Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

My next point is that Fianna Fáil also believes the current Government agreed to a conversion of the Irish Bank Resolution Corporation promissory notes into long-term bonds, the non-payment of which would result in a sovereign default, that is, were there to be any default in those payments. This is the first time, legally, that this debt was copper-fastened on the backs of the Irish people. I acknowledge that my party, when in government, had nationalised IBRC at that time. It subsequently has been liquidated but at that time, the debt was not formally copper-fastened on the body of the Irish taxpayer but on a State organisation. State organisations have come and gone and have welshed on debts in the past. I note it has been stated by some Members opposite that the essence of any market transaction is that one borrows money and one pays it back. In other words, one pays the debts, but I wish to digress in respect of the IBRC promissory notes and the Government bonds that have replaced them.

The legislation introduced in this Chamber some months ago by the Minister, Deputy Noonan, on the liquidation of IBRC and the appointment of a special liquidator resulted in a State body welshing on its debt and on its bonds. I have raised this issue in the Chamber previously. This legislation was drafted by the Minister and his officials months in advance. It was agreed with the KPMG special liquidator, Mr. Wallace, and simply was sitting in the top drawer for several months. While I acknowledge it was rushed through the Dáil in a single night, it was not rushed legislation but had been in place for months. It had been prepared and planned for months and the consequences of that legislation were known in advance to the handful of people who were involved in its preparation. Members only knew about it and had an hour or two to deal with it here in the Chamber. However, I wish to provide Members with one example concerning a State body and IBRC. While the latter was afraid to welsh on its bondholders, it welshed on its own bonds.

As for the bonds to which I refer, I am looking at the impact of that decision here that night. Members are learning of the impact on housing estates that have been left unfinished by developers, who themselves have gone to the wall. Developers take out financial bonds to ensure that estates can be finished if they go out of business before the job is completed. All Members are familiar with this process. However, all bonds held by IBRC are no longer being paid out and this is causing huge difficulties. Local authorities now face the impossible choice of leaving estates unfinished or taking money from other services to pay for the cost of finishing road surfacing, drainage, water, sewerage works and street lighting in certain estates. The Minister knew what he was doing on the night he liquidated IBRC, namely, that local authorities would be left out of pocket as a result of that decision. People may not be fully aware of this but IBRC, like all major financial institutions, had issued bonds to developers. The councils had accepted these bonds as part of their planning conditions, that is, if the developer in question went bust, the financial institution would honour the bond. I will provide an example of which I am aware in County Laois. The Quinn group had issued bonds to several developers in County Laois and when that group went into administration, those bonds were honoured in full because it was continuing to trade. However, as soon as IBRC went into liquidation, those bonds were no longer being honoured and some work the council had expected to be done in estates through the bond mechanism cannot now be done. This was a direct result of the Government decision and those concerned must have known about this on the day in question. Moreover, these bonds were put in place as part of a planning condition and this is no idle issue, as four estates in County Laois have bonds in place that were from IBRC, ranging from €87,000 in one estate to €354,000 in another.

In all these cases there will be a call on some of these bonds to complete the work. This will not be possible because IBRC no longer exists as the Minister chose to liquidate it. I asked the Minister if he would put in place special arrangements. He gave my request short shrift. During the Topical Issue debate he informed me that the special liquidators and the departmental officials had met on several occasions with officials from the Department of the Environment, Community and Local Government. They are aware the problem exists in several counties. The Minster stated these bonds will rank as an unsecured creditor for the purposes of liquidation, in other words, that the local authorities are at the end of the list of creditors and the Minister will not honour the bonds that were issued by a State body to complete estates in various counties. The Minister is not being upfront with the truth. He said that throughout a liquidation process it has to be acknowledged there are, unfortunately, unavoidable costs. This cost was avoidable because he could have put measures in place to deal with it. He asked for a full report from all Departments. I call on the Minister to honour the IBRC bonds.

The Government must be awarded full marks for its PR spin on selling the new arrangement. It has stated the new arrangement will have reduced the State's cash borrowing requirement by €20 billion over the next ten years. The notion there will be a saving in the short term is juvenile economics. It is like a bank spreading a client's debt over a longer period, charging more interest and the client will pay back every penny owed plus more interest. The client will pay more than was owed but the bank will go easy for the first couple of years. The Minister successfully sold that arrangement to the people as a good deal. It is a bad deal because it increased our debt. I do not understand how it was regarded as a good deal. The Government fooled a lot of people for a long time-----

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