Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I am glad to have the opportunity on behalf of Fianna Fáil to speak to Second Stage of this Bill and to state at the outset that we welcome the broad thrust of this Bill and will be supporting its passage on Second Stage and will be considering appropriate amendments on Committee Stage. As the Minister of State knows, on a number of occasions, I have raised the issue of the lengthy delay in getting this legislation brought forward with him and the Minister for Finance. It was back in September 2011 when the Government first announced the establishment of a strategic investment fund so this Bill is very much overdue but I welcome its publication and the fact that we are finally getting to discuss it.

The NTMA has undergone a remarkable process of development since its original establishment in 1990 when Albert Reynolds followed through on a budget commitment to establish, under statute, an independent office for the management of the national debt. The impetus for its establishment was the fact that debt management had become an increasingly complex and sophisticated activity, requiring flexible management structures and suitably qualified personnel to exploit fully the potential for savings. Albert Reynolds also pointed out that with the growth of the financial services sector in Dublin, the Department of Finance had been losing staff that were qualified and experienced in the financial area and it had not been possible to recruit suitable staff from elsewhere. The then main Opposition spokesperson on finance, who I believe was a certain Deputy Noonan, said that the action by the Minister in setting up the NTMA was a fire brigade action arising from the fact that he could neither maintain in nor recruit to the Civil Service persons with the desirable level of expertise to manage the national debt. That was 1990 though and since then, the NTMA has developed from a single function agency managing the national debt to a manager of a complex portfolio of public assets and liabilities.

This Bill looks to rationalise and simplify the governance structures at the NTMA to enable a more integrated approach to the performance of its functions which have expanded significantly over the past 24 years. The agency will be reconstructed as a body with a chairperson and other members who will have overarching responsibility for the agency's existing debt management and State Claims Agency functions, its function in respect of infrastructure projects currently carried out by the National Development Finance Agency, NDFA, and the ISIF and NewERA.

There will be no change in the relationship to NAMA. Under this legislation, the NPRF will become the ISIF and in that regard, it will have a statutory mandate to make commercial investments domestically that sustain jobs and growth. We very much welcome this. It also has a role in the NewERA project and will be known as such in this regard and may also bring forward suggestions for investment in particular sectors of the economy. The Bill also establishes a legal costs unit within the State Claims Agency function to deal with third-party costs arising from certain tribunals of inquiry. Three years ago, we suggested leveraging private pensions and the NPRF as a means of supporting infrastructure investment. I know other Opposition groups have made similar proposals. The Government is now belatedly coming round to this idea. However, given its failure to deliver on existing promises, there must be considerable doubt over whether forthcoming announcements will actually produce the tangible benefit they have the potential to deliver.

When the Government announced in September 2011 that it would establish a strategic investment fund, we understood that the legislation would be brought forward quickly, which simply has not happened. While the merit of maximising non-Exchequer capital investment is universally recognised, the Government's plans lack ambition and are likely to be of limited impact as currently devised. In our pre-budget submissions in recent years, we have proposed a mandatory total investment of 1% per annum for the next three years from private pension funds and a matching investment by the NPRF from its discretionary portfolio. This gives a potential €4.2 billion for investment on a commercial basis in infrastructure opportunities, would be separate from the public capital programme and could complement the investments that will flow from the ISIF.

The size of the fund could be further enhanced by making investment in it available to regular savers in a manner similar to the national solidarity bond as well as additional market funding where available. Earlier this year, following a successful bond sale in which the NTMA raised funds under 3%, we called for consideration to be given for action by the NTMA to significantly reduce the current interest burden of the national debt.

Currently, for example, the average interest rate on our national debt is 4%. This is made up of both market and official funding under the EU-IMF programme. We pointed out that there are two options that the NTMA could consider. First, there is the option of an open market buy-back of some of the more expensive debt funded from either the cash reserve we currently hold or by issuing new debt at the current lower rates. Second, while the interest rate on our EFSF-EFSM funding was reduced and the term extended we are continuing to pay 4.1% on our loans from the IMF. Refinancing these loans at even 1% lower than the current rate would save us €225 million on an annual basis. We need to secure the agreement of the European Commission and the ECB for this to happen. Given the European authorities have stated that they wish to enhance the sustainability of the Irish economic recovery, agreeing to allow us pay off our more expensive loans would be a practical demonstration of this commitment and we call on the Government to pursue that option. It is essential that the Minister for Finance works with the NTMA to bring this about.

