk register. The Deputy is right that it is an escalating risk and we will have to look at it across the portfolio.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
It may well show up as a risk in the future, particularly if trade wars happen.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
I want to focus on the investment strategy. The NTMA invests in specific areas and that sits as a State asset. Is the asset the item invested in or the return on the investment?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
I will focus on one thing that was purchased, the concessionary agreements for Enet. Did the ISIF purchased that in 2017?
Mr. Conor O'Kelly:
No. The Irish Infrastructure Fund made an investment in Enet. That is a fund that ISIF is a passive investor in and it ultimately invested in Enet. That investment in the Irish Infrastructure Fund is a legacy investment from the national pensions reserve fund from 2012. It is an investment that we plan to examine to determine whether it is still appropriate.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Is that under the remit of the NTMA?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
When one looks at the challenges and the extent of the external risk, it would make one weep. Italy is noted as a risk. Is Italy's debt not almost exclusively internal?
Mr. Conor O'Kelly:
It is. I am pointing to Italy as a risk that investors are talking about in the context of the debt markets and the cost of debt. My final slide compares Italy with Germany. The Deputy can see where the cost of debt spiked in early 2018 due to investors changing their perception of Italy as a creditor. Italy's growth is slowing and its debt-to-GDP ratio has started to rise towards 130%, which is higher than our ratio. Its banks own 20% of sovereign debt, its growth is slowing, its debt-to-GDP ratio is rising and the investors are suddenly charging it much more money for debt. That kind of environment can come about quite quickly.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
We know that outside influences, such as what happened in the United States, had a significant bearing on us. This could have exactly the same kind of bearing.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
How would the NTMA see that playing out if it was to become more than a risk?
Mr. Conor O'Kelly:
The cost of our borrowings would start to rise. We are currently rated as a semi-core country against Germany. If the Italian scenario turned into a full-blown crisis, people's attitude towards many European sovereign entities would start to change. Anything that could suddenly affect the interest rate that we pay in the marketplace is a risk for us as a debt manager. That is why we are watching the bond market so closely.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
It is new borrowings as opposed to ones that the NTMA has already.
Mr. Conor O'Kelly:
Correct. With our debt being so elevated, we will be borrowing for a long time. If the cost of that borrowing and our debt on the market starts to rise, it will have to come out of other spending. As the Deputy mentioned, there is also opportunity cost due to what it could be spent on.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I welcome our guests and thank them for the presentation. I have a few questions. Anybody looking in who, like me, has a basic understanding of these matters will require the Ladybird explanation in respect of some points. Deputy Catherine Murphy mentioned that the Italian borrowing is primarily internal. The yields on Italian debt are approximately 3.5% or 4%.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We are at 0.5%. Is it Mr. O'Kelly's sense of the market that a major crash is anticipated in Italy?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Investor sentiment is saying to us that things are not good in Italy.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
There is nothing we can do about that and, in the European context, there is very little the EU can do.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
People have to manage their own contingency as best they can. The NTMA carries on average €10 billion of forward funding, but it is €20 billion at the moment because maturities are coming up.
What happens if the wheels come off post Brexit? What if there is a major problem and something manifests itself in Italy or Portugal or elsewhere? How is the State fixed then? I recall the days when we were fully funded for the year ahead. Are we in danger of the markets drying up for us or is it just the case that yields will go up and it will be more expensive for us?
Mr. Conor O'Kelly:
I think it is the latter. Ireland has strong growth, creditworthiness and resilience, and a strong position and economy across the board. Obviously we could get a significant shock from Brexit; we can see that certain sectors will be significantly affected. In the overall context, it probably will not be viewed as material from a bond market point of view when it comes to access to markets. However, they could easily change the price that they charge us, and that is where we need to have contingency built in.
Debt managers want to be in the position where they do not have to go to the market but can choose their timing and what part of the market and yield curve to go to. When there is big refinancing risk and they have to go to the market at a time that does not suit - perhaps it is very volatile or conditions are very poor - there will be a charge for borrowing in those circumstances. Debt managers want the freedom and flexibility not to have to go when the conditions are very poor. The cash buffer gives control over the timing and can allow them to wait it out and come up with a more efficient and economic strategy.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
For people watching at home, the understanding generally is that our debt is at €205 billion but we are not borrowing any more or adding to that. Is that correct?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
When Mr. O'Kelly said the State will be borrowing for a very long time into the future, he was referring to refinancing, managing maturities and making sure that if the market improves, we can diversify our debt for better interest rates. We are not borrowing at the moment. There is speculation in the media and in some ministerial announcements that there is the potential for two budgets in the year ahead: the Boris Johnson budget and the other budget. If there was a crash-out and a very bad Brexit, we might be looking at a €5 billion deficit next year. How is that calculated? Does the Government lift the phone to the NTMA and ask it to prepare for a debt of €5 billion next year? What kind of preparation is done? What is the process or is that built in?
Mr. Conor O'Kelly:
We feed in our assumptions to the Department in the form of economic statements and projections of the cost of the debt and of financing. We get forecast estimates of the Exchequer surplus or deficit for the years ahead. As those change, we have to adjust our strategy. That is the way it works. The Government is in charge of economic policy and if it wants our advice, we give it when asked.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We do not want to comment on policy anyway. Policy aside, the economic statement published a few week ago indicates that there is €2.8 billion of fiscal space with €2.2 billion committed. If things go bad for the HSE in the next period, that €2.8 billion will be gone and there will be no money. Is the NTMA preparing for the fact that we might need a few extra euros around next year?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
If we go back to borrowing-----
Mr. Conor O'Kelly:
We manage independently of events. We cannot predict the future and we do not know what is going to happen, so we manage on a permanent contingency basis. We believe that is the most prudent thing to do. We have told the Minister and the Department that we are comfortable that, irrespective of the scenarios that will play out in respect of Brexit, from a debt management point of view everything is under control for the time being.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
In the event that things do not play out particularly well and the Oireachtas decides to pass a budget involving a €5 billion deficit in current expenditure next year, what would be the likely impact on yields available to the NTMA to raise money?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Based on the NTMA's experience, what would the impact be? We are down to a bond yield of 0.5%; it was a very high a number of years back but, thankfully, bond yields have recovered since. Would it be a major statement to the markets if Ireland was not just debt managing but borrowing €5 billion as a Brexit contingency? I know we are talking about hypotheticals but what rate of increase could we expect on yields?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
They are also opportunistic, in the sense that if they can sell something for €10 billion, they will, rather than taking €5 billion. Will preparations for a hard-Brexit budget - one of the two that is being prepared at the moment - have an impact on yields on an opportunistic basis? People know that they will be paid back because Ireland is not Venezuela. Might it be used as an opportunity for people to charge 1%, 2% or 5% instead of 0.5%?
Mr. Conor O'Kelly:
Investors will look at the long-term economic impact, what the money is being spent on and why it is being spent. I imagine that if it were for a temporary blow such as Brexit, where the Government is trying to fix a problem and insulate itself, investors would look through that. As to whether debt managers would be charged a premium when they are in the market actively auctioning, it is very likely. If a little bit more needs to be borrowed, the markets would estimate that; it is supply and demand. However, I think it would be modest.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
It would be reasonable to expect a modest spike for a short period.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Why is the NTMA not buying its new offices?
Mr. Conor O'Kelly:
Government policy is not to buy for agencies such as ours or allow them to purchase property. That is probably for the purposes of precedent. It would probably cost €150 million to buy the building; even if we thought it was a good thing to do, if we spend €150 million on a building, that is €150 million that cannot be spent somewhere else. That is why we will not buy the building. I presume that if we owned the building, we would probably never sell it, so is there real value in buying it? We negotiated lower rents because of the type of lease and the Government covenant. That is probably the best way to extract value.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is it important to be on the North Dock?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
If the office was in Kildare, say, would that matter?
Mr. Conor O'Kelly:
There is an argument for both. Access to the airport makes it easier for international investors and we have a lot of traffic coming through. Staying close to the Central Bank and the financial district probably makes sense at the margin. That is my view and I know other people have different views.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Rent is just dead money though. It is just a personal view, but the NTMA is not going to close down any time soon and it would make better sense to purchase or build a building or to take over a State-owned building, rather than dishing out money. Is a lease on Treasury Building being broken to facilitate the move?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
NAMA is there as well.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Will it be there for whatever period it has left?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
What is the post office savings bank fund?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The old-fashioned book, that we all had our 50p in. The NTMA is given that money and it manages that fund.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The NTMA takes that money and manages and invests it.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
When Joe and Mary Bloggs lodge their money there, the NTMA manages it.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is it managed in liquid form or is it invested for them?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Does it pay NTMA a dividend for doing that or does it do it for free as part of its role?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
They gather the money for NTMA and NTMA pays them a fee.
I have a final question. It goes back to Deputy Cullinane's question about the escrow account. What does it mean if we are in negative interest in the context of the Apple money? Is it that we are putting in money and getting no return or losing some of the principle over the period?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I know we agreed with Apple what we were going into, that there would be a three to five-year period and so on, but why would we not invest it where the principle was guaranteed and there was less risk?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The NTMA could put it into the post office saving fund, could it not?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
If it goes on for ten years and we lose €16 million a year, that would be €160 million.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
And, of course, we may be in better shape in respect of it in five years. Who is managing the fund?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Was the contract put out to tender?
Mr. Conor O'Kelly:
There was a full open EU procurement process. The position was similar in the case of our escrow agent and custodian, Bank of New York Mellon. That is the custodian and there are three investment managers. We can monitor their performance, which we do daily, and can change the manager if necessary but all were done on open procurement basis.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Are they paid by the NTMA, Apple or the fund?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That is all done on pre-negotiated rates as per the contract and so on.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That is great. I thank Mr. O'Kelly.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I welcome our guests from the NTMA and thank them for all the information provided. I cannot say that I understand all of it but I have tried to read it. They have provided the information and it is up to us to ask the questions.
I am seeking clarity on matters relating to rent, which I raised on the previous occasion. I refer to pages 111 and 113. The NTMA indicated that there were no breaks in the leases but according to what is stated on page. 113, the leases go on until 2026 and 2027. Is there parallel leasing? We are going into a new building. Will Mr. O'Kelly give me the details and cost of that? In parallel, the NTMA is retaining the old building because it has leases right up to 2027. What is the cost of that? Do some of those buildings remain empty? Does the NTMA plan to sublet some of them?
Mr. Conor O'Kelly:
Mr. Black can talk more on the detail but we are moving out. There are leases on some of the floors because we took different floors at various times. We can sublet that and we are comfortable with the demand on that. We are also talking to the OPW on that. There are lots of possibilities in that regard.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I find Mr. Kelly very straight so I will keep questioning him. I refer to the NTMA's commitments which states that in 1991, 2007 and 2012, the agency entered into lease agreements of varying duration until 2017, 2026 and 2027. The NTMA is in the process of moving. Is it paying parallel rents?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I might be using the wrong word. At present, the NTMA is renting one building and another.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Then the NTMA will sublet.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
What is NTMA paying? The amount was approximately €1 million per floor when our guests were previously before us. How many floors was that?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Does that include NAMA?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
So that is two floors and does not include NAMA. What else does it not include that comes under the NTMA's remit?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
The rent is €2 million in the current building. What is the cost of the new building?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
That is going from €2 million plus NAMA.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I am stuck and it would be helpful if I could get a note on exactly what the NTMA has been paying, what it will pay and how long the premises will remain empty before it is sublet. I would like it spelled out in the same manner in which the NTMA have spelled out everything.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I also want this for NTMA's sister companies. The NTMA's spending has gone from €2 million - €1 million per floor - to €7 million, but there are reasons for this and the NTMA is going to supply details in that regard.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
That may well be by square foot, but what about for the overall cost? A figure of €150 million was thrown out in the context of buying a new building. My view is that we should either build or acquire buildings. It is absolute madness and the State is part of the problem in the market. In this case, we need the details.
