George Lee (Dublin South, Fine Gael)

The way the Minister has described the use of the special purpose vehicles, SPVs, which came like a rabbit out of a hat in terms of the legislation, has taken many people aback. It is clear from his description that they were not mentioned in the legislation because a view from EUROSTAT was required to indicate whether that option would be accepted as an off-balance sheet vehicle. I can understand why the Minister did not include that reference in the legislation until he got the approval, as he would have had to amend the Bill if EUROSTAT did not give the measure the go-ahead.

That highlights one of the significant issues about the Bill, namely, the murky nature of special purpose vehicles in terms of clarity. I know it is not intended to be a murky thing but in terms of trying to understand its impact on the legislation it becomes a little confusing. That highlights the extent to which people will perceive an element of trickery in what we are doing, namely, trying to bury a large amount of borrowing on the back of a State guarantee in a manner which for accountancy reasons will be treated in a different way. We all know that it is State borrowing one way or the other but for accountancy reasons some excuse has been made.

The working of the special purpose vehicle is the most remarkable aspect of it because it will be a majority privately owned legal entity with €51 million invested by private entities. The most peculiar aspect of it is that those private entities, in investing their money, will accept to remain silent or to do what the Government would wish in terms of their involvement with the special purpose vehicle so that NAMA would have a veto. That makes one wonder about the kinds of people who would invest money in the special purpose vehicle. The Minister said in the course of the debate that he might expect pension funds to invest money in the special purpose vehicle. One can understand that he would probably like pension funds to invest their money in this special purpose vehicle, because to date pension funds have not done much in terms of asking any difficult questions, especially when they were looking after people's investments, investing much of our savings in banks and never asking questions about how those banks were run. I have no doubt they would be nice and silent in terms of their involvement in this special purpose vehicle, if required, but it poses a difficulty in that pension fund managers can change.

The ownership of a pension fund management company can change over a period of time. The extent to which many big financial companies are sold, merged or get taken over by an international body is significant. We are living in a time when there is an enormous amount of upheaval in financial circles. We do not know what the future will entail in terms of ownership of any particular financial entity or any fund management organisation. If it transpires that fund management organisations are ideally suited to be the private sector investor in the special purpose vehicle, as the Minister indicated he would welcome, they have an obligation in terms of the management of their funds to the people who have invested those funds. It is not beyond the bounds of possibility that one day someone will make those pension fund managers sit up and take notice, ask questions and do more in terms of living up to their responsibilities about where those funds are invested. 9 o'clock

It is conceivable that we might start off this process with the likes of Irish Life, which might be a welcome investor for the special purpose vehicle. Over a period of time, however, it might be taken over by somebody we do not know, and a person who is an investor or who has his or her funds invested through Irish Life might be very uncertain and unhappy about the performance of those funds, begin to ask questions, put the company under pressure and in doing so change the policy whereby it remains a dummy or quiet regarding its involvement in any investment decision relating to shareholdings for which it is responsible. It is possible that over a period of time the investors whom the Minister thinks will be well behaved in the beginning will, by 2010, have changed significantly in terms of their ethics, culture or rates of return.

As a result, one does not know about conflicts of interest. There will be an enormous amount of information involved in the special purpose vehicle and in any involvement with it. NAMA will be the biggest property management company on earth. To the extent that it is in possession of assets of such potential value, there will be many people who would like to have an insight into the information there. Over a period of time it is conceivable that the people involved in the silent part of the investment element of this special purpose vehicle might change the nature of what they do and why they are there. For that reason, it is important to provide in the legislation for regulations and rules relating to membership and operation for the people who would be on the board of the special purpose vehicle.

This special purpose vehicle is being given an enormous gift. It will be, as legally described and as accepted by EUROSTAT, an entity that is majority privately owned. It will issue bonds which will have a Government-backed guarantee. The entity is not paying a penny for that guarantee. It is a special purpose vehicle which will, the legislation states, aim to make a profit. It will do so on the back of a Government guarantee which, under any other circumstances, a government would sell or cause the users of that guarantee to pay a fee. I can understand why the Minister has the structure in such a way that it will operate as he has described, but the public will see it as the use of a huge public good, that is, the enormously valuable public's guarantee, for absolutely no charge. It will be used to build profits for a special purpose vehicle, a legal entity which is designed to maximise those profits and get a return. The public will become very unsure with regard to how that works, and who is making the profits and why, on the basis of an enormous gift. The public will feel it is unfair to be taken for granted like that.

To allay the public's fears it is important to make provision in the legislation for some form of protection. This would say, in effect, that we understand there could be concerns about the operation of an entity such as this and, to allay those concerns, we have provided in the legislation for rules, regulations and determinations about who, how and when an individual might qualify as a suitable person to be on the board of the special purpose vehicle. The public deserves that reassurance. It has been let down enormously by the Government and regulation in terms of the losses it has suffered in its investments, the collapse in the banking system and the consequences of that collapse. It deserves reassurance in the current uncertainty.

Nobody has a definite template for how to get out of our current situation; there is no guarantee that the NAMA rescue plan will work. The Minister knows that as well as Members on this side of the House. There are huge risks, huge uncertainties and huge concerns. In that environment, the public deserves some form of reassurance that, to the extent possible, rules and regulations will be provided for the operation of this vehicle, given that it is perceived to be such a small part of the NAMA operation. However, it is the little things that can trip one up, as has been said so often in politics and elsewhere. It is reasonable, therefore, to make the case for this amendment.

The other striking issue about this proposal so far, and it again drives home the need to give the public as much reassurance as possible, is the fact that I know, as the Minister and anybody who knows anything about banking knows, that when banks collapse or there is a collapse in the banking system there is an enormous cost and, in most cases, a degree of that cost falls on taxpayers. However, nowhere in what has happened so far has there been an open acceptance that this is what the Government is doing. It produced a blueprint in the form of a draft business plan for NAMA and how it will operate. The figures that are produced suggest it will make a profit. It is possible that the Government feels it must present it as such because it is so difficult to tell people the truth, that NAMA will make a very significant loss. It is not because the Government wants it to make a loss but because it appears to be the law of the economic jungle that when banking systems collapse, there are big losses and when it falls on the taxpayer to bail them out, it is the taxpayer who suffers many of those losses. I do not believe there is any economic literature anywhere in the world which will tell one anything different.

Given that truth, it is extraordinarily odd that the Government would produce a blueprint which suggests that a profit could be made. Nobody who has looked at those numbers and who has any insight into accountancy, banking or economics thinks that the figures in the draft business plan will add up. The plan is presented as if it will not be a loss to the taxpayer but the reality is that the assumptions, particularly the one about recovering 80% of the bad loans over a period of time, are fanciful.

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