National Asset Management Agency Bill 2009: Committee Stage (Resumed).
SECTION 208.
Debate resumed on amendment No. 61a:
In page 126, lines 1 to 4, to delete subsection (11).
—(Senator Joe O’Toole).
An Leas-Chathaoirleach:
I welcome the Minister for Defence, Deputy O’Dea. We are dealing with Committee Stage (resumed) of the National Asset Management Agency Bill 2009. We are on section 208, amendment No. 61a in the names of Senators O’Toole and Ross. Senator O’Toole was in possession.
Senator Joe O’Toole:
We are dealing with section 208(11). We had a lawyer speak in the House this morning who put words in my mouth as well as Fianna Fáil could ever do it. NAMA is a market-driven plan. The idea that someone might interpret it as a social democratic plan or form the view that something I said in support of NAMA was the same as my saying this is a social democracy-based plan, is anything but the case. This is market driven all the way.
Senator Eoghan Harris:
Thank you for that note of realism.
Senator Joe O’Toole:
I ask Senator Alex White to note that fact.
Senator Alex White:
The Senator makes it very clear.
Senator Joe O’Toole:
If I suggested anywhere that it is social democratic, I will buy him dinner in the most expensive restaurant in Dublin and we will argue it further.
The Minister has a legal background so I invite him and Members of the House to listen with an open mind to what is in the provision: “The Minister shall not approve a restructuring plan or business plan that does not comply with the law of the State and of the European Communities...”. We are passing a law which tells the Minister not to break the law. What are we doing? This is creating clover for lawyers, who will argue some day in a court about some other section of the legislation and that if in fact they meant the Minister not to break the law in the application of this aspect of NAMA, would they not have said it in the legislation given it is in this section of the legislation. This is tautology. As a legislator, I find it offensive. I assume social democratic, socialist, Christian democratic legislators and theocratic legislators, as there apparently are such legislators——
Senator Ivana Bacik:
There are clearly a few of them.
Senator Joe O’Toole:
——would share my view. I urge the Minister to take a realistic and practical view on this. I will not push the amendment to a vote. This is about tidying up legislation, which is the business of the House.
Including this provision begs the question as to why it is there. Does it mean a Minister could approve a plan which did not comply with the law of the State or of the European Union? It is nonsensical to suggest that might happen. If a Minister did that, he would be in breach of the law. There is an implication here that a Minister might in some situations do things that would be in breach of the law but because he is a Minister and is implementing another piece of law, it will be okay. The provision is unnecessary. In all fairness, we know we must keep within the law. Otherwise, we must ask ourselves what we are doing here. To insert a provision to provide that Ministers, too, must obey the law of the land might have been necessary in the old communist regimes where Ministers had to look after each other and give each other special areas of consideration in working life, including special traffic lanes. In a modern democracy, however, we take it for granted that a Minister is as amenable to the law of the land as the rest of us and that legislators are no more above the law than anybody else.
I ask the Minister to accept the proposal and remove those lines from the Bill. It will do nothing to NAMA. In fact, removing the provision gives credibility and respectability to the legislation. There is no need for it. It implies that we are unsure of and lack trust in our Ministers and that we cannot allow them to do what they are elected to do. We are saying: “You must keep the law, Minister.” Think about that. I appeal to the Minister to be sensible about this.
Minister for Defence (Deputy Willie O’Dea):
I listened carefully to Senator O’Toole and, as usual, he makes a great deal of sense. However, we are seeking EU approval for NAMA and, in doing so, it is important to make what is already implicit in the legislation absolutely explicit and state in clear and unambiguous language that we will not approve any restructuring plan that contravenes EU law. The amendment proposes to delete subsection (11) of section 208, which provides that the Minister for Finance, after consulting with the Governor of the Central Bank and the Financial Regulator, may direct a participating institution to draw up or amend within a specified period a restructuring plan for the purposes of the Act. The section also makes provision for related matters, including business plans. It is not clear why we would wish to propose the deletion of this subsection, although Senator O’Toole partly explained it, which provides that the Minister shall not approve a restructuring or business plan that fails to comply with domestic law and with European Communities law relating to competition and state aid.
People might consider the provision unnecessary. However, it is a very necessary provision as we must make it explicitly clear that we will respect EU requirements on state aid, in particular. Furthermore, the Seanad will be aware that we have been in close contact with the European authorities on every step of the process to date. The European authorities have already seen that this provision is included in the Bill. Its removal at this stage will serve no purpose other than to create difficulties or potential difficulties with the European Commission. For those reasons, I am reluctant to accept the amendment.
Senator Alex White:
The last point might be the most telling. It suggests the provision is there to send a reassuring signal to the European Commission. Senator O’Toole is correct. It reads as something that should go without saying. How could it be otherwise? Senator O’Toole is not saying it should be removed so the Minister could approve a restructuring plan that did not comply with the law, and the Minister understands that. He is querying its inclusion and saying there should be a presumption that this would be the case. There is no need to spend long on this provision but I am curious about other legislation where such a provision is not included. Are we setting up different types of commitments that the State will make to comply with European legislation? In other words, if that provision is included, it means we really, really will comply with EU law but if it is not in the legislation, perhaps we might not. Of course, the Minister might have a problem accepting Senator O’Toole’s amendment providing for its deletion because, having had his attention drawn to it, it might give rise to other problems if he removes it now.
Senator Joe O’Toole:
I understand the Minister’s point. It is a belt and braces measure because the chaps in Brussels are watching too much television and they know that nobody in Ireland obeys the law. We must ensure the Minister does. This confirms what Senator Regan has been saying over the last couple of days — I have been arguing against him but I have been incorrect — that we must shape up for Brussels and assure the European authorities we are doing this the right way. We can now point to the legislation and tell them that even if we wanted to break the law, we cannot. Incidentally, remember those words because my next amendment reflects precisely that view, although in a different context.
I will not press the amendment. I can understand that we are not trusted in Brussels and that we must be seen to be keeping the law and be able to point to it. I have no wish to lessen the strength of the Minister’s hand when he goes there, but I will be amazed if Senator Regan does not have something to say. This confirms his worries all along that we still have to impress the Brussels crowd. The Minister is really feeding his paranoia on this issue.
Senator Liam Twomey:
Senator O’Toole does not like the negativity of this so perhaps the Minister should change the words to: “The Minister shall approve a restructuring plan or business plan that does comply with the laws of the State and the European Communities”. That might satisfy the Senator and make the Minister more positive in his dealings with Europe.
Senator David Norris:
One is always in favour of being in harmony with the laws of both the State and the European Union but it is a little fatuous to state the Government will not engage in criminal activity. What a relief for the Irish people. Is the Minister contemplating another section stating that he undertakes not to throw stones through the windows of the Seanad Chamber? It is really daft. I do not anticipate that it will do huge damage but it certainly will not make us appear terribly intelligent.
Senator Eugene Regan:
It is an interesting provision. We are discussing delegated legislation and it underscores the importance of compliance with EU state aid and competition law. We received confirmation from the Minister, Deputy Brian Lenihan, yesterday that all the valuation methods, the figure calculations and the assumptions must be verified by the European Commission and approved before this scheme proceeds. However, to remind this Government and its Ministers of their obligations to comply with the law is no bad thing.
Amendment, by leave, withdrawn.
Section 208 agreed.
Amendment No. 62 not moved.
Section 209 agreed.
SECTION 210.
Government amendment No. 63:
In page 126, between lines 29 and 30, to insert the following subsection:
“(2) The Minister shall cause a copy of guidelines issued under subsection (1) to be laid before each House of the Oireachtas as soon as practicable.”.
Deputy Willie O’Dea:
Arising from the debate on Report Stage in the Dáil on the need for transparency in respect of guidelines issued with regard to lending practices of participating institutions, the Minister for Finance tabled this amendment to require that guidelines relating to lending practices that will be issued under this section would be laid before both Houses of the Oireachtas.
Senator Ivana Bacik:
Amendment No. 63 and section 210 are very important. Everyone is glad that guidelines may be issued in respect of lending practices and procedures and that, under the amendment, these guidelines will be laid each House of the Oireachtas as soon as is practicable. I reiterate what I said on Second Stage and Committee Stage, namely, that guidelines may not be sufficient to ensure an adequate flow of credit to small businesses. The Minister for Finance accepted what I said in this regard and stated he would examine the idea of going further and perhaps facilitate the creation of a post similar to that of credit mediator in France. Senators on the Government benches supported this proposal. The French credit mediator, a position established by Christine Lagarde, that country’s Minister for Economic Affairs, is in effect a sort of ombudsman who has the power to intervene where it appears that loans are not being made to viable businesses. In such circumstances, he or she can name and shame banks that are not lending. According to recent reports, the credit mediator has managed to facilitate the lending of money to approximately 10,000 businesses.
While I welcome the amendment, especially as it will strengthen the oversight and accountability aspect of the guidelines relating to lending practices and procedures, I ask that the Minister for Finance go further, either in section 210 or some other section, and provide for the appointment of a credit mediator who could intervene where lending practices are not facilitating the availability of credit. I am concerned that we should strengthen the principle that is already expressed in section 210. This principle will be augmented by the amendment but I am of the view that it could be strengthened further.
I welcome the Minister’s statement to the effect that he would review this model, that he was not averse to it and that he recognised its merit. I accept it may not be appropriate to accommodate it in this section. However, this is the key section which deals with the overriding public interest — the need to ensure the availability of credit to borrowers, including small and medium enterprises — with which NAMA is really concerned.
Senator Marc MacSharry:
I support the amendment. I also support the general concept of establishing a credit mediator. However, I do not know whether it will be possible to allow for the setting up of such an entity under this legislation. In the section, the term “may” rather than that of “shall” is used in respect of the Minister issuing guidelines. It is clear that an amendment will not be tabled in respect of replacing the former word with the latter. However, I hope the Minister will take some action in that regard.
Senator Liam Twomey:
We engaged in an interesting debate in respect of an earlier amendment in respect of how much power the Minister or the Government will have in the context of compelling institutions to lend money to small and medium enterprises and to extend credit to individuals. We have not yet seen the guidelines and, therefore, we do not know if they will work. I am of the view that they should be produced quite quickly.
The Minister of State will be aware that two years ago the criteria used by the banks in respect of applications for overdrafts made obtaining such overdrafts relatively easy. However, the banks have changed those criteria and are trying to bring to an end the overdraft facilities available to a huge number of businesses. I do not know if it will be possible to compel the banks to restore those criteria to the way they were two years ago when the market was more favourable.
Fine Gael put forward a proposal in this regard which would involve the establishment of a wholesale bank which could employ the criteria that were previously used and thereby facilitate lending to the type of companies to which I refer. I accept that there would be a greater risk involved but it would certainly facilitate the restoration of credit flows. What Fine Gael proposed would be much cheaper, the State would have control over it and everyone would know the number of loans involved and the value thereof because the wholesale bank would operate in a real-time market scenario rather than on the basis of the model relating to long-term economic value.
The Minister for Finance should either produce the guidelines or provide further information with regard to how they will be used to oblige banks to lend in a difficult economic environment. The banks are restricting overdraft and lending facilities to small and medium enterprises for two reasons. First, in difficult recessionary times, banks restrict their lending. The second reason is that because they overextended themselves and simply do not have the requisite money, the banks are trying to reduce the number of loans on their balance sheets. If we are going to compel the banks to lend, then we are going to require something more concrete.
The Minister should indicate what will be the content of the guidelines. If such information is not forthcoming, we should revert to Fine Gael’s proposals to the effect that a wholesale good bank be established.
Senator Paschal Donohoe:
I welcome the Minister of State back to the House. I also welcome the amendment for all the reasons outlined by colleagues. We previously engaged in a debate on trying to amend the objectives and purposes of NAMA to include the provision of credit to small and medium-sized enterprises as one such objective. The Government did not accept the proposal that emanated from this side of the House in that regard.
Section 210 is welcome because it provides NAMA with the capacity and statutory ability to do what we all believe it should do, namely, facilitate the flow of credit. If, however, one compares the section with Part 8, which relates to the relationship between NAMA and participating institutions, one discovers a marked difference with regard to the relationships envisaged under both.
An Leas-Chathaoirleach:
We are dealing with amendment No. 63.
Senator Paschal Donohoe:
My point relates to the amendment. Section 130 states:
A participating institution that fails to comply with any obligation under this Act is liable to NAMA and any NAMA group entity concerned in damages in addition to any other consequence of the failure under this Act.
The section provides clear guidance with regard to what will be the relationship between NAMA and participating institutions, in this case the banks. However, that fact is neither laid down nor implied in section 210. What will happen if the banks decide to disregard the guidelines laid down in that section?
12 o’clock
Senator Frances Fitzgerald:
How will the guidelines be evaluated or monitored? Will the Minister of State provide additional details in that regard and indicate when the guidelines will be published? Banks and lending institutions ignored regulation and authority for many years and that is why we are experiencing our current difficulties. What can be done to ensure the guidelines will be effective? We were not allowed to include in the objectives and purposes of NAMA the key point that the agency’s primary function should be the freeing up of credit flows. Fine Gael’s amendment in that regard was rejected. It is suggested that guidelines which will have less of an impact than what was proposed by Fine Gael will assist us in dealing with these matters.
If the guidelines are not adhered to, what action can be taken? Who will be responsible for taking such action to ensure that what we all desire will come to pass? This goes to the heart of our earlier discussion regarding the role of the State in respect of banking and the level of direction that can be given. This matter also arises in the context of mortgage holders and those in negative equity. Are we shifting the balance at all in the context of intervention?
We are engaging in a major intervention to save the banks. Are we, however, placing any further obligation on them? Senator Harris referred on the Order of Business to the position in which people find themselves as a result of their debts. Are we taking action in that regard? Are we doing anything effective to address that issue by what we are doing with the guidelines? This is a key question. Will the Government consider whether there are other interim steps that could be taken? Senator Bacik suggested a credit mediator. Are there other innovations that could be brought into the legislation to deal more effectively with the issues it hopes to address, whether credit flow or mortgages? Are there other interim initiatives that could be taken that would be stronger than guidelines and might deal with the problems we seek to address?
An Leas-Chathaoirleach:
Unfortunately, I have allowed the debate to open up on this simple amendment. I take it the main debate on the section is taking place also.
Senator Joe O’Toole:
I am speaking on the section and the amendment. There is a crucial issue in question here and there is a great need for clarity. Last night, when I said this could not work, it was interpreted as meaning I was opposed to it. I completely agree with the objectives of the points being made by Senator Fitzgerald. However, I am also saying — I will brook no contradiction on this — it cannot be implemented.
Senator Eoghan Harris:
Hear, hear.
Senator Frances Fitzgerald:
Let us not pretend it can.
Senator Joe O’Toole:
This is a free market economy. I do not like it, but that is the way it is. When I was looking for a mortgage for my house in 1971, the idea of going to a bank never crossed my mind. There was no such thing as bank mortgages; people went to a building society. In 1933, six men who could not get credit anywhere sat in the Teachers’ Club in Dublin. They borrowed from each other and lived off the recognition of their IOUs. Eventually, they decided there was a better way to do things and they formed the Educational Building Society. That society is still the only real mutual society and financial institution of its type left in the country, although Irish Nationwide is still reluctantly in that category.
We need to be clear about this section. Senator White misunderstood me earlier. What I said about what Senator Fitzgerald was trying to achieve is that it is something that cannot be done under NAMA.
Senator Eoghan Harris:
Except for Anglo Irish Bank.
Senator Joe O’Toole:
I will come to that.
Senator Frances Fitzgerald:
I am raising the question.
Senator Joe O’Toole:
We have dealt with this issue previously since the foundation of the State. Emerging from that, I have given one example, namely, the mutual building societies, which were non-profit making, committed to their members and which had a soft, reasonable and humane approach to debt. Similarly, another member of my union established the Irish credit union movement, which similarly dealt with sub-prime lending in a controlled and regulated environment that maintained control of the liability. For example, each night going to the credit union meeting the manager would pass the shop of the man who had borrowed money to paint his shop-front. Then, if it had not been painted with the money that had been borrowed two weeks earlier, questions would be asked.
Similarly, in more recent times the State had two banks, the ACC and the ICC, which did exactly what Senator Fitzgerald was talking about. I have spoken here previously about the changes in all these areas. At some point during the past year the Leader has also bemoaned the loss of the ACC and the ICC. What happened when the boom took place was that every building society wanted to be a bank and every bank wanted to be a building society and it became impossible to distinguish between the different financial institutions. We have had this debate here.
I introduced a credit union Bill. I do not know how many years ago it was, but both I and Maurice Manning stood and argued when the building society legislation was going through. We resisted attempts by Government Members who had been put under pressure by a well-known figure in the building society movement to try to get the legislation on mutuality changed so that they could become public limited companies. Once a building society becomes a PLC, as all banks are, it cannot be controlled by Government, unless one is in a command economy. A command economy is communist or socialist and that is the point I was making.
This is a circle that cannot be squared in this context. However, and this is the point Senator Fitzgerald was making, while the Minister can issue all the guidelines he wants, he cannot make them stick. He can exert moral authority, but as Senator Harris asks, since when did banks respond to moral pressure, that is not how they operate.
Another crucial issue in this area is companies legislation, which requires limited companies to act in the interests of all their shareholders, which leaves them in breach of the law if they take action not in the best interest of increased shareholder value. Even if the Government owned a huge share of the banks, it would still be in breach of the law if it tried to make stick something that would give money where it would earn less than giving it elsewhere. The problem here is both a societal and economic structural problem and it will not be dealt with by NAMA.
The issue raised by Senator Fitzgerald is extraordinarily important. We should deal with it here and should look at the different instruments to do that. There are ways to do that within society, everything from tontine societies to mutual societies. There are all sorts of ways to deal with the issue. The State could encourage, support and develop this area. The way proposed in the Bill is not the way. It is a sop to the Opposition, but it cannot be made stick. It is a nice thing and people can say “Isn’t it lovely?” However, if one goes to the courts or Bank of Ireland and flashes the guidelines, they will only laugh.
Senator David Norris:
It is always refreshing and stimulating to listen to Senator O’Toole. It is a long time since I heard the word “tontine”. The Dublin Tontine Society used to reside around the corner from me and from Senator O’Toole’s distinguished union, whose history in this area I had not realised until now. It is very impressive.
