Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I thank you. I am delighted to be in Seanad on my first outing as Minister of State at the Department of Finance and the Department of Public Expenditure and Reform.
The National Treasury Management Agency (Amendment) Bill 2014 delivers on one of the key parts of the programme for Government and of our medium-term economic strategy, which was published last December. There are four principal elements to the legislation I am introducing today. First, it will establish the Ireland strategic investment fund, the ISIF. The ISIF will take over the assets of the National Pensions Reserve Fund, NPRF, and use the discretionary assets of the fund, some €6.9 billion at the end of March last, for investment in the Irish economy in order to promote economic growth and help foster employment. Second, it will put the New Economy and Recovery Authority, NewERA, on a statutory basis. NewERA is up and running as a business unit of the NTMA, providing financial and commercial advice on commercial semi-states to shareholding Ministers. Third, it will restructure the corporate governance of the NTMA and its associated entities. These governance structures are relatively complex as a result of the assignment of additional functions to the agency since it was established in 1990. Under the Bill the agency, in addition to its core function of borrowing on behalf of the Exchequer and managing the national debt, will be directly responsible for the Ireland strategic investment fund, NewERA, the functions of the National Development Finance Agency, NDFA, and the State Claims Agency. Finally, the Bill will provide a statutory basis for the legal costs unit within the State Claims Agency, which deals with claims against State bodies. The unit was established to deal with third-party costs arising from certain tribunals of inquiry. There will be no impact in respect of NAMA.
I wish to present some of the main provisions of the Bill. There are eight Parts and four Schedules. Part 1 contains the preliminary and general provisions, including the Short Title. Part 2 contains provisions in relation to the governance structure of the agency. I will explain the background in more detail to make clear what we are proposing in the Bill.
The National Treasury Management Agency was established in 1990 under the National Treasury Management Agency Act 1990 to borrow on behalf of the Exchequer and to manage the national debt. The agency was established outside normal public sector structures, with operational freedom to negotiate market-competitive salaries. This business model was designed to enable the NTMA to compete with the private sector and attract and retain specialists in mid-career who would not normally be attracted to working in a public sector environment.
Over the years, the agency's remit has been considerably extended. The principal additional functions are as follows. The agency is the manager of the National Pensions Reserve Fund, which was established in 2001. The investment of the fund is the responsibility of the NPRF Commission. The agency is the body through which the National Development Finance Agency performs its functions. The National Development Finance Agency was established in 2003. Its role is to provide financial advice to State bodies undertaking major public investment projects and to procure and deliver public private partnership projects in sectors other than transport and local authorities. It also procures non-PPP schools on behalf of the Department of Education and Skills. The agency, acting through its NewERA unit, provides advice to shareholding Ministers in relation to commercial semi-states. The agency is responsible for providing risk management advice and claims management assistance to State authorities with the aim of ensuring that the State's liabilities and expenses are contained at the lowest achievable level. The agency is known as the State Claims Agency when dealing with claims against State bodies. The agency also provides business services and staff to NAMA.
I will turn to the governance structures underlying these functions. The NTMA does not have a board, although it does have an advisory committee whose role is to advise on matters referred to it by the agency. The chief executive of the NTMA is directly responsible to the Minister for the performance of the functions of the agency. The chief executive reports directly to the Minister on the NTMA's funding and debt management and State Claims Agency and NewERA functions. To that extent the agency is more like a Government Department than a State agency.
The NPRF, NDFA and NAMA were established under their own governing legislation and each has its own governing body. The NTMA acts as the executive in respect of the NPRF and the NDFA. It assigns staff to NAMA and also provides it with business and support services and systems. The NTMA chief executive is ex officio a member of the NPRF Commission and the board of NAMA and the chairman of the NDFA. A director of the NTMA acts as CEO of the NDFA. That is the situation as we have it now.
The agency has carried out the functions it has been assigned with skill and dedication. However, the governance structure under which it operates has become unwieldy and complex as new functions have been bolted on. As we put NewERA, the ISIF and the legal costs unit on a statutory footing, we are taking the opportunity to simplify and streamline the governance structures of the NTMA and its associated entities. The legislation will convert the agency into a body with members, effectively a board. It will have a total of nine members, six members appointed by the Minister for Finance, serving a five-year term, and, ex officio, the chief executive officer of the NTMA, the Secretary General of the Department of Finance and the Secretary General of the Department of Public Expenditure and Reform. The Minister for Finance will nominate one of the appointed members as chairperson. The reconstituted NTMA will continue to be directly responsible for the borrowing and debt management functions, as well as the State Claims Agency and various other functions such as the Central Treasury Service, just as it is now. In addition, it will be directly responsible for the Ireland strategic investment fund and NDFA functions, rather than acting on behalf of other statutory bodies, and it will have NewERA. No changes are proposed to the existing arrangements in respect of NAMA.
On foot of the changes outlined above, the NTMA advisory committee and the NDFA and its board will be dissolved, as will the State Claims Agency policy committee. The NPRF Commission will also be dissolved as soon as practicable.
Part3 establishes the New Economy and Recovery Authority, NewERA, on a statutory basis. NewERA is already up and running as part of the NTMA, providing financial and commercial advice on commercial semi-states to shareholding Ministers. Financial and commercial advice covers advice on a wide range of things: a Minister's statutory role, exercising rights as ashareholder, governance, expected rates of return, dividend policy, corporate and investment strategy, acquisitions and disposals, as well as appointments and the remuneration of directors and the chief executive. NewERA will not have an executive role in its own right. It is a dedicated source of commercial advice for relevant Ministers who will continue to carry out their current executive functions. NewERA will also be able to provide project management services and oversight in respect of acquisitions, disposals and restructurings, at the request of a relevant Minister.
The Bill sets out the designated commercial semi-state bodies on which the agency will provide advice. They are the ESB, Ervia, formerly Bord Gáis Eireann, Irish Water, Bord na Móna, Coillte Teoranta, EirGrid and any other State body specified by order.
The Bill provides that the agency may provide financial and commercial advisory functions relating to other bodies if requested by the Minister with responsibility for the body.
The Minister for Public Expenditure and Reform will have power to give directions to NewERA as to the performance of its functions. He or she must first consult the Minister for Finance and any relevant shareholding Minister. This mirrors the ministerial power of direction over other NTMA functions. Any such directions must be published. NewERA will be required to submit a report on the financial performance of each of the commercial semi-States under its remit to the Minister for Public Expenditure and Reform and relevant Ministers each year.
The Bill provides that the agency, in consultation with relevant Ministers, may develop proposals for investment in order to support economic activity and employment in energy, water, telecommunications and forestry and any other sector that is specified by order.
Part 4 gives the agency responsibility for the role in relation to infrastructure projects currently carried out by the National Development Finance Agency, NDFA. The NDFA was established on 1 January 2003 to provide a financial advisory service to State authorities in respect of capital projects over a certain size, at present €20 million. It is a body corporate with a chief executive and board, which discharges its functions through the NTMA. It is proposed that the NDFA and its board will be dissolved and its functions will be assigned to the agency.