There was no breaking of leases. Was NTMA given the option to break the leases?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
If they are surrendered, is there a penalty clause?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I think of Galway and the daftness that went on there in renting. There was one appalling building at a cost of €1 million per year and when the lease was broken, a payment of over €1 million had to be made. There are penalty clauses if a lease is broken.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
The NTMA is not going to break the lease. It will keep it and sublet. That is okay. We would like details of that. I turn to the financial statements and the weakness of financial controls that is referred to on pages 70 and 147. I refer to page 147 and the figure of €721,000.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
A weakness was identified in the context of internal controls. Was there an actual loss of €721,000 there?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
The question was whether there was a loss. I am trying to get to simple language on it.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I see. The gains are lower to the value of €721,000.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
How did that happen and what has been done to prevent it from happening again?
Mr. Conor O'Kelly:
It is unfortunate that it happened. Our policy invariably is to hedge our exposure outside the euro. We bought a fund which was in dollars, but it was not designated or marked on one of the spreadsheets as such; rather, it looked like it was a euro fund. We discovered the mistake and brought it to the attention of the Comptroller and Auditor General. When we discovered it and went to put the hedge in place, the dollar exchange rate had moved against us, unfortunately, and it cost us €750,000. Had we done it at the time, the investment returns would be €750,000 more. We have since closed the gap in that process, which essentially resulted from human error and a process that had a weakness. We fixed the weakness and are confident that such a situation could not arise again.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Mr. O'Kelly set out the situation in regard to the divestment fund in his opening statement. The NTMA continues to consider it. While researching this issue, I realised the Government had initiated a Nuclear Weapons (Prohibition of Investments) Bill in 2012. I had not been familiar with it previously. It was introduced but not enacted. It was an excellent Bill which was somewhat similar to the Fossil Fuel Divestment Act. Has the NTMA given consideration to in what it is investing such as nuclear weapons? Has it considered its policy in that regard?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
It is a separate matter and specific to cluster munitions.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I am referring to nuclear weapons.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
It is a matter for the Dáil to consider. I refer to the NTMA's ethical policy in the light of the military parade to take place in Washington today. The mind boggles.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
On NTMA investment, I note and welcome that it has five strands this year, of which housing and regional development are two. On regional development, the map Mr. O'Kelly showed the committee detailing regional investment is not very positive for the west. I presume it will be a top pillar of the five.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I cannot find the map, but it struck me that------
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I thank Mr. O'Kelly. One can see that the figures for Connacht are 5%, 6% and 4%, while the figures for Ulster are also quite low. Munster, Leinster and Dublin receive the majority of investment.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I would love it too, but I would like to see more practicality in the plans.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
The NTMA is open to proposals and investment.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
One of the big risks is that all of the investors are from outside the country. The NTMA made that point publicly and Mr. O'Kelly made it to the committee. What is its plan in that regard in terms of Irish savings and the potential here, given that there is that big risk.
Mr. Conor O'Kelly:
We have the State savings market, to which reference was made. There is approximately €20 billion in State savings, which are retail State savings. To what we are referring in that regard is the institutional investment market. Ireland is not a big institutional investment centre. It does not have the pension fund and insurance industry that exists globally. The fact is that the financial centres are Frankfurt, Paris, London, Tokyo and New York. That is where the capital is. We travel a lot. Ours is a planes, trains and automobiles job selling Ireland and making sure people are informed and aware of the credit and risks.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Would it be possible to get investors in Ireland or is it too small an economy for that to happen?
Mr. Conor O'Kelly:
I think the economy is too small. Various factors such as the IFSC and attracting that financial sector are part of it and will help a little, but even if companies have their headquarters here, it is still international capital and their original savings, investors and funders are probably in other jurisdictions. The savings must come from somewhere and the economy is too small to generate the savings we would need to fund that level of investment.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Mr. O'Kelly highlighted that as a risk. What steps can the NTMA take to alleviate the risk if it is outside its control and it cannot do anything within Ireland?
Mr. Conor O'Kelly:
There are several things that can be done. First, one ensures there is plenty of cash available. Second, one ensures the investor base is diversified. One must be aware of the risk of an event happening in the United States or the United Kingdom which would lead to that investor base shutting down. We ensure we are diversified geographically and by type, which is why we have the green bond, the inflation bond and other types of bond. Having different pools of investor in terms of type and geographical location means that one is unlikely to be shut out of any market at one time or, if one market starts to decline, one can look elsewhere for capital. Diversification is probably the key mitigation measure as an issuer, with holding some cash on the balance sheet.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I thank Mr. O'Kelly.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We are dealing with the National Treasury Management Agency's accounts separate from those of the State Claims Agency, with which we will soon deal in a separate session. We will take a five-minute break between sessions.
I have some questions for the witnesses based on the information provided. I thank them for the very professional and helpful presentation. On the Apple escrow account, the three fund managers involved - Amundi, BlackRock and Goldman Sachs - are based in Paris and London. If one of them underperforms, are there criteria to reduce its involvement? How long are the contracts?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The NTMA can switch the money from one to another.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Has it done so?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
On the escrow account, the agent and custodian is the Bank of New York Mellon which is based in London. Some €14.285 billion was put into the fund by Apple Sales International. The Comptroller and Auditor General carried out an audit on behalf of the Minister for Finance and the State. Presumably, Apple Sales International carried out an independent audit of the fund at the end of last year. Does Apple accept the NTMA audit or does it carry out its own?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The fund of €14 billion was deposited in an escrow account by Apple Sales International to be held for it and the State. The NTMA looks after the fund for the Minister for Finance and the Comptroller and Auditor General audits it to provide reassurance for the Minister and the committee that everything is okay. I presume Apple has done the same. Was there a joint audit? There must be some detail on an audit of the fund at the end of each calendar year in the tomes of contracts that were signed. I am looking for a copy of the audited accounts produced for Apple Sales International to make sure it tallies with what I have in front of me.
Mr. Ian Black:
The custodian provides the information for us and Apple to allow it to produce its accounts. We produce our accounts based on the same information Apple receives directly from the custodian. In a sense, it is for Apple to deliver. It allows it to monitor the fund and produce whatever financial report it has to provide for the Securities and Exchange Commission.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
What is the line of communication between Apple Sales International and the NTMA? Is there a line of communication?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
So the NTMA communicates with the Bank of New York Mellon?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I am hearing something that I have not heard before. Who are those six people?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Who are they?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Are they staff of the NTMA?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
How often do they meet?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Are there minutes of those meetings?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Who is the chairperson of that group?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The amount of money is so large that the Committee of Public Accounts could do with reassurance from the Apple-Ireland committee that it has seen the audit report from both sides. We presume they are identical but we would like to verify that.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
No, Apple must have done an audit on this escrow account.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Apple has not done an audit.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
How does Mr. O'Kelly know that? Is it from the work of the joint committee?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Does Apple plan to do an audit?
Mr. Seamus McCarthy:
I imagine that when Apple is doing its financial statements it may or may not have a reference in them as required for the companies that contribute to the fund. It may be recognised as a contingent asset but presumably the value information would be standard and it would be accepting of it.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is it possible for the NTMA to use its good offices to get us a note on-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We do not want to hear in two years' time that Apple is not satisfied with something after the NTMA has said everything was in order. Apple may have a different view, although I presume it takes a view that is identical to that of the NTMA.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We want to have that verified in a transparent manner. That is all I am asking.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I am laughing at the symbolism of the apple and Eve comes to mind but there is not a sign of a woman on the committee. It might be appropriate to tell Apple about what women suffered as a result of the apple symbolism.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I have a question about the Strategic Banking Corporation of Ireland. Page 17 of the NTMA's financial statements notes that its investment has supported 32,000 jobs in Ireland. Does the NTMA make funds available to the Strategic Banking Corporation of Ireland?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The SBCI is a separate organisation.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The SBCI, in its financial statements, states that it is supporting 40,000 jobs or whatever the case may be.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That includes the NTMA's investment in the Irish Strategic Banking Corporation.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Can the NTMA give us a breakdown on the 32,000 jobs it supports? Are they organisations? To give an example, IDA Ireland often states how many jobs it supports. It may give a small grant to an organisation that employs 500 people and then say it is supporting 500 jobs. Can the NTMA give us a breakdown of these 32,000 jobs? Would we not have those jobs without the NTMA?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I know but I am only asking about that bit.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Employment is a big aspect of the Irish economy.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
It is highlighted here so I ask the NTMA to provide a breakdown of these 32,000 jobs, whether by category, region or companies employing under 500 people, over 50 people, or whatever the NTMA thinks is reasonable.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Did the National Development Finance Agency have a separate account before? Where is it in the NTMA's financial statements? Is there a separate account in there?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Where are the NDFA's figures?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Does the NTMA have a separate cost centre for what we would call NDFA's function?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Can the NTMA send us a note on that or is it shown separately?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I was wondering where the NDFA went and if its role has been diminished.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
A sum of €11 million is attributed to the NDFA. I ask the NTMA to send us a note on the NDFA's main activities. We have a note stating that the NDFA delivered public private partnership, PPP, projects in education, health and justice with an estimated total capital cost of €1.7 billion and it mentions the schools bundle. Will the NTMA send us an information note on the activity or is it provided here?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That is good. I have not read every single one of the more than 200 pages in the report in detail.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is that its activity in 2018?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That is fine. We have touched on the banks already, as detailed on page 27. The NTMA says it lost €3.5 billion on the investment in the banks last year due to the market.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The taxpayer did.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The NTMA is our agent. It lost that money on our behalf. I should have specified that I meant the taxpayer lost the money.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Did the NTMA have a choice on that investment?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
It is a directed fund from the Minister. We understand that.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We will not get into the politics of blaming the Minister for that one.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
The terms of a direction are authoritative.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Yes, it is a long-standing direction so it might go back a number of years or cover various Ministers. That is fine.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
When was the sale of the AIB shares? Was that the previous year?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The fall in value had nothing to do with the disposal of those shares.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
On page 27, there is what looks like a simple chart with small figures but there is a lot behind it. Is it correct that €4.7 billion was invested in Bank of Ireland, the State has already received €4.2 billion in return and the value of the investment at the end of the year was €700 million? That would indicate that in respect of the €4.7 billion the State invested in Bank of Ireland, between cash received and the balance of the 13.9% of shares at the end of December, the State and the taxpayer are slightly up.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
When it comes to Bank of Ireland, of the €4.7 billion invested in it, the taxpayer has received €4.2 billion back to date in cash terms and the shares are worth €700 million, even at the reduced value. That means there is a €200 million surplus on the State's cash injection into Bank of Ireland to date.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The State is in surplus as a result of the Bank of Ireland bailout.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I will move on to Allied Irish Banks in which the State invested €16 billion. Is that correct?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The value of the shares at the end of 2018 was €7.1 billion and we have received €6.1 billion in the meantime. That amounts to €13.2 billion, which indicates we are down about €2.2 billion on that investment.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
When we come to that I will let the Comptroller and Auditor General in. We all know the big black hole was caused primarily by the IBRC, that is, Anglo Irish Bank and Irish Nationwide. I ask the Comptroller and Auditor General to flesh out the figures for the other banks.
The black hole is concentrated within those two banks: IBRC which includes Irish Nationwide Building Society and Anglo Irish Bank. The other two, to a significant extent, have been repaying the original investment to the State. I want to indicate that pen picture.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
It had to finance it.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I understand that.
Mr. Seamus McCarthy:
I will provide a chapter on the updated position as at the end of 2018. When I reported on the matter in 2016 - the figures are broadly in the same space - the big loss concerned IBRC. There is a loss on AIB which is relatively significant. In the case of PTSB and Bank of Ireland, one is slightly under and one is slightly over, but that does not take account of any surplus that will be eventually generated from NAMA. When one takes it into account, all in all-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
As we all know, the ultimate value of the shares when they are sold could be up or down. On the payments that had to be made under the bank guarantee, what does "cash received" consist of?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Yes, Bank of Ireland-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The banks were paying a significant fee to the State during the period of the bank guarantee. Has it been factored in in the figures?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
It was significant in its own right.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
It will come back by way of a dividend.
I am handing over to Deputy O'Connell, although I have a few more questions to ask, but it is not fair of me to take up too much time.
