Thursday, 4 November 2021
Finance (European Stability Mechanism and Single Resolution Fund) Bill 2021: Report and Final Stages
I remind Senators that a Senator may speak only once on an amendment on Report Stage except the proposer of an amendment who may reply to the discussion on the amendment. On Report Stage, each non-Government amendment must be seconded.
Amendments Nos. 1 to 3, inclusive, are related and may be discussed together.
I move amendment No. 1:
In page 6, between lines 11 and 12, to insert the following: “Report on review and operation of Act3. (1) The Minister shall, by 31 December 2022, lay a report before both Houses of the Oireachtas on the potential for a review of the European Stability Mechanism and its operations, including potential revisions of the Annex III criteria to better reflect—(a) the European Commission’s review of the EU economic governance framework,(2) Such a report will include information on the position the Minister proposes to take on any such reforms or revisions.”.
(b) any conclusions of the Conference on the Future of Europe.
Amendments Nos. 1 and 2 cover similar ground. In amendment No. 1, I try to spell out some of the aspects more specifically. There is a slightly different piece of work being done in amendment No. 3. Fundamentally, these amendments provide for reports both on the operations of this Bill and on the operations of the mechanisms which are being updated by this legislation. The specific area of focus for me is related to the precautionary condition credit line.
Amendment No. 1 provides that there would be, by 31 December 2022, just over 12 months from now, a report laid before both Houses of the Oireachtas on what potential reviews there may be of the European Stability Mechanism and its operations, including the potential revisions of the Annex III criteria, which is a specific area of interest for me and which we discussed previously, to better reflect the outcomes from the EU economic governance framework which, as the Minister rightly highlighted, was relaunched in September - it was initially there in 2020 but was suspended - and is open for pubic engagement until December.I encourage people to engage because the governance framework we have at an EU level is going to be really important. We know mistakes were made in regard to that governance framework in the past, whereby, as I have highlighted before, things like the smart, sustainable and inclusive growth initiative, which was a very well though-through plan under Europe 2020, was very much put aside in favour of economic and short-term fiscal targets. There were the 11 points put forward by the former head of the European Commission, Mr. Juncker, which later needed to be supplemented by a social pillar because the way economic governance had been focused, with the emphasis on austerity and short-term fiscal governance and targets over the long-term development goals for the EU and the states within it. That led to a fracturing of our social fabric and resulted in many missed opportunities. Many of us have an eye at this time to COP26 and climate action. We lost a lot of time in terms of making the transitions we should be making in respect of sustainability during the period when the focus was constantly on the short-term fiscal targets and the EU semester process excessively focused on that.
The semester process is gone, the recovery and resilience process is functioning and we now have the discussion on what comes next. I do not necessarily want to fight over old battles but I want to make sure we do not embed old structures. Unfortunately, the criteria that are currently proposed under Annex III are very much the same criteria, including fiscal criteria, that we had in the past. For example, Article 14 allows that the board of governors of the ESM may decide to change the eligibility criteria. I might be ruled out of order for trying to change the actual mechanism but the board of governors, which Ireland has a role in, may decide to change the eligibility criteria around precautionary financial assistance and may amend Annex III in that regard. These are things that are potentially likely to happen. One of the key factors that may influence how they happen is the decisions that are made on what kind of economic governance framework we want to have, where all of this fits into it and, I hope, a recognition of the failures of the past.
Another point to consider is that as well as the review of economic governance, there is a parallel process underway in the form of the Conference on the Future of Europe. My participation in that forum was the reason I was not able to engage directly with the Minister on Committee Stage. I thank colleagues for having brought forward points of concerns. One of the conversations at the conference is around what we are going to prioritise, what the focus will be, whether we can make the kinds of long-term transformational changes that are needed and how we can facilitate public investment. The tools we had, including the precautionary credit line, were found to be inadequate in the face of a crisis like Covid. In fact, we had a situation with that credit line where we had to change the rules and waive many of the requirements in order to be able to act with the speed and in the way we needed to act to give the fiscal stimulus that was vital and very much welcomed across Europe. Indeed, that went a long way towards rebuilding public faith in, and engagement with, the European project.
The point is that there was a solidarity response, although, unfortunately, it was not extended to the wider world in terms of a TRIPS waiver. Be that as it may, within the European Union, there was a solidarity response and there were speedy mechanisms deployed. This pointed up that the tools we had available were not fit for purpose and were, in fact, getting in the way. When we talk about things like the climate crisis, for instance, or the massive transformations that are needed in terms of something as simple as the UN Convention on the Rights of Persons with Disabilities, CRPD, with people in that cohort making up 14% to 18% of society across different EU states, that creates a whole shift. When major changes are needed and there is a major deficit to address, including the deficits in public services that came to light during the Covid crisis, we need economic governance policies that facilitate long-term thinking and a fiscal response that is flexible and recognises the environmental boundaries and social imperatives.
