Seán Sherlock (Cork East, Labour)

I propose to take ten minutes.

The Bill is being presented to us against a backdrop of an announcement today that AIB is to write off €1.8 billion in bad loans for 2008. The Minister is asking the House to support a Bill that will recapitalise that same bank to the tune of €3.5 billion. That is laudable but only if it results in provision of credit lines to businesses and borrowers in general.

The Labour Party must critically assess the proposals brought before us in the Bill. As I understand it, €4 billion of the National Pensions Reserve Fund's current resources will be used as part of that recapitalisation, out of the total of €7 billion. Bearing in mind that the global markets are not touching Irish stocks currently, I wonder whether that is a wise move and whether the methodology the Minister proposes in the Bill is not without its flaws.

We are told by the Minister that he has consulted widely with financial and property experts in drafting this Bill. I would like to know who were those financial and property experts. I become a little afraid when I hear of Ministers taking the advice of property experts given the culture we have been used to in recent years. I would like to know the nature of that advice and whether there was an alternative advice to that on which he has based his Bill.

For example, what was the alternative advice, if any, on devolving more power to the Minister with regard to directing the National Pensions Reserve Fund Commission "to make investments in such institutions and to underwrite their share issues"? Such a concentration of power must be questioned and the Minister must tell us whether there is scope for this power to be abused. It is a theoretical question but in terms of the enactment of a law it is worthy of answer by the Minister in his reply.

For instance, if the Minister determines, for political expediency, that an investment should be made in a specific financial institution, and if the NPRF determines that this is contrary to any responsible investment policy, it is powerless to act against such a move. My understanding is that the responsible investment policy is one of the key components underpinning the governance of the National Pensions Reserve Fund. Furthermore, investing such powers in the Minister bypasses this House and any scrutiny we may wish to pursue in this regard. I would like the Minister to address that point when replying to the debate.

In his contribution the Minister told us that the State will get a direct return for its investment. In the current climate, and in the context of AIB's write-down of €1.8 billion today, it is difficult to envisage any return to the taxpayer any time soon. I understand that if we take the long-term view an alternative view could be argued but the fundamental principle underpinning the National Pensions Reserve Fund is the responsible investment policy. That is a stated policy that gives rise to the need to meet the cost to the Exchequer of social welfare pensions and public service pensions to be paid from the years 2025 to 2055.

On the face of it, the Bill should, ceteris paribus, yield a return to the Exchequer over a long-term period if a number of assumptions are taken. If we assume there is no restructuring of the banking regime in this country within that period of time, that is, that no banks will merge or there will be no rationalisation or consolidation of banking, then it is reasonable to assume that the taxpayer will see a return on his or her investment but I question the Minister's strategy in that regard. That we invest with the possibility of a return is fair enough but the manner in which the Minister has pitched the proposed return on the investment speaks to me of an ill-thought out strategy that allows the banks to dictate the terms by which they will be recapitalised and not the people, through the National Pensions Reserve Fund, whose moneys will be used for this purpose.

The Minister proposes to get a preference share with a fixed dividend of 8% or ordinary shares in lieu. I would like the Minister to explain the reason he is proposing to take preference shares in the first instance instead of ordinary shares. If the Minister is buying preference shares with a fixed dividend at today's prices, what will be the total yield to the National Pensions Reserve Fund if those shares are bought back by the bank within the five year period? I understand they have a provision to do so or they are allowed to do so. It seems to me that the Minister has allowed the banks a provision to buy back shares within the five year period at today's prices.

I question the validity of such a strategy and wonder if it would have been more expedient for the taxpayers' money, through the NPRF, to be used to buy ordinary shares. That would have been a more responsible strategy. If the two banks report losses within the next five years, what will be the status of the 8% yield on those preferences? Also, what will happen to the yield? If there is a return of 8%, where will that yield be invested? Will it be awarded to the NPRF?

I would also like to know what the Minister means, in layman's terms, when he states that he will allow the commission to set up a special purpose investment vehicle. Notwithstanding that I have a degree in economics, I admit with a degree of humility that I do not have a clue what a special purpose investment vehicle is. When we are writing legislation in this House, and if we are using taxpayers' money to underpin a strategy of recapitalisation, we must have it set out to us in clear terms what exactly that means. If the Minister is to be given devolved powers and if we are setting up special purpose investment vehicles, we must know for exactly what purpose they are designed and, if there is a return on such a vehicle, the nature of that return and how those investments will be pitched. Will they be for philanthropic purposes? Will they be a sop to our learned friends in the Green Party? Will there be a sustainable element to those vehicles? What will be the nature of those vehicles? The people are entitled to know that and it must be set out clearly in any legislation that is brought before the House.

I wish to address some points made by Deputy Gogarty. I do not mean to be personal in my response to his contribution earlier but I wish to state for the record that I have never taken a bribe or a red cent from any corporate entity, except through a fund-raising race event I held whereby local companies bought in to a race night I ran when I was raising funds to try to get elected to this House. There is a desire by Deputy Gogarty to impugn certain Members of this House and develop a language that states that we are not credible to critically analyse any measure that comes forth from this Government in respect of any tract of legislation because somehow our respective parties in opposition are dirtied by the fact that they may have taken corporate donations. I wish to state for the record that I have never taken corporate donations in that sense of the word.

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