Wednesday, 4 November 2009
Dáil Eireann Debate
Deputy Edward O’Keeffe: I would like to say a few brief words on Report Stage. Over the past couple of weeks we have seen how frustrated the Opposition is with NAMA because it will be a great success. I have no doubt that all sorts of words are being used to discredit it. I say well done to the Minister, Deputy Brian Lenihan, for bringing this Bill before the House——
Deputy Edward O’Keeffe: Given that the legislation was published in July of this year, it should have been passed by now. If it was working, we would not have the misery we currently have in the banking system. I listened this morning to Deputies suggesting that there are flaws in this legislation. I suggest to them that we have to look back. Northern Rock went out of business long before Anglo Irish Bank went bust. We have to listen to all kinds of stuff in here. We know what happened to Lehman Brothers and Bear Stearns in the United States of America, not to mention AIG in the insurance area. I watched the experts discussing this issue on last night’s “Prime Time”. Where was Professor Lucey five years ago? He was not to be heard of. I regret that this kind of thing is happening. When another bank expert did a sum last night, as if he was in sixth or seventh class, he came up with a few figures to suggest that there will be a loss of €12 billion. I commend my colleague, Deputy Michael McGrath, who held up very well on that programme as he clearly defended the Government’s position on NAMA.
Deputy Edward O’Keeffe: Yes. I do not speak in this House very often. I am astounded that the establishment of another committee has been proposed. This Bill is the privilege of the Government, which is responsible for putting the law in place. It does not have to establish another committee. Governments have always regulated legislation. This law will be regulated by the Government of the day. The Minister, Deputy Brian Lenihan, will be responsible for it. Deputy Bruton’s amendment proposes that “the Committee shall be chaired by a member of Dáil Éireann who is not a member of a political party whose members form part of the government for the time being”. That is a bit rich, in my view. It is the privilege of the Government to appoint the Chairman of an Oireachtas committee. I understand that the Minister and his Cabinet colleagues might have a sneaking admiration for the proposal to establish a committee. A figure of €54 billion has been mentioned. This country’s two banks — Bank of Ireland and Allied Irish Banks — are having problems with their debts. I have to say they have stood the test of time on this island and have done a lot for the Irish community. Day after day, I am told that no money is being made available for small business.
When I picked up a newspaper yesterday, I read about the huge food and drink businesses in rural Ireland. I do not understand how they can be short of money. According to the farming section of the Irish Independent, small businesses in the food and drink sector increased their imports to £1.27 billion sterling over the last year. That suggests to me that there is little need for finance. We should kill the idea that one can lend additional moneys to people who do not have the capacity to repay their loans. The uncertainty in the financial markets is playing hell with the whole stock market in this country. I appeal to Opposition Members to be fair and honest in their dealings. They should not be frustrated about this legislation because it will be a major success for the Irish economy. I do not doubt that it will put us on a new footing. There can be no secret about that.
Deputy Edward O’Keeffe: Although regulation failed on the Government side, nothing is being done about the fact that corporate governance and risk management failed on the private sector side. The legislation in those areas needs to be tightened up if we are to save them. I have been making the point that the private sector has a lot to answer for, especially in the auditing area, but nobody seems to want to listen to it. Audit committees and all sorts of remuneration committees are being established as part of the boards of banks and other organisations, but no proper policing or reporting back is being done. The weakest people — the friends of the managers — are being put on the audit committees. Regulations need to be put in place to ensure that such people have to report back to a full meeting of the board in its entirety. I would like to make the point that the stronger people who are on the board might not be on the average committee. I appeal to the Minister to deal with the issues in the banks. What is the reason for the delay in appointing a new chief executive of Allied Irish Banks? I am asking that question because there is uncertainty in the banking system. What is wrong with Irish men and women that they are not getting these jobs? Why do we have to go outside the country to get people? We have the finest educated people in the world in this country. They are quite competent in every area, including the financial area. I do not understand why we have to go abroad to get people to set up business here. If there is a general election next year, will we have to go abroad to get people to stand in the various constituencies, on the basis that foreigners have more to contribute than Irish men and women? If we had depended on foreigners to free this island in 1916 and in the 1920s, Ireland would still be an alien country that is controlled from outside. It is about time for us to stand up for and defend our own people. The nonsense has to stop. If we have no one here, how can we go abroad and say we have something to offer? It is very important that these points are made.
Deputy Edward O’Keeffe: We need to get money flowing and get the economy right. We need to stop the nonsense that has been going on for too long. The Minister should take charge and push this Bill ahead. He should not listen to Opposition Deputies, who will be frustrated when NAMA turns out to be a success that is envied. I have no doubt in my mind about that. All they can do is burst and give out about Bank of Ireland and Allied Irish Banks. What about the foreign banks that came here to create competition, but instead put us in the position we are now in? None of those banks is giving out money to small businesses and small people. Those who are blaming the two Irish banks, which are part of our heritage and our great success in life and have branches throughout the country, are forgetting about banks like National Irish Bank, which is owned by Danske Bank, and ACCBank, which is part of Rabobank.
Deputy Edward O’Keeffe: I am expressing some genuine concerns. I say “well done” to the Minister. He should be allowed to get on with his business of getting this legislation right and getting it through. We have the support of EUROSTAT, the European Central Bank, much of the Irish business community and many well-heeled economists who understand business. A few Members of this House are on the sideline. The bank expert who spoke on television last night suggested that NAMA will make a loss of €12 billion. If he had drawn up his figures on the side of a cigarette box, he would have come up with the same thing. The Minister has the full support of the House. He should not mind the frustrations of the Opposition. He should get on with the business of putting this country back on its feet.
Deputy Michael D. Higgins: I will try to be brief. Deputy Edward O’Keeffe’s speech should do wonders for share prices. If it does not, we have just no hope at all. I would like to focus specifically on the amendments before the House. When I attended last evening’s launch of a book written by Senator Ross, I learned about the packages that were negotiated by some of the people at the tops of the banks. It seems that some of those referred to by Deputy O’Keeffe were far less influenced by heritage than by their views of appropriate compensation. They decided they needed €1 million a year, or sweeteners for the future in terms of options. My Labour Party colleague, Deputy Burton, has said that although we will support amendment No. 2, we regard amendment No. 4 as more important because it will provide the transparency that is needed. Now that Second Stage has been passed, Committee Stage has been discussed and some changes have been promised, Deputies on all sides of the House agree that we want the legislation to be as good as possible. I thought the Minister for Finance had accepted on Committee Stage that there is a need for a significant change in culture. I hope I was not mistaken in placing my belief in that. Such a change is absolutely essential. We could not go on as we were.
I wish to pick up on the comments made by Deputy Burton when she quoted from material she received on foot of a freedom of information request. It is clear that PricewaterhouseCoopers worked as a financial consultant to the Financial Regulator, which let us down. In its own communication, Merrill Lynch described itself as a financial adviser to the Department of Finance. It is plain that both companies, which were rewarded over the rate, let us down. A communication between the Government and the European Central Bank, which has been mentioned, stated that the Governor of the Central Bank believed that Anglo Irish Bank was of systemic importance. That is also disgraceful.
I want to make clear where the oversight committee and the Oireachtas committee are required. What is at stake is a degree of vigilance, accuracy of information and commitment to the public interest that did not exist heretofore. With regard to the two committees, one should note there is across the water an interesting discussion taking place on Professor Nutt’s relationship to the British Cabinet as an expert adviser. Later amendments will cover gagging as it arises in respect of the role of an independent, intellectual, public-interest voice. In the case of Professor Nutt, it is suggested that, under the Westminster model, the British Government practically owns the mind of the person involved. What we now need is an entirely different approach to transparency and the question of expert advice.
Amendment No. 4 concerns an extremely important topic, the oversight committee. Deputy Edward O’Keeffe is at least straightforward about what he is suggesting, that is, that the committee be the Government’s committee. According to the legislation, unless we amend it, not only will it be the Government’s committee but the Government’s committee with the neutered expert. The expert will be neutered in so far as he will not be free to express an opinion. If ever there were proof of the need for independent public-interest-driven people, this is it. I refer to people who know the complex structure of financial markets but who are free to express their opinion. This is needed urgently in regard to the provision of information in the public interest through an oversight committee and in a policy sense with a view to discussing whether one is achieving liquidity, which everyone agrees is necessary. It is needed in respect of the Oireachtas committee. However, one cannot achieve this if committees are structured as they are at present.
I will leave for another day the flaw in our legislative process whereby the Government has a monopoly on the right to introduce legislation. We would be better served by the Scandinavian model, under which significant committees have blocks of expenditure and are transparent and accountable. Not only can such committees change legislation and make it accountable, they can also introduce it. We are paying a high price for our very old, undemocratic, unaccountable form of decision-making. However, we have what we have in this regard.
The Minister agreed in his reply on Second and Committee Stages there was a need for a break with the past. Consider the circumstances if one does not break with the past and continues to allocate €240 million per year for the purchase of expert opinion. We must ask whether it is not in the public interest to know how we have operated in the past. We paid €7.4 million to Merrill Lynch to tell us Anglo Irish Bank was sound when it clearly was not. Equally, the Governor of the Central Bank provided a letter to state Anglo Irish Bank was of systemic importance. This provokes a theological debate on how a bank can be a niche bank. By this I mean a person deals with a particular person in Anglo Irish Bank in respect of a particular project and is coached on how to go forward with his speculation, be it national or international. How can a bank do this and be a systemic bank? A bank can only be a systemic bank according to such a theological argument if one says the entire system is speculative, unaccountable and going down the Suwannee, as our system very much nearly did. Anglo Irish Bank was never of systemic importance. It was a disastrous mistake to include it in the guarantee, from which we have been seeking to recover.
With regard to oversight, one needs to use both committees in a way that will make a significant break with the culture of negligence. The various people responsible have gone away into the sunset. What they did in regard to the banking system was appalling. If we are to envisage consultancy fees of €240 million per year, we must not have more of the same.
If one says in a letter that Merrill Lynch is the financial adviser to the Department, one must ask by whose decision. The decision in this regard was a disastrous, overpriced decision and we cannot have more of that. That is why we need an oversight committee that will be at arm’s length from the people who are taking some of the decisions. It must have a degree of independence to ensure information will be available to all sides and all members. The Oireachtas committee must have regard to what I stated about the contracting of services, the valuation of debt or, for example, the manner in which bonds are issued. I refer to the question of whether a distinction might be drawn between bonds issued generally in respect of an entire institution or packages of bonds that carry different levels of risk. These are points on which people have opinions.
I believe Deputy Edward O’Keeffe’s views are genuinely held. He is taking the cover off the notion that there are some people who simply understand all of these matters and that the public and elected representatives do not. He implies there are some special people who understand this subject. They are highly priced people who will not get out of bed except for €1 million per year and they become insecure if they do not have share options. If they want to change position, the share options must travel with them. They also expect a retirement package. If something goes wrong and they have to leave, they have to be sent off with a blast of gold that would frighten anybody. This is nonsense.
