Fergus O'Dowd (Louth, Fine Gael) | Oireachtas source

I move: "That the Bill be now read a Second Time."

First, this legislation will establish the Ireland Strategic Investment Fund, ISIF. This is one of the key elements of the programme for Government and the medium-term economic strategy published last December. The ISIF will take over the assets of the National Pensions Reserve Fund, comprising some €6.9 billion in the discretionary portfolio at the end of the first quarter of the year, to be used for commercial investment in the economy to support economic activity and employment and some €13.3 billion representing the directed investments in the pillar banks, together with related cash balances.

Second, the legislation will put NewERA, New Economy and Recovery Authority, on a statutory basis. The core role of NewERA is to provide financial and commercial advice on commercial semi-State bodies for shareholding Ministers. NewERA's role also involves, where requested, advising on the disposal or restructuring of State assets. In addition, it works with relevant stakeholders to develop proposals for investment in energy, broadband, water and forestry projects. It has been operating as a business unit within the NTMA and the Bill defines that function in legislation.

Third, the legislation will restructure the corporate governance of the NTMA and its associated entities. The Bill will streamline and simplify the governance structure of the agency and its associated entities which are now relatively complex as a result of the assignment to it of additional functions since it was first established in 1991 as a single function agency responsible for funding and debt management. The reconstituted agency will be directly responsible for funding and debt management, the Ireland Strategic Investment Fund, NewERA, the functions of the National Development Finance Agency, NDFA, and the State Claims Agency. There will be no change in relation to NAMA which will continue with its own board and to which the NTMA will continue to provide business services and staff.

Fourth, the legislation will put the Legal Costs Unit within the State Claims Agency on a statutory basis. The NTMA is known as the State Claims Agency when dealing with claims against State agencies. The Legal Costs Unit deals with third party costs such as those arising from the Mahon and Moriarty tribunals of inquiry, with the aim of minimising the financial exposure of the State and achieving significant savings for the Exchequer.

The Bill comprises seven Parts and four Schedules. Part 1 deals with the preliminary and general provisions, including the Short Title. Part 2 contains provisions relating to the governance structure of the agency. I trust Deputies will bear with me while I set out as clearly as possible the current governance structures in the NTMA.

The NTMA was established in 1991 under the National Treasury Management Agency Act 1990 to borrow on behalf of the Exchequer and manage the national debt. The agency was established outside normal public sector structures, with operational freedom to negotiate market competitive salaries. Information on these salaries is available in the annual report. This business model was designed to enable the NTMA to compete with the private sector and attract and retain specialists in mid-career who would not normally be attracted to working in a public sector environment.

Subsequently, a number of additional functions were assigned to the NTMA. As with debt management, these were also commercial and market-facing functions where the agency's business model gave it the flexibility to attract and retain staff with the necessary expertise and experience.

The agency took over the management of personal injury and property damage claims against the State in 2000, and is known as the State Claims Agency when doing so.

The National Pensions Reserve Fund was established in 2001. The agency is the manager of the fund. The National Development Finance Agency, NDFA, was established in 2003. Its role is to provide financial advice to State bodies undertaking major public investment projects and to procure and deliver public-private partnership projects in sectors other than transport and local authorities. It also procures non-PPP schools on behalf of the Department of Education and Skills. It acts through the NTMA.

The NTMA, acting through its NewERA unit, provides advice to shareholding Ministers in regard to commercial semi-state bodies. The NTMA also provides staff and business and support services to NAMA. Turning to the governance structures underlying these functions, the NTMA does not have a board, although it does have an advisory committee whose role is to advise on matters referred to it by the agency. The chief executive is directly responsible to the Minister for the performance of the functions of the agency. The chief executive reports directly to the Minister on the NTMA's funding and debt management, State Claims Agency and NewERA functions. To that extent, the agency is more like a Department than a State agency.

The NTMA is responsible for claims management and risk management on behalf of State agencies and is known as the State Claims Agency when doing so. A committee advises on policy and procedures in regard to that work.

