Seanad debates

Thursday, 5 March 2009

Investment of the National Pensions Reserve Fund and Miscellaneous Provisions Bill 2009: Committee Stage

 

Section 1 agreed to.

NEW SECTIONS.

2:00 pm

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Amendments Nos. 1, 3a and 3b are related and will be discussed together.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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I move amendment No. 1:

In page 3, before section 2, to insert the following new section:

2.—The remuneration of any officer, employee or director of any financial institution to which funds are paid out of the National Pensions Reserve Fund under this Act shall not exceed the sum of €250,000.

This relates to one of the core provisions Fine Gael wants to see in this legislation, namely, some block on the remuneration of senior bank officials under this legislation. There is no reason in the world that the Government cannot fix this and deal with bank officials' remuneration. On other occasions in the course of the debate on the economy and the bank recapitalisation, I have raised the issue of people who are stuck with fixed interest mortgages. I raised it again last night. The bank recapitalisation plan is costing taxpayers €7 billion. We are using all the 1% income levy, which normally goes towards looking after social welfare and public sector pensions, to recapitalise the banks for this year and next year. All the money from the civil and public servants' pension levy, which the Government passed into law last week, is going directly towards recapitalisation of the banks. Yet there seems to be no give from the banks regarding what they might be able to do for their customers, the ordinary people of Ireland.

Fixed rate mortgages are at a much higher rate now. Somebody who took out a mortgage a year or two ago and got a fixed rate for four or five years pays up to 6% interest. The situation has changed dramatically in that time and people are paying huge repayments on their mortgages. When I raised this last night the best the Fianna Fáil representatives could come up with is that this is a contract, and they are therefore happy to see the customer being screwed by the banks. It could be made part of the recapitalisation programme that the banks would give customers the opportunity to come out of these fixed rate contracts if they wish. It is possible that some customers may wish to stay with these fixed rate contracts, but as a gesture, this should be put forward by the Minister.

The silence is deafening from the Minister for Finance, the Taoiseach and other Ministers on this issue, although it has been raised a few times in this House. I would like the Minister to examine it. Will the Government give serious consideration to putting a proposal on this to the banks? Will it look at some way of getting those who have fixed rate mortgages, which cost them from €200 to €350 per month depending on the size of their mortgages, out of them, especially since the Government has hit them with a fairly significant income levy in the past few weeks? Many of the people affected by the levy have this type of mortgage.

There must be a cap on executives' pay in the banks that are being recapitalised. The impression is given is that the Government is saying no bank will fail. This is being picked up by senior bank executives as meaning they may do as they like because the Government will not challenge them. The Minister of State can speak about preferential shares and ordinary shares, and 25% of this and 25% of that, and state the Minister is charging the banks 8% for this money. If there is an 8% cost to the banks, what is the cost to the Government for borrowing that money at this time?

There is also a need for the Government to show its back teeth in its dealings with the banks, to show that not only is it representing taxpayers' interests but that it is also prepared to stand up for customers of the banks and to show that the banks, just like all of us, must pay for this over the next couple of years.

This is an awful crisis. We have seen the way a blue-chip stock, which is what banks were always considered to be, simply disappeared off the face of the earth. It is a crisis beyond proportion. The public is angry because it cannot really fathom the size of this crisis and how it was delivered to them by a few individuals motivated more by greed than anything else.

When the Minister of State responds I want to hear that the Government is serious about taking on these issues. I ask him not to give me the response that these individuals, if they are not paid €1 million or €2 million per year, will go somewhere else. There are few places to go for senior bank executives, given the track record of some of them.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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For Senator Doherty's benefit, we are discussing amendments Nos. 1, 3a and 3b.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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I tabled amendments Nos. 3a and 3b.

There is much we could say about this Bill. It has been described as a technical Bill in one sense but it provides for what is potentially one of the most momentous decisions that will ever be taken by the Oireachtas in our time. The Government is about to commit the people's money, in the form of the National Pensions Reserve Fund, to recapitalise AIB and Bank of Ireland.

We, in Sinn Féin, have repeatedly called on the Minister to use the National Pensions Reserve Fund in productive investment projects to ensure that we get the country back to work and that the social services for which the people are crying out are delivered.

Only today I highlighted the fact that the Minister for Education and Science, even after a year of posing the original question, still does not have a clue how many schools are using prefabs in this State. He does not have a clue how many schools have got planning permission and can move to the next stage. He does not know. The Taoiseach and the Government are willing to work through the night into the early hours of the morning to bail out the banks and to secure high pay and bonuses for bank executives and senior managers who have been reckless, but when it comes to our children they are not willing to bail them out of classrooms that are falling down and prefabricated buildings that are in a terrible state, some of which date back 40 or 50 years. That is where some of the problem lies in terms of the Government's priorities in this Bill.

One of the problems is that the amendments being put forward, and those that were put forward by my colleague, Deputy Morgan, in the Dáil, are not being accepted by the Government. They are falling on deaf ears. They are responsible amendments, amendments that the majority of people would like to see implemented. They deal with proper reporting, proper procedures and ensuring that those who continue to rip off the country will not be favoured by the Government at a time when it is attacking the most vulnerable, the most weak and the poorest in society. I urge the Minister of State to accept and listen carefully to the proposals that we have tabled.

We all know that there was a drug in banking society, but also in the elite in Irish society, which was based on profit, bonuses and a merry-go-round that they thought would never end, and they are holding the rest of us, the workers of the country, to ransom. All this was based on irresponsible borrowing by the banks and it locked the Irish financial system into a cycle which, as my party previously highlighted in this Chamber and in the Dáil, could only end in disaster.

It was not the case that nobody shouted stop. Sinn Féin shouted stop but the problem was that the Government was not prepared to listen. The people are now paying the price for that rampant irresponsibility by bankers, developers and the Government, which failed to listen and to take action, and which will commit to put every man, woman and child in the State into debt, increase their taxes and increase the pain so that those who got us into this difficulty continue to be bailed out.

Both of the amendments I tabled deal with executives, senior managers and employees of financial institutions that are availing of these funds. Amendment No. 3a proposes that executives, employees and senior managers of these banks should not be paid more than a Minister.

If I go back to Donegal and tell the people that I proposed an amendment that bank officials would receive over €250,000, they would probably lynch me because we should be going much further. My party would go much further but, as I stated initially, this is in light of the fact that the Government is not willing to take decisive action and is not willing to rein in those who were responsible and reckless in the financial institutions. It is a compromise amendment, but it is linked to ministerial salaries, which, with the salaries of Deputies and Senators, should also be cut substantially.

I ask that the Minister of State accept this amendment. I predict that he will speak of further reports, further discussions and further strategic or scientific analysis, but the reality is nobody needs a report to tell us that a senior bank official should not earn €3 million per year. Nobody needs a report to tell us that bonuses in the region of millions of euro per year should not be paid to these people who trapped the Irish people into borrowing vast amounts, who are now repossessing their homes and treating them shabbily and who have completely restricted financial lending to small and medium enterprises. There is a need for this amendment.

My second amendment deals with the bonuses that have accrued by executives within these financial institutions over the past three years. In this amendment my party proposes that all bonuses collected as part these people's remuneration in the financial institutions over the past three years be paid back to the State. As I stated, some of these executives received millions of euro in bonuses per year over those three years.

A question needs to be asked and I know the answer to it. Did those people earn that money? Did they deserve that money? We cannot reward people who exploited the Irish economy and who put us into this disaster. We speak about it — we heard it from the Fianna Fáil Ard-Fheis — being as bad as Cromwell. Would the Minister of State pay Cromwell a couple of million euro per year? Would he pay him huge bonuses? If the Minister of State does not accept this amendment he is allowing the people who put us in this position to continue earning vast amounts of money.

One must remember the important aspect of this. After this Bill passes, which no doubt it will, it is the Irish people, the taxpayers, the mothers and fathers who sent their children to special needs classes, which were taken away by the Government two weeks ago so that they are now in mainstream classes, who are paying these executives their bonuses and wages. It is the woman who is lying on a trolley in an accident and emergency department who is paying these executives their bonuses and their millions of euro in wages. The people demand that the Government take action and I put forward these amendments to ensure action is taken. The people will reward the Government if action is taken, however belatedly. It is never the wrong time to do the right thing.

3:00 pm

Photo of Eoghan HarrisEoghan Harris (Independent)
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While I generally agree with Senator Doherty's desire for fairness, I am not in favour of this sort of tinkering with small aspects of the general crisis. The entire matter of remuneration, not just of the banks but across the whole public sector, will come under savage scrutiny in coming times.

Since before Christmas I have been saying unemployment will hit half a million and I have since revised that figure upwards to 700,000, with 20% unemployment, and I do not believe this is down to the Irish economy. I am totally opposed to the hysterical campaign that has been whipped up against the banking system as a whole. There are delinquents within the banking system and people who should be brought to book and, indeed, put in jail. The Bank of Ireland, however, has existed since before the Famine and been there through the land wars and two world wars. AIB Bank goes back to the Munster and Leinster Bank and no one would wish to see these two great Irish institutions which have a physical presence in every town and village go to the wall. The Government was right to support these banks systemically. Perhaps it got a bad deal. It is a pity one had to bail out the banks but it had to be done because otherwise we would have no credibility in the world.