When considering accountability, we must ask what we are elected for. We are elected to answer questions on the street. Very straightforward people ask me what has happened the people who made all the bad decisions. I refer to the Secretary General in the Department of Finance at the time in question, the Governor of the Central Bank, the regulator, all the supporting staff and those involved with all the contracts. They have all walked away. The Minister needs to make it clear he has made a break with the past in this regard. It must not be a case of going back to the people whom one supposes know how to do business, as Deputy Edward O’Keeffe suggests. If they did know how to do business, they did a very bad job of it.  People are paying the price for this, no matter how often one disagrees. Our ability to create a flow of liquidity, such as is needed to save businesses and jobs, is connected to the price we are paying for saving a banking system that has been wrecked. It is insulting to one’s intelligence to suggest these are two separate questions. They are analytically distinct if one wants to structure proposals but one has a consequence for the other.
The Minister should be clear on whether all the people who over-priced their services and gave the bad advice will be excluded from receiving money from the trough of €240 million. Will they simply come back again, telling in many cases the usual story that the crisis was caused by international turbulence over which we had no control? Language has slipped away in regard to all these rationalisations of failure, stupidity, laziness, ignorance and arrogance.
Deputy Michael D. Higgins: These are all the correct words. I am sure that, in many cases, the ordinary, average shareholders in Bank of Ireland and Allied Irish Banks debated whether one should pay €500,000 or €1.5 million to the people in charge of those banks. Some of the deals negotiated were obscene. The argument in their favour was that the system involved gambling of such a sophisticated international kind that one might lose the directors to somewhere else if one did not pay them so much.
Deputy Michael D. Higgins: Proper business, yes. That tells us a lot. It gives significance to where we are going. I hope the Minister realises we are supporting his suggestion if he is talking about a change of culture. There must be a change of culture and process, and transparency must be introduced. There must also be an opportunity for those who are elected to be able to try to move the economy on to a safer place. Some space must be provided where people who are concerned about the public interest will be able to come to a committee and offer oversight or opinions on policy.
The Minister has already appointed a public interest director to Anglo Irish Bank and to the other banks that come under the guarantee scheme, but they sit there, trammelled in regard to the public interest because they are directors under the Companies Acts and they are limited in what they can do. That is why we do not get a geek out of them on all of the issues that are being discussed on the street and by those who care for a sound financial system. Some of them are so changed that they have become bankers. They have decided, for example, that when they entered the holy circle they understood how magic was made and all the members of the public, including the elected representatives of which they were once numbered, do not understand this complicated stuff where people used to give themselves €1 million for inflating their ego.
The Labour Party supports amendment No. 2, but we stress the importance of amendment No. 4, which proposes the setting up of an oversight committee because we believe it is to be perhaps the most important of all. I am deliberately focusing on this amendment because the other one which I am particularly interested in occurs much later. It relates to the gagging clause on the chief executive and the chairman. Between now and when we get to that amendment the Minister should ask his officials to have a good, long, slow look at what is happening with Professor Nutt and his colleagues across the water. One will see then the consequences of requiring someone to come to a committee and say he or she will not produce anything on his or her computer, not have a bad thought about the Government, not say anything that would upset any Minister or the Government, and that he or she is willing to be chief executive or chairman. If the Minister gets such a person to intellectually spancel themselves like that, they would not be worth much.
We are back to the issue of whose committee it is to be; the Government’s or the party that forms part of the Government, and what is to be the status of the people who are attending it? We will discuss that in detail when we come to it. The most important thing about those two committees is that there should not be any suggestion to us that it is really a matter now of finishing off this Bill rather quickly and getting on with things the way we were. I would repeat everything I said. I would say every word of it publicly about all of the people I mentioned who have disgracefully damaged this country. As I read in Senator Ross’s book, there was this little network, this clique, who moved from one position to another, sometimes chief executive, tomorrow chairman and then one went back on the board.
Reference was made to a definition of a niche bank. What is a niche bank? It operates on the basis that the potential borrower enters into a relationship with the assistant manager, he or she identifies a particular project and, as they say in the Enid Blyton books, two go gambling together. That is what the niche bank was. It was no more systemic than a dandelion. What one means by being systemic is that it is so bad that it can scandalously degrade the reputation of the other parts of the banking system. It is systemic in its toxicity and in its consequences. That is why the Minister should accept amendments Nos. 2 and 4, and he should do so with a flourish and say he is introducing transparency and accountability into banking.
Deputy Terence Flanagan: I, too, strongly support both amendments Nos. 2 and 4. Fine Gael’s amendment No. 2 sets out some of the functions that the proposed committee on NAMA could have. That should be considered by the Minister. I am surprised there has not been an amendment from him on Report Stage to set up a committee to oversee both NAMA and the master special purpose vehicle.
The Fine Gael Party has consistently sought a reduction in the number of Oireachtas committees and for them to be restructured along the lines of the committees in America, where there is proper scrutiny, probity and accountability. Not many committees are more important than a committee on NAMA. A €54 billion gamble is being taken and taxpayers’ money needs to be fully protected. There needs to be proper transparency and accountability. The public need to know that there are no sweetheart deals or underhand dealings taking place. They need to be assured that there are proper checks and balances, especially when hard-earned taxpayers’ money is at stake.
The Minister does not go far enough in only providing for quarterly reporting. I support the proposal in amendment No. 4 for monthly reporting on NAMA. That would allow for information to be provided in a timely manner, which is what taxpayers need to see. If the legislation needs to be amended in the future, that will only become apparent if there is proper scrutiny. The committee needs to become proactive in that regard. We all agree that a properly functioning committee with adequate resources is required. The sooner the Minister accepts this view and gets on with business, the better.
Deputy Pat Rabbitte: I support the amendments but I am not sure I do so with a great deal of conviction. I am not sure that it is possible to have a functioning oversight system consistent with the provision in the Bill to muzzle the chief executive of NAMA when appearing before a committee. It does not make sense to provide for democratic oversight and at the same time say in section 57 that the chief executive or chairperson may not express an opinion about Government policy. I find it difficult to get my head around how democratic oversight of this enterprise can be given expression if the chief executive is muzzled. I would have thought the whole point was that one would get his or her assessment, experience and evaluation. Without that, it is very difficult to know how such a committee would work.
This is the clash of culture to which Deputy Higgins referred. In my 20 years plus in this House, there has been a gradual and ongoing erosion of the position of Parliament vis-à-vis the Executive. Gradually, the Executive has arrogated to itself more and more powers as the years have passed and Parliament’s standing has been diminished. Therefore, when we provide for democratic oversight in these amendments, to which I hope the Minister will agree, unless it can be given real meaning by the testimony or advice of the chief executive, chairperson or whoever to that committee, in the sense that the person is free to express his or her evaluation and give his or her genuine assessment, that will undermine the value of it. What has motivated the Minister to retain section 57(2)(a)? I welcome his commitment to delete section 57(2)(b). Is it seriously being posited that the people who will appear before the committee are sufficiently feeble-minded to be exploited to the narrow advantage of the Opposition vis-à-vis Government? They are not that type. That does not happen before the Committee of Public Accounts. Without the ability to question about the entire gamut before it, the committee will be ineffectual.
This is part of the reason we are here now. If there had been a structured imposition on the Governor of the Central Bank or on the Financial Regulator to appear before an informed committee of the House, we might not be in the current mess. The fact is that when they make their occasional visits, by courtesy rather than obligation, they will not deal frankly with the questions. Their mindset is that they are responsible to the Minister, not the committee.
Deputy Pat Rabbitte: That does not mean the Governor of the Central Bank does not make his views known to the Minister and to the Department of Finance, and I am not referring just to the quarterly reports. It is not acceptable that the governor points to the paragraph at the bottom of page 28 of the report of 2006 and says: “There it is. I alerted you to the credit expansion problem, the danger of the bubble and so forth”.
I recall when the estimable previous governor appeared before the DIRT inquiry. He told us, quite properly at the time, that his role was not a consumer role. A number of questions were asked about taxation, evasion issues and so forth. I asked him what exactly he did. He replied that he was responsible for the prudential supervision of the banks. Unless this committee is enabled to ask the chief executive of NAMA meaningful questions and get meaningful answers, it will be a fig leaf. That would be a great pity.
The Department of Finance, the Financial Regulator and the Central Bank must accept their huge share of responsibility for what has happened. One can talk all one likes about government, the Minister for Finance, the policy decisions, the global financial crisis and letting Lehman Brothers fail but, ultimately, if those agencies had been doing their jobs as they ought when the credit expansion was allowed to grow unhindered in this economy, our situation would be somewhat and probably considerably better than it is. I am not sure there is an acceptance of that. There was no statement from the Financial Regulator, either before he left or since then, stating, “I was wrong and derelict. My people did not have the information”. I do not believe he can say that.
The Department of Finance has not explained why it got matters so badly wrong over so many years and especially why it allowed this bubble to grow in the economy without interference. The record of the Central Bank in public documents or in the documents that are accessible to those who are not members of the Government or the Minister for Finance does not show, even on close subsequent reading, an alertness to the problems that were building.
If we provide that Dáil Éireann or the Oireachtas will have an oversight role, that role must be meaningful. Otherwise, it is not worth the candle. If people have the mindset that they are responsible to the Minister for Finance and that their job is to obfuscate before committees of the House, it will not work.
There are huge issues of national interest at stake here. There are sensitive issues that go to the heart of the country’s reputation. There are also sensitive issues about the sheer scale of the taxpayers’ investment involved, as well as sensitive issues about state aid and its implications. That is why I have been more equivocal on the creation of the SPV than many commentators outside the House. I do not know if it is significant that the EUROSTAT approval is no longer on the website or why that is the case. The document ought to be laid formally before the House by the Minister. There are a number of matters in that approval to which we will return under the relevant sections of the Bill.
Amendment No. 2 proposes that it shall be the job of the committee to review the shareholders agreement. Many commentators have said they were taken aback by this development but even those who are inclined to see the SPV merely as a technical device to avoid having this additional debt taken into account in the national accounts are puzzled as to how the Minister can assure us that NAMA will still be calling the shots. With a construct where private equity is the majority shareholder, is it feasible and safe that NAMA, by way of shareholders agreement and a veto for NAMA, is calling the shots rather than the private interest?
Consider the document that Deputy Burton opened at the beginning of today’s session. It is extremely difficult for the informed, interested and concerned public to reach conclusions about the issues before us when one sees the contents of that document, based on expert advice presented by Merrill Lynch at enormous cost to the taxpayer. If one talked to the porter in the Shelbourne Hotel at the same stage that document was compiled, he would have given a more reliable steer on the future of Anglo Irish Bank, its soundness and whether it was systemic to the banking system. It does not surprise me that the Minister tried to find advice wherever he might get it. If that is the type of official advice he was getting, it is a cause for alarm.
The Minister said in response to Deputy Burton that a niche bank can be systemic, as if that was the end of the debate. This bank had nothing to do with the money transmission system, did not have a high street presence and was essentially a credit union for billionaire developers. How he can say it was a systemic bank is beyond me.
