Martin Mansergh (Tipperary South, Fianna Fail)

I thank all the Senators who contributed to this debate. I have sat through many debates over recent days in the other House and once again I pay tribute to the quality of debate in this House. On the whole, the sort of shrill partisanship that is, unfortunately, characteristic of the other House, or some of its deliberations, is absent from this House. That is part of the value of the House, that there is more reasoned debate. Conscious that it is snowing and people may wish to get home, I will try to answer and go through as quickly and briskly as I can the great number of questions raised. As always, Senator Twomey had quite a long list of sharp questions. He wanted me to elaborate on NAMA, as did the Leas-Chathaoirleach. To assist the banks in the process of deleveraging it has been decided that land and development loans intended to remain in the banks will now be transferred to NAMA. This transfer will include approximately €16 billion in land and development and associated loans in AIB and Bank of Ireland which had previously been excluded from transfer as they were below a value threshold of €20 million. The size of the loan book that NAMA will now acquire will be in the region of €90 billion, and it will categorise all land and development and associated loans in Bank of Ireland and AIB under the €20 million level, roughly estimated to number 10,000, by reference to asset type and region. NAMA will then apply various discounts to each category based on NAMA's loan valuation experience. It is anticipated that all loans will be transferred by the end of March 2011.

AIB and Bank of Ireland will realise losses on the transfer of these assets and the increased capital requirement arising from the transfer will be injected by the State as part of a programme that is included in the aggregate €10 billion capital number that was announced. Both banks will have increased liquidity as they will receive additional NAMA securities.

As I am sure Senators will be aware from previous discussions on the issue, the management of these smaller loans will remain with the institutions and NAMA will build on the existing outsourcing arrangements with the banks for the management of these loans, and performance with respect to ultimate realisation will be incentivised by NAMA to the participating institutions as appropriate. The discounts will vary in line with asset type and the geographical region in which the asset is located.

The main thrust of the final contribution from the Leas-Chathaoirleach was to do with the cost and operation of advisers and valuers. If he will forgive me, I will take down the blacks of his remarks and get a reply for him and write to him. I will not bluff a reply at this point.

A question was asked about the purpose of the bank contingency fund and whether we will need it. A total of €25 billion is provided on a contingency basis for banking system reports. This is a prudent measure for the Government to take in order to address any potential downside risks that may arise through the course of the programme.

The issue of banking bonuses was raised and as we know, the Central Bank issued a report yesterday on the review of remuneration policies and practices. It found little evidence that banks have self-consciously made a link between their risk appetite and their incentive structures. It also found that governance and oversight of remuneration practice is poor with little or no consideration for preparing for the implementation of impending European requirements and guidance on remuneration. Obviously, this is disappointing. However, it is important that the Central Bank highlights ongoing deficiencies in remuneration policies and practices with a view to addressing these issues. There will be individual follow-up with the respective institutions by the Central Bank and this is to be welcomed. Owing to legislative changes implemented by the Government under Central Bank legislation, enforcement action is now available for non-compliance.

I will not go into the question of other taxes. The documentation released yesterday contains targets on other taxes. This does not mean to say that the European Commission is targeting other taxes because it finds something objectionable; it is simply targeting them as a source of additional revenue to cover the fiscal gap.

A point was made on the more cautious growth forecast, and a growth forecast will also be attached to the budget next week. A good deal of discussion has taken place elsewhere about the Government's strategy to boost growth. The reduction in the minimum wage is seen as removing a barrier to job creation, as are reforms in the welfare system to incentivise work and eliminate unemployment traps and to reinvigorate activation policies to ensure unemployed people can make a swift return to work. Senator Bradford made a point on the importance of more rigorous competition in the professions and measures to reduce legal and medical costs. This is long overdue and it may well be the case, as he put it, that sometimes a crisis is needed to break the logjam in such issues. The most important dynamic in growth will come from strong export growth, and its performance this year was 6%.

Unfortunately, the cuts being made in capital expenditure are necessary. What we need to take into context is that there has been enormous capital expenditure over the past ten to 12 years. It would be preferable if we could maintain it at 4.5% to 5% but at present unfortunately something has to give. Given this level of past investment, and we are not realising the value of it as yet, unfortunately it is unavoidable.

The interest rates will depend on market rates at the time we draw down a tranche of the loan and the duration of each loan. To answer the question on sequencing, the loans will be drawn down proportionately from each of the various lines of funding being made available, namely, the IMF, the European financial stabilisation mechanism, the financial stability facility and bilateral loans. The actual interest rate from each line of funding is determined by the rules governing their establishment and operation as well as by the terms of the funding. To modify what I just stated, the full sequencing of drawdown has not yet been decided but it is believed that the logical drawdown would be to begin with the National Pensions Reserve Fund, NPRF, given that there would be no interest repayments. However, if one wants to be realistic about it, the NPRF produces a certain return so the idea that putting it in would be entirely cost free is not the case and I would not wish to pretend that it is.

Senator MacSharry raised aspects of the Croke Park deal and increased flexibility and redeployment. He also complained about the nine-month deadline. I believe something will be said on progress to date in this regard in next week's Budget Statement.