I have stressed repeatedly the extent and depth of this crisis. It is not an Irish crisis. It has been exacerbated somewhat but not to the degree some parts of the media have been exciting themselves about. It is not confined to us. There are versions of what is happening in Ireland occurring in Japan, Australia and across Europe. This is not just a depression or a recession. It should be more closely compared to one of those historical moments such as the Black Death or the Thirty Years' War. It will outlast our lifetime. It is a systemic and deep structural crisis of the capitalist system and it will not be alleviated by recourse to the equally flawed Marxist system which has been tried and tested. It will take a long time to recover confidence. As my colleague, John Drennan, pointed out, it takes no time to pollute a river but it takes a long time to clean it up.

There is a volume of debt across the globe that is untapped and unknown, a vast, bottomless pit of debt caused by the insurance contract default system. The AIG model, not Lehman Brothers, caused the beginning of this collapse, aided and abetted by the sub-prime mortgage system. It cannot be dealt with, as many of my colleagues think, simply by regulation. That can do a lot but I am not a Platonist who believes in a perfect society, human nature being what it is. I believe in the doctrine of original sin and just because many things were legal in our society does not mean to say they were not wrong. They were wrong and we must introduce the concept of sin back into the body politic at every level.

Let us begin here. There are increasing calls for the abolition of the Seanad. These calls cannot be gainsaid much longer. In a year's time they will seem commonplace and unless we proceed to take voluntary cuts of a severe sort in our income, the people will come and take it off us. I have always believed in going forward to meet a problem, in hanging a lantern on it and not standing back from it. The Members of the Seanad should seriously consider a cut in their salaries so swingeing that it alerts the public to the fact we are sincere about it. It should be a minimum of 15% to 20%. We should stay ahead of public sector cuts.

Beyond that, Senator Doherty rightly raised the general question of equity and that should be brought up right across the board in all forms of public remuneration, not least in further reforms of the public sector. The Minister did not cut deeply enough and I understand why. I spoke to the former Taoiseach, John Bruton, lately, commiserating with him on the death of his father. There was no partisan or party element in our conversation about the economy, just a deep concern for this country. Perhaps he belongs to the trade union for Taoisigh so he empathises with the current Taoiseach but he believes, like me, that this is a deep crisis.

I value the contribution of my colleague and fellow Sunday Independent writer, Senator Shane Ross. It is clear, however, that he understands banks but does not understand politics. Perhaps I know a little bit more about politics in the same way he knows a little more about banks. I disagree with his statement yesterday when he warned Fine Gael not to get embroiled in supporting the Government. In recent days, Fine Gael has gained great credibility. I read with great interest Deputy Richard Bruton's broad outline of the plans that he is bringing to the Minister for Finance and which I hope he brings to the Taoiseach. They are credible, deep and cutting. The Government has never got ahead of this crisis and to do so, public sector pay cuts of the order of 30% will be necessary and pensions of Ministers and former Ministers should be levied severely.

Senator Doherty is right. The public must see that fairness comes first. If we are fair, the public will put up with anything. That means starting at the top with us, with the politicians and the political class, then going on to the public sector. I do not agree with Senator Ross, however, when he advises Fine Gael not to get involved because we do not know what is coming down the stream. Fine Gael knows as well as anyone else what is coming down the stream and it is not good. It is time to remember André Gide's great motto for getting through life: anything can happen.

We need a dose of European pessimism now, not American optimism. We must look at this situation and recognise that bad stuff is coming down the stream and we must assume the worst. We may need to go back to allotments before we are finished, growing our own food in our back gardens, but we can handle anything.

I am not presenting this apocalyptic vision to make the flesh creep but I am tired of people half-trying to explain it away as just another recession that was caused by a few Irish bankers or Charlie McCreevy's low tax policies, all of them correct policies at the time. The Government has nothing to apologise for and the business of these pathetic, mawkish apologies should stop. We were all in the Celtic tiger together and the infrastructure lies all around us. It is good stuff, well built.

Low tax policy is the right policy and in that respect I want to point to the ideological struggle going on in Ireland. There are elements and media commentators grouped around RTE who carry on as if increases in taxation will solve the deficit of €18 billion, which I believe is closer to €25 billion. Whatever it is, tax will not do it. One would think listening to RTE, to George Lee, Fintan O'Toole and other commentators, that this can all be done through tax increases. It cannot; some of it must be done by tax, but the bulk of it must be done by cuts in public expenditure. The national development plan should be stopped, the metro should be stopped and all State companies that can be privatised should be privatised with the exception of the courts, the Defence Forces and the security forces.

We need radical measures for these terrible and radical times. While Fine Gael has gained enormous credibility with the public in its responsible attitude, and I am glad the Minister and the Taoiseach have invited the Opposition parties in, I still believe that despite its position in the polls, the Labour Party will continue to decline in credibility if it continues to refuse to tell us where it proposes to make the cuts. Fine Gael has credibly told us where it will make cuts. The Labour Party just grandstands and swans around the place, being all things to all men, like the Quakers: friend to all, enemy to none. That sort of stuff will not last forever.

I have great sympathy with the need for fairness that drives Senator Pearse Doherty. We should not tinker with that fairness. We must look at the tax situation again, not least at the way farmers have fallen below the radar. They pay ridiculously small amounts of tax compared with the public sector. I have been a hammer on the public sector but I will be no less hard on the farming sector. There are 105,000 of them paying some ridiculously small sum in the millions compared with the 370,000 civil servants who pay €3.4 billion in tax. This must stop, there must be no protected or cushioned classes. To borrow one of the Minister's best sardonic lines from yesterday, all must aspire to the dignity of being Irish taxpayers.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I thank Senators for their contributions on these three amendments. Focusing on amendment No. 1, there must be pay restraint. In reality, however, reductions in net income are vital in the overall current economic situation. The Government recognises the importance of that at the most senior levels of the banking sector. It is important not only in the context of financial support being provided by the taxpayer to that sector but also because it sends a message to workers on ordinary incomes who are suffering as a result of the global crisis.

The covered institutions remuneration oversight committee, or CIROC, was established to oversee remuneration plans of senior executives of the covered institutions. CIROC was also asked to examine whether an overall cap on executive remuneration could be introduced for the banking sector. I can inform the House that the Minister for Finance received CIROC's report on Tuesday and is considering it. The report proposes caps on the remuneration of various senior executive positions within each of the institutions. That will go to Cabinet in the first instance and I imagine there will be a public statement shortly afterwards. In the meantime, I take the points that Senators have made.

One needs to be aware that in banking cultures, and far below the top level that has attracted so much attention, remuneration in recent years has been made up of basic pay, bonuses and share options. There has been an unhealthy culture whereby the value of people working in that sort of world is measured by the size of their salaries and bonuses. We have to shake ourselves out of it because nobody's value is measured by whether they have a higher salary than someone else. All of that is false thinking. Some of the best people are those on low incomes and salaries, yet their contribution can be quite disproportionate.

Senator Twomey raised the question of the Government's view of fixed rate mortgages. Perhaps a question should be tabled on that matter in the other House. The pros and cons of fixed rate mortgages were well debated at the time they were introduced. People make choices which have risks attached, whether they concern variable or fixed rate mortgages. I do not know whether anything can be done about that matter in discussions. However, in a situation where banks are vulnerable we must resist the temptation to interfere in every possible way. The banks have to recover credibility, but they will not do so if they are subject to systematic Government, Oireachtas or public diktat on any and every activity they undertake. However, I am not denying the reality of the particular problem to which the Senator referred. No doubt it can be looked at.

Up to now, the repossession of homes has been on a very small scale. I saw a figure last week in the Financial Times of 75,000 repossessions in the United Kingdom. Allowing for the disproportion in population between the two countries, we are at nothing like that level here at the moment. The recapitalisation package contained specific measures to hold off on repossessions.

I am not a spokesperson on education, but it was stated that the Minister for Education and Science did not know the number of prefabs. I saw an article in the Irish Examiner two or three days ago which provided great detail from the Department of Education and Science on the number of prefabs and their cost. Therefore I do not accept that point.

Sweeping rhetoric is made about how the Government is bearing down on the weakest, poorest and most vulnerable in society. Frankly, that is absolute nonsense because every effort has been made to protect them. I was glad to see that only last week Age Action Ireland's bulletin pointed out that such people were not affected by the current set of measures since the beginning of this year.

Senator Harris was speaking in the voice of the author of "The necessity for social democracy" back in 1989. I agree with his general points about remuneration. I do not wish to make any particular virtue of it because we are still pretty well paid, but Ministers and Ministers of State took a voluntary 10% cut and followed it up by being subject to the pension levy, which together probably adds up to about 16% or 17%.