The €54 billion that NAMA will pay out represents almost twice our annual revenue income and must be viewed in the context of all the fuss that is being made about the budget and the number of people who are tearing their hair out trying to identify €4 billion in savings. We are dealing with an issue which the Minister states will give rise to a cost of €7 billion, whereas outside experts indicate that it will cost approximately €12 billion. Last night, Mr. Peter Matthews pointed out that if one presumes that the 40% of performing loans can be recovered, in their entirety, to the tune of €30.8 billion and if one applies a factor of 25% recovery in respect of the 60%, or €46.2 billion, in non-performing loans, this gives rise to an additional €11.5 billion. If one adds the latter amount to €30.8 billion, one arrives at a figure of €42.3 billion. If this is then subtracted from €54 billion, one is left with €11.7 billion. According to Mr. Matthews, this would represent a good return. That is the scale of what we are discussing and that is why this matter warrants ongoing supervision on the part of the Oireachtas.
Deputy Jim O’Keeffe: I strongly support amendment No. 2. I have been a Member of the House for many years and during that time I have not come across legislation as important or with such financial implications as that before the House. If one calculated the costs accrued on foot of all the legislation in respect of which I have made contributions during the past 30 years, the aggregate figure would not in any way compare to the enormous sums relating to the establishment of NAMA. Correspondingly, the risk to the taxpayer is that much greater
I do not pretend to be an expert on matters of this sort. I have tended not to rely on experts and that tendency has been reinforced as a result of many recent events relating to banking matters. However, all I can foresee is the taxpayer being exposed in respect of extremely substantial sums. I hope the most optimistic predictions will prevail and that taxpayers will not be exposed. However, the possibility of exposure clearly exists.
We live in a democracy and in such circumstances this Parliament must play a significant role in monitoring what is going to happen in respect of NAMA. The way for Parliament to do so would be through a properly serviced Oireachtas committee. During the 30 years I have been a Member of the Houses I have served on many committees and I have witnessed the pressures under which colleagues operate and which are exerted on those committees. The Committee of Public Accounts has been the most effective such committee in the context of achieving a specific purpose. To all intents and purposes, it is a role model. I am not in any way downplaying the work of the Joint Committee on Finance and the Public Service. The latter has many other jobs to do. There would be no point in referring the job of oversight to the Joint Committee on Finance, which is obliged to deal with the Finance Bill each year and with many other matters. It is already fully engaged.
What is needed to deal with such an enormous job of work is a separate Oireachtas committee. I am of the view that such a committee should be modelled to a substantial degree on the Committee of Public Accounts. I would go further and state that it is a sine qua non that it should be chaired by an Opposition Member, if only from the point of view that this would bestow upon it democratic legitimacy. There is no suggestion that the person appointed as chairman would hassle the Minister. That does not happen in the case of the Committee of Public Accounts. I do not know whether it is by tradition or otherwise but, as with most democracies, the Chairman of the latter has always been a Member of the Opposition. The model employed in respect of the Committee of Public Accounts has worked and that is the point from which we should start with the committee to which amendment No. 2 refers.
It is essential that such a separate committee, chaired by an Opposition Member, should have access to the best resources available. The Committee of Public Accounts would be a disaster if it did not have available to it the support provided by the Comptroller and Auditor General. Much of the committee’s investigative work is based on the detailed analysis produced for it by the Comptroller and Auditor General. Members of the committee are just not competent enough — in any event they do not have access to the relevant documents — to produce detailed reports such as those supplied by the Comptroller and Auditor General. It is for this reason that the combination of the Comptroller and Auditor General and the Committee of Public Accounts provides a good democratic dividend. I would like a similar democratic dividend to be forthcoming via the establishment of an Oireachtas oversight committee on NAMA.
Deputy Bruton and others have already made arguments in respect of the various powers that should be put in place. I am sure that such powers are not set in stone. The Minister may be of the view that we should not go as far as creating an advise-and-consent situation similar to that which obtains in the American Senate in respect of appointments. It is a question of degree. However, there should be a substantive role for an Oireachtas oversight committee to play with regard to the various issues in respect of which Deputy Bruton and others have put forward arguments.
The Minister is at the centre of a major debate. He indicated that he is open to reasoned arguments. I wish to put such an argument to him, the basis of which is that an effective Oireachtas oversight committee which would have access to the proper resources and to which as many of the powers necessary to bestow upon it the strongest possible democratic legitimacy would be granted. Such a committee should have legitimacy in and of itself and also in the eyes of the public. There is an entire spectrum of views in the House in respect of NAMA. Members of the public are not convinced that it is the answer and there is great trepidation among them with regard to the approach that is being adopted. People’s concerns would be allayed, to a degree, if there were parliamentary oversight of the strongest possible sort in respect of the activities of NAMA.
On Committee Stage, the Minister referred to the line that exists between the Legislature and the Executive. I understand that such a line exists. However, there is a way of marrying the points raised by members with those expressed by the Minister in respect of reserved Executive functions. Now is the time for the Minister to reach out not only to the Opposition, but also to the public and provide a reassurance that a strong committee such as that to which I refer will be put in place and that it will provide effective oversight in respect of NAMA.
Deputy Michael Mulcahy: Many points similar to those which have arisen in respect of these amendments were made on Committee Stage. I wish to reiterate my personal support for the idea of an Oireachtas committee to monitor the activities of NAMA. Given the huge amount of money involved, €54 billion — it could be more — the public will not be happy with any less a form of scrutiny. For this reason, I suggested during our Committee Stage deliberations last week, which I was privileged to attend although I am not a member of the Select Committee on Finance and the Public Service, that the proposed committee should be called a NAMA scrutiny committee.
On amendment No. 4 in the name of Deputy Burton, I argued against this proposal on Committee Stage and do so again now. An oversight committee means a committee that would look over the shoulder of the board and executive of NAMA. That I believe is not the function of a proper committee. In my view the committee should be a committee of this House which will monitor and review NAMA.
The wording of the amendment appears a little contradictory. It states that the oversight committee shall mean a committee of Dáil Éireann or a sub-committee thereof so enjoined and appointed by resolutions of that House and consisting of specified persons not being Members of the Houses of the Oireachtas.
Deputy Michael Mulcahy: The functions of the proposed oversight committee are not delineated and its membership is not defined. For those reasons, I believe amendment No. 4 does not pass mustard, with all due respect to Deputy Burton.
Amendment No. 2 is in the name of Deputy Bruton. As I stated last week on Committee Stage there is much in this amendment I can support and believe is valuable. The provisions I do not support or believe are worthy of support are those which seek to take away the executive functions of NAMA and from the statute of the Minister. The functions listed at subsection (3) paragraphs (a) to (e), possibly (f), but probably not, and (g) and (h) are the type of functions which should be the preserve of the board, the chief executive and the Minister as set out in this legislation.
I accept that subsection (3) paragraphs (j), (k) and (l) could be functions that would come within the remit of an Oireachtas scrutiny committee. I want to repeat my comments of last week that this committee should be properly staffed and resourced with full legal powers of compellability of witnesses. When dealing with a sum of €54 billion there should be no question but that where a committee subpoenas a person to appear before it such person must attend, as they say in legal parlance, ad duces tecum testificandum— they must testify and must bring their documents. This, for me, is also the bottom line in terms of compellability.
I disagree with the point made by Deputy Rabbitte with regard to amendment No. 73. It would be preposterous if the chief executive or chairman of NAMA appeared before a committee and stated he or she believed a different policy was required. That is not their job. If he or she were to be elected to Dáil Éireann or to be Minister for Finance then he or she could create and submit that policy on the floor of the House for scrutiny.
Deputy Michael Mulcahy: Let us be clear, the function of the proposed committee should be to review and scrutinise the work of NAMA to, as proposed, examine the quarterly reports, to bring before it witnesses and documents and to ensure that the policy of NAMA, as enunciated by this Dáil is being followed through. It should not be an oversight committee that looks over the shoulder of NAMA or tries to jump into the executive hot seat. That is not our system of government as set down in the Constitution.
I listened with great interest to the stimulating panorama presented by Deputy Michael D. Higgins. As usual, however, it was not complete. He spoke only about Anglo Irish Bank not being systemic. Unfortunately, the Labour Party did not support the bank guarantee scheme——
Deputy Michael Mulcahy: ——must ask themselves questions. The reality is that what the Minister and Government did in standing behind the banks was greeted not alone with institutional approval at EU level but with the approval of the financial markets worldwide.
Deputy Brian Lenihan: My time has come to speak. There has been an extensive argument about the systemic character of Anglo Irish Bank. While I am not certain that arises in the context of this amendment the debate has partaken of a Second Stage debate.
I want to reiterate yet again that Anglo Irish Bank was a systemic bank at the time of the bank guarantee scheme and its nationalisation because it was a bank with a balance sheet in excess of €100 billion, more than two-thirds of our GDP. It was a bank whose deposit base consisted of in excess of €50 billion worth of deposits as of September 2008. The total number of depositors throughout the world was in excess of 250,000, of whom more than 150,000 were in the United Kingdom. That is a very large number of depositors and a very large amount of money. The idea that the collapse of such an institution by a Government would have no implications for the rest of the banking sector or for the financing of the State, guarantee or no guarantee, is utterly fallacious.
One could argue, as Deputy Burton argued on Committee Stage, that the Government could have opted — it considered this — to nationalise the bank on 30 September and guarantee the other institutions. The only effect of that would have been an immediate requirement on the taxpayer to put substantial funding into that bank immediately. In any event, that funding had to be provided some time later. That is the only material difference I can see.
Deputy Brian Lenihan: The big risk on the night of the guarantee was that if we did not guarantee this with the other institutions, we might well have set in train a systemic collapse of all of the institutions. That was something we had to take into account also. I am only dealing with that issue as an aside.
Deputy Brian Lenihan: The Government is there to make decisions. Deputies Terence Flanagan and Higgins asked why the committee was not part of the legislation. We dealt with this issue at length on Committee Stage. Most sides of the House would accept that there is an excessive number of committees. Entrenching the existence of a committee in legislation is not a desirable way to go at a time when we are talking about reforming the numbers of committees. In addition, there is clearly not all-party agreement on the character of this committee. Some argue for a full committee, while others argue for a sub-committee of the existing Oireachtas Committee on Finance and the Public Service.
Deputy Brian Lenihan: What I am prepared to say is that in the normal practice the Minister must oversee the activities of the agency and report to the Oireachtas on these activities. I do not accept there is any reason to depart from this practice in this case. I agree with Deputy Mulcahy that Oireachtas scrutiny is desirable. However, Oireachtas oversight would interfere not so much with the Minister, but with the board it is proposed to appoint to manage NAMA. So many powers have been conferred on this committee in the main Opposition party amendment that the committee would itself constitute a board of the National Asset Management Agency.
I indicated on Committee Stage that I will consult the Opposition leaders on appointments to NAMA and that I will disclose the names I am considering for the board. Following on last week’s debate, an advertisement was placed in the daily national newspapers earlier this week seeking expressions of interest in appointment to the board.
Deputy Brian Lenihan: The Department of Finance works with me and helps me in my work. It is essential that it does that, because I would not be able to do all the work on this matter alone. I am inviting expressions of interest from suitably qualified persons for appointment to the board of NAMA. I hope it is not suggested the Department will conceal some of these individuals from me. I believe this is the appropriate approach.