The NPRF, the NDFA and NAMA - all of which were established under their own governing legislation - all have their own boards. The NTMA acts as the executive in respect of the NPRF and the NDFA. It assigns staff to NAMA and also provides it with business and support services and systems. The NTMA chief executive is an ex officio member of the NPRF commission and the board of NAMA and is ex officio chairman of the NDFA. A director of the NTMA acts as CEO of the NDFA. The NTMA has a number of other functions, such as providing a central treasury service to State agencies and managing various funds, but these are not affected by this Bill.

That is the current position. The agency has carried out the functions it has been assigned with skill and dedication. The governance structure under which it operates has become unwieldy and complex, as my speech indicates. As we put NewERA, the ISIF and the legal costs unit on a statutory footing, we are taking the opportunity to simplify and streamline the governance structures of the NTMA to ensure it is governed in a way that reflects best practice and that will assist it in working in an integrated manner towards the achievement of its objectives.

The legislation will convert the agency into a body with members, effectively a board. It will have nine members in total, six appointed by the Minister for Finance, serving a five-year term, and, ex-officio, the chief executive officer of the NTMA, the Secretary General of the Department of Finance and the Secretary General of the Department of Public Expenditure and Reform. The Minister for Finance will nominate one of the appointed members as chairperson. All these people will have to have specialist skills and knowledge in the areas in which they are operating.

The reconstituted NTMA will continue to be directly responsible for the borrowing and debt management functions, as well as the State Claims Agency and various other functions such as the central treasury service, just as it is now. In addition, it will now be directly responsible for the Ireland Strategic Investment Fund and NDFA functions, rather than acting on behalf of other statutory bodies, and it will have NewERA.

No changes are proposed to the existing arrangements in respect of NAMA. NAMA will continue to have its own separate board and the existing arrangements whereby the NTMA assigns staff to NAMA and provides business and support services, including HR, IT, market risk, finance, compliance and treasury services, will also continue. On foot of the changes outlined, the NTMA advisory committee and the NDFA and its board will be dissolved, as will the State Claims Agency policy committee. The NPRF commission will also be dissolved as soon as practicable.

Turning to the detail of the governance changes, section 8 of the Bill amends the NTMA Act 1990 to provide that the National Treasury Management Agency will be a body with a chairperson and other members. The members will in effect form a board that will be responsible for oversight of the agency and will report to the Minister for Finance. As I mentioned earlier, there will be nine members, with six appointed by the Minister, in addition to the chief executive of the agency, the Secretary General of the Department of Finance and the Secretary General of the Department of Public Expenditure and Reform. The Minister may appoint as members only persons with expertise and experience at a senior level in a number of specified areas, such as investment, treasury management, economics and accounting. The Minister is required to ensure that there is an equitable balance between men and women, as far as practicable. The chair of the agency is appointed by the Minister.

Section 8 inserts a new Schedule, Schedule A, into the NTMA Act 1990. This sets out the detail in relation to the members of the agency. Appointments will generally be for five years, but the term of office of the initial members will be staggered so that they do not all end at the same time. This is in the interests of continuity. A member may not serve more than two consecutive terms of office. Terms and conditions of appointment will be set by the Minister for Finance. The Schedule also contains ancillary provisions, covering such areas as disqualification from office and filling of vacancies. Any remuneration of board members will be published in the annual report. There will be total transparency.

Section 9 inserts a new section 3B in the NTMA Act 1990 to provide for the procedures of the agency, the detail of which is set out the Schedule. This sets out rules for the quorum for meetings, electronic meetings and the seal of the agency. The agency will be able to hold incorporeal meetings and pass resolutions by majority without a meeting. This sort of flexibility is essential for an agency which has a central role in the financing of the Exchequer in order to allow speedy decision-making.

Section 10 inserts new sections 5A and 5B in the NTMA Act 1990 to establish an investment committee, which will be a committee of the agency and, under the authority of the agency, will be responsible for the investment of ISIF, and allow the agency to establish other committees, respectively. The investment committee will have up to seven members, two members of the agency and up to five persons who are not members of the agency but who have substantial relevant expertise and experience and are appointed with the consent of the Minister for Finance. The chair of the investment committee will be a member of the agency and will be appointed by the agency.