I was amused by the reference to going back to allotments and I do not think there would be any harm in that. In fact, within the last week, as Minister of State in charge of the Office of Public Works, I had discussions with my officials and those of the Minister of State, Deputy Trevor Sargent, on precisely this point and the possible use of property within State control. As someone who still does a bit of fruit and vegetable gardening, to the extent that time allows, I greatly regret the way that has gone totally out of use. Some 20 or 30 years ago, if one was travelling along the canal in Dublin one would see a line of allotments, but nearly all of them are now overgrown. In the countryside, every cottage garden was used to grow potatoes, cabbage and possibly turnips. It would be healthy, quite literally, if the 75% of people who, according to the ESRI, do not engage in direct sporting activity, did a bit of gardening. Senator Harris will remember the final line of Voltaire's Candide, "Il faut cultiver notre jardin". I would not see that as being the equivalent of going back to the cave, or anything like it.

We are clearly in a prolonged crisis but it is hard, if not impossible, to say how prolonged it will be. I am sure it was also very hard to say so if one lived in the early 1930s. We do not have a crystal ball to see into the middle distance. I hope I have dealt with the main points raised by Senators. I will not be accepting these amendments. However, a commissioned report on the matter is being studied which will provide the basis for action in this area.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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It is not acceptable for the Minister of State wanting to have a hands-off approach with the banks.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I did not say that.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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I believe the issue of fixed rate mortgage repayments can be addressed.

The point that the banks will not repossess any house for 12 months is a red herring. A bank would easily wait 12 months or more before it would apply for a repossession order, attempting other ways to resolve the arrears. When people took out fixed rate mortgages, they were not anticipating this financial crisis no more than the Minister of State or I were. Banking continues in other aspects. I run a business myself in which I pay banking fees, overdrafts and mortgages. While not seeking concessions in this area, I am asking about that particular group of people who are being hit by mortgage repayments due to what is happening in the wider economy.

There is a need for leadership in resolving this. Small actions often matter much. The Government has too much of a hands-off approach to the banks. Telling the banks the State will not take control of them is an opt-out clause to allow them to do their own thing. We are challenging those actions and decisions in the banking sector that may be legally correct but are morally wrong.

Photo of Eoghan HarrisEoghan Harris (Independent)
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Hear, hear.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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Senator Harris is correct that we need to examine this from the top down. However, it is not a question of someone making a voluntary contribution here or not taking a remuneration there. For example, there is a need for Members in both Houses, and Ministers, to take a significant pay cut. The Minister for Arts, Sport and Tourism, Deputy Cullen, sent out the wrong signal recently, flying around Ireland in an Air Corps helicopter to attend one meeting in Killarney. Former Ministers receiving pensions while still Members also sends out a wrong signal. These are small issues but they matter much to ordinary people.

The Fine Gael spokesperson on finance, Deputy Richard Bruton, has put forward his ideas on resolving the wider economic issues. There was a certain amount of sneering and smart-aleckness in the way the Taoiseach and Minister for Finance asked the Opposition to assist them in tackling the economic crisis but then did not take up offers of co-operation. If that is the way they want to play, we can easily withdraw our co-operation. We are still trying to keep the country's interests at the top of the agenda.

There are small and large matters that can be addressed with regard to banking and the perception of how Ministers carry on. The Minister of State should be taking these amendments on board.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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I am not happy with the Minister of State's response.

In trying to play down home repossessions, claiming the figures for them are not as great as they are in other countries, the reality is that home repossessions have increased 100% over the past year. Repossessions before and after Christmas have increased at an even higher rate.

Home repossession is just not a statistic. It is the repossession of the homes of people who bought houses at large prices who cannot genuinely meet their repayments due to the new financial circumstances. They are being chucked out of their homes by these banks who have been bailed out by taxpayers' — their — money. One home repossession is one too many when those affected are paying the salaries of the bank chief executive officers, the bank officials and those pen-pushers signing the orders to chuck people out of their homes. We cannot play it down because it is too serious an issue.

From our history, we all know from landlordism and evictions the importance to the Irish people of owning their homes. Compared to other countries in Europe, Ireland has the highest house possession. It is unfortunate the Government did not take decisive action to curtail home repossessions during the bank bail out.

We do not need to wait for a report on bankers' remuneration.

Photo of Shane RossShane Ross (Independent)
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Hear, hear.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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Bankers have made millions of euro every year through reckless behaviour. A decision can be taken on their remuneration now. However, a report is in the Minister's drawer and the Cabinet will decide on it after the legislation is passed. A statement will be made but there will have been no debate in these Houses in which we can hold the Minister to account and ask him did he cut their wages from €7 million plus bonuses to a ministerial salary level. The decision on bankers' pay must be taken now.

I agree with Senator Harris to a certain degree that it is not just bank officials. Ministers, Deputies and Senators need to take serious cuts in salary. The matter over pensions and Members, as pointed out by Senator Twomey, is ridiculous. In my school in Donegal, a Deputy held down his teaching job and took the difference in salaries while denying somebody a full-time position. This was a Fine Gael Member but it happens with Fianna Fáil Members with former Ministers still drawing down pensions. These anomalies need to be stopped immediately.

The figures involved may seem minute and addressing them will not plug the hole in the projected €30 billion deficit by the end of the year. However, it will stem the anger felt by people outside this House. I am feeling this anger too because I can see the wrong direction in which this country is being lead. Why would people not be angry if the Government allows 5,300 people to live part-time in this country, earning money for themselves but not paying a penny in tax?

The Minister of State said he does not believe me that the Minister for Education and Science does not have a clue about the number of prefabricated schools in the State. I am glad the Minister of State referred to the article in the Irish Examiner. It was based on statistics gained last week by Deputy Caoimhghín Ó Caoláin. The Minister only did a sample survey of 900 schools in the State when there are over 4,000 schools. Up to 93% of the schools had prefabricated units. In total, there were 2,605 prefabricated units. The Minister does not know the figure even though he has been investing €130 million in the past three years in this area. He does not have a clue where the buildings are located. We need Ministers to work through the night to bail out our children from the prefab classrooms. Let us show the same attitude that supported the bankers to these children who do not have a voice.

The Minister of State spoke about supporting the most vulnerable in society. Today, the people's money, to the tune of €7 billion, will be invested in the banks. Two weeks ago, savings of €7 million were made by the Government withdrawing special needs classes from special needs pupils. In the context of €7 million in savings in this area as against the €7 billion being given to the banks, we must ask who is vulnerable. Are the special needs of bankers more important than those of children? The Minister of State should not say the Government is protecting the most vulnerable and the weak. I am angry with regard to this matter. The Minister of State is aware that the children in question require special needs tuition but due to the fact the numbers of such children have fallen below a certain point, they will now be placed in mainstream classes. If the Government had closed 113 special needs classes two years ago and dispatched these children into mainstream classes, there would have been uproar and the Houses would have been obliged to debate the matter day and night. However, because the country is in such a mess, issues of this nature are not receiving a proper airing.

The Government must grab the bull by the horns and decisive action must be taken. People are sick and tired of waiting for reports and hearing about matters being placed on the long finger. Provision should be made in the legislation to cap the salaries of bank CEOs at the level which applies to Ministers. In addition, the bonuses these people received for the past three years should be taken back. They did not earn that money and what we should do is demand that they pay even more money back. These individuals behaved recklessly and they should not be in a position to retain the millions of euro they received in bonuses. In that context, it should not be forgotten that taxpayers are going to pay these people's wages for the next couple of years.

Photo of Shane RossShane Ross (Independent)
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The responses given by Ministers in respect of amendments to Bills of this nature contain a common thread. I find such responses disappointing. The common thread to which I refer relates to the "hands off" attitude to the banks. I have spoken about this matter so often that I sometimes exhaust myself with the monotony of what I say. However, I cannot understand why the Government has not decided to dictate to the banks what they should do in the short term, at the very least.

The amendments under discussion are not particularly demanding. They state that anyone working for a bank who will be paid out of the National Pensions Reserve Fund should not receive more than €250,000. Why can the Minister of State not indicate that this is a fine proposal and that those involved will not be paid more than that amount? For some reason, the Government is frightened with regard to making a decision on this matter. It does not want to be seen, as the Minister of State indicated, to be interfering in the macro or micro activities of the banks. The Government should interfere because the activities of those who operate at the top levels in our banks are rotten.

The Minister of State said that CIROC is due to report next week and that the Government will cherry-pick from that report. As far as I am aware, there is no commitment that the Minister for Finance will do what CIROC asks of him. It is obvious what needs to be done. In the first instance, those at the top in our banks must be removed.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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Hear, hear.

Photo of Shane RossShane Ross (Independent)
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These individuals are putting up two fingers to the Government on a daily basis and they are winning. When the chief executive of AIB put two fingers up to the Irish people last week, I really began to despair. The individual in question stated he would remain in his job for the foreseeable future. When asked what he would be paid, in words reminiscent of those used by the former chief executive of Bank of Ireland, he stated his annual remuneration would be €690,000. I am not engaging in rhetoric; I am providing plain, factual, forensic evidence when I state that €690,000 is an exorbitant amount to pay someone who has presided over the absolute pulverisation of the value of shares in AIB. On this man's watch, share values have decreased by 98% or 99%.