Deputy Brian Lenihan: It is a matter for all of us to agree as to whether it should be a sub-committee of the Oireachtas Committee on Finance and the Public Service or a full committee of the House. I have an open mind on that and I am open to persuasion. What I agree to in principle is that a committee or a sub-committee should be established to scrutinise NAMA. I propose to contact the Chief Whip in the coming days to prepare an Oireachtas resolution to provide for the establishment of the committee or sub-committee and the specific detail on the terms of reference. Opposition parties will be consulted in the usual way as part of this process and any such resolution must be presented to the House for approval. That is the way we set up a parliamentary committee.
I have also accepted the amendments that the reports should be issued quarterly. We considered the vast information in that regard and the committee will have plenty of material to work on from a quarterly report. We also discussed on Committee Stage when the first quarterly report would arise, which will be in late March 2010. In addition, Deputy Burton expressed the specific concern that an amount of the work in terms of the issue of the bonds will take place before 31 March next. Initially, I explored with her the concept of a process order, but I never indicated that the process order would be entrenched in legislation. However, when I raised the possibility of the process order, I found she was unconvinced of the merits of this approach.
I then pointed out on Committee Stage that the regulator would have a specific role with regard to the validation of the issue of the securities in the context of our obligations to the European Union. I felt the regulator would be an appropriate person to report to the Oireachtas on that matter also, so that there would be greater scrutiny by any committee we established of the issue of the relevant bonds. I indicated I was open to that and do not have difficulty with such scrutiny.
Deputy Brian Lenihan: I confirm to the House that the regulator has been contacted and has confirmed that a person will be designated within the regulatory structure who will be willing to provide the information on an ongoing basis.
Most international observers have welcomed the appointment of the new regulator and have made the point that it is a very fine appointment. It is an external appointment and will create confidence in our regulatory system. The least the regulator is entitled to is a fair trial by the Deputy, rather than to be condemned in advance that he will presumptively not co-operate with the institutions of Parliament.
Deputy Brian Lenihan: The Deputy is not listening. I said I do not see how it would be necessary for it to be in private. I am open and will ask the Chief Whip to prepare the necessary resolution. The terms of reference can be discussed between the Whips. I have also included a provision at a later stage for appointment to the audit committee of a Member of the Oireachtas, if the Opposition parties are so minded. I know some Members have reservations about this and I understand that.
Deputy Richard Bruton: I have just a couple of questions for my two-minute slot. Why has the Minister reversed his view that he thought it appropriate that the Oireachtas would have a role in respect of the valuation committee? That was an explicit statement he made but he is now providing no statutory arrangement. Why does he believe the Oireachtas should have no role in the board subsequent to the first board he is appointing?
I have heard the Minister when in Opposition repeatedly claim that the Oireachtas had ceded too much authority and that it should have enhanced powers over agencies. As soon as he becomes Minister, however, he comes into this House and says the very opposite, that the Dáil should be bounced back into the old way, the way things were always done so everything is kept under wraps and the Oireachtas can see nothing and anything it can see, it does not have the expertise to analyse. The Minister wants things to go back to the old way. He is not even offering half a loaf, he is offering a single slice when providing for this committee. The one backbench Deputy who has spoken endorsed the idea and wanted to see legislative provision for the existence of the committee so that a future Minister for Finance or Government could not eliminate a NAMA committee for scrutiny.
Many of these powers are appropriate. Why should the Oireachtas not have a power over guarantees that the Minister issues on the taxpayers’ behalf to the tune of thousands of millions of euro? It is a fundamental right of the Dáil to sanction spending. Why not have a right to approve guarantees? Guarantees are commitments that we, the taxpayer, will honour if things go wrong and we are entitled to a role in that. What we have set out is not unreasonable and I am very disappointed. The Minister should immediately circulate the terms of reference he envisages so that we do not find in a week’s time, when all this is over, that the Minister’s idea of a committee with some slight powers, that is a slice of bread, has turned into the few crumbs we see in the legislation today.
If we are sceptical about the regulator appearing before an Oireachtas committee and opening his heart to it and telling it as it is, it is because we have bitter experience. All during the spring and summer preceding the crash in Anglo Irish Bank and Irish Nationwide that led to the bank guarantee——
Deputy Joan Burton: If there was no crash, Irish Nationwide is experiencing a little local difficulty, such as needing €8 billion of distressed loans to be written off. If that is not a crash, I do not know what is. I worked in banking and €8 billion in a small building society constitutes a crash.
Deputy Joan Burton: If one went back to the spring and summer of 2007, was the Government doing its job? If the Minister for Finance was doing his job and if the Department of Finance had been awake and was paying attention to what was happening in the banking system, there would have been action that would have diminished the level of the crisis in Ireland by a considerable margin. If the Minister feels that we are sceptical about the regulator, it is because we have the experience of those fine gentlemen coming in and telling us repeatedly, as in the Minister’s draft report to Brussels, that the fundamentals were sound and that every Irish bank was wonderful.
There is so much liability being transferred to the Irish taxpayer, €54 billion, that to go along with the old ways without transparency is a huge mistake on the part of the Minister. He has put himself forward on previous occasions as being somewhat enlightened in terms of opening up Government to transparency and oversight but he is anything but that in this case. I regret the approach he is taking because Irish taxpayers will pay for it.
Deputy Arthur Morgan: The passage of this Bill through the House is bordering on a shambles. The Minister is making off with €54 billion of taxpayers’ money to give it to the corrupt bankers and we are getting not even a commitment but a vague comment of some oversight. We are not even getting a firm committee. That should be dealt with now. We do not know what the Minister is bringing in but it should be before us to examine line by line and nothing else is acceptable.
Deputy Seán Barrett: Why does the Minister think the Committee of Public Accounts has a statutory basis? If it has a statutory basis, why can a committee as important as this, overseeing the expenditure of €54 billion not have a statutory basis?
This is typical Department of Finance stuff. During all the years I have been in here, the Department of Finance has wanted to hold power in its hands at all times. If we had provision in legislation, the crisis we are facing now would not have happened because it would have been debated here on a regular basis and the Minister would have been answering questions. That would have been to his advantage.
What guarantee can the Minister give the Irish taxpayer that after the next election, whoever is in the Minister’s chair will reappoint the committee? If it does not have a statutory basis, there is no guarantee that the committee will continue into the next Dáil or the following Dáil.
There is no explanation. If the Committee of Public Accounts has a statutory footing, surely expenditure of this size should fall within an oversight committee’s remit. Who will represent the taxpayer on the board? Surely the taxpayer is entitled to know who will represent him. It is a reasonable request.
What about the master special purpose vehicle? We do not even know about it. Why should we not have power to review the shareholders’ agreement undertaken by the master special purpose vehicle? This is a joke, where no power is being given to the Oireachtas to perform its function and check what is happening.
In all my time in this House and in Government, it was the same old story, and the Minister knows it. The Department of Finance will demand to see all legislation that goes to the Cabinet before anything can be done. That is exactly what is happening here, they are all afraid to release power to the Oireachtas because they know best.
Deputy Paul Gogarty: Perhaps there are reasons for not allowing, at a given time, too much information to be released to the Oireachtas. Whether we like it or not, there will be a conspiracy that it is a bailout for the bankers, where we sort out our friends with a nudge and a wink. There could be issues of public confidence, disclosure and non-disclosure that are very sensitive. In that context, having scrutiny by a committee on an ongoing basis might not be a good idea.
Deputy Paul Gogarty: We will get to that, but I will stick to the amendment. The Houses of the Oireachtas are trying to reduce the number of committees. How can that be squared with adding another committee and more costs? I understand the Committee of Public Accounts has powers of compellability and that any regulator could be compelled to come before the committee, even if a new committee was not established. I presume the usual restrictions would apply to anyone coming before the committee. The person cannot give his or her opinion on an issue but may only state fact and is prohibited from disclosing sensitive information. This would be well and good. It is not necessary to disclose material to the public view that could damage the country. While non-disclosure and lax regulation caused much of this problem we need to ensure that we do not go too far in the other direction. Minutiae cannot be disclosed line by line every second week at a committee. That is why I agree with the Minister about checks and balances. Is that part of the Minister’s reasoning, that he does not want sensitive information that could be damaging to the interest of the country being disclosed?
Deputy Jim O’Keeffe: It may have been helpful if some of that famous sensitive information had been available to Members of the Oireachtas over the past couple of years. We might have had a different outcome. The outcome now is a huge bill of over €50 billion, huge exposure of the taxpayer and the Minister tells us that he agrees with the principle of parliamentary oversight——
He talks about setting up a sub-committee of one of the existing committees of the Houses. Does the Minister realise what he is doing? There is a model that has worked well since the foundation of the State. It is embedded in statute and it is the model we should be following. Setting up a sub-committee is the last thing the Minister should do. It has no statutory basis, could be chaired by anybody, has no assured existence and might not last beyond the next election which could be in a month’s time. That is no assurance to the House or the people.
Deputy Jim O’Keeffe: I spent two years in that Department as a Minister of State a while ago. It has fine officials, great backroom training and expertise but they are officials. They have an official mind. They are different from politicians who have a different approach and, with all due respects, are closer to the people. The mix of the two can contribute something. The notion that the officials have advised the Minister against setting up an independent scrutiny committee of the Oireachtas is par for the course. They would not see the need for it but the Minister should see the need for it. This House sees the need for it. The Minister’s colleague, speaking a while ago, indicated that he saw the need for it. We are talking about enormous moneys, and a reasonable request from this Parliament. We want scrutiny over this €50 billion and the way to achieve that is to set up a scrutiny committee along the lines proposed. I urge the Minister as strongly as I can to take this on board and do it in the interest of democracy and of proper scrutiny of this enormous sum.
Deputy Kieran O’Donnell: I would be interested to know how the members of the Green Party view the fact that the Oireachtas committee is not being put on a statutory footing. No doubt their view would be that it needs to be. Deputy Mulcahy said that the public will accept no less.
The Minister should be trying to build credibility in the NAMA process rather than reduce it. The public is watching this debate and sees that it is being sold a three-card trick as the Minister talks about setting up an Oireachtas sub-committee with little if any power, when he could do the decent thing, accept our amendment, put the committee on a statutory footing and allow for proper transparency at valuation stage which is key. Regardless of the oversight post-evaluation it is critical to get the evaluations right. I would like to see the Minister take on board this reasonable amendment and put this committee on a statutory footing. I do not know what he has to fear. He clearly does not want to set up the committee but to create a fudge. I welcome the fact that the Green Party is taking part in the debate because Deputy Gogarty’s was the first contribution——
Deputy Kieran O’Donnell: Richard Bruton tabled an amendment for Fine Gael stating that we want a statutory Oireachtas committee. I would like to see whether Deputy Mulcahy will support us when this goes to a division.
Deputy Kieran O’Donnell: Deputy Gogarty is not listening. The Green Party members are watching this debate and expect to see this put on a statutory footing. Will they support the Fine Gael amendment?