On page 7 of the NTMA's financial statement it is indicated that we owe €205 billion, while the interest paid on the national debt last year was €5.8 billion. On average, a figure of 2.8% was paid on debts last year. Much of it is now coming in at 0%. Can the NTMA give the committee a breakdown of the €205 billion in terms of how much is at a negative interest rate, or below zero; between zero and 1%; between 1% and 2%; between 2% and 3% and all of the way up? What is the most expensive debt still in the NTMA's portfolio?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We have no debt which carries an interest rate of over 6%. I know that there are 200 pages, but they are the figures I want to see.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I am sure Mr. O'Kelly knows it off the top of his head.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
It also relates to the amounts of money involved because an interest rate of 5.9% might be charged for a very small or a very large amount of money.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I want the NTMA to break down the figure of €205 billion by money amounts.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
And by time.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
By duration.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We want the amounts of money and the matching interest rates.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
On the charts we were given it was indicated that a figure of 29% of the national debt was sourced in the United Kingdom. Was much of it moved in 2018?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
It is necessarily in sterling.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is it included and I am sure Mr. Black will show me the exact note. Can we have a breakdown of the sum of €205 billion by currency?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
When the accounts refer to the United Kngdom, from the NTMA's point of view, the public might assume it is in sterling.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That amounts to about 99%. It is important to clarify the matter as people might have misunderstood.
I have two other minor questions. On page 81 of the accounts there is a reference to the EU-IMF funding programme, under which we still owe €45 billion. There is a figure of €18 billion for the European Stability Fund; €25 billion for the European Financial Stability Mechanism; and €4 billion for the UK Treasury. At what interest rate is the money owed? Why can we not get out of it?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
They are at a lower rate. That is fine.
My last question which always interests some relates to the dormant accounts mentioned on page 136. There are charts, but and I am a little confused. I have the impression from what is included on page 140 that the NTMA holds a sum of €477 million from dormant bank accounts and €100 million from dormant unclaimed insurance policies. There is a figure for the escheated State fund of €4.4 billion. Can it be explained?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Yes, it is €103 million.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
A sum of €500 million was not claimed.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
In broad terms, €300 million has been disbursed-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
-----out of a total of €600 million approximately. We are left with half of that sum. That leads me to page 142 on which it is indicated that €27 million went last year to different Departments. Who decides where the money is to be disbursed? Is it by ministerial direction? Who made the decision that the Department of Rural and Community Development was to receive €9.7 million and the Department of Transport, Tourism and Sport, €5 million?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
When representatives from Pobal attended and we looked at the dormant account funds in the Department, we found that it was one of the most mismanaged funds. It had been moved from one Department to another. I am not talking about NTMA's administration of the fund, but there were things that had been approved and never happened. Some of the projects were a mirage. Will the NTMA send us a note on the method by which the funds are-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is it by ministerial or departmental-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The Department sends a letter requesting the sum of €9.7 billion and the NTMA sends the money to it. We can take up this issue with the line Department.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We were not happy with the amount of money claimed, money Pobal-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That is the only reason I have raised the issue because it has crossed our desks before.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
On what page is the chart to which the Chairman referred which indicates the investment in Bank of Ireland?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
If we look at this example, there is almost an inference that the return received represented good value or was a good idea. When did we give it the money during the bail-out? Was it eight or ten years ago? There is a surplus of €200 million after an eight or ten-year investment period.
It does not seem like good value for money or a good return for the country. The Comptroller and Auditor General referred to the opportunity cost. That money could have been invested in other things, like people's lives. I do not think it is true to say that ending up with over €200 million on that investment was a good idea. It was essential but in terms of a return for the taxpayer, it does not seem like a very good one. AIB's is much less.
Is the reference to the 100% chance of a recession in respect of the present time or 31 October stuff? Can I assume that if we have a hard Brexit looking at a contraction of 8% to 10%, we really will be in an extremely precarious position as a country? Would it be fair to say that?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
It always happens, the cycle.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Okay. If we are in this precarious position, which we clearly are as we are carrying that mountain of debt, and if there is a hard Brexit, we really could be in the depths of a recession worse than we were in ten years ago. Would that be true to say? If there is a 100% chance today and then we have a likely contraction of 10%, that does not seem ideal. Would it be true to say we need to brace ourselves?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
If the interest rates had not been so favourable, we would be in a far more precarious position, would we not?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
It is purely interest rates.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
We have been lucky.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
We might not necessarily be as lucky into the future and we have to be very conscious of that.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Perhaps this is outside the remit of the meeting but we have significant pay pressure coming on because there is an affordability issue. I am assuming people like Mr. O'Kelly are very concerned about this in terms of an inflationary set-up taking off. It is quite concerning, especially when we have been lucky with interest rates and given the threat of Brexit. Has Mr. O'Kelly any view on that himself or is it outside his area?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The appointment of Ms Lagarde is positive, as Mr. O'Kelly mentioned.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I know I discussed the NTMA building with Mr. O'Kelly - is it a year since he was here? Time goes very quickly.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I am still waiting for my invite although I know the NTMA is not in the building yet. Mr. O'Kelly mentioned ethical investments. I see whiskey on the list and Deputy Catherine Murphy referred to Mercosur and the effects that deal might have. Who determines what is ethical in terms of NTMA investment? We have had a lot of conversation here about minimum unit pricing of alcohol and all of that. Is there an ethics committee or how is it decided?
Mr. Conor O'Kelly:
We do. We sign up to the international guidelines in respect of environment and sustainability governance, ESG, principles. A member of our investment team sits on that and is very active. She is in charge of driving our investment process around issues of what is green and ethical, in respect of fossil fuels and so on.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
In terms of the booze element and our issues as a country with alcohol, which is a psychoactive substance, is it ethical for the NTMA to be investing in a product like that?
Mr. Conor O'Kelly:
I would prefer to think that it is for the Oireachtas and elected officials to make decisions like that. We will take our guidance from the Deputies and Senators in that regard. The Deputy would not want people in the NTMA making discretionary investment decisions about what is ethical and what is not.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
That direction has to come from on high.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Has the NTMA investigated any investments in the global movement that is cannabis production? Is that on the radar as something that is a good return?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I will not make as much out of the building as I did last year. The new rate was €49 per square foot, was it not?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The NTMA would have had to do up the original building, is that right?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Mr. O'Kelly mentioned the turnover with reference to the price of doing up the building. Is it the L'Oreal approach of "We're worth it"? What difference does the amount the NTMA turns over make to the cost per square foot of its office?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Cabling seems to be an issue everywhere. We had it going around the children's hospital five times.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
How long is the lease on that building?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Regarding the voluntary redundancy scheme that was set up in 2018, each contract at the NTMA is individual to the person, so why would it need a voluntary redundancy scheme? Let us say I was employed there and my contract said I would do X, Y and Z. If I was no longer fulfilling those criteria, surely the NTMA could get rid of me. Why would it need to pay me off? Some 33 people were made redundant. Did I hear right that it is at a cost of €33 million or did I just write that down?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Jeepers, that is very lucrative. A third gone, a third at reduced cost and a third-----
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
That individual contract did not really hold any water.
Dr. Sinead Brennan:
All of the NTMA employees are on permanent contracts. It is an individually negotiated contract in the context of the terms and conditions of that individual. We do not have pay bands, increments or scales such as one would typically find within the rest of the Civil Service. That is what we mean when we refer to individually negotiated contracts. At the same time, all of our employees are still protected by the normal employment legislation.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
What about their pension rights? Would getting this voluntary redundancy affect an individual's pension rights going forward?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Is the pension similar to the public sector pension in respect of being aligned with the Department of Public Expenditure and Reform situation?
Dr. Sinead Brennan:
We have our own career average defined benefit pension scheme. It is similar to the single scheme in the Civil Service in that it is a career average scheme.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
It is a fairly lucrative scheme, like a Civil Service pension.
Dr. Sinead Brennan:
Yes, it is like the more recent scheme that has been introduced into the Civil Service since 2013.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Under each individual contract, were people's pensions negotiated?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
I do not understand something. According to the chart, the gross debt is largely unchanged since 2011. We had the IBRC legislation to turn it into sovereign debt in 2013, I think. When did it go on the balance sheet? Were the promissory notes always on the balance sheets?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
So that really would have been from 2010.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Okay.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Is the IMF €45 billion included in the €200 billion? Is that on top of it? The cheap money.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The one the Chair was asking about, at the bottom.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Okay. We are going to suspend for five minutes at this stage-----
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Can Mr. O'Kelly just clarify the figures for the national debt and the general government debt?
The Comptroller and Auditor General will give us a note on that, or somebody will.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I would appreciate that as the public gets confused as to the difference between the two. We will suspend and, when we return, we will still be dealing with the NTMA but, specifically, the State Claims Agency.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We are continuing our consideration of the NTMA financial statements for 2018. In this session, we are dealing specifically with the State Claims Agency, which is part of the overall NTMA. I welcome the new witnesses, who are Mr. Greg Dempsey, deputy Secretary General, governance and performance, in the Department of Health; from the HSE Mr. Patrick Lynch, national director, quality assurance and verification; and Ms Mairéad Dolan, assistant chief financial officer.
I wish to advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009 they are protected by absolute privilege in respect of their evidence to the committee. If they are directed by the committee to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
It is not a formal script but we touched on the matter in the opening remarks this morning. Mr. Breen might give us a two-minute pen picture of the overall number and value of claims from last year to this year. We are not looking for a lot; just a two-minute pen picture of where the agency is at and then we will take questions.
Mr. Ciarán Breen:
Absolutely, Chairman. We have 10,658 outstanding claims that we are managing at a potential cost of €3.15 billion. Clinical claims amount to 3,196, which is a €2.33 billion estimated liability. That is 30% by volume terms, in terms of the number of claims, and yet representing 74% of the potential cost. On the general side, we have 7,462 claims that are active at a cost of €820 million. They are the employers and public liability and property damage claims against the State.
Our total transactional expenditure is the amount of money that we spend in a particular calendar year across both schemes, that is, the clinical indemnity scheme and the general indemnity scheme. In 2017, that was €303 million and in 2018, it went up to €347 million. One reason that has climbed in the way it has is due to things like claims inflation and the factoring in of the Gill Russell case, which is the case dealing with the discount rate and the calculation of special damages. In addition, we are setting and resolving more claims as well.
Our clinical claims resolved in the year 2018 came to approximately €247 million, compared with €134 million in the previous year. If I could explain the €92 million gap, about which members might wonder, we have set it out in our annual report that it is due to the Gill Russell uplifts. These were cases that we had settled on the basis of the higher discount rate and when the Court of Appeal gave its judgment, we had to pay at the lower rate. Consequently, there were differences to be paid on some claims that we had settled and that amounted to €65 million. The awards over €1 million jumped from 20 in 2017 to 56 in 2018 and then we had other awards and settlements; we just simply had at a higher number, up from 42 to 59. That is probably the overall pen picture of the statistics.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Please explain the discount rate. Mr. Breen said that it was paid at a higher rate and the settlement was at a lower rate, so people will think that means the amount payable went down. Please explain that for the people watching.
Mr. Ciarán Breen:
It has all to do with the calculation of what we call special damages. So this is the cost of future care, the cost of things like aids and appliances and so on. It almost sounds counter-intuitive but the lower the rate, the higher the amount of damages and the higher the rate, the smaller the amount of damages. It used to be at 3%. The Gill Russell case, which we handled, was a catastrophic injury case to an infant in which the rate was reduced based on economic advice that was available to the court at the time. To give a contrast with that, Chairman, in the UK the current rate is - 0.75% and they link the rate to index-linked Government securities and how they trade, and the rates. That is why we are getting higher damages the lower the discount rate.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Some people will still not get that. The problem is this is counter-intuitive. The people watching will hear that a lower rate is more expensive and will not get that. Please explain it again for the people watching.
Mr. Seamus McCarthy:
It is counter-intuitive. I think it turns on discount rates and how one values moneys one would receive in the future and how one values them now. Or, if one has to spend money in the future, how much would one have to pay now to avoid having to pay that in the future? So I think that is the principle on which this operates.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
On the lower, what Mr. McCarthy called the discount-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Let us say €1 million.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Only 1%.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Okay. The Comptroller and Auditor General has helped to explain this from the public's point of view. The discount rate is something that you manage and it is what you are going to earn. People when they hear about the discount rate think it is the interest rate. That may sound strange. For the public watching, the State Claims Agency is looking at this from its point of view and using the terminology, which we understand. Somebody watching who hears that the discount rate goes down will not get it. The rate goes down from the perspective of the State Claims Agency.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The State Claims Agency has to provide more-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
-----but it does not affect the people on the other-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Can that change in the future?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
At this stage Deputies Connolly, Catherine Murphy, MacSharry and O'Connell have indicated. This debate is a continuation of a topic that we discussed here last year. We did not to complete it because there was so much information being sought from the HSE on the number and category of claims. We sought information for the public watching by hospital in an effort to see whether hospitals had a higher risk. There was an assessment from the agency that were such a league to be published, then it could potentially be misleading or unfairly damaging to some hospitals just because of the number of people presenting. We agreed to not go into that detail because it could have other knock-on consequences. We then mentioned hospital groups as an issue. When the agency was here on the last day, we had quite a bit of information to receive on an ongoing basis thereafter and we said we would come back to it again this year. We are really only in a follow-through mode, somewhere along the line, from the HSE.
