Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank the Acting Chairman. We brought this Bill into the Dáil on Tuesday, with the former of State at the Department of Finance, Deputy Jack Chambers, dealing with it. Yesterday was the second day we spent debating it, with thanks to the Minister of State, Deputy Patrick O'Donovan. Interestingly, I was one of the Government backbench speakers on this legislation on Tuesday night and here I am responding as the Minister of State 48 hours later. For those who say that a week is a long time in politics, a day can be an even longer time on some occasions.

This legislation is an extremely urgent matter, as we outlined in the briefing provided to the Seanad, and we are seeking to expedite the enactment of this Bill. This is the first piece of legislation the Department of Finance has come forward with since the Government has been formed. The main source of urgency is attached to the supports to mitigate unemployment risk in the emergency instrument, known as the SURE instrument, which cannot be accessed by all member states until all member states have signed the guarantee agreement. That is the reason the schedule is tight, and I thank Members for their co-operation on that.

This is a short Bill with a long and detailed list of technical Schedules attached for the information of the Oireachtas to allow Members see what Ireland and all other EU countries are signing up to.We had a good engagement in the House on Tuesday and yesterday on matters relating to the stringent payment timelines available to meet demands under the two guarantees, and the consequences of missing those deadlines. There was a good deal of discussion around the types of firms that might avail of funding under the European Investment Bank, EIB, pan-European guarantee fund. The SURE, support to mitigate unemployment risks in an emergency, and EIB pan-European guarantee fund initiatives are in keeping with the commitment to a jobs-led recovery, which is laid out in the programme for Government. This will help those families and households where jobs have been lost to return to work and will ensure those businesses that have weathered the Covid-19 storm can now grow and rebuild.

First, I will deal with the EU initiative to support citizens in maintaining jobs, known as the SURE initiative. The SURE instrument is primarily intended to support member states' efforts to support workers and jobs, and to support some health-related measures. In the case of Ireland, the introduction of the temporary Covid-19 wage subsidy scheme has been hugely important in supporting families and ensuring businesses can continue trading. These are the types of essential initiatives which can now be supported at a European level. Under the proposal, SURE will provide financial assistance to member states. The Commission will borrow up to €100 billion on financial markets to finance loans to member states at very similar interest rates, allowing member states to benefit from the EU's strong credit rating and low borrowing costs. The loans are targeted to assist member states to address sudden increases in public expenditure which were caused by the pandemic and undertaken to preserve employment, such as short-time work schemes and similar measures put in place for the self-employed, as well as certain health expenditure.

SURE comes with safeguards to ensure fair and equitable access to funding for all member states, with no more than €60 billion available to any three member states under this proposal. That ensures all member states can get a fair opportunity to draw down funds under this arrangement. Other important prudential conditions on the instrument include the requirement that no more than 10% of all loans will fall due for payment in any one year. The loans will be underpinned by a system of voluntary guarantees from member states. For a lending volume of €100 billion under the SURE instrument, €25 billion in guaranteed commitments is required from all member states collectively. One benefit of this guarantee mechanism is that it ensures member states do not have to pay any money up front. The instrument does not become available until all member states sign up to the guarantee, and those commitments will remain in place for the full term of the loans they are underwriting. Each member state contributes to the guarantee in proportion to its relative share of the total gross national income of the European Union. For Ireland, this is equivalent to €483 million or 1.9% of the EU gross national income.

SURE was adopted by the finance ministers of the Economic and Financial Affairs Council, ECOFIN, and published in the EU Journalon 19 May 2020. While the instrument is a regulation which is directly applicable in Ireland, signing the voluntary guarantee agreement will require enabling legislation. The requirement stems from Article 11 of the Constitution of Ireland, which provides that all revenues of the State "shall be appropriated for the purposes and in the manner and subject to the charges and liabilities determined and imposed by law". As no member state can access SURE funding until all member states have signed the voluntary guarantee, the timeline for introducing this legislation is now urgent.