Deputy Kieran O’Donnell: The Green Party’s statement that it is dictating the way the Government will go forward does not hold true. Deputy Gogarty is coming in like a good little boy and asking the Minister whether he is okay with that and what exactly he wants the Deputy to do. The Deputy should ask the Minister to put the committee on a statutory footing on behalf of his party’s membership.
Acting Chairman (Deputy Jack Wall): Will Deputy O’Donnell please take his seat? He should speak through the Chair. Drawing reference to himself from other Members is not acceptable and he should realise that there is a time limit on his contribution. He is using up the time of other Members.
Deputy Pat Rabbitte: When Deputy Gogarty expresses his no doubt genuine concern about the cost of a committee I reckon that under the new pared down regime implemented by the Minister for Finance a committee probably costs up to €20,000 a year these days. It would be €20,000 well spent. That is not a compelling argument against invigilating an investment of €54 billion by the taxpayer. A more serious argument is whether it should be an integral part of the Oireachtas Joint Committee on Finance and the Public Service, expanded or otherwise, or a sub-committee of that committee. Its powers must be clear if it is to be meaningful.
When one reads the Minister’s amendments on more complex issues it is clear that this has not defeated the Minister’s capacity to design a committee. The Minister would do that in a spurt on a Sunday morning radio show, off the top of his head without any bother. Why he has not brought this amendment before us when he has brought more complex ones before us must lead us to doubt whether there is any change in the mindset. If this House had been in possession of some of the sensitive information we might not be in the situation we are in. The mindset that says that the repository of all wisdom is on the Government side and in the Department of Finance and the other agencies has, I am afraid, been changed utterly and forever. The Minister is not acknowledging that in playing us along and saying he will get out of this House and into the next House which may or may not pay much attention or be up to speed on where he is. He thinks he will have no difficulty with the Seanad and that he will be clean away.
Deputy Brian Lenihan: I hope we can reach an all-party agreement on it. I believe we will. It is important that we establish one. I do not believe it is desirable to entrench it in legislation. Deputy Jim O’Keeffe referred to the example of the Committee of Public Accounts. However, it hears the audits of accounts for a whole range of Departments. In this case, it is only a single statutory authority.
I agree with Deputy Pat Rabbitte that to sustain public confidence in NAMA we must accept there should be a Dáil committee devoted to it. Again, we will have to decide whether it will be a committee or a sub-committee.
Deputy Brian Lenihan: It does not need a statutory basis because as long as my party is in office it will exist. It should be easy for the Opposition parties to agree among themselves that the committee will exist thereafter, if there is a thereafter.
Deputy Brian Lenihan: Deputy Paul Gogarty asked if this was motivated by the desire to protect confidential information. That is not at all the case. Most committees and boards established by statute only have an annual reporting function which all Members know can be very uninformative. In this case, the statutory authority will give quarterly reports and an Oireachtas committee will be dedicated exclusively to the scrutiny of the authority. I do not dispute that it is desirable that should be the case but I am making the point that in corporate governance terms a quarterly report is a far more ample accounting mechanism than annual reports with their impressive covers and somewhat less impressive information between them.
Deputy Brian Lenihan: We have laid down in the Bill a great deal of the matter which the quarterly report must contain. Due to the concern expressed by Deputy Joan Burton on the issue of the bonds, I drew to her attention the European arrangement. I have the undertaking of the regulator to work with such a committee as well. It is not the regulator but a person designated by the regulator as he could not take a personal interest in the vast wealth of information involved. These matters have been attended to.
Deputy Bernard Durkan raised the matter about parliamentary questions concerning the body. They will be dealt with in a manner similar to that in which my Department deals with queries concerning the Revenue Commissioners so that Deputies will get information in a timely way from the agency.
Deputy Richard Bruton: I must express my huge disappointment with the Minister’s response. If we have learned anything from banking crises in other countries and analyses of them from the IMF and others, the one common thread is that there must broad political consensus around a proposed solution with proper transparency and scrutiny of the asset recovery process. As we have seen from the IMF, in cases where there is not proper scrutiny, politically motivated intentions take over in asset recovery vehicles. When controlled by bureaucracies, these vehicles fail to fulfil for the taxpayer the recovery of assets needed.
We have the opportunity to provide proper transparency. Instead we have a Bill proposing the establishment of a body that has no obligations under the Freedom of Information Act. It will have no register of the loans that can be viewed by the public. There is to be no comment by NAMA executives on policy when they attend an Oireachtas committee meeting. There will be no information as to how much the chief executive officer will be paid, no watchdog and no sight of a business plan which would show the credible foundation for undertaking this decision on public moneys.
Instead there will be business plans in the future in which the Minister can, at his own whim, declare a matter confidential so that it is concealed from the Oireachtas. This is not transparency. If the Minister has been so sucked into the maw of the Department of Finance that he believes this is transparency to the Oireachtas, he better have a period on the backbenches to rediscover what it is to hold the Government and its agencies accountable as is our statutory duty and the purpose for which we were elected.
Deputy Richard Bruton: ——that the Dáil had made huge mistakes in letting power away from elected Members when it should be seeking to seize it back. On his very first test on this issue, he offers a toothless committee without a legislative basis or any expertise to underpin its work. It is the old mushroom treatment — keep them knee deep in manure and leave them in the dark. This is what he is offering the Oireachtas in the way it will oversee the NAMA exercise.
If Fine Gael makes up a government after the next election, it will establish a NAMA Oireachtas scrutiny committee on a statutory basis so that it can have proper powers and recognise the right of Members to oversee decisions.
Deputy Richard Bruton: It is sufficiently important that this body has all-party consensus. The former Swedish Minister for Finance told an all-party committee of the House that such a consensus is vital. It is essential to have all-party understanding, willingness to confront the problem, proper scrutiny and not to pay over the price.
The Minister is letting himself and his officials down in the longer term. He entered this debate with the sort of weasel words that I would expect from Ministers who do not have the same breadth of understanding and experience he has.
He also stated the proper conduit for reporting to the Oireachtas should be himself, the Minister for Fiance. It is outrageous he thinks he can cramp the Oireachtas back on to the narrow ground which he and previous Governments have sought.
The one lesson from this crisis is that we need a stronger Oireachtas that is willing to hold Ministers to account and force them to take responsibility. It is important that those in charge of €54 billion know there will be people looking over their shoulders, others with real power to hold them accountable.
Members on the opposite side, with the exception of Deputy Gogarty, have been at one on this. I cannot understand why the Minister is resisting that consensus which has been built. We cannot go back to this blindman’s bluff as the way in which the Oireachtas holds the agencies like this to account, stumbling around in the dark in the hope we might crash up against something that exposed a weakness in the way business was being conducted. We need instead a strong committee to hold the body to account.
There are vital issues at this point such as the codes of conduct for credit, the way in which NAMA can enforce change and the way in which property is dealt with so that there are no sweetheart deals. These are matters which require tough oversight. The Minister has let the Oireachtas down in not being willing to give a clearer commitment that we will have a committee with a statutory base and expertise to back it up. It must also have powers including those for appointment of boards and subsequent boards. There is no reason the Oireachtas should be excluded from a role in the appointment of boards. I believe that is true in the case of trivial boards and——
The Minister at one level acknowledges this when he said he was willing to consult with the Opposition. However, when it comes to putting it into the legislation, some gremlins have got a hold of it and have dragged the Minister back into the corridors of darkness. The Minister has let himself down. This was one area on which there was broad consensus where we could have done a decent job of work.
Deputy Richard Bruton: The Minister has run to ground for whatever reason. It will leave a suspicion in the minds of people that he does not want proper scrutiny and oversight and that all his the talk and blather about the need for transparency and to have a powerful Oireachtas is hot air.
Deputy Richard Bruton: When it comes to making the decisions, the Minister is not to be found fronting up to the decisions that need to be made. This is an important amendment and one that should be made. I hope the House will support us on this amendment.
Acting Chairman: I ask the Deputy to allow me to state the position. Rule 190 of the Chair states that when amendments are taken together for the purposes of debate, only the mover of the first amendment has the right of reply. Members who have tabled other amendments may only speak twice. Deputy Burton has already spoken twice. Therefore, it is not within my remit to allow her to speak again.
Deputy Joan Burton: On a point of information, this is probably the most important debate that has taken place in the Oireachtas for a very long period. When it comes to putting amendment No. 4 before the House, will I have an opportunity to reply to the Minister at that point? I understand that amendment No. 2 is being taken first. We would not have agreed to the grouping if we understood it would diminish the right of the Labour Party to put amendments before the House.
Acting Chairman: Allow me to state the position. As I stated in regard to how the rules of the House apply, the only option available to Deputy Burton is to get a separate decision in regard to amendment No. 4. I have ruled on this in accordance with the rules of the House.