I have a question for our colleagues in the Department of Health and the HSE, more so than the State Claims Agency. What is being done to reduce the amount of medical negligence cases in the health service? We are here having this meeting not because the State Claims Agency has a cost of €3 billion but because of medical negligence in hospitals and other HSE footings. Really the question should start and begin with the Department and the HSE because that is the source of where all of the issues have happened. We have talked about this over the past year and we have been given a report today for today's meeting. Can somebody talk to me from the HSE's perspective on the proactive measures that have been taken? We heard here the last time that an incident can happen in a hospital, a report is compiled locally, which is not a ministerial one, but there is no proper mechanism to share the lessons and so on beyond that hospital in some cases. Sometimes it might have been the group. Sometimes, if a more serious event is being examined, the results might be circulated to all of the hospital managers but nobody seems to know whether they even have time to look at these things when they do get them. The number of claims increases every year. Our question is, in the first instance, more directed at the health service rather than the State Claims Agency. We will just take an observation from the witnesses at this stage and we will then move on to the substance of the matter.
Mr. Patrick Lynch:
On what we tried to illustrate in the report, we know already there are big areas of risk in terms of harm that happens in the health service. It is not always medical negligence. It is not down to a clinician who is negligent but to a whole range of factors. In the report, I tried to set out for members some of the big areas of harm we know that have happened. Really then, we should be way ahead of it in terms of prevention. I then have a particular interest in when incidents happen. We know that a lot of people go the legal route for a number of reasons. One is, in particular, that they do not feel they have got the answers to what went wrong. I have met a number of patients who have been harmed. Last week I met a number of mothers who had lost babies in Portiuncula and the committee is aware of the larger review.
Those three mothers are now involved in the improvement programme and are leading it. They told me that one of the reasons they went to court was that they did not get the information and were not told what had happened. They had very simple questions, namely, what happened, why did it happen and what had been done to fix it. They wanted to know that it was not going to happen to anyone else.
We work closely with the State Claims Agency, not only when it comes to claims but also in incident reporting. The national incident management system was established by the State Claims Agency but is owned by the public service. In the four years since its establishment, we have seen a 33% increase in the number of incidents reported. That is a good thing, although it may seem counter-intuitive, because any health system with a healthy patient safety culture will report incidents. That includes incidents where no harm has been caused at all, which may be negligible or which may have had no impact on the person involved. Good incident reporting leads to good learning at the outset. Any health system in the world encourages reporting because assuming that increased numbers are an indication of poorer safety takes from the culture of patient safety in hospitals, institutions or community services. That has been a big success. While the State Claims Agency can answer for itself, I think it would point to that as being very significant. It allows us to see the trends in incidents, whether at a local level in a hospital, community service or hospital group, or at national level. That is just one part of it.
Only 1% of the incidents reported are considered major or extreme. These are incidents that result in serious harm to people and, in some cases, people die as a result. We do not want to wait until a claim is lodged to get people to start looking at why it happened. With category 1 incidents, where that level of harm has occurred, there is a requirement to review them and understand what happened, not after two or three months but immediately. If another person coming in to that facility today will face a risk, that risk has to be sorted and the factors that led to the incident have to be identified. As I said in the paper, we have introduced an incident management framework. It is easy to talk about policy at national level but this framework provides a practical way for people to review incidents, get the learning and fix the problem there and then at local level. Some issues are more systemic but they may only be systemic in a hospital, rather than across a number of hospitals. All hospital groups and community healthcare organisations now have serious incident management teams and quality and patient safety committees that review that information. At national level, we also look at that data and where there are significant systemic issues, we may have a national initiative to deal with it or we may hold national learning events to get the message out across the system.
The question of open disclosure has been the subject of discussions here as well. That is fundamental to a caring healthcare system because it not only provides the person harmed with the information he or she is entitled to and should have immediately, but is a lever for services in itself. If we tell patients what happened to them, we are also expected to tell them what we are doing to fix it. I have tried to give a bit more detail.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I will ask a few short questions before the Deputies contribute. Mr. Lynch might not know this off the top of his head but perhaps he could send us a report on the number of category 1 incidents. While the numbers involved are small, these are the most catastrophic cases which result in major claims down the road. Mr. Lynch described the increase in reported incidents as a good thing and a reflection of a more proactive and open approach. I get that point. We are interested in the category 1 incidents, so I ask him to send us figures on those. What mechanisms are in place for immediate action when category 1 incidents occur?
Open disclosure is improving and people understand that. We were told at a previous meeting that when someone lodges a claim and names a consultant or an individual, the State Claims Agency is told to drop the names and substitute them with the HSE corporate. When we asked whether some people had caused or been involved in several serious incidents, the State Claims Agency's response, which called to mind a fireside chat, was that it had spotted one or two names cropping up a few times and referred such cases to the HSE asking why these individuals' names had popped up a few times. There did not seem to be any mechanism for dealing with that. Mr. Lynch has repeatedly mentioned learning but we have not seen learning based on what we have heard so far. What happens to people who make a mistake or do not know their job? Are they taken off duty for six months? Mr Lynch knows what I am getting at. He gets my question. That is what we want to hear.
I concur with Mr. Lynch on a final point. Many people end up taking claims, which I blame on HSE management rather than consultants, nurses or doctors. They may have been part of it but if something goes wrong in a hospital, the hospital manager or senior manager is eventually involved. It is a major issue. Group management then comes into it. There is a policy of not being open at that stage. The reason many people take cases is that they did not get answers in the first place. Some of the fault lies in the management structure of the HSE. Management probably thinks its first objective is to protect the HSE and the patients come second. Mr. Lynch has admitted to that culture and that people did not get answers when they asked questions. I am pleased to hear him say that.
Mr. Patrick Lynch:
I deal with and talk to patients, and at my level I tend to meet people who have gone through some of the most difficult experiences in the health service. We have heard that again and again but that also happens internationally. To develop that culture of open disclosure, we need openness from the very outset.
The second question was about clinicians. When we look at incidents, we know that the majority of incidents cannot be laid at the feet of any one individual.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I understand that.
Mr. Patrick Lynch:
I know people do not like the idea of systems or systems failure but I have seen many review reports where a clinician is only the final point in a weak chain. They are the ones dealing with patients face-to-face but a whole series of things will have gone wrong before that point. As well as the joint senior governance forum between us and the State Claims Agency, we now have a senior clinical risk forum between the clinical indemnity scheme in the State Claims Agency and senior management in the HSE. We meet quarterly to look primarily at clinical risk. It is an opportunity for the State Claims Agency to escalate concerns it has raised locally to a national level. Its risk advisers deal with local hospitals but if it is concerned that issues are not being addressed or are not adequately responded to, there is a forum, quite apart from the interactions we have on a day-to-day basis, at which it can escalate those issues. Equally, if we see emerging risks, which the State Claims Agency as the indemnifier will need to know about, there is a formal forum for that. Again, the State Claims Agency may want to comment on that.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I will make one further comment before handing over to Deputy Connolly. Mr. Lynch mentioned the clinical risk forum. The former chief executive of the HSE, Mr. Tony O'Brien, was before this committee 14 months ago, shortly after the Vicky Phelan case became public, and we asked him about that. He was the chief executive and he said he was not aware of that issue at all.
We then sought to examine the risk register of the HSE but that case was not on the risk register. Mr. Lynch is now stating that there is a clinical risk forum. That surprises us. That certainly was not the practice up until recently, although it might be the plan now. The chief executive indicated that he was not even aware of the case. Did the clinical risk register forum even exist at that stage?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is clinical risk not a HSE function?
Mr. Patrick Lynch:
It is a joint clinical risk forum. It is a partnership between two of us. The State Claims Agency has information that its gets as it comes through the claims process. The agency also has risk advisers. We have information from our side. Rather than the two agencies not talking to each other or bringing this intelligence together, we set up the clinical risk forum in order that we could escalate-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Clearly, people in the HSE were familiar with the cervical cancer issue because it was going before the High Court. Yet, there did not seem to be any communication within the HSE for that to be known at senior level.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The problems start in the HSE. We want the HSE to take more ownership. The view seems to have been that since the agency handles all the cases and gets all the legal documents and discovery, the minute a case comes in it is over to the agency. This lack of communication has contributed to the lack of adequate learning. The HSE only learns when the case is over. If the chief executive only hears about these issues after a High Court case or on RTÉ's "Six One" news programme, then something is faulty in the system. Is Mr. Lynch a medical person?
Mr. Patrick Lynch:
No, I am not a medic. I am national director for quality in the HSE. I am not a medic or a doctor.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Mr. Lynch stated that he met several people. That was not in the medical context. What was the context?
Mr. Patrick Lynch:
One of the things that my role includes is trying to improve the way we proactively prevent harm as well as improving how we respond when incidents happen. I get a lot of cases that may have gone on for years. Some of them may be historical and may date back ten or 12 years. Major damage has happened to people, much of which is not because of the original incident. It is about the years they felt they were battling the health service in order to get information. By the time cases come to me, they tend to involve people who have been very harmed. I hear the stories from them about their experiences.
We have made significant improvements in recent years. Ours is a large health service, with over 120,000 staff. We have millions of service interactions every year. In the midst of this there are still people who are harmed and who have tragic stories. I hear those stories all the time. It means that I am not removed from hearing about what actually happens to people. It is about improving that.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I thank Mr. Lynch because he is saying what we have been saying. It is good to hear someone in the HSE voicing the same concerns that have made their way into the public arena. The fact that Mr. Lynch is voicing these concerns appears to be recognition of some of the issues about how cases were or were not dealt with over a period.
Deputy Connolly, Deputy Murphy, Deputy MacSharry and Deputy O'Connell are all down to speak. We will get everyone in.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I welcome what Mr. Lynch says but it is not happening in practice. I hear about three aspects of this. The first is when an incident happens. I hear about learning from that incident. Then I hear about how cost-effective the State Claims Agency programme is at minimising the cost of dealing with something that happens inevitably. It could be something that should not happen. Many of the incidents and accidents should not have happened. Some were inevitable and some were not. There are different aspects to it.
The first aspect is the extraordinary liability. A sum of €3.15 billion is the liability for this year. Can Mr. Breen tease that out somewhat? He mentioned some of the reasons, including the Russell case and one or two others. Can he tease out why that figure is so large? What methodology was used to calculate it? Could it be more or could it be less?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
At this point in time, what is it?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
What does that include? What has the State Claims Agency put in there? For example, does it include women with cases relating to cervical tests?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Is that every live case where proceedings have issued?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Is that from the moment the agency is given a letter?
Mr. Ciarán Breen:
Exactly. We do what an insurer would do or what a medical defence organisation would do. We value the claim based on what we believe will be the most likely outcome. As Deputies can imagine, in the context of any individual claim, the person's health may worsen. For example, the damages will go higher if the person is completely incapacitated.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Many variables can lead to that figure changing. At any given point in time, that figure is the best estimate of the agency. Is that right?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Why is it such a big figure? Why has there been such an increase from previous figures? It is going up all the time. Is that correct?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Why is that?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
What value did the agency put on the consequences of that case?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
What was the value? Of the €3.15 billion, what value does the agency attribute to that case?