It seems like I am bringing a lot into this discussion but I am doing so because I know the Minister is aware of all of this and is fully engaged in the European discussion. Nothing is closed. We are not in an Overton window position where we have had business as usual and now we have a small window in which we are doing things differently during the Covid period but we will then will go back to the same as before. The Minister has acknowledged that we are facing periods of radical change and transformation and that how we in Ireland and our fellow EU states are able and willing to respond to that is crucial. The two major conversations, namely, the Conference on the Future of Europe and the review of economic governance, are fundamental.
I spoke on Second Stage about my concern that we have chosen to build the same old mechanisms into the new arrangements. They are slightly different because it is a case of doing things in advance rather than after the fact, but they are still the same fiscal criteria and debt ratios. There is scope in this agreement to change them. Amendments Nos. 1 and 2 make specific provision in that regard and amendment No. 3 is specifically around the precautionary conditional credit line. We had a situation where we had a supposed safety net for states for which only nine countries qualified. If the safety net does not work for a majority of European Stability Mechanism members, then it is not a safety net that works or is fit for purpose. We might press each country to get to the fiscal targets and criteria that will allow them to qualify for the precautionary conditional credit line but, in some cases, that would be asking countries that are under pressure to put themselves under further pressure to get to a level at which they can be helped. If there is a financial crisis in each of those countries, they are not going to be able to access the support. We have a situation where this credit line is not meeting its purpose The Minister acknowledged in his speech, as has been acknowledged in briefings previously, that it was a failure that the previous criteria served as an obstacle such that nobody accessed the precautionary conditional credit line. It certainly was of no use in regard to the Covid crisis.
What I am trying to do in amendment No. 3 is have the Minister be a champion within this process. We cannot change the process. I tried to do so in some of my amendments on Committee Stage but I know I cannot change the mechanisms. Nonetheless, the Minister and Ireland have a key role within that process. Amendment No. 3 is asking that the Minister, or his or her representative on the board of governors, would advocate, if we have a situation where more than half the members of the ESM do not qualify for the safety net, that there be a review of it. If we have a situation, as we have had in the past, where only nine countries qualify for the credit line, the criteria should be reviewed to ensure it is a credit line that can work and that people can reach. I am asking that in those situations, Ireland, through its role on the board of governors, would advocate for a review of the criteria, including the eligibility criteria provided for in Annex III, as is allowed for under Article 14.1 of the proposed schedule, and that powers be activated whereby the board of governors may decide to change the eligibility criteria for the ESM precautionary financial assistance provision and amend Annex III accordingly.I advocate Ireland's triggering of the activation of the powers in those circumstances and having an appropriate review.
There are two things happening in these amendments. We could have argued against their grouping. In the first two, I am suggesting there should be a review of the Annex III criteria that reflects the outcomes of the economic governance review and the Conference on the Future of Europe. I ask that the Minister, in his report and engagement with the Oireachtas in this regard, indicate the position Ireland will take in the review. He should engage with both Houses of the Oireachtas or the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach on the position Ireland will take given the outcomes of the Conference on the Future of Europe and the review of economic governance. That is one proposal.
My other proposal, as contained in amendment No. 3, is that if the precautionary conditioned credit line does not work for, or is not within reach of, at least half of the ESM member states, Ireland should seek the triggering of a review of the criteria to ensure fitness for purpose.
Perhaps an amendment like mine will be proposed in the Dáil. It would be a worthy amendment. I would be glad if the Minister gave us a signal on this because it would be useful. I have indicated three reasons why a review of Annex III might be needed but, if for any other reason the board of governors decides to change the eligibility criteria for ESM precautionary financial assistance and amend Annex III, I hope the Minister will engage. It is stated the changes would come into force only after applicable national procedures. I hope the Minister will indicate to us today that he will consider engagement with the Oireachtas or the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach to be part of the applicable national procedure for Ireland if it is to take a position on proposed changes to eligibility criteria. Perhaps that is a matter the Minister will address in his answer.
The Minister will be aware of an amendment of mine that would not be in order because it deals with the shared document. It specifies that the applicable national procedure for Ireland should include consultation with the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. Perhaps that might be revisited in the Dáil. It would certainly give some assurance. Could the Minister indicate that where the powers under Article 14 are being triggered or activated, he intends to engage with the Oireachtas on the position Ireland will take regarding the board of governors?
I thank the Minister for his engagement on this. I read the detailed comments he made on Committee Stage. I am aware that he understands very well the kinds of decisions we are making and the seriousness of our future direction, and that is why I hope he might be able to give a positive indication regarding the reports and reviews.
I want to emphasise just one point. The Minister made a very thoughtful speech on Second Stage in which he contrasted the approach of the EU in the wake of the Covid crisis with the approach associated with the austerity of the preceding decade. I believe he was right, and that is why I do not understand why there has been no change to the financial criteria for accessing the precautionary credit line. It does not make sense. Therefore, the requests made by Senator Higgins are very reasonable. I urge the Minister to accept them.
I apologise to Members for keeping them waiting. I have just come from the Dáil, where I was taking Leaders' Questions, so I could not get here any quicker.
