Wednesday, 11 November 2009
National Asset Management Agency Bill 2009: Report and Final Stages
I move amendment No. 1:
In page 16, between lines 35 and 36, to insert the following:
"2.—Where NAMA proposes to establish a Special Purpose Vehicle to purchase, manage or dispose of assets , it shall do so only in accord with regulations published by the Minister and approved by the Oireachtas which shall include, but are not
(a) the suitability of investors,
(b) the suitability and behaviours of members of the Board,
(c) the finance, planning accountability and reporting,
(d) the manner in which the Special Purpose Vehicle shall discharge its functions under this Act,
(e) the method of determine the appropriateness of paying a dividend or bonus to investors, and
(f) its consistency with the statutory objectives of NAMA under this Act.".
I am only moving this amendment on Report Stage because we felt it was a good amendment that the Minister would not accept on Committee Stage. The Minister said he thought that the proposal to get the Irish people involved in the ownership of the private part of the SPV was not such a bad idea. I decided I would table this amendment on Report Stage to see if the Minister had any further comments on that. Making the Irish people the owners of the private part of the SPV would help to legitimise this whole project in the next few years.
The EUROSTAT position on the balance sheet treatment of NAMA and the SPV took account of the balance between State and private engagement in the proposed organisation structure. The proposed amendment could result in EUROSTAT changing its preliminary decision on the treatment of NAMA operations in the national accounts. The amendment also runs the risk of making the SPV so unattractive to any investor that no suitable investor can be found.
I have repeatedly explained that we should welcome the EUROSTAT preliminary decision, as a result of which the acquisition of the assets from the institutions by NAMA will have no effect on our general Government debt ratio or our general Government balance. This puts the Irish asset protection scheme on an equivalent footing with bank support schemes in other member states that are also being recorded off balance sheet. The main advantage of this is that it minimises the danger of the markets and international investors misinterpreting our headline debt or budget balance ratios when comparing us against other EU member states. However, I have also repeatedly stated that the statistical treatment does not change the basic fact that the operations of NAMA will lead to an increase in the amount of the State's potential liabilities. Neither should it be overlooked that these liabilities will be met by a countervailing asset holding.
It is intended that the master SPV will be established by the NAMA board to conduct the purchase, management and disposal of loan assets identified and valued by NAMA. The legislation provides a robust process for the appointment of board members, requiring that they have senior level experience and expertise in relevant areas. I have indicated that I would consult the Opposition leaders on the appointments to the board in the interests of creating all-party confidence in the board. I have already received a letter in that respect today from the leader of the Labour Party.
It is an executive matter for the expert board to allow NAMA to carry out its business in the most efficient and effective manner. We must be careful that in creating a board to carry out a complex commercial task, for which the members will be accountable, we do not then undermine their ability to carry out their duties and functions by the imposition of statutory regulations and restrictive rules which prevent them acting in a commercial manner.
A detailed legal shareholder agreement is being drawn up, and that will be put in place to ensure that at all times, the NAMA board has a veto over any master SPV actions or decisions. This will protect the NAMA board itself, which has significant responsibilities, and it will also be in the interest of Irish citizens. I intend to issue a direction to the board of NAMA that not a single decision should be made or allowed to be pursued by the master SPV which will not be in the best interests of achieving the objectives and purposes of the NAMA legislation. Following the Dáil debate, a number of amendments were made to reflect the role of the master SPV in the NAMA group entities. I outlined those amendments on Committee Stage, so I will not re-iterate them now.
I move amendment No. 2:
In page 16, between lines 35 and 36, to insert the following:
"2.—(1) There shall be established a "Register of Derivatives" on the commencement of this Act, which shall include information on derivatives obtained under this Act and shall be detailed in the annual accounts of NAMA.
(2) Information to be recorded under subsection 1 shall include, but is not limited to:
(a) the market value of the derivative
(b) the name of the counter party to the derivative, and
(c) the date of maturity of the derivative
(d) such other information as the Minister from time to time directs.".
This arises from some points that I made on Second Stage and during the discussion in this House a few weeks ago about the NAMA business plan. The majority of the discussion that we have had on the assets for which NAMA will be responsible has focused on the loans for the properties in question. The NAMA business plan also makes clear that when this organisation is set up, it will be taking on responsibility for a huge amount of derivative contracts in respect of the properties for which loans were given. The value of these particular contracts is between €16 billion and €18 billion, according to the business plan.
This is a gigantic amount of money and is also based on derivatives, some of which have been at the heart of the difficulty faced by banks all over the world. These instruments had complicated interrelationships as one bank would own a certain amount while the counterparty would be another bank. Nobody really understood their value and how they would perform in light of a change in market conditions.
Given the amount of money involved and given the difficult recent track record that these tools have, the Bill as set out does not have too much to say about them. The word "derivative" is only mentioned twice in the entire Bill. It is mentioned as part of the definition of a credit facility at the beginning of the Bill, and the examination of derivative contracts to allow NAMA to place a market value on a bank asset is mentioned in the section dealing with long-term economic value.
My proposal is an attempt to shed more light on the value of the derivative contracts for which the State will be responsible. The business plan mentions the currency breakdown of the derivatives and it makes the point that the derivatives are mostly in respect of currency hedging for property acquisitions. The plan mentions little about their content and what could happen in the future. This proposal is to establish a register of derivatives on the commencement of this Act. This document would contain four pieces of information. First, it would indicate the market value of the derivative contract, something that is easy to establish. One only has to look at a computer screen to get the answer to that. Second, it would name the counterparty to the derivative. That is particularly important because in the past 18 months quite a few hedge funds have gone out of business for reasons with which we are familiar. It is worth knowing with whom we will have those counter deals. It would also be worth establishing how many of the €16 billion of these positions are between Irish banks. Third, it would indicate the date of maturity of those and when they will expire. Fourth, it will indicate any information the Minister will want to provide on those contracts.
Speakers from all sides of the House have frequently said we cannot have too little transparency in this area and that the lack of transparency, information and clarity was a contributing factor to the difficulty in which we find ourselves. The misuse and lack of understanding of those very tools have caused massive difficulty and I am proposing an amendment that will allow us understand the State's exposure to them, the contracts and with whom we have that exposure.
An interesting amendment. NAMA, like the National Treasury Management Agency annual report or any bank annual report, will publish the type of derivative, the nominal value of the derivative, the mark to market value of the derivative and all of those values as of the financial account reporting date. NAMA will also publish the maturity date of derivatives by calendar year, for example, 2010, 2011, 2012. All that information will require to be published in the annual report, which is the current practice with the NTMA, but it is not appropriate to publish the name of the counterparty to the agency, whether the counterparty is categorised as a borrower or a lender, in sharing this particular risk in regard to money. It is not appropriate to publish the name of the counterparty as that will be the name of the underlying counterparty. The information will be subject to the approval of the form of the NAMA accounts and audit by the Comptroller and Auditor General. The information in the amendment - the market value, the date of maturity and other information - will be contained in the annual report but the identity of the counterparty to the derivative is not disclosed under current NTMA practice.
I did not raise it with the Minister. It is an important clarification. To repeat what the Minister said, this information, with the exception of my suggestion for the counterparty, will be published as part of the annual accounts NAMA will furnish.
I move amendment No. 3:
In page 17, between lines 17 and 18, to insert the following:
"(viii) to ensure that the measures taken in this Act restore confidence in the banking sector are reciprocated by lending by the participating institutions to members of the public generally in their private capacity and to small and medium enterprise in particular,
(ix) to ensure an orderly property management strategy over a ten year period following the enactment of this Act,
(x) to recover the maximum funds for taxpayers by ensuring that the principal and exclusive purpose of NAMA is to recover the maximum funds possible for the assets acquired by NAMA under this Act, and
(xi) to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis.".
We discussed this issue on Committee Stage and the proposals are self-explanatory. Does the Minister have any plans to publish a ten-year strategy on how NAMA will work out and how it will dispose of its property? The concern is the size of NAMA. NAMA is massive. It will be the biggest property company, and probably the biggest development company, in the country. It will control significant assets for a number of years. Once this legislation has been passed I would like to know the Minister's plans to provide more information on the future of NAMA in the next decade. The purpose of this amendment is to insert a requirement in the legislation seeking that.
I second the amendment. I support what Senator Twomey said in regard to the amendment. One of the points made in the discussion on Committee Stage was that while everybody here is emphasising that the NAMA institution must take all steps possible to ensure this does not happen again, this amendment proposes that it be put on a statutory footing as part of the purpose of the organisation.
The second point I would emphasise, which Senator Twomey has touched on, is that paragraph (viii) gets to the heart of our discussion in terms of needing to find a way of providing all the guidance we can to the institution and that the huge investment going in from the taxpayer leads directly to greater liquidity and lending to small and medium-sized businesses.
I refer to paragraph (xi) which states: "to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis". The Minister has a letter from the Frontline Alliance. I have just come from the streets. I walked passed them, and most of them recognised me. I am one of their strongest critics but what struck me was the lack of rancour, the discipline and the decency with which they conducted that march.
The Minister has spoken eloquently to me in the past about his admiration for the public sector. In terms of the least we might do out of this crisis, we are now having to ask the front line people in the public sector to give back some of the inflated benchmarking agreements that were made in the bubble for which they were not responsible. That is a hard task. It has to be done, and I am not in any way reneguing from it. The public sector will have to take a cut but I believe the Minister and the House would join me in expressing the wish that the reward for this cut should be that we determine to reform the public sector, make it fit for purpose and create conditions which inspire enthusiasm, energy and a sense of career purpose in those who will work in a renewed and enthused public sector. I know this is the bottom of the well, so to speak, but out of all periods of recession come great reforms. I hope the Minister will consider, in his other capacity later, on foot of trying to ensure these conditions do not recur, what Senator Norris said this morning about the need to look after the people in the public sector and the private sector whose backs are against the wall and who are terrified in regard to negative equity, and to look after them in the workplace as well as those out of work. I do not want to do a Pollyanna on it but I believe the public sector is now having to carry some of the consequences from which its workers benefited but of which they were not the authors. The least we might do is give them a reformed public service that is fit for purpose.
I support the amendment but want to raise questions on paragraphs (ix) and (xi). Paragraph (ix) states: "to ensure an orderly property management strategy over a ten year period ....". Paragraph (xi) states: "to take all the necessary steps to prevent a recurrence of the conditions that brought about the financial crisis". I raised this issue on Committee Stage yesterday and, unfortunately, the Minister was not present at the time but the Minister of State, Deputy Mansergh, was present.
The issue I raise is not unrelated to amendment No. 29 by my colleague, Senator Coghlan, who also raised it on Committee Stage. It concerns property acquired by NAMA. Obviously, such property will be taken in for a reason, say, if there are over €5 million in borrowings and they are related to housing, land and so forth. There are quite a number of developers and house builders in that bracket. I heard a house builder say on a radio programme that they could end up in NAMA; I speak about the likes of McInerney, which specialises mainly in house building. I put the question to the Minister of State, Deputy Mansergh, yesterday, that if that company has a performing asset on which equity has built up, it would be unable to use that equity as collateral for a further development. The Minister of State replied that it could use the equity but it would not be for housing. If it is not for housing then it must be for commercial use and there is probably an over-supply of commercial property in the State also. The main business of the likes of McInerney is house building and if what the Minister of State, Deputy Mansergh, stated is correct, then McInerney and companies like it will not be able to go forward in the business of building houses unless they can borrow from NAMA, which will have funding of up to €5 billion available for such work. I want the Minister, Deputy Brian Lenihan, to clarify this important point. It is the kernel of all of this. What we will have, in effect, is the State controlling house building and housing right throughout the length and breadth of the State, if a company which may be in NAMA cannot use its built-up equity for the purposes in which it specialises, namely building houses. It is an issue at which the Minister must look.