Mr. Ciarán Breen:
I would not be able to isolate it exactly. Within the portfolio of clinical negligence cases we have a relatively significant number of cerebral palsy or catastrophic injury cases. Recently, one of those cases in total cost €32.5 million. That was an exceptional case and there were exceptional features associated with it, but it gives members an idea of the potential cost of any particular catastrophic injuries case. Given the number of those cases that we have, we can see why the liability is climbing. The fact of the matter is that in clinical negligence damages, settlements and awards are climbing. We expect that to happen in any event.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Few cases go to court. Is that right? Only a small percentage of cases go to court.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Approximately 97% are settled either through mediation or on the steps of the court. Is that right?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I would expect the cost to go down. Let us leave aside the awards for the moment. What about the legal costs? We would expect them to go down. Is that not the case?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I understand that. Mr. Breen has set that out before and has set out the improved methods in place.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I have waylaid Mr. Breen. I will come back to costs in a moment. The State Claims Agency praises itself for the reduction. I see that on page 48 of the document and I will come to it.
The figure of €3.15 billion is because courts are giving higher awards in the small number of cases that go to court, but they set the precedent for the other cases. Are there higher awards? Is that what Mr. Breen is saying?
Mr. Ciarán Breen:
That cost of care with inflation is going up. Committee members can imagine that is a significant element of any catastrophic injuries claim to compensate in future. General damages are staying at a level that is pretty much capped by the court at €450,000.
The balance of all those claims comprises the cost of care to the point when one is settling, or past care, and then the cost of future care. In some of these cases one might need all-round nursing care; one might need two or three carers per day. All of that has to be costed and paid.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Are all of those variables accounted for in this figure?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Does Mr. Breen expect that figure to increase next year?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
How high does Mr. Breen expect it to increase?
Mr. Ciarán Breen:
It is hard to predict but if one looks at previous years, the percentage increase can be anything from 10% to 20%. For example, we could get at any point in time a mass action - a number of cases on the one point, which could come in suddenly. The valuation of those will add considerably to the estimation for the future.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Page 47 outlines some of the mass actions in process.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
As a woman, one could take a social history from this. We have mother and baby homes, the Shine abuse case, thalidomide and symphysiotomy. Some university might take this up and examine how women were treated. For the purpose of this mass action, we have the lack of in-cell sanitation. I will come to those specifically because I want to ask questions. What value has the State Claims Agency put on those within that €3.15 billion?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
All of those.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
They are not part of the €3.15 billion.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I see.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Does Mr. Breen want to go through the rest of them while we are on it? I want to come back in and ask questions about them separately, but just overall-----
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Yes, that would be great. Mr. Breen will go through each mass action-----
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
----- Lariam, mother and baby homes, thalidomide, and give us a note on the agency's estimate for those costs.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I am obliged to say that we cannot accept that because I, as Chairman, cannot guarantee it will be kept private if it is sent into the Oireachtas. I am being truthful. It is disappointing. If Mr. Breen provides a figure to Oireachtas Members, it will appear in the public domain thereafter. I do not want to compromise the agency's handling of cases by publishing a figure that could give claimants an indication of what it is willing to pay.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
It is my difficulty too in not being able to accept it because I do not want the Oireachtas to be a conduit for information getting into the public domain.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Just on that-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I am sorry. We can talk about this.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
The Chairman can make a ruling. I am not interfering with a ruling.
Mr. Breen has given one global figure.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
That is okay. Is there a difficulty giving global figures? If there is specifically, can we have an overall global figure?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Will that include the mass action?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Chairman-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We could go into private session for two or three minutes so that Mr. Breen could speak to us without supplying any documentation.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
We should carry on in public session for the moment because it is not about us. It is about knowledge and knowledge is empowerment to people.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
For the public record, it can be supplied as Mr. Breen plans to do it. If we want to go into private session subsequently, that is fine by me. For the record, he is going to give that in public session.
Page 48 deals with legal cost claims settled in 2018. There were 556 cases negotiated and settled presumably. Is it the number of cost claims negotiated?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Are those negotiated and settled?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
The amount claimed was €90.6 million.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
The cost of claims was €53.7 million.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
That is great and it looks great. How, in God's name, could there be such a difference between what is going in and the outcome? We have met Mr. Breen many times previously. It is great on paper that there is a reduction in the cost. How, in God's name, could the estimate of the bill going in be so out of touch?
Mr. Ciarán Breen:
It might be helpful if I explained what we do. For example, if we get in a large claim for costs for more €1 million or a couple of million euro, if it is a tribunal or whatever, our legal cost accountants in the agency examine the files of the solicitor who is presenting that bill of costs.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Presumably they go through it in detail.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I understand.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I have heard that and I welcome that. It is very good. The State Claims Agency goes through it in minute detail and says, "That's way too high." How does the bill keep coming in overestimated?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
In Mr. Breen's experience, has that aggregate Bill increased each year?
Mr. Ciarán Breen:
We are finding that legal costs are always problematical. May I mention one thing to this committee that deserves mention and it is problematical for us? There had been an agreement with the Bar Council going back a number of years ago - way back - that there would be payment for only one senior counsel in any action in the High Court.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
That is correct.
Mr. Ciarán Breen:
We are finding now there is great divergence from that and that in fact we are being asked at taxation and even in court that we pay for two seniors in these cases. The difficulty we are having is that is increasing legal costs and it will continue. It is a big challenge for us. By the way, we have mentioned this at the cost of insurance working group, which as the Deputy probably knows, the Minister of State, Deputy D'Arcy is chairing. It has been a point of contention there as well.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Of the 221 potential cervical smear test cases, how many cases are before the agency?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Is that out of the 221?
Mr. Ciarán Breen:
This is out of that. This is as of 27 June. There are three further potential claims. Seven cases have been settled, one of which is finalised. When we say finalised, we mean all costs have been agreed and paid. Just to mention, there are three cases which are listed for hearing in the High Court in October and mediation in one of those cases will take place this month.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Within that is there a figure the agency has estimated?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Is Mr. Breen prepared to give us that figure?
Mr. Ciarán Breen:
I will not give it. I will give it, obviously, when I write in with the general mass actions. It would be in the aggregate, but I would not give it for the particular cohort of cases. It may not make sense to give it because our estimate is based on, for example, things like non-disclosure of the audit results and the likely level of general damages coming from that, or the possibility, like we had in the Ruth Morrissey case, where we get a clinical negligence case, separate from the screening and so on. Many of these will be taken care of from the ex gratiascheme that has been set up and the tribunal when it is set up. It will change quite a bit; it is quite dynamic.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
The State Claims Agency is handling these cases now and Mr. Breen has given the figures. Separately there are other potential cases coming when the Royal College of Obstetricians and Gynaecologists-----
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
There is another-----
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
These are the ones we know and there may be more coming.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
When is the Supreme Court appeal in the Ruth Morrissey case likely to be heard? Does Mr. Breen have any information on that?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Has awaiting the Supreme Court case had an influence on the way the State Claims Agency deals with these cases?
Mr. Ciarán Breen:
No. I would like to clarify to the committee that we have simply sought leave to appeal from the Supreme Court. We have to apply to the Supreme Court to take the appeal. It will make a decision on whether it will take it. It will then take the appeal if it decides to do so.
As far as these cases are concerned, we have a judgment of the High Court, which said what it said. That judgment is on appeal. Therefore, things are as they were before that High Court judgment.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
The tribunal that will take over will be a court in my opinion. Other than the fact that it will not be in public, it will have all the characteristics of a court and it will make an award. Will the agency still have a role in that?
Mr. Ciarán Breen:
We will to an extent. If a woman was refused a payment in respect of non-disclosure under the ex gratia scheme, for example, she might want to include that as an aspect of her claim before the tribunal. Equally, the tribunal will hear a claim by the woman against the laboratory, or laboratories if there are two smears.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
How much money has been allocated for the ex gratiascheme?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I wish to go back to health and prevention. I do not like to be parochial about anything but I will use the example of Galway to generalise. I thank the Chair and the secretariat of the Committee of Public Accounts. I sought all the external reviews in University Hospital Galway, UHG, over a ten-year period. The purpose of that was to establish the number carried out, the recommendations, the costs and the changes that could be made. This responsibility fully falls on Mr. Lynch. We learned from the language he has used.
An extraordinary letter came back. I have mentioned it loads of times. It stated that UHG did not have a system to record the number and cost of all external reviews. That letter was dated 5 November. On 18 December, it was followed by another, advising following a further search that the hospital did not have an electronic system to record the number and associated cost of all external reviews and investigations. Finally, on 25 April, the committee found out that a manual search showed there were 13 external reviews concerning the hospital between 2010 and 2018, at a cost of €246,883. That seems like good value for money. I will follow up on that. A figure of 13 external reviews is not a great answer. It does not show trust.
Secondly, I refer to a visit to the hospital. I have the greatest respect for public nursing and public medicine. I refer particularly to units five and six of Merlin Park University Hospital. Again, this concerns management pre-empting and learning from claims. I refer to a report of a visit by the Health Information and Quality Authority, HIQA, in December and January. I will not quote it because my time is limited. During the inspection, the inspectorate sought written assurance that the water supply was safe for use, but this was not provided. I remind witnesses that this is a hospital. The report refers to inadequate signage relating to water. I will not go into it. I have the greatest respect for both units. Like other members, I have made so many representations to get people in there. I have only mentioned one of the factors that have been highlighted. There are many more. It is no reflection on the staff; it is a reflection on management. It seems to have failed to act.
Separate to that is another file I have mentioned many times. This is a file of letters from consultants who have written to us about the extraordinarily long waiting list. This is to do with money, not health. It is to do with the cost to the public purse that eventually arises when people are forced to sue or when people die prematurely and legal actions result. One correspondent told us that it is intolerable and that it is a regional crisis too big for management to address. I can hand any of this to the witnesses. The correspondent describes a catastrophic waiting list of almost 2,000 patients, which has been accumulating since the shortfall in infrastructure. That is not to mention the pain and suffering caused.
I will stick with that bad word, "money". People end up suffering more, which on top of all their pain and suffering costs the State more in the end, and we end up facing cases. I refer to risk assessment, acting on risk and identifying the problems on the ground. Capacity is the first item on the risk register for this hospital.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Mr. Lynch might address those general-----
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
These things can happen. There can be a problem with water or a temporary waiting list. However when it goes on and is not identified by management, is that not a problem?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Mr. Lynch is in charge of quality assurance. If there is a question mark over water - the most fundamental thing - in a hospital, surely that is a red alert?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
What is wrong with the process that it has not been dealt with and highlighted?
Mr. Patrick Lynch:
Without trying to absolve myself of responsibility, we have hundreds of community centres. Having heard that, I am concerned. I do not have the answer. I do not know what is happening in Galway. Certainly if HIQA has raised that and there has not been a local response to deal with it-----
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Then there is a problem. There are two questions. First, was there a response after the HIQA inspection? What about the response previously when the problem was highlighted by staff? Why did it take HIQA? If that is the situation in one hospital it raises questions, notwithstanding all the lovely stuff I read here. I note the special committee, and I see the doctor that chaired the inquiry into Ms Savita Halappanavar's death is on that committee. I welcome all of that. Sometimes I read and read and say "Good Lord". There are so many cases where risk assessment is simply not working. I am only highlighting a tiny bit.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I take more comfort from the fact that Mr. Lynch is going to hear about this than I do from the general situation. I am allergic to people having to suffer as collateral damage for the greater glory. I know Mr. Lynch is not saying that.
Mr. Patrick Lynch:
One of the things I value about my job, which as a national role can be difficult sometimes, is that I meet people who are affected by what happens in healthcare. I am not divorced from the reality of what happens. I will not walk out of the room and forget the things the Deputy has outlined.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I thank Mr. Lynch. Is my time nearly up?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
There is time for a final question.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I want to go back to pages 46 and 47, which concern mass actions, with Mr. Breen. We talk about a litigious society. I have an allergy to several things, including that idea. Nobody featured on these pages is taking a case without cause. Mr. Breen will agree with that. One of these actions concerns a lack of in-cell sanitation, which is a State responsibility. Now the public purse is brought into it because of the State's inaction.
We have a list of cases, such as the anti-malaria drug Lariam and the mother and baby homes. I understand that Mr. Breen will come back to the committee secretariat on these cases.
In addition, there is the incidence of prison-based tuberculosis. This question is also addressed to Mr. Lynch from the HSE. I know of a case in Galway where a patient with tuberculosis was admitted. In the paper record, which I followed up, everything was perfect, the patient was isolated and all the protocols implemented, but in fact that did not happen, the patient was left and other patients and staff were exposed to tuberculosis, so this will give rise to cases against the State. This was completely preventable.