The board of AIB was completely irresponsible in announcing last year that, for reasons those in the market or anyone else could not possibly understand, it was going to increase the dividend paid to shareholders. Now the chief executive has stated he will only take home €690,000 this year. In my opinion, that is €689,000 too much. That is just this man's salary.

Will the Minister of State outline the Government's attitude to share options? Let it provide an indication in that regard before CIROC issues its report. If I were a very cynical banker — God knows there are plenty of them around — I would state that I was taking a salary cut and that I would only be paid €700,000, and I would give myself a pat on the back. When matters have settled down somewhat, the boards of the banks — which dished out an orgy of share options in the past — would suddenly get the bright idea that I and others like me should be given a few share options. That avenue remains open to the banks and they would provide share options at rock bottom prices.

The share price will not go much lower than it stands at present, even if the banks to which the Bill relates go bankrupt and are nationalised. If that happens, the cynical bankers to whom I refer will get back on the gravy train by means of the back door. These guys make their money not through their basic salaries but through underhand perks such as those I have outlined. If the incumbent at Bank of Ireland receives unlimited options in the future, he may perhaps make millions of euro within in a few years.

It is not acceptable to state that we should wait for the CIROC report. I do not recall who serves on that committee but I believe those involved may be highly paid civil servants. Why are the customers and small shareholders of the banks who would have views in respect of this matter not members of CIROC? My guess is that those serving on the committee have some knowledge of the banking industry, have themselves benefited and are very highly paid people. I am sure these individuals have not suffered at the hands of the banks.

It is not good enough to say that we are going to leave responsibility for this matter to someone else. This time next week, CIROC will report and will recommend reductions and caps here, there and everywhere. The Minister for Finance will accept the parts he likes and will reject those with which he is not enamoured. What eventually emerges will be riddled with loopholes and will contain recommendations on performance criteria that will enable top bankers to earn fortunes once again.

What has happened to the Government's nominees on these boards? Are they asleep or are they conflicted? The board of Irish Life & Permanent sat late one night recently and emerged with a result of which the Minister for Finance did not approve. As a result of the outcry that followed, the Minister directed those on the board to meet on the following day. On the second occasion, these people arrived at a different result. Had events not unfolded in this way, the board of that institution would have got away with something. I presume it would have done so against the wishes of the two Government-appointed directors on the board.

The Government-appointed directors to whom I refer have already proven themselves to be political eunuchs. I do not know whether they have gone native, have been ostracised or have no influence. In a case such as that involving Irish Life & Permanent, if they could not get their way and if the old board was up to its old tricks, we must ask what sort of role the Government is playing in respect of the banks. We have the right to exert major control over the activities of the two main banks once this €7 billion has been invested.

The Minister of State indicated the funds provided by the NTMA do not constitute taxpayers' money. Of course it is taxpayers' money. This money may not be taxed currently but it came from the Government pot, which is owned by the taxpayer. I beg the Minister of State to outline the Government's attitude to those who are earning €700,000 and not merely to state we will reconsider the matter when CIROC reports next week. Why does the Government not have more control over the banks which caused so much trouble for the economy?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I do not propose to accept the amendments. With regard to Senator Twomey's remarks, it is, of course, the function and duty of the Opposition to put the other point of view. However, I always pay particular attention when the Opposition, when saying what the Government should be doing, states that if it were in government it would do it. Very often, however, one does not hear that.

Some of my remarks on fixed mortgages might also relate to the pay issue. Incidentally, the Government is not waiting for the report; it has the report and will take decisions on it. There is no significant delaying mechanism.

Photo of Shane RossShane Ross (Independent)
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There was no need for the report.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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That might be the Senator's point of view but the Government commissioned the report, has received it and will deal with it with due process. That will take place very shortly. I do not propose to express personal views on the matters covered by that report. I am sure the Minister will make a statement in that regard next week or, at the latest, in the following week.

With regard to fixed mortgages, a contractual arrangement was entered into by the parties. A contract provides legal, commercial certainty. We need banks to get back to operating on commercial investment if the investment being put in by the taxpayer is to be protected. There is also the question of protecting our international reputation. If one systematically interferes with commercial decisions, it sends a bad signal to international markets. Without in the least denying the difficult social and financial problems referred to by Senator Twomey, we must be a little clear-headed about what we are doing. For that reason I do not accept the notion put forth by Senator Ross that we should ride roughshod in all directions over the banks that still have independence. At the same time there are clear issues relating to lending to small businesses, providing mortgages and remuneration, on which action must and will be taken. In the case of remuneration, I am not in a position, and do not intend, to pre-empt the precise position the Government will take. It is fine in a Seanad debate to adopt an "off with his or her head" position, but Governments must act responsibly when dealing with sectors. They must also act ruthlessly from time to time. Government is not just about striking attitudes.

The issues of repossessions and mortgage arrears were raised. The Senator will be aware that a statutory code of practice on mortgage arrears has been published by the Financial Regulator. Under this code, where a borrower is in difficulty the lender will make every reasonable effort to agree an alternative repayment schedule and will only commence legal action for repossession after 12 months from the time arrears first arise, where the customer continues to co-operate reasonably and honestly with the bank. To be frank, that is in the bank's self-interest, apart from any altruistic or societal point of view. With the fall in the price of property I cannot imagine that repossession would be anything other than a last option, from a purely commercial self-interest point of view.

The banks have assured the Government that in the normal course of events they will make every effort to avoid repossessions, as has been evident from the low level of repossessions by them to date. A percentage increase on a very low base can seem very large but the level of repossessions to date has been small. To use a historical analogy, if there was that level of evictions taking place we would be reading all about it in the newspapers and hearing about it on "Morning Ireland". There is also support for mortgage lending. The recapitalisation package includes a commitment to increase lending capacity for first-time buyers by 30%. Of course, the fall in house prices presents opportunities for people trying to get on the property ladder. On balance, for some people property might be more accessible now than previously.

Senator Doherty mentioned that Sinn Féin had put down a question about prefabs in schools. Presumably, the question was put down for reply by the Minister for Education and Science and the Minister supplied the information. The idea that the Minister does not know the information he is including in his reply does not appear to be very sensible.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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He only had the information for 900 schools out of over 4,000. He does not know about the other more than 3,000 schools.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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The Minister, without interruption.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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We do not live in a state, and I doubt if such states exist, where Ministers or anybody else has perfect information on absolutely everything that happens in society. I am not much in favour of Ministers, as a regular habit, working through nights. If Ministers are to make sensible decisions, they need some sleep like everybody else.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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No wonder the bail-out Bill was so bad.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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With regard to special needs classes, the provision for resource teachers, special needs assistants and other assistance, which was virtually non-existent in 1997, has been vastly improved, partly due to various Ministers, including Senator Hanafin's sister. What the Senator is talking about — I do not underestimate its effect in certain instances — is essentially a marginal adjustment.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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That is true.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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Tell that to the special needs children. A marginal adjustment.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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Yes.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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That is an outrage. These are special needs children.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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Senator Doherty, the Minister is speaking. The Senator must respect the Minister. He will have an opportunity to speak.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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A tremendous amount of provision has been put in place in the past ten or 12 years for special needs and resource teachers. The change does not even affect every part of the country. In my constituency of Tipperary South, no school was affected by that decision. Something that does not even affect every constituency in the country legitimately deserves the description I attached to it.

The final point is one on which I failed to respond to Senator Harris. He wants to see farmers pay much more tax. Farmers are among the poorest people in this country today. The lowest paid salary of any full-time civil or public servant in this country is €20,000. Many small farmers are earning far below that figure. I accept there is a commercial sector and some of those farmers might be doing well, and obviously, they should pay tax like everybody else, but I do not underestimate the extreme income marginality of very many farmers. It is much too easy to say that this sector is essentially wealthy, but it only applies to a small part of the sector.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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I wish to follow up Senator Twomey's point about the Government not having a hands-on approach to the banks. Is it the case that the Government's position is compromised? On the one hand, it is investing €7 billion of taxpayers' money in AIB and Bank of Ireland while, on the other hand, it has its own bank, Anglo Irish Bank. As Senator Twomey said, it is not taking a hands-on approach where it is investing the €7 billion. Is it because it is compromised as it has its own bank?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I absolutely reject the proposition that the Government is compromised in that or any other sense. The provisions that have been adopted are those judged to be in the best long-term interest of the people of this country.

Amendment put and declared lost.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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Amendments Nos. 2 and 3(c) are related and will be discussed together.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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I move amendment No. 2:

In page 3, before section 2, to insert the following new section:

2.—Any funding to any financial institution to which funds are paid out of the National Pensions Reserve Fund under this Act in excess of a cumulative total of €7 Billion shall not be made save pursuant to a resolution of both Houses of the Oireachtas.

To answer Senator Burke's question, the Government has taken a hands off approach, not only to the bank it owns but also to those it proposes to recapitalise. Perhaps this is the reason the Minister of State believes a conflict of interest does not arise.

I ask the Minister of State to accept my amendment. The Government proposes to recapitalise the banks using €7 billion of taxpayers' money. It is amazing how things can change. In September 2007, when the House sat through the night to discuss the legislation to guarantee all bank deposits, I tabled an amendment in the early hours proposing that the Government should not invest more than €10 billion of taxpayers' money in recapitalising or nationalising the Irish banks. The Minister for Finance stated he would be discommoded if the taxpayer had to pay more than €10 billion to save the banking sector. This figure has been exceeded and it is approaching €20 billion.

