Tuesday, 24 March 2009
It is only appropriate, on the day that is in it, that the House should take note of the outstanding sporting achievement of the weekend — the winning by the Irish rugby team of its first Grand Slam for 61 years. The House will agree that it should pay due tribute and give due credit to Declan Kidney, Brian O'Driscoll and all those associated with the victory. I was one of the team's supporters in Cardiff, in a cauldron of sound, on what was a momentous occasion for the green jersey brigade. I say "well done" to them. I also compliment Bernard Dunne on his fabulous individual performance in winning the world super bantamweight title, matching Barry McGuigan's achievement of 24 years ago.
It is possible to contrast that level of euphoria with the despair, fear and confusion of many families, caused by personal circumstances such as unemployment, which stands at over 350,000 and is rising by 1,000 a day on occasion. Those who are being charged interest rates of over 20% on personal overdrafts are genuinely and absolutely fearful for the futures of their families. They are being asked to make huge upfront payments — €40,000, €50,000 or €60,000, in some cases — to change from fixed-rate mortgages to variable-rate mortgages. Many of those whose houses have not yet been repossessed are fearful about the possibility of their houses being repossessed.
We are aware of what is happening with a small number of individuals in financial institutions. They have thanked the Government and the taxpayer for the guarantee that now applies to the financial institutions by engaging in disgusting behaviour. On occasions, they have literally shown the finger to the taxpayer. I understand that one of the gentlemen in question has secured an obscene defined benefit pension. He was awarded a bonus of €1 million after the legislation to guarantee the financial institutions was passed by this House.
I hope the Taoiseach is aware of the extent of the anger on the streets about this issue. People are absolutely appalled that this should be allowed to go on. The Minister for the Environment, Heritage and Local Government, who once more is not present in the Chamber, has said that this position is untenable and that it cannot go on. The Minister for Foreign Affairs has said that a request has been made for a sum of money to be paid back. The Green Party has given its view. The Tánaiste and the Taoiseach have been quite trenchant from the beginning. What will we get at the end of all of this? So far, we have got a statement from the Minister for Finance saying that there will be an investigation and that another report will be published inside a month. It is always the same, another report.
I ask the Taoiseach to clarify for the House what is the position of the Government in so far as Irish Nationwide Building Society is concerned, and on the return of a €1 million bonus paid subsequent to the guarantee legislation going through the House, which is certainly outside the spirit of the law. I ask the Taoiseach to inform the House of what he intends to do about this in the immediate term so that we will not have another situation where all we are left with is a response from the Department of Finance and the Minister for Finance, another report, another investigation, and will have to wait another month and hope it will blow over.
That is not the purpose of the statement. The purpose of the statement is to indicate the Minister's intentions on this matter. He had discussions last evening with the two directors of the Irish Nationwide Building Society, INBS, appointed by him to promote the public interest, Mr. Adrian Kearns and Mr. Rory O'Farrell. These directors were nominated by the Minister on foot of the Government guarantee scheme and they met the Minister with the knowledge and consent of the board.
The Minister has asked the two directors to convey to the board of Irish Nationwide Building Society his view that the board and management team must be reviewed having regard to the current market position, the plans of the society and the appropriate mix of skills for the future of the society. The Minister has indicated that he will invite the board to brief him next week on its plans for the society, including the review of management and board personnel.
It is the Minister's view that recent disclosures on the remuneration of the CEO of the INBS require investigation. The Minister has conveyed to the board that any such investigation must be carried out by the two directors appointed to promote the public interest and he expects the report on the outcome of this investigation within one month. What that means, of course, is that he wants the facts established as to the circumstances in which this matter arose so that we can see what precise action can be taken.
Deputy Kenny will be aware that the committee established by the Minister for Finance reported at that time that no bonuses should be paid in institutions which are covered by the guarantee scheme. We need to see what way that can be assured in this case and what has been happening by reason of the actions he is now taking.
The fact of the matter is that a €1 million bonus has been paid to the individual concerned. That is not in doubt. When the Taoiseach states he wants to establish the facts, that is the principal fact. A bonus of €1 million was paid after the legislation went through this House. Last October when speaking on this Bill, I made the point that following the enactment of this legislation no bonus, no dividend or other moneys should be paid to any individual without absolute clearance from here.
In fact, Deputy Bruton put down an amendment to the financial guarantee Bill to that effect, that payment of dividends, bonuses and other moneys should be restricted, as appropriate, that might in any way limit the rebuilding of the credibility and the capital base of the financial institution involved. The Minister for Finance responded to that amendment by stating: "Financial institutions as a whole in Ireland, both domestic and those in the Irish Financial Services Centre, need highly experienced, skilled and expert people to succeed."