We also believe that savings that are achieved should be deployed to support investment in infrastructure and job creation. The importance of the Government and the NTMA maximising savings is also underlined by comments of former Taoiseach and Minister for Finance, John Bruton, who has spoken of the possibility of another ten years of budget adjustment. He cited the EU fiscal compact treaty, which commits us to reducing the debt-GDP ratio from 120% to 60% and highlighted the fact that the Department of Finance's figures showed that budget surpluses will have to be run to get the debt down. The Minister might indicate his assessment of Mr. Bruton's contribution to this debate. The NTMA in its May investor presentation is forecasting that the budget will be in balance by 2018. That is the year revenue and spending will finally meet, yet, if Mr Bruton is to be believed, there will be another six years of consolidation after that. We need to know the Department's assessment of his contribution.

Clearly we have to maximise growth over the next decade and with that in mind, it is vital that in making investments the focus must be on boosting Irish business and jobs rather than just generating profits for asset management companies in the private sector. We heard earlier this year of a fund to make €6.8 billion of commercial investments to boost Irish business and that 13 investments have been made by the entities into which the NPRF has put hundreds of millions of euro as part of its drive to stimulate the economy. The NPRF made cornerstone investments totalling €375 million in three entities with which it has partnered, respectively, and the funds have different objectives, with one focused on healthy businesses seeking to grow, another focused on underperforming businesses and a third on originating and acquiring loans to larger SMEs. The theory is that these funds will benefit the SME sector but sometimes it seems the fund manager will see the real benefit.

The State has a proud record of making investments which serve otherwise unmet economic and social need over a prolonged period. Companies such as the ESB, Coillte, Bord na Móna and Aer Lingus were pioneers in their time meeting critical needs in the country and at the same time providing employment and a significant return to the State by way dividends over the years. The aim for the ISIF should be similarly ambitious in terms of the needs of the 21st century. The ICT sector is one that offers particular opportunities for both an investment return and also significant employment benefit.

There is a huge need for capital investment in the economy. The investment component of GDP is the one that fell most dramatically by up to 60%. The private sector has not as yet, nor is likely to, be able to restore levels of investment to pre-recession levels. There is, therefore, an obvious need for the State to step in. The much vaunted 1,000 jobs a week growth in employment is beginning to tail off, according to the recent CSO figures; it is now not much more than 1,000 jobs a quarter. Every job that is gained is to be welcomed. The Minister may regret stalling on bringing forward this measure, as it is not likely to result in a practical benefit for more than 12 months, other than the raft of announcements similar to that which we had in the run-up the recent local and European elections.

Everyone agrees that the original intent with respect to the NPRF was a good idea - setting aside 1% of GNP annually to provide for public sector pensions from 2025. In the run-up to the last budget, we warned that the Government was ignoring major long-term issues such as future pension provision. While the Bill is welcome as an economic stimulus measure, a comprehensive plan is still needed to ensure the huge and growing future pension liability is met. The performance of the ISIF should be benchmarked against similar investment funds on an annual basis in order that we can make an assessment of how it is progressing.

The legislation establishes a legal costs unit within the State Claims Agency to deal with third party costs arising from certain tribunals of inquiry. In its role as the State Claims Agency, the NTMA also manages personal injury, property damage and clinical negligence claims brought against certain State authorities, including Ministers and health enterprises. It also has a risk management role, advising and assisting State authorities in minimising their claim exposures. Total legal costs for the agency increased by €3.6 million between 2012 and 2013. It had legal costs totalling in excess of €39 million in 2012 and almost €43 million in 2013. Those figures are inclusive of €21.9 million in fees to solicitors in 2012 to defend claims managed by the agency, which increased to €24.3 million last year. Public liability cases currently take an average of three years to complete, an increase from 2.4 years since 2011, while employer liability cases take 3.7 years, down from 4.1 years in 2011. Third party property damage cases take 350 days, up from 335 days in 2011, while clinical claims take an average of four years, up from 2.9 years. Clearly, the lengthy time period which it takes to deal with claims is contributing to the high legal costs that are being incurred.