The Government must seek the approval of the Houses if it plans to spend more than €7 billion recapitalising the banks. Any such proposal must be discussed in both Houses. The Minister should not be in a position to issue resolutions to provide more taxpayers' money to the banks when the full extent of their debts are finally exposed. While I am not an expert on the precise exposure of the banks to bad debt, basic common sense would suggest it is probably well in excess of €20 billion and probably closer to €50 billion.

Given that they are technically insolvent, I hope the banks will be able to survive the crisis and, with the assistance of taxpayers, trade themselves into a position of greater strength. They are being allowed to trade into a position of solvency at the expense of the taxpayer. For this reason, the Minister of State should accept some of the amendments and show respect to both Houses and the Opposition.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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The amendments make a straightforward proposal and, like Senator Twomey, I can find no reason the Government should not accept them. They do not propose to prevent the Government from investing in excess of €7 billion in the banks but simply to require it to seek the approval of both Houses of the Oireachtas before proceeding with any such measures. They seek to avoid giving the Government an open purpose which it could continually dip into to fund the banks and financial institutions. The proposal is a sensible one which would require the Government to argue a case for any further proposed funding for the banks.

The sum involved in recapitalisation, €7 billion, is substantial. The amendment provides that the Government must seek the approval of both Houses if it proposes to provide funding in excess of this figure. On a previous occasion, the Minister for Finance, Deputy Brian Lenihan, maintained that such a scenario would not arise as it would send a signal to international markets that the banks were in trouble again. I do not subscribe to that argument. The €7 billion in the National Pensions Reserve Fund is not under the Minister's mattress but invested across the world. Clearly, therefore, it will be necessary to call in some of these investments to invest in the banks. The Minister's argument does not stand up. I ask the Minister of State to accept my amendment No. 3(c).

Photo of Shane RossShane Ross (Independent)
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I am at a loss about a couple of issues and I ask the Minister of State for an explanation. When €7 billion has been taken from the National Pensions Reserve Fund and split evenly between Bank of Ireland and Allied Irish Banks, how much will be left in the fund? On the basis that these figures cannot be calculated daily, I ask the Minister of State for a reasonably up-to-date figure, perhaps from the previous quarter or the most recent valuation.

It is important to put this issue in perspective. Provision has been made to allocate 1% of GNP to the National Pensions Reserve Fund every year. Will the fund continue to be topped up with 1% of GNP this year, next year and in 2011 or does the Government intend to cease this practice? From where does this money come? I presume it is borrowed because I cannot think of any other source. If it is borrowed, I presume our need to borrow would reduce if we stopped paying into the fund. It would be absurd to borrow or take from any other source €1 billion to give to the National Treasury Management Agency to manage, probably at a lower return than the interest charged on the loan or, worse still, to hand over to the banks. I seek clarity on this issue. Am I correct that this is the process being proposed for the next few years?

Photo of Paddy BurkePaddy Burke (Fine Gael)
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I support Senator Twomey's amendment. The funding allocated to the banks should be capped at €7 billion and if the banks require further funding, the Government should seek the approval of the Oireachtas.

Senator Ross raised an important question. Is there any point in borrowing €1 billion or €1.5 billion annually to be allocated to the managed fund? If, as Senator Ross stated, this practice were to cease, our borrowing requirement would immediately reduce.

Last September, when the House debated legislation on the financial institutions, I expressed to the Minister for Finance my view that he was taking the wrong option and should instead have taken a stake in the banks. Six months later, we have adopted a course of action which places future pensions at risk. How will the banks repay the funds they receive from the National Pensions Reserve Fund? Will 8% of the €7 billion be paid annually or in monthly instalments? If the banks cannot afford to repay the fund, will the €7 billion go down the swanny?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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To make a general point, the Minister or Minister of State will accept an amendment if it makes sense. They will not do so merely out of respect for this House or the Other House.

The amendments have been carefully considered and the Minister appreciates the thinking that lies behind them in relation to the oversight of the expenditure of public moneys. It is important to bear in mind that the Bill provides that the Minister for Finance may give directions to the NPRF commission in circumstances where the Minister is of the opinion, having consulted the Governor of the Central Bank and the Financial Regulator, that the direction is needed to remedy a serious disturbance in the economy or prevent serious damage to the financial system. In these kinds of circumstances, there may be a balance to be struck between transparency and the need to withhold, at least for a time, market sensitive information about investments which the NPRF is being directed to make in the public interest.

The NPRF Commission is, in any case, required to produce an annual report within six months of the end of its financial year, and the Minister for Finance can give directions as to its content. The commission has been producing very detailed reports of its activities and investments and that is expected to continue. I might add that the Minister undertook in the Dáil yesterday to keep that House informed in advance of any directed investment in a listed credit institution, subject to any requirements of confidentiality. He made the point, however, that he could not absolutely guarantee it in all circumstances. I regret I am not able to accept the amendment.

I will refer to two other points that were made. The intention is to continue making payments into the NPRF, simply because that is a responsibility we ought to be fulfilling and which we should not just scrap because of our present difficulties. The fund at the end of 2008 amounted to €16.4 billion. Of this, €4 billion has been designated for recapitalisation, which would reduce the total to €12.4 billion, and €3 billion of additional funding is coming from the Exchequer. Thus, €12.4 billion is available to the fund for its normal investment activities at end-2008 values. The payment obviously comes out of the Central Fund each year.

Photo of Shane RossShane Ross (Independent)
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How much will it be this year?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I am sorry; how much will what be?

Photo of Shane RossShane Ross (Independent)
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The payment into the fund from the Exchequer.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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An exact figure was given in my speech.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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It was €1.4 billion or €1.6 billion.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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It is €1.584 billion — in effect, €1.6 billion. There is no provision in the Bill or indeed the principal Act for a suspension of this contribution. The Senator is correct in saying the contribution is effectively being borrowed. Those were the main issues raised.

Photo of Shane RossShane Ross (Independent)
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May I pursue this further? If €1.6 billion is being borrowed, or coming out of Exchequer funds, whichever one likes — it does not really matter how one designates it — is there not the possibility of making a saving? It is a reasonable point to make. This fund is now being used for utterly different purposes from those for which it was set up. That is why this legislation is before us. It is a different creature. I do not want to put it in a pejorative way, but it is now a fund to be used by the State in times of emergency. It certainly is not being used for investment purposes or for pensioners of the future. We are now taking at least €4 billion — maybe €7 billion — out of it, and there is every prospect of our taking a great deal more in the future if a bank, or any other organisation in trouble, needs more money.

We are borrowing money in an amount of €1.6 billion per annum, when we are in chronic debt, to put into a fund that, as far as I can see, does not need it. In other words, we are borrowing money to put into a contingency fund. Surely one way of reducing our borrowings would be to decide that this fund unfortunately does not fulfil the purpose for which it was set up and we will save €1.6 billion by not putting in any more money. In this way we would also save money on interest. Is that not a perfectly reasonable, sensible thing to do at a time when we are in chronic difficulties and are vastly over-borrowed? We could knock €1.6 billion off our borrowings immediately.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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The fund, in the short term, is being used for recapitalisation, so we do need the money, and therefore we will have to borrow it and we cannot save the interest on it. When the Senator says the fund has been diverted from its purpose, or words to that effect, given that this fund was never intended to be used until 2025, he is talking about a temporary use of it for emergency purposes. However, it is an investment which should in principle bring a return. None of the money will be lost during the process, and therefore it is present and within the remit of the original purpose. One Senator, before Senator Ross was present, rejoiced in the fact the NPRF was investing more in domestic institutions than abroad.

There is also the point that there are gross borrowing figures and net ones. This has always been the case. Net debt was always lower than gross debt, although the latter was mostly quoted for public purposes. The net debt was 10% or 12% lower when the NPRF was taken into account.

Photo of Shane RossShane Ross (Independent)
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The Minister is ruling out the possibility of making a massive saving by saying the Government will go ahead and borrow the money on the market to put into the fund. Is that correct? I want to get this right. We are actually going to go out and borrow the money to put into the fund. Is that right?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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What I am saying is that there is no provision in this Bill or, a fortiori, in the principal Act for suspending payments into the fund. The payments into the fund will be needed in any case over the next year or two, perhaps more——

Photo of Shane RossShane Ross (Independent)
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Why?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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——for the recapitalisation process.

Photo of Shane RossShane Ross (Independent)
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There is €16.4 billion minus €4 billion — that is, €12.4 billion — left in the fund. Is that correct?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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As of 31 December 2008, yes.

Photo of Shane RossShane Ross (Independent)
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Would that not be enough for the recapitalisation process? Will we have to pay all that out?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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The Government, in this Bill, has not changed its policy with regard to annual payments into the NPRF. In broad principle I do not think it is a good idea to suspend payments. If we suspend them, when will we ever re-establish them? There is a pensions problem down the line; we have seen that with regard to public sector pensions. I do not think we should consider the virtual suspension or scrapping of the NPRF for short- to medium-term considerations. There is much to be said for maintaining continuity and staying on course even in turbulent waters.