I have questions for Mr. Breen about those living with the effects of thalidomide. There are 36 active cases. On a previous occasion we went though a Government scheme for the people involved and the contributions from the German company. Is it correct there are a further 36 cases outside of that?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Is it correct that none of those cases has been resolved?.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I am looking at the report
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I might use a different word than the drop dead date. To recap, the six people received €62,500 each, but those six people are included in the figure of 36 cases.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Since 2018, the State Claims Agency, SCA, has received two more cases, bringing the figure up to 38. The next column states that none of the cases is resolved.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
When were the first proceedings in those cases issued?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Roughly how many years?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
May I request a note on the range of the years to be sent to the committee secretariat?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Is it the case that the State Claims Agency is challenging the cases on the basis that not all were suffering from the effects of thalidomide?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
The Government is pressing the Statute of Limitations.
Mr. Ciarán Breen:
We, the State Claims Agency, have no choice but to do that because we have to treat every plaintiff equally, no matter who they are. These are not our terms but the terms used by the solicitor for the thalidomide survivors, and these are what are called acknowledged and unacknowledged survivors. The unacknowledged survivors are those who are in dispute as to whether the foundation deems them to have suffered from thalidomide in the way they certify them.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I see that the cases are being managed by a judge of the High Court.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
When will those cases be resolved in one way or another?
Mr. Ciarán Breen:
It is difficult to know. The judge recently said that he was very anxious that these cases would move on very quickly. Unfortunately, in the interim period, discovery has been sought and that discovery is so large that if it stays as it is, it will only add to the length of these cases, so the judge who is managing the case is handling that discovery order and trying to confine it as best he can.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Is that the plaintiff's discovery order?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
It is the Government plus the plaintiff is looking for it.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Does Mr. Breen see the line about the Shine abuse case where the State Claims Agency has reached an agreement in principle?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
There is no liability but that is in consideration of the State bearing its own legal costs. Why is that the case, if there is no liability, and what are the costs?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Will Mr. Breen give the figure for costs to the committee secretariat?
Mr. Ciarán Breen:
Yes, we will give a note on that. The issue in the particular case is that there is an insurer involved who is offering an indemnity to the State in respect of the State agreeing to bear its costs. If the State does not agree to bear its costs, the company will not give the indemnity. There is a calculation to be made by us at that time as to whether effectively a bird in the hand is worth two in the bush and whether we should get out on that basis and take that calculated risk of not exposing the State to a much greater financial risk, and it could be a much greater financial risk.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
What percentage is the cost of what is being agreed for those who suffered?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Okay, I see. My very last question concerns lack of in-cell sanitation. The Supreme Court judgment will have a very significant bearing on the remaining cases. Is it the case that 77 of these cases were resolved in December 2018, but the State Claims Agency is still awaiting on the Supreme Court judgment?
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
Does Mr. Breen have a date?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I call Deputy Murphy.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
I wish to raise the thalidomide cases. Obviously there is still activity in the courts about these cases. In respect of proven cases and the disputes, how does the profile of Ireland compare with other countries? Does the State Claims Agency keep an eye on that? Does that have a bearing on how one decides to handle similar claims?
Mr. Ciarán Breen:
Back in 2010, the then Minister for Health and Children asked me if I would produce a report on thalidomide generally, which I did, which was a comparative look on a cross-jurisdictional basis of how persons affected by thalidomide were treated by different governments in different countries. That report is on the website of the Department of Health. There have been significant issues in these cases in other jurisdictions. For example, because of a particular peculiarity, Diageo is involved in the UK cases. There was a very big settlement done many years ago in those cases. Diageo is clearly not involved in Ireland. There are differences between jurisdictions.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
The contingent liability has increased quite considerably. Does the SCA have a profile of roughly how long it takes to settle? I know it can be a case of how long is a piece of string, especially when one is depending on the courts. Departments and Government agencies ultimately have to fund the settlements. I presume that it is appropriate to the body concerned. For example, if it is in the health service, it will be the HSE. If it is a case in the Department of Transport, Tourism and Sport, it will be that Department that ultimately settles. Does the SCA tell them how much they have to settle for?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
In terms of the accuracy of their own budgets and how they capture this, how does that happen? Does the SCA give them a future assessment? What way does it work?
Mr. Ciarán Breen:
Yes, we do. We have an actuarial firm which carries out a very detailed look at our current data. The actuaries look at our settlement patterns, for example, things like the period from incident creation date to finalisation of claims. They have their own logarithms which tell them what they think the likely budget is in any particular year on a global basis. Obviously, the really big one here is the one for the HSE. We furnish that to the HSE on an annual basis. We say, based on what our actuaries tell us, what amount we think the HSE should set aside in terms of what will be required.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
With regard to the list of actions where there are groups of people affected in the same way - mass action as opposed to class actions - how many would be grouped if it was to be described as a mass action? How many claims would there be if they were to be put into a category like that?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
If there was a dozen-----
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
What about the list the agency has given us?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Are there many more like that?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Are the ones in the report the only ones Mr. Breen would describe in that way?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
What would the new ones be?
Mr. Ciarán Breen:
For example, there are 26 cases in regard to transvaginal implants. There is sodium valproate, which is a potential mass action. Where there is another abuser, there may be a set of claims which attach to him. We have Gardasil, which is the HPV vaccine, and we have Aulin, which is another medicinal product.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
In regard to the Air Corps, the agency has 21 active claims. Mr. Breen has not mentioned that.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
The State Claims Agency would have had an involvement in risk management. I received a reply to a parliamentary question from the Minister the State, which stated:
I am advised by the State Claims Agency that it has a statutory remit under the National Treasury Management Agency (Amendment) Act 2000 to provide risk management advices to Delegated State Authorities. ... [The] State Claims Agency conducted a number of Health & Safety Management System Defence Forces audits within the Air Corps between the years 2006 – 2015. The Reports are authored by the State Claims Agency and are confidential between the Agency and their Client [which is the Department of Defence].
What would the agency have looked at when it went out to do those assessments? Would it have looked at the paperwork, and would it have gone down to the level of looking at what equipment people are wearing to protect them or the environment they are working in?
Mr. Ciarán Breen:
The Defence Forces has put a safety management system in place, and this applies to all branches of the Defence Forces. We have worked very closely with them in that regard. On risk, our people on the ground, when they carry out audits, go onsite and they meet with the person who would have responsibility for safety and health in the particular barracks, battalion or otherwise. They carry out audits of things like, for example, what is being done about lifting and the safety standards in respect of that.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Would it have looked at chemicals, for example, where chemicals are sited or how they are handled? Would it have looked at the kind of things that would expose people to risk?
Mr. Ciarán Breen:
I want to explain the position in regard to the Air Corps because I believe it might be helpful in answering specifically what happened. We started our audits there in 2006. The particular exposure we are looking at in respect of the chemicals in the Air Corps is from 1972 to 2007. In 2007, the particular workshop which is associated with the alleged exposure was changed to a state-of-the-art facility. At no time-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Sorry to interrupt. A vote has been called in the Chamber on a particular amendment.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
I will stay here.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Thank you.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
The agency would not have looked at-----
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
I have been given a document, which I might have mentioned before, on the extraordinary age profile of people who have died in the Air Corps. The Air Corps is not a big employer and there have been 72 deaths at pre-retirement age, some of them very young. Of the 72, 14 or 15 are by suicide but others are in particular categories, such as cancers and cardiac issues. It seems a very dangerous place to work - I am sorry, I do not really mean that, but it seems to be a place where an abnormal number of people die prematurely. That would have jumped out to me as something that would make me question the risk. As Mr. Breen said, it goes back to a time prior to when the agency was doing its assessment. I understand there were no registers of this particular chemical available.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
I have the names of the-----
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
I am trying to find out how to mitigate risk and I am using this as an example. What I am hearing is that there still is not, or there was not in recent years, use of protective clothing and availability of a particular type of protective clothing when handling these materials. Would the State Claims Agency have looked at that, given it would have known the profile? Is the agency satisfied the risk assessment is mitigating this risk?
Mr. Pat Kirwin:
I head up the enterprise risk unit that would have carried out the audits.
When we go out, we look at the systems that are in place. We are back to that word, "systems", again. We sample as we go out. They are snapshots. One is only there for a particular day. We talked to the staff and the members of the Defence Forces who were available in the workshop. They are highly-trained, technical people. We came across no evidence of procedures or practices being carried out to anything other than the appropriate standards at that time.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
I understand that the Air Corps does not carry out mandatory risk assessments. Does the SCA not instruct particular organisations to carry out mandatory risk assessments? Is that not essential?
Mr. Pat Kirwin:
Absolutely. It is not only essential from the point of view of the agency's expectations, but it is also a legal requirement under the Safety, Health and Welfare at Work Act 2005. Again, that was not our experience. Ultimately the Defence Forces are responsible for the risks. When we originally worked with the Defence Forces they had risk assessments in place. In organisations as complex as the Defence Forces, the Naval Service, the Air Corps, and the Army, we are talking about thousands of different types of risk assessments. I cannot vouch for any particular risk assessment but, in general, the Defence Forces do have risk assessments in place.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Are they mandatory?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
What the does the SCA do? Does it visit, carry out the assessment, and give the Defence Forces a certificate? Is there a certificate for each year? Were there years in which they were not given a clean bill of health?
Mr. Pat Kirwin:
There are approximately 56 units in the Defence Forces. We cannot possibly audit every single one every year. We carried out approximately 100 audits between 2006 and 2015. An audit might be themed, that is, we might be looking at particular themes. For example, we may be worried about appropriate training documentation because that is something we have learned about from dealing with claims. We may have seen a number of incidents of a given type. For example, we may have seen particular injuries arising from vehicle crashes. For that reason we might look at that aspect of the system in particular. In general we look at roles and responsibilities, the structures that are in place, and the types of risk assessments and documentation that are in place.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Does the SCA work with the Health and Safety Authority on any of this?
Mr. Pat Kirwin:
No. We have worked collaboratively with the Health and Safety Authority to produce guidelines in respect of, for example, schools, critical incidents and stress management. We have a different role in this area however. It is a policing authority and enforces legislation. On the specific issue of chemicals in the Air Corps, we were involved with the Healthy and Safety Authority in the sense that, after going in and carrying out one of its inspections, it made some recommendations and advised the Defence Forces to consult with us in addressing those recommendations.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Did the Health and Safety Authority not threaten legal action over shortcomings in the use of chemicals?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
It is my understanding that it did.
Mr. Pat Kirwin:
I am not exactly sure and I would not like to speak on the Health and Safety Authority's behalf. I do know that it audited the Air Corps and raised issues. I am not sure of the level at which they were raised. We were active in helping the Defence Forces to address those issues to the satisfaction of the Health and Safety Authority.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
It is my understanding that the authority did threaten legal action. It seems extraordinary that one arm of the State may be doing so while another is giving the Air Corps a clean bill of health with regard to risk. That does not stack up in terms of mitigating risk into the future.
Mr. Pat Kirwin:
Again, I would have to know the specific details to comment but statutory legislation underpins the health and safety of our employees across the State sector and, indeed, all employees within the State. With regard to chemical safety in particular, there is a complex suite of legislation in place. There is legislation from 2001, 2007, 2010 and, most recently, 2018. In addition, there is guidance in that area. It moves. In other words-----
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
The SCA is not expert in all of this, so does it have to bring in people who are experts in a given area?
Mr. Pat Kirwin:
We are experts in this area. Members of our enterprise risk management team have backgrounds in engineering, science, public health, and nursing. Most have, at a minimum, a degree level qualification. Many have masters and some have doctorates. They are experts in various areas. We have expertise right across the main areas one would expect to encounter in dealing with employee and public safety. We are a very expert unit. We publish national and international guidelines. We are recognised as such.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
How many people work in Mr. Kirwin's unit?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Most of these people have professional qualifications. Are there administrative staff included in that 20?
Mr. Pat Kirwin:
There may be two administrative staff members included in that 20. The others have worked at very senior levels in the Defence Forces, the Health and Safety Authority, and other semi-State and private organisations nationwide, usually in some area of environmental or public health and safety.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Is there a bonus system or anything of that nature in the agency for mitigating risks?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Yes.