I would like to hear the Minister's views on it. Unfortunately, I will not be able to contribute subsequently as this is Report Stage. However, I draw his attention to the remarks made by the Minister of State, Deputy Mansergh, that the company would be able to use the equity, but not for housing.
This amendment is like a mission statement. I do not see it doing the slightest damage, but it is really rather exhortatory.
I want to take up what my distinguished colleague, Senator Harris, had to say, and welcome it strongly. He has been a harsh and trenchant critic of the Frontline Alliance for clear and idealistic reasons. There was no nastiness in it. He felt it passionately. Having seen these people and their response, he feels these are not dangerous Jacobins; these are ordinary and decent people.
I also saw that march and I was impressed by them. They asked would I be with them on the 24th and I replied that I sincerely hope it will not be necessary for them to be there. I hope they can be persuaded and that their plight can be looked at because Frontline Alliance services are at the delivery point of the most important services to the average citizen.
Frontline Alliance, in its little leaflet, gives a couple of examples, such as the present position in health. I am sure the Minister will be aware of this. This is why it is so important to get this thing done properly. I agree with the idea that we must take all necessary steps to prevent this because what is already happening is so awful, and there is more to come. In health, gone are 6,000 staff, 4,000 hospital beds and 300 front-line posts, and there is the cutting of patient transport and ambulance services, the increasing of accident and emergency fees to €125, the increasing of thresholds for medical cards and drug refund schemes, and the means testing of home care.
I am all in favour of means testing everything, but it is all a question of where the bar is set. It could be devilishly unfair if it is set wrong, but I have no difficulty with means testing. I realise that would exclude me from many services. I do not care a damn; it never bothered me.
On crime, 350 Garda stations are closing. My local police station, Fitzgibbon Street, is being closed. It is unbelievable that with a serious crime problem this major station in the heart of the city of Dublin is being closed. The Garda states the station is closing for redecoration, but I did not come down the Liffey in a bubble. The leaflet also refers to such matters as 800 front-line Garda posts gone, the shelving of the new urban CCTV, the closing of 40% of the courts.
Of course it is. It is part of the problem. It is exactly related to paragraph (xi) in the amendment, and I am taking up from what Senator Harris stated.
I just want to state the following three sets of figures on the deduction since the April budget. On a salary of €31,500 per annum, for the average PAYE worker the deduction is €945 per annum, but for the front-line workers it is €3,345 per annum or €195 per month, which is what most of us used pay on a mortgage. On a salary of €45,000, for the average PAYE worker the deduction is €1,350 per annum or €112 per month, but for a front-line worker - these are nurses, fire brigade staff, gardaí, ambulance workers - it is €4,100 per annum or €342 per month. That is real pressure. That is why I so much agree with Senator Harris and why I feel strongly that we must never allow this to happen again.
I congratulate the Minister on his work to date and on his endeavours.
On the purpose of the Act, we all are aware this is a complex area. I spoke following Senator Burke on the same issue yesterday. The language we all are getting to know about performing and non-performing assets, loans and transfers, SPVs and other stuff is quite complex.
In amendment No. 3, on restoring confidence in the banking sector, orderly property management strategy, maximising funds and steps to prevent recurrence, will the Minister clarify the position on a loan transferred in light of what has been stated about any equity value in a performing asset, or even in a non-performing asset depending on when it was purchased? Will the Minister simply clarify that it is the loan rather than the asset that is being transferred, the management of the loan continues with the financial institution, the conditions associated with that - unless a new agreement has been reached - remain in place, and the asset, or the portfolio, depending on the value and the size - is managed as it was prior to NAMA?
We are in a complex area, uncharted waters. As Senator Harris said, there is concern among certain groups in society who feel they are carrying the can. There are other groups within the financial institutions who are pointing the figure at NAMA and stating that the rules are being changed because of the transfer to NAMA.
I say this equally for the benefit of the Minister. My understanding is that there are a number of accountancy practices which are not able to grapple with what I stated here on where what is and who deals with what. Some state - this might come from some of the financial institutions along with the accountancy practices - one's loan and portfolio has been transferred. That is not my understanding and the Minister might bring clarity to that.
Maybe people are using this new tool as a vehicle to get out of a particular position or to change what has been prior to the birth of NAMA. When we get into the other amendments the position can become somewhat confusing. Will the Minister clarify that where people have a loan, it is the loan that is transferred, the management remains with the financial institution, and that the benefits, if any, arising from the portfolio, the performing asset or the non-performing asset can be utilised by the promoters behind the portfolio or the asset base. Will he clarify that NAMA will only deal with the financial institutions from which it takes the loans and there will be no direct contact with the customers of the financial institutions whose loans are being transferred?
A point was made earlier today that the banks did not intend to honour an €11 million cheque paid out by a certain company for a contract because of the NAMA commitment. If NAMA is not a working body at present, how can the banks make that statement? The lending institutions must be careful about what they are doing at this time. It is not right to use legislation that has not yet left the House and for institutions to make excuses that they cannot do this or that because of NAMA. However, the Minister has just cleared up this point.
Second, Senator Burke referred to McInerney Homes, which is a house building company. It will have to make a business plan, which it will presumably put to NAMA. The main reason NAMA might hold up some of its developments is because it would not be able to sell some of the houses on the market. That is the reality at present and why we have NAMA in the first place. We cannot blame NAMA for the fact there is no market. In fact, NAMA is to achieve the opposite in that no fire sales will take place because NAMA will control most of the property market. This is a good thing in a way, because property will increase in value much more quickly because of NAMA. When there is a scarce commodity, which property will be, the market certainly moves more quickly.
I do not accept that Senator Burke's point is correct. If whatever company goes into NAMA has a good business plan, it will be able to continue to work within NAMA. However, such companies will have to have liquidity and credit through NAMA. It will be critical that NAMA deals with business plans quickly because, if it was not to deal with them on an urgent basis, we could find that we would be putting many companies that could stay in business out of business. That is a key point.
The three arms of NAMA - business, credit and the special purpose vehicle - must work very closely together. If they do not, we would certainly have a problem. I ask the Minister to clarify what kind of mechanism would be put in place to deal with the business plan and make sure it is not being frustrated in the system, as we find with regard to red tape in legislation whereby business cannot function. I hope the Minister can deal with those questions.
What the Minister is trying to do through NAMA is restore confidence in the banking system and, through that, in the economy. With that in mind, I want to ask about his response to material linked to this amendment concerning confidence in the Minister's projections that has been put in the public arena by Mr. Peter Mathews - I know the Minister has looked at this material. I would like to hear the Minister's response to what Mr. Mathews says in regard to the assumptions underlying NAMA. He suggests that the assumption there would be 100% recovery on the €30.8 billion of performing loans is completely wishful thinking, bordering on fanciful, and the assumption that there will be 50% recovery on the €46.2 billion of non-performing loans is equally fanciful. He goes on to quote what the Minister's adviser, Dr. Alan Ahearne, said last year in regard to the banks, namely, that they should sell these loans at fair market value.
I raise this point simply because it is very much in the public domain and has been circulated to all Senators and Deputies. I am genuinely interested in this. We were talking about whether NAMA would make a profit, and there was also some discussion on this point earlier. On Mr. Mathews's figures, he suggests NAMA will make a loss of between €12 billion and €18 billion, and that the assumptions the Minister is putting forward in the business plan and elsewhere are quite fanciful. I would like to hear the Minister's response to that today. Quite a number of papers have been presented to all of us by this gentleman. The question is linked to this issue of confidence and the desire to achieve confidence in this plan. Will the Minister address the House in regard to the points that have been made about the potential losses of between €12 billion and €18 billion?
I want to place on record my appreciation and admiration for the Minister for being so attentive to this legislation. I have listened to almost all the contributions. Although the members of the largest Opposition party, Fine Gael, have strong reservations about the Bill, they have endeavoured to improve it to the best of their ability. I commend them and the Labour Party for their efforts. They could have ignored it and walked out, saying they were not going to participate in the legislation. They have done better than that because they have given the opportunity to the Minister to consider aspects of the Bill, which has been very worthwhile. I compliment all our colleagues in the Seanad on what has been an extremely good and very informative debate. I am sure the Minister would agree we have done the State some service in this regard.
I wanted to clarify the situation referred to by Senator Harris. The Minister kindly received and read the letter. The point made very clearly to me by the people involved was that they hope the Minister acts on the letter. I sent a text back to them on that issue.
I know the difficulties, as we all do. Some young people in the public service are not on the maximum income and have committed themselves to very expensive loans through the activities of the banks, which the Minister is now resolving. They are landed with negative equity and the danger that they will have a reduction in their pay, which will make it difficult to repay the loans. The Minister understands and appreciates that. This was one of the points they made to me. Another point they submitted to the Minister is that a reduction in overall salary has an effect in regard to the long-term pensions for retired members. These were the issues, although I know the Minister is burdened with many issues.
The guarantee scheme which the Minister introduced in September 2008 will extend to September 2010. I ask the Minister when summing up to clarify the situation. Concern has been expressed to me by ordinary savers who have funds which are guaranteed under the scheme. I was asked recently where it was best to put money, whether in the post office or another institution which would really guarantee future deposits. While I know there is no danger to deposits because the guarantee is in place, I ask the Minister to state clearly that the guarantee will be extended continuously with regard to deposits.
This issue is linked to NAMA as it is all linked to the banking situation. Without the Minister's quick action last year, we would have been in dire straits and the banking system would have collapsed due to a run on funds. The banks know that, and know the Minister responded extremely efficiently. To my knowledge, it has not cost the State. The charge to the banks for the guarantee introduced last year has resulted in some funds accruing to the Government. The only group in the House that opposed the guarantee was the Labour Party. Will the Minister clarify the points I have raised?
With regard to a point I made on Second Stage, there is a role for the OPW in carrying out the work of NAMA. The Minister's Department has direct responsibility for the OPW. It is the largest architectural practice in Ireland and has done most extraordinary work for the country. It has been decentralised to Trim. It has the capacity to manage estates and properties of architectural and heritage value. There is no need for any amendment to facilitate the OPW because the Minister has full power over the organisation. The OPW has a role to play and it would be worthwhile investigating where it could be of assistance to NAMA in carrying out its responsibilities.
I received very good advice on this matter. I will not read it because I was asked not to. The country needs a solution and NAMA is the only one available currently. The legislation establishing it needs to be implemented. The United States took a similar approach in the 1980s, as the Minister knows, and it proved successful and paid off. The US taxpayer actually won because of the decision taken at the time.
To some extent, the issue whether NAMA will pay more than the current market price is not the most important. Whatever excess it might pay will be more than recouped once economic activity resumes. The State will generate an additional return in the form of an equity return on its shareholdings in the banks. To my mind, it could be a win-win situation. The Minister would not have gone down this road in the first instance if he could have avoided it or if the banks could have solved the problem.
The banks will attract more funds. There is considerable funding available, irrespective of whether one believes this. Those who made money on the sale of properties and land, including builders, have money. Some of this money is still available and if the Minister could make it attractive for it to be invested, be it in Anglo Irish Bank or a bond, it would be tremendous. I have been made aware that, through the special purpose vehicles, funds from private sources can be raised.