That is true and there is no denying it, and what happened here is absolutely where highly experienced, skilled and expert people did succeed in establishing one particular fact, namely that a €1 million bonus was paid out after the legislation went through this House.
The Taoiseach was Minister for Finance when we debated the nursing homes Bill here. As Deputy O'Dowd dealt at the time with the range of elderly people who were frightened and terrified in their health institutions, the Government, because it wanted to do it, was able to put through legislation as a principle and make it retrospective. The amendment tabled for Fine Gael by Deputy Bruton was to the effect that no dividend, no bonus or any other moneys should be paid to individuals in this regard. If it was possible to bring legislation before the House and make it retrospective where elderly people were concerned and frightened out of their wits about being charged for their stay in long-stay institutions, the same principle should apply now. The Taoiseach has one undisputed fact, that a €1 million bonus was paid. If he wants to follow the same principle, the amendment tabled by Deputy Bruton on behalf of Fine Gael is as relevant now as it was then. If the Taoiseach wishes, on behalf of the Government, I will give him time to make this amendment to the legislation. Then he will have authority, if he does not have it already, to take back this money that was paid out as a bonus.
Is the Taoiseach prepared to consider that? Is he prepared to take swift, appropriate and decisive action now and not have us waiting for another month to establish what we already know, namely, that a bonus of €1 million was paid out after the legislation went through here in a case that people find appalling and obscene? At a time when people are losing their jobs all over the country, where they fear that their houses will be repossessed, where they are being penalised with in excess of 20% interest on personal overdraft facilities and where they are being asked for huge amounts of money to change from fixed to variable mortgages, it is not fair and it is not just. This is not the kind of country that we need. The Taoiseach is in charge of the Government and he should act decisively now, and I will support him on that.
The Government will explore all options available to it based on the facts to be established. It is a question of whether this was an arrangement that was entered into before the State guarantee scheme was brought into play; what authorisation there was for it by the board; in what way it was in the interests of the society that such an arrangement be made; and in what way were the fiduciary duties of directors discharged in that respect.
The Government is quite clear on the matter. The Government has put out its position regarding the question of remuneration for senior bankers or for people in building societies and we have already indicated the salary caps that should apply. What we are saying here on this particular matter is that the Minister, using the public interest directors he has appointed, will ensure that he gets to the bottom of this issue in terms of the circumstances that apply to it and decide on that basis what are the legal avenues available to him and what way can it be arranged that that issue can be dealt with satisfactorily. That is what he wishes to do to allay the public concern.
First, I join with Deputy Kenny in congratulating Bernard Dunne on winning a world title and the Irish rugby team on winning the Grand Slam. As I watched the final moments of the match on Saturday on television I could not help but wonder how well Ireland does when it gets a change of manager.
The Minister for Finance was in London on St. Patrick's Day telling the assembled gathering that the Government would crack down on crony-capitalism in Ireland. The Labour Party warmly welcomes that. There are certainly a few cronies on whom one could crack down. We have Mr. Fitzpatrick, who is known to his cronies as Seanie; Mr. Fingleton, known to his cronies as Fingers; and now a Green crony, Mr. McCaughey, who, of course, has legally avoided the payment of capital gains tax by the convenient means of transferring the shares to his spouse who then transferred herself to Italy for the best part of a year to qualify as a tax exile. I want to ask the Taoiseach a couple of questions arising from these.
On Mr. Fingleton, like Deputy Kenny, I was surprised at the statement which has just been issued by the Minister for Finance which effectively states that the Minister will take a month to investigate what remuneration was paid to Mr. Fingleton. It is already in the public domain that Mr. Fingleton paid himself a bonus of €1 million after the guarantee scheme came into effect. Taxpayers who await the worst of news on budget day, which is less than a month away, will want to know whether the Government will recoup that and how such a bonus could be paid after the guarantee scheme came into effect when we were told the Government had given itself very considerable powers to exercise control on these institutions.
What Mr. McCaughey did was perfectly legal; that is the problem. Can the Taoiseach give some assurance to the taxpayers of the country, who are likely to be hit with further tax increases in the budget, that this arrangement concerning tax exiles will be ended once and for all? People are scandalised that this type of arrangement can be entered into, that if one is wealthy enough and has good accountants one can get around tax liabilities while PAYE workers and businesses which are trying to keep going have no escape.