|Allen, Bernard.||Barrett, Seán.|
|Behan, Joe.||Breen, Pat.|
|Broughan, Thomas P.||Bruton, Richard.|
|Burke, Ulick.||Burton, Joan.|
|Byrne, Catherine.||Carey, Joe.|
|Clune, Deirdre.||Connaughton, Paul.|
|Coonan, Noel J.||Costello, Joe.|
|Coveney, Simon.||Crawford, Seymour.|
|Creed, Michael.||Creighton, Lucinda.|
|D’Arcy, Michael.||Deasy, John.|
|Deenihan, Jimmy.||Doyle, Andrew.|
|Durkan, Bernard J.||English, Damien.|
|Feighan, Frank.||Ferris, Martin.|
|Flanagan, Charles.||Flanagan, Terence.|
|Hayes, Brian.||Hayes, Tom.|
|Higgins, Michael D.||Hogan, Phil.|
|Howlin, Brendan.||Kehoe, Paul.|
|Lee, George.||Lynch, Ciarán.|
|Lynch, Kathleen.||McCormack, Pádraic.|
|McEntee, Shane.||McGinley, Dinny.|
|McManus, Liz.||Mitchell, Olivia.|
|Morgan, Arthur.||Naughten, Denis.|
|Neville, Dan.||Noonan, Michael.|
|Ó Caoláin, Caoimhghín.||Ó Snodaigh, Aengus.|
|O’Donnell, Kieran.||O’Dowd, Fergus.|
|O’Keeffe, Jim.||O’Mahony, John.|
|O’Sullivan, Jan.||O’Sullivan, Maureen.|
|Penrose, Willie.||Perry, John.|
|Quinn, Ruairí.||Rabbitte, Pat.|
|Reilly, James.||Ring, Michael.|
|Shatter, Alan.||Sheahan, Tom.|
|Sherlock, Seán.||Shortall, Róisín.|
|Stagg, Emmet.||Stanton, David.|
|Timmins, Billy.||Tuffy, Joanna.|
|Upton, Mary.||Varadkar, Leo.|
|Ahern, Dermot.||Ahern, Michael.|
|Ahern, Noel.||Andrews, Barry.|
|Andrews, Chris.||Ardagh, Seán.|
|Blaney, Niall.||Brady, Áine.|
|Brady, Cyprian.||Brady, Johnny.|
|Byrne, Thomas.||Calleary, Dara.|
|Carey, Pat.||Collins, Niall.|
|Conlon, Margaret.||Connick, Seán.|
|Coughlan, Mary.||Cowen, Brian.|
|Cregan, John.||Cuffe, Ciarán.|
|Dempsey, Noel.||Devins, Jimmy.|
|Dooley, Timmy.||Fahey, Frank.|
|Finneran, Michael.||Fitzpatrick, Michael.|
|Fleming, Seán.||Flynn, Beverley.|
|Gogarty, Paul.||Gormley, John.|
|Grealish, Noel.||Hanafin, Mary.|
|Harney, Mary.||Haughey, Seán.|
|Healy-Rae, Jackie.||Hoctor, Máire.|
|Kelleher, Billy.||Kelly, Peter.|
|Kenneally, Brendan.||Kennedy, Michael.|
|Killeen, Tony.||Kitt, Michael P.|
|Kitt, Tom.||Lenihan, Brian.|
|Lenihan, Conor.||Lowry, Michael.|
|McEllistrim, Thomas.||McGrath, Mattie.|
|McGrath, Michael.||McGuinness, John.|
|Mansergh, Martin.||Martin, Micheál.|
|Moloney, John.||Moynihan, Michael.|
|Mulcahy, Michael.||Nolan, M. J.|
|Ó Cuív, Éamon.||Ó Fearghaíl, Seán.|
|O’Brien, Darragh.||O’Connor, Charlie.|
|O’Dea, Willie.||O’Flynn, Noel.|
|O’Hanlon, Rory.||O’Keeffe, Batt.|
|O’Keeffe, Edward.||O’Rourke, Mary.|
|O’Sullivan, Christy.||Power, Peter.|
|Power, Seán.||Roche, Dick.|
|Ryan, Eamon.||Sargent, Trevor.|
|Scanlon, Eamon.||Smith, Brendan.|
|Treacy, Noel.||Wallace, Mary.|
|White, Mary Alexandra.||Woods, Michael.|
This amendment seeks to put a legislative framework around the special purpose vehicle, SPV, that has arrived into this legislation without a great deal of advance notice. The special purpose vehicle is to be a company controlled by private interests which is to have a 51% interest in it. The investors in it are unknown at this stage. It will have all of the powers of acquiring, managing and disposing of the assets so it will be absolutely at the heart of the activity of NAMA. The concern of the House during Committee Stage was that while we are going to huge lengths to regulate the operation of NAMA and to set out the standards to which it should work and the reporting it should meet, we suddenly find that the action where big decisions will be made has moved offshore, so to speak. It will now not be in NAMA, which we have regulated to a great extent in this legislation, but the final decision will rest in this other body, the special purpose vehicle.
There was broad consensus on the Opposition side that this was an unsatisfactory and unacceptable way to proceed. The Minister on Committee Stage undertook that he would consult with the Attorney General and would come back with a decision of the Attorney General in regard to how he would regulate it. He has an amendment which offers some crumbs in regard to how it might be overseen. It is critical that we recognise the master special purpose vehicle in the legislation, define its role and consider what sort of investors would be suitable to take up this. Could it be the very same banks from which we are acquiring these assets that would have the final control over their purchase, management and disposal? That would seem unthinkable, yet there is nothing in the legislation to disbar it.
Equally, we need to understand the individuals who appear on this SPV board and who will be in a position of very great authority and influence. Again, we need to know if they are suitable persons to occupy this position and whether they have any interests other than the interests they put up in terms of the €51 million that is required of them, and whether they have any other interests that might constitute a conflict in carrying out the role of managing these assets or of deciding on their purchase, disposal and management. It is important that we would define who are appropriate people, how they should behave and what criteria they must meet in order to be acceptable as people who would play such a pivotal role in regard to an investment made by the State.
The Minister has also assured us that the SPV will at all times act only to discharge the functions and purposes of this Act. This seems to conflict with the Minister’s note which he circulated last week which was to the effect that this body must have ultimate control and discretion in its activity and that the only purpose will be the public purpose, whereas it is to be a private vehicle, controlled privately with private investment moneys. There seems to be an underlying contradiction and the only way to reconcile that contradiction would be to set out in statute exactly how we are going to regulate the potential conflict between private investors seeking their own interest, or those private investors seeking to further other interests not directly represented on the board but which might be totally inimical to the purposes of this legislation.
Equally, we need to know and see that the finances, accounting and reporting of this body are in the public domain. It is vital that there is regulation and oversight of that, including the right of the Comptroller and Auditor General to be able to audit those books appropriately, to give assurance to the taxpayer that everything is being done in a way that would be proper.
A crucial issue is how dividends are to be paid. We understand from the Minister that a crucial condition is that the SPV will get a dividend only in years in which NAMA proves to be profitable. We need to have that spelled out. How does one define NAMA as proving to be profitable? Will there be a separate valuation every year of the assets that NAMA owns to find whether there is a profit being generated that year, and only if that revaluation of the assets achieves a certain result will the private investors get access to their dividend? We need to see the detail of that. We have only this flimsy note and the matter is not set out in detail. With regard to the assurances we have received that this private sector body can only get something akin to returns on a Government bond, again, this needs to be set out.
The Minister will probably assure us that the shareholder agreement will cover all of this. However, just minutes ago the Minister refused to provide the Oireachtas with an opportunity to oversee the shareholder agreement. It is vital that the shareholder agreement would be in the public domain and open to scrutiny by the Oireachtas — an Oireachtas properly empowered to scrutinise and understand the implications of these shareholder agreements.
The Minister presented this body as perfectly innocuous. There is generally a willingness to accept the Minister’s assurance that this is being set up solely for a purpose of getting a certain treatment in the accounts. However, if it is that innocuous, the Minister should have no concerns about providing the legislative oversight that would be necessary to assure the Dáil. We also need assurances, when the Minister is gone and when NAMA perhaps seeks to alter the shareholder agreement at some subsequent opportunity, that this would be a public event and that there cannot be modifications in the shareholder agreement that have implications for the taxpayer and the public interest that are not subject to proper scrutiny and oversight.
The Minister was fulsome in offering assurances to the House on the last occasion that there was nothing suspect or underhand about this SPV and that it was purely fulfilling a model that was required by EUROSTAT and had been done elsewhere without damage. He needs to back up that with legislative provisions that would reassure the House that this is what will happen.
Deputy Joan Burton: The Labour Party will support the Fine Gael amendment. We have an amendment No. 17 relating to the special purpose vehicle which we consider to be very important because it cuts to its fundamental status. This very peculiar SPV was informed to the Dáil very late in the day. I do not believe it was the subject of any message from the Government to the Green Party that it would have such a fundamental role and would, in fact, control the issuing of the debt and control the loans to be taken over. This is the terminology the Minister used in describing the SPV in the note he sent to the Dáil. Despite that, and despite NAMA taking the risk, nonetheless, this SPV would have to pony up only €100 million, with €51 million to be provided by the private sector, for control of an entity which is going to control the issuance of €54 billion of Government debt. To people involved in high finance, that is a very small amount of money.
The Minister referred to the example of France as a model for the SPV. As I pointed out to him in an earlier discussion, the banks in France were the beneficiaries of the particular French arrangements that gave rise to their SPV. The French provided a group of investors with the funds to invest in the French SPV and, therefore, they were the representatives of the banks in the same way, say, that the Anglo ten — the ten investors who took on the shares in Anglo Irish Bank from the Quinn family — were specially related to Anglo and were significant customers of the bank. In other words, it was a golden circle arrangement.
These financial gymnastics — the use of off-balance sheet vehicles — were thoroughly discredited in the accountancy world as a result of the collapse of Enron and WorldCom. We can say that something is off-balance sheet, and it sounds as though we are at some distance from whatever the off-balance sheet does. In fact, the directors of Enron and WorldCom ended up being fully responsible in law for the liabilities created for the SPV. In the same way, the Irish taxpayer remains fully responsible for the liabilities created by the SPV and by NAMA. When discussing the crisis in banking besetting many European countries with his fellow finance Ministers, the honest thing to do would be to classify the special government measures from different EU states that obtain EU approval and which are recognised as arising as a consequence of the financial and banking crisis.
Deputy Joan Burton: In terms of the long-term governance of the European Union, I do not think this is the correct way to go. Everybody recognises that the banking debts are special and specific, and we hope that they are one-off and pretty much limited to what is described in the Bill. I am sure that is what the Minister wants and that is what everybody else would like to see. However, EUROSTAT should not permit this fiction. It is either a fiction or a kind of a fraud. The description of the SPV states that it will be a separate legal entity entitled to its own goods and assets in its own right, have autonomy of decision in its day-to-day operations, be able to incur liabilities on its own behalf and have complete accounting information. The Minister then listed 13 things that the SPV could do.
If the SPV has these powers and is independent, then the Minister made an entirely contradictory statement when he said: “Since the State is guaranteeing the securities issued by the master SPV, the NAMA representatives on the board will maintain a veto over all decisions of the board that could affect the interests of NAMA or of the Irish Government.” When he replied to me on the issue the other day, he said: “We are not discussing a special purpose vehicle in a banking context or in the context of NAMA’s balance sheet. We are discussing a special purpose vehicle, the purpose of which is to put the entire operation outside our national accounts in the Eurostat statistics.” The Minister is trying to persuade us that he has managed to come up with a proposal that tells EUROSTAT that the SPV that does the heavy lifting will have decision making autonomy in respect of its principal functions. The SPV will have majority private sector ownership at 51%. NAMA in the public sector will be able to maintain a veto over all decisions of the SPV in the private sector that could affect the interests of NAMA or of the Government, but the SPV will still be able to have considered decision making autonomy. This is obviously contradictory, and it is where the fiction lies in the fictional statement by EUROSTAT.
The Bill has no provision anywhere for a NAMA group entity that has private sector majority ownership. It is simply not in the Bill. I understand where the Minister’s desire to take part in this exercise arises from, but it is an extremely unwise exercise and if it is the preferred method to be adopted by the European Commission, EUROSTAT and the ECB, then it is very foolish.
The issuing of the bonds is currently based on an interest rate of 1%. Interest rates are likely to rise slowly but surely as European economies recover. We hope it will not be much more than a 2% interest rate rise over a period of time. The SPV will make it much more difficult to manage things when it is loss making. It is almost bound to be loss making because of the structure the Minister has put on it once the rates of interest rise. The Minister will say that this is only for a period of time and that we are looking at the long-term ten year life cycle of the SPV. If it is autonomous and loss making, its funding costs will be far higher because it will be going to the bond markets and the formal, legal agency will be issuing the NAMA bonds. Is the Minister saying it is not the formal agency that is issuing the NAMA bonds?
Deputy Joan Burton: It is very likely that in this scenario, the Minister will be going regularly to the EU looking for approval for this on a continuing basis in the context of State aid. I am not sure that this has been thought through. The Government will probably need regular EU approval for State aid. We saw a memo today to the EU that dealt with Anglo Irish Bank on the eve of the bank’s nationalisation and which claimed that everything was fine. I think there are severe problems with this entity and I would like to hear from the Minister how he gets over the essential contradictions at the heart of this particular creation.