I commend the Minister on introducing the Bill. It is receiving tremendous support from the public which is impressed by the Minister's handing, command and knowledge of the issues involved. I compliment him and his officials who have done tremendous work on NAMA. I have been a Member since 1977, although I had a break for ten years, and in that time I never dealt with a more important Bill than this one. All we can do is wish it success. It will be successful in the longer term.
There has been a long series of interventions. Senator Twomey, who moved the amendment, inquired into the nature of the business plan. The interim business plan that was discussed is simply an interim draft plan. The final plan, which will be a ten-year plan, will have to be approved by the board of the agency when it is appointed.
The interim business plan is a draft and an indication of the character of the final business plan. The final one will be prepared and submitted to the board of NAMA for approval. This is the position on the business plan of NAMA and its strategic direction.
Very little was said about the amendment. I will deal with the various points raised. Quite a number of the amendments proposed are already encompassed by various objectives or functions of the legislation or else they are surplus to legal requirements. A proposed purpose of the legislation that caught Senator Harris's eye is, "to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis". While it is not appropriate to include this in legislation, it is entirely appropriate that this should be an objective, not just through NAMA but through the reform of the regulatory system and public financial system and the restructuring of the banking system. There is a wide range of action points.
The mandate of NAMA is very clear. I do not want to reiterate the argument on estimating and fixing the long-term economic value based on appreciation of 10% or 15% if one takes the subordinated bonds into account. We will not agree on this but, on any view, it is fair to say modest assumptions are being made. What is envisaged through NAMA is a sustainable construction industry rather than the bubble-driven one we witnessed in recent years. We can agree on that.
The objective of national economic and social development is written in as a compelling need that NAMA must address. This accommodates the Senators. This matter was raised by the Labour Party in the Dáil and it is covered by the legislation. It is important that it is stipulated within the legislation that the board of NAMA should have regard to the social and economic development of the country.
The amendment deals with the question of lending. We have included in the Bill specific powers to give guidelines on lending and to police them. The compelling need NAMA must address is the need to facilitate lending. Clearly, NAMA is not a lender. Reference is made in the amendment to an orderly property management strategy. The business plan will address this.
The debate covered more than the amendment. Senator Harris stated he was discussing the current economic position with a number of public sector workers who are engaged in front-line operations and a day of action today. It is important to record, because it has not been part of the debate, that public servants have been subject to a substantial reduction or adjustment in their salaries already. I have been very struck by this since the supplementary budget in April. The average reduction is approximately 6.9%. It was a little over that in the initial measure announced in March but it was adjusted in the supplementary budget in April. The average deduction among all public servants has been 6.9%. It is higher for those further up the income scale and a little lower for those further down. That is a substantial adjustment. The argument will be made that many in the private sector have been subject to similar adjustments. This is true but not all have.
I deeply appreciate the services provided by public servants. It is important to note this in the debate but this does not absolve us from the need to ensure our public services are delivered in an efficient way that is cost-effective for the taxpayer. While the costs of many goods and services have been falling during the crisis, the cost of public goods and services has not. This has become an increasing burden on the rest of the community. There is a responsibility, not just on the central Government but also on all parties concerned with local government, to address the excessive cost structure in the public sector. The economy cannot sustain it. This is all I want to say in reply to Senator Harris. I agree with him on the importance of and the work done by gardaí, nurses, firemen and many others in the emergency services. I am glad he was able to report to the House that the debate was conducted in a civilised way. There is growing public awareness that we must make a very substantial adjustment. We will be debating this in the weeks and months ahead.
Senator Paddy Burke was concerned with the question of equity and the builder who has equity left in a property and who may find it difficult to obtain a loan. If the builder has equity remaining, he should be able to obtain facilities from the banks. If the builder wishes to obtain facilities from NAMA, there is provision under the legislation for €5 billion which will be concentrated on incomplete developments.
That a loan will be transferred to NAMA does not mean a bank will not be able to extend credit to a reliable borrower in that context. It is important to make that point. Again, this relates to the working out of the loan and this operation. Let us be clear: the current financial model for construction and development in Ireland is broken. One of the reasons for this - this is not the fault of builders or developers - is that it is built on the enterprise and industry of the individuals or the companies they incorporated as private companies and dependent upon one development to fund the next. That is not a structured financial model that will ensure the construction industry will revive to a sustainable level. The reason for the drop in asset prices is this is an unsustainable financial model to restart the construction sector. It is worth noting that in other jurisdictions there are available a far wider range of financial models to fund the construction sector. In many countries the sector does not depend on one development to fund the next. Many construction companies in the United Kingdom, for example, have gone to the market and raised the funds which form their capital base. This allows for a more structured investment in a company over time.
Senator Burke referred to a particular company. I do not wish to go into the difficulties of an individual company but that company is organised as a public limited company, PLC. Many of the UK building companies are organised as public liability companies. What has happened in the course of this crisis is that the banks have taken their shares and taken on responsibility for working out the management of companies. It is not possible to do that in this jurisdiction because the bulk of the building and construction activity here covering two third of the NAMA loans located in Ireland was undertaken by private individuals or private individuals who incorporated small companies in which the corporate equity contribution is uncertain.
We need more flexible models. NAMA, in amassing this land bank and the amount of loans it will amass, will, when it enforces securities, undoubtedly, be in a position to attract funding into the sector. I have heard many CIF representatives and individual builders and developers make the point made by Senator Burke, namely, that they are concerned they will not receive credit under this system. However, the reality is that they are not receiving any credit under the current system which for funding the construction sector in Ireland is a broken model. It is entirely dependent on the equity of the last development. This will not fund a return to sustainability in the building sector. We are all aware the number of houses that will be constructed here this year and next could be as low as 10,000. The vast majority of these houses will be accounted for by once-off developments rather than systematic estate-type developments.
I have been at pains throughout this debate to make it clear that I am not advocating a return to the conditions where we were constructing approximately 70,000 or 80,000 houses a year. Most of the data on this subject in the Department of the Environment, Heritage and Local Government suggest we have an ongoing need for 30,000 to 40,000 house units a year, which we will have to meet. This will require a sustainable construction industry. The current financial condition of the sector and its financial model will not secure this objective, which is a separate argument for the agency, on which I have not yet embarked upon much in public debate, although I mentioned it at a committee meeting in August. Naturally, there were other topics of greater interest to members, in particular, protection of the taxpayer which should be a legitimate and proper concern for public representatives. I thank Senator Burke for raising the issue, as it raises many important points on this legislation.
Senator Norris echoed the views of Senator Harris on the economic crisis. While I have commented on the matter, I would make the point that we have three distinct problems: we have our difficulties with the public finances - our receipts are far lower than what we spend; we have a problem generally with our cost structures which allowed us to become uncompetitive - by 2007 our unit labour costs were the highest in the eurozone, while our third problem is that we have a banking crisis. Unfortunately, each of these problems, although distinct, is related and must be tackled to put this country on the road to economic recovery.
What the Minister says is useful. I will communicate it to the people, given that the Minister was particularly sensitive in communicating the information to Senator Harris. I believe the people concerned have a website and this reply from the Minister should be forwarded to them.
Senator Callely raised a number of specific questions which are important. Like Senator Burke, he is also reflecting, not so much on what builders and developers are saying as builders and developers but on what they are saying as customers of financial institutions. As Senator Butler correctly stated, NAMA does not yet exist. It has assumed an existence in the public mind which it does not yet have. It does not exist for a legal or any other purpose.
Senator Callely sought clarification in regard to what was being transferred to NAMA. The asset which is transferred is the bank loan, not the collateral. If NAMA has to take enforcement action, action will be taken to secure the collateral and eventually sell it. What is transferred initially under the legislation is a bank loan. The bank loan agreement remains in place. NAMA steps into the shoes of the banks and has the same rights and duties as the bank in regard to the loan. That is the position of the customer as against NAMA.
Senator Callely asked if the management would remain in place. It will not remain in place. I am glad the Senator raised that issue as it is not a topic that has come up in this debate. Clearly, if we buy the asset, we must manage it. NAMA will manage the assets. As regards the larger exposures - of which there are a number, as Members will be aware, some of which have been mentioned in the debate - these will be centrally managed by the agency. They will not be managed by individual banks. The banks will lose all responsibility in the management of large exposures which run to substantial amounts of money. Typically their loans can be located in a number of financial institutions. The particular arrangements surrounding them are - I do not like this verb, although it is used by my officials - bespoke, namely, they are distinctive to the borrower in question. As such, they require careful centralised management.
It is envisaged that NAMA will take direct responsibility for a block of loans owed by the most substantial borrowers whose loans are being transferred. The Government's decision to establish the agency was influenced by the existence of this block of borrowers who cross the financial institutions. I am sure many Senators have heard in the public debate the argument that a separate vehicle should be established in each bank and that each bank should be forced to work out its own loans in isolation from the other banks. However, the litigation referred to in this and the other House illustrates that a large number of financial institutions are involved with the more substantial borrowers. It will be impossible to manage and work out the position if one does not have a single agency managing the problems, taking a collective view on the loan portfolio right across the institutions, taking the necessary enforcement action and managing it in one parcel. That was one of the arguments, although not the only one, for the single agency approach. In response to Senator Callely, that is the position on the larger exposures. The board of NAMA will determine at what level this will happen and clearly will have regard to the degree of cross-collateralisation within the system.
In regard to the majority, in number, if not in value, of loans, NAMA will take a management role in respect of them but the actual loans will be managed by the original banks in which they originated. The bank, in respect of these loans, will be working for NAMA. Under the relevant EU rules, the State will be obliged to pay a management fee to the financial institution in respect of that loan. Senators might legitimately inquire about the reason we took this route. Reference was made by Senator Callely and others to the experience of the United States. While, in respect of the United States Savings and Loan crisis, there was a successful outcome in financial terms, a huge staff and bureaucracy were retained to manage the loans in question. That made the working out of the loans very expensive. We are back to the argument we had about professional fees. No matter how one structures it, there is a cost.
In his evidence to the committee, Dr. Somers rightly warned us all about the dangers of establishing a huge bureaucracy and turning NAMA into a huge bureaucracy. I have been conscious of that from the start. Therefore, the view was taken that the banks should continue to manage the smaller loans, but on behalf of NAMA. That is one of the advantages of the subordinated debt, risk sharing arrangement to which I would like to draw attention. Several Senators suggested I did not follow the advice of the Governor of the Central Bank on risk sharing. In fact when the Governor of the Central Bank was a private citizen he was very free with his advice, both to me and to many others. He had a correspondence with me about NAMA in which he gave much valuable advice. His suggestion was that it was the shareholders who should bear the risk, whereas in fact it is the bank itself that shares the risk under the subordinated bond arrangement. The reason I was anxious for that is that it creates an incentive for the bank to perform in the management of those assets which remain as an agent of NAMA in regard to the management of the loans. They stand to lose if they do not work out the loans correctly. I felt it was important to put the mechanism in place that the bank itself would be at a direct loss so its employees would be incentivised to make that extra €1 billion or €2 billion, which the subordinated debt arrangement gives them the opportunity to earn over time. That is the reason it was structured in that way.
To answer Senator Callely's question on management, NAMA manages but the lesser exposures are managed by the institution on behalf of NAMA. He said there was much confusion due to some accountancy practices. I cannot assist him on that. I belong to a different profession and the mysteries of my profession have always astonished the outside world. One of the things I have learned as Minister for Finance is that the mysteries of the accountancy profession are equally bewildering to the outside world because they seem to make money appear and disappear-----
-----amount to something and not amount to something with great ease. I have always followed the maxim in regard to banks that cash is king. If one can find out where the cash is, one will generally find the answers.
Senator Butler made a point on the entity. It is the case that NAMA has a commercial mandate. That must be the case, as that is how we protect the taxpayer.