Senator O’Toole’s argument is very persuasive. Directors of banks would be in breach of their obligations to their investors if they acted in any other way than according to strict rules of capitalism. That is why I advocated full nationalisation of the banks. If the banks were nationalised, the Government could direct them to do whatever it wanted them to do. Is that correct?
Senator Joe O’Toole:
In some countries it is, but in New Zealand where the Government has done that, it is not the case. It needs more. That has to do with the articles of association.
Senator David Norris:
One learns more and more. However, it could be done and would not be in conflict with the kind of principles we spoke about earlier. Regrettable though it may be, I think Senator O’Toole has won this argument intellectually, game, set and match. I would prefer to see the banks nationalised, but that is not going to happen and we must live with that.
Amendments Nos. 63 and 64 seem to me to be clearly related, yet they have not been grouped together. Why is that and why are we not discussing both together?
An Leas-Chathaoirleach:
Amendment No. 64 has already been discussed.
Senator David Norris:
As it has been discussed, it would be completely wrong for me to revisit it, but since I am a very naughty boy, that is what I propose to do. Even though I do not agree with the amendment, I suggest it would be better if the wording was changed. It states: “Guidelines issued under this section shall be approved by the Oireachtas . . .”. That is telling the Oireachtas it must approve them. What would happen if the guidelines were a complete load of rubbish? Could they be thrown out? The amendment should read: “Guidelines issued under this section must be approved by the Oireachtas commission on NAMA before issuance”. In other words, they could not be issued until they were approved. The logic behind this amendment seems to be that the commission must approve everything. However, I suppose this is an academic point because the amendment is not going to get anywhere. However, as a retired academic, I like making these points.
Senator Terry Leyden:
I welcome the Minister for Defence to the House. The Government amendment is an excellent amendment. However, section 210(1) states, “The Minister may issue guidelines”. I think this should use the word “shall” and I ask the Minister to consider that for Report Stage, because “shall” is more definite. We have had concerns about the word “may” previously and as Senator MacSharry has said, the Bill would be stronger if we used the word “shall”, which is more definitive. The Government amendment inserting subsection (2) uses the phrase “shall cause a copy of guidelines” and does not use the word “may”.
Senator O’Toole spoke about lending agencies and I would like to mention something of which he may not have been aware because he would not have been in the same position I was in 1971. I did not have access to a bank or building society for a loan and could only approach the local authority for a loan. My local authority was effective and well organised and gave loans to people with very little income, but got the money back. That is another side of the loan issue.
On the issue of the ACC and the ICC, I remember that in Newtowngore one time a former Fianna Fáil Minister intervened with the ACC bank to ensure a company was assisted in some way. There was, therefore, much direct political involvement in the ACC and the ICC, positive involvement as far as enterprise was concerned. There were excellent banks and it is a shame they were removed because they would be of great assistance now.
I do not know whether Anglo Irish Bank will be so compliant with Government directives or requests. There is a another section in the Bill on representations which we will go into further. However, there are other ways to raise money and most people in rural Ireland actually received their first loans from local authorities.
Senator Alex White:
The very last thing of which I would accuse Senator O’Toole would be copping out of this discussion because he has been closely involved in it throughout. The consequence of what he is saying, however, risks a cop-out from the issue we are trying to address. I do not believe the argument he has made wins through in the end for the following reasons.
This discussion is raging all over the world and the extent to which governments can intervene in relation to financial institutions and seek to have their lending strategies focused on the productive part of the economy, is not peculiar to Ireland. I accept the first thing that must be addressed, regardless of whether the banks are in public or private ownership, is the capitalisation issue. I agree with Senator O’Toole that very little can happen unless the basic capital requirements are in place. It is the stated intention of the NAMA legislation to ensure this can be fixed and sorted out. For the purposes of what I am saying now I accept absolutely that this is the intention of the NAMA project.
However, I do not accept that when this is achieved, however it is to be done, that there is not a role for State intervention. It is not a question of the Minister determining whether Alex White or Joe O’Toole should get a loan. I am talking about something that is much more strategic and structural in terms of the configuration of lending and touching on the regulatory point made by Senator O’Toole. How should banks be required and expected to configure their lending in terms of the overall proportions of loans going to productive activity as opposed to what I described last night as the casino-type venture.? One of the Minister’s colleagues last night thought I was referring to a casino, meaning a physical place where people go to play games, when in fact I was talking about the type of activity the banks have engaged in for so many years. I do not accept there cannot be a role for the State to intervene by directing the strategies of the banks and communicating to them not just a guideline but an expectation of promoting lending to the productive part of the economy. To that extent I do not agree with the fatalistic approach.
I understand where Senator O’Toole is coming from and it is an attractive argument on one level to say that the State cannot intervene and it has to be either one thing or the other. I probably agree more with what the Government is trying to achieve with section 210 to the effect that there must be a role for the State in this question. Otherwise this entire project could not conceivably be sold to the public or to future generations. I do not go along with that point at all, but I accept it is not so simple either in so far as it is being indicated that this can be done or directed overnight. To that extent I agree with Senator O’Toole, although I believe he carried the argument too far.
To pick up on the point made by Senators MacSharry and Leyden about the guidelines contemplated in 2010, I remind everybody that there may not be guidelines. When one reads the section one finds that the third word is “may”, and that is the most important word in the section. If one does not get past “may”, there are no guidelines. In other words, the Minister does not have to issue guidelines. Senators MacSharry and Leyden are absolutely right and the Minister should consider changing that on Report State. I hope I shall be permitted to table an amendment on Report Stage to replace “The Minister may issue guidelines” with “The Minister shall issue guidelines”. I agree with the Minister’s amendment absolutely to the effect that they should be laid before the Houses.
Senator Dan Boyle:
The question of direction is at the core of the legislation if it is to achieve what we hope it will as soon as possible. The contributions made so far are all very worthy. Mine would probably be somewhere between the contributions made by Senator O’Toole and Senator Alex White. Of the five financial institutions we shall have 100% direct ownership of two and substantial, close to dominant, ownership of the other three. In those circumstances, if maximum influence cannot be exerted, then we need to question our role as an organ of State in controlling the economy in any manner.
It is more important philosophically, I believe, to decide on the role of Government in taking over a commercial entity and in determining, for instance, the extent of such involvement. That is why guidelines are important. There is still some uncertainty in the Bill notwithstanding the acceptance of the amendment that the guidelines, when they come into being, will be laid before the Houses of the Oireachtas. There is the big question whether there will be guidelines in the first instance. I believe that guidelines are useful and necessary.
I agree with Senator Alex White that the guidelines should specify the areas rather than the amount of lending. We have had some experience in the recapitalisation legislation last year of setting up particular funds which to date have been very poorly accessed in terms of the two largest banks. A €100 million fund was established on foot of that legislation for green enterprise which was meant to be the centre point of the Government’s Smart Economy document, yet there has been only a tiny drawdown on those funds to date. When we specify in legislation that particular types of lending should be made available, we need to ask why this is not being put into practice. We know the future of lending in the short-term for the financial institutions cannot and will not be in property. We have over-extended ourselves there and there must be new forms of lending to promote better and more sustainable economic activity. Much of the debate so far has focused on small and medium-sized enterprises. While we need to promote that type of business structure, it is more important that as a Legislature we are more directive about the type of economic activities we want to see rather than the vehicles we want to see them being promoted in.
That is where the vacuum exists at the moment. We are bringing in legislation to deal with the effect of an economy that was over-reliant on property and construction. We need economic activity that replaces that and which is more sustainable in the medium and long term. Rather than talking about the existence of credit and the vehicles through which it should be provided, there should be more discussion about the type of economic activities we would like to see. That is where the direction should be given to the financial institutions.
Senator Eoghan Harris:
Like many former Marxists or socialists who have learned sense, Senator O’Toole likes to make our flesh creep with the contradictions of capitalism. I am tempted to do this myself.
Senator Joe O’Toole:
I have spent some time in that direction, let us say.
Senator Eoghan Harris:
He is right, of course. I have described this as being comparable to a match where the State is the referee, only intervening when a professional foul is committed. It conjures up a scene where the referee is going to be stopping the game continually and instructing the players while the object of the capitalist exercise in game terms is to score as many goals as possible. The referee might start to decide how many goals should be scored or that first aid should be given to a worthy youth group visiting the match which would stop so that players can talk to such people. It is hard to say this and maintain any level of popularity in this society but the function of the State at the moment is to return the banks to their perceived norm as being red in tooth and claw. Banks that are functioning normally tend to give people money where they believe a return will be yielded on their investment and to withhold money from enterprises they believe will fold.
By and large, it is the least worst system in the world. There is no better one since we have tried command economies and they do not work. I agree with Senator Boyle, so what is to be done about maintaining State objectives? The answer as Senators Boyle and Alex White have suggested is to move into the higher regulatory areas of fiscal policy, not to direct specific credit policies but to introduce tax regimes that make it attractive to banks and investors to move into areas such as telecommunications to develop them and create employment. Direct interference is not a good idea.
One great advantage of this recession is that we have had a reality check throughout the system on the use of language, and on how banks and the economy function. The Irish are probably one of the best-educated peoples in the world on the functioning of the capitalist system. We are trying to get back to capitalist health and the State is doing its best to intervene where appropriate. We should not abuse language while doing so. It is ridiculous to give sops to people by saying that it will return the banks to normal, which is capitalist trading, and at the same time that it will keep on interfering with them. There must be other instruments and ways for the State to do that through taxation, fiscal policy or systems of regulation. Meanwhile, we should try to restrain our use of language and tell the truth when the people are in the mood to hear it.
Professor Stiglitz has been quoted again and again in the course of this debate as saying that what is being done here is criminal. Anybody who abuses language like that and uses the word “criminal” in that context cannot be trusted to use language or think straight in any other way.
Senator Ivana Bacik:
When I spoke earlier I was speaking on the amendment but as this has now developed into a debate on the section I am not clear whether Senator Harris favours or opposes the section. He seems to express doubt about the working of section 210.
Senator Joe O’Toole:
We are agnostic on it.
Senator Ivana Bacik:
That explains everything.
In answer to Senator Harris, this envisages a system of regulation. A consensus is emerging across the House that the word “may” should be altered to “shall” and that the Minister must introduce these guidelines to regulate the participating institutions.
In response to Senator O’Toole’s critique of the workability of the section, this applies only to participating institutions, credit institutions so designated under section 67 by the Minister. They have already been bought into a system that is different from the normal free market run which has failed us.
Senator Joe O’Toole:
I share Senator Bacik’s hopes.
Senator Ivana Bacik:
I am delighted to hear that. It is imperative that the Minister issues these guidelines. That is reflected in the word “shall“ in the Minister’s amendment and in the important subsection (2) that requires participating institutions to comply with the guidelines issued. It states “A participating institution shall comply with any guidelines issued under subsection (1).” We will table an amendment if the Government does not accept this one.
The Minister’s willingness to consider my point about the credit mediator relates to his existing provision in section 210(1)(b) which describes the guidelines as relating not only to lending practices but also to the review of decisions of participating institutions to refuse credit facilities. The objective of the credit mediator model is to intervene where credit facilities have been refused and to ensure that they are granted where businesses are viable, and to name and shame where banks refuse to lend to viable businesses. That is the provision under which a credit mediator model might well be introduced.
An Leas-Chathaoirleach:
Senators have spoken at least once on this amendment. Before I call the Minister let us get the amendments out of the way because the debate has moved onto the section.
Amendment put and agreed to.
Amendment No. 64 not moved.
Question proposed: “That section 210, as amended, stand part of the Bill.”
Deputy Willie O’Dea:
I am glad the amendment is acceptable to all sides of the House. Senator Fitzgerald referred to the purposes of the Act. These are dealt with in section 2.
Senator Frances Fitzgerald:
Yes but we are trying to amend that section to include our points.
Deputy Willie O’Dea:
I understand that but I am trying to explain to the Senator that section 2 sets out the raison d’être of the Act. Section 2(b)(i) states, “to facilitate the availability of credit in the economy of the State”. That adequately covers what the Senator is trying to achieve.
Under section 210(1)(b) the guidelines will include a review of decisions about participating institutions to refuse credit facilities. The word “may” is the usual way this sort of thing is done. The Minister for Finance has reassured the Dáil that he intends to introduce guidelines. I reiterate that commitment here. There has been an interesting debate on what those guidelines should be or what they can achieve. The purpose of the legislation is not just to set guidelines or decide how much the Government can intervene here or there. The basic problem was to deal with lending institutions, on which we were depending to provide credit for the economy, whose balance sheets were effectively trashed.
In the first instance the legislation will restore liquidity to these institutions and repair their balance sheets by taking the bad loans off the balance sheets and allow them to focus on their real business, lending. As Senator Harris has said, the days are gone when the Irish banks’ main activity is borrowing money cheaply on the wholesale credit markets and getting involved in all sorts of property scams and speculation. The banks will return to their core business, lending, which will increase shareholder value in the interest of the institutions. They will lend to get a return that will exceed what it costs to give the money. That is what the banks must get back to doing and the legislation enables them to do so.
The Government cannot tell a bank that it must lend to certain people even though it is obvious they cannot repay the loans.
Senator Frances Fitzgerald:
That is not obvious.
Deputy Willie O’Dea:
The purpose of the legislation is to put the banks in a certain position and we do not want to do something now that will reverse that. We can, as Senator Alex White says, provide that certain sectors of the economy must receive a certain percentage. We do not have to reinvent the wheel to do that because there is a precedent for it in the initial deal with the banks on recapitalisation. The Minister is holding discussions with the banks. They know that the legislation exists to enable the Minister to introduce guidelines, which he has said he will do.
In response to Senator Bacik, what has been done in France is very interesting but I would guess that will not happen under these guidelines although it may. It is possible that under subsection (1)(b) something similar would be set up here. The Government has not gone through all the hassle, pressure and torture of coming up with the idea of NAMA, getting it off the ground and working out its exact details in order to arrive at a situation this time next year where credit is not flowing to the economy. If the guidelines and the legislation are not working, the Government will have to take action to deal with it. The Seanad can rest assured that it will.
Senator Liam Twomey:
It seems as if we are just going to have to wait for the guidelines.
The purpose of NAMA is to sort out the banks. However, the scale of the problem must be examined from the people’s view. Loans in this country total approximately €390 billion, many of which were backed by interbank loans made by Irish banks with their international counterparts. The feeling is that when the Government gives the €54 billion worth of bonds to the Irish banks, they will exchange them for cash from the European Central Bank. In turn, they will replace their interbank loans with these ECB loans to tidy up their balance sheets.
Some argue we should leave the banks on their own as this is a free market. The market dictates what happens. However, this is not a normal recession. In such a recession, banks change their lending criteria, restrict lending and reduce their exposure to bad debts. However, the added factor in the Irish banking problem is that the banks do not have access to cash, meaning there are greater restrictions than there were in past recessions.
The banks are not just evaluating the risks of the businesses they are dealing with but actually reducing their exposure to any type of lending, both good or bad. I know, and I am sure the Minister does too, of good businesses with full order books but the banks are trying to reduce their overdraft facilities. This factor is not typical of the free market. The Irish banks simply have no access to cash.
The Government hopes that pouring €54 billion into the banking sector will solve this problem, allowing the banks to go back to how they work in a recession, simply evaluating risk, and ensuring credit flows. If that does not work, however, some pressure will have to be put on the banks to lend. This could be through the guidelines in question or Fine Gael’s option of a good bank. The latter would be a wholesale bank that would simply back new loans while the banks would be left to deal with their old loans. It would allow new money into the economy to let businesses work.
The Government may end up having to back this Fine Gael proposal because next year it will have to pour between €10 billion and €15 billion into the banks to recapitalise them. That is after paying €54 billion for these toxic loans. When the Government is discussing the guidelines with the Oireachtas, it should not blind itself to the good bank concept just because it came from Fine Gael. If the banks are keeping their lending criteria strict and running the risk of putting good businesses out of work, the Fine Gael option may need to be taken.
Senator Paschal Donohoe:
If Senator O’Toole is correct that the NAMA model is wrong, we must take account of where we stand. We are having this debate in the context of a €54 billion investment in the banks’ balance sheets and a State guarantee potentially worth €410 billion. We are beginning to accept there is no ability to direct the banks to put credit into the economy, which is after all the main objective of this legislation. This must give us pause for thought about the design and role of NAMA.
There are two different aspects to this debate. First, as the Minister said we are looking at cleaning up the banks’ balance sheets and ensuring that credit flows again. The second aspect is how we achieve this. Section 210 states the Minister may issue guidelines to the banks but we are not sure how they will respond to this. The question again arises as to whether the NAMA vehicle is the solution. This is somewhat like last night’s debate about long-term economic value.
The flow of credit is one of the two foundations upon which the whole NAMA model rests. After all the investment made by the taxpayer, the Minister may issue guidelines to the banks on lending but we are not sure they will be implemented. The Minister is correct that next year if credit is not flowing, then NAMA will have to be revisited and alternative models examined. That is not acceptable. Up to €54 billion is involved in NAMA and €410 billion in the State guarantee but the Minister may issue guidelines for credit.
My ideological journey to all this was probably much shorter than it was for those who started off with Marxism and socialism. Like all young men, I was once attracted to and dabbled in socialism, as well as young women, for quite a while. After all the investment made, the legislation’s objective is not to clean up the banks’ balance sheets but to get credit flowing again. The use of word “may” in this section means that we have to have a relentless dissatisfaction with how credit flow is working and be open at all times to considering new ways of doing it.
Senator Ivana Bacik:
I am still reeling from the revelation that Senator Donohoe once dabbled in socialism.
Senator Paschal Donohoe:
I did more than dabble.
Senator Eoghan Harris:
I have his name on a list somewhere.
Senator Dan Boyle:
He inhaled.
(Interruptions).
Acting Chairman (Senator Maurice Cummins):
I would appreciate it if Members could stick to the section.
Senator Alex White:
Do we all have to make our confessions this morning?
Senator Ivana Bacik:
It would seem there are more secret socialists in the Houses of the Oireachtas than Deputy Bertie Ahern ever dreamed of.
Acting Chairman:
I am afraid we cannot have a debate on socialism. Will Members please stick to the section?
Senator Ivana Bacik:
We are reassured the Minister intends to issue guidelines on credit flow. In that case there is no reason why “may” cannot be changed to “shall”. It would secure the Minister’s contention. As Senator Donohoe and others said, it would underline the seriousness of this section and the core purpose of this enormous risk-taking mechanism — that credit needs to be made available.