Mr. Ciarán Breen:
No, we do not. There is no kind of risk-pooling approach in the public service. That does not happen. Every year, however, we ourselves recognise individual State authorities in a ceremony we hold at one point in the year. We give certificates to authorities that have done something very particular to mitigate their risk, and which produce documentation to prove it, at an annual event.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
We saw some evidence of that the last time the SCA was before the committee. We could see serious progress with regard to slips and falls. That is to be commended. I am still not entirely clear what the SCA looks at when it goes out to such organisations to look at issues such as the handling of serious chemicals. Does it look at whether adequate equipment, such as gloves or clothing, is provided to reduce the risks? Does it evaluate risk at that level?
Mr. Pat Kirwin:
I fully understand that it is quite difficult to understand. There are thousands of risks in, for example, a large facility such as that of the Air Corps in Baldonnel. We have to be guided by what we see, for example, reported on the national incident management system. At no time did we see any significant level of reported incidents relating to chemicals. In other words, it was not flagged to us as a hotspot to investigate. Nonetheless, because, as I said, chemical safety is important in workshops, it is something we test. I use the word "test". In other words, we sample. On the day, we talk to people, we look at how the chemicals are stored, and we ensure the appropriate documentation is in place.
Perhaps I should give an alternative example. We did a very large job with the Defence Forces with regard to the guarding of machinery. We did so because there had been incidents of people being seriously injured because guards were not in place. We looked at a series of workshops. In that case, some workshops were closed down and some machines had to be retrofitted. That investigation proceeded machine by machine. We looked at it in detail because we, as a claims agency, saw it as a definite source of litigation risk.
The Deputy talked about the Health and Safety Authority. It will be guided by the statutory legislation. We obviously consider what we are particularly concerned about that could lead to claims. One of the indicators is whether incidents are being reported.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
On those cases, are they ongoing, settled or in dispute?
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
When mediation is possible for a group, but not necessarily the group in question, how does it happen? If there are a dozen cases coming in on something or other, does the agency wait for one case to be proven in the court? What approach does the agency take?
Mr. Ciarán Breen:
We do not have what in the United States and certain other jurisdictions is called class action, whereby a whole series of cases is taken at the one time, or for the group. Here a lead case will be chosen by a plaintiff's solicitor, and it will be agreed with us that it will be the lead case. We engage on that case in terms of our separate investigations. One can imagine that we are preoccupied with the question of whether the State has a liability. Where it does, we obviously want to settle at the earliest possible opportunity. One of the vehicles we might use for that is mediation, if it comes to that. Having settled one, we would be of the view that unless the other cases could be differentiated in some way, we should seek to settle them through incurring the best possible cost and as quickly as we could.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
On CervicalCheck, a couple of years ago we saw Vicky Phelan going public. If she had not done so, would others have realised they could have been affected in the same way? Is that used as a means of mitigating against damage done to individuals? I am referring to settling with what is known as a gagging order.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Yes.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Yes.
My last question relates to something that came up by way of correspondence. Somebody had written to us and advised us about the prison facilities or detention facilities. It might have been in Garda stations. We were talking about it earlier. I cannot remember the details.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
It was about glass blocks in the prison and Garda stations.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
Yes. The correspondence pointed out the risk, or potential risk, in design. Is this something the agency would look out for in terms of mitigating against risk, or does it give advice? It is a matter of trying to make sure claims are not presented in the future.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
It was very helpful that this person pointed out that there was risk by virtue of the design of the facility. Does the State Claims Agency have any role at all, even in giving advice, where people are particularly exposed?
Mr. Ciarán Breen:
Yes, if there were a risk to human health in any way arising from something such as design and it became obvious to us on a visit to the premises or, better still, if we had on our national incident management system, even one incident that might have been a safety incident, that would trigger a certain reaction from us in terms of how we would consider it and the advices we would give. We do that on a constant basis.
Catherine Murphy (Kildare North, Social Democrats)
Link to this: Individually | In context | Oireachtas source
We may well give the agency the information we got.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Bearing in mind the mass actions, particularly regarding thalidomide, Pandemrix and the vaccine that came out, who is responsible for the learnings from such historic events? I was trying to look up these events but I could not. The thalidomide issue arose around 1958. I had not time to look it up. The HPRA is now the body that authorises medicines in this country. When did it start? Was it the 1990s?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
How were drugs authorised before the HPRA was established? Hopefully Mr. Breen will know that answer. Did we just go with the UK?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Before the thalidomide matter, there must have been something.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The drugs advisory board was essentially a precursor to the HPRA.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The latter has international standing. What have we learned from the time in question, particularly regarding thalidomide? I am a chemist by profession so I am aware of how the thalidomide issue arose. The isomer changed and had a profoundly different effect. The regulations and hoops companies have to go through were really reinforced as a result of the thalidomide issue. The Swiss cheese theory, of things going through the gap, was mentioned. It opened a whole new regulatory process, which was very exciting for people like me but not very exciting for most people. That gives rise to greater safety. What have we learned from the thalidomide issue that will ensure we do not let the same thing happen again? I acknowledge it arose in a different era. I am referring, in particular, to the recent legislation introduced by the Minister for Health on access to medicinal cannabis, with the expansion of the compassionate access programme. Is the agency considering potential risks to the State seeing that it seems to have circumvented the HPRA's regulatory rules? Are we opening ourselves wide to another situation in the future if we circumvent the processes put in place? "Circumvent" is probably a loose word. I am referring to where processes might not necessarily be abided by 100%, bearing in mind what arose from the thalidomide issue.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
That it hits the agency.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Aulin was available in Ireland but not in the UK. I was actually working in the UK at the time. Are the learnings a matter for the Department?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
It was well documented in the UK that people were not to be on Aulin, and it was taken off. We seem to have been so far behind the UK in terms of our learnings. I am assuming Mr. Breen's answer will be the same as with thalidomide.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
It is the same answer but Mr. Breen is still the person who has to come in here and answer the questions as to why there is so much money being spent.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
In the case of Pandemrix, the emergency, the epidemic or potential epidemic – I believe it was swine flu – the State took on the liability associated with the drug. It had not gone through the trial process.
Does the Department have to provide the learning from that experience?
Mr. Ciarán Breen:
We obviously would contribute to that by reference to what we see and find. We would work with the Department and say these are the things that happened. The World Health Organization, WHO, called the pandemic on swine flu. There was an urgent search for a vaccine and the only two providers were Baxter with Celvapan and GlaxoSmithKline with Pandemrix. The issue for Ireland at the time, as I recall and as I have seen in the litigation, was how would we get our hands on sufficient quantities of a vaccine so that we would not have a pandemic in Ireland, and particularly for the more vulnerable categories of persons one would want to vaccinate.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The best effect of not going to the trial process is the cost. The question is about the effect on the children's lives and those of their families. Turning to claims against the State, 3% of people go to court.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The proportion of claims that are related to obstetrics and gynaecology is massive. Is it 60%?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
So, half of all-----
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Does the 50% encompassing obstetrics and gynaecology cover the claims of the mother and baby or is that figure only for mothers' claims?
Mr. Ciarán Breen:
Most of the claims procedure cases are maternity and obstetrics related. There potentially are two aspects to the claim. There is looking after the infant and that is the catastrophic injury claim that costs what it does. There is also often the trauma to the mother as a result of the birth.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Does the 50% for obstetrics and gynaecology cover the babies and the mothers?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
What I am getting at is why people do not go to court. I am all for mediation but are a disproportionate amount of affected women not going to court? Mr. Kelly and Mr. Lynch spoke compassionately earlier but the reality is that if a women suffers damage during a birth that has aspects of negligence, if she was to go to court, like the 221 women who were misdiagnosed in the CervicalCheck case, she would have to go to court and prove she was doubly incontinent and not able to have sex. To go into court and detail that publicly is something no one would ever want to do. Is the system weighted against women? I am trying not to be sexist but if a man hurt his knee, that would not be overly private. Think of a woman who has to go court and say she had fourth-degree tears and has had to wear a nappy since she was 30 and will have to keep doing so in the future. That is not an attractive place to seek justice as a woman. Is the amount of women with complaints related to obstetrics and gynaecology particularly low?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
That is a very general statement. I have spoken to women who have specifically said that they would never go to the court process because they do not want their wider family or the wider community knowing the intimate details of their lives as a result of medical negligence.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
There are such women. There is no "perhaps" about it.
Mr. Ciarán Breen:
It is open to a woman to ask a court to ensure her anonymity is preserved and that there is not reporting, for example, of a particular case. We generally find that, when we have such cases, our aim is always to spare a woman having to go into court and go through that. What we try and do in all of those cases, insofar as we establish liability, is to arrange as early a mediation as we possibly can and treat people with the dignity they are due. I agree with the Deputy that women should not be forced to go into court to make those kinds of very private declarations about their health.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
We want to spare women the court experience, as Mr. Breen said. There is a process preceding mediation. Consider the case of a woman who has an incident at birth and we will leave the infant out of the situation, we are only dealing with the mother. There are experts on the HSE side and the mother's side. I understand from the health committee meeting yesterday on the tribunal for the 221 women affected by CervicalCheck, there is a third layer of experts. I may have misheard the Minister, but the judge will have his or her own expertise. When we talk about sparing women, in practice a woman who suffers injury at birth and there is negligence must explain her entire case to her own legal people, medical people including psychiatrists, psychologists and everything else, and then to another equivalent group of experts for the defence on behalf of the HSE. We are not sparing women. That process involves manual and verbal examinations. We are not doing anything to spare women from the indignity of that sort of process. I understand why women would not want to seek justice because the current process is so invasive and intrusive. It is inappropriate to put women through that. An expert is an expert. Medical experts are bound by their ethics and their governing body. I cannot understand the need for two colorectal surgeons to examine a women's rectum to see how damaged it is. I do not know why we are doing that to people. Can Mr. Breen explain?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
It happens on both sides.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Everything is in duplicate. That is my point.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
We have had words about sparing women the experience of court. This is not sparing women.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
How often does that happen? I have never heard of that.
Mr. Ciarán Breen:
It has happened but I agree it does not happen often. Our difficulty is that unfortunately, our tort system is adversarial. Therefore a person has to establish that he or she has had damage and all the rest. We then must be in a position to say this is the injury, and the extent of it, if we are going to sign a big cheque.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I get that.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I get that we cannot be throwing money around willy-nilly. However, if someone is an expert, they are an expert. They should be impartial. One expert should do in this case.
Mr. Ciarán Breen:
The reality, unfortunately, is that experts sometimes differ. For example, we get life expectancy reports on children who are catastrophically brain damaged. The Deputy has no idea of the variation we get in those life expectancy reports. One would imagine that a life expectancy expert would say one thing and that everybody would be in agreement. That happens in an ideal world.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
That is more theoretical.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Assessing the physical state of someone's rectum is not as out there as that.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Let us pull back and consider a woman who has had an incident in childbirth that has left her damaged. She may also be dealing with a baby with a catastrophic injury. Does Mr. Breen think it is appropriate that the next thing we put her through is to prove how much she has suffered? That seems lacking, as a way of going about things.
I understand that there may be a large variation. For example, a lady might say that she cannot walk. In fairly clear-cut cases where there is actual physical damage as opposed to crystal ball stuff, that is, how long someone will live, and an expert in the field is already involved, however, why are we putting women through two lots of experts? In the case of the Scally tribunal, there could be three sets of experts. I am not saying that the women would undergo physical exams. Rather, I am referring to the process through which they will have to go. It seems a cruel way of dealing with the issue. I understand about protecting the State's money, but it is an unpleasant way of going about this.
Mr. Ciarán Breen:
Sometimes, there is reluctance on the part of the plaintiff's solicitor to share the report with us. Therefore, we find ourselves in a situation where we cannot do anything but have the woman examined, as we need to have our own report. The question of estimated liability and so on has been mentioned. If we did not have a report, we would be in danger of miscalculating the value of the case. If there has been an extensive or severe injury, we want to know that at the earliest date so that we can value the case properly. These are functional aspects of the tort system. I agree that it is not the nicest or easiest thing to happen, but it is part of the rigour of handling cases. Even where we do it as sensitively as we can, there is always a tension between what we do and how people feel about it.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Will periodic payments be introduced?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
How should that progress? Will it remain this way? In the case of a catastrophic injury to a child, would there be a payment now and the remainder would depend on outcomes and interventions? Are we moving towards that?