Section 11 amends section 6 of the NTMA Act 1990. It sets out the role of the chief executive, reflecting the reconstitution of the agency and the change in reporting relationships. The chief executive will be appointed by the agency with the consent of the Minister for Finance.

Section 12 inserts new sections 6A and 6B in the NTMA Act 1990. They provide for the chief executive to appear before the Committee of Public Accounts of Dáil Éireann and for the chairperson and chief executive to appear before other Oireachtas committees, respectively. There will be direct accountability to the Oireachtas in that context.

Section 13 effectively updates section 10 of the NTMA Act 1990 so that members of local authorities, as with members of the Oireachtas and European Parliament, may not be employed by the agency. If an employee of the agency becomes a member of a local authority, the Oireachtas or the European Parliament, he or she will stand seconded from the agency.

Section 14 amends the provisions concerning the accounts of the agency pursuant to section 12 of the NTMA Act 1990 to take account of the new structures. The accounts are to be signed by the chief executive and an appointed member of the agency. The chief executive will be the officer accountable for the agency.

Section 15 inserts new sections 13A and 13B. These sections cover the disclosure of interests by members of the agency and committees of the agency and members of staff of the agency, respectively.

Section 16 inserts a new section 13C which provides for the indemnification of members of the agency, members of a committee of the agency, members of staff of the agency and members of the National Pensions Reserve Fund Commission, where the agency is satisfied that duties have been discharged in good faith.

Section 17 replaces section 14 of the Act, covering the disclosure of confidential information. It updates the existing provision to take account of the new structures proposed for the NTMA and developments with regard to the disclosure of confidential information since the NTMA was established. The existing provision is very strict: it is an offence for a person to disclose information obtained in the course of carrying out his or her duties on behalf of the agency. The new section is more nuanced. It will continue to be an offence to disclose, without the consent of the agency, information obtained while performing functions on its behalf. This is essential, given that staff of the agency will have access to information which is very sensitive commercially. However, it will not now be an offence to disclose confidential information in certain circumstances, including disclosure to the Minister for Finance or An Garda Síochána where the information may relate to the commission of an offence. These qualifications to the legislation mean that there is a route available for individuals who believe they should raise issues outside the confines of the agency. Given the pivotal role of the agency in financing the State, while sensitive commercial information is protected, it is also essential that individuals should be able to bring justifiable concerns to an outside authority without risking committing an offence.

Part 3 deals with the New Economy and Recovery Authority, NewERA, which is already up and running as part of the NTMA, providing financial and commercial advice on certain commercial semi-State bodies for shareholding Ministers. This part of the Bill puts NewERA on a statutory basis. The idea behind NewERA is that it will help to oversee the financial performance, corporate strategy and capital and investment plans of commercial semi-State bodies. It will provide a dedicated source of corporate finance expertise for Ministers taking a commercial approach to the oversight of semi-State companies, with an emphasis on return on capital. It will also work with stakeholders to develop structures and proposals for investment in energy, broadband and water projects to support economic activity and employment. Its role will also involve, where requested, advising on the disposal or restructuring of State assets.

The NTMA will be responsible for the performance of the shareholder advisory functions and known as NewERA when performing these functions. Section 18 sets out the designated commercial semi-State bodies on which the agency will provide advice. These are the ESB, Bord Gáis, Bord na Mona, Coillte Teoranta and EirGrid. The Minister for Finance, after consulting the NTMA, the Minister for Public Expenditure and Reform and relevant shareholding Ministers, may add other State bodies to the list by order. This enabling provision will allow other shareholding Ministers to benefit from NewERA's commercial expertise.