Senator Fitzgerald inquired about Peter Matthews. I had an opportunity of meeting him recently and he submitted to me the papers I am sure he submitted to Senators. I wish to make a number of points on them. I could be here a very long time if I were to do a detailed analysis. An assumption he makes in his papers is that he is not restricting himself to the assets to which NAMA is restricted. He is looking right across all the banks' assets. He is looking at mortgages, consumer debt and other miscellaneous borrowings. He is giving a picture of an entire bank rather than part of a bank. I do not mean to criticise him but he is doing it without the benefit of having looked at the loan quality in the banks. Since the guarantee was introduced we have had that benefit in the past year of going into the banks and looking at the quality of the loan books and doing the due diligence on the different institutions.
I salute the fact that he has done all of that work off his own bat and put it into the public domain. It is still under examination in my Department. We do not always agree with him but it is valuable that a public spirited citizen would take that interest. He also makes certain assumptions about the loan books, which again are not in accordance with the assumptions we are making on the evidence we have available to us.
The other point, which I mentioned to him when I met him, is an interesting one. Essentially, he is arguing that what we need to do for the banks is give them massive capital injections. In other words he wants us to build up their capital base and not concentrate so much on liquidity and exchanging assets for bonds that will give the banks cash. There is a balance to be struck. There is no doubt that when the NAMA exercise is complete it will accelerate capital requirements in the banking system and there will have to be an increase in capital. However, one of the difficulties about putting in capital without doing the kind of detailed examination of the loan books we are doing is that I do not think one would create the same international confidence in the institutions if one did not come up front and look at the weakest loan books, carry out an individual evaluation of them and then see what is the exact capital requirement.
I dealt with Japan the other night. What they did was to make repeated capital injections, but I do not think that approach on its own will solve the problem. There is a balance to be struck between liquidity and capital. If Peter Matthews falls on one side of that equation, Dermot Desmond falls decisively on the other. The latter essentially argued we should not buy any assets; we should just put the €54 billion straight into the banking system as a float and come back in ten years and see what happens. We need to strike a balance between capital, liquidity and funding.
Senator Leyden was engaged in canvassing his nominator for his panel. I have dealt with that already. He did it, as he always does in these matters, in a very admirable way-----
-----in that sort of soft Connacht voice of his. "Would you not be sorry for the poor man who is outside the gate this evening?" He is a master at that. I have seen him at it all his life, so it is not a new-trick pony to me.
Yes. We have receipts on foot of the guarantee scheme. The Senator also inquired about possible assistance from the Office of Public Works. We are open to that. That office has some specialities that could be of considerable assistance.
I still intend to press the amendment. None of us wants to see NAMA fail but in the next few years there will be many problems and difficulties for the Minister. There will be the master SPV and there may be other SPVs. I have no doubt the Minister might find himself setting up property management companies in the foreseeable future. Ongoing critical financial management will be required. One of the questions that is seldom addressed by the Government side is what will happen if NAMA does not work, and if it does not get credit flowing. What is the Minister's plan B? The amendment would be useful in the sense that it is something to which we can constantly refer back in terms of the purpose of the legislation. We will approach that at a later date.
I move amendment No. 7:
In page 24, between lines 18 and 19, to insert the following:
8.-The following shall be added to paragraph 1(2) of the First Schedule to the Freedom of Information Act 1997-
The amendment deals with the proposed application of the Freedom of Information Act. I made the point last night but I cannot remember who was sitting in the chair the Minister is in-----
It makes sense that it should be grouped with the other amendment. I made the point last night to one of the Minister's colleagues that I take the view, I am not sure whether it is shared by the Minister, that the Freedom of Information Act is vitally important legislation that applies right across the public service and that a strong and compelling case needs to be made where it is proposed it should not apply to a public body rather than a case having to be made that it should apply. In other words, the default position across our system should be that the provisions of the Freedom of Information Act apply. I can anticipate what the Minister might say in response, and it was argued last night. Briefly, it is that commercial confidentiality is at the heart of the NAMA legislation.
I accept that we are discussing commercial matters of a high degree of sensitivity and that in many cases there is need for confidentiality to be observed. However, the Freedom of Information Act 1997, as amended in 2003, already contemplates many instances in which information cannot and will not be released. Part 3 of that Act, which deals with exempt records, excludes, for example, information obtained in confidence, under section 26; commercially sensitive information, under section 27; financial and economic interests of the State and public bodies, under section 31; and enactments relating to non-disclosure of records, under section 32. I did not have a copy of the Act with me last night but what I suspected to be the case is the case. That Act already excludes from disclosure a considerable range of data and information. It is not possible for applicants to obtain it. The blanket argument that commercial sensitivity is involved with regard to the matters covered by NAMA is not a persuasive argument by itself. The House should be told in more detail why it was considered necessary to exclude this body from the coverage of the Freedom of Information Act.
We debated this morning the culture here over the decades in respect of the transactions that have occurred and the lack of transparency and so forth about them, the risk of abuse and the sense the public has that it should be able to understand and have information about what will occur in its name in the coming years. I am not naive enough to claim that everything should be open and that there is a case for every book, document and transaction to be available immediately to somebody who simply asks for it. In any case the Act and the further restrictions of 2003 would put the kibosh on many such frivolous applications because they are already excluded very considerably from the operation of the Act. The basic question is why exclude, rather than ask those of us on the other side of the argument to make the opposite case?
I second the amendment. It is in keeping with the general theme we have pressed on Second and Committee Stages, that the operation of NAMA should be carried out in as transparent a manner as possible in the public interest and that there should be sufficient scrutiny and accountability to ensure there is public trust and confidence in it. We tabled amendments on Committee Stage that were designed to achieve that. This is another such amendment. It seeks to add the NAMA group entity and the valuation panel to the definition of public bodies under the Freedom of Information Acts.
I emphasise the valuation panel. Amendment No. 7 should be read in conjunction with amendment No. 21 which specifically relates to the valuation panel and proposes that it "shall operate in a transparent fashion and in accordance with the Freedom of Information Act 2007". Amendment No. 7 seeks to add the panel to the category of bodies under the freedom of information regime. That is particularly important when one considers the provisions relating to the valuation panel in section 119 and succeeding sections in the Bill. The method of appointment of a valuation panel is left to the Minister. I accept a Government amendment was tabled on Committee Stage to specify levels of knowledge and expertise, and there was some debate on that. However, there is a lack of transparency as to who will be on the valuation panel and the method of appointment. This was discussed on Committee Stage. Given the lack of transparency in the provisions relating to the establishment of the valuation panel, it is especially important that the valuation panel be covered by the Freedom of Information Act.
As Senator Alex White said, plenty of exemptions are provided for in Part 3 of the Freedom of Information Act 1997, as amended in 2003. Section 27 refers specifically to commercial sensitivity as a ground for exempting matters from having to be disclosed. There are plenty of safeguards to ensure the danger the Minister identified on Committee Stage is not a problem if these entities are included under the Freedom of Information Act. This is about transparency and ensuring greater public trust in the workings of NAMA. We all agree that public trust is critical in this enterprise. Other speakers when discussing amendment No. 3, and departing somewhat from its terms, referred at length to the Frontline marchers outside the gate of Leinster House. All of us are very conscious of the people who are suffering the brunt of the recession and in whose interests we are hoping NAMA will work. Even Members who are opposed to NAMA very much hope it will be effective in protecting the interests of members of the public, ordinary working people and especially vulnerable people.
In those interests, we require a level of transparency about the operations of NAMA. Some of our amendments seeking to ensure transparency were defeated. This is a critical amendment which seeks to include NAMA as a public body covered by the Freedom of Information Act.
With regard to the valuation panel, there has been a robust application process in NAMA that has been very difficult. No valuers have yet been appointed but short-lists and so forth have been compiled. The review of valuations is probably what interests Senator Bacik and perhaps there is scope for the Minister to allow an application process to exist there, similar to that which was carried out for NAMA.
I agreed in the Lower House to advertise for the board of NAMA and I have received 500 applications to date. I will examine Senator MacSharry's suggestion, which might be appropriate in this context.
On the merits of this amendment, a great deal has been inserted into the legislation to ensure that this body is far more transparent and accountable than any other body we have established. The direct link of accountability to the Minister is there through the ministerial power to give directions. I was struck during the debate in both the Dáil and the Seanad by how little criticism that power has received. When the proposed legislation was tabled, there was a great deal of criticism that the Minister had dictatorial powers and could tell NAMA what to do. There was further criticism along those lines when the Bill was initiated. As the debate progressed, however, many Members on both sides of both Houses realised how important it is to retain a line of ministerial accountability for the operation of bodies such as this.
I am encouraged by that because it represents a change in the attitude of both Houses towards corporate governance. In the past decade the attitude has been that one can set up an agency, divorce it from the Government, prescribe a corporate governance standard for it and leave it entirely apart from the political system, because the political system is presumptively wicked in its intentions or any expressions of policy it might wish to give to these bodies. We seem to have moved away from that and I am glad-----
-----to note that it appears to be an all-party drift away from it. I was struck when the Bill was introduced by the amount of criticism to the effect that the Minister has too much power and how that vanished during the debates.
There is a high degree of transparency in the legislation. The National Treasury Management Agency is exempt from the Freedom of Information Act.
Senator Alex White made a fair point when he stated that commercial information does not have to be disclosed under the freedom of information legislation. In light of the nature of NAMA, the processing of such confidential commercial information and of freedom of information requests would constitute a burden on the agency. For these reasons, I am not able to accept the amendments.
The Minister's observation that it would be a burden on NAMA is neither acceptable nor adequate. Of course it would be a burden. The Minister is obliged to shoulder certain burdens but these are legitimately carried by him and shared by others. It would be extraordinary if the fact that something might be a burden were the only reason for its exclusion. I have sympathy for the civil servants and others who are charged with unearthing information and making it available. The line of argument offered by the Minister is extremely thin, particularly in the context of the many and varied comments he has made in this and the Lower House in respect of this legislation. His response to the effect that we should accept that this should not be done because the processing of applications would constitute a burden is extremely disappointing.
If the bulk of the information is commercially sensitive, being obliged to prove that in individual cases will, of course, constitute an administrative burden. Virtually all of the information at the disposal of the agency will, in any event, be exempt.
The Dail Divided:
For the motion: 25 (Ivana Bacik, Paul Bradford, Paddy Burke, Jerry Buttimer, Ciarán Cannon, Paudie Coffey, Paul Coghlan, Maurice Cummins, Pearse Doherty, Paschal Donohoe, Frances Fitzgerald, Dominic Hannigan, Fidelma Healy Eames, Michael McCarthy, Nicky McFadden, Rónán Mullen, David Norris, Joe O'Reilly, John Paul Phelan, Phil Prendergast, Eugene Regan, Shane Ross, Brendan Ryan, Liam Twomey, Alex White)
Against the motion: 29 (Dan Boyle, Martin Brady, Larry Butler, Ivor Callely, John Carty, Donie Cassidy, Maria Corrigan, Mark Daly, John Ellis, Geraldine Feeney, Camillus Glynn, John Gerard Hanafin, Eoghan Harris, Cecilia Keaveney, Terry Leyden, Marc MacSharry, Lisa McDonald, Brian Ó Domhnaill, Labhrás Ó Murchú, Francis O'Brien, Fiona O'Malley, Ned O'Sullivan, Joe O'Toole, Ann Ormonde, Kieran Phelan, Feargal Quinn, Jim Walsh, Mary White, Diarmuid Wilson)
Tellers: Tá, Senators Ivana Bacik and Alex White; Níl, Senators Camillus Glynn and Diarmuid Wilson.