While the Bill has no impact on NAMA, it is worth noting its annual report published this week. When we voted to set the agency up five years ago, there was enormous scepticism about its operation, yet it is clear now that it will fulfil its mission, hopefully ahead of target. The agency expressed increasing confidence that it will complete its work earlier than 2020, as originally envisaged. Subject to the outcome of portfolio and asset sales currently under way, it aims to have as much as half of its senior debt repaid by the end of the current year, two years ahead of schedule. As the chairman of the agency pointed out, this is an important achievement for taxpayers. NAMA paid €31.8 billion for the loans it acquired and €30.2 billion of this comprised senior bonds guaranteed by the State, which is a contingent liability on taxpayers. When the agency was set up, many expressed outright disbelief that it would succeed and claimed it could cost the State additional billions of euro but it is likely it will not cost the taxpayer additional money and may well generate a surplus over its lifetime. It must be acknowledged that when the agency purchased the loans from the banks, significant losses crystallised on their balance sheets and this gap was plugged by the vast recapitalisation of the banks by the State at the time. NAMA looks set to at least break even in the context of its own liabilities and that has to be welcomed.

When the late Brian Lenihan passed away, the Minister for Finance generously acknowledged that his predecessor had done the heavy lifting on the public finances and the establishment of NAMA and its success to date will be a positive legacy of the former Minister, notwithstanding the issues the agency needs to address in the context of, for example, improving the transparency in the way in which it operates. Along with others, I have raised many issues of concern regarding the agency's operations and will continue to do so but, overall, it is critically important for the State that the agency does well in its financial performance.

I refer to the Government's recently announced construction stimulus plan. It seemed to be little more than an election stunt.

In any case it contained neither measurable jobs targets nor any real measures to tackle the housing shortage. When one strips back the spin and takes a second look at the 75 actions in this document, it is plain that there are no details on how the shortage of new housing units will be addressed, there is no new investment in social housing and no apprenticeship scheme to help construction workers to qualify for new jobs in the future. Indeed, the document bore an uncanny resemblance to the lofty promises in the NewERA document of some years ago, which pledged to provide 100,000 new jobs. Three years later we are struggling to see any evidence that these jobs have been realised. Just as the job promises in the NewERA document evaporated in a matter of weeks, it is legitimate to fear that the 60,000 jobs promised in this document will suffer the same fate.

The plan promises investment of €50 million in social housing nationally, but Dublin City Council has been forced to halve its investment in social housing, reducing it by €40 million this year, due to budget cuts imposed by the Minister for the Environment, Community and Local Government, Deputy Hogan. If the social housing spend is down by €40 million in Dublin city alone, the new investment of €50 million in this document goes nowhere near what local authorities have already been forced to cut from their social housing budgets.

We support this Bill. We believe in intervention by the State where there is an investment vacuum. However, we must be both ambitious and careful in how we act. That is a balance which is often difficult to achieve. I reiterate my concerns about pension funding into the future. Allied to this are projections for a massive jump in the number of Irish people over the age of 85 years and all that entails for care budgets. While this Bill is welcome as an economic stimulus measure, we still require a comprehensive plan to ensure that the huge and growing future pension liability is met.

My final point relates to the directed portfolio within the NPRF, which includes our shareholdings in Bank of Ireland and AIB. Will the Minister address that point further in his reply to the debate? Is it still the intention of the NPRF to sell those shareholdings to the European Stability Mechanism, ESM, as part of any retroactive recapitalisation deal concerning the Irish banks? It is important that the Government clarify the role it sees itself playing for State companies generally in the future. Currently, it appears to view the commercial semi-state companies as a cash cow to plug the gap in the State's finances, not as a long-term asset to be protected and nurtured.

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