Dáil debates
Thursday, 25 September 2008
Priority Questions
Pension Provisions.
3:00 pm
Kieran O'Donnell (Limerick East, Fine Gael)
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Question 3: To ask the Minister for Finance his intentions regarding funds held by the pension trustees of certain non-commercial State sponsored bodies in view of his letter proposing a full guarantee of pensions by the State and a transfer of funds; and the way the transfer will be accounted for in terms of general Government borrowing in 2009. [31745/08]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Discussions are in train with the trustees and administrators of the funded pension schemes of the five older universities and certain non-commercial semi-State bodies, SSBs, which have funded pension schemes with a view to providing consistency and clarity for the future in terms of meeting the liabilities of the schemes. This follows consideration some time ago of the pension difficulties facing those universities by a working group under the Higher Education Authority, which recommended such discussions. The background is that all funded schemes must now meet minimum funding standards under EU law unless they are covered by the State. This has presented problems for the universities and non-commercial SSBs with funded pension schemes where the State ultimately carries the liability but where this is not clear enough to warrant exemption under EU law. In that context, and provided all the schemes concerned agree, it is proposed that the assets of those schemes would be transferred to the State with the liabilities, which would then be effectively met effectively by the State on a pay-as-you-go basis in the future. The terms and conditions of the schemes would be neither better nor worse than what the members would be entitled to anyway. If agreement is reached, legislation to give effect to the proposal would be required.
I am informed that the estimated value of the assets of the funds in question at the end of 2007 was in the region of €2.3 billion but this will have changed in the interim and is subject to market fluctuations. As regards the impact on the public finances, under current EUROSTAT rules the transfer of the assets would impact positively on the general Government balance, GGB, when received. This initial revenue would be offset in the future by the payment of pension benefits which would be recorded as Government expenditure at the time of payment. The effect on the GGB when the assets are received is clearly identified as being once off in the national accounts and the underlying GGB is, therefore, still unaffected.
Kieran O'Donnell (Limerick East, Fine Gael)
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The Minister is proposing creative accounting. I want an assurance that he will not use the proposal as a mechanism to borrow further. Will he confirm that the transfer will have a positive impact on the general Government balance of €2.3 billion?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It will have a positive impact.
Kieran O'Donnell (Limerick East, Fine Gael)
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Does that mean the Government will borrow an additional €2.3 billion over what it would borrow if it was not able to transfer the funds?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Borrowing plans are not being formulated in light of the existence of this fund. The details of the borrowing in which we will have to engage next year are a matter for the Budget Statement but, as far as this matter is concerned, discussions with the relevant institutions are at a preliminary stage. I am sure Deputy O'Donnell has noted from my reply that a difficulty exists in EU law which must be addressed. The position of the Exchequer in regard to the payment of these pensions in the future is cost neutral. We may have to engage in an exercise involving the consolidation of the existing assets of the colleges with the Exchequer or other relevant designated parts of the public financial system under the direction of my Department.
Kieran O'Donnell (Limerick East, Fine Gael)
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I find it incredible that as the budget is less than two weeks away the Minister has not yet decided the level of borrowing. He speaks about instilling confidence in the economy but he cannot answer a straightforward question.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That is a complete misrepresentation.
Kieran O'Donnell (Limerick East, Fine Gael)
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It is not a misrepresentation. This runs contrary to his advice to the private sector in terms of properly funded pension schemes. He is taking over assets and unquantifiable liabilities. Will the pension liabilities he is taking from the semi-State non-commercial bodies be put under the management of the National Treasury Management Agency? Will he give us an assurance this is not being used as a mechanism to enable the Government to borrow recklessly while appearing to satisfy the EU's general borrowing requirements?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As I made clear to Deputy O'Donnell in my first supplementary reply to this question, discussions on this matter are at a preliminary stage. It is not my practice or, indeed, the practice of any previous Minister to disclose the borrowing plans that may be disclosed in the Budget Statement and I do not propose to do so at this stage. I have pointed out to the Deputy that plans in regard to this matter are at a preliminary stage and will involve discussions and legislation which will be distinct from the Finance Acts. I cannot comment on the matter in the context of the budget.
Kieran O'Donnell (Limerick East, Fine Gael)
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Is the Minister introducing it as part of the general Government plans for the 2009 budget?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I cannot comment on what will be in the budget. I have stated that the matter is at——
Kieran O'Donnell (Limerick East, Fine Gael)
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Is it your intention——
Brendan Howlin (Wexford, Labour)
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Allow the Minister to respond.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I will not disclose the budget this afternoon.
Kieran O'Donnell (Limerick East, Fine Gael)
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You are indulging in creative accounting.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am saying that the matter is under discussion with the relevant parties and this will take time and will require separate legislation to advance.
Kieran O'Donnell (Limerick East, Fine Gael)
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The €2.3 billion will not be coming in this year.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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May I finish my answer?
Brendan Howlin (Wexford, Labour)
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I ask the Deputy to allow the Minister to respond to the question.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In regard to the suggestion of unquantifiable liabilities on foot of any decision that may be taken on this matter, these will in any case accrue to the State because it assumes liability for these pensions in practice. The allocation of assets that may accrue as a result of any decision that may be made will be determined by the Government in due course.