Photo of Shane RossShane Ross (Independent)
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I find that difficult to accept. The Minister says it would be wrong to do that for short-term reasons. However, we have taken a short-term decision by taking all this money out. I do not think the Government yet realises we are in a state of financial emergency.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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Of course we are.

Photo of Shane RossShane Ross (Independent)
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One of the measures taken by Government was to take apart a ring-fenced fund that was never to be touched — a sacred cow. That was set out in legislation and that is why we need legislation now. The fund was devised by a former Minister for Finance specifically to make it difficult to raid and to this end legislation is required to change its purpose. The Government has taken the drastic decision to introduce the requisite legislation, with the result that the fund is a completely different creature and is available for all sorts of emergencies, including recapitalisation of the banks. It seems that it will be available for further recapitalisation as necessary. Given that that decision was taken, it is inconsistent to say that because the fund will be needed in the future for its original purpose, which has now been undermined, we will borrow €1.6 billion on the international markets, to which we are already in hock, and pay a vast rate of interest to save the banks. I am making a point of logic rather than a political argument. If that is our intention, we should be honest about it, but if it is not going to happen we should suspend our efforts to borrow €1.6 billion, thereby saving the interest payments at a stroke.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Senator Ross makes perfect sense. The rate at which this country can borrow has increased dramatically in recent months. It does not make sense to borrow €1.6 billion at a very high rate when we do not need to do so. I cannot understand why the Minister of State is getting hot and bothered about the matter when he should be proposing it to his senior Minister and the Government.

4:00 pm

Photo of Eoghan HarrisEoghan Harris (Independent)
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I am loathe to take issue with Senator Ross, who gave me very good financial advice several years ago. I remain reasonably solvent because I heeded his advice to put a small legacy into a plastic bag inside a Jacobs cream cracker tin and bury it in the darkest part of the deepest woods.

However, I take issue with the nit-picking. I wish the Government was more courageous in its defence of the National Pensions Reserve Fund, which seems to be one of the most imaginative innovations of the former Minister for Finance, Charlie McCreevy. I deplore the constant revisionism that is taking place. I always hate hindsight in people or those who wait for polls before putting their hunches on the market. I cannot stand whinging about apologies. We did what we did and one lives one's life minute by minute. Who in Ireland's history could escape scot free from the never ending tribunals of inquiry? Mistakes were made and obsessing about them comes under the heading of what my mother used to call "a Mhuire, a Mhuire", which is what the women at a wake used to howl and moan. If one moans like that, one becomes impotent and cannot move.

The National Pensions Reserve Fund is a perfectly understandable Irish phenomenon. It was established in the boom times to back up the pensions reserves and, dialectally, to do any other function required of it. The reserve is just a kitty or nest egg. I agree with Senator Ross that it does not make sense to borrow to top it up but I do not care what it is called. It is almost a celebration of our exuberant financial health during the Celtic tiger era. It is our rainy day money and some of it should be spent on recapitalising the banks or on small and medium enterprises. I do not see any reason to nit-pick about what it is called or why, although I agree with the Senator's secondary point about avoiding borrowing.

I do not want to nit-pick the Minister of State on the farm issue but, given that he responded to me on it, I should note that I am not referring to farmers who own less than 60 acres. As even this quantity of land is worth approximately €1 million on the market, they are not in the same position as civil servants who are totally dependent on their income. They have the capital of their farms behind them. Farmers who own more than 60 acres are not paying enough. I recognise that the Minister of State has to protect the interest of his south Tipperary constituents but I come from an urban background and I wish to raise several difficult questions.

Why are farmers not paying towards the farm pension scheme? Why are 3,000 public servants assigned to the farming industry when they could do far more valuable work in other Departments? Why is a region by region balance sheet not published so that we can understand how much an area receives compared to the amount taken from it? Take, for example, a cutback of €50 million imposed on a regional hospital. We would need to know the grants being paid to the farmers in the region before determining the equity or otherwise of the cut. Why are there special laws for farmers in regard to stamp duty? A progressive land tax would help young farmers and take some of the old hang-abouts off the land.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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The Senator should speak to the amendments.

Photo of Eoghan HarrisEoghan Harris (Independent)
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Why not develop an income tax system for farmers which would prevent abuse of the education and student maintenance grant schemes? Why did the taxpayer have to pay for a series of meat scandals? Farmers are not an invincible or pure and virtuous class. They have the same responsibility to pay taxes as the rest of us.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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We should keep to the section.

Photo of Shane RossShane Ross (Independent)
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I will speak to the section.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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I want no further Second Stage speeches.

Photo of Shane RossShane Ross (Independent)
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I wish to correct Senator Harris. The incident to which he referred took place 30 years ago. I was a stockbroker at the time.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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Is that relevant to the section?

Photo of Shane RossShane Ross (Independent)
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It is important that I correct the Senator's comments. His story is correct but the circumstances should be explained. When I saw a few people coming, I feared them becoming clients. To prevent them from becoming my clients, I would steer them as far away from the Stock Exchange as I could.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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That is not relevant to the section.

Photo of Shane RossShane Ross (Independent)
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I did so to ensure they never returned to me.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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We are on amendment No. 2.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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The Senator succeeded.

Photo of Shane RossShane Ross (Independent)
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I do not care what the fund is called but we should decide whether it is an emergency fund. It is certainly no longer a pension fund. Senator Harris is correct in that regard. We should not borrow to put money into a saving fund because it is too expensive to do so.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Get out the USA biscuit tin.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I do not think I can be accused of defending the National Pensions Reserve Fund with insufficient vigour. I refute the notion that it is a sacred cow.

Photo of Shane RossShane Ross (Independent)
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It is one no longer.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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As Senator Harris noted, it was a prudential decision. I hate to think of the circumstances we would face today if we did not have the fund, given the banking crisis that has come on top of the budgetary and employment crises.

Photo of John Gerard HanafinJohn Gerard Hanafin (Fianna Fail)
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Hear, hear.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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It has been our saving grace. It is not the Government's intention to begin using the fund for various purposes. A specific emergency has arisen and acting on it is not inconsistent with the fund's long-term purpose after 2025. It is being made available solely for the purpose of recapitalisation.

The annual 1% contribution is a substantial charge on the Exchequer by any standard. The deliberate structuring of that charge in a way that does not require ongoing parliamentary approval sends a powerful message about the intention to provide for future pension costs and our willingness to structure budgets around that provision. Changing that policy now could be seen as short-sighted and would be damaging to confidence in Ireland at a very sensitive time.

Photo of Shane RossShane Ross (Independent)
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That is Department of Finance gobbledygook.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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The Minister of State, without interruption.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I think Senator Ross is wrong. A more pragmatic point is that because the annual contribution to the fund is not reckoned in the calculation of the general Exchequer balance, it does not impact on Government expenditure. High borrowing costs are a temporary phenomenon and if we succeed, as I hope we shall, in getting the financial situation under control, any additional borrowing costs will subsequently fall. The fund is a symbol of commitment to fiscal responsibility for credit rating agencies.

Senator Harris referred to agricultural inspectors and suggested that more valuable work is done in other Departments. I believe the agricultural sector remains important to this country in particular in terms of the development of the regions. It is an important part of society outside city areas. Senator Harris spoke about the progressive land tax, a proposal put forward by former Taoiseach, Garret FitzGerald in 1986. It is one of the battles I, as an adviser, fought with former Leader of the Opposition, former Deputy Charles Haughey, in conjunction with the Irish Farmers Association. Our purpose was to defeat that proposal which was introduced as a substitute for income tax.

Photo of Eoghan HarrisEoghan Harris (Independent)
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It was a bad decision.

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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Deputy Mansergh won a few battles.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Was Deputy Mansergh a civil servant at the time?

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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He was an adviser.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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My Cork grandmother would certainly have approved of the motto, "Never explain, never apologise".

Photo of Paddy BurkePaddy Burke (Fine Gael)
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We get a lot of that from Senator Harris.

Amendment put and declared lost.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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I move amendment No. 3:

In page 3, before section 2, to insert the following new section:

2.—(1) Any advance contributions made by the Minister to the Fund shall be confined to the provision of funds to certain financial institutions agreed by a resolution of the Houses of the Oireachtas to constitute critical financial institutions to the provision of financial stability and the flow of credit in the economy.

(2) Any institution that receives funds under this Act must publish a quarterly report, to be provided to the Houses of the Oireachtas, detailing their increased lending provided to enterprises and first time home purchasers.

This is a fairly straightforward amendment. Unfortunately, the Government has so far taken a hands off approach to the banks and how they propose to spend taxpayers' money. What guarantees can the Minister of State give us that money promised to SMEs and first-time buyers will be spent as intended? Also, will the Government put before the Oireachtas a quarterly report in that regard, as requested in this amendment?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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It is fair to say that both parts of this amendment reflect a concern, which we all share, to improve the flow of credit in the economy. Under the Credit Institutions Financial Support Act 2008, the Minister for Finance can provide financial support only where, after consultation with the Central Bank and the Regulatory Authority, he or she is of the opinion that there is a serious threat to the stability of financial institutions, provision of support is in the public interest to maintain the stability of the financial system and support is necessary to remedy a serious disturbance in the economy.