I am glad the Minister is open to the French credit mediator model. On Second Stage, he said an independent appeal mechanism is planned where credit is refused by a bank. It is precisely because the banks cannot be directed to lend to a particular individual that some form of independent mechanism is necessary. In France, the credit mediator was introduced to ensure a business, which believed it was wrongly refused credit, has a form of mediation and appeal. The sanctions and mediation process in France which we could adopt here is that banks which wrongly refuse to lend to viable businesses are named and shamed. It is a constructive suggestion from this side of the House to ensure the key purpose of NAMA is achieved.
I ask the Minister to strengthen the wording by substituting “may” with “shall” in section 210(1) and also to strengthen the vague idea in paragraph (b) of that subsection which states the guidelines shall relate “to the review of decisions of participating institutions to refuse credit facilities”. We need to see something a little stronger to ensure there will be an independent mechanism to which people can go when they are wrongly refused credit.
Senator Frances Fitzgerald:
I support Senator Bacik’s desire to see the framing of the Bill made stronger, but it seems from this discussion that we need to see the guidelines to assess whether they will address some of the issues raised in the debate. For example, Senator Boyle spoke about strategies to direct investment or fiscal policy in particular areas, while Senator Harris wondered whether it was higher areas of fiscal policy that needed to address this issue. We need answers to these questions. Within the NAMA structure will we be able to deal with the issues of those in negative equity who are experiencing major difficulties with their repayments? I am not suggesting we direct banks in the minutiae of their lending, but I am questioning whether a direction can be given, influence can be exerted and policies developed in dealing with this problem facing thousands of people throughout the country. If we are not able to impact on lending policies or have mechanisms put in place to help them via the guidelines in NAMA, let us be honest about it and identify where the Government needs to develop fiscal policy, bring forward further regulation and go for the credit mediator. This has not been done in the debate on NAMA. What will be the impact of the guidelines? Do we need to move somewhere else outside NAMA to address these issues? These are critical questions.
Senator David Norris:
Amendment No. 63 states the Minister “shall cause a copy of guidelines issued under subsection (1) to be laid before each House of the Oireachtas as soon as practicable”. I hope that will be done very soon because today the banks are down a further 9%, which marks a further collapse. This is desperately serious and we need to act with the greatest possible speed.
On a technical drafting matter, it is obvious that the Minister should accept the change from the word “may” to “shall”, but I would like to have the power to say he must accept that change. Otherwise, his own amendment is a nonsense because he includes the word “shall” in the amendment. He cannot force himself to issue a copy of something; therefore, he must include the word “shall”. This is a partisan but partly a grammatical point. The world will not fall apart if he does this and it would have the added advantage of making him look intelligent.
Senator Paddy Burke:
This is a very important debate. Section 210 forms the core of the Bill. Very significant contributions have been made and there is a solution. The Government has not examined the Fine Gael good bank proposal, even though it should have done so, but it was cast aside because it was a proposal made from elsewhere. Section 210 is all about risk and risk takers. If a bank loans money, it has to take a risk. The person looking for the money is also taking a risk.
Senator O’Toole said this section was a sop to the taxpayer; that is one interpretation of it.
Senator David Norris:
The core of the Bill is less than 20 lines, even though the Bill is 160 pages long.
Senator Paddy Burke:
Yes, it is the core of the Bill. If money does not start flowing to businesses, there will be no money to meet the €54 billion that the Bill is all about. If NAMA makes a loss, the Minister has said there will be a surcharge on the banks. We could alter the section to state the surcharge would be lower on those banks willing to lend to those who put a business plan in place and take risks.
Senator Eoghan Harris:
I welcome the fact that light is being thrown on the realities of the banks during this debate. It is good that we are now facing the fact that NAMA is more of a process than a product. It is tedious and nit-picking — I have always personally disliked it — when people like Senator Regan ask whether we are going to make a profit. I do not know how we could pin anything like that down in the case of any human enterprise. The Minister is entitled to say we hope and intend to make a profit, that we have made the calculations as well as human beings can do but that we are still at the mercy of history, time and circumstance. I do not understand such platonic thinking; I just do not get it. This is a process, not a product. It is a process in history and the Minister is doing the best he can. We should be more concerned about the readiness of Ministers to admit that this is contingent and that they can make mistakes. I am glad the Minister has said the Government will review the position continually. Senator Donohoe has emphasised the need to review continually, re-examine and reopen and adopt new methods.
I am not a lawyer and might need assistance from Senators Regan and White or anybody else on the following query. Enormous expertise will be built from the Bill in the assessment of loans and creditworthiness. We will need to access that expertise at some stage if we are to deal with the mountain of personal debt and negative equity problems, as Senator Fitzgerald pointed. I cannot see how we will get away from a position where a State agency will have to be set up to assess the situation of some 300,000 people in negative equity and solve their difficulties. Otherwise, the State will not be able to function as a society.
Senator David Norris:
Well said.
Senator Eoghan Harris:
To do this, we need access to NAMA. I trust the Minister and his officials will be able to confirm that there is nothing in the Bill to prevent NAMA from making its expertise available to any such State agencies or in any assessment of personal mortgages. I suspect that in the coming five to six years up to 300,000 people will need to have their mortgages reassessed by a neutral agency and then have some policy to sort out the matter. We cannot make banks do this, as it would be another bailout. Let us think of the ethical consequences of asking people who made provident decisions when buying a house to carry those who made improvident decisions in the past few years. Let us think of the ethical and financial morass, in which the one guiding light will be the staff of NAMA. They are the only people with the expertise to make those hard decisions, as well as the compassionate ones.
Acting Chairman:
We have given this section a good airing but some other speakers are offering. I ask Members to speak to the section and get on with the business.
Senator Larry Butler:
I agree with the views of Senator Harris, and other speakers, on this section. On Monday night the Minister stated clearly that we could not put the mortgage section — people who have mortgages — into NAMA because it was structured to ensure that taxpayers’ money is protected as much as possible in this legislation. We will go after developers, builders and whoever else owes money to the banks to ensure that the taxpayer will not suffer and therefore special legislation will have to be introduced. I covered that issue on the first day I spoke in the debate. The special legislation could provide for a moratorium of 12 months whereby the lender and the borrower could come together and there would be no penalty clause for the borrower if he or she got into trouble. If the borrower got his or her job back or his circumstances improved, the extra year allowed could be added on to the end of the mortgage. That is one way of doing it. If two people lost their jobs and were unable to meet their mortgage commitments we would have to examine the possibility of the bank having a rental scheme to suit people like that.
Senator Harris is right. This will have to be done because if we do not do it we will wind up with another agency to deal with this aspect. We should ensure that the legislation covers all banks in this State, not just the six banks we guaranteed. We have sub-prime lenders who are bringing their clients to court at the moment. They are the people outside of the system who are the hardest to deal with and we should bring in legislation to deal with that but it must be separate legislation. The Minister said he is looking at that question. We can spend all day here talking about the other problem. Let us deal with this problem. This is the hand we have been dealt.
There was some confusion in the debate last night on the €54 billion. That is an estimated value. We may have to review downwards that valuation when due diligence takes place. That is the reality. With the best will in the world, and we do not all have a crystal ball to look into to get the answers we want, this is the best guesstimate we can come up with at present. It is important that we pass good legislation to ensure this Bill works well when it is put to the test. There has been very good debate on the Bill and no guillotine has been imposed. We had a late night last night, and I must say I work better early in the day. One does not do as well at night-time.
This is a business Bill. There are three arms to this Bill: the special purpose vehicle, the credit system that will create, and the business sector. The first objective is to get credit flowing, and that is where our valuation and our bond system comes in. That goes back in to ensure the banks have money to lend. We then have the special purpose vehicle which will have an investment sector. That will kick in and then we have NAMA, which is the main agency to ensure that we have a working relationship with all three. On the basis of that, and the legislation we are drawing up here, we should have a reasonable prospect of ensuring we get lending back into the banking system again. Our banking system will be much healthier after this measure but it is our job, as public representatives, to ensure that the taxpayer is not exposed. We have covered that in the Bill by ensuring that if there is a shortfall the banks will have to pick up the Bill.
I thank the Acting Chairman for the time given. We should not spend too much time considering what might happen in terms of the ordinary mortgage holder. We must now bring in legislation urgently to deal with that.
Senator Paddy Burke:
The Senator should talk to his leader.
Senator Larry Butler:
When we complete this Bill it is important that we draft new legislation to deal with what will be a tsunami if we do not take action.
Acting Chairman:
I call Senator Regan. I ask Members to speak to the section, which is section 210. Speakers should confine their remarks to the section.
Senator Eugene Regan:
I want to make one or two points on the section but I want to make a preliminary remark in regard to what Senator Harris said earlier. Senator Harris has crossed the floor of the House to the Independent benches but he is a most effective apologist for Fianna Fáil and what the Government is doing both in this——
Senator Joe O’Toole:
On a point of order——
Senator Eugene Regan:
Please Senator.
Acting Chairman:
Senator Regan——
Senator Joe O’Toole:
It is an attack on the Independents.
Acting Chairman:
I have asked that we would speak to the section——
Senator Joe O’Toole:
We are Independents.
Acting Chairman:
——without referring to any other commentator or any other Member who has spoken. Please stick to the section.
Senator Joe O’Toole:
Hear, hear.
Senator Alex White:
It should be done on the Order of Business as well.
Senator Eugene Regan:
We dress up the defence of the Government but I must take issue with the criticism Senator Harris made of the business plan. In the debate last night a Minister said that the Minister, Deputy Lenihan, never said that NAMA would definitely make a profit yet we have a business plan which suggests a net profit of €5.48 billion over the ten years. Senator Harris is saying it is not relevant whether it is or is not a profit. Are we serious about the business we do in this House? This plan was sold to the country as the financial underpinning of the NAMA legislation. We are not dealing with figures in this Bill but this is the background document on which we must rely. Senator Harris is suggesting we do not refer to that document——
Senator Eoghan Harris:
As long as it breaks even.
Senator Eugene Regan:
——and that it is not relevant whether it makes a profit or not.
Senator Eoghan Harris:
It just has to be solvent.
Senator Eugene Regan:
It is fundamental. We may not vet it in this House but they will vet it in the European Commission when the Government gets around to trying to sell this.
Senator Paddy Burke:
They have looked at it already.
1 o’clock
Senator Eugene Regan:
The word “may” in a Bill can mean “shall” but in this instance it does not. I suggest the Minister could cut short the debate on this entire section by changing the word “may” to “shall”. I understood this was part of the undertaking given to the Green Party and part of the Government-Green Party new deal that there were to be commitments on lending. This was a watered down version of that commitment, a bit like the levy, but I would have thought that a commitment that the Minister shall issue guidelines was the minimum that would be expected in that context but since the Minister has indicated that it is the intention to issue guidelines, we could cut this debate short by simply changing the word “may” to “shall”.
Senator David Norris:
While we are farting around in here there are people up in court who will have their houses repossessed.
Senator Terry Leyden:
That is unparliamentary language.
Senator David Norris:
That is what should give us urgency in this matter. At present, it is companies such as Start Mortgages which are involved in the sub-prime area. That company refuses to be interviewed and to be subject to questioning.
I will be succinct, and I hope that the Acting Chairman, Senator Cummins, will soon find it possible to put this to the House.
Senator Joe O’Toole:
Immediately.
Senator David Norris:
Yes.
In January last I proposed to this House the establishment of something I called the national property management agency. I will not rehearse all of that, but I just want to signal it. I returned to the matter four times. At that very early point I suggested something that chimes with what was stated by Senator Harris, who went to the heart of the issue, on the experiences of the estimated 200,000 or 300,000 people who may find themselves in negative equity and in difficulty.
I ask the Minister to take this up. At that stage I suggested the creation of a portfolio of Minister of State for home security — not homeland security like that of the idiot Bush — because we have a primary responsibility to the people of this country.
I thank God I have paid my mortgages. I have no mortgage. I have no debt. I even have the prospect of——
Senator Eoghan Harris:
What a catch the Senator is.
Senator David Norris:
I am a real catch, honey.
Because I went through it the last time, I really empathise with people who are in this position. We must move as rapidly as possible and get something done. Once again, I throw out this suggestion of a portfolio to deal specifically and urgently with this question.
I hope that we can move on and perhaps get to Report Stage. Senator O’Toole wants the question to be put to the House and I support him on that.
Acting Chairman:
If Senator O’Toole wanted to put the question, I am sure he is quite capable of saying so himself.
Senator Paschal Donohoe:
Well said.
Senator David Norris:
He is resting from his labours.
Senator Paul Coghlan:
On the qualifying eligible assets, there are some serious situations arising here and without naming it, I wish to come to one specific matter of which the Minister has been made personally aware. In the case of a company in the renewable energy field, probably employing in the region of 500 persons and which had, say, €100 million in security and maybe €50 million in loans, because of the definition NAMA has clarified that all of that has been taken in, even though they are performing loans. The company has a contract to complete by Friday, say, for another €11 million, which, on the existing security, the bank is more than willing to lend because the company is good for it, but because all of the existing security is being proposed to be transferred to NAMA, the bank now finds that it cannot advance the €11 million on the alternative security. This is a crazy situation where this company could be liquidated by court order for something that has been sanctioned because of a nonsensical rule within the NAMA proposal. The financial institution concerned is comfortable to lend.
This is pertinent to what we are dealing with on section 210, on the guidelines. I would plead that in all such cases NAMA not be allowed take an excess, especially where these are performing loans. This is not something that is non-performing. I refer to performing loans that NAMA is taking because they are related under the guidelines, under the definition section, as a qualifying eligible asset.
This is nonsensical. We must free this up for the sake of our economy and for the sake of companies. I refer to a specific company, with 500 persons employed in the south, which is facing completion of a contract on Friday for €11 million, where the bank had sanctioned it but NAMA is taking the existing security, which it does not need at all. One would understand it in the case of a non-performing loan. These are performing loans but, because of the definitions, this is all being taken in.
I will follow this up with the Minister, Deputy O’Dea, afterwards. I raise the matter here on this section because it is sensible that the Government amend this, in all our interests and in the interests of the economy, so that NAMA not be allowed take all of the existing security in the case of performing loans that are being transferred because of the definitions in the Bill.
Deputy Willie O’Dea:
I am not familiar with the case to which Senator Coghlan refers but I certainly will be happy to talk to him about it later. It is not in the interests of anybody that, unintentionally, a good company employing several hundred persons is forced into liquidation, and I would not like to see such a situation.
All I would say to Senator Coghlan on the performing loans is that NAMA deals with certain categories of loans. Whether loans be performing or non-performing, if they fall within the category they come into NAMA.
Senator Paul Coghlan:
They do.
Deputy Willie O’Dea:
Maybe this issue can be sorted out. I will talk to Senator Coghlan about it.
On the use of the word “may” or “shall”, I reiterate the commitment the Minister gave in the lower House that he will introduce guidelines. He may well introduce a number of sets of guidelines. For example, he intends to introduce guidelines from time to time to respond to sectoral credit problems as they arise. In that case, in view of the fact that the Minister wants to take on himself the right to introduce guidelines from time to time, the word “may”, I am advised by the parliamentary draftsman, is the appropriate word to use. The word “may” gives the Minister a power, “shall” creates an obligation.
Section 22(1) of the Interpretation Act 2005 provides “A power conferred by an enactment may be exercised from time to time as occasion requires.” We have sought the advice of the Attorney General in view of the points made here this morning and he has reiterated that “may” is the appropriate terminology in this case, in view of what the Minister wants to do.
I listened to various Senators outlining what the banks might do with the money. Let us assume it is €54 billion. As Senator Butler stated, we still must work out the exact amount. It might be more, it might be less — I would say, probably less. Is it seriously being suggested, as some have appeared to suggest, that putting all of these billions of euros together with the billions of euros we are putting in to recapitalise the banks into the Irish financial institutions, whilst at the same time taking the problem loans out of the banks, will make no difference? That is not sustainable.
Senator Paschal Donohoe:
Nobody said that.
Senator Frances Fitzgerald:
That is rubbish.
An Cathaoirleach:
The Minister without interruption. He is replying.
Deputy Willie O’Dea:
I stated that people appeared to suggest it. If that is not what they meant, it is fine, but that is the way it came across to me.
Senator Paschal Donohoe:
We are trying to be constructive.
Deputy Willie O’Dea:
I appreciate that. However, I am just saying if anyone is under that impression, it is an illusion.
On the Department or the Minister for Finance intervening in the banks to ensure that credit flows, if the thing is not working as we intend it to work, if that fundamental first purpose set out in the purposes section of the legislation is not being achieved, of course we will have to intervene again. If we must intervene again, we will not necessarily have to use a different vehicle. A bank, if it is to stay in existence for any time at all, must act as a bank whether one calls it a good bank, a bad bank or an indifferent bank. That is the reality of life.
Senator Harris and other Senators mentioned the question of those who, unfortunately, are running into arrears with their mortgages. The Government is conscious of that situation and has discussed it at the Cabinet table. The Government has already announced that it is taking measures to deal with that and in the measures we are taking and in the way we will implement those measures, we will have recourse to the expertise of NAMA and the National Treasury Management Agency.
I reiterate that the Attorney General’s advice and the advice of the parliamentary draftsman is that “may” is the appropriate terminology here because the Minister intends to introduce guidelines but he may want to introduce guidelines at different times to deal with different sectoral credit problems as they arise.
Question put and agreed to.
Sections 211 to 213, inclusive, agreed to.
SECTION 214.
Question proposed: “That section 214 stand part of the Bill.”
Senator Terry Leyden:
Will the Minister explain why, if NAMA at some future stage is very successful, it is exempt? I accept it is a State organisation and all profits accrue to the State but why exclude it from all normal taxation?
Deputy Willie O’Dea:
It is because it is a State body. The income accruing to NAMA accrues to the State, so what we would be doing by taxing the income from NAMA is to have the State apply income tax on its own income to hand back to itself.
Senator Liam Twomey:
The SPV is a private company, not a public company. NAMA is a public company. I had this discussion yesterday with the Minister involved. It seems strange that a private company which is not a charity is exempt from all taxes.
Deputy Willie O’Dea:
The SPV is not exempt.
Senator Liam Twomey:
The SPV is managing all of these——
Deputy Willie O’Dea:
NAMA is exempt but the SPV is not exempt.