Amendment declared lost.
I move amendment No. 8:
In page 25, between lines 2 and 3, to insert the following:
"(d) facilitating specified service providers in the fields of the provision of emergency housing, transitional housing and related areas to have preferential purchasing rights in relation to the purchasing of such housing units, particularly where there are housing problems as defined by the local authorities.".
Fáilte ar ais roimh an Aire. I thank him for his very illuminating contributions this afternoon. I was reminded of the character Fabrice from the French novel, La Chartreuse de Parme, who after a distinguished career went on to become a much sought-after preacher. People would crowd the house to hear him speak. I thought the Minister had great potential in that regard.
This amendment proposes an addition to the purposes of NAMA, namely, the facilitation of specified service providers in the fields of the provision of emergency housing, transitional housing and related areas to have preferential purchasing rights in relation to the purchasing of such housing units, particularly where there are housing problems as defined by the local authorities. This issue was discussed extensively on Committee Stage last night and some excellent contributions were made by my colleague Senator O'Toole and Labour Party Senators on the issue in the context of similar amendments of their own.
In the Minister's dealings in the Dáil with Deputy Burton, she proposed an amendment to include among the aims of the Bill to contribute to the social and economic development of the State and the Minister accepted that amendment. His response on that provides a rationale for this proposal which seeks that in addition to the commercial mandate of NAMA, we would also strive for a social dividend. I mentioned on Second Stage that we are obliged to seek this social dividend and not just a commercial dividend and suggested the allocation of land for amenities and sheltered housing should be specifically included as part of NAMA's remit. It is clear that NAMA's mandate must be to maximise its returns by disposing of assets for as much money as possible. However, it is also clear that this crisis provides an opportunity to obtain desperately needed low cost housing for those worst affected by the current economic crisis. Therefore, instead of just bequeathing to the next generation a social and economic millstone, we should also seek to bequeath a social legacy.
In the course of last night's debate we had some illuminating contributions from some Senators. Senator O'Toole, in particular, brought forward an amendment which proposed the addition of certain words to the power specified for NAMA, namely, its power to distribute assets in specie to the Minister. Senator O'Toole proposed that this would be included to facilitate the development of infrastructure and public services for communities recovering from the financial crisis. He also asked a very relevant question about what that proposed power for the Minister was intended to achieve.
Senator Hannigan spoke eloquently to a similar amendment from the Labour Party which focused on appropriate assets being made available for public, community or social use, either free or at a non-commercial cost, or assets being transferred to appropriate statutory agencies to facilitate such use.
The reason I mention the other contributions is to underline the point that I believe there is general agreement to the effect that there must be some kind of social dividend specified in the NAMA legislation, not just envisaged. I appreciate that the purposes of NAMA have been amended to provide for it being required to contribute to the social and economic development of the State, and ministerial powers are so specified in section 14. The Minister intends, in effect, for this social goal to be achieved.
The Minister for Defence, Deputy Willie O'Dea, said last night that the Government was not opposed to giving Ministers and State agencies first refusal, in effect, when it came to NAMA assets where this was important for social developments in their particular areas. I note Senator Hannigan's contribution in particular about surveys he had carried out in communities where young people were very much in need of social facilities. I am thinking of such things as youth cafés and other services, and the importance of achieving that if we are to deal with some of the social problems that face us in the very areas where there are properties that may not be capable of being sold for anything like a reasonable market value.
In accepting that NAMA must seek to maximise the financial return, I believe nonetheless a case can be made for a specific named or included purpose for the agency, namely, to facilitate the specialised services providers in the provision of emergency transitional housing and related areas. I have been more general than the Labour Party and others in that regard, but I ask the Minister to consider this amendment because of the need for specificity. I do not deny that NAMA must seek to make the best financial return in all cases, but nobody denies that there will be assets which are not capable of a meaningful financial return, and it is to those properties we are now directing our attention.
I also submit that there is a need for legislation that will enable such socially minded action by the Government and it should be specified as a stated purpose. In doing this, it would in no way frustrate the central focus of NAMA to maximise the financial return on the assets.
I second the amendment. This is a core part of what the Bill is about, namely, giving a balance in the form of a community add-on facility and a sense of ownership among ordinary people and communities.
In the Minister's absence last night I had tabled another amendment to the legislation and to the section where it says that NAMA may "distribute assets in specie to the Minister". I added a very generalised non-binding amendment with levels of choices within it. The words, as I recall were to the effect of facilitating, inter alia, the transfer of assets to the community. I only tabled it to establish what was meant because this single line that NAMA would "distribute assets in specie to the Minister" was puzzling. It was there on its own and as such allowed the transfer of finished or unfinished assets, fields, half-built buildings or whatever to the Minister. I could not find the reason for it anywhere in the legislation, and it was there from the very beginning. I had looked at the early part of the legislation in section 2, which deals with the objectives and purposes of NAMA and had assumed the line was included to allow for the insertion of section 2(b)(viii), which was added on Report Stage in the Dáil and which says: "to contribute to the social and economic development of the State", but it was there from the beginning. We need to know what was intended in tabling this.
We were doing all right in terms of the debate, Senator MacSharry was giving me a half-reasonable explanation and then the Minister, Deputy O'Dea, got involved. He started to change position and began to duck and dive and weave. I was less informed at the end of the debate than at the beginning. I told the Minister I would read the Official Report to see whether I could come up with something different for Report Stage today.
In the meantime my colleague, Senator Mullen, said he was tabling this amendment. While I am not exactly enthusiastic about Senator Mullen's form of words, he and I have an agreement on what we are trying to achieve.
The Senator might just be wrong on this one, however. The issue is that the Minister was quoted in his absence last night by his ministerial colleague, Deputy O'Dea, who said a number of things. I gave examples such as the fact one might be left with 50 houses in Tulsk or a cinema somewhere else which might be used for social and affordable housing or as a community hall, respectively. The Minister for Defence said, in effect, that in the event these could be transferred in specie to the Minister who could then offer them to the highest bidder from the local authorities. I was completely winded by this because I had read the legislation very carefully, as the Minister knows because I discussed it with him many times over recent months. I said the Minister was going to be buying and selling and was going to be a trader, auctioneer, agent, operator, shopkeeper or whatever. When I challenged the Minister, Deputy O'Dea, on this point, he quickly changed his position and came up with a new explanation to the effect that were the Minister to try to take control of assets, he or she would want to pass them on to some aspect of his or her area, and the only way in which this could be done in many cases, without specifying, would be if it could be vested in the Minister.
When I read it first, I tried to do what a legislator should do. I asked what it meant, and while the words were clear enough, the meaning escaped me. I wanted to know how this fitted into the business plan. Obviously NAMA would not make money by transferring stuff for buckshee to the Minister, so it did not fit in with the making money end of things one way or another in terms of transfer rather than purchase.
I then thought I had the answer. It seemed akin to Grattan's Parliament with NAMA eventually voting itself out of existence. Senator Mullen might appreciate it that I have recommended to some of my children that they join remote orders so that they could be there for the share out at the end, the last man standing, so to speak. I had this view that at the end of NAMA one could be left with a couple of rocks or houses or housing estates. What would be done with them? All that could be done would be to transfer them, in specie, to the Minister, in order that at least they would be owned by the State.
The Minister is nodding, and I know it is an attractive proposition, but it does not fulfil all our problems. It is a logical answer which is why the Minister finds it attractive. However, I still had to ask how the Minister was going to fulfil the sop he gave to the Green Party in section 2(b)(viii) of a community aspect to all this. I thought this would be one way to do it. I am waiting for a reasonable explanation from the Minister as to how this works. What was the intention of the Parliamentary Counsel and the Minister and what would he do with a couple more buildings or half-built houses or 50 houses? I will listen closely to the Minister's answer because as Senator Donohoe said, much depends on this.
Our amendment proposes that the Minister "make appropriate assets available for public, community or social use either free or at a non-commercial cost, or transfer assets to appropriate statutory agencies to facilitate such use". We aired this idea last night when the Minister for Defence was present. We pushed it to a vote because we were not satisfied with his answer. Perhaps the Minister for Finance can provide a more satisfactory answer.
In the commuter belt and across the country many teenagers have no place to go and are at a loss for something to do for lack of facilities and money to rent or purchase premises to use as youth clubs, etc. We want to use NAMA to provide a social dividend for the people concerned. Is it possible to lease vacant properties for three or five years at peppercorn rents to youth clubs?
Such properties are likely to remain vacant for the next five years because of the absence of demand in the market. Will the Minister think about that, and if NAMA is not the appropriate vehicle to make these facilities available, what would he say to young people in Ashbourne or Drogheda or Dundalk? They have nowhere to go so they hang out on street corners and sometimes get into trouble for anti-social behaviour. What is the Minister's solution for that generation? Where should they go and how should they access facilities if the money is not available for them to rent or purchase premises?
We had a good discussion about this last night. I am against both of these amendments. In respect of amendment No. 8, the local authorities will be first in the queue for any housing around the country. This amendment would undermine NAMA's ability to give the ultimate social dividend, to get the country moving again in order that we can have resources for sports capital or youth café programmes and the kind of infrastructure we require.
I have no doubt that, under the workings of NAMA, the Minister could suggest to the board that if any properties in its control are lying idle it could take a nominal rent for them. NAMA must get the maximum value it can, whether through rent or sales, otherwise the process will be undermined. Maybe at some stage the Minister could ring-fence prospective NAMA profits for a sports capital programme or other such infrastructural projects.
I support both amendments. I am particularly looking forward to having the opportunity to vote on the amendment tabled by Senators Mullen and O'Toole. They are interesting amendments. If the Government is to be serious about tackling this problem amendment No. 9 achieves that because it does not use the phrase "preferential purchasing rights". Most of the specified service providers for housing are broke. Local authorities do not have the money to purchase houses. I am aware of at least one that is approaching an intensely difficult budget process, as many others will. If the Bill proposed fixing that problem by offering properties at preferential purchase prices to local authorities it will not work because they will not have the money to buy them for the foreseeable future.
It is crucial that we address this objective. In my area of Dublin Central I see people who have been on housing lists for between seven and nine years. They could not afford the house prices of recent years. They will pass vacant, derelict properties. We should find some creative way to use land and these properties to address this problem. Many speakers have mentioned how explosive the issue of housing and related personal debt could be. There is no greater symbol of this than a couple who have been waiting on a housing list for eight or nine years with a local authority that will not have the money to give them anything for another eight or nine years, walking past derelict apartment blocks and vacant plots of land.
I have learned during the years in business that one gets the greatest sense of achievement from doing something profitable that is also good for the community. Many companies work to do that because of the benefits they get from it. Therefore I can understand exactly what Senators Mullen and O'Toole are doing in setting this worthy objective but I am not going to support their amendment because in this matter we must be totally focused. We must focus on getting the economy and NAMA right and bring order to our situation. It is not possible to achieve several objectives at once. The objective here is to get our finances in order and we do not have the freedom to add these good, worthy things to that process. I would love to support the amendment but I am unable to do so.
Senator Quinn should not feel so strongly about not supporting this amendment because when one considers the amount of assets that NAMA will control, there will be plenty of opportunity for the Minister to look after the sort of organisations we are discussing. The Minister will deal with property worth €54 billion and there is more than ample scope for him to use a small proportion of that in this way. We will spend 0.1% of that sum to set up a special purpose vehicle to run NAMA. If the same sum was invested in the organisations covered by these amendments it would make a significant difference. Senator Quinn could support this proposal because it does not require giving a large amount of the NAMA assets to these organisations but rather a small percentage of the total assets which would have a disproportionately positive impact on the affected communities.
