Billy Timmins (Wicklow, Fine Gael)
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Question 61: To ask the Minister for Finance the projects he hopes to finance by way of a new pension bond; and if he will make a statement on the matter. [19035/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It is premature to identify specific projects that may benefit from any additional investment in infrastructure by pension funds. I note that we are spending a considerable sum on capital this year, some 5% of GNP, one of the highest ratios in the world. This supports a substantial level of employment, while the reductions in tender prices mean we can do more with less.

Nonetheless, the Government is prepared to examine new ways to fund needed capital investment and support activity and employment in the construction sector provided the terms are right and in the taxpayer's favour, the investment makes economic sense, value for money is secured, and the private sector shares the appropriate level of risk such that there is not a disproportionate impact on the public finances.

If possible, I wish to see moneys currently invested abroad put to work in Ireland if a sensible, workable proposal emerges. My officials have actively engaged with representatives of the pensions industry and other interested parties to discuss alternative funding proposals. These discussions have focused on the possible sources of additional funding and on what steps would be required to access such funding. Several meetings have taken place and further meetings will be arranged in the near future.

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister indicated in the supplementary budget that this was something he was hoping to develop. It would seem that some six weeks later little progress has been made because he is still referring to frameworks, he is unable to specify anything and he says everything is premature. Does the Minister believe this is a genuine starter? Does he believe this will be off balance sheet such that it will not form part of our borrowing requirement? Has the Minister identified the nature of the projects under consideration? Will it include school building, hospital building or roads? Will there be a requirement for a matching revenue stream? Will leases be entered into by the State to honour it? The House requires a little more elaboration because the Minister indicated a commitment to this during the budget speech. However, a considerable amount of time has passed and meetings have taken place. We must learn a little more of the detail.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The protection of the taxpayer and our borrowing capacity arises in this case. The crucial issue in any bond issue is the rate of interest which accrues, a matter of considerable sensitivity having regard to our general borrowing requirements. The advantages of accessing additional funding for infrastructure investment are clear. Infrastructure investment helps to create jobs. Although the employment impact of construction projects varies, research conducted in this area suggests that a range of between eight and 12 direct jobs are created for every €1 million invested in infrastructure. The directing of additional private sector investment towards infrastructure will boost our public capital stock.

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister is simply repeating the last answer. He is not even reading the supplementary answer.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It will support efforts to increase competitiveness and raise economic growth. My Department and the NDFA, National Development Finance Agency, are working closely together in exploring this area. A working group has been formed involving not only my Department and the NDFA but also the Central Statistics Office which has provided very useful advice.

Richard Bruton (Dublin North Central, Fine Gael)
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Give us a clue.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I point out to the Deputy that simply achieving an off balance sheet solution or status for projects is not the main driver in our capital investment decisions. As I am often remind by Deputy Bruton, the priority must be to achieve value for money and protection for the taxpayer. That is my priority as the Minister for Finance and it is the priority of the Government. Given the difficult budgetary circumstances we face, we are mindful of the need to minimise the State's exposure to additional Exchequer borrowing. However, it cannot be at any cost.

Joan Burton (Dublin West, Labour)
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Has the Minister read the Labour Party's detailed proposal in respect of the establishment of an investment development bank? Such banks exist in many countries and provide a mechanism for issuing bonds similar to those to which the Deputy has referred, whether on or off the State balance sheet? Is the Minister suggesting the price or rate of return investment and pension fund managers have sought in the recent discussions about such bonds is too high? Many in both the private and public sectors are extremely anxious to find safe places to save at reasonable rates of return. They are looking not for huge interest rates but for reasonable rates of return. Many of them end up going overseas. In the past, many of them invested in Irish banks because they felt, patriotically, that they were a safe place. How wrong they were, given that the Taoiseach introduced contracts for difference tax free and wrecked the value of Irish banks on the Irish Stock Exchange through gambling. Is the Minister saying pension funds are looking for excessive rates of return or that he does not want to encourage Irish savers to buy into Government products, perhaps because he wants to leave the money for the Irish banks? It is difficult to understand what approach he is taking. Will he explain it?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Deputy Burton asked a few questions. Of course, money is safe in Irish banks, by virtue of the Government guarantee to them. It is important to make that point. Money deposited in Irish banks is very safe and I do not understand why the Deputy would suggest otherwise.

On the establishment of a national development bank, the Government is optimistic that the private financing options it is considering will prove helpful. We prefer to explore approaches that retain as much of a role as possible for the private sector to avoid the setting up of an additional State body. Within its pension fund arrangement, the NTMA can invest in projects for a return, including projects in the State. Funds are available for this in the NTMA.

Joan Burton (Dublin West, Labour)
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It has not been able to do it.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In that regard, it has been considering, for example, the east-west electricity connector. It is a question of identifying suitable investments that will give a rate of return to the fund. That is crucial in determining whether an investment can be made.

The Deputy has asked whether I have any reluctance about investment in Government bonds by Irish citizens. I certainly do not.

Joan Burton (Dublin West, Labour)
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And by pension funds.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As the Deputy is aware, there are a number of possibilities, through An Post, for citizens to invest in entities managed by the NTMA.

Joan Burton (Dublin West, Labour)
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I asked the Minister about the pension fund proposal.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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On the pension fund proposal, of course, there is a concern, the same concern the Deputy expressed about the valuation of assets in the National Asset Management Agency. Any rate of return on the issue of these bonds would be a reasonable rate of return having regard to the interests of the State. The Deputy expressed similar reservations in previous parliamentary questions about the operation of the public private partnership system.

Brendan Howlin (Wexford, Labour)
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I will allow a brief supplementary question from Deputy O'Donnell.

Kieran O'Donnell (Limerick East, Fine Gael)
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The Minister says he is considering priorities for the pension bond. It is clear the school building programme should be a priority. I note the Minister cut €30 million from the programme in his recent supplementary budget. On the return, the investment managers of Ireland say they are interested in the scheme, but why is there no urgency? Infrastructure schemes under public private partnerships could be brought to the fore. The Minister needs to show leadership.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Progress has been made with the public private partnership system in the school building programme; it has been implemented. I am open to the use of infrastructure bonds in that context. One great difficulty in the PPP context in relation to schools is that, in general, PPP finance must be used for new projects. To attract PPP finance, a project must not involve refurbishment or an extension such as the building of a hall but must be a full, new project.