Most people I meet on the street and at club functions and so on are actually worried to death about NAMA. They are worried about the implications for themselves and their families of the cost of the €54 billion that is riding on NAMA and for which they are responsible. Almost everybody I have met sees the SPV as some kind of clever accounting trick of the loop that was introduced at the last minute. They feel they will be even more exposed, as if they had been dealing with a fairground trickster. The debate on NAMA has lasted more than six months since the initial comments on the draft legislation before the summer. Until the week before last, at no point during the long debate had the Minister or any of his Government colleagues said that a vehicle of this nature would be a critical part of the entire NAMA architecture. That is why the sections of the Fine Gael proposal that set out minimum regulations with regard to the SPV are to be welcomed. While we will support those sections, we feel that our amendment addresses a more fundamental issue that arises in respect of this vehicle.
Deputy Kieran O’Donnell: The introduction of the SPV question changed the whole debate on NAMA overnight. It brought into focus the fact that SPVs are private vehicles, in effect. It just so happens that the State will have a veto on the decisions taken by this SPV. The Minister’s amendment No. 44 proposes the insertion of a new section that will make certain provisions for NAMA group entities. It appears that the only involvement the Minister will have in these entities will be in appointing their directors and disclosing their interests. What about the issue of reporting requirements? What about the lines of control? Will the SPV and NAMA have a common CEO? In terms of our dealings with the EU, will the SPV or NAMA be the formal reporting entity? As Deputy Burton has said, the SPV is being granted the authority to deal with all aspects of NAMA, in effect. It will be responsible for the purchase, management and disposal of loan assets identified and valued by NAMA. Major questions arise about the legal basis for that. A number of years from now, NAMA’s veto over the board of the SPV could be legally challenged by private shareholders and its validity might not stand up.
It is understandable that taxpayers have major concerns about the proposal to give a private vehicle responsibility, in effect, for managing €54 billion of debt that is being borrowed on their behalf. I do not doubt that the Minister will have noted that a rating agency, the Fitch Group, today downgraded Ireland’s credit rating from AA+ to AA-. The agency stated that it does not regard the off-balance sheet mechanism — the SPV — as an effective way of parking the €54 billion of debt I have mentioned. It said that it downgraded its rating of Irish Government debt partly because such debt will rise to 110% of GDP by the end of 2010.
This amendment raises the same question as the previous amendment, which related to the establishment of an Oireachtas oversight committee. It is a question of transparency and accountability. The Minister for Finance needs to take charge of the public purse and meet his commitment to look after the money of the Irish taxpayer. He should introduce legal provisions to ensure that the SPV is subject to proper reporting requirements.
I would like to raise a number of questions that the Minister did not properly clarify last week. He said that the master SPV may create a number of subsidiary SPVs, each of which will be responsible for the loan book of an individual financial institution. He emphasised that any such subsidiary SPV will be 100% owned by the master SPV. I would like the Minister to confirm whether subsidiary SPVs will be established to deal with the separate loan books of the individual institutions. Who will be on the board of these baby SPVs? I suppose the master SPV could be referred to as the Daddy SPV.
Deputy Kieran O’Donnell: I suppose it is a form of cloning. This is extremely important. We still do not know who the shareholders will be. It is technically possible that the shareholders will be the banks to which we are giving €54 billion, in effect. The Minister should make no mistake about the fact that we are bailing out the banks by giving them major breathing time. We are taking toxic loans off the balance sheets of the same banks that are putting pressure on householders who are under severe pressure with their mortgages. The protocol or code of conduct that is in place will assist home owners until February, but they are accountable to the banks nonetheless. The Minister needs to provide guarantees in this area. I cannot see how that can be done if it is not enshrined in legislation.
I suggest that amendment No. 4, which is straightforward, will protect the Minister and the taxpayer when the SPV is being established. Amendment No. 3 proposes that regulations be drawn up to cover “the suitability of investors”, thereby ensuring that we do not give taxpayers’ money to the same banks. The amendment refers to “the suitability and behaviors of members of the Board” because we do not know who the members of the board will be. What input will the Minister have into the private investors’ process of appointing people to the board?
Reference is made in the amendment to “the finance, planning accountability and reporting” of the SPV because such matters are critical. I welcome the Minister’s amendment, which will provide for quarterly reports. I would like to know whether those reports will be audited. Will the term “draft” be applied to the reports? It is extremely important that the information we receive should be valuable. I do not doubt that one of the reasons the business plan is a draft plan is that no auditor would sign off on it. One could not sign off on those draft plans. It is critical that the information we are getting stands up to proper scrutiny.
Amendment No. 3 also proposes the drawing up of regulations dealing with “the manner in which the Special Purpose Vehicle shall discharge its functions under this Act”. There is no mention of how exactly the SPV will discharge its responsibility to achieve value for money on behalf of taxpayers. The amendment also refers to “the method of determining the appropriateness of paying a dividend or bonus to investors”. Although one of the Minister’s documents stated that “the profits earned by the SPV will be distributed to the shareholders according to the following arrangement”, we have no idea exactly how they will be calculated. The document also stated that the private equity investors, like NAMA, will be entitled to “receive an annual dividend linked to the performance [and profitability] of the Master SPV” and taking account of all direct and indirect costs. How does one define performance and profitability? These are critical issues as we try to protect the interests of the taxpayer. The document also states that “on winding up the Master SPV, the equity investors will only be repaid their capital if the Master SPV has the resources; they will receive a further equity bonus of 10% of the capital [up to a maximum of €5 billion] if the Master SPV makes a profit”. These liquid investments will be tied up for up to ten years, but we still do not know the duration of NAMA. We know from the business plan that the Minister has indicated that it will last for ten years, but we still do not have any idea of the length of all the loans going into NAMA. It is clear that all the loans will be dealt with under NAMA within a ten-year period. That presupposes the Minister will securitise the debt in NAMA at some level. Will the SPV be doing this?
The Minister stated all citizens are equal and I agree with him. If all citizens are equal, they should have the same entitlements as the private investor. The private investors will have proper reporting requirements. The taxpayer is entitled to have his interests in respect of how the SPV will work protected legislatively by the Minister. The SPV will effectively be carrying out the daily operations of NAMA.
The Minister will have a veto over decisions made by the board. Day-to-day operations will be dealt with by the CEO of the SPV but we still do not know who this will be. It is not mentioned anywhere in the legislation. The Minister should correct me if I am incorrect in stating there is no reference to the CEO of a group entity. I see only a reference to the “Chief Executive Officer of NAMA”. Will the Minister clarify this?
Bringing the SPV on board has resulted in a seismic shift. Will the SPV be dealing with all the daily activities of NAMA? Will it be purchasing and administering the assets? Will it be paying the banks their yearly coupon and will it be disposing of assets? Will it be collecting the repayments of debt through the banks? Will it be dealing with the banks on a day-to-day basis? Ultimately, the SPV is now NAMA. NAMA has been reincarnated as the SPV, yet this is not mentioned anywhere in the legislation.
The only amendments the Minister has made concern corruption and the disclosure of interests in terms of group entities. He has not focused on the financial reporting side, particularly in terms of the group CEO. As Deputy Barrett has enunciated at length, the Minister will have to provide a legislative basis for the SPV to ensure there will be no question of private investors taking a case alleging the Minister for Finance, be it Deputy Brian Lenihan or, as will no doubt be the case, Deputy Richard Bruton, does not have the power to enforce effectively the rights of the taxpayer in respect of the running of the SPV. If Deputy Brian Lenihan were to consider this as a barrister rather than as Minister for Finance, I have no doubt he would advise the Government to include the SPV in the legislation.
Deputy Pat Rabbitte: Depending on whom one believes, the SPV is merely a technical device to take the debt from the national accounts or, as many commentators such as Deputy O’Donnell have described it, a seismic shift that changes the nature of NAMA. Why did the Minister handle the matter in this way? He never explained to the House why the SPV emerged in the public domain in the fashion that it did.
Deputy Pat Rabbitte: When the CSO made its submission to EUROSTAT, which I believe was last July, and when the initial draft legislation was being published, was there any reason no attention was drawn to this? The first I learned of it was when I read Matt Cooper’s book approximately three weeks ago. He refers to the SPV in the book, but in the belief that NAMA is to own it. It emerged in the documentation the Minister’s handed out last week that NAMA will not own it and that the agency is to be a minority stakeholder.
Will the Minister explain why the detail emerged in the fashion it did? It has only given rise to suspicion. If there is a considerable row and everyone is agonising over how to decrease expenditure by €4 billion this year, I can understand why the Minister would not want to exacerbate the problem by adding the NAMA-related liability to the national debt. However, the manner in which the detail has seeped out has not helped. I understand the Fine Gael amendment is seeking to put some kind of statutory scaffolding around the provision.
It is interesting to draw attention to a couple of points in the EUROSTAT statement. It refers to the Minister’s submission that real estate prices in Ireland will increase by 10% over the next ten years. It states: “EUROSTAT is not in a position to judge whether this condition in plausible, however the presence of market investors is reassuring (those providing 51% of the equity of the SPV)”. There is something endearingly naïve about that. That it is reassured by 51% of €100 million given the scale of what we are talking about seems very puzzling. When I asked if this could mean Allied Irish Banks and Bank of Ireland could be subscribers for the private equity, the Minister answered bluntly this was not the case. I trust that is on the record. He stated the subscribers were more likely to include pension funds, for example.
Deputy Richard Bruton asked whether there would be a dividend paid in a year with no profits. Why would somebody want to invest in this vehicle? The only reason one would want to invest is for information given that the vehicle is to acquire and manage the loans in the largest property company in the world. It would be worthwhile putting up the money required to obtain the information that will be forthcoming. We need to test that a little further.
The EUROSTAT approval states: “The current market value is 15% lower than the LTEV [long-term economic value] but Irish authorities believe that under the current conditions the market values for properties are artificially low”. I have difficulty with that assessment. The market value for property is the market value for property. Perhaps the Minister will turn out to be right. I hope he is. I hope the increase is more than 10%. It is interesting that EUROSTAT signs off the preliminary approval by saying:
It is a major development. I am not sure whether the Minister said he did not tell us about it because he was waiting for the EUROSTAT approval or that it had just come out a day or two before he made it available to us. I do not find that entirely reassuring in the sense that if it was always contemplated and this term “NAMA group entities” was meant to encompass a special purpose vehicle, SPV, or in this case the daddy of all special purpose vehicles, in fact the mother and father of special purpose vehicles, I would have thought that we ought to have been given a heads-up on that. What did the Minister propose to do if EUROSTAT turned it down?
I do not object in principle to the notion of the Minister trying to arrange the financing in a fashion that does not compromise the already extremely high national debt figures. I wish to make that clear, but I have difficulty with the way it has emerged. The points in the amendment that Deputy Bruton has adduced are immensely important. In the context of that question I asked the Minister about Bank of Ireland or Allied Irish Banks contriving to get us to shed their toxic assets and then they run the show, we need to look at the question of the suitability of investors as envisaged in line (a) of the amendment. The reference in line (b) to the suitability and behaviour of members of the board is just as important. This puts An Bord Pleanála, the National Roads Authority and other such bodies in the ha’penny place.