I thank Senator Higgins for the substantive amendments she has tabled and the important matters she is raising regarding this legislation and its future operation. I thank her also for her acknowledgement of the importance of the debates currently under way in the European Union. I am very much aware of, and understand, the issues she is raising. In addition to approaching these matters as Minister for Finance for our country, which is a tremendous privilege, I am also serving as chairman of the board of governors of the ESM. Therefore, I have regular engagement with the ESM and understand the issues the Senator is raising, in addition to those concerning the future architecture of the European Union in the sense of how it will deal with the future of economic and monetary union and, in particular, with countries or banks that experience great financial difficulty.
I genuinely thank Senator Higgins for displaying such interest in these matters because they are so important to the future of Ireland and Europe. In responding to the broad group of amendments that have been tabled by her, I can assure her regarding the spirit in which, and attitude with which, I would approach co-operation with the Oireachtas on the debate on the future of the Stability and Growth Pact. I assure her that in the context of any decisions the board of governors might need to make on the operation of the ESM, I and, I expect, future Ministers for Finance will engage with the Oireachtas and explain to the Seanad or relevant committee the Government's view on the debate on the future of the Stability and Growth Pact, the input Ireland has regarding the operation of the ESM, the actions taken, the view on how the ESM is operating and decisions it might make.
I will deal with the procedural questions before I move on to the policy issues the Senator raised. While I can assure the Senator on the spirit in which I will co-operate and on my expectation that future Ministers will co-operate, I cannot accept these amendments. I cannot do so for two reasons, the first of which is that I believe, as a matter of principle, that it is not appropriate to deal with issues concerning the relationship between the Executive and the Parliament by way of requiring reports to be furnished through legislation. I do not believe it is good use of legislation, nor do I believe it is appropriate that issues of accountability be dealt with in that specific way.
Second, regarding the role of Ireland as a member of the board of governors of the ESM, it is very conceivable that decisions will have to be made by the ESM and its board at speed. In those circumstances, we will have to respect the need for fast and efficient decision-making. We will have to respect the fact that it may at times be practically difficult for the board of governors to operate in really urgent circumstances. Overlaying the process with the kinds of procedures Senator Higgins is seeking, in the sense of requiring the Government to account for the view of its representative on the board, can be done, but it should be done in a way that respects the fact that the ESM deals with very sensitive matters. It has to deal with those matters in private, and sometimes in a really urgent way. It is possible that its board of governors might not be able to fulfil its duties as a board if some of the things Senator Higgins is calling on our representative on the board to do must be done.Those are the procedural reasons I am not in a position to accept the amendments - first, because of the relationship between the Oireachtas and the Government and, second, the particular way in which the ESM may have to operate, though I hope we it is never obliged to operate in that way.
To move to the policy matters raised by Senator Higgins, the first issue I understand her to be raising in that regard is her concern that this ESM legislation in some way predetermines the debate that is under way regarding what could be the future of the stability and growth pact. Let us park for a moment that debate and where it may end up. I fully respect the Senator's views on that issue and thank her for the role she is playing on the Conference on the Future of Europe. However, on a basic and fundamental level, a law or a treaty can only make reference to other laws or architectures that are in place at this time. This framework can only make reference to the stability and growth pact, SGP, because the only governance framework that is in place within the European Union is the SGP. She stated that it should not predetermine the political debate that is under way, and I understand that point. However, I make the point that a law or a treaty can only refer to other laws or treaties that are in existence and cannot be based on change that may happen in the future. If there were to be change in the stability and growth pact and the economic architecture of the European Union and the euro area, the board of governors of the ESM would be cognisant of that change in any decisions they may make in the future. However, on a fundamental level, if the Senator is arguing that this is predetermining any political debate, I do not believe it is doing so, but would argue that a law or a treaty can only make reference to other laws or treaties as they stand at this time.
Second, the Senator made the point that the safety net of the Covid precautionary credit line from the European stability mechanism was inadequate because only nine countries could have qualified for it.
I was not referring to the Covid fund but, rather, the precautionary credit line. The Covid fund was widely applicable. My point related to the previous tool, namely, the precautionary conditional credit line. I was told by the Minister's Department that approximately nine countries would have qualified for it.
That may be so, but a safety net is only credible if it recognises that countries might not need it because their national finances are sound and resilient. How would a credit net be realistic or credible if a country in excellent economic condition, with very low debt, in surplus year to year and a growing economy with multiple sources of employment and income growth and no macroeconomic imbalances, also qualifies for use of the safety net? The very nature of a safety net is that it will have criteria for access and there will be countries that will not need it. I do not believe that in order for a safety net or a credit line to be credible, all countries have to be able to immediately qualify for it. There will always be countries that, by dint of their national budgetary policies and the decisions they make, may not need to qualify for it.
As regards the Covid-related points made by the Senator, the reason it ended up being the case that no countries had a need to access the Covid precautionary credit line in particular was the success of all the other things the European Union did, such as the decision the Commission made with regard to activating the general escape clause, the decision the European Central Bank made through its pandemic emergency purchase programme and the role of the support to mitigate unemployment risks in an emergency, SURE, programme. For me, particularly in the context of the Covid environment we are in, the fact that the ESM was not called in is purely a consequence of the success of other interventions by the European Union and the national buffers that many countries, including Ireland, had built up before this awful disease hit.