I will now talk about the EU initiative to support businesses. The European Investment Bank and the European Commission have already presented a support action plan which amounts to €40 billion to address the economic challenges resulting from the Covid-19 crisis. However, given the gravity of the challenges facing the EU economy, it has become apparent that far more is now required. To extend significantly and rapidly the EU's support for struggling small and medium-sized enterprises, mid-caps, corporates and public entities, the European Investment Bank has decided to establish a pan-European guarantee fund. The €25 billion guarantee fund is designed to support those enterprises by leveraging up to €200 billion in additional funding. The EIB guarantee fund is for workers and businesses and is designed to finance higher-risk operations that are viable in the long term but are vulnerable due to the economic impact of the Covid-19 crisis. Assistance will primarily be provided to private sector operations, with a focus on small and medium-sized enterprises, though mid-caps and large corporations will also be eligible.The fund will be implemented by the EIB in partnership with national promotional banks, in our case the Strategic Banking Corporation of Ireland, SBCI. In managing the fund, the EIB group plans to deploy a broad mix of products, including counter-guarantees for national promotional banks, venture debt, venture capital and private equity to fund working capital for the corporate sector.

Public entities providing essential services, particularly those in the health, research and education sectors, that cannot be financed under existing EIB group products will also be eligible for support under the guarantee fund. Geographic eligibility will extend to those EU member states that have agreed to participate in the fund by way of a contribution guarantee.

All 27 EU member states are invited to participate in the guarantee fund. The contribution from each member state will be in the form of a state guarantee of €25 billion in proportion to its shareholding in the EIB. As Ireland's shareholding in the EIB is 0.66%, our liability to the guarantee fund is capped at €164.7 million. Ireland's shareholding in the EIB was recently adjusted from 0.67% to 0.66%, which led to a corresponding reduction in our liability from €167.5 million, based on a shareholding of 0.67%, to €164.7 million. This adjustment occurred as a result of two events that had a material impact on our shareholding in percentage terms, namely, the UK's departure from the EU and the subsequent withdrawal of its shareholding, followed by two member states increasing their shareholding. While our commitment to the guarantee fund is €164.7 million in actual terms, provision in the proposed legislation is for an amount not to exceed €167.5 million. This offers a degree of flexibility should further shareholding variations occur.

The State guarantee is required to cover a degree of losses incurred in the implementation of the commercial operations of the guarantee fund. The fund will be formally established once member states representing at least 60% of EIB capital make appropriate commitments. Following Government approval on 29 May, Ireland gave a commitment in principle that it will, subject to the passage of legislation in the form of this Bill by the Oireachtas, participate in the guarantee fund. Legislative provision is required for payments to be made out of the Central Fund to cover any calls on the guarantee provided by the State. Where losses are incurred by the guarantee fund in the implementation of its operations, a call will be made on all of the member states' guarantees at the same time, given the pooled nature of the fund. Any delay in payment beyond five days would incur interest penalties. However, the European Investment Bank will provide a liquidity facility to allow member states time to make the necessary payment arrangements to cover the call on their guarantees.

Repayments or advances under the liquidity facility will take place on standardised dates once a quarter. The maturity of each advance will be for a maximum of six months. It is envisaged that the guarantee fund will be temporary in nature, with the initial investment period in place until 31 December 2021. A prolongation of the six months could take place if the majority of contributing member states do not object. Any further prolongation would be subject to the agreement of all contributors.

The legislation to provide for Ireland's participation in the European instrument for a temporary support to mitigate unemployment risks in an emergency, otherwise known as SURE, and the €25 billion EIB pan-European guarantee fund established by the EIB, and to provide for related payments from the Central Fund to cover both guarantees, is set out in sections 2 to 9, inclusive, of the Bill we are discussing.

On 7 April, the Government approved the drafting of an amendment to remove an ambiguity about the ability of the SBCI to offer guarantees without breaching the insurance Acts or regulations. This was not considered necessary up to this point because the SBCI was only involved in a small number of risk-sharing schemes up to now. It was already clear that risk-sharing schemes were going to become a larger part of the SBCI's offering in the coming years. The current crisis has accelerated this process. Following detailed consideration, it was decided that the most appropriate way to deal with this ambiguity was to amend the Strategic Banking Corporation of Ireland Act 2014. Taking this step will aid the development and deployment of new risk-sharing loan schemes, including schemes that may be backed by the EIB guarantee fund, to which this Bill is facilitating access for Ireland.For this reason, the amendment will be included in section 10 of the Financial Provisions (Covid-19 Bill) 2020, which is under discussion today.

On a further clarification matter, section 11 of the proposed legislation includes a provision to allow for an award of the arbitral tribunal to be enforceable before the Irish courts in accordance with the Third Protocol, dated 5 March, 1959, to the General Agreement on Privileges and Immunities of the Council of Europe, dated 2 September 1949. That was long before most of us were born. This provision is for the avoidance of doubt on the matter.