We should all support this amendment. Senators Mullen and O'Toole may experience some personal embarrassment if this amendment is pushed to a vote and they have to vote with this side of the House, if Senator Quinn also stayed with us.
Because the Government would lose which would be difficult for the individuals involved. Aside from the politics of the House and the fact that we might derive some pleasure from that vote, the proposal has significant merit. The amount of the assets to be transferred would not disproportionately affect the outcome of NAMA. We should consider it in a positive way. We have wasted many millions of euro in the past few years but this would not be a waste.
I agree with Senators MacSharry and Quinn that the focus of this legislation is to ensure a lift-off in the economy. While I commend the amendment, in the past ten years local authorities have made great strides in providing community services, not just in Dublin but across the country. The problem with putting individual groups into community centres is that they tend not to last. Community groups now join forces. For example, most GAA centres share with the local soccer club and other groups in the community. This is what we want to encourage. A small individual group on its own may falter, the centre would become derelict and the county council would have to become responsible for it. I do not believe that is the way forward.
We could not include a mechanism for dealing with mortgage arrears in the legislation. It would do the Bill an injustice to introduce any other measure at this point. The Bill is essentially a business plan to regenerate the country and recapitalise the banks. Putting bits and pieces of other legislation into it will only send out the wrong message. No one has more experience than Senator Quinn in how to run a successful business and I agree with his view on this amendment. The Minister is sympathetic to the spirt of the amendment but including it in this legislation will only divert from the main focus of dealing with the economy.
Of course, I support the thrust of these amendments and the Minister has indicated he is keen there will be some civic benefit from NAMA. However, as Senator Quinn already said, accepting these amendments would be contrary to the purpose of the NAMA legislation. If accepted, they would dilute the efficiency and effectiveness of the agency to operate with a sole purpose.
That raises another contradiction which Senator Donohoe spoke about earlier. This legislation is all about a civic purpose in bringing about a strong banking sector in the national interest. It is also, as Senator Donohoe said, a purpose of Government to provide houses for the people. When we had plenty of money, we still had housing lists which tended to lengthen because of costs. In a declining market, the State has an opportunity to purchase houses cheaply. In a roundabout way, the Bill's civic purpose is still there. In one sense it provides the country with a good, strong economic basis. Its civic benefit is being able to provide housing for local authorities at much reduced rates.
While accepting these amendments would tie up NAMA's singular purpose, we need to see some way in which the public will benefit from NAMA in other legislation. It is easier for the community to buy into the NAMA model if there is a clear way as to how it will benefit.
There have been many contributions on this amendment.
Senator O'Toole introduced the concept of the distribution of assets in specie. I should eliminate that from the debate before dealing with the amendments' merits. Senator O'Toole is of course quite right.
I said I was going to eliminate him before I addressed the merits of the amendment.
As Senator O'Toole rightly pointed out, section 12(2)(h) creates a specific power in NAMA to distribute assets in specie to the Minister. I am grateful to Senator MacSharry for providing a good translation of the term; its colloquial meaning is "as is".
Senator O'Toole was quite correct on the provenance of this provision. It stems from the provisions of section 60 which describes what happens at the end of NAMA. Having attended at the birth, it is very interesting to study what will happen at the end. Section 60(2) states:
NAMA may, from time to time, after consultation with the Minister—
(a) use any surplus funds of NAMA to redeem and cancel debt securities issued under this Act, and
(b) transfer any surplus funds remaining after that redemption to the Central Fund.
The Parliamentary Counsel considered the term "assets" as lacking sufficient precision to cover the transfer of all of the assets which NAMA will have at that time. Clearly, the provisions are wide enough to cover money because there is a specific reference to funds. The Parliamentary Counsel thought it desirable to insert an additional power to distribute assets in specie.
For example, NAMA might happen to have items of collateral such as some fields in Claremorris, bank shares which carry with them the right to collect a dividend or a racehorse or two stabled around the country.
This section enables NAMA during the termination of its existence to transfer these assets in specie to the Minister. The Minister will hardly put the racehorse into the Exchequer but can decide what to do with it. That is the provenance of this particular power and has nothing to do with social purpose or a social dividend.
That was the issue Senator O'Toole raised. I am grateful to him for raising this interesting question about the provision.
The Labour Party's amendment provides for making appropriate assets available for public, community or social use, either free or at a non-commercial cost, or transferring assets to appropriate statutory agencies to facilitate such use. Senator Mullen's amendment is somewhat narrower in that it provides for facilitating specified service providers in the fields of the provision of emergency housing, transitional housing and related areas and having preferential purchasing rights in the purchasing of such housing units, particularly where there are housing problems as defined by the local authorities.
I agree with these worthy sentiments. They are policies which we hope to implement in the context of the operation of NAMA. The section in which Senator Mullen wishes to insert his amendment, however, states the purposes of NAMA are to acquire bank assets, deal expeditiously with them and to protect or otherwise enhance the value of the assets. NAMA has a commercial mandate. While that does not mean it cannot have a social mandate, the bulk of the debate about its purpose has been devoted to how essential it is that it breaks even or makes a profit. If we were simply to give land away for nothing - as proposed in Senator White's amendment - clearly that commercial mandate would be entirely cancelled out. That would not be appropriate because, if we were to accept the Labour Party amendment to section 12, we would be disposing of assets for nothing in a way that would not be expressed on the balance sheet. Clearly, the agency should not be empowered by the Oireachtas to do this.
Senator Mullen formulated his amendment in a narrower format, as he said the area of preferential purchasing rights should be accorded. The interim chief executive has met a number of agencies involved in connection with the provision of emergency accommodation and it will be the policy of the agency to engage with such bodies and provide for preferential access. I intend to direct NAMA to give State agencies the first opportunity to purchase certain assets where this is important to social developments within their remits. There has been a difficulty with the acquisition of school sites, playground sites and sites for community developments where the developers have effectively ransomed the community in respect of the purchase price. In the context of the social and economic development of the State, NAMA can give a first option on the acquisition of a particular site to the appropriate authority, be it a local authority, school authority or health authority. Far from being opposed to this idea, I support it. However, we should not mix it up with the statutory purposes of the agency.
It seems the correct way to deal with this matter is by way of ministerial direction. The powers of ministerial direction are very explicit on the issue. The compelling needs identified for the establishment of NAMA include the need to contribute to the social and economic development of the State, as set out in section 2. In sections 13 and 14 the Minister is given the power to issue guidelines on these matters. Section 13(2) and section 14(2) both provide that, without prejudice to the general power of the Minister to issue guidelines, he or she may issue guidelines that relate to the purposes of the social and economic development of the State. The ministerial power to issue guidelines in the Bill enables the securing of what Senator Mullen wishes to secure with his amendment. The Minister is in a position to issue guidelines and give a direction. I am not sure whether the issue was explored on Committee Stage, but there is a distinction made in the Bill between guidelines and a direction. Guidelines are abstract in character and clearly would cover all developments. One of the difficulties with them is that they would inhibit NAMA's capacity to realise commercial gain when disposing of property. Let us say NAMA had a good buyer and I had issued guidelines which obliged the agency to offer every item of property as a first option to the local authority. That would be a very inflexible arrangement. On the other hand, the guidelines I intend to draw up may deal with cases where there are certain essential community facilities, be they health centres, community centres or schools. In my own county schools are being built with community centres, which is a marvellous initiative. All of this can be done under the Bill, but we must be clear on what we are doing. We are giving people first refusal, but they still have to pay------
They still have to pay market value. Market values have fallen, but they will not be required to pay the ransom values which we witnessed in connection with some sites in recent years. That will be a substantial advance.
With respect, there is a substantial change. Market values have fallen dramatically; the values of the lands required for these purposes are often very low. Extortionate demands were placed on the Department of Education and Science for the acquisition of lands for school sites. That will not apply in this Bill because NAMA will be in a position to give a first opportunity to the relevant school patron. The power of direction is more powerful in this context. There are particular parts of the State such as east Meath and west Dublin where there has been very rapid housing development without the immediate provision of the essential primary education facilities. Were I to discover that NAMA was about to dispose of a large amount of land with housing built on it in the absence of school facilities, the powers conferred on the Minister are wide enough to require NAMA to make a school site available on that land at a reasonable charge to the relevant authority. There is a substantial amount for which the agency will be able to secure a social dividend.
We cannot put all this off balance sheet and write it off as a loss to the taxpayer in some discreet way.
It must be done in a transparent and up-front way. The different public authorities must pay a reasonable price for whatever is being required in order that the NAMA operation proceeds with its correct commercial purposes. There is ample power under the Bill to deal with the specific issue raised by Senator Mullen, that of emergency housing, transitional housing and the acquisition of property. This is an issue which will have to be dealt with by NAMA and the relevant local authorities. There is no question about this.
Several Senators have mentioned the fact that private purchasers are not in funds, but the cost of housing for private purchasers has fallen dramatically in recent times. That fall makes it easier to buy housing. When we repair and restore the banking system, greater finance will be available for first-time buyers to acquire properties. Aside from this, there are large blocks of property which will be at the disposal of the agency and in respect of which it can enter into arrangements with the local authority or voluntary group for their occupation. The interim chief executive has engaged with many voluntary groups which provide social and emergency accommodation. This will have to be done on a transparent financial basis.
There are financial mechanisms available to the State such as the Housing Finance Agency which can seek to construct the necessary financial mechanism. However, NAMA cannot be the financial mechanism to do it because were it to be such a mechanism, it would make a loss. That is something we do not want to visit on it, which is not to say its establishment will not facilitate many social objectives; it will. When institutions such as this were formed in other jurisdictions, one experience was that a large amount of social and affordable housing was relocated within a particular area. As we know from the Irish experience, many of the properties we have are located in the wrong place. There is demand again in Dublin for semi-detached properties, but there is a large surplus of properties in counties Leitrim and Longford. The local authorities may have a part in actually resettling people in these areas. That has been the experience in other countries.
I thank the Minister for his very illuminating response which is worthy of Stendhal's character, as I said earlier. When I saw the phrase "in specie", I thought I was reading the phrase "in species". I thought that might have been a mechanism for the eventual transfer of certain white elephants back to the Minister that had not been disposed of.
I have not heard any intellectual disagreement with any aspect of my amendment and the Minister has not pointed to any specific problem with the proposed wording. He went on to embrace both the spirit of the proposed amendment but he also expressed his intention to achieve, using other powers in other sections of the Bill, what the amendment specifies. It is important to specify this information. Senator Butler spoke about business plans but as I said on Second Stage, it was business plans devoid of social conscience that led us to this crisis. There is an appropriateness about getting specific information on the social intent, particularly in circumstances where I have drafted it in such a way so as not to frustrate in any way NAMA's commercial or financial objectives or to involve any lack of transparency. I do not believe there is anything in the amendment that undermines NAMA's commercial or financial objectives.
I agree it is not unknown for legislation to aspire to and set out aims and objectives without unduly tying the Minister's hands. I think of the directive principles of social policy in our Constitution, for example, which, without being strictly binding in the sense of other amendments, have the effect of shaping the environment of the rights to be protected and enjoyed and setting out what should be the general direction. It is because we have between 50,000 and 60,000 people on housing waiting lists, and many more on rent supplement, that I considered it appropriate to focus in large measure in my amendment on the area of housing.
Senator Donohoe is incorrect in suggesting that it would not work because I believe there will be assets that will be capable of being disposed of and which could be obtained by those in the business of addressing in particular our housing problem but also the related problem of amenities as discussed by others and by the Minister.