The Minister indicated to me on Committee Stage that he envisages the chairman of NAMA will be the chairman of the SPV but he never explained in detail how he can provide for all of that in the shareholder’s agreement. A number of other matters arise in the amendment to which Deputies Bruton and Burton have spoken and I do not wish to go back over that but it is very important. If the reason that the Minister did not give tangible expression to this in the Bill when he first published it was because he did not have the approval from EUROSTAT, now that he has the approval why resist incorporating in the law the amendment tabled by Deputy Bruton or something like it?
Deputy Seán Barrett: It is beginning to make more sense to me now why the Minister refused to accept Deputy Bruton’s amendment on putting the Oireachtas committee on a statutory basis. Part of the proposal put forward was to review the shareholder’s agreement undertaken by the master special purpose vehicle. That confirms my suspicions that something tricky is going on. I do not know whether the Minister has ever been to the Grand National in Fairyhouse at Easter time but there is a tradition that when one exits Fairyhouse there is a line of people called the three-card trick merchants. I am sure the Minister has seen them. That is precisely what all of this is about. This is three-card trick stuff.
In case Members have not had an opportunity to read the note supplied by the Minister, this master special purpose vehicle has wide powers. There is no mention of a special purpose vehicle in the interpretation section. In fact, the only reference is to a NAMA group entity, whatever that means. It states in the briefing note on NAMA SPV structures that, “The master SPV will be a separate legal entity and will be jointly owned by private investors, who will own 51% of its ordinary equity, and by NAMA, which will hold the remaining 49% ordinary equity”. My definition of a legal entity is that it is named. What is the name of the master special purpose vehicle? That is not a name for a separate legal entity. There has to be a name. There will have to be directors of a company named such and such. It is extraordinary that we have not been given a name for this special purpose vehicle.
That confirms exactly what I said on Committee Stage, that in order to get approval from EUROSTAT this company not alone has to be a separate legal entity with its own board of directors and with a name, but it must also be able to take economic decisions and engage in economic activities for which it is itself held to be directly responsible and accountable at law. That is the most important statement. In other words, according to EUROSTAT if a developer wants to question why his or her properties are being confiscated by this body, that company, the SPV, that is named and is a separate legal unit is accountable at law. Therefore, the business of a NAMA group entity being sufficient is a con trick. That company must be named, have separate legal authority and be accountable at law, according to the Minister’s note, under EUROSTAT requirements to merit the achievement of an off-balance sheet structure. The failure of the Minister to bring forward an amendment on this Stage clearly outlining the responsibilities of this animal known as the “master SPV”, which is without a name and is not mentioned in the interpretation section of the Bill, must be corrected immediately if the Minister wishes to use the excuse that the reason he is doing this is to take these liabilities off-balance sheet. Otherwise, according to EUROSTAT, it will not achieve that status.
The Minister’s note to Members states that the master SPV will be a separate legal entity, entitled to own goods and assets in its own right and will have autonomy of decision in its day-to-day operations. How does that fit in with what the Minister is now telling us, that the NAMA board can veto all decisions of the SPV? That is totally contradictory to the requirement of EUROSTAT, which clearly states that it must be accountable at law in itself because it is a separate legal entity with its own board and shareholders. Not alone do we not know who the shareholders are, we do not know who the directors will be. In one part of the note the Minister tells us that NAMA representatives on the board will maintain a veto over all decisions of the board that could affect the interests of NAMA while in the next part of the same note, he tells us that the SPV will have complete autonomy, will be able to incur liabilities on its behalf and will have complete accounting information available. That does not add up.
I cannot understand how we are expected to pass legislation relating to a company which is a legal entity with no name and that is not mentioned in the legislation. The only matter mentioned in the legislation is the definition of a NAMA group entity, which states that it is a subsidiary of NAMA within the meaning given by section 115 of the Companies Act 1963. If it is a subsidiary of NAMA it does not comply with what EUROSTAT states in its ESA 95, paragraph 2.12. This sets out the rules whereby an entity can be considered an institutional unit which would merit the achievement of an off-balance sheet structure. It goes on to state what the entity can and must do. That does not comply with what the Minister tells us in his note. There is no mention of this company in the legislation we are being asked to pass this week.
This is a con trick. It is no wonder the Minister does not want a statutory Dáil or Oireachtas committee that can question all the issues Deputy Bruton outlined in his amendment, which was defeated in the last division. It is an absolute shame. This is not the type of legislation that can be easily amended. It is putting the taxpayers of this country at risk to the tune of €54 billion and possibly more. We are being treated as if we are being disloyal to the State by asking awkward questions, but we have an obligation to ensure that this legislation will, as far as is humanly possible, protect the interests of taxpayers.
I have read the Minister’s note carefully and I invite others to read it and tell me if am misreading it. It clearly states what the requirements of EUROSTAT are regarding the formation of this legal entity, which has complete authority, a board of directors and shareholders. It even goes so far as to state that the subscribed capital of the master SPV is “likely to be”€100 million. It is as if the Minister has not yet made up his mind or it might not be possible to get the €100 million. This is extraordinary. The note continues: “The Master SPV will have its own Board with members appointed by NAMA (maybe the whole NAMA board of 9) and the Private Sector equity investors.” Nobody mentions who they are or how many directors there will be. It continues: “...the NAMA representatives on the Board will maintain a veto over all decisions of the Board...”. Then one reads what EUROSTAT says is required to qualify as a legal entity and the conditions that must be fulfilled. There is no way they can be adhered to in view of the Minister’s note and the lack of any information in the legislation concerning this matter.
Deputy Arthur Morgan: I commend Deputy Richard Bruton and Fine Gael on tabling this amendment. It offers the Government an opportunity to include it in the Bill to ensure there is some type of clarity and oversight regarding what these SPVs may do. I believe the SPV will take power from NAMA. It will take the driver and engine from NAMA and leave it like a shell. It is a completely separate entity.
Deputy Arthur Morgan: I wondered what the Minister was up to and thought, perhaps, it was to dupe the Green Party membership and the majority of its Members of the Oireachtas. We would give the Minister no credit for that because the Green Party was not going to ruffle any feathers once it got through its conference. However, it is far more serious than that.
There are only vague references in the Bill to NAMA group entities. There is nothing that ties the SPVs into NAMA in a way that would be necessary for purposes of scrutiny. I am mystified by the Attorney General’s advice to the Minister that it is all covered and I would not be surprised if that was tested at some stage in the near future. In fact, the President might consider referring the legislation to the Supreme Court to check these matters. It certainly seems suspicious.
I will try to avoid repeating the points that have been made. We are told not to worry and that all is safe because the NAMA directors in the SPV will have a veto. Members of this House will be aware that there are many opportunities to frustrate vetoes; one ends up cutting a deal. The taxpayers cannot afford any more deals with the people who are likely to be the directors of the SPV. Obviously, we do not yet know who they are but the Minister will understand if there are suspicions on this side of the House, at least on my part, in respect of who they might be. The Fine Gael amendment is an opportunity to correct this and to make this body accountable. I hope the Minister accepts it.
Deputy Paul Gogarty: Just because I disagree with regard to whether a committee should be placed on a statutory footing does not mean that I do not necessarily agree with other amendments — such as that which we are discussing — tabled by the Opposition.
Reference was made to the Green Party and it is fair to state that our membership structures need to be changed, particularly in view of the fact that it is not possible to deal with urgent legislation by means of special conventions. The Minister has, unintentionally I presume, caused some problems for the Green Party, which engaged in a fulsome debate and adopted a thorough process of analysis in respect of what was contained in the Bill, as drafted. Many of the views taken on board were genuinely held by the party’s membership. At our special conference, the legislation, as it then existed but with some amendments from the Green Party, was agreed by our membership.
Deputy Paul Gogarty: There are members of the Green Party and cynical individuals in the media who argue that it was all a con job on behalf of our party leader. These people state that we knew about the SPV and the surcharge and that we were trying to pull the wool over the eyes of our members. For the record, that is clearly not the case.
Deputy Paul Gogarty: I would give the Minister the benefit of the doubt and state that he was not trying to pull the wool over anyone’s eyes. The announcement relating to this matter was only made when the relevant information had been obtained from EUROSTAT. In hindsight, it might have been better to indicate an intention to seek, subject to EUROSTAT approval, the establishment of a special purpose vehicle. That might have made matters somewhat clearer for Members on all sides of the House.
Neither I nor my party colleagues have an issue with the principle behind the SPV, particularly in the context of its being used to remove certain items from the balance sheet. However, there are valid questions to be posed in respect of the make-up of the SPV and also with regard to the fact that a number of mini-SPVs may be established. The more of these vehicles there are in existence, the less influence the Oireachtas will have on the process.
I agree with Fine Gael Deputies in respect of the need for strong committee regulation without, as stated earlier, there being a need for control to be exerted in respect of every minor matter. Will the Minister indicate if a committee will be in a position to engage in a thorough discussion with representatives of the SPV? Would a committee be in a position to invite these people or those representing the mini-SPVs to come before it in order to answer questions about their activities? To what level will the Oireachtas or its committee have power to examine matters in detail? Will the quarterly reports to be provided merely cover the NAMA “holding company”, so to speak, or will they include details on how the SPV and the mini-SPVs operate? If the SPV continues to be subdivided ad infinitum, how will it be possible to regulate, control and monitor matters?
The SPV constitutes an attempt to clarify that what is involved here is a special loan which should not be included as part of the State’s overall liability on a year-to-year basis. At the same time, it goes some way towards making provision for risk equalisation. The Green Party was criticised in respect of the additional €7 billion and €2.8 billion was quoted as being the magic figure in this regard. I am aware of the issues relating to contingent liability. Another issue relates to the 51%-49% shareholding in respect of the advent of private sector involvement. We cannot pre-empt any decision in respect of this matter but at some stage there will be increased shareholdings in the Irish banks. If those banks do well, then the risks involved will be shared through other means.
There has been much debate with regard to the valuation and the amount we are paying above that figure. In one sense, this is something of a red herring. Most Members would agree that there is a need to recapitalise the banks. If the money must be invested in any event, then a question arises with regard to what is the cheapest way to procure loans. I am of the view that the NAMA scheme, by means of which preferential loans can be obtained through the issuing of bonds, offers the cheapest way. Deputy Burton stated that this may actually increase——
Deputy Paul Gogarty: The point I am making is that I see NAMA as a lower interest loan scheme which will assist us in avoiding the necessity of trying to obtain the money to recapitalise the banks from the financial markets.
Deputy Paul Gogarty: When those specific amendments in respect of which we made a positive contribution — such as that relating to windfall tax — are moved, Green Party Members will be blowing their own trumpets because those opposite will not give us credit.
Deputy Paul Gogarty: ——of the SPV, I ask the Minister to provide a valid reason as to why he is not going to accept the amendment, if that is the course of action he proposes to take. If there is no difficulty with regard to increased transparency, then the Minister should accept the amendment.
|Last Updated: 15/12/2010 21:23:22||Page of 146|