Senator Liam Twomey:
We were told that all of the bonds it is handling for the State are exempt, although the investors and whatever dividend they are paid are not exempt. I understand this because this involves income for these individuals. The Minister is suggesting that any profits made on handling these bonds and in dealing with them on behalf of the State, which are being handled by the SPV on behalf of NAMA, which is still a private company——
Deputy Willie O’Dea:
My understanding is that the income——
Senator Liam Twomey:
It would seem the Minister is suggesting a private company will not pay income tax.
Deputy Willie O’Dea:
No.
Senator Joe O’Toole:
No tax is paid on the money which the SPV pays to NAMA. NAMA has a special purpose vehicle which operates as a separate legal entity at arm’s length from NAMA itself. For example, NAMA might decide there is a certain element of rental income which it will securitise and put a price on, and that is made available in a special purpose vehicle. The reasons it is done this way is so that the ordinary investors can put money into it without fear of being dragged down by anything that might happen to NAMA. Those investors will pay tax in the normal way. The money they pay to NAMA will come into NAMA, and it would be ridiculous to suggest that the Government would tax itself to collect money that will go to it in any case.
The important point the Minister should reassure us about is that the investors in the special purpose vehicle would be like investors in anything else, namely, they would have the normal levels of risk and taxation. Let us be clear about this. What they are doing is taking some of the impaired assets from NAMA and we are getting rid of them. This is part of the process of which we are in favour. However, nobody will get away tax free. The only one that will not pay is the State, for the simple reason that the tax would come to it anyway. No individuals will get away tax free on this.
Senator Marc MacSharry:
I have a question which is perhaps based on my inability to understand maths. I understand NAMA will not pay tax because the State will not tax itself.
Senator David Norris:
As the Minister explained.
Senator Eugene Regan:
No, as Senator O’Toole explained.
Senator David Norris:
That was it.
Senator Marc MacSharry:
However, if the SPV makes a profit, and 51% of it is privately owned, is the SPV subject to corporation tax before it splits up the dividend? In effect, will the State tax its 49% before it then hands on the profits to NAMA?
Deputy Willie O’Dea:
NAMA is a State body not subject to tax. The SPV will be subject to tax because it will be in possession of a great deal of property and it is the SPV which is the property owner and the entity holding the title to the properties. If there was one major, dominant player in the property market which was not subject to tax, this would seriously distort the market. My understanding is that the profits made by the SPV will be subject to tax in the normal way. If it pays a dividend to NAMA, that will not be taxable. That is the position, as I understand it.
Senator Paul Coghlan:
Clear as mud.
Question put and agreed to.
Sections 215 and 216 agreed to.
SECTION 217.
Question proposed: “That section 217 stand part of the Bill.”
Senator Paddy Burke:
I raise a point I referred to on the Order of Business this morning on accountants working in Ernst & Young, which is carrying out work in the Irish Nationwide Building Society. Its charges are €3,000 a day for a senior accountant and €800 a day for a junior. As we have gone down the route of paying this type of fee in the tribunals, it is an issue the Minister must immediately take on board, not when the matter is over and done with. The winding up and amalgamation of financial institutions will happen. If we are not prepared to say what the fees will be at the very outset, we will end up with the same situation we have seen in the tribunals.
Senator Paul Coghlan:
Senator Burke should explain that he is talking about accountants, not barristers.
Question put and agreed to.
Sections 218 to 220, inclusive, agreed to.
SECTION 221.
Amendment No. 65 not moved.
Question proposed: “That section 221 stand part of the Bill.”
Senator Terry Leyden:
On the role of public representatives — Deputies, Senators and councillors — in making representations to NAMA, this section is pretty strong with regard to a person communicating on behalf of another person, providing advice and so on, and it refers to the initiation of legal proceedings. What is the role of the public representative as far as NAMA is concerned? The Minister stated NAMA would be subject to parliamentary questions, which are very important, and subject to debate in the House, hopefully. What about the representations made by councillors, Deputies and Senators if there is a problem with a particular property? What would my role be if I contacted NAMA in regard to a person owning an adjoining property, for example, and tried to influence NAMA not to proceed with the project?
Senator Alex White:
Zero, I would say.
Senator Terry Leyden:
The role of public representatives in this regard is an important issue.
Senator Paddy Burke:
Senator Coghlan raised an important issue with the Minister. If this Bill is enacted before Senator Coghlan speaks to the Minister about the issue he raised, will he commit an offence? It would seem that any type of lobbying would be an offence under section 221.
Senator David Norris:
I welcome this section. It is about time we had governance concerning lobbying. I do not believe Senator Coghlan is in the slightest difficulty because section 221(3) states it is not an offence if the communication is made in public. It could not be more public when it is in the arena of the Oireachtas.
Senator Paddy Burke:
It is the position afterwards to which I referred.
Senator David Norris:
Senator Coghlan has been absolutely clear about it. Section 221(3)(b) refers to a situation where the communication is made “without an intention to benefit, or confer an advantage on, any specific person” and section 221(3)(c) refers to where the communication “is made in the public interest”.
Most of the Members who spoke on this issue are present again today, although one Member on the Government side who spoke is not here. I indicated there is a specific case for each provision included. Why not? They are all covered and protected. I would hate to see us adopt the model of professional lobbying that exists in the United States, whereby large multinational corporations lobby extensively. Consider what has happened to President Obama’s health Bill. Events unfolded as they did in this regard because corrupt corporations are spending millions of dollars lobbying politicians. There are people at Capitol Hill who do nothing else, which is obscene. Providing information and making attempts to represent the interests of one’s constituents, save jobs and create employment in one’s constituency are marvellous and to be applauded. When this is done in the public forum of the Oireachtas, there is nothing underhand about it. It is about time we had lobbying legislation.
It is a pity our legislative provision on lobbying extends only to one section of the National Asset Management Agency Bill 2009. I hope the Government will consider introducing full legislation on lobbying, not with a view to outlawing it completely but to ensuring it is above board, can be held up to scrutiny and is carried out honestly and fairly. I am all in favour of that.
Senator Alex White:
Hear, hear.
Senator Marc MacSharry:
While I do not disagree with Senator Norris, I contend we need to differentiate clearly between public representatives lobbying and making representations. People are happy with how the political system operates in Ireland as it gives them access to public representatives to make their case on any given subject. Provided people meet the appropriate criteria pertaining to getting whatever they are making representations on, I do not see a difficulty.
Senator Alex White has withdrawn his amendment to section 221. I ask the Minister to consider the issue because it relates to an employee of NAMA or a NAMA entity or somebody acting on behalf of NAMA who is approached or lobbied to make a certain decision in favour of a person, issue or valuation. The provision compels the employee to report the fact that they have been communicated with. Subsection (6) makes it an offence for the employee not to report the communication. While one may be ill-advised not to communicate the information to the Garda or one’s superiors, one’s not doing so should not be an offence.
Senator Paschal Donohoe:
The answer to all these questions, as Senator Norris indicated, is in subsection (3). The key phrase concerns whether the communication “is made in the public interest”. This is the line of which we must be on the right side.
Senator Coghlan gave an excellent example of how it should be done. Regardless of whether the public interest is served in the Oireachtas or in a meeting with another politician and some of his officials, if a communication is made in the public interest rather than in the name of professional or personal gain, it is clearly in the spirit of what is mandated in the legislation. If it is not, one is fined or one goes to jail. That is exactly how it should be given how important the agency will be.
Senator Paul Coghlan:
I will be happy if, as politicians, we will all be free to continue to act in the public interest. It would be wrong if politicians could not talk to each other, as we do, in the public interest, be it in respect of a specific case or a general one. It is very important that our ability to do so be protected. From what Senator Donohoe and others have stated, it is protected and we should be happy with that.
We are not professional lobbyists but we are guarding the public interest in a general way and sometimes in specific cases. The Minister’s offer to talk to me is a case in point. I do not want to put on record the name of the firm I have in mind. There could be multiple cases of this kind because of the way the legislation is framed. We must get the economy moving again and free up credit. In the case to which I refer, the bank is prepared to advance the additional €11 million or €12 million but is being prevented by NAMA from having the security needed to cover the loan. Although everything is performing, all the security, which is way over the top, is going to NAMA.
Senator Joe O’Toole:
This discussion goes two ways. Senator Coghlan is absolutely correct in stating that if an issue requiring public representation arises, one puts it on the record and deals with it. Let us not get carried away in deciding where this takes us. In this regard, one should consider what occurs if one goes across the line and discusses making decisions on tendering, the sale of property or legal proceedings.
We should have a discussion in this House on governance.
Senator David Norris:
Yes.
Senator Joe O’Toole:
Plenty of people were prepared to make comments on how FÁS worked. FÁS was characterised by an absence of governance.
Yesterday we approved an audit committee for NAMA. An audit committee will be operating next year and it will consider four or five issues of importance in connection with NAMA’s business. Let us consider four: the purchase or sale of property; a tender; the engagement of the services of and payment of an expert adviser; and legal proceedings. The committee will bring in external auditors who will stress test the process from start to finish. They will consider a few tenders and determine how they were granted. If in the middle of doing so they find some note that a public representative made a private phone call to a person in charge of the tender, the tender will be challengeable. In this regard, one should consider the issue of phone licences.
That there is some doubt in our minds as to what we can and cannot do is disgraceful. That anybody should have such a doubt is disgraceful. We should close the door and have a discussion on how we should proceed.
Senator Alex White is correct that one must include the proposed measure. That Senator Coghlan has a doubt about what he can do is bad. There should be no doubt whatsoever. We represent, speak out, put information on the record and put forward the agenda. That is what we do. The day lifting the phone to ask a Minister to make a phone call to somebody else is gone.
Senator David Norris:
Hear, hear.
Senator Joe O’Toole:
The sooner, the better. The Minister should issue a guidance chart. The Department of Finance has issued three or four in recent years. One is Welcome to the Board, a document for people on semi-State bodies. Another concerns governance issues. Recently the Department issued a third, an update on how governance should operate. Anybody who does not know how it operates should not be in the Oireachtas. There is no question that this is crucial to how we do our business and to the importance we attach to ourselves. We should not have to hold back on issues of importance to us and what we believe to be solutions that must be made work.
Let us be clear about what the Minister was saying about asking questions. He will answer questions in the Houses on the operational issues but not on how or why a tender is granted, or on why legal action is taken. There are boards all over Dublin city and if they heard a Member say we could intervene in the sale or purchase of land or in the issuing of a tender — in fairness, no Member has — they would find it outrageous.
Senator David Norris:
We need a full lobbying Bill. The Minister should put that to the Cabinet.
Senator Alex White:
My party has called for such legislation on a number of occasions. I am in complete agreement with Senator O’Toole. Perhaps it is good that this matter was raised, precisely for the purpose of having it knocked on the head so sharply in this context.
There is an interesting cultural exchange across the floor between the Opposition and Senator Leyden. He is making it very clear that he believes we are being too extreme or adopting a politically correct position. I have heard this before but it is part of the reason we are where we are in this country. Senator Leyden may smile, laugh and joke about it all he wants. While we have resisted partisan comments for most of this debate, I must say the system he is defending is part of the problem in this country and it is associated mainly with his party. This is the difficulty we are in.
Senator O’Toole is correct that there should be no question at all of this issue arising. I do not care if I sound politically correct or holier than thou. Section 221 is one of the most important in the Bill. I believed it was one of the most uncontroversial and such is its importance that I am amazed it is receiving even two minutes’ attention. Anybody who believes politicians are covered under subsection (4), which refers to one acting in a professional capacity, had better think again because politicians certainly are not.
Senator Dan Boyle:
This provision was included on the insistence of my party during the development of the Bill.
Senator David Norris:
Well done. Good man.
Senator Paschal Donohoe:
We can see why.
Senator Dan Boyle:
I am happy it has attracted so much attention. Senator O’Toole is correct that this does not prohibit any public representative from engaging in any——
Senator David Norris:
Sorry, I made that point and would like that to be indicated.
Senator Dan Boyle:
Senator Norris is also correct.
Senator David Norris:
Thank you. That is a first.
An Cathaoirleach:
Senators, please.
Senator Dan Boyle:
This provision does not prohibit any public representative fulfilling his or her normal functioning role. The term “public representative” is the moot point here. Once we represent publicly——
Senator Paul Coghlan:
And in the public interest.
Senator Dan Boyle:
——there is nothing in this provision which we should fear. This provision is being included because there is a sense that we got to where we are, in terms of how dealt with issues like this in the past, because of a tendency to be furtive, clandestine and conspiratorial, which has been to the loss of our political system. The best way of addressing how this will be done in the future and how we can prevent this from happening again is by having recourse to these provisions.
Senator David Norris:
Hear, hear. The Green Party should try for a full Bill.
An Cathaoirleach:
Senator Norris, please. I call Senator Leyden.
Senator Terry Leyden:
I am the longest serving Member of either House of the Oireachtas. However, I do not mind if I am a minority of one. When I served in the Departments of Posts and Telegraphs and Transport, I received representations from public representatives from all sides. The Green Party was not around at that time, which is a long time ago. I was lobbied by Fine Gael and the Labour Party.
Senator David Norris:
About what? Was it about Fianna Fáil?
An Cathaoirleach:
Senators should make their comments through the Chair and should refrain from making comments across the floor.
Senator Terry Leyden:
I am making the point that there is something wrong if public representatives, be they Deputies, Senators or councillors, cannot communicate their constituents’ concerns. We are not speaking here of lobbyists making money. One cannot communicate with the Health Service Executive which is above reproach. In addition, one cannot contact An Bord Pleanála because——
An Cathaoirleach:
We are speaking about NAMA.
Senator Frances Fitzgerald:
One cannot contact the HSE but there are mechanisms through which one can contact An Bord Pleanála.
Senator Terry Leyden:
I am interested to hear from Senator Boyle that the Green Party is responsible for this provision, which is fair enough. I accept his point. I am making the point — I may be in the minority in this regard — that when one sees a situation where——
Senator Paul Coghlan:
The experiences of Senator Leyden.
Senator Terry Leyden:
It is a fact. There should be in place a mechanism which allows public representatives to make representations on behalf of their constituents. That is all I am asking for. I am not asking for special deals.
Senator Joe O’Toole:
That is a special deal.
Senator Terry Leyden:
I am asking for——
Senator Joe O’Toole:
That is a special deal.
Senator Terry Leyden:
The reality is this will involve property in every town and village throughout the State and issues will arise from time to time.
Senator Frances Fitzgerald:
That is the reason the provision is needed.
Senator Terry Leyden:
This means councillors, Deputies and Senators will not be in a position legally——
Senator Joe O’Toole:
That is good.
Senator Terry Leyden:
——or they will be fined €1,000 and will receive a sentence of six months in prison, or both.
Senator Alex White:
That is correct.
Senator David Norris:
Both.
Senator Terry Leyden:
I am amazed at how righteous Members are. I am surprised half of them were elected to this House. I have never heard such righteousness.
Senator Frances Fitzgerald:
Senator Leyden got in here in a righteous manner.
Senator David Norris:
We were elected.
An Cathaoirleach:
Senators, please.
Senator Terry Leyden:
The Members are becoming political eunuchs. One cannot communicate or contact the organisation and it may not be possible to even raise a matter in this regard in the Seanad.
Senator David Norris:
Yes, we can.
Senator Frances Fitzgerald:
We can, it is stated in the section.
Senator Terry Leyden:
The Cathaoirleach will, perhaps, tell me in six months’ time when I try to raise an issue in regard to the activities of NAMA that the matter is out of order and I cannot raise it.
Senator David Norris:
That is not the purpose of section 3.
Senator Terry Leyden:
It will not be possible either to raise the matter in Dáil Éireann, even by way of parliamentary question.
An Cathaoirleach:
As an experienced politician, Senator Leyden will be aware he cannot make comments across the floor.
Senator Terry Leyden:
I will have a job getting around this. Paragraph (3)(a) states: “is to be made public at the time of communication”. Will Senator Coghlan make public the person on behalf of whom he is raising an issue?
Senator Paul Coghlan:
Yes, if the person so wishes.
Senator Terry Leyden:
If making a point of behalf of a constituent or somebody else, he will have to make all communications in that regard public. Paragraph (3)(b) states: “is made without any intention to benefit, or confer an advantage on, any specific person, or”, which is fair enough. This would mean that a widow with a small site adjoining another with which problems have arisen cannot make representations.
Senator David Norris:
Break our hearts.
Senator Terry Leyden:
Paragraph (3)(c) states: “is made in the public interest”. It is obvious the representation would be in the public interest.
When one communicates with a person, he or she must note the communication and report it straight away to a member of the Garda Síochána. This means if one picks up the phone and contacts an official of NAMA in regard to an issue on behalf of a constituent one could end up being fined €1,000, sentenced to six months in prison, or both.
Senator Joe O’Toole:
That is correct.
Senator Terry Leyden:
Members have got very righteous. I do not understand from where they are coming in this regard.
Senator Liam Twomey:
The Senator should ask Senator Boyle about it.
Senator Paul Coghlan:
We are being righteous in the public interest.
An Cathaoirleach:
Senators, please.
Senator David Norris:
The Cathaoirleach should put the question to the House and the Senator will find out just how much of a minority he is in.
An Cathaoirleach:
I call Senator Fitzgerald.
Senator Terry Leyden:
All Members have at some point made representations on behalf of their constituents. They have made representations to hospitals, the HSE and other organisations.
An Cathaoirleach:
Senator Leyden has made his point.
Senator Terry Leyden:
Doing so is part of one’s life. One might as well give up altogether and close the Dáil and Seanad and not have any public representatives because they will not be needed. I never heard such righteousness in all my life. I do not mind if I am a minority of one in this House explaining my point, as did people, who in the parliamentary party in 1970s, said that when we set up Eircom and An Post there would be no more communication with them and they would ignore people and public representatives. I believe NAMA should respond.
I spoke on this issue on Second Stage. I have been a Member of this House for a long time and frequently raise issues on the Order of Business and by way of the Adjournment debate. If I have to use this House to raise an issue in regard to NAMA, I will have no hesitation whatsoever in doing so——
Senator Joe O’Toole:
About individuals.
Senator Terry Leyden:
——within the confines of parliamentary privilege. I intend to take on NAMA in regard to any damage caused by its activities to a community, village or person. If I have to use parliamentary privilege to do this, I will do so.
An Cathaoirleach:
I call Senator Fitzgerald.