I thank the Senator for raising the various issues she has highlighted. Issues of accountability and the relationship between the Executive and the Parliament are better dealt with outside the legal framework we are currently debating. In any event, I do not believe it would be practically possible in the event that the ESM was called into action or that the treaty we are discussing predetermines the outcome of the political process that is under way in respect of the stability and growth pact.
I thank the Minister for his very thoughtful engagement on the amendments, as well as throughout this process. To be clear, my amendment does not relate to the Covid conditional credit line. The general escape clause was needed. If we have a stability mechanism where a general escape clause is needed, that raises questions regarding the functionality of that mechanism. However, my concern does not relate to those that do not need it. The problem is that fiscal criteria for fiscal health are being set in order to be able to qualify for it. That is the concern. The concern is that there is a need to hit certain debt-to-spending ratios, the same kinds of criteria that countries were required to meet in order to access the safety net. It is not about the countries in good financial health being excluded; the concern is that the countries that might need or have needed this precautionary credit line the most - not the Covid particular credit line but the general precautionary credit line - will not qualify for it, particularly now because the idea is that it is a pre-qualification to get near the safety net of that precautionary conditional credit line. The argument was made that it was political because of the political impact of having these criteria attached after the fact. It is a problem if there is something that several countries may need but cannot qualify for and access and the only way around that is a general escape clause.
There is a concern relating to the Annex III criteria the Minister mentioned in terms of their amendments and change. I am not suggesting that the board of governors would have to consult Ireland on every decision it makes. The specific aspect I was speaking to relates to where there is a change in the eligibility criteria for ESM precautionary financial assistance and amendments to Annex III. Even in a situation where emergency or other decisions are being made in a short timeline or at short notice, there is nothing to preclude the inclusion of a provision for them to be reviewed. That is a matter that could be considered on Report Stage or as the Bill progresses through the Dáil. It is normal to build reviews into legislation and to recognise that situations arise where decisions may need to be reviewed. That would be appropriate.
I welcome the Minister's indication that where the board of governors is making a decision, it is his expectation that there would be engagement with the joint Oireachtas committee. That is important. These are significant decisions. In terms of the balance of what I have put forward, I am not attempting to pre-empt what might emerge from the process on the review of economic governance or the Conference on the Future of Europe.It is appropriate - this happens all the time with legislation - to build in review points and points where it can be anticipated there will be a review. We know this from lots of legislation, such as, for example, the two-year review built into the Health (Regulation of Termination of Pregnancy) Act. It is quite standard practice to build in a review point, especially with legislation that is coming through in a situation where there are known unknowns and where there is a known uncertainty regarding the landscape in which that legislation will operate. In this case, the known unknowns include the economic governance review and the outcomes of the Conference on the Future of Europe. There are probably also some known unknowns regarding the impact of the climate crisis. We know we have a situation in which the landscape will change. As a result, the report is the mechanism which I can suggest be used.
I will push back a little on the Minister's suggestion that reports are not the best. For those of us in the Seanad who cannot bring forward amendments with a financial implication, for example, reports are one of the key ways in which we can identify and signal key policy issues in respect of the consequences or impact of legislation. They are an important tool at times and have been very useful. We know that, in many cases, amendments on Report Stage requiring the submission of reports on issues relating to legislation being dealt with by the House have ended up sowing the seeds of subsequent legislation that might come from Departments. There is a role for reports.
Leaving that aside, whatever one's views on reports, there is certainly a role for reviews. It would be useful if, perhaps, in this Bill's journey through the Dáil consideration was given to making a commitment to carry out a review on what position Ireland will take. We will go further into the positions Ireland might take on the economic governance review in our next set of amendments. I will not anticipate the debate in that regard. On both the issue of a situation whereby a number of countries do not meet the qualifying criteria of the precautionary condition credit line, or a situation where the board decides to amend Annex III, even if those happen at short notice, we could build in a mechanism whereby the Oireachtas will engage with the Minister, or any subsequent Minister, on what position Ireland will take. That might be six-month review or it may be a matter of a decision needing to be made. If it is an emergency decision, or one taken in an emergency context, it is all the more important that it is reviewed and gets proper scrutiny.
We need these mechanisms for healthy countries with healthy finances and so on because it is vitally important that we have solidarity between countries. We are focusing on the Stability and Growth Pact mechanisms, but their overall thrust and goal, and that of the legislation, is to have a mechanism that functions in the context of solidarity. The reason each country's health matters to the others is that we are connected globally but, very specifically, we are connected within the European Union and in the context of economic and monetary union. We are deeply interdependent. There have been failures of solidarity in the past, which have had consequences that may not always have come out on the balance sheets of the economy, but have come out socially and through situations of political instability. In that regard, it is in everybody's interest, no matter what the health of any country is, that the safety net works for a majority of members to whom it is meant to apply.