Part 5 establishes a legal costs unit within the State Claims Agency to look after costs awarded by certain tribunals of inquiry. The NTMA, as the State Claims Agency, manages personal injury claims, including bullying and harassment and third party property damage claims against specified State authorities, as well as associated risks. On foot of a Government decision, the agency has started to advise on costs awarded by the Mahon tribunal on planning matters and the Moriarty tribunal on payments to politicians. The Bill puts this function on a statutory basis. This is being done to minimise the State's exposure and deliver significant savings to the Exchequer because third party costs represent the bulk of tribunal costs. These costs are awarded in principle by tribunals and their amounts are determined in retrospect.

Part 6 establishes the Ireland Strategic Investment Fund, ISIF. The assets and the liabilities of the NPRF - just over €20 billion at the end of March - will become the assets and liabilities of the ISIF. The NPRF was set up as an investment fund to supplement Exchequer resources from 2025 on when the burden of social welfare and public service pensions is expected to have increased considerably. The fund was invested on a global basis accordingly. As Senators will be aware, a portion of the fund was used to recapitalise the banks during the financial crisis. These investments were worth some €13 billion at the end of March and are held at the direction of the Minister for Finance. The balance in the fund - €6.9 billion at the end of March - will be used by the agency for investment on a commercial basis in a manner designed to support economic activity and employment in the State. The intention is to make funding available across the board for infrastructure, SMEs and whatever. While the issue of the future cost of pensions has not gone away, the Government believes fostering economic activity and employment in Ireland is a greater priority in the current circumstances and that the resources of the NPRF should be redeployed accordingly. As the Minister for Finance has stated, the best way to ensure the State will be in a position to meet its future obligations is to ensure we have a growing economy.

The agency will set the overall investment strategy for the fund and in so doing will consult the Minister for Finance and the Minister for Public Expenditure and Reform and have regard to views expressed by them. An investment committee will be established by the agency which will be responsible for individual decisions in line with the investment strategy and within parameters set by the agency. The Bill carries over from the NPRF Act 2009 the power of the Minister to direct that the fund be used to recapitalise the banks. This is being done as a pragmatic precautionary measure. It is not envisaged that the provision will ever be used. However, if for whatever reason, the Government needed to provide funding for the financial system, the likelihood is that it would need to be in a position to do so quickly. It should be noted that this is a measure that can be used only in exceptional circumstances.

Part 7 dissolves the National Pensions Reserve Fund Commission, the National Development Finance Agency, the NTMA Advisory Committee and the State Claims Policy Committee.

Part 8 contains two provisions that were added on Committee Stage in Dáil Éireann. Section 54 allows Ministers to provide guarantees or indemnities in respect of borrowings by State authorities in respect of public private partnerships. Section 55 allows the NTMA to use the PPSN number as a unique identifier for its State savings retail investment products.

There are four Schedules to the Bill which deal with consequential matters. Schedules 1 and 2 amend existing legislation to take account of the provisions of the Bill, for example, deleting references to the National Pensions Reserve Fund Commission. The SIF will be exempt from tax in the same way as the NPRF. Schedule 3 lists State authorities for which the agency, in its NDFA role, provides advice on financing public investment projects. Schedule 4 contains detailed technical provisions ensuring the changes envisaged in the legislation work smoothly. It also removes the requirement to pay the Exchequer contribution of 1% of GNP to the National Pensions Reserve Fund in 2014.

The establishment of NewERA and the ISIF will play a catalytic role in accelerating investment in strategic infrastructure and providing commercial financing and investment in areas that support economic growth and employment. As the economy grows and demand increases, it is essential that well priced financing is available to assist business to trade, grow and create jobs. I look forward to a constructive debate on the Bill.