The Minister is saying that the social dividend in the Bill is the elimination of ransom strips and the provision of better planning, which I respectfully suggest is something that could be achieved through existing planning laws and through changes in planning laws if necessary. However, there is nothing in the Bill to redress the imbalance in terms of the lack of youth facilities and the lack of funding for youth facilities.
The social dividend that the Green Party in particular was claiming from this Bill has not been achieved. We pressed our amendment yesterday and therefore we cannot press it again today but we know Senator Mullen is a man of principle and commitment and that he will press his amendment, on which we will support him.
We have covered most of the points. I would say to Senator Mullen that I propose to exercise my powers and I am satisfied that the powers are available already. The introduction of this additional material will confuse the issues in regard to putting an obligation on the agency to always offer land, irrespective of the circumstances.
The Dail Divided:
For the motion: 23 (Ivana Bacik, Paul Bradford, Paddy Burke, Jerry Buttimer, Ciarán Cannon, Paudie Coffey, Paul Coghlan, Maurice Cummins, Pearse Doherty, Paschal Donohoe, Frances Fitzgerald, Dominic Hannigan, Fidelma Healy Eames, Michael McCarthy, Nicky McFadden, Rónán Mullen, Joe O'Reilly, John Paul Phelan, Phil Prendergast, Eugene Regan, Brendan Ryan, Liam Twomey, Alex White)
Against the motion: 31 (Dan Boyle, Martin Brady, Larry Butler, Ivor Callely, John Carty, Donie Cassidy, Maria Corrigan, Mark Daly, John Ellis, Geraldine Feeney, Camillus Glynn, John Gerard Hanafin, Eoghan Harris, Cecilia Keaveney, Terry Leyden, Marc MacSharry, Lisa McDonald, David Norris, Brian Ó Domhnaill, Labhrás Ó Murchú, Francis O'Brien, Fiona O'Malley, Ned O'Sullivan, Joe O'Toole, Ann Ormonde, Kieran Phelan, Feargal Quinn, Shane Ross, Jim Walsh, Mary White, Diarmuid Wilson)
Tellers: Tá, Senators Rónán Mullen and Maurice Cummins; Níl, Senators Diarmuid Wilson and Camillus Glynn.
Amendment declared lost.
I move amendment No. 10:
In page 39, between lines 32 and 33, to insert the following:
"(f) the avoidance of conflict of interest by any expert adviser or service providers to NAMA and the participating institutions,
(g) the orderly property management strategy over a ten year period,
(h) for issuing loans, or for allowing security over which it has a charge be used as collateral for loans by other institutions by persons whose loans with NAMA are functional and not in arrears".
I agree with the Cathaoirleach. I note that so far we have taken approximately half an hour per amendment on Report Stage. I thought this might be over quicker for Members but if we keep going at this rate, it looks like we might be here until 6.30 a.m. tomorrow. I will make this fairly quick.
This relates to section 35, the codes of practice. The Minister listed a number of areas where he wants to see a code of practice issued by NAMA. We are simply adding three paragraphs to the subsection. It does not change the section. It simply asks for three more codes of practice to deal with conflict of interest, to deal with the ten year management strategy which the Minister previously stated is more or less coming anyway, and to deal with loans and securities of loans which is more or less part of what NAMA is anyway. I see no reason the Minister cannot agree to this. I ask the Minister of State, Deputy Mansergh, to state why we cannot have codes of practice on these, which also are fundamental parts of what the NAMA legislation is about. It changes nothing else.
The last paragraph of the subsection, which states "any other matter in relation to which the Minister directs NAMA to prepare a code of practice.", still remains in the Bill and I cannot see why this is in any way contentious. If the Minister of State wants to reply, I will say no more on it.
On a point I raised earlier about the purpose of the Bill, and moving on to the code of practice which is before us, will the Minister of State confirm there will be no practices applied that would be different to the original business practice entered into by the loan applicant and the financial institution? I understand new terms may be agreed mutually but I ask that there would be no practice whereby the financial institution, especially NAMA, would be able to apply a new code or term in reference to the original loan.
I asked the Minister earlier whether the asset or the management was being taken over by NAMA. My understanding was that it was not. However, the Minister later indicated that there were going to be a number of cases - the information available to me is that there will be as many as 20 - that will be taken over and managed by NAMA. If that is so and given whatever code of practice applies to those cases, especially if not only the loan but also the asset is to be managed by NAMA, what practice applies to ensure the person whose loans and assets are being incorporated into NAMA is not being disenfranchised in any form?
I am concerned about a number of issues. It is now likely there will be a group of people who will be treated slightly differently from the majority. I am asking for clarity as to what will apply in their cases. I understand some of this work has already commenced and that there has been application of certain procedures and codes of practice. I would like to have clarity on that point.
It is not just coming from the NAMA side. This issue was touched on earlier but I did not have the opportunity to contribute at that stage.
I ask the Minister of State and his officials to be on guard with respect to the other players involved. The mechanism we are putting place can be used as a tool by various players participating in this regardless of what capacity they may be playing at. For example, it may be purposely beneficial for valuations to come in at a particular level. If we take the 30% that is within the body of NAMA itself, the percentage could be far greater than that, even if we go according to the old mantra of location, location, location, which I have mentioned before when participating. There could be a prime site in a prime location, although I recognise the variances that might appear throughout the country and there can be variances in valuations. I am concerned there could be game playing, allowing for the fact there is a new tool which permits some of the financial institutions perhaps to use valuations which may be in their best interests and not necessarily in the interests of either NAMA, the Government or the original applicant. There seems to be a shifting of the ground and a shifting of what one might expect to be in a code of practice.
I merely want to support Senator Norris in regard to doing our business with some dispatch. It is late. Wars of attrition do not impress the public. The public are much more interested in our doing our business with dispatch. I appeal to Senators to shorten their contributions. I hope the Acting Chair will take a heavy hand.
I will respond to the points made as briefly as I can. To respond to Senator Callely's point, which is not strictly on the amendment, there will be no change in the rights and obligations of the debtor under NAMA than had been the case with the participating institution.
Section 35 provides that NAMA, within three months of the establishment day, is to prepare codes of practice for approval by the Minister for Finance. It is normal that codes of practice of a State agency are approved by the Minister with responsibility for that agency. Section 35(1)(f) allows the Minister to make codes of practice in regard to any other matter he considers necessary. The general power of direction to make codes of practice is sufficient and it is not necessary to add to the list of codes of practice as purposed.
I draw attention to the provisions of section 45, which states: "NAMA shall seek to ensure that each expert adviser or service provider ... makes every effort to avoid or manage conflicts of interest and to declare any such conflict (actual or potential) to NAMA". Therefore, I cannot accept the amendment.
I move amendment No. 11:
In page 50, line 30, to delete "Éireann.", and substitute the following:
save that such evidence shall not include questioning or expressing an opinion on the merits of any policy of the Government or a Minister of the Government or on the merits of the objectives of such a policy.".
This is a proposed amendment to section 58. The matter was ventilated in the House last night.
It concerned the issue of the chairperson and chief executive officer of NAMA and the extent to which they ought to be restricted or constrained in what they say before the Committee of Public Accounts and what type of evidence they are entitled to give, as well as the level, basis or extent of the nature of the questioning that is entitled to be permitted. The Minister for Finance last night made a number of points, chief among which was that essentially this was a protection for the chairperson and-or the chief executive officer. He noted the fact, which is interesting, that the Standing Orders of the Committee of Public Accounts already provide for a restriction on the members of that committee and the type of questions they can put to persons appearing before that body. However, he felt he needed to go further with this formulation.
The position I outlined last night was that it is odd that something that purports to be a protection of an officer should be expressed in terms of prohibition on that person. If one wants to protect a person from something, why does this translate into a prohibition on that person?
There was some debate on this question last night and the Minister said he would leave over the matter to Report Stage. We had hoped he might come to the House with something in this line. He has not done so, although I note there are two amendments before the House, one of which is the Labour Party's. It carves out of the evidence to be given by the officers concerned on the questioning or expression of an opinion on the merits of any policy of the Government or the Minister or the merits of the objectives of such a policy. It would meet the Minister's objective in subsection (3) but without being as restrictive or draconian. In the circumstances and given what the Minister said, the amendment would provide for the protection of the chief executive officer and chairman. There is a list of items that constitute the evidence that may or should be given and there is an exception, namely, that the evidence to be given or the questioning to be allowed should not include the expression of "an opinion on the merits of any policy of the Government or a Minister of the Government or on the merits of the objectives of such a policy". The amendment would meet the policy objective without being as draconian as the formulation included in the Bill.
I second the amendment. I will speak to amendments Nos. 11 to 14, inclusive, which include an amendment in the names of Senators Norris and O'Toole. Theirs has a slightly different nuance, although it addresses the same point as that of the Labour Party.
Sections 58(3) and 59(2), both of which we propose to delete and replace, are very prescriptive and impose extreme restrictions on the chairperson and chief executive officer. The alternative wording in amendment No. 11 provides a somewhat more nuanced approach to the giving of evidence, while still meeting Government objectives, as Senator White stated.
Amendment No. 13 would have a somewhat different effect in that it would give more scope to the chairperson and chief executive officer to question or express an opinion on the merits of Government policy. It would simply allow them to decline to express or question an opinion. There is a difference between the amendments. If amendment No. 11 is rejected, amendment No. 13 can be put separately. I am not sure all the amendments should be grouped together. While I know we can vote on them separately, it must be noted there is a difference in their effect.
My amendment is in the same area but different. The Labour Party's amendment would go quite a way in the direction of that of the Government because it still states "evidence shall not include questioning or expressing an opinion" in other areas and in certain ways. Mine would simply replace the words "shall not" with "may decline to". This meets the requirement the Minister stated last night he wished to defend, that is, to protect the rights of the chairperson giving evidence. He stated last night that he was very attracted to my amendment and I was very hopeful I would see a little asterisk indicating this like a token of affection. However, I do not see the asterisk and feel rather jilted. On the other hand, we made our point and it lodged with the Minister. He indicated he would seek further advice and place that advice before the House. I am not sure whether he was referring to the Attorney General or the Parliamentary Counsel but I am sure the Minister of State, Deputy Mansergh, will have reply for us.
I am taking the amendments together. It is standard practice to include a provision requiring the chief executive officer and chairman of a State agency to refrain from inquiring into or commenting on the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objective of such policy or policies. Therefore, this legislation is no different in that respect.
It is worth noting the orders of reference of the Committee of Public Accounts. In that regard, paragraph 7(b) of Standing Order 158(i) of Dáil Éireann states the committee shall refrain from "enquiring into the merits of a policy or policies of the Government or a member of the Government or the merits of the objectives of such policies". The proposed amendment in the names of Senators Norris and O'Toole would put the CEO and chairperson in a very difficult position. It provides that they might answer questions or decline to do so. They would be under pressure from the committee to do so and might find it difficult not to do so. They should not be in a different position from other public servants vis-À-vis the Committee of Public Accounts. Therefore, I cannot accept the amendment.
The Minister deleted a proposed subsection (3)(b) which would have prevented the chief executive officer and chairman from commenting on policy in any document or report. He accepted that was excessive.
The Minister examined the Senators' proposed amendments and consulted the Office of the Attorney General on the issue. I am certain he did not promise to lay the Attorney General's opinion before the House because Ministers never do so. A trained lawyer such as the Minister would be least liable to make such a commitment. However, it is his view and that of those from whom he sought advice that the Labour Party's amendment is not necessary. Its intention is captured in subsection (3).