I move amendment No.2:
In page 6, between lines 11 and 12, to insert the following:
“Report on outcomes
3.The Minister shall, within 36 months of the passing of this Act, lay a report before both Houses of the Oireachtas and the relevant Joint Oireachtas Committee outlining an analysis of outcomes of the European Commission’s review of the EU economic governance framework, the Conference on the Future of Europe and such other issues which the Minister may deem relevant and what position the Minister intends to take on any reforms of the European Stability Mechanism, including any proposed revisions to the Annex III criteria.”.
I move amendment No. 3:
In page 6, between lines 11 and 12, to insert the following:
“Review of precautionary conditioned credit line
3. Where less than half of the European Stability Mechanism Member States meet the qualifying criteria for access to the precautionary conditioned credit line, the Minister or his or her representative at the Board of Governors, shall advocate for a review of those criteria to ensure that a majority of European Stability Mechanism Member States shall meet the qualifying criteria.”.
I move amendment No. 4:
In page 6, between lines 11 and 12, to insert the following:
“Report on European Commission review of EU economic governance
3.The Minister shall, by 1 December 2021, provide to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach an outline of any proposed submission Ireland will make in relation to the European Commission review on EU economic governance, including in relation to the operation of the European Stability Mechanism.”.
There are a couple of versions of this amendment. Three, rather than two, amendments have gone in. Effectively, these amendments relate to that process the Minister rightly highlighted is happening, and is important, which is the European Commission's reinstated review of EU economic governance. Again, I know we cannot have a situation whereby we require the Minister to have agreement and so forth, but it is appropriate that there would be engagement because the position Ireland takes on this really matters. It matters in the sense that the position each country takes on the future of EU economic governance is fundamentally important to the health and survival of our Union.
It is, perhaps, particularly important in the context of the position Ireland takes because the Minister is very influential in terms of economic policy at European level. I have seen him engage in discussions and debate at an EU level. It is very important and appropriate that where Ireland is participating, contributing and perhaps shaping economic policy, all those branches of expression of the Irish public through the legislature would have engagement in that conversation. We know the influence that Irish financial advocacy has had. We saw it very recently, for example, in the discussions on tax law. The Minister spoke recently with Ms Yellen on the positions being taken by the US Treasury on tax and the question of at least - or not at least - a 15% corporate tax rate. These are all massively significant decisions and there is an onus on the Oireachtas and the Government, as the Executive branch, to engage very constructively on this because the decisions made on economic governance, and the positions taken on economic and financial policy and governance, have extraordinarily significant life and death impacts on the lives of the citizens we represent.
We know that during the financial crisis many of the decisions, including those relating to banking, were taken in the middle of the night. We know there was deep frustration during some of the period of austerity regarding the sense of disempowerment, disenfranchisement and disengagement when it came to crucial financial decisions.Many people felt that their discussion was always on the outcomes and about what service gets cut and what is most needed. We need to have an empowering, positive engagement and relationship with the European Union. For that to be meaningful, it needs to have citizen engagement and the public representatives in both of these Houses must be able to show that we can engage and that we can help to shape the European Union and its economic governance and financial structures. That is part of rebuilding faith and trust in the European Union. It says that these areas are not shut down. It is not simply a case of saying what has happened in Europe and what we need to do now but instead that we shape it. I know that we shape it and that the Minister shapes it. We need to bring that connection to the public. These are incredibly important decisions about what the economic governance of the European Union will look like in the future.
I ask that the Minister provide the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach with an outline of the proposed position that Ireland intends to take. I have three versions of the amendment. I ask that the Minister engage with us prior to any decision on economic governance. These are all different ways of wording it. I wanted to make sure that I balanced appropriately and was clear. I am not saying that the Minister needs to seek the approval of both Houses or even of the committee about the position that he takes but I ask that he engage. Will he indicate if he can support any of these three amendments? If there is a principled objection about a report, perhaps the Minister will signal what other mechanism would be appropriate for ensuring that we have public and visible scrutiny of the position Ireland will take on the next direction for the European Union.
I have a principled objection to these amendments. I believe that the need that Senator Higgins refers to is better discharged through the normal functioning of the Oireachtas and the normal procedures of accountability between the Minister and the Oireachtas committee. As I indicated in my opening contribution, I do not believe that there should be further reporting requirements for a member of Government on this matter beyond the normal procedures that are in place. In particular, I have a concern about amendment No. 4, which lays down a timeline in which this could be done. It is certain that by 1 December 2021, the Government will not have concluded its work on what our national position will be in the debate that is unfolding on the future of the Stability and Growth Pact. On the other matters, I believe that the best way for the Government to inform the Oireachtas and the country on our view on the future of the Stability and Growth Pact and our national position is through the normal procedures between the Oireachtas and the Government. For those reasons, I am not in a position to accept Senator Higgins's amendments but I assure her that, in the debate which will unfold across next year rather than this year, the Government will make the Oireachtas aware of our national position in this important debate.