Senator Terry Leyden:
I am asking the Minister to consider tabling an amendment that will allow Deputies, Senators and councillors to make reasonable representations on behalf of their constituents.
An Cathaoirleach:
The Minister will reply shortly. I call Senator Fitzgerald.
Senator Frances Fitzgerald:
Given the confused state Senator Leyden is in about the meaning of section 3, the Minister will have to clarify the Green Party insertion here.
Deputy Willie O’Dea:
There is nothing to stop Senator Leyden or any other Senator or Deputy raising in the Seanad or Dáil general or, even specific, issues in regard to NAMA. There is nothing to stop them putting down parliamentary questions in this regard to the Minister for Finance who will, of course, answer to Parliament for NAMA.
Senator Frances Fitzgerald:
That is correct.
Deputy Willie O’Dea:
It strikes me it would be absolutely devastating to the national interest if we allowed secret lobbying of NAMA or its officials——
Senator David Norris:
Exactly.
Deputy Willie O’Dea:
——with the intention of influencing the making of a decision in relation to the performance of the functions of NAMA. The function of NAMA will be to get credit flowing in the country again. NAMA has an obligation. The Irish people are making a huge investment in NAMA, whose obligation it is to recoup that money on their behalf. It cannot be subject to secret lobbying.
Senator David Norris:
Exactly.
Deputy Willie O’Dea:
That is the reality. On the defences a person will have in terms of how far he or she can go, I agree with Senator White that subsection (4) does not cover Deputies and Senators.
Senator Alex White:
No, it does not.
Deputy Willie O’Dea:
It provides an exemption to a person who is acting in his or her professional capacity or in the course of his or her employment. I would not like to chance that one.
If one is charged under subsection (3) of the offence of approaching NAMA one can defend——
Senator David Norris:
There is a defence. That is exactly what I said.
Deputy Willie O’Dea:
One can defend oneself on the grounds that such an approach is made public at the time of the communication, is made without an intention to benefit, or confer an advantage on, any specific person, or is made in the public interest. These are three standalone provisions any one of which will get a person off the hook. It would be wrong to say that if Senator Coghlan wants to speak with me at a later stage he must publicise that if it is in the national interest.
Senator Paul Coghlan:
We have publicised it here.
Senator David Norris:
That is the point I made.
Deputy Willie O’Dea:
I am speaking about publicising the name and so on.
Senator Alex White:
As a matter of policy, everything we do is in the public interest.
Deputy Willie O’Dea:
Yes. The reality is that there is a compelling need for this section. People will understand that.
Senator David Norris:
Yes, absolutely.
Question put and agreed to.
NEW SECTIONS.
An Cathaoirleach:
Amendment No. 66 is a new section. Amendments Nos. 66 to 68, inclusive, and amendment No. 70 are related and may be taken together by agreement.
Government amendment No. 66:
In page 131, before section 222, to insert the following new section:
“222.—(1) Where a person who is an employee of a participating institution or an officer of NAMA communicates his or her opinion, whether in writing or otherwise, to a member of the Garda Síochána or a member of the Board that—
(a) an offence under this Act or any other enactment has been or is being committed,
(b) any provision of this Act or any other enactment or rule of law has been or is being contravened, or
(c) there has been other serious wrongdoing in relation to NAMA,
then, unless the person acts in bad faith, he or she shall not be regarded as having committed any breach of duty towards any other person, and no person shall have a cause of action against the first-mentioned person in respect of that communication.
(2) Where a person who is an employee of a participating institution or an officer of NAMA communicates his or her opinion, whether in writing or otherwise, to the Minister that a direction given by the Minister under this Act has been or is being contravened, then, unless the person acts in bad faith, he or she shall not be regarded as having committed any breach of duty towards any other person, and no person shall have a cause of action against the first-mentioned person in respect of that communication.
(3) This section applies to a communication—
(a) that would, but for this section, constitute a breach of duty by the person who made it, or
(b) in respect of which another person would, but for this section, have a cause of action against the person who made it.”.
Deputy Willie O’Dea:
Wrongdoing can take place in any organisation regardless of whether it is in the public or private sector and even where proper internal financial control structures are put in place. Unfortunately, there have been several examples of this in recent times.
The Minister has included several sections in the Bill relating to the disclosure of information to the various authorities, where appropriate. On reflection, and arising from the Dáil debate, the Minister has further decided to add specific provisions into the Bill which will protect bona fide whistleblowers if they report wrongdoing. This whistleblower protection extends to officers of NAMA and participating institution employees, regardless of their position within the organisation, which is correct. It can be difficult to legislate for whistleblower protection. It is important to strike a balance between providing protection for the individual and the need to deter people from making false allegations. The proposed amendment is framed in such a manner as to ensure this balance is struck.
The proposed amendments are largely based on the amendments to the FÁS legislation recently introduced by the Tánaiste. The proposed sections provide protection from civil liability for employees of participating institutions and officers of NAMA who make a bona fide report of offences being committed under any enactment or serious wrongdoing in regard to NAMA. The individual can make the report to the Garda Síochána or a member of the NAMA board. The proposed sections also provide that it is an offence for an employee of a participating institution or an officer of NAMA to make reports in bad faith to the Garda Síochána, members of the board of NAMA or the Minister for Finance. That provision is included to discourage persons from making false accusations of misbehaviour. It is important that persons are responsible for their actions and do not abuse the whistleblower protection.
Senator David Norris:
This is an important section relating to the whistleblower’s charter. I urge the Minister to introduce broad legislation covering the rights of persons who make such disclosures. I am aware of a number of examples. I know of one in a health facility where an employee saw mistreatment of disadvantaged people who were vulnerable. They made an anonymous telephone call and discussed the issue with agencies of the health arm of the State. Eventually that intervention was divulged to the employers. Others who had witnessed the behaviour had confirmed and discussed it but subsequently denied it. The job of the person concerned was placed in considerable jeopardy. Anything that protects whistleblowers is good, but it has to be balanced. The Minister has done this through the second amendment covering false accusations which can be devastating and should not be entertained.
The one thing that concerns me — I would like the Minister to re-examine the matter — is that the fines and penalties are considerably more severe than for the offence we have just been discussing. It would be appropriate for these two offences to be harmonised. Attempting to interfere illegally with the operation of NAMA should be treated at exactly the same level of seriousness as an individual making a false accusation against someone. In the case of a corrupt intervention or lobbying offence, the fine is not to exceed €1,000, or imprisonment for six months, but in the case of somebody who makes a false accusation, it is €5,000 or imprisonment for 12 months. I do not understand the discrepancy in the fines, as they are equally serious offences. If anything, the offence under section 221 is more serious; therefore, I do not think it should attract a lighter penalty. I urge the Minister to re-examine the issue.
Senator Alex White:
I made the point last night that I welcomed this——
Senator David Norris:
I beg Senator White’s pardon, but I wish to signal that I will be tabling a Report Stage amendment along those lines.
Senator Alex White:
I indicated last night when the Labour Party whistleblower amendment was moved that I was prepared to withdraw it on the basis that the Government’s amendment was progressive. I welcome it. The Minister has acknowledged that the amendment is a response to concerns raised by my party and others in the Lower House in respect of this issue. Therefore, I welcome the amendment he has tabled in response.
I drew some distinctions between what we had proposed and what the Minister was proposing. One issue I overlooked last night but that has now come to my attention is that there is protection from civil liability but no protection from criminal liability which was contemplated in the Labour Party amendment. What is the thinking behind the Minister’s decision that it would not constitute a civil wrong but that criminal liability could arise?
Senator Liam Twomey:
It has been evident in recent years that it is not always possible for the Garda Síochána or even a member of the board to instil confidence in a whistleblower that he or she will be protected. The Minister is aware of cases in which persons who have acted as whistleblowers have had their names released, either directly or indirectly, to their employers, which has had a detrimental effect on their career. One of the changes that could be introduced would be to allow complaints to be made to a Member of the Oireachtas or a member of the board of NAMA, in addition to members of the Garda Síochána. If a person were to give information to me on wrongdoing in regard to NAMA, I would make the best possible effort to clarify the information and ascertain it was correct. I might check with the Minister on whether it was true before I would say anything publicly. That would give protection to the individual concerned, as he or she would be one step removed from people finding out who they were.
Complaints made to members of the Garda Síochána have to be written down in report books and a detailed file must be compiled, which could be accessed by someone else. The PULSE system has been accessed by individuals who were paid by criminals to do so. The board of NAMA would be deeply involved with people in NAMA, which could give rise to a conflict of interests. I urge the Minister to consider making a change to the effect that complaints could also be made to Members of the Oireachtas. There are only 226 Members and most of us could be trusted not to do something that would be detrimental to NAMA, or that would in any way be wrong. We do not abuse parliamentary privilege. That would be a useful change. The Minister has seen cases in which members of the Garda Síochána have made information available and their names find their way into the public domain eventually. I propose that Members of the Oireachtas and members of the board be included in the provision, with members of the Garda Síochána.
Senator David Norris:
I support Senator Twomey whose contribution is significant. The House should bear this specifically in mind because of the recent case involving former Senator Jim Higgins and Deputy Brendan Howlin who found themselves in some legal difficulty in regard to their sources. That is a good point. The more I think about it the more strongly I believe the Minister should harmonise the penalties in section 221 between whistleblowers and persons who act corruptly because the potential gain and sums of money involved are astronomical. There is potential for criminal, deliberate and perverse corruption of the system, which is very serious. In many cases a person who makes a false statement to the Garda Síochána does so not just out of malice but because he or she is a little unbalanced. At least the fines and terms of imprisonment should be the same for both offences. If I was a corrupt business person and saw the possibility of securing a contract for myself or an ally that would reward me in terms of millions, I do not think I would be deterred by a slap on the wrist or a €1,000 fine. I would not be that much more deterred by a €5,000 fine but it would make the point that the offences were at least at the same level. I have thought about the matter since I first raised it and will be tabling an amendment straightaway. I believe my colleague, Senator O’Toole, will be prepared to second it.
Deputy Willie O’Dea:
With regard to synchronising the offences with the offences under section 210, I am advised the whistleblower provision is modelled on a similar provision in the FÁS legislation, so the same penalties are applied. The Deputy has a point and I will bring it to the attention of the Minister.
On Senator Twomey’s point about being able to report to Members of the Oireachtas, I believe that if a Member of the Oireachtas receives a report of serious wrongdoing in this regard, they will bring it to the attention of the Garda Síochána. I will mention the Deputy’s point to the Minister as to whether it is possible to extend the protection where the report is given to Members of the Oireachtas. As regards Senator Alex White’s point about criminal liability, it is not a crime. The whistleblower is not committing a crime, even if he or she is wrong. The only possible exposure he or she has is to civil liability, which is why he or she is only protected from civil liability.
Amendment agreed to.
Government amendment No. 67:
In page 131, before section 222, to insert the following new section:
“223.—(1) In this section and in Schedule 2:
‘employee’ means—
(a) an employee of a participating institution, or
(b) an officer of NAMA;
‘employer’ means—
(a) a participating institution, or
(b) in relation to an officer of NAMA, both NAMA and the NTMA;
‘penalisation’ includes any act or omission by an employer or a person acting on behalf of an employer that affects an employee to his or her detriment with respect to any term or condition of his or her employment, and in particular includes—
(a) suspension, lay-off or dismissal (including a dismissal within the meaning of the Unfair Dismissals Acts 1977 to 2005), or the threat of suspension, lay-off or dismissal,
(b) demotion or loss of opportunity for promotion,
(c) transfer of duties, change of location of place of work, reduction in wages or change in working hours,
(d) the imposition or administering of any discipline, reprimand or other penalty (including a financial penalty), and
(e) coercion or intimidation.
(2) To avoid doubt, this section and Schedule 2 have effect in relation to a person who is an officer of NAMA as if both NAMA and the NTMA were employers of the person.
(3) An employer shall not penalise or threaten penalisation against an employee for—
(a) making a complaint to a member of the Garda Síochána or the Minister that a provision of this Act is not being complied with,
(b) giving evidence in any proceedings under this Act, or
(c) giving notice of his or her intention to any of the things referred to in paragraph (a) or (b).
(4) Schedule 2 has effect in relation to an alleged contravention of subsection (3) and matters consequential on such a contravention.
(5) If a penalisation of an employee, in contravention of subsection (3), constitutes a dismissal of the employee within the meaning of the Unfair Dismissals Acts 1977 to 2005, relief may not be granted to the employee in respect of that penalisation both under Schedule 2 and under those Acts.
Amendment agreed to.
Government amendment No. 68:
In page 131, before section 222, to insert the following new section:
224.—(1) A person who states to a member of the Garda Síochána or a member of the Board that—
(a) an offence under this Act or any other enactment has been or is being committed,
(b) a provision of this Act, a provision of any other enactment or any rule of law has been or is being contravened, or
(c) there has been serious wrongdoing by any person in relation to NAMA,
knowing the statement to be false commits an offence.
(2) A person guilty of an offence under this section is liable—
(a) on summary conviction to a fine not exceeding €5,000 or imprisonment for a term not exceeding 12 months or both, or
(b) on conviction on indictment to a fine not exceeding €100,000 or imprisonment for a term not exceeding 3 years or both.
Amendment agreed to.
SECTION 222.
SECTION 224.
Question proposed: “That section 224 stand part of the Bill.”
Senator Paschal Donohoe:
We previously engaged in a good discussion on the need to review the activities of NAMA continually to ensure it delivers on the objectives laid down in the Bill. Section 224(3) states:
As soon as may be after 31 December 2012, and every 5 years after that while NAMA continues in existence, the Minister—
(a) shall assess the extent to which NAMA has made progress toward achieving its overall objectives, and
(b) shall decide whether continuation of NAMA is necessary having regard to the purposes of this Act.
Is five years too long a timeframe in this regard? If a decision is going to be made under this section with regard to whether the continuation of NAMA is necessary, surely the position should be reviewed annually or perhaps every two years.
Section 224(3)(a) goes to the heart of the matter. Under it, the Minister will be obliged to assess whether NAMA is working and make public the findings in that regard. In my opinion, the matter should be reviewed more regularly than every five years. Why was it decided to review the position every five years? Is there not a case to be made for reviewing it more regularly?
Deputy Willie O’Dea:
Section 223 states that the Comptroller and Auditor General will assess the position every three years. There are many reporting mechanisms in place. Basically, it comes down to whether we believe NAMA will be in existence for at least five years. I am of the view that there is little doubt that this will prove to be the case.
Senator Alex White:
On a point of order, has amendment No. 67 been disposed of?
An Cathaoirleach:
Yes. It was taken in a group with amendments Nos. 66, 68 and 70.
Senator Alex White:
Was the amendment agreed?
An Cathaoirleach:
Yes, it is recorded as having been agreed.
Senator Alex White:
I appreciate that.
Senator Paschal Donohoe:
I thank the Minister for his reply. He stated that this all depends on whether we believe NAMA will be in existence for longer than five years.
Deputy Willie O’Dea:
No, for five years.
Senator Paschal Donohoe:
Would it not then make sense to have a review period that is shorter than five years? I may be missing something and perhaps the Minister will indicate if that is the case. It may be the case that by 2012 we will discover that there is a case for winding up NAMA. However, this is extremely unlikely. In such circumstances, therefore, after 2012 should we not review its activities more often than every five years? The Minister indicated that the Comptroller and Auditor General will carry out a review every three years. I am of the view that three years is a reasonable timeframe and I did not, therefore, make this point in respect of section 223. If we are stating that the Comptroller and Auditor General should be carrying out his review every three years after 2012, then surely that which is envisaged in section 224 should be performed more often than every five years. Perhaps it should be done every three years.
Minister for Finance (Deputy Brian Lenihan):
It is a matter of judgment. The review by the Comptroller and Auditor General will be carried out every three years. The ministerial review relates to the broader policy aspects of the legislation, the state of the property market and the evolution of the banking sector. These are wider matters and a longer period will be required for their consideration. That is why it was decided that the ministerial review should be carried out every five years.
Stating that there will be a ministerial debate every five years will not exclude NAMA from public debate. The legislation simply indicates that the Minister of the day will be obliged to carry out a review every five years. It would be undesirable for the reviews of the Minister and Comptroller and Auditor General to run parallel to each other because matters would become confused. That is the thinking behind the section.
Question put and agreed to.
Sections 225 and 226 agreed to.
SECTION 227.
Senator Joe O’Toole:
I move amendment No. 69a:
In page 133, line 35, after “Act.”, to insert the following:
“However, the text of this Act shall be published electronically in each of the official languages as soon as practicable after its enactment.”.
I welcome the Minister, Deputy Brian Lenihan. Molaim leasú a dhéanamh ar an mBille ag an bpointe seo. Section 227 states: “Section 7 of the Official Languages Act 2003 does not apply in relation to this Act.” An rud atá sa phíosa sin den Acht sin, I will read into the record, “As soon as may be after the enactment of any Act of the Oireachtas, the text thereof shall be printed and published in each of the official languages simultaneously”. Bhí mé sa Teach seo ar 8 Aibreán 2003, nuair a bhí an Aire, an Teachta Ó Cuív, ag tógaint an reachtaíocht sin — Bille na dTeangacha Oifigiúla 2002 — tríd an Oireachtais. Ag an uair sin, nuair a bhí an tAire Ó Cuív ag tabhairt an Official Languages Act 2003 tríd an Tí, bhí leasú curtha ag an Seanadóír Joe McHugh, atá anois ina Theachta. Thug mise tacaíocht don leasú, ach chuir an Aire ina gcoinne. Tá an díospóireacht sin ar fad anseo agam, ach ní léifidh mé ach an abairt deireanach. Dúirt an tAire:
Tá an rud sa mBille iomlán slán agus ní féidir éalú uaidh. Ní féidir Acht ar bith a fhoilsiú gan é a dhéanamh go comhuaineach i nGaeilge agus i mBéarla as seo amach ...
In other words, he said the Bill was completely safe and there was no escape from it. No Act could be published from then on except in Irish and in English, provided the legislation was passed. The Minister did not understand the cleverness of the Department of Finance. It took one look at the provision and brought in legislation to the effect that in that one sense, section 7 of the Act does not apply.