In recent years, legal opinions have been necessary in order for the Housing Finance Agency, HFA, to borrow from the Council of Europe Development Bank. This provision will be important in allowing for and simplifying the potential future borrowing by the HFA and other State parties from the Council of Europe Development Bank. The original agreement on that dates from 1949, as I have said. Events have changed since then with the establishment of these types of agencies, and this now needs to be clarified. This is what the section is about.

I will now outline the specific sections of the Bill. Section 1 defines certain commonly used terms in the Bill. Section 2 outlines the circumstances for the application of section 8. The European Investment Bank, EIB, guarantee fund can be formally established when member states representing at least 60% of EIB capital have made appropriate commitments. Section 8 shall not apply unless and until that occasion occurs.

Section 3 allows the State to enter into the SURE guarantee and associated commitments and empowers the Minister for Finance to carry out the obligations associated with that guarantee. Section 4 of the Bill permits the payment of a sum not exceeding €483,401,250 in aggregate out of the Central Fund under the State's obligations under the SURE guarantee. Section 5 ensures all moneys received by or on behalf of the State by way of repayment of sums paid in accordance with the SURE fund will be placed in the Central Fund to ensure the Exchequer has access to these funds.

Section 6 provides for reporting arrangements on the operation of Ireland's part of the SURE guarantee. In the event of a demand being made under the guarantee, a report will be laid before the House within one month of payment of that demand and annually thereafter. This report will consist of information on any sum paid by the State or repaid to the State under the guarantee. Each subsequent demand will be reported upon within one month in the same manner and is then included in the annual report. The reporting arrangements cease when the SURE instrument expires and when all outstanding commitments by or to Ireland have been exhausted.

Section 7 confers on the Minister the power to enter into a contribution agreement and fund guarantee agreement with the EIB for the purpose of committing to the pan-European guarantee fund. The guarantee shall be based on Ireland's shareholding in the EIB, not exceeding €167.5 million, thereby capping the State's liability at this figure. If any amendment is proposed to be made to the contribution agreement or the fund guarantee, a draft of the proposed agreement providing for the amendment and containing the text of the amendment shall be laid by the Minister before Dáil Éireann, and the amendment shall not be made unless a resolution approving the amendment has been passed by this House.

Section 8 permits payments related to the contribution agreement and fund guarantee to be made out of Central Fund for an amount not exceeding, in aggregate, the sum of €67.5 million. Section 9 allows for any payments received by or on behalf of the State by way of repayment of sums paid in accordance with the contribution agreement and fund guarantee to be received by the Exchequer and lodged to the Central Fund.

Section 10 amends the Strategic Banking Corporation of Ireland Act 2014 to remove an ambiguity about the issuance of guarantees by the Strategic Banking Corporation of Ireland, SBCI. The amendment confirms that the Insurance Acts 1909 to 2018 and regulations relating to insurance made under the European Communities Act 1972 do not apply to guarantees made by the SBCI in the furtherance of its functions.

Section 11 includes a provision to allow for an award of the arbitral tribunal to be enforceable before the Irish courts in accordance with the Third Protocol, dated 6 March 1959, to the General Agreement on Privileges and Immunities of the Council of Europe, dated 2 September 1949. This will allow and simplify potential future borrowing by the Housing Finance Agency and other State bodies from the Council of Europe Development Bank. Section 12 provides for the Short Title, the Financial Provisions (Covid-19) Bill 2020, and commencement.

These measures, alongside the soon to be announced July stimulus package, will help us to kick-start the economy post lockdown and set us on the path to recovery.However, Ireland's response must also take account of the wider EU and global context for recovery. As a small open economy with a global outlook, Ireland depends on the rules-based international order and robust global trading frameworks. A recovery at global and European levels will in turn support efforts at national levels to restore the Irish economy to growth. Our membership of the EU guarantees access to a Single Market of 450 million consumers and the EU's network of free trade agreements covering 72 countries. This is central to our prosperity and the success of our businesses. Ireland will work with its EU partners to restore the European economy to growth and to ensure the smooth functioning of the Single Market. As a member of the eurozone, we share a common currency with 18 other states with which we will continue to engage closely in the development of economic and monetary union. Engaging at the heart of the EU with our fellow member states will play an important part in the Government's pursuit of national recovery and efforts to return the economy to growth. Participation in SURE and the pan-European pandemic guarantee fund is essential to this recovery.

To summarise, the Bill allows us to participate in two important EU Covid-specific pandemic response instruments. It supports access for workers on short-term schemes and in struggling businesses and is a strong signal of our willingness to stand in solidarity with fellow EU member states. I look forward to engaging with Senators.