Unfortunately, I am not making this in simply a precautionary manner but because there has been a lack of engagement on some important decisions, most notably the recovery and resilience strategy. Ireland is one of only seven countries in the European Union that did not have parliamentary scrutiny or debate on our plan for recovery and resilience. That is a fund of €850 million, which is substantial, and which did not have public scrutiny, Oireachtas scrutiny or engagement. That is why I am trying to insert hard instruments in this regard to ensure we have such engagement because, sadly, we have not had it. We had requests from the joint committee about scrutiny of that matter. It is a frustrating issue, given that one of the largest individual, financial and fiscal packages was being made, since we did not have the opportunity to input, guide or engage on that plan. We were an outlier within the European Union on that. Only seven countries did not have such a process.
I agree that the December date in amendment No. 4 is tight. It is because mid-December is the point for public and stakeholder engagement. For stakeholders to be able to engage on the economic governance position, it is useful for them to have it. That is why I refer to an outline. I agree that it may not be finalised. I hope that when there is engagement from the Government, it will not be fully finalised but there will be scope and flexibility to engage with what is coming through. At the moment, the deadline for other stakeholders to engage on economic governance falls in December. There is not a sense yet of an outline of what position Ireland will advocate for and what difference it will make. I do not like to cite media concerns.
There was a concern with regard to housing which I will not go into in depth since it is not in the Minister's remit. We have seen clear positions being taken in the Department of Finance with regard to other realms and other areas, relating to, for example, the State accessing finance. I am concerned that leasing, which we were told was only being done because we were required to do it by the fiscal rules, has continued to be part of this year's budget strategy. More than 2,600 houses are proposed to be provided through leasing, which is bad value for the State. There is a concern that policies and preferences are being pursued which, in some cases, overrule other economic advice such as the advice from the ESRI, yet it has not had public discussion.
Even the tensions between competing goals that we have as a State have not been properly articulated, for example, between our long-term development strategy and our position on fiscal constraints or the Stability and Growth Pact. I am not likely to put this in. It is only in the context of some frustration about engagement on this that I would table these amendments. I will withdraw amendment No. 4 but will press amendments Nos. 5 and 6. I recognise that 1 December is quite tight, but it is tight for everyone.
I move amendment No. 5:
In page 6, between lines 11 and 12, to insert the following:
“Report on European Commission review of EU economic governance
3.Prior to making a submission in relation to the European Commission review on EU economic governance, including in relation to the operation of the European Stability Mechanism, the Minister shall provide to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach an outline of such a proposed position.”.
I move amendment No. 6:
In page 6, between lines 11 and 12, to insert the following:
“Report on European Commission review of EU economic governance
3. Where the Minister elects to make a submission on behalf of the Government to the European Commission review on EU economic governance, the Minister shall, prior to making such a submission, provide the proposed submission to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach, including any submission relating to the operation of the European Stability Mechanism.”.
I move amendment No. 7:
In page 7, between lines 17 and 18, to insert the following:
8.The Minister shall, within 12 months of the passing of this Act, publish a report outlining the procedures and agreements between the ESM and the EU Commission in relation to their cooperation in any area of policy.”.
I am not really sure how amendment No. 10 is related but I am happy to have these amendments grouped for the purposes of expediency.I am not really sure how amendment No. 10 is related, but I am happy to have them grouped for the purpose of expediency. Amendments Nos. 7 and 8 are certainly related.
The Minister provided clarity on the ESM's engagement with the European Commission in his reply on Committee Stage. While I am very interested in those clarities, in amendment No. 7, I have proposed that it would be useful if we had procedures or agreements between the ESM and the European Commission, for example, if there are memorandums of understanding, MOUs, and if there are clearly demarcated areas of responsibility. The Minister gave some information on that but if there are any formal instruments or agreements that emerge on that, it would be very useful for those to be made public. Perhaps they will be made public. The Minister might be able to give me assurance on that, in which case the amendment would not be necessary. Certainly, we need clarity on exactly what the roles the ESM and the European Commission are when they are co-operating on policy. I very much appreciate the Minister's outlining of it. If there are any formal mechanisms, it would be also be useful to have those. It is always better to see procedures in writing.
On amendment No. 8 the focus is not the ESM's engagement with the European Commission regarding any member. Where the ESM is engaging with the European Commission on a member and the ESM is engaging, as is provided for under the amended legislation, with a private investor to a member, the ESM may have these two different roles. On the one hand, it may be engaging access to funding for a member with the European Commission, with the Stability and Growth Pact and so forth. The Minister has indicated in his speech that this is voluntary and on request, but nonetheless there is concern over working with private investors on the one hand and working with one of the instruments or bodies of the European Union on the other hand while ensuring each interest is very clearly specified.
I have suggested that the Minister might publish a report outlining what procedures, safeguards, firewalls and internal confidentiality protocols are in place. I know there is an indication in the legislation that there would be confidentiality - I believe the Minister also indicated it in his speech - on the ESM's engagement with the private investor to a member and that it would all be happening at the request of the member. Sometimes confidentiality can be a bit of a concern as much as a protection. If we do not know what conversation the ESM is having with the private investor, we should at least be absolutely sure it is not influencing in any sense the discussions the ESM may be having with the European Commission about a member.