Tuigim, nuair atá moladh á thabhairt agamsa don Aire — agus phléigh mé é seo leis cúpla mí ó shin — nach féidir liom aon rud a mholadh that will add to the costs etc. agus tuigim go maith dá mba rud é go raibh mé ag moladh go mbeadh seo clóbhuailte agus foilsithe i gcóip crua that there would be costs attached to that. Nuair a bhí an rud seo á phlé sa Teach seo sé bliain ó shin, bhí mise go mór den tuairim an uair sin that we should not have got into all the costs of printing annual reports in gloss and hard copy. I suggested to the Minister at that stage, that as long as these documents were published on the Internet, anybody who wanted them could print them off. However, that would not do the Minister, purist and virginal as he is. Such a thing would undermine the true Gael approach to matters. Of course, he was better off going off changing the name of my town and doing other things.
Senator David Norris:
Welll, Senator O’Toole is no virgin.
Senator Joe O’Toole:
Cúpla bliain ina dhiaidh sin bhí an tAire sásta go mbeadh doiciméid foilsithe ar an Idirlíon. That satisfied everybody. Bhí mise an-sásta le sin.
Ag féachaint ar an reachtaíocht os ár gcomhair anseo, chuir sé an-díomá orm nuair a thuig mé go rabhamar chun éalú ón Acht chomh tapaidh sin agus gan focal ón Aire Gnóthaí Pobail, Tuaithe agus Gaeltachta who should, rather than I, watch these things agus gan focal ar bith ach oiread ó aon ceann de na heagrais Gaeilge who would queue outside my door if I wanted to protect the name of my town. There is no word from them nuair atá muid ag cur reachtaíochta ar fáil, gan é a bheith ar fáil i nGaeilge.
Tuigeann an tAire an motivation atá agam ag an bpointe seo. Creidim, ó thaobh dearcadh mhuintir na Gaeltachta de, go bhfuil seo scannalach agus náireach dóibh siúd. I ndáiríre, tá sé maslach chucu nach mbeadh an Bille nó an reachtaíocht ar fáil i nGaeilge. Fiú ón dtaobh praiticiúil de, some of the assets of NAMA will be lodged in Gaeltacht areas. Gaeltacht lands and assets will be involved in this. Aon uair a mbíonn aon agóid nó conspóid sna Gaeltachtaí faoi rudaí mar seo, má théann sé go dtí na cúirteanna — as it well may do — ba mhaith an rud é go mbeadh an reachtaíocht ar fáil i nGaeilge. Ba mhaith an rud é go mbeadh sé ar fáil do dlíodóirí, do mhúinteoirí, do shaoránaigh agus do ghnáth daoine. An rud atá á mholadh agamsa ná go ndéanfar an leasú ar seo.
Is ó Daingean Uí Chúis, Daingean, Dingle mé. Bhí trí ainmneacha i gcónaí ar ár mbaile go dtí gur tháinig an píosa reachtaíochta sin síos an bóthar chugainn. Anyway, níl mórán saibhris ar imeall iarthar na tíre seo. My area, is dócha, is not the richest place. Níl aon ró-shaibhreas ann. Ach is tobar na Gaeilge i ndáiríre é. Chomh maith le sin, is áit é ina dhéanann saoránaigh na tíre seo, muintir na Gaeltachtaí, caomhnú ar chultúr, teanga agus sean nósanna na tíre. Mar adúirt mé, níl aon ró-shaibhreas acu. Níl acu ach saibhreas a gcultúr agus a dteanga. Tá siad ag braith orainne go mór. Tuigim go n-aontóidh an Aire liomsa sa mhéid seo; tá sé de freagracht orainne gach seans agus gach deis a thógaint agus gach iarracht a dhéanamh caomhnú a dhéanamh ar chultúr na Gaeltachtaí, an Teanga — más féidir sin a dhéanamh — agus muintir na Gaeltachtaí.
I raise this issue because I want people to recognise the situation. I do not want people to see this as if coming from one of the kind of fascist groupings that often support the Irish language. I make this plea on a practical level. I want the people I went to school with and with whom I grew up to be able to do their business trí Gaeilge if that is what they want to do. I do not propose anything that will bring a huge cost to the Exchequer. There are no costs involved except translation costs, which would be involved at some stage anyway. Effectively, what I propose allows the Official Languages Act to be implemented, without the costs associated with it. In that sense, I am heartened to think the Minister will accept the amendment. That would make us all feel a bit better and would add to áilleacht na tíre.
Senator David Norris:
Go raibh míle maith agat a Leas-Chathaoirligh. Ba mhaith liom——
An Leas-Chathaoirleach:
Tá a lán Gaeilge ag an Seanadóir.
Senator David Norris:
Tá an Ghaeilge go flúirseach agam agus bhí mé ar TG4 cúpla oíche ó shin. Ba mhaith liom tacaíocht a thabhairt don leasú seo a mhol mo chara, an Seanadóir Seosamh Ó Tuathail. This is a good amendment for several reasons. First, it caters for people in the Gaeltacht. It also addresses the situation in a modern way. We are catching up with the electronic world. Also, and importantly, it involves only a small cost. Senator O’Toole was right to mention that some planning documents were printed in Irish and put on library shelves, but not one copy was ever bought or borrowed. Given the considerable costs involved, people have a reason to begrudge the money spent. However, publication in Irish is a constitutional requirement, but it is satisified at minimal cost through this amendment, which makes appropriate provision for people who speak our own language.
I compliment Senator O’Toole on his fluency and on his wonderful blas. It is a long time since I heard the word “náireach”. I think I am correct in thinking it means shameful. Scannalach agus náireach. I do not think the Minister can withstand that blistering.
Senator Feargal Quinn:
I support Senators O’Toole and Norris. It seems quite likely that in a few short years we will no longer print papers and annual reports in hard copy. Everything will be done electronically, although that may threaten An Post and others who expect people to send letters. Someone who spoke after me the other day mentioned he had received a letter in the post and found that unusual, because all of his mail generally came by e-mail. I believe we are not looking forward enough. The amendment makes great sense from the point of view of cost, but also from the point of view of modernity and of recognising where we are going. This is the way of the future.
Deputy Brian Lenihan:
Is iontach an rud é, ach tá mé chun an leasú seo a ghlacadh. Chomh maith le Gaeilge an-mhaith, tá eolas an dlí go han-mhaith ag an Seanadóir, mar níl aon fhadhb ag an Ard-Aighne leis an fhoclaíocht sa leasú seo. Mar sin, glacaim leis an leasú. An deacracht atá ann ná caithfidh go mbeidh leagan oifigiúil amháin sa Teanga don Bhille ar fáil nuair a síneoidh an tUachtarán an reachtaíocht, mar tá cinneadh le déanamh ag na bancanna atá ag dul isteach i NAMA. Caithfidh mé leagan oifigiúil den Bhille a ullmhú mar sin, ach beidh an leagan Gaeilge le fáil chomh luath agus is féidir. Tá sé sin i leasú an Sheanadóra fhéin. Beidh NAMA, is dóigh liom, deich bliain ag fás, agus ina dhiaidh sin, please God, beidh NAMA faoi bhláth. Táim an-sásta leis an leasú agus táimse ag glacadh leis.
Senator Joe O’Toole:
Go raibh míle maith agat, a Aire. Táim thar a bheith sásta le sin. I really believe it is something many people will appreciate. The Minister will recall that the Government was very successful in getting Gaeilge recognised as one of the official languages of the European Union. There is a great opportunity to stress test how well that is working. I suggest the Minister first sends them a copy of the leagan Gaeilge den Acht seo. See how they translate it and compare like with like. That will show how well they are doing their job.
I very much appreciate the Minister accepting the amendment. It might seem small in the greater scheme of things, but by such a myriad of small things do great things emerge. Go raibh míle maith agat. Tá mé thar a bheith sásta le sin.
Deputy Brian Lenihan:
Rud eile, tá an raic seo an-chasta ar fad, mar is eól díobh go léir. Sin an fáth nach bhfuil an leagan Gaeilge le fáil anois. De ghnáth bíonn Rannóg an Aistriúchán ag obair ar an mBille roimh an tosnú agus bíonn an dá leagan réidh. Sa chás seo ní raibh fhéidir é sin a dhéanamh agus sin an fhadhb a bhí againn.
Amendment agreed to.
Section 227, as amended, agreed to.
Sections 228 to 234, inclusive, agreed to.
SECTION 235.
Question proposed: “That section 235 stands part of the Bill.”
Senator Liam Twomey:
I want to ask about the changes the Minister proposes to make to the Planning and Development Act 2000. It is about extending planning for NAMA. When this is being extended, are any changes to planning permission being contemplated which might improve the overall environment and the green agenda when applications come up for renewal? This might not be directly connected, but are there any proposals concerning other planning where changes might be in train, even where they do not come up for renewal? If a person decides to improve his or her planning by adding solar energy or heat recovery units, will this entail an additional fee because it means changing the original planning application or will this fee be waived if such alterations improve the environment? That is not directly covered here. What is directly covered is that where the planning permission is extended in projects taken over by NAMA, efforts should be made to promote a green agenda, thus improving the environment.
Deputy Brian Lenihan:
I shall certainly draw Senator Twomey’s observations to the attention of the incoming board. In fact, there is an amendment tabled to the Schedule, which will be addressed, I take it, when we discuss the Schedule, to ensure the capacity NAMA has to apply for or extend a planning permission will be harmonised with the proposal contained in legislation in connection with planning and development which I understand is before this House. The wording “at present” in the Schedule is somewhat different from that in the other legislation before the House so there will be a harmonisation of the legislation.
National Asset Management Agency Bill 2009: Report and Final Stages.
Senator Liam Twomey:
I move amendment No. 1:
In page 16, between lines 35 and 36, to insert the following:
“2.—Where NAMA proposes to establish a Special Purpose Vehicle to purchase, manage or dispose of assets , it shall do so only in accord with regulations published by the Minister and approved by the Oireachtas which shall include, but are not
limited to:
(a) the suitability of investors,
(b) the suitability and behaviours of members of the Board,
(c) the finance, planning accountability and reporting,
(d) the manner in which the Special Purpose Vehicle shall discharge its functions under this Act,
(e) the method of determine the appropriateness of paying a dividend or bonus to investors, and
(f) its consistency with the statutory objectives of NAMA under this Act.”.
I am only moving this amendment on Report Stage because we felt it was a good amendment that the Minister would not accept on Committee Stage. The Minister said he thought that the proposal to get the Irish people involved in the ownership of the private part of the SPV was not such a bad idea. I decided I would table this amendment on Report Stage to see if the Minister had any further comments on that. Making the Irish people the owners of the private part of the SPV would help to legitimise this whole project in the next few years.
Senator Paschal Donohoe:
I second the amendment.
Minister for Finance (Deputy Brian Lenihan):
The EUROSTAT position on the balance sheet treatment of NAMA and the SPV took account of the balance between State and private engagement in the proposed organisation structure. The proposed amendment could result in EUROSTAT changing its preliminary decision on the treatment of NAMA operations in the national accounts. The amendment also runs the risk of making the SPV so unattractive to any investor that no suitable investor can be found.
I have repeatedly explained that we should welcome the EUROSTAT preliminary decision, as a result of which the acquisition of the assets from the institutions by NAMA will have no effect on our general Government debt ratio or our general Government balance. This puts the Irish asset protection scheme on an equivalent footing with bank support schemes in other member states that are also being recorded off balance sheet. The main advantage of this is that it minimises the danger of the markets and international investors misinterpreting our headline debt or budget balance ratios when comparing us against other EU member states. However, I have also repeatedly stated that the statistical treatment does not change the basic fact that the operations of NAMA will lead to an increase in the amount of the State’s potential liabilities. Neither should it be overlooked that these liabilities will be met by a countervailing asset holding.
It is intended that the master SPV will be established by the NAMA board to conduct the purchase, management and disposal of loan assets identified and valued by NAMA. The legislation provides a robust process for the appointment of board members, requiring that they have senior level experience and expertise in relevant areas. I have indicated that I would consult the Opposition leaders on the appointments to the board in the interests of creating all-party confidence in the board. I have already received a letter in that respect today from the leader of the Labour Party.
It is an executive matter for the expert board to allow NAMA to carry out its business in the most efficient and effective manner. We must be careful that in creating a board to carry out a complex commercial task, for which the members will be accountable, we do not then undermine their ability to carry out their duties and functions by the imposition of statutory regulations and restrictive rules which prevent them acting in a commercial manner.
A detailed legal shareholder agreement is being drawn up, and that will be put in place to ensure that at all times, the NAMA board has a veto over any master SPV actions or decisions. This will protect the NAMA board itself, which has significant responsibilities, and it will also be in the interest of Irish citizens. I intend to issue a direction to the board of NAMA that not a single decision should be made or allowed to be pursued by the master SPV which will not be in the best interests of achieving the objectives and purposes of the NAMA legislation. Following the Dáil debate, a number of amendments were made to reflect the role of the master SPV in the NAMA group entities. I outlined those amendments on Committee Stage, so I will not re-iterate them now.
Amendment, by leave, withdrawn.
Senator Paschal Donohoe:
I move amendment No. 2:
In page 16, between lines 35 and 36, to insert the following:
“2.—(1) There shall be established a “Register of Derivatives” on the commencement of this Act, which shall include information on derivatives obtained under this Act and shall be detailed in the annual accounts of NAMA.
(2) Information to be recorded under subsection 1 shall include, but is not limited to:
(a) the market value of the derivative,
(b) the name of the counter party to the derivative, and
(c) the date of maturity of the derivative,
(d) such other information as the Minister from time to time directs.”.
This arises from some points that I made on Second Stage and during the discussion in this House a few weeks ago about the NAMA business plan. The majority of the discussion that we have had on the assets for which NAMA will be responsible has focused on the loans for the properties in question. The NAMA business plan also makes clear that when this organisation is set up, it will be taking on responsibility for a huge amount of derivative contracts in respect of the properties for which loans were given. The value of these particular contracts is between €16 billion and €18 billion, according to the business plan.
This is a gigantic amount of money and is also based on derivatives, some of which have been at the heart of the difficulty faced by banks all over the world. These instruments had complicated interrelationships as one bank would own a certain amount while the counterparty would be another bank. Nobody really understood their value and how they would perform in light of a change in market conditions.
Given the amount of money involved and given the difficult recent track record that these tools have, the Bill as set out does not have too much to say about them. The word “derivative” is only mentioned twice in the entire Bill. It is mentioned as part of the definition of a credit facility at the beginning of the Bill, and the examination of derivative contracts to allow NAMA to place a market value on a bank asset is mentioned in the section dealing with long-term economic value.
My proposal is an attempt to shed more light on the value of the derivative contracts for which the State will be responsible. The business plan mentions the currency breakdown of the derivatives and it makes the point that the derivatives are mostly in respect of currency hedging for property acquisitions. The plan mentions little about their content and what could happen in the future. This proposal is to establish a register of derivatives on the commencement of this Act. This document would contain four pieces of information. First, it would indicate the market value of the derivative contract, something that is easy to establish. One only has to look at a computer screen to get the answer to that. Second, it would name the counterparty to the derivative. That is particularly important because in the past 18 months quite a few hedge funds have gone out of business for reasons with which we are familiar. It is worth knowing with whom we will have those counter deals. It would also be worth establishing how many of the €16 billion of these positions are between Irish banks. Third, it would indicate the date of maturity of those and when they will expire. Fourth, it will indicate any information the Minister will want to provide on those contracts.
Speakers from all sides of the House have frequently said we cannot have too little transparency in this area and that the lack of transparency, information and clarity was a contributing factor to the difficulty in which we find ourselves. The misuse and lack of understanding of those very tools have caused massive difficulty and I am proposing an amendment that will allow us understand the State’s exposure to them, the contracts and with whom we have that exposure.
Senator Liam Twomey:
I second the amendment.
Deputy Brian Lenihan:
An interesting amendment. NAMA, like the National Treasury Management Agency annual report or any bank annual report, will publish the type of derivative, the nominal value of the derivative, the mark to market value of the derivative and all of those values as of the financial account reporting date. NAMA will also publish the maturity date of derivatives by calendar year, for example, 2010, 2011, 2012. All that information will require to be published in the annual report, which is the current practice with the NTMA, but it is not appropriate to publish the name of the counterparty to the agency, whether the counterparty is categorised as a borrower or a lender, in sharing this particular risk in regard to money. It is not appropriate to publish the name of the counterparty as that will be the name of the underlying counterparty. The information will be subject to the approval of the form of the NAMA accounts and audit by the Comptroller and Auditor General. The information in the amendment — the market value, the date of maturity and other information — will be contained in the annual report but the identity of the counterparty to the derivative is not disclosed under current NTMA practice.
Senator Paschal Donohoe:
I thank the Minister for that clarification. I raised this point in earlier debates and that information was not made available to me.
Deputy Brian Lenihan:
I am sorry.
Senator Paschal Donohoe:
I did not raise it with the Minister. It is an important clarification. To repeat what the Minister said, this information, with the exception of my suggestion for the counterparty, will be published as part of the annual accounts NAMA will furnish.
Deputy Brian Lenihan:
Yes.
Amendment, by leave, withdrawn.
Senator Liam Twomey:
I move amendment No. 3:
In page 17, between lines 17 and 18, to insert the following:
“(viii) to ensure that the measures taken in this Act restore confidence in the banking sector are reciprocated by lending by the participating institutions to members of the public generally in their private capacity and to small and medium enterprise in particular,
(ix) to ensure an orderly property management strategy over a ten year period following the enactment of this Act,
(x) to recover the maximum funds for taxpayers by ensuring that the principal and exclusive purpose of NAMA is to recover the maximum funds possible for the assets acquired by NAMA under this Act, and
(xi) to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis.”.
We discussed this issue on Committee Stage and the proposals are self-explanatory. Does the Minister have any plans to publish a ten-year strategy on how NAMA will work out and how it will dispose of its property? The concern is the size of NAMA. NAMA is massive. It will be the biggest property company, and probably the biggest development company, in the country. It will control significant assets for a number of years. Once this legislation has been passed I would like to know the Minister’s plans to provide more information on the future of NAMA in the next decade. The purpose of this amendment is to insert a requirement in the legislation seeking that.
Senator Paschal Donohoe:
I second the amendment. I support what Senator Twomey said in regard to the amendment. One of the points made in the discussion on Committee Stage was that while everybody here is emphasising that the NAMA institution must take all steps possible to ensure this does not happen again, this amendment proposes that it be put on a statutory footing as part of the purpose of the organisation.