The Minister for the Environment, Heritage and Local Government, who appointed Mr. McCaughey as chairman of the Dublin Docklands Authority, said he is "one of our most successful green entrepreneurs and in the past decade has shown clear leadership on issues including regulatory reform [and] sustainable business practices". Does the Minister still have confidence in Mr. McCaughey as chairman on the Dublin Docklands Authority?
This morning the Minister for Finance informed the Government of his intentions to ensure the public interest directors are given the opportunity exclusively to investigate the circumstances in which such a bonus payment was paid in the Irish Nationwide Building Society. The mandate given to them was to do so within a month. He has also indicated that the members of the board will come to see him within the coming week with a view to examining the situation as he believes the board and management need to be reviewed and changed in view of what has been happening. Upon establishment of the facts we are as determined as anybody else, working within the legal means available to us, to see how the Government's intent and policy on the payment of bonuses to people in covered institutions is respected and implemented.
I am aware of the report on the second matter, which was aired this morning and the Deputy will appreciate that I cannot comment in any detail on individuals' tax affairs. These are matters between the individuals concerned and the Revenue Commissioners. As a result of cases that have come to the attention of the Revenue Commissioners involving transfers of assets between spouses and the use of reliefs provided under tax treaties with other countries, changes in the capital gains tax legislation were introduced in section 75 of the Finance Act 2006. That amendment of the principal Act removed the exemption of gains on transfers between spouses in such cases. Arrangements undertaken before the Finance Act 2006 are the subject of litigation and it would be inappropriate for me to comment further on them. The Revenue Commissioners will continue to hold the view that requires it to pursue these matters in respect of those arrangements prior to enactment of the Finance Act 2006 through litigation. When this matter came to the attention of the Revenue Commissioners, its recommendation was adopted in finance legislation and arrangements prior to the Finance Act 2006 are the subject of litigation.
When the Minister for the Environment, Heritage and Local Government appointed the individual concerned as chairman of the Dublin Docklands Authority, was he aware that these matters were already under consideration by the Revenue Commissioners and that they had given rise to the change in legislation the Taoiseach described? I do not understand why the investigation of the payment to Mr. Fingleton has to take a month. When the United States Government discovered very big bonuses were being paid to people in AIG, it did not take a month to deal with it. Taking a month here means deferring a decision until after the budget and Easter, and putting it into Never-Never Land where matters under investigation are overtaken by other events.
On 30 September 2008 Deputy Burton proposed specific amendments to the bank guarantee legislation to the effect that caps should be placed on the remuneration given to the top people in financial institutions. The Minister for Finance assured her that there were sufficient powers in the Bill he presented to deal with any eventuality of this kind. Section 5 of the Act provides that "The Minister may, in respect of any difficulty that arises in the operation of this Act during the period of two years ... make regulations to do anything that appears necessary or expedient". The Act goes on to provide that in circumstances where the institutions concerned do not comply with such directions and rulings by the Minister for Finance, he could withdraw the financial support and guarantees given to these institutions.
The Minister for Finance has the power to require that these bonuses be repaid and to ensure that whatever other steps to deal with it are taken. Why are we waiting a month for this? Facts are easily established. What payment was made? When was it made? Who authorised it? Was any clearance sought from the Minister or Department of Finance or the Financial Regulator? Was it cleared by the board? It does not take a month to establish these facts. This must be dealt with speedily because the public, which is being asked to shoulder the burden of the difficult economic circumstances, needs to have it addressed before the budget. The international financial markets, which do not look very favourably on this country or our banking and financial system, need to see that our Government is dealing with this quickly. The Government should not be looking for a report in a month's time when it might be considered and dealt with on a méar fada basis. The Taoiseach should deal with it quickly. The power to deal with it is in the legislation and there is no justification for delaying for a month.
The statement makes clear the matter will be addressed within a month. In the meantime, apart from meeting with the public interest directors, the Minister will meet the board and existing management within the coming week and has outlined his views regarding the Government's arrangements in the building society for the future. He has indicated that the public interest directors alone will investigate this matter on his behalf and the public interest directors have the confidence of this House so to do in a way that will ensure an outcome that will comply with the legislative intentions of this House and within the law.
The question arises as to whether in fact a bonus arrangement was agreed by the board in respect of the chief executive concerned which predated the enactment of the State guarantee legislation. That issue must be established as well as the circumstances in which, if that were the case, it happened and, third, what legal options are available to us as a result. This can only be established on the basis of facts to be obtained by the public interest directors. It is a question of ensuring that we proceed in the proper fashion and make sure we achieve an outcome the Government is as anxious as anyone else to see, which is the return of the bonus concerned.