Particularly regarding internal confidentiality protocols, will there be the same kinds of firewalls we expect in companies? Will there be different staff? Will there be clear confidentiality on what can come out of the conversation with a private investor and go into a conversation with the EU Commission and vice versa? I am concerned about these two functions happening in-house and how we can have best practice.
Amendment No. 10 is probably slightly different, but maybe it is not different, which in itself is a concern. The proposed new legislation provides that there may be ad hocattendance at a meeting of the board of directors. This legislation outlines the very significant power the board of directors of the ESM will have. The Minister has indicated he is the chair of the board of directors of the ESM. It would always be good practice to have transparency on any ad hocattendees so that we know who is in the room at least. I realise I cannot change the formal structures or standing orders of the board of directors, but this amendment seeks to encourage the Minister to advocate for publication of a list of all persons who attend meetings of the board of directors for the purposes of transparency and accountability.
The Senator spoke about how we can better understand the engagement between the European Commission and the European Stability Mechanism. When this treaty comes into force, a memorandum of co-operation between the ESM and the European Commission will be published. That will be publicly available on the websites of both the ESM and the European Commission to indicate to stakeholders how the Commission and the stability mechanism will engage with each other.
Amendment No. 8 relates to the engagement the ESM will have with the European Commission or another private investment or a member. Issues relating to the engagement between the ESM and the Commission will be dealt with by the memorandum of understanding which will be published when the treaty comes into force. The engagement the ESM might have with a private investor will only happen when a member state that could be the subject of that kind of engagement gives its consent to the ESM dealing with investors. Engagement between the stability mechanism and private investors about a member state will only happen when a member state gives its consent to the ESM for that kind of engagement to be initiated. By its very nature, it will be confidential because the European Stability Mechanism will be dealing with issues that are very important to the confidence financial markets may have in a member state. For those reasons it is very important to maintain confidentiality when it is happening, which is why I am not in a position to accept the amendment.
I am not accepting amendment No. 10 because information regarding who will attend the meetings of the board of directors is already publicly available. That is published on the website of the ESM. Information regarding who can attend those meetings but does not have voting rights is available. I can tell the Senator who they are. Observers appointed by the European Commission who would be in charge of economic and monetary affairs may attend but do not have voting rights. The president of the Eurogroup working group, the secretary general of the ESM and representatives of institutions or organisations might be there on an ad hocbasis, but they do not have voting rights. A list of those institutions and countries with voting rights is already publicly available. For those reasons, I am not in a position to accept that amendment. In summary it is because the names of those who have voting rights are already publicly available.
I will; that is fine. I think only one amendment remains after this.
Exactly as the Minister has outlined, the focus of this amendment is on the ad hocattendees. While people may not have voting rights, their presence in a room when a discussion is taking place and decision is being made is very relevant.I suggest with respect that where there are ad hoc attendees, which, as the Minister has outlined, can and does occur, they should be listed as being in attendance, regardless of whether or not they have voting rights. That would be an improvement on the current transparency structures. That is why my amendment specified "all persons attending" rather than those voting.
I thank the Minister for his assurance in relation to amendment No. 7 and the publication of the MOU. That addresses my concerns. I suspected it might and am glad it does.
Regarding amendment No. 8, unfortunately the Minister did not address my key concern. He spoke about the ESM's relationship with the European Commission and its engagement with private investors but my amendment focuses on the separation between the engagement with the European Commission and that with provide investors. My concern is not the internal relations described in (a) and (b) but the relationship between (a) and (b). How do we ensure that ESM engagement with a private investor in respect of a country, a process whose workings the Minister has described, does not overly influence the other engagement?
I move amendment No. 8:
In page 7, between lines 17 and 18, to insert the following:
8. The Minister shall, within 12 months of the passing of this Act, publish a report outlining
what procedures, safeguards, firewalls and internal confidentiality protocols are in place
to ensure appropriate separation between—(a) ESM engagement with the EU Commission in relation to any member, and
(b) ESM engagement with any private investor to a member.”.
I move amendment No. 9:
In page 7, between lines 17 and 18, to insert the following:
8. The Minister shall, within 12 months of the passing of this Act, conduct and publish a
report outlining—(a) where, between 2012 and 2020, compliance with EU fiscal rules has been a factor in Government decisions to deliver public services or infrastructure “off balance sheet”, through newly created bodies or through contracted services rather than through direct public investment or provision, and
(b) an analysis of the costs associated with such an approach, including the opportunity cost of short-term expenditure versus long-term investment.”.