The second point I would emphasise, which Senator Twomey has touched on, is that paragraph (viii) gets to the heart of our discussion in terms of needing to find a way of providing all the guidance we can to the institution and that the huge investment going in from the taxpayer leads directly to greater liquidity and lending to small and medium-sized businesses.
Senator Eoghan Harris:
I refer to paragraph (xi) which states: “to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis”. The Minister has a letter from the Frontline Alliance. I have just come from the streets. I walked passed them, and most of them recognised me. I am one of their strongest critics but what struck me was the lack of rancour, the discipline and the decency with which they conducted that march.
The Minister has spoken eloquently to me in the past about his admiration for the public sector. In terms of the least we might do out of this crisis, we are now having to ask the front line people in the public sector to give back some of the inflated benchmarking agreements that were made in the bubble for which they were not responsible. That is a hard task. It has to be done, and I am not in any way reneguing from it. The public sector will have to take a cut but I believe the Minister and the House would join me in expressing the wish that the reward for this cut should be that we determine to reform the public sector, make it fit for purpose and create conditions which inspire enthusiasm, energy and a sense of career purpose in those who will work in a renewed and enthused public sector. I know this is the bottom of the well, so to speak, but out of all periods of recession come great reforms. I hope the Minister will consider, in his other capacity later, on foot of trying to ensure these conditions do not recur, what Senator Norris said this morning about the need to look after the people in the public sector and the private sector whose backs are against the wall and who are terrified in regard to negative equity, and to look after them in the workplace as well as those out of work. I do not want to do a Pollyanna on it but I believe the public sector is now having to carry some of the consequences from which its workers benefited but of which they were not the authors. The least we might do is give them a reformed public service that is fit for purpose.
Senator Paddy Burke:
I support the amendment but want to raise questions on paragraphs (ix) and (xi). Paragraph (ix) states: “to ensure an orderly property management strategy over a ten year period ....”. Paragraph (xi) states: “to take all the necessary steps to prevent a recurrence of the conditions that brought about the financial crisis”. I raised this issue on Committee Stage yesterday and, unfortunately, the Minister was not present at the time but the Minister of State, Deputy Mansergh, was present.
The issue I raise is not unrelated to amendment No. 29 by my colleague, Senator Coghlan, who also raised it on Committee Stage. It concerns property acquired by NAMA. Obviously, such property will be taken in for a reason, say, if there are over €5 million in borrowings and they are related to housing, land and so forth. There are quite a number of developers and house builders in that bracket. I heard a house builder say on a radio programme that they could end up in NAMA; I speak about the likes of McInerney, which specialises mainly in house building. I put the question to the Minister of State, Deputy Mansergh, yesterday, that if that company has a performing asset on which equity has built up, it would be unable to use that equity as collateral for a further development. The Minister of State replied that it could use the equity but it would not be for housing. If it is not for housing then it must be for commercial use and there is probably an over-supply of commercial property in the State also. The main business of the likes of McInerney is house building and if what the Minister of State, Deputy Mansergh, stated is correct, then McInerney and companies like it will not be able to go forward in the business of building houses unless they can borrow from NAMA, which will have funding of up to €5 billion available for such work. I want the Minister, Deputy Brian Lenihan, to clarify this important point. It is the kernel of all of this. What we will have, in effect, is the State controlling house building and housing right throughout the length and breadth of the State, if a company which may be in NAMA cannot use its built-up equity for the purposes in which it specialises, namely building houses. It is an issue at which the Minister must look.
I would like to hear the Minister’s views on it. Unfortunately, I will not be able to contribute subsequently as this is Report Stage. However, I draw his attention to the remarks made by the Minister of State, Deputy Mansergh, that the company would be able to use the equity, but not for housing.
Senator David Norris:
This amendment is like a mission statement. I do not see it doing the slightest damage, but it is really rather exhortatory.
I want to take up what my distinguished colleague, Senator Harris, had to say, and welcome it strongly. He has been a harsh and trenchant critic of the Frontline Alliance for clear and idealistic reasons. There was no nastiness in it. He felt it passionately. Having seen these people and their response, he feels these are not dangerous Jacobins; these are ordinary and decent people.
I also saw that march and I was impressed by them. They asked would I be with them on the 24th and I replied that I sincerely hope it will not be necessary for them to be there. I hope they can be persuaded and that their plight can be looked at because Frontline Alliance services are at the delivery point of the most important services to the average citizen.
Frontline Alliance, in its little leaflet, gives a couple of examples, such as the present position in health. I am sure the Minister will be aware of this. This is why it is so important to get this thing done properly. I agree with the idea that we must take all necessary steps to prevent this because what is already happening is so awful, and there is more to come. In health, gone are 6,000 staff, 4,000 hospital beds and 300 front-line posts, and there is the cutting of patient transport and ambulance services, the increasing of accident and emergency fees to €125, the increasing of thresholds for medical cards and drug refund schemes, and the means testing of home care.
I am all in favour of means testing everything, but it is all a question of where the bar is set. It could be devilishly unfair if it is set wrong, but I have no difficulty with means testing. I realise that would exclude me from many services. I do not care a damn; it never bothered me.
On crime, 350 Garda stations are closing. My local police station, Fitzgibbon Street, is being closed. It is unbelievable that with a serious crime problem this major station in the heart of the city of Dublin is being closed. The Garda states the station is closing for redecoration, but I did not come down the Liffey in a bubble. The leaflet also refers to such matters as 800 front-line Garda posts gone, the shelving of the new urban CCTV, the closing of 40% of the courts.
An Cathaoirleach:
I doubt if NAMA will be involved in Garda stations.
Senator David Norris:
Of course it is. It is part of the problem. It is exactly related to paragraph (xi) in the amendment, and I am taking up from what Senator Harris stated.
I just want to state the following three sets of figures on the deduction since the April budget. On a salary of €31,500 per annum, for the average PAYE worker the deduction is €945 per annum, but for the front-line workers it is €3,345 per annum or €195 per month, which is what most of us used pay on a mortgage. On a salary of €45,000, for the average PAYE worker the deduction is €1,350 per annum or €112 per month, but for a front-line worker — these are nurses, fire brigade staff, gardaí, ambulance workers — it is €4,100 per annum or €342 per month. That is real pressure. That is why I so much agree with Senator Harris and why I feel strongly that we must never allow this to happen again.
Senator Ivor Callely:
I will take the opportunity, because the time is short and we will not be getting in and out——
An Cathaoirleach:
We are discussing amendment No. 3. Senator Callely will understand Senators are allowed contribute only once on Report Stage.
Senator Ivor Callely:
I congratulate the Minister on his work to date and on his endeavours.
On the purpose of the Act, we all are aware this is a complex area. I spoke following Senator Burke on the same issue yesterday. The language we all are getting to know about performing and non-performing assets, loans and transfers, SPVs and other stuff is quite complex.
In amendment No. 3, on restoring confidence in the banking sector, orderly property management strategy, maximising funds and steps to prevent recurrence, will the Minister clarify the position on a loan transferred in light of what has been stated about any equity value in a performing asset, or even in a non-performing asset depending on when it was purchased? Will the Minister simply clarify that it is the loan rather than the asset that is being transferred, the management of the loan continues with the financial institution, the conditions associated with that — unless a new agreement has been reached — remain in place, and the asset, or the portfolio, depending on the value and the size — is managed as it was prior to NAMA?
We are in a complex area, uncharted waters. As Senator Harris said, there is concern among certain groups in society who feel they are carrying the can. There are other groups within the financial institutions who are pointing the figure at NAMA and stating that the rules are being changed because of the transfer to NAMA.
I say this equally for the benefit of the Minister. My understanding is that there are a number of accountancy practices which are not able to grapple with what I stated here on where what is and who deals with what. Some state — this might come from some of the financial institutions along with the accountancy practices — one’s loan and portfolio has been transferred. That is not my understanding and the Minister might bring clarity to that.
Maybe people are using this new tool as a vehicle to get out of a particular position or to change what has been prior to the birth of NAMA. When we get into the other amendments the position can become somewhat confusing. Will the Minister clarify that where people have a loan, it is the loan that is transferred, the management remains with the financial institution, and that the benefits, if any, arising from the portfolio, the performing asset or the non-performing asset can be utilised by the promoters behind the portfolio or the asset base. Will he clarify that NAMA will only deal with the financial institutions from which it takes the loans and there will be no direct contact with the customers of the financial institutions whose loans are being transferred?
Senator Larry Butler:
To take up the point dealt with by Senator Burke, I understood that until this legislation is completed, NAMA is not a functioning body. Is that correct?
Deputy Brian Lenihan:
Yes, it is correct.
Senator Larry Butler:
A point was made earlier today that the banks did not intend to honour an €11 million cheque paid out by a certain company for a contract because of the NAMA commitment. If NAMA is not a working body at present, how can the banks make that statement? The lending institutions must be careful about what they are doing at this time. It is not right to use legislation that has not yet left the House and for institutions to make excuses that they cannot do this or that because of NAMA. However, the Minister has just cleared up this point.
Second, Senator Burke referred to McInerney Homes, which is a house building company. It will have to make a business plan, which it will presumably put to NAMA. The main reason NAMA might hold up some of its developments is because it would not be able to sell some of the houses on the market. That is the reality at present and why we have NAMA in the first place. We cannot blame NAMA for the fact there is no market. In fact, NAMA is to achieve the opposite in that no fire sales will take place because NAMA will control most of the property market. This is a good thing in a way, because property will increase in value much more quickly because of NAMA. When there is a scarce commodity, which property will be, the market certainly moves more quickly.
I do not accept that Senator Burke’s point is correct. If whatever company goes into NAMA has a good business plan, it will be able to continue to work within NAMA. However, such companies will have to have liquidity and credit through NAMA. It will be critical that NAMA deals with business plans quickly because, if it was not to deal with them on an urgent basis, we could find that we would be putting many companies that could stay in business out of business. That is a key point.
The three arms of NAMA — business, credit and the special purpose vehicle — must work very closely together. If they do not, we would certainly have a problem. I ask the Minister to clarify what kind of mechanism would be put in place to deal with the business plan and make sure it is not being frustrated in the system, as we find with regard to red tape in legislation whereby business cannot function. I hope the Minister can deal with those questions.
Senator Frances Fitzgerald:
What the Minister is trying to do through NAMA is restore confidence in the banking system and, through that, in the economy. With that in mind, I want to ask about his response to material linked to this amendment concerning confidence in the Minister’s projections that has been put in the public arena by Mr. Peter Mathews — I know the Minister has looked at this material. I would like to hear the Minister’s response to what Mr. Mathews says in regard to the assumptions underlying NAMA. He suggests that the assumption there would be 100% recovery on the €30.8 billion of performing loans is completely wishful thinking, bordering on fanciful, and the assumption that there will be 50% recovery on the €46.2 billion of non-performing loans is equally fanciful. He goes on to quote what the Minister’s adviser, Dr. Alan Ahearne, said last year in regard to the banks, namely, that they should sell these loans at fair market value.
I raise this point simply because it is very much in the public domain and has been circulated to all Senators and Deputies. I am genuinely interested in this. We were talking about whether NAMA would make a profit, and there was also some discussion on this point earlier. On Mr. Mathews’s figures, he suggests NAMA will make a loss of between €12 billion and €18 billion, and that the assumptions the Minister is putting forward in the business plan and elsewhere are quite fanciful. I would like to hear the Minister’s response to that today. Quite a number of papers have been presented to all of us by this gentleman. The question is linked to this issue of confidence and the desire to achieve confidence in this plan. Will the Minister address the House in regard to the points that have been made about the potential losses of between €12 billion and €18 billion?
Senator Terry Leyden:
I want to place on record my appreciation and admiration for the Minister for being so attentive to this legislation. I have listened to almost all the contributions. Although the members of the largest Opposition party, Fine Gael, have strong reservations about the Bill, they have endeavoured to improve it to the best of their ability. I commend them and the Labour Party for their efforts. They could have ignored it and walked out, saying they were not going to participate in the legislation. They have done better than that because they have given the opportunity to the Minister to consider aspects of the Bill, which has been very worthwhile. I compliment all our colleagues in the Seanad on what has been an extremely good and very informative debate. I am sure the Minister would agree we have done the State some service in this regard.
Senator Paddy Burke:
We are all canvassing.
Senator Terry Leyden:
Senator Harris referred to the Frontline Alliance protest, as did Senator Norris. I thank the Minister for receiving its letter. I was contacted by one of the organisations, the GRA, of which I am a nominee in the Seanad.
Deputy Brian Lenihan:
All politics is local.
Senator Terry Leyden:
I wanted to clarify the situation referred to by Senator Harris. The Minister kindly received and read the letter. The point made very clearly to me by the people involved was that they hope the Minister acts on the letter. I sent a text back to them on that issue.
I know the difficulties, as we all do. Some young people in the public service are not on the maximum income and have committed themselves to very expensive loans through the activities of the banks, which the Minister is now resolving. They are landed with negative equity and the danger that they will have a reduction in their pay, which will make it difficult to repay the loans. The Minister understands and appreciates that. This was one of the points they made to me. Another point they submitted to the Minister is that a reduction in overall salary has an effect in regard to the long-term pensions for retired members. These were the issues, although I know the Minister is burdened with many issues.
The guarantee scheme which the Minister introduced in September 2008 will extend to September 2010. I ask the Minister when summing up to clarify the situation. Concern has been expressed to me by ordinary savers who have funds which are guaranteed under the scheme. I was asked recently where it was best to put money, whether in the post office or another institution which would really guarantee future deposits. While I know there is no danger to deposits because the guarantee is in place, I ask the Minister to state clearly that the guarantee will be extended continuously with regard to deposits.
5 o’clock
This issue is linked to NAMA as it is all linked to the banking situation. Without the Minister’s quick action last year, we would have been in dire straits and the banking system would have collapsed due to a run on funds. The banks know that, and know the Minister responded extremely efficiently. To my knowledge, it has not cost the State. The charge to the banks for the guarantee introduced last year has resulted in some funds accruing to the Government. The only group in the House that opposed the guarantee was the Labour Party. Will the Minister clarify the points I have raised?
With regard to a point I made on Second Stage, there is a role for the OPW in carrying out the work of NAMA. The Minister’s Department has direct responsibility for the OPW. It is the largest architectural practice in Ireland and has done most extraordinary work for the country. It has been decentralised to Trim. It has the capacity to manage estates and properties of architectural and heritage value. There is no need for any amendment to facilitate the OPW because the Minister has full power over the organisation. The OPW has a role to play and it would be worthwhile investigating where it could be of assistance to NAMA in carrying out its responsibilities.
I received very good advice on this matter. I will not read it because I was asked not to. The country needs a solution and NAMA is the only one available currently. The legislation establishing it needs to be implemented. The United States took a similar approach in the 1980s, as the Minister knows, and it proved successful and paid off. The US taxpayer actually won because of the decision taken at the time.
To some extent, the issue whether NAMA will pay more than the current market price is not the most important. Whatever excess it might pay will be more than recouped once economic activity resumes. The State will generate an additional return in the form of an equity return on its shareholdings in the banks. To my mind, it could be a win-win situation. The Minister would not have gone down this road in the first instance if he could have avoided it or if the banks could have solved the problem.
The banks will attract more funds. There is considerable funding available, irrespective of whether one believes this. Those who made money on the sale of properties and land, including builders, have money. Some of this money is still available and if the Minister could make it attractive for it to be invested, be it in Anglo Irish Bank or a bond, it would be tremendous. I have been made aware that, through the special purpose vehicles, funds from private sources can be raised.
I commend the Minister on introducing the Bill. It is receiving tremendous support from the public which is impressed by the Minister’s handing, command and knowledge of the issues involved. I compliment him and his officials who have done tremendous work on NAMA. I have been a Member since 1977, although I had a break for ten years, and in that time I never dealt with a more important Bill than this one. All we can do is wish it success. It will be successful in the longer term.
Deputy Brian Lenihan:
There has been a long series of interventions. Senator Twomey, who moved the amendment, inquired into the nature of the business plan. The interim business plan that was discussed is simply an interim draft plan. The final plan, which will be a ten-year plan, will have to be approved by the board of the agency when it is appointed.
The interim business plan is a draft and an indication of the character of the final business plan. The final one will be prepared and submitted to the board of NAMA for approval. This is the position on the business plan of NAMA and its strategic direction.
Very little was said about the amendment. I will deal with the various points raised. Quite a number of the amendments proposed are already encompassed by various objectives or functions of the legislation or else they are surplus to legal requirements. A proposed purpose of the legislation that caught Senator Harris’s eye is, “to take all necessary steps to prevent a recurrence of the conditions that brought about the financial crisis”. While it is not appropriate to include this in legislation, it is entirely appropriate that this should be an objective, not just through NAMA but through the reform of the regulatory system and public financial system and the restructuring of the banking system. There is a wide range of action points.
The mandate of NAMA is very clear. I do not want to reiterate the argument on estimating and fixing the long-term economic value based on appreciation of 10% or 15% if one takes the subordinated bonds into account. We will not agree on this but, on any view, it is fair to say modest assumptions are being made. What is envisaged through NAMA is a sustainable construction industry rather than the bubble-driven one we witnessed in recent years. We can agree on that.
The objective of national economic and social development is written in as a compelling need that NAMA must address. This accommodates the Senators. This matter was raised by the Labour Party in the Dáil and it is covered by the legislation. It is important that it is stipulated within the legislation that the board of NAMA should have regard to the social and economic development of the country.
The amendment deals with the question of lending. We have included in the Bill specific powers to give guidelines on lending and to police them. The compelling need NAMA must address is the need to facilitate lending. Clearly, NAMA is not a lender. Reference is made in the amendment to an orderly property management strategy. The business plan will address this.
The debate covered more than the amendment. Senator Harris stated he was discussing the current economic position with a number of public sector workers who are engaged in front-line operations and a day of action today. It is important to record, because it has not been part of the debate, that public servants have been subject to a substantial reduction or adjustment in their salaries already. I have been very struck by this since the supplementary budget in April. The average reduction is approximately 6.9%. It was a little over that in the initial measure announced in March but it was adjusted in the supplementary budget in April. The average deduction among all public servants has been 6.9%. It is higher for those further up the income scale and a little lower for those further down. That is a substantial adjustment. The argument will be made that many in the private sector have been subject to similar adjustments. This is true but not all have.