Section 19 defines what NewERA does. It provides financial and commercial advisory services on request for Ministers in respect of the commercial semi-State bodies within its remit. This covers advice on a wide range of issues: a Minister's statutory role, exercising rights as a shareholder, the governance of a semi-State body, expected rates of return, dividend policy, corporate and investment strategy, acquisitions and disposals, as well as appointments and the remuneration of directors and the chief executive. NewERA will also be able to provide project management services and for oversight of acquisitions and disposals and restructurings, at the request of the Minister.

The Minister for Public Expenditure and Reform will have power to give directions to NewERA on the performance of its functions. He or she must first consult the Minister for Finance and any relevant shareholding Minister. This mirrors the ministerial power of direction over other NTMA functions. Any such direction must be published.

An important aspect of the role of NewERA is that it is required, under subsection (4), to have regard to the effective and efficient application of capital by commercial semi-State bodies taken as a whole. The point is that commercial semi-State bodies should not be looked at in isolation, one from another. Rather, a portfolio approach should be considered with a view to optimising the deployment of capital.

Section 20 provides that the agency may provide financial and commercial advisory services, as well as project management and advisory services, in regard to other bodies and assets if requested by the Minister with responsibility for the body or asset.

Section 21 requires NewERA to submit a report on the financial performance of each of the commercial semi-State bodies within its remit to the Minister for Public Expenditure and Reform and relevant Ministers each year.

Section 22 provides that the agency, in consultation with relevant Ministers, may develop proposals for investment to support economic activity and employment in energy, water, telecommunications and forestry projects. The Minister for Finance, having consulted the Minister for Public Expenditure and Reform and other relevant Ministers, may specify other sectors by order. A successful example of work in this area was NewERA's work with the Department of Communications, Energy and Natural Resources on the recently announced launch of the €70 million national energy efficiency fund backed by London and Regional Properties and Glen Dimplex.

Section 23 requires Ministers to provide NewERA with the information it requires to carry out its functions. Ministers must have regard to the advice provided, but this does not constrain them in any way.

Section 24 provides that NewERA is to establish procedures for seeking and providing advice, in consultation with the Minister for Public Expenditure and Reform and relevant Ministers. The protocols agreed will streamline interactions between the agency and Departments and ensure NewERA will achieve its full potential.

Part 4 gives the agency responsibility for the role currently carried out by the National Development Finance Agency, NDFA, in regard to infrastructural projects. The NDFA was established on 1 January 2003 under the National Development Finance Agency Act 2002 to provide financial advice for State authorities on capital projects over a certain size - at present €20 million. It also procures and delivers PPPs other than in the transport and local authority sectors. As I said, it is currently a stand-alone corporate body which discharges its functions through the NTMA. It is proposed that the NDFA and its board be dissolved and its functions be assigned directly to the agency.

The two National Development Finance Agency Acts of 2002 and 2007 are repealed by section 6 and this Part, in effect, restates the provisions of these two Acts in so far as they relate to the NDFA's functions, with one exception. The 2002 Act provides that the NDFA can borrow and advance moneys in respect of infrastructural projects, but this power is being removed because the revised rules on Government accounting treatment, as issued by EUROSTAT in February 2004, deemed such transactions to be "on" the State's balance sheet and, consequently, this provision was never used.

Section 25 defines terms used in this Part. Section 26 gathers together the functions of the NDFA under the National Development Finance Agency Act 2002, the National Development Finance Agency (Amendment) Act 2007 and the Education and Training Boards Act 2013. These are as follows: providing advice on the optimal financing of public investment projects for State authorities which are defined in Schedule 3 to the Bill and which broadly mean Departments and non-commercial semi-State bodies; providing a specialised procurement delivery function in respect of PPPs, with the exception of road and rail projects, for which the NRA has responsibility; and providing a procurement service in respect of non-PPP schools on behalf of the Department of Education and Skills.

Section 27 provides that the agency shall have regard to policy directions and guidance issued by the Minister for Public Expenditure and Reform to State authorities on the financing of public investment projects and PPPs. Section 28 provides that a State authority shall seek the advice of the agency before undertaking a public investment project, subject to guidelines that may be issued by the Minister for Public Expenditure and Reform. Section 29 provides that the Minister for Public Expenditure and Reform may specify State authorities, in other words, bodies which the NDFA can advise.