These onerous requirements on the Minister are further reflected in the conditions for direction by the Minister in section 8 of the Bill which require that a direction to make investments will be given only after consultation with the Central Bank and the Regulatory Authority and where it is necessary in the public interest to remedy a serious disturbance in the economy and-or to prevent serious damage to financial stability.

A central objective of the Government's bank recapitalisation programme is to support the flow of credit, which is of course critical to continued economic development in Ireland. In this context, the recapitalised banks have agreed to a package of measures which include increased lending capacity to small and medium enterprises and first-time buyers, codes of practice to facilitate the flow of credit and protect consumers and the establishment of specific funds for environmental and seed capital lending. To ensure these lending targets are met the banks will make quarterly reports to the Financial Regulator, with the first report to end March 2009 to be submitted by end April 2009.

As I stated, the Government is aware of restrictions in the flow of credit to viable business while at the same time reports suggest that falling demand for credit is the main cause of reduced credit flow. There may be truth in both explanations. The perception of limited credit availability is damaging at this time of fragile business and consumer confidence. The Government has therefore decided there should be an independent review of bank lending to report within a short timeframe. The recapitalised banks have agreed to fund this independent review which will be managed by the banks, Government and business representatives. The banks have undertaken to co-operate fully with this review and to engage constructively in implementing any recommendations made. Independent consultants appointed to conduct this review will report in four weeks.

I regret, therefore, that I am unable to accept the amendment.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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The Minister referred to an independent review of credit flow. We are all agreed that credit needs to flow to small businesses in particular. We have our own bank in the form of Anglo Irish Bank. I have received several complaints in regard to high interest rate charges and a lack of credit availability to small businesses. Perhaps the Minister of State will address the following issues. First, no independent review in regard to credit flow to small businesses is required from Anglo Irish Bank, which is our own bank. Surely, we do not need an independent review in that regard. Second, what is the up to date position in regard to Anglo Irish Bank in terms of whether credit from it is flowing to small businesses?

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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On that point, I appreciate what the Minister of State had to say on this matter. Bank of Ireland and Allied Irish Banks have two large branch networks throughout the country and are the ideal vehicle through which to get credit flowing again and to provide seed capital for small businesses. While I am delighted to hear there is in place an agreement with the banks following recapitalisation, will the Minister say how much is earmarked in that regard? It is important we know that. Banks will be concerned with maintaining their ratios and improving their profitability rather than focusing on the flow of credit to small businesses. This will cut against the grain. Banks' concern will be for the shareholder rather than small business. We are seeking balance. I would like if the Minister of State could elaborate a little on this and tell us specifically what amount of money is earmarked in this regard.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I have set out already what recapitalisation involves. Senator Burke referred to Anglo Irish Bank as our bank. Anglo Irish Bank is a semi-State bank which is run at arm's length on a commercial basis. It is not an instrument of Government that operates according to different rules from other banks. Anglo Irish Bank will bring before Government a business plan outlining its proposals on lending into the future. Obviously, these will need to be consistent with what we are expecting other banks to do.

Amendment, by leave, withdrawn.

Amendment No. 3a. not moved.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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Amendment No. 3b has been already discussed with amendment No. 1. Is the amendment being pressed?

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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Yes. I move amendment No. 3b:

In page 3, before section 2, to insert the following new section:

"2.—Any senior manager or any executive of a financial institution which is availing of funds under the National Pension Reserve Fund shall return all bonuses which have been collected as part of his or her remuneration in that financial institution over the past three years.".

Amendment put.

The Dail Divided:

For the motion: 14 (Paul Bradford, Paddy Burke, Jerry Buttimer, Paul Coghlan, Maurice Cummins, Pearse Doherty, Frances Fitzgerald, Nicky McFadden, David Norris, Joe O'Reilly, Joe O'Toole, Eugene Regan, Shane Ross, Liam Twomey)

Against the motion: 26 (Martin Brady, Larry Butler, Ivor Callely, Ciarán Cannon, John Carty, Donie Cassidy, Maria Corrigan, Mark Daly, Déirdre de Búrca, John Ellis, Geraldine Feeney, Camillus Glynn, John Gerard Hanafin, Eoghan Harris, Cecilia Keaveney, Terry Leyden, Marc MacSharry, Brian Ó Domhnaill, Labhrás Ó Murchú, Francis O'Brien, Fiona O'Malley, Ned O'Sullivan, Ann Ormonde, Kieran Phelan, Mary White, Diarmuid Wilson)

Tellers: Tá, Senators Jerry Buttimer and Pearse Doherty; Níl, Senators Camillus Glynn and Diarmuid Wilson.

Amendment declared lost.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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I move amendment No. 3c:

In page 3, before section 2, to insert the following new section:

"2.—The Minister shall not direct the Commission to use funds from the National Pension Reserve Fund in excess of €7 billion for the purposes of investing in any financial institution without the consent of both Houses of the Oireachtas.".

Amendment put and declared lost.

Photo of Pat MoylanPat Moylan (Fianna Fail)
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As amendments Nos. 3d and 5 are related, they may be discussed together.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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I move amendment No. 3d:

In page 3, before section 2, to insert the following new section:

"2.—The Minister for Finance shall make a quarterly report to both Houses of the Oireachtas on all financial institutions availing of funds from the National Pension Reserve Fund.".

This is another simple amendment. We might have to make these amendments a little simpler if the Minister of State is to accept some of them. I propose that the Minister for Finance should be required to make quarterly reports "on all financial institutions availing of funds from the National Pension Reserve Fund" available to the Houses of the Oireachtas. We cannot wait for a year. As Senators said earlier, the banks have done immense damage to the Irish economy over recent years. They could continue to do similar damage. There needs to be tight scrutiny of where taxpayers' money is invested, how much of it is invested and how it is used. We are asking the Minister for Finance, who has asked for co-operation from all sides, to respect the elected representatives of the people who sit in the Houses of the Oireachtas. This amendment deals with that, in a sense.

We would like to have a share of the information so that, like the party colleagues of the Minister of State, Deputy Mansergh, we can scrutinise it. If a report is laid before the Oireachtas on a quarterly basis, we will know whether damage is being done. If we find people are not behaving as the Members of the Oireachtas would like them to behave, as they use funds from the National Pensions Reserve Fund, at least we will be able to discuss such matters in a transparent manner. Like those of us who have been elected to the Oireachtas, the public was outraged when it learned of the behaviour of bankers like Mr. FitzPatrick who organised secret wheelings and dealings, loans and forms of embezzlement between financial institutions. If there had been greater transparency and more accurate reporting of what was going on, various issues would have been identified and certain problems would not have continued for as long as they did. Some of the reporting that was done in the past omitted details of the real deals and scams that were taking place. We are calling for the Minister to be required to furnish to both Houses of the Oireachtas quarterly reports on how the funds taken from the National Pensions Reserve Fund are used.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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Like the Minister for Finance, I respect the decisions of this House and the other House. Section 27 of the National Pensions Reserve Fund Act 2000 requires the National Pensions Reserve Fund Commission to submit an annual report to the Minister for Finance "as soon as may be, but not later than 6 months, after the end of each financial year". The Minister is then required to "cause copies of the report to be laid before each House of the Oireachtas". Section 27(2) of the 2000 Act sets out the matters that need to be covered in each annual report of the commission. It provides that each report must include, for the year under review, information on the "investment strategy" being pursued by the National Pensions Reserve Fund Commission in respect of the fund; "a report on the investment return" achieved by the fund; "a valuation of the net assets", including the market capitalisation value, of the fund; an illustration of the changes that take place from year to year; a detailed list of the asset holdings of the fund; information on "investment management and custodianship arrangements"; and details of the "fees, commission and other expenses" incurred in the administration of the fund, including expenses incurred by the National Treasury Management Agency as the manager of the fund.

In compiling the report, the commission must bear in mind the need for open and transparent reporting on the operation of the National Pensions Reserve Fund. This will ensure that the maximum appropriate detail will be made available to the Oireachtas and to the public in general. The National Pensions Reserve Fund Act 2000 provides that the annual report of the National Pensions Reserve Fund Commission "shall include information in such form and regarding such matters as the Minister may direct", thus allowing the Minister to ensure the amount of information provided in the report is satisfactory. In fact, the commission's annual reports have been models of information. They have provided extremely detailed information on the activities and investments of the fund. They could well be taken as an example of best practice in reporting on sovereign wealth funds. I take the view that the commission's annual report is the most appropriate vehicle for informing the House on all investments undertaken by the commission, as well as on all forms of funding provided by the commission to listed credit institutions on foot of directions from the Minister. As I do not see any advantage in providing for a separate report on this aspect of the commission's activities, I do not propose to accept the amendment.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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I am disappointed that the Minister of State will not accept the amendment. The National Pensions Reserve Fund has entered into new territory. As we have said, it is not being used for the purposes for which it was originally established. Annual reporting may have sufficed in the past. I do not question the best standards or practices used in such reporting. Now that we are funding banks that have been involved in extremely dodgy dealings, there is an onus on us to provide for additional reporting so we can know how this €7 billion is spent. We are talking about a huge amount of money. The Minister of State said earlier that a report is needed so he can tell us how much these executives should be paid. It is strange that, in this instance, he is not willing to provide for a report to be published every quarter. I do not believe he needs a report to tell us how much banking executives should be paid. I am asking for a report to be produced every three months so we can know where €7 billion of public money is being spent. The Government's priorities are absolutely——

(Interruptions).