Senator Ross put forward the case for default and compared us with Spain, Portugal and Italy. The situation of each country is different. The economies of Spain and Italy are much larger than ours and the particular terms, hypothetically, they might be able to negotiate is a matter for speculation. One cannot simply equate Ireland with Spain or, indeed, with Greece. It is the other way round in the case of Greece and it is trying to see whether it can improve its terms comparative to those for Ireland. I have two quarrels with the argument for default, which was not only made by Senator Ross but also others, including by the Financial Times correspondent, Wolfgang Münchau. The people who make that argument never spell out in more than the vaguest detail the consequences of that would be. I would regard default as disastrously irresponsible and as a kind of gamble. It is easy for commentators or those with no responsibility for the decision or who are unlikely to have responsibility in an executive governmental sense to make that argument. Also, when the argument comes from outside of Ireland, it is often because the people making it have different interests and perspectives, coloured by whether they are German or American, and particular ends in view. Sometimes, as hinted in Münchau's article, they would like a catalyst to a much fuller fiscal and monetary union. He questioned whether that would happen. It will not.

We must seriously discount such comments, but people keep citing them. Even in the Dáil this week Members were mentioning Nobel prize winning American professors and so on. Do those American professors write primarily from what they think is best for Ireland's interest or do they think in much broader terms of what might be in the interests of America or their perspective of the world economy? I would be inclined to discount heavily some of the outside commentators. When people in the country make these comments, however, they should spell out the consequences. It is easy to comment. Newspapers do it all the time and throw out wild suggestions that may sound good to the public at large. Senator Norris did the same and spoke about the moral argument. Of course moral considerations should inform public policy, but they cannot dictate it. If we look around the world today, we will see, unfortunately, with Wikileaks and the like, that there are all too many instances of Governments and agencies that are far from operating on any sort of recognisable principles of public morality.

We have a moral responsibility towards the people of this country to try to do as best we can. We have been trying to do that since September 2008 and I suspect our successors will continue to do the same for a long time in the future. We are trying to protect people to the best of our ability and trying to protect the things we value from the fall-out of this difficult crisis. One of the good things about this support programme is that it allows us, by giving us the loans we need, to support our basic services. We are in a situation that has gone beyond our control, perhaps because it is a European-wide situation, but we now have the means to support our basic services, although perhaps on a significantly more economical basis than previously. A default would mean we would face unpredictable, cataclysmic consequences. It would mean a breach of faith and if we defaulted, why should anyone ever trust this country again? We were involved in a negotiation with other agencies which had to take account of the possible knock-on effects in other situations and countries across the eurozone. Senator Ross cast aspersions on the senior officials of the Central Bank and Department of Finance who were involved in the negotiations on this deal. I believe, as the members of the next Government will find out, that we have very high calibre people. It is quite true, as Senator White said, that things have not turned out as we would have wanted or expected. However, he at least had the decency to give credit to the Government for its efforts. He did not accuse the Government of having lied through its teeth for two and a half years. He accepted that things had not necessarily turned out the way we wanted and predicted, in good faith. I appreciate that approach and feel it is more characteristic of this House.

Senators Boyle and Ó Brolcháin raised the matter of how things were. We and many others in the country bought into the vision that we could spend more, have lower tax rates, continue collecting higher tax revenues and remain financially healthy based on our dynamic economy. I do not suggest that was an unworthy idea, but it was too ambitious and, perhaps, unrealistic. It has certainly crashed to the ground and we will be wiser in the future. Senator Norris suggested that the fact the agreement was not put to a Dáil vote constituted an infringement of the Constitution. No fewer than two lawyers, on successive days, dealt with that argument in The Irish Times and broadly supported the Government's position that the IMF is very careful not to do treaties but to do memorandums of understanding. The sanctions it has are not to resort to the law but to withhold further funding. Members, especially those who have been a long time in the House, should not use phrases like "shower of foreigners". There is no maturity in such comments. We have partners in the European Union and many of them are our friends. However, they too must look after their interests, just as we look after ours. That sort of xenophobia will not advance our cause an inch. He referred by name to certain economic and banking commentators who he would like to see advising the Government. We have called on far-seeing experts such as the special adviser to the Minister for Finance. The next Government will have the liberty to hire the individuals to which the Senator referred if it so chooses but it will need people who have the right temperament to work as part of a team and who do not behave as if they are Moses bringing the tablet from Mount Sinai.

Senator Bradford attributed to me a zeal for electoral reform which I confess I do not have. The system of election to the Dáil has many merits. It is fair and, more than many other systems, it allows for the displacement of individual incumbents without displacing their parties. I could, of course, be a victim of such displacement in the near future.

I would not be wise to neglect the contribution from the Leas-Chathaoirleach because he might ask me to continue instead of cutting me off. In regard to his main point, I will respond to him in writing. He mentioned the tourism industry and the air travel tax. I am also a Minister of State at the Department of Tourism, Culture and Sport, although my primary responsibility is the arts. There has been considerable debate in this House on the air travel tax. The Minister of Tourism, Culture and Sport has indicated that she would like to hear from some of the transport companies but I am not sure whether she has received an answer on the matter. Wearing my other hat as Minister of State at the Department of Finance, I am conscious that the €140 million that the travel tax raises would have to be replaced by some other means. We will wait to see how the Government deals with that issue.

With regard to banking legislation, the memorandum of understanding provides for legislation on a special bank resolution regime to be presented in the first quarter of 2011. There is also a commitment to introduce legislation in the second quarter of 2011 to enhance bank regulation and the Central Bank's supervisory enforcement powers. I presume that will be one of the first Bills to come before the new Dáil and Seanad in 2011.