This is the final amendment for discussion and it goes to the crunch. It is a retrospective amendment whereas most of the others look forward. I am asking that the Minister publish in the next year a report looking at the period in question. If we are to shape the future in terms of a new economic governance framework for the EU we need to learn from the past. It would be beneficial if the Minister published a report examining:
where, between 2012 and 2020, compliance with EU fiscal rules has been a factor in Government decisions to deliver public services or infrastructure “off balance sheet”, through newly created bodies or through contracted services rather than through direct public investment or provision, and
... an analysis of the costs associated with such an approach, including the opportunity cost of short-term expenditure versus long-term investment.
We could list these, from Irish Water, which had to be done off balance sheet, creating much tension around the concern it was not being done through our public utilities directly, to the concerns in relation to leasing. We have thrown money away on leasing, rather than buying or building, and are continuing to do so.
I could talk at length on this but will not. We know the economic analysis of the opportunity cost and loss. There is a short-terming saving and a long-term cost. We know that from Mazzucato's writings and I know the Minister is aware of the role the entrepreneurial state can play in investing and driving the future. We know from Piketty the issues when having capital is given predominance. I worry that the policies and the fiscal rules we had led much of the time to the opportunity being given to the private sector and the State ending up subsidising that sector and being unable to make a wise choice. There is Terry Pratchett's story about the boots, whereby the best value are the boots that last ten years, but all people can afford are short-term boots that need to be replaced every six months. That is what we have had in terms of leasing. We have lost opportunities and allowed private sector capital to seize advantages and opportunities that could have been public advantages and opportunities. That is due to a short-term framework of targets that we have prioritised and to a prioritisation of austerity and narrow targets over long-term benefits.
Looking back at EU fiscal rules, we see how they have factored and the amount of times we have heard of things having to be off balance sheet or needing to be done in a way that defies common sense and, in many cases, has defied long-term development vision or long-term common sense. It is so we can learn from that and it can affect how we input into the new economic governance framework and how we ensure that we as a state have space in the future to make the transformational investment we will need.
I hope the Minister will consider such a report. He will be aware of the analysis that many bodies have done on austerity and its impacts but this is specifically in terms of giving scope to the State for long-term thinking and investment, especially at a time like now when the State can borrow at almost zero interest yet we are still asking private providers who need to build in a profit dividend and have to borrow at a higher rate than the State. All those financing, profit and dividend costs are added into the provision of the essential needs of the State. We can learn from the past. I hope the Minister will support the amendment for a report on that matter.
It is quite a literary horizon from Discworld to the entrepreneurial state to Capital in the Twenty-First Century. Terry Pratchett, may he rest in peace, wrote about much but I missed his book on European monetary union, if he wrote one. If he did, I am sure it is worth a read.
On the views of Piketty and Mazzucato on the future of Europe and economic policy in relation to it, the degree to which Ireland and Europe are already responding to the issues Mariana Mazzucato has championed about the entrepreneurial state is underestimated. The role of the European Union in co-funding and creating an environment in which we will be the leading exporter of vaccines to the world is the entrepreneurial state in action. It is happening. The work of the Ireland Strategic Investment Fund, ISIF, in co-funding innovative companies and having a stake in their future and their returns is the entrepreneurial state in action.
The world of Thomas Piketty is a cold one for a small country in the European Union. I agree with many of his views regarding the change in the composition between public and private capital, a broader assessment of his views has to acknowledge that he has a lot to say about big countries but not much to say about small ones.
I am not in a position to accept the amendment. The fiscal rules of the European Union as currently structured allow and facilitate investment and expenditure in the future. They make the point that the majority of that needs to be funded from taxes that a country can raise. That is a reasonable position for those rules to take. It allows borrowing but if a country wants to invest in its future and its public services, much but not all of that investment should come from the taxes it raises. That is a reasonable balance. The debate the Senator is looking for happens all the time here and in various Oireachtas committees. Given that debate is ongoing, I do not believe a report should be required within this legislation.
There is an opportunity cost that has been lost. The idea is that the State will gather the money first but we know that not all large-scale investment firms and other funds move to gather the money first. In many cases, they look to the future dividends.When we as a State invest up front, it will not necessarily be about spending dividends and revenue but about creating future social and economic dividends. Sometimes that does require upfront investment. It is like the idea that sometimes a coat of paint is not the best solution when dealing with things like substantial dry rot or a need to make a major change. That is why we have the financing systems.
This is my last and a vital point. The one point on which I disagree with the Minister as far as the entrepreneurial state is concerned is in respect of the vaccines. We cannot afford that to be an entrepreneurial or business opportunity. The Minister, Deputy Stephen Donnelly, here in the Seanad yesterday acknowledged that we should support a TRIPS waiver. The Minister of State, Deputy Troy, has acknowledged that we should support a TRIPS waiver. I urge the Minister and his party in government to ensure we support that. We cannot have the EU exporting the vaccine to the world because that means its member states are the only ones manufacturing it. This is a point on which we need to move beyond the European Union perspective. A TRIPS waiver is one of the most vital decisions we would make.
I move amendment No. 10:
In page 7, between lines 17 and 18, to insert the following:
“Meetings of Board of Directors
8.The Minister shall advocate for the publication of a list of all persons attending meetings of the Board of Directors to be published and to be publicly available.”.