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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I cannot say the right word without offending the Minister of State. I will leave it at that. He can probably think of what I was going to say.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I occasionally provided a little drafting help to Sinn Féin in the past, but I will not do so on this occasion. The report on remuneration will not tell us how much the executives should be paid. It will advise the Government, which will then make a decision taking the report into account. As with any other report, we will not necessarily be bound by any or every recommendation in it.

Amendment put and declared lost.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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I move amendment No. 3e:

In page 3, before section 2, to insert the following new section:

"2.—Any drawdown of funds under the terms of this Act will have sole application to the primary banking activities of either beneficiary and will be confined to the said financial institution's activities wholly within the island of Ireland.".

Am I right in saying that amendment No. 5 was supposed to have been discussed with amendment No. 3d?

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Yes.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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Perhaps Senator Twomey would like to return to that amendment.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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It is okay.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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Amendment No. 3e deals with the drawdown of funds under the terms of this legislation. Sinn Féin proposes that the funds should have "sole application to the primary banking activities of either beneficiary" and should be "confined to the said financial institution's activities wholly within the island of Ireland". In other words, the moneys that are drawn down should be used as we want them to be used. When we suggest that funds should be used for "primary banking activities", we are trying to ensure they are made available as mortgages and car loans and to small businesses. The €7 billion that is being provided by the Irish people, through the National Pensions Reserve Fund, should not be used to lend money to people in other countries. We ask that it be confined to the island of Ireland. Banks such as AIB have many branches in Poland and the USA, for example. Will the Minister clarify whether some of this money could be used in those branches to provide big loans to the Poles or the Yanks? Could that happen to our National Pensions Reserve Fund or are there restrictions? If there are no restrictions, we ask that the money invested by the Irish people in these banks be used for customers here on the island of Ireland.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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It is not possible to impose such chauvinist and protectionist thinking on the National Pensions Reserve Fund. The amendment is not acceptable. The scope of the Bill is such that it allows the Minister for Finance to direct the NPRF commission to invest in a listed credit institution. That means a credit institution listed on a stock exchange which has a trading presence in this country. In view of our commitments as a member of the EU it would be unacceptable and impossible for us to attempt to limit the scope of a direction to activities in this country. Given that the recapitalisation will involve the purchase of preference shares, it is not obvious how that investment could be limited to activities in this country. It is primarily for the boards of the financial institutions to manage their day-to-day activities to make a return on investment and it would be inappropriate for the Minister to interfere in such board decisions or proposals.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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Is the Minister saying the €7 billion can be used by AIB or any other institutions to provide massive loans in places such as New York, Boston, Chicago, Poland, Britain, Scotland and Spain where there are branches of these banks and that there is no guarantee that this money will be spent on the island of Ireland? The Minister says the Bill is to allow us to invest in these institutions but it also contains conditions on the institutions. We should seek to incorporate the spirit of this amendment even if it is not accepted as I have worded it. We are recapitalising the banks to sort out the Irish economy. There is a fear that this could sort out other economies and that if the banks decided to they could invest this money in providing loans and engaging with the markets in different countries outside Ireland.

The amendment seeks to ensure we invest our National Pensions Reserve Fund on the island of Ireland. It is consistent with what my party has said in the past. We should invest this fund on the island of Ireland to get people back to work. We should build the roads, schools and social housing that are needed. That would be an investment in the future of the country. The Government has taken a different decision to invest in the banks. That is its prerogative but it will not get people back to work. At least if we were investing in Irish banks that operate solely with customers in Ireland, not merely Irish-owned banks or banks which are on the Irish Stock Market, it would be one small step in the direction I would like this Bill to go.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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Recapitalisation is linked to a customer lending package to support credit availability. If we want our banks to act commercially to revive their credibility and profitability we cannot ring-fence their commercial activities within the State or the island. That would be contrary to EU rules.

Amendment put and declared lost.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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Before we move on from section 2, will the Minister tell me which section of this legislation covers the possibility of the State giving recapitalisation funding to the EBS or Irish Nationwide Building Society since neither trades in shares? Senator Burke referred to this on Second Stage and I do not remember a clear answer being given.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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The mutuals are not covered in this section.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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Are they covered in a separate section?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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They are a separate issue and are being dealt with by the Government separately.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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Are they not covered by this legislation?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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That is correct.

Question put and declared carried.

SECTION 3.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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I move amendment No. 4:

In page 4, line 26, after "Minister" to insert the following:

"having secured the prior approval of each House of the Oireachtas".

Before funding is given to anybody, both Houses of the Oireachtas should be made aware of it. In the Minister's speech he said: "This will allow the commission to carry out the necessary due diligence on Allied Irish Banks and Bank of Ireland before the actual recapitalisation." That covers section 3. What was the purpose of the fee of €30 million which Bank of Ireland paid to the commission?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I will deal with amendment No. 4 in general first. Section 6 of the Bill allows the Minister for Finance to transfer shareholdings or other assets to the fund. Paragraph (c)(5A) is the counterpart to that provision, allowing the commission to accept funds and other assets. Any shareholding or other interest transferred by the Minister under the powers provided in section 6 of this Bill will count against the normal annual Exchequer contribution to the fund of 1% of GNP. The provision will allow the Minister to transfer shareholdings in a semi-State body into the fund. However, the provision would also allow a different scenario for recapitalising the banks where the Minister for Finance would make the initial investment in the banks under the Credit Institutions (Financial Support) Act 2008 and subsequently transfer the shareholding to the NPRF. This is a contingency provision just like the provision allowing the Minister for Finance to direct the commission to underwrite a share issuance in a listed credit institution. There are no plans to use the provision but it is generally a wise move when drafting legislation to allow the possibility of an alternative approach to an issue.

The amendment seeks that approval of both Houses would be required when the Minister transfers funds or assets to the commission other than from the central fund. To the extent that this power is used in the context of recapitalisation, the Minister would also be giving a direction to the commission to invest in a listed credit institution in the extraordinary circumstances envisaged in section 8. The Minister for Finance has undertaken to inform the House in advance of any direct investment in a listed credit institution subject to any requirements of confidentiality. He made the point that he could not guarantee it in all circumstances. I am satisfied that the concerns motivating the amendment have been adequately addressed and I regret that I am unable to accept it.

The €30 million is a standard arrangement fee payable by a body receiving an investment.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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Will the Minister explain that?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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It is a standard fee for a body that is receiving an investment. It is self-explanatory.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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Bank of Ireland is paying the NPRF €30 million to receive State funding of €3.5 billion?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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It is paying the Exchequer.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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The Exchequer is receiving the €30 million so it has nothing to do with the due diligence report carried out by the NPRF?

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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The due diligence takes place before recapitalisation.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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On the due diligence that will be carried out before this, how much of the other reports will be taken into account? Does the PwC report come into this, does the Farrell Grant Sparks report come into this or does the National Pensions Reserve Fund itself do a complete, different due diligence report?

In the past six months we received very variable ideas of how solid or otherwise are the banks being recapitalised. In October last, the CEO of AIB dismissed the Government having any role in recapitalisation and now there is legislation being brought in that will allow for an unlimited amount of funding to be handed over to both of these banks.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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Due diligence is a normal procedure when making an investment and the NPRF is obliged, simply as an investor, to do due diligence.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
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That is about all we get.

Amendment, by leave, withdrawn.

Amendment No. 5 not moved.

Section 3 agreed to.

Sections 4 to 13, inclusive, agreed to.

Title agreed to.

Bill reported without amendment and received for final consideration.

Question put: "That the Bill do now pass."

The Dail Divided:

For the motion: 24 (Martin Brady, Larry Butler, Ivor Callely, Ciarán Cannon, John Carty, Maria Corrigan, Mark Daly, Déirdre de Búrca, John Ellis, Geraldine Feeney, Camillus Glynn, John Gerard Hanafin, Cecilia Keaveney, Terry Leyden, Marc MacSharry, Francis O'Brien, Fiona O'Malley, Ned O'Sullivan, Brian Ó Domhnaill, Labhrás Ó Murchú, Ann Ormonde, Kieran Phelan, Mary White, Diarmuid Wilson)

Against the motion: 13 (Paul Bradford, Paddy Burke, Jerry Buttimer, Paul Coghlan, Maurice Cummins, Pearse Doherty, Frances Fitzgerald, Nicky McFadden, David Norris, Joe O'Reilly, Eugene Regan, Shane Ross, Liam Twomey)

Tellers: Tá, Senators Glynn and Wilson; Níl, Senators Cummins and Twomey.

Question declared carried.