Under section 30, the NDFA recoups its costs from the State bodies for which it provides its services.

Part 5 establishes a legal costs unit within the State Claims Agency function to look after costs awarded by tribunals of inquiry. Part 5 sets out the detail of how the agency is to operate when managing claims for costs. The Government will delegate to the agency claims in respect of specific tribunals. The National Treasury Management Agency (Amendment) Act 2000 and subsequent delegation orders delegated to the NTMA a range of functions in respect of the management of personal injuries claims, including bullying and harassment and third-party property damage claims, and their associated risks, against specified State authorities. The agency is known as the State Claims Agency, SCA, when performing these functions.

The SCA has already started to advise on costs awarded by the Mahon tribunal on planning matters and the Moriarty tribunal on payments to politicians. Setting up the legal costs unit within the SCA is being done to minimise the State's exposure and deliver significant savings to the Exchequer as it is recognised that third-party costs represent the major portion of the costs of tribunals. These costs are awarded by the tribunals and their amounts are drawn up in retrospect. The legal costs unit will provide specialist advice in this area and will assess and-or challenge third-party costs claims in order to ensure the costs to the Exchequer are reasonable.

Sections 31 and 32 define terms used in this part. Section 33 provides that the agency will manage delegated claims for costs to ensure that costs and expenses are contained at the lowest level achievable. Section 34 empowers the Government to delegate the management of claims for costs to the agency. Section 35 specifies that when managing claims for costs, the agency will do so on behalf of the Attorney General. Section 36 sets out the arrangement which will apply in respect of the payment of legal costs and professional fees. The agency will make such payments out of advances from the Post Office Savings Bank Fund and will subsequently recoup the amounts from the relevant State authority.

I will now move on to Part 6. In September 2011, the Government announced its intention to establish the Strategic Investment Fund, which formed part of the programme for Government published in March 2011. The intention is that the Ireland Strategic Investment Fund, ISIF, will channel its resources towards productive investment in the Irish economy and leverage its resources with private sector co-investment and target investment in areas of strategic significance to the future of the Irish economy. Part 6 of this Bill establishes the ISIF. The ISIF will replace the National Pensions Reserve Fund, NPRF, with a mandate to invest on a commercial basis in Ireland so as to support economic activity and employment. The NPRF was established in 2001 as an investment fund to build additional resources to support the Exchequer from 2025 onwards when it was projected that the burden of social welfare and public service pensions would have increased significantly. The NPRF is controlled by the NPRF commission. The NTMA is the manager of the fund and is essentially responsible for investing the NPRF as approved by the commission. In 2009, amending legislation was introduced to allow the Minister for Finance to direct the NPRF commission to recapitalise the banks in order to support the banking system. These are called the directed investments. The value of the NPRF holdings in Irish banks together with related cash balances was €13.3 billion at the end of March. The value of the fund's other investments was €6.9 billion at the end of March. This is what we call the discretionary portfolio which is managed and invested by the NPRF commission.

While the State must continue to be aware of the future budgetary implications of social welfare and pension obligations, fostering economic activity and employment in Ireland is a greater priority in the current circumstances and the resources of the NPRF should be redeployed accordingly. As the Minister for Finance has stated, the best way to ensure that the State is in a position to meet its future obligations is to ensure the economy is growing. The ISIF is to be invested on a commercial basis. This will put the fund in a position to leverage its resources by attracting private sector co-investment, recycle its resources in order to make more strategic investments over time and ensure the public assets entrusted to the fund are not frittered away. The primary point of the exercise is to enhance economic activity and increase employment in Ireland which in turn will support the Exchequer.

The agency will be responsible for setting the overall investment strategy for the ISIF. When determining and reviewing the strategy, the agency must consult the Ministers for Finance and Public Expenditure and Reform, who may consult other Ministers, and must have regard to their views.

See this speech in context