I have a general comment on the notion that the provision under discussion comprises gagging or censorship. Within the framework of Government policy, it is possible to give a great deal of opinion, make assessments, etc. I know this from experience. I did a a lot of public speaking as an adviser. I did not depart from Government policy but noted there were many supplementary points one could make to help to explain in detail what was occurring. Therefore, the provision will not be a significant restriction. There is a clear division of roles. Governments decide on policy and it is normally set out in broad terms. Agencies are responsible for its detailed implementation. It is proper that the interest of any committee be in how the policy is being implemented. If one wants to debate the policy, there are adequate fora for doing so, namely, the Houses of the Oireachtas.
That is a very disappointing response and it is not convincing. With regard to the contention that the provision represents standard practice, it emerged in the debate last night that provisions such as this appear in some Acts but not in others. It is clear it is not a universal provision affecting the types of officeholders in question. I accept the provision is included in some legislation but it seems perfectly clear that it is not contained in others.
I am not sure whether I misunderstand something. I certainly believed I understood the issue last night but now the debate has been reopened. Far from necessitating this amendment, the Standing Order, as read by the Minister of State, actually obviates the need for it. I would like an explanation. If the Standing Order states the committee is to refrain from asking the questions at issue, this is surely an argument not to prevent an individual from answering them. If the committee is not going to ask the questions, one does not have to legislate to stop somebody answering them. That is the point I was making. Unless I have missed something, I believe I am correct in that basic proposition which has not been addressed by the Minister of State. If I am correct in what I am saying, this helps rather than hinders our argument.
I am disappointed by the response from the Minister of State. The Minister for Finance, when in the House last night, appeared somewhat more open to addressing this particular objection. On the general question of gagging and so on, I do not know if this provision represents a wish to gag public officials, although I am suspicious it does. I believe people would be entitled to hold that view.
A controversy arose earlier this year in regard to the appearance of Dr. Somers at a committee of this House. At the very minimum, there was embarrassment, if not fury, on the part of Government when Dr. Somers delivered himself of the opinion that the National Treasury Management Agency had no experience of bank restructuring and was not adequately staffed to deal with it. The furore in regard to his relatively innocent remarks in that regard was extraordinary. I do not believe the response in this regard is unconnected to the attitude being taken by the Minister of State in regard to this amendment. That is my, not unreasonable, view.
I am not yet finished but I am almost finished. The House has heard very few speeches from the Labour Party benches for the past six hours. Perhaps the Acting Chairman will indulge me in regard to the two or three amendments which we will be pressing.
I would like to finish the point I was making in regard to Dr. Somers. I note RTE has stated that Dr. Somers is to leave his post next month. This was confirmed on the airwaves this evening. Dr. Somers has served the State well. It would be entirely wrong for us to be seeking in any sense to restrict or gag officials such as Dr. Somers, his successors or officials of NAMA who have such an important job to do on behalf of the State.
If the Acting Chairman does a word count on my contribution, she will find it is a lot shorter than many others-----
I have reasonably good antenna and can tell how matters are progressing. I have no appetite for any further disclosures from the Minister. As the debate progresses I discover in myself an increasing appetite for the gag. I also have other more carnal appetites which I now propose to satisfy elsewhere. I will return for all votes.
On a point of order, before Senator Norris leaves the House, I wish to inquire, in terms of the business of the House, whether if the Labour Party amendment is pressed the outcome of that vote will in any way affect the possibility of Senator Norris's amendment being put to the House.
The equivalent of Committee of Public Accounts Standing Orders are being extended to the committee dealing with NAMA. The Minister's view is that the point made in the Labour Party amendment is adequately covered by the text already in the legislation.
There are, in particular in regard to a body like NAMA, important confidence issues which cannot be disregarded. These apply to institutions such as the Central Bank and other institutions that have particularly sensitive functions, which makes this provision particularly important. I had not heard, as I have not had an opportunity to listen to any news bulletins, that Dr. Somers is retiring from his post. I have known Dr. Somers for a long time. I take this opportunity to pay tribute to him as an absolutely outstanding public servant-----
The Dail Divided:
For the motion: 27 (Dan Boyle, Martin Brady, Larry Butler, Ivor Callely, John Carty, Donie Cassidy, Maria Corrigan, Mark Daly, John Ellis, Geraldine Feeney, Camillus Glynn, John Gerard Hanafin, Eoghan Harris, Cecilia Keaveney, Terry Leyden, Marc MacSharry, Lisa McDonald, Brian Ó Domhnaill, Labhrás Ó Murchú, Francis O'Brien, Fiona O'Malley, Ned O'Sullivan, Ann Ormonde, Kieran Phelan, Jim Walsh, Mary White, Diarmuid Wilson)
Against the motion: 25 (Ivana Bacik, Paul Bradford, Paddy Burke, Jerry Buttimer, Ciarán Cannon, Paudie Coffey, Paul Coghlan, Maurice Cummins, Pearse Doherty, Paschal Donohoe, Frances Fitzgerald, Dominic Hannigan, Fidelma Healy Eames, Michael McCarthy, Nicky McFadden, Rónán Mullen, David Norris, Joe O'Reilly, John Paul Phelan, Phil Prendergast, Eugene Regan, Shane Ross, Brendan Ryan, Liam Twomey, Alex White)
Tellers: Tá, Senators Camillus Glynn and Diarmuid Wilson; Níl, Senators Ivana Bacik and Alex White.
Question declared carried.
The Dail Divided:
For the motion: 28 (Dan Boyle, Martin Brady, Larry Butler, Ivor Callely, John Carty, Donie Cassidy, Maria Corrigan, Mark Daly, John Ellis, Geraldine Feeney, Camillus Glynn, John Gerard Hanafin, Eoghan Harris, Cecilia Keaveney, Terry Leyden, Marc MacSharry, Lisa McDonald, Rónán Mullen, Brian Ó Domhnaill, Labhrás Ó Murchú, Francis O'Brien, Fiona O'Malley, Ned O'Sullivan, Ann Ormonde, Kieran Phelan, Jim Walsh, Mary White, Diarmuid Wilson)
Against the motion: 24 (Ivana Bacik, Paul Bradford, Paddy Burke, Jerry Buttimer, Ciarán Cannon, Paudie Coffey, Paul Coghlan, Maurice Cummins, Pearse Doherty, Paschal Donohoe, Frances Fitzgerald, Dominic Hannigan, Fidelma Healy Eames, Michael McCarthy, Nicky McFadden, David Norris, Joe O'Reilly, John Paul Phelan, Phil Prendergast, Eugene Regan, Shane Ross, Brendan Ryan, Liam Twomey, Alex White)
Tellers: Tá, Senators Camillus Glynn and Diarmuid Wilson; Níl, Senators Pearse Doherty and David Norris.
Question declared carried.
I move amendment No. 15:
In page 56, between lines 28 and 29, to insert the following:
"(2) It shall be an obligation of a participating institution not to commence or pursue proceedings for repossession of a principal private residence unless the arrears of any mortgage are in excess of 24 months, provided the mortgagor provides reasonable co-operation within his or her means and ability with the participating institution.".
This amendment seeks to place on obligation on participating institutions not to commence proceedings for repossession of principal private residences unless the mortgage arrears are in excess of 24 months. This matter was discussed at length on Committee Stage. In the context of Government policy, the principle underpinning the amendment is already accepted, particularly when one considers that an agreement is already in place that the two largest banks will not pursue proceedings for repossession for a period of 12 months.
In the light of the high levels of personal debt and the increasing number of repossessions taking place, it is important to create a higher level of public confidence in the banking system in order that people might rest assured that their homes will not be repossessed. As the level of negative equity grows and the number of repossessions increases, there are major concerns that people's homes will be on the line. These concerns arise at a time when jobs are at risk or when serious pay cuts are being contemplated.
For all of the reasons of which the Minister of State is well aware, we ask that this amendment be accepted in order to place Government policy on a statutory footing. Participating institutions should be required to hold off on attempting to repossess people's homes for a period of two years. This is a fair amendment, to which the Minister of State is probably sympathetic, in principle. Let us place this matter on a statutory footing and provide people with a level of security in respect of their homes.
As Senators are aware, I have done quite an amount of work on this subject and prepared a series of recommendations which were presented to the Minister in August. It is clear that the amendment is not going to be accepted. However, the Irish Banking Federation, IBF, indicated yesterday that a committee involving itself and MABS would be established and oversee the application of its statement of intent not to pursue people willing to pay their mortgages. The statement of intent to which I refer covers some but not all of the mainstream institutions. For example, it does not cover Start Mortgages, Springboard Mortgages and others.
It is clear that action on this matter will not be taken in this Bill. However, perhaps the Government will, in line with its commitment under the renewed programme for Government, consider legislating in this area in order to provide a safety net for families. As stated on Second and Committee Stages, perhaps the most appropriate way to proceed would be to amend the Enforcement of Court Orders Act. People are a good medium-term bet and must be able to avail of the options outlined in the code of conduct issued by the Financial Regulator and in the IBF protocol which has been further strengthened by yesterday's statement of intent. Like Senator Bacik and others, I am of the view that we must legislate for this matter. However, I cannot support the amendment.
This matter has already been debated extensively in connection with this Bill and otherwise. The issue is not one of ends - there is a fair degree of consensus in that regard - it simply is one of means.
The Minister for Finance is opposed to the amendment. I will not rehearse all of the relevant material in that regard; I will merely summarise the key points. Including a provision such as that outlined in the amendment could have a detrimental funding and ratings impact on participating institutions. There is no evidence of an avalanche of repossessions to date, nor is one expected in the near future. We have undertaken significant work in this area, with the introduction of a code of conduct in respect of mortgage arrears. As Senator Bacik stated, there is also an agreement with Bank of Ireland and AIB to extend the period before which they will apply to the courts to commence enforcement of legal action for repossessions to 12 months. In addition, the renewed programme for Government includes a commitment to introduce new measures to protect families experiencing difficulties with their home mortgage repayments.
I anticipated the Minister of State's reply and I am glad Senator MacSharry put the case in favour of the amendment so eloquently. I do not understand why it is not possible to deal with this matter in the legislation before us, particularly when the Minister of State and Senator MacSharry expressed support, in principle, that there should be a moratorium on repossessions. The Minister of State has indicated that there is no evidence of an avalanche of repossessions. However, we know that the number of repossessions is increasing and that there is major concern that people's homes will become liable to repossession. As Senator MacSharry stated, there is a need to address these issues by means of a statutory formula. However, I do not believe the Court and Court Officers Bill would be the appropriate vehicle to use in this regard.
I apologise. I do not see it as a more appropriate place than this Bill which is all about trying to increase levels of confidence and trust in the banking and financial systems. Therefore, it would be entirely appropriate to deal with the matter in this Bill.
I move amendment No. 16:
In page 56, between lines 28 and 29, to insert the following:
"(2) It shall be an obligation of a participating institution to increase lending to SMEs and first time buyers to such an extent as is specified in agreements made by the participating institutions with the Minister whether before or after the passing of the Act and in the absence of such agreement, to the extent specified by the Minister.
(3) A participating institution shall report to the Houses of the Oireachtas on a monthly basis as to the level of lending to SMEs and first time buyers.".
We had very extensive debate on this issue on Committee Stage and I think the Minister prefers to deal with the matter in section 210. Given that is where the Minister wishes to deal with the issue, where we would much prefer to have this amendment adopted, I will withdraw the amendment. However, I draw the Minister of State's attention to the fact that we have something to say on section 210 and have tabled amendments to it.