Mr. Ciarán Breen:
That is our preference. It is why we introduced the interim payments regime. We want to ensure that families do not have to worry about the future care of their children. A payment will issue annually, which will take care of all the care and other costs that a child needs without his or her parents needing to worry.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
The payouts have been discussed by this committee at length. They keep increasing. Is the proportion of the payout to the person versus the legal fee 50:50? That is my understanding. Is it a case of give and take?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Of the total claim.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
If we hear on the news that someone got a settlement of €1 million, does that mean that €230,000 to €270,000 will go to his or her legal people?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
In the ballpark of 25% to 30% of the money paid out in damages is for the legal people. Is the progression linear? The more someone gets, the more the legal people get.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I understand. What about in the case of mediation? What is the balance in ballpark figures? Going through the mediation process might be less adversarial for a woman and it seems to be preferable in most cases, but are the solicitors and senior counsels getting the same legal fees as they would were they before a court?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Mr. Breen mentioned the court, the Bar Council and the two senior counsels. Will he elaborate? How long ago was that and did he call it an agreement, chat or something else? How did that happen?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
That is all right.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
How long ago was that?
Mr. Ciarán Breen:
Approximately 25 years. Actually, it was 1986. As a quid pro quo, the Bar Council, by way of a protocol, agreed voluntarily that someone would only have to pay the cost of one senior counsel. The background to this was that, at the time, there was some outcry about legal costs being so high. This was the solution. That protocol operated very well up until the past three to four years, although I am guessing that time. We are now seeing two senior counsels appearing, particularly in clinical negligence cases, with bills for both. It used to be the case under the protocol that, if two senior counsels appeared,-----
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Just one would be paid.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
When did that practice change?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Has there been much mention of it? I had not heard about it until today.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Mr. Breen stated that this matter was discussed by the cost of insurance working group.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Are there soundings from that group?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
How long ago was it discussed by the cost of insurance working group?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
When Mr. Breen says it is being taken seriously, does he mean that everyone has a serious face or is something actually being done?
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Something occurred to me recently. If two children are born on the same day and one has a genetic abnormality while the other suffers a catastrophic incident at birth, an award of, for example, €40 million might be made to provide for the latter's care. The child born with the genetic abnormality might have the same needs, though. As someone working in the Oireachtas, it needs to be highlighted that, if one child gets the bungalow with rails and so on that he or she requires because blame can be attributed to the State or whoever and the other child, who was just born that way and no one is to blame, so to speak, does not necessarily get-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
A vote has been called, Deputy. I will explain to the witnesses what is happening. We will finish this session entirely in the next moment or so. If we can return immediately after the vote, we will take a final run through the periodic payments question.
We will do it very quickly because there is a debate on issues concerning wards of court in the Dáil shortly. We want to have our work completed before then. We will return immediately following the vote.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I just want to mention this. It is something with which I have an issue.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
Who is deciding which child born in this country, and a citizen of this country, is more deserving? I refer to where blame is being apportioned. One child definitely has a headstart.
Mr. Ciarán Breen:
I agree with the Deputy. It is an anomaly of a tort system which is fault based. It is necessary for someone to prove that there was fault. Damages are then paid. That is opposed to the situation of a child with a naturally born syndrome, of whatever type, which needs just as much care.
Kate O'Connell (Dublin Bay South, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I thank Mr. Breen.
Catherine Connolly (Galway West, Independent)
Link to this: Individually | In context | Oireachtas source
I have a quick comment for Mr. Lynch. I welcome the documentation I got from the HSE. When I was mentioning things from Galway, that was in a general manner for use as an illustration. It is fascinating and worrying when I look through that document. When we look at Staffordshire in England, despite all of the protocols and everything else being in place, it was the persistence of the complaints that had an effect and not the mortality rate or anything else. That is my experience in Ireland. Something happens if somebody persists. The second aspect was the extraordinarily high rate of patient falls. These account for 26% of all incidents recorded on the national incident management system. We have run out of time but I just wanted to make those observations.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I have one or two questions. We have only a minute or two left. As I mentioned, there is a debate in the Dáil this afternoon regarding issues concerning wards of court. Mr. Breen is familiar with that. We asked him on a previous occasion how much of the payments, approximately, that the SCA makes each year are to the Courts Service. A sum of €347 million was paid out. Was the figure approximately 50%?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Yes, but I am asking if Mr. Breen recalls that off of the top of his head because there is a debate in the House in an hour. I would be grateful if he could refresh the figure in my head before I go into the Chamber. Was it over 50%?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I do not need an exact figure now but it was substantial.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That was all I wanted to know. We are aware of that. I have two other questions. The last time Mr. Breen was here he also told us that the section 38 organisations have come within the remit of the SCA in the last year. Is that correct?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Will Mr. Breen send us a list of agencies and organisations with which the SCA deals? I am referring to a client list or whatever the correct term might be.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I ask Mr. Breen to send that on in due course. It does not have to be done now. The second thing concerns the general claims of €820 million. Can that be broken down by client list or would that be difficult? I know the SCA has such a list.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That is fine. As I stated, I do not want to do anything that would compromise the SCA's defence. I will just state that it would be interesting to know if perhaps there is an agency that attracted something like 100 claims. Other agencies might have fewer claims. Perhaps there might be a mechanism to group them, if there is a way to provide that information without compromising a defence.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Mr. Breen and the SCA can liaise with the secretariat. I ask him to give us some reply. He heard me earlier; I do not want to compromise the State's position by over-exposing what is being provided at this stage. Mr. Breen will understand my position.
I have some final points. I am interested in a figure regarding the settlements made by the SCA last year. I would like the figure for previous years. There is no need to go into the exact figures, it is just a general question. Let us presume settlements amounted to €347 million. What would the SCA have provided for in respect of the cases that were to be settled? Had the SCA allowed for perhaps €247 million or something closer to €547 million or what was provided for prospective settlements? How close was the SCA's estimate?
Mr. Breen is telling us what is accumulating. We are underestimating the costs and that leads me to ask how often does the SCA revalue its cases? Let us take the example of a case that comes in and all of the legal papers have been served. It is then adjudged that it is a case worth €1 million. As the months go by, however, more information may become available. Is there a systematic method in place which is regularly used to reassess cases when more information is received? Would a case then be adjusted to state that it might now cost €2 million in light of the new information received? Does the SCA adjust its overall figures and what is the mechanism for doing that? I am not looking for information immediately. Does Mr. Breen know, for example, out of the settlements made last year, what was the approximate provision before the outcome of those settlements?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
What scheme?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That is fine.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
In respect of the specific cases.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Has that been the pattern to over-estimate the provision each year?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is there a buffer in this €3.15 billion?
Mr. Ciarán Breen:
No. I will explain the reason to the Chair. If we look at the volatilities regarding periodic payment orders and whether people will accept interim payments or default to lump sums, our actuaries are always trying to factor in what might happen in that regard. They might get that absolutely right when they say that four or five cases will revert to lump sums. The outcome could be worse than that, however, and there could be eight or nine cases. There are volatilities inherent in the model and they are very hard to engineer out.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The job of this committee is to be satisfied that the SCA's provisioning is reasonable. The only way to verify that is by comparing the provision made to the costs of the cases settled. I accept that in some years that could be very much over or under, depending on the number of high cost cases that might come in a year. I ask Mr. Breen to give us the figures for the last five years. If we had those figures, we could then see over that five year period if the SCA has been under or over-providing. That will also be useful information for the SCA. I presume it may have it already. When this committee gets large figures, such as this €3.15 billion - I know they are audited - we as a committee have to be satisfied that we have verified the figures from our perspective as well. We have a duty to interrogate the figures. I think this is a simple way for us to interrogate the figures.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
No, I want the figure that the SCA had booked in the provision. I am referring to the figure that is now €3.15 billion. It was something like €2.6 billion or €2.8 billion last year. The SCA will have 10,000 cases, or whatever, with a value for each. How often are the cases valued? Is it once a year or is a monthly rolling system? How is it done?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
In other words, some cases could be valued three or four times over its history.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Will Mr. Breen send us a note on that?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I ask that because if we only see figures once a year we assume that they are only looked at once a year. It would give us a greater understanding to know that there is an ongoing review.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I ask Mr. Breen to send us a note on that issue. I understand but not all of the committee members are here. It would also be beneficial to put that on the record from the point of view of the SCA because this is such a major area for us. I have one last question on a different topic for Mr. O'Kelly. I forgot to ask him about it this morning. He can send us a note. It is in respect of the purchasing of carbon credits, which is a matter we are examining. I am referring to the statistical transfer arrangements in the context of renewable energy. Mr. O'Kelly need not answer this question now. The NTMA is the agent for the State to buy carbon credits. It has done that in the past.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Mr. O'Kelly might explain to us the market transactions undertaken. There are other funds called the carbon fund for Europe, CFE, and the bio-carbon fund, BioCF. I do not know what those mean. Mr. O'Kelly might send us a note on that. I know that the NTMA has been in the market for some of that recently. I ask that a note be provided on the role of the NTMA in this regard. I know it gets an instruction to buy them as the NTMA is the agent for the State. It is not making the decisions regarding what to buy, however. At this stage, Ireland has not yet purchased statistical transfers from other EU member states in respect of renewable targets. There will probably be a call to stand by those targets.
The NTMA must be monitoring that area because it might be called to action on it soon.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Yes, I am happy to take an answer now.
Mr. Conor O'Kelly:
We bought carbon credits at different times back in 2007 and 2008 for the 2020 targets, which will be missed. Those will be used against our targets and additional expenditure will be modest. Between €6 million and €12 million will satisfy all our obligations for 2020, along with the credits we have purchased.
Then we have the 2030 targets. No carbon credits have been purchased for the 2030 targets. It is very unlikely that the carbon credit market will even exist for sovereign countries so I do not anticipate-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
What does that mean?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
So countries will pay fines instead of spending money to avoid paying fines.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Rather than having the market-----
Mr. Conor O'Kelly:
Correct. The bilateral negotiations for 2030 will probably not happen until 2027 or 2028 so there will be no forward purchasing of carbon credits in lieu of possible future obligations. That whole business has kind of ended. I anticipate that the carbon fund will not exist in three or four years time.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
There will still be a mechanism for purchasing the statistical transfers.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We have a note from the line Department saying that in 2017, trades between Luxembourg, Lithuania and Estonia suggested a cost of the order of €22.5 million per percentage point. That was on renewable targets. They were bilateral agreements so that is allowed but there will not be an EU-wide market. Every country will have to do its own negotiations.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The facility will still be there but it will not be a market.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Countries will approach other countries.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That does not matter to an extent. A country may still have to buy the credits and spend the money.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Why will there be no more market transactions?
Mr. Conor O'Kelly:
The market for sovereign exchanges failed. There were not enough transactions in the market, it was too volatile and not enough countries participated. There is a market for carbon credits for utility companies, which is an active market that trades, but it is not available for sovereign countries to offset their carbon emissions in. The European Union changed its rules.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
On sovereigns, are commercial state organisations such as the ones we have in Ireland able to access that market, even though they are State-owned?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
As well as the private sector that is also in the energy production sector.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
The likes of the ESB could offset-----
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
I know this is outside Mr. O'Kelly's bailiwick but he might know a bit about it. Why would the ESB do this? Would it be doing it on behalf of Ireland or because it has its own plans and targets?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Is there much of this going on?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
On emissions?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Where does that fit into this?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
Do we normally look at that?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
What is the name of the fund?
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
In other words, that will be laid before the Houses in the coming days.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
We will try to note that for next week before we go.
Seán Fleming (Laois, Fianna Fail)
Link to this: Individually | In context | Oireachtas source
That is great. I forgot to raise that matter this morning in the earlier session. I thank our guests from the NTMA, the State Claims Agency, the Department of Finance, the Department of Health and the HSE for their attendance and for the information they provided for today's meeting and I thank the Comptroller and Auditor General and his officials for being here today.
Is it agreed to request the clerk to the committee to seek any follow up information and carry out any agreed action arising from the meeting? Agreed. Our next public meeting will be on 11 July when we will be meeting with the Houses of the Oireachtas Commission to examine its appropriation accounts for 2018. We will now suspend the meeting and recommence in private session immediately after the Dáil voting session to conclude our periodic report.