I deeply appreciate the services provided by public servants. It is important to note this in the debate but this does not absolve us from the need to ensure our public services are delivered in an efficient way that is cost-effective for the taxpayer. While the costs of many goods and services have been falling during the crisis, the cost of public goods and services has not. This has become an increasing burden on the rest of the community. There is a responsibility, not just on the central Government but also on all parties concerned with local government, to address the excessive cost structure in the public sector. The economy cannot sustain it. This is all I want to say in reply to Senator Harris. I agree with him on the importance of and the work done by gardaí, nurses, firemen and many others in the emergency services. I am glad he was able to report to the House that the debate was conducted in a civilised way. There is growing public awareness that we must make a very substantial adjustment. We will be debating this in the weeks and months ahead.
Senator Paddy Burke was concerned with the question of equity and the builder who has equity left in a property and who may find it difficult to obtain a loan. If the builder has equity remaining, he should be able to obtain facilities from the banks. If the builder wishes to obtain facilities from NAMA, there is provision under the legislation for €5 billion which will be concentrated on incomplete developments.
That a loan will be transferred to NAMA does not mean a bank will not be able to extend credit to a reliable borrower in that context. It is important to make that point. Again, this relates to the working out of the loan and this operation. Let us be clear: the current financial model for construction and development in Ireland is broken. One of the reasons for this — this is not the fault of builders or developers — is that it is built on the enterprise and industry of the individuals or the companies they incorporated as private companies and dependent upon one development to fund the next. That is not a structured financial model that will ensure the construction industry will revive to a sustainable level. The reason for the drop in asset prices is this is an unsustainable financial model to restart the construction sector. It is worth noting that in other jurisdictions there are available a far wider range of financial models to fund the construction sector. In many countries the sector does not depend on one development to fund the next. Many construction companies in the United Kingdom, for example, have gone to the market and raised the funds which form their capital base. This allows for a more structured investment in a company over time.
Senator Burke referred to a particular company. I do not wish to go into the difficulties of an individual company but that company is organised as a public limited company, PLC. Many of the UK building companies are organised as public liability companies. What has happened in the course of this crisis is that the banks have taken their shares and taken on responsibility for working out the management of companies. It is not possible to do that in this jurisdiction because the bulk of the building and construction activity here covering two third of the NAMA loans located in Ireland was undertaken by private individuals or private individuals who incorporated small companies in which the corporate equity contribution is uncertain.
We need more flexible models. NAMA, in amassing this land bank and the amount of loans it will amass, will, when it enforces securities, undoubtedly, be in a position to attract funding into the sector. I have heard many CIF representatives and individual builders and developers make the point made by Senator Burke, namely, that they are concerned they will not receive credit under this system. However, the reality is that they are not receiving any credit under the current system which for funding the construction sector in Ireland is a broken model. It is entirely dependent on the equity of the last development. This will not fund a return to sustainability in the building sector. We are all aware the number of houses that will be constructed here this year and next could be as low as 10,000. The vast majority of these houses will be accounted for by once-off developments rather than systematic estate-type developments.
I have been at pains throughout this debate to make it clear that I am not advocating a return to the conditions where we were constructing approximately 70,000 or 80,000 houses a year. Most of the data on this subject in the Department of the Environment, Heritage and Local Government suggest we have an ongoing need for 30,000 to 40,000 house units a year, which we will have to meet. This will require a sustainable construction industry. The current financial condition of the sector and its financial model will not secure this objective, which is a separate argument for the agency, on which I have not yet embarked upon much in public debate, although I mentioned it at a committee meeting in August. Naturally, there were other topics of greater interest to members, in particular, protection of the taxpayer which should be a legitimate and proper concern for public representatives. I thank Senator Burke for raising the issue, as it raises many important points on this legislation.
Senator Norris echoed the views of Senator Harris on the economic crisis. While I have commented on the matter, I would make the point that we have three distinct problems: we have our difficulties with the public finances — our receipts are far lower than what we spend; we have a problem generally with our cost structures which allowed us to become uncompetitive — by 2007 our unit labour costs were the highest in the eurozone, while our third problem is that we have a banking crisis. Unfortunately, each of these problems, although distinct, is related and must be tackled to put this country on the road to economic recovery.
Senator David Norris:
What the Minister says is useful. I will communicate it to the people, given that the Minister was particularly sensitive in communicating the information to Senator Harris. I believe the people concerned have a website and this reply from the Minister should be forwarded to them.
Deputy Brian Lenihan:
Senator Callely raised a number of specific questions which are important. Like Senator Burke, he is also reflecting, not so much on what builders and developers are saying as builders and developers but on what they are saying as customers of financial institutions. As Senator Butler correctly stated, NAMA does not yet exist. It has assumed an existence in the public mind which it does not yet have. It does not exist for a legal or any other purpose.
Senator Callely sought clarification in regard to what was being transferred to NAMA. The asset which is transferred is the bank loan, not the collateral. If NAMA has to take enforcement action, action will be taken to secure the collateral and eventually sell it. What is transferred initially under the legislation is a bank loan. The bank loan agreement remains in place. NAMA steps into the shoes of the banks and has the same rights and duties as the bank in regard to the loan. That is the position of the customer as against NAMA.
Senator Callely asked if the management would remain in place. It will not remain in place. I am glad the Senator raised that issue as it is not a topic that has come up in this debate. Clearly, if we buy the asset, we must manage it. NAMA will manage the assets. As regards the larger exposures — of which there are a number, as Members will be aware, some of which have been mentioned in the debate — these will be centrally managed by the agency. They will not be managed by individual banks. The banks will lose all responsibility in the management of large exposures which run to substantial amounts of money. Typically their loans can be located in a number of financial institutions. The particular arrangements surrounding them are — I do not like this verb, although it is used by my officials — bespoke, namely, they are distinctive to the borrower in question. As such, they require careful centralised management.
It is envisaged that NAMA will take direct responsibility for a block of loans owed by the most substantial borrowers whose loans are being transferred. The Government’s decision to establish the agency was influenced by the existence of this block of borrowers who cross the financial institutions. I am sure many Senators have heard in the public debate the argument that a separate vehicle should be established in each bank and that each bank should be forced to work out its own loans in isolation from the other banks. However, the litigation referred to in this and the other House illustrates that a large number of financial institutions are involved with the more substantial borrowers. It will be impossible to manage and work out the position if one does not have a single agency managing the problems, taking a collective view on the loan portfolio right across the institutions, taking the necessary enforcement action and managing it in one parcel. That was one of the arguments, although not the only one, for the single agency approach. In response to Senator Callely, that is the position on the larger exposures. The board of NAMA will determine at what level this will happen and clearly will have regard to the degree of cross-collateralisation within the system.
In regard to the majority, in number, if not in value, of loans, NAMA will take a management role in respect of them but the actual loans will be managed by the original banks in which they originated. The bank, in respect of these loans, will be working for NAMA. Under the relevant EU rules, the State will be obliged to pay a management fee to the financial institution in respect of that loan. Senators might legitimately inquire about the reason we took this route. Reference was made by Senator Callely and others to the experience of the United States. While, in respect of the United States Savings and Loan crisis, there was a successful outcome in financial terms, a huge staff and bureaucracy were retained to manage the loans in question. That made the working out of the loans very expensive. We are back to the argument we had about professional fees. No matter how one structures it, there is a cost.
In his evidence to the committee, Dr. Somers rightly warned us all about the dangers of establishing a huge bureaucracy and turning NAMA into a huge bureaucracy. I have been conscious of that from the start. Therefore, the view was taken that the banks should continue to manage the smaller loans, but on behalf of NAMA. That is one of the advantages of the subordinated debt, risk sharing arrangement to which I would like to draw attention. Several Senators suggested I did not follow the advice of the Governor of the Central Bank on risk sharing. In fact when the Governor of the Central Bank was a private citizen he was very free with his advice, both to me and to many others. He had a correspondence with me about NAMA in which he gave much valuable advice. His suggestion was that it was the shareholders who should bear the risk, whereas in fact it is the bank itself that shares the risk under the subordinated bond arrangement. The reason I was anxious for that is that it creates an incentive for the bank to perform in the management of those assets which remain as an agent of NAMA in regard to the management of the loans. They stand to lose if they do not work out the loans correctly. I felt it was important to put the mechanism in place that the bank itself would be at a direct loss so its employees would be incentivised to make that extra €1 billion or €2 billion, which the subordinated debt arrangement gives them the opportunity to earn over time. That is the reason it was structured in that way.
To answer Senator Callely’s question on management, NAMA manages but the lesser exposures are managed by the institution on behalf of NAMA. He said there was much confusion due to some accountancy practices. I cannot assist him on that. I belong to a different profession and the mysteries of my profession have always astonished the outside world. One of the things I have learned as Minister for Finance is that the mysteries of the accountancy profession are equally bewildering to the outside world because they seem to make money appear and disappear——
Senator Liam Twomey:
That would be useful.
Deputy Brian Lenihan:
——amount to something and not amount to something with great ease. I have always followed the maxim in regard to banks that cash is king. If one can find out where the cash is, one will generally find the answers.
Senator Butler made a point on the entity. It is the case that NAMA has a commercial mandate. That must be the case, as that is how we protect the taxpayer.
Senator Fitzgerald inquired about Peter Matthews. I had an opportunity of meeting him recently and he submitted to me the papers I am sure he submitted to Senators. I wish to make a number of points on them. I could be here a very long time if I were to do a detailed analysis. An assumption he makes in his papers is that he is not restricting himself to the assets to which NAMA is restricted. He is looking right across all the banks’ assets. He is looking at mortgages, consumer debt and other miscellaneous borrowings. He is giving a picture of an entire bank rather than part of a bank. I do not mean to criticise him but he is doing it without the benefit of having looked at the loan quality in the banks. Since the guarantee was introduced we have had that benefit in the past year of going into the banks and looking at the quality of the loan books and doing the due diligence on the different institutions.
I salute the fact that he has done all of that work off his own bat and put it into the public domain. It is still under examination in my Department. We do not always agree with him but it is valuable that a public spirited citizen would take that interest. He also makes certain assumptions about the loan books, which again are not in accordance with the assumptions we are making on the evidence we have available to us.
The other point, which I mentioned to him when I met him, is an interesting one. Essentially, he is arguing that what we need to do for the banks is give them massive capital injections. In other words he wants us to build up their capital base and not concentrate so much on liquidity and exchanging assets for bonds that will give the banks cash. There is a balance to be struck. There is no doubt that when the NAMA exercise is complete it will accelerate capital requirements in the banking system and there will have to be an increase in capital. However, one of the difficulties about putting in capital without doing the kind of detailed examination of the loan books we are doing is that I do not think one would create the same international confidence in the institutions if one did not come up front and look at the weakest loan books, carry out an individual evaluation of them and then see what is the exact capital requirement.
I dealt with Japan the other night. What they did was to make repeated capital injections, but I do not think that approach on its own will solve the problem. There is a balance to be struck between liquidity and capital. If Peter Matthews falls on one side of that equation, Dermot Desmond falls decisively on the other. The latter essentially argued we should not buy any assets; we should just put the €54 billion straight into the banking system as a float and come back in ten years and see what happens. We need to strike a balance between capital, liquidity and funding.
Senator Leyden was engaged in canvassing his nominator for his panel. I have dealt with that already. He did it, as he always does in these matters, in a very admirable way——
Senator Liam Twomey:
The Minister could get him under section 221.
Deputy Brian Lenihan:
——in that sort of soft Connacht voice of his. “Would you not be sorry for the poor man who is outside the gate this evening?” He is a master at that. I have seen him at it all his life, so it is not a new-trick pony to me.
Senator Terry Leyden:
I learned from the Minister’s father, who was the master.
Deputy Brian Lenihan:
I see. There you are. Obviously there are things he taught Senator Leyden that he did not teach me.
It has been a very good debate——
Senator Terry Leyden:
I did ask the Minister about the guarantee scheme.
Deputy Brian Lenihan:
Yes. We have receipts on foot of the guarantee scheme. The Senator also inquired about possible assistance from the Office of Public Works. We are open to that. That office has some specialities that could be of considerable assistance.
Senator Liam Twomey:
I still intend to press the amendment. None of us wants to see NAMA fail but in the next few years there will be many problems and difficulties for the Minister. There will be the master SPV and there may be other SPVs. I have no doubt the Minister might find himself setting up property management companies in the foreseeable future. Ongoing critical financial management will be required. One of the questions that is seldom addressed by the Government side is what will happen if NAMA does not work, and if it does not get credit flowing. What is the Minister’s plan B? The amendment would be useful in the sense that it is something to which we can constantly refer back in terms of the purpose of the legislation. We will approach that at a later date.
Amendment put and declared lost.
Amendments Nos. 4 to 6, inclusive, not moved.
Senator Alex White:
I move amendment No. 7:
In page 24, between lines 18 and 19, to insert the following:
“8.—The following shall be added to paragraph 1(2) of the First Schedule to the Freedom of Information Act 1997—
“NAMA, a NAMA group entity or a valuation panel under the National Asset Management Act 2009”.”
The amendment deals with the proposed application of the Freedom of Information Act. I made the point last night but I cannot remember who was sitting in the chair the Minister is in——
Deputy Brian Lenihan:
May I make a point of order?
Acting Chairman (Senator Diarmuid Wilson):
No, but we will facilitate the Minister if he has a query.
Deputy Brian Lenihan:
I think amendment No. 7 is grouped with another amendment.
Senator Alex White:
It is.
Senator Liam Twomey:
I move amendment No. 10:
In page 39, between lines 32 and 33, to insert the following:
“(f) the avoidance of conflict of interest by any expert adviser or service providers to NAMA and the participating institutions,
(g) the orderly property management strategy over a ten year period,
(h) for issuing loans, or for allowing security over which it has a charge be used as collateral for loans by other institutions by persons whose loans with NAMA are functional and not in arrears”.
I agree with the Cathaoirleach. I note that so far we have taken approximately half an hour per amendment on Report Stage. I thought this might be over quicker for Members but if we keep going at this rate, it looks like we might be here until 6.30 a.m. tomorrow. I will make this fairly quick.
7 o’clock
This relates to section 35, the codes of practice. The Minister listed a number of areas where he wants to see a code of practice issued by NAMA. We are simply adding three paragraphs to the subsection. It does not change the section. It simply asks for three more codes of practice to deal with conflict of interest, to deal with the ten year management strategy which the Minister previously stated is more or less coming anyway, and to deal with loans and securities of loans which is more or less part of what NAMA is anyway. I see no reason the Minister cannot agree to this. I ask the Minister of State, Deputy Mansergh, to state why we cannot have codes of practice on these, which also are fundamental parts of what the NAMA legislation is about. It changes nothing else.
The last paragraph of the subsection, which states “any other matter in relation to which the Minister directs NAMA to prepare a code of practice.”, still remains in the Bill and I cannot see why this is in any way contentious. If the Minister of State wants to reply, I will say no more on it.
Senator Frances Fitzgerald:
I second the amendment.
An Cathaoirleach:
Does Senator MacSharry wish to come in on this amendment?
Senator Marc MacSharry:
No.
Senator Ivor Callely:
On a point I raised earlier about the purpose of the Bill, and moving on to the code of practice which is before us, will the Minister of State confirm there will be no practices applied that would be different to the original business practice entered into by the loan applicant and the financial institution? I understand new terms may be agreed mutually but I ask that there would be no practice whereby the financial institution, especially NAMA, would be able to apply a new code or term in reference to the original loan.
I asked the Minister earlier whether the asset or the management was being taken over by NAMA. My understanding was that it was not. However, the Minister later indicated that there were going to be a number of cases — the information available to me is that there will be as many as 20 — that will be taken over and managed by NAMA. If that is so and given whatever code of practice applies to those cases, especially if not only the loan but also the asset is to be managed by NAMA, what practice applies to ensure the person whose loans and assets are being incorporated into NAMA is not being disenfranchised in any form?
I am concerned about a number of issues. It is now likely there will be a group of people who will be treated slightly differently from the majority. I am asking for clarity as to what will apply in their cases. I understand some of this work has already commenced and that there has been application of certain procedures and codes of practice. I would like to have clarity on that point.
It is not just coming from the NAMA side. This issue was touched on earlier but I did not have the opportunity to contribute at that stage.
Senator David Norris:
On a point of order, I welcome Senator O’Malley to the Chair. I know now that matters will be expedited.
Acting Chairman (Senator Fiona O’Malley):
Senator Callely should continue.
Senator Ivor Callely:
I did not hear the comment.
Senator David Norris:
I said thank God we have Granuaile in the Chair. She will put an end to the nonsense.
Senator Ivor Callely:
I ask the Minister of State and his officials to be on guard with respect to the other players involved. The mechanism we are putting place can be used as a tool by various players participating in this regardless of what capacity they may be playing at. For example, it may be purposely beneficial for valuations to come in at a particular level. If we take the 30% that is within the body of NAMA itself, the percentage could be far greater than that, even if we go according to the old mantra of location, location, location, which I have mentioned before when participating. There could be a prime site in a prime location, although I recognise the variances that might appear throughout the country and there can be variances in valuations. I am concerned there could be game playing, allowing for the fact there is a new tool which permits some of the financial institutions perhaps to use valuations which may be in their best interests and not necessarily in the interests of either NAMA, the Government or the original applicant. There seems to be a shifting of the ground and a shifting of what one might expect to be in a code of practice.
Acting Chairman:
We will get the Minister of State to clarify that point.
Senator Ivor Callely:
We may see further developments in this area. I do not want to put the Minister of State on the spot. I do not believe he will be able to clarify these issues.
Senator David Norris:
Why not ask him?
Senator Ivor Callely:
I did not ask. I said I wanted to put the Minister of State on guard, and I repeat that. If he can respond, that would be brilliant, but it is something we will have to monitor closely as this issue progresses.
Senator Eoghan Harris:
I merely want to support Senator Norris in regard to doing our business with some dispatch. It is late. Wars of attrition do not impress the public. The public are much more interested in our doing our business with dispatch. I appeal to Senators to shorten their contributions. I hope the Acting Chair will take a heavy hand.
Acting Chairman:
Thank you, Senator. I call the Minister of State. Has he a brief response?
Minister of State at the Department of Finance (Deputy Martin Mansergh):
I will respond to the points made as briefly as I can. To respond to Senator Callely’s point, which is not strictly on the amendment, there will be no change in the rights and obligations of the debtor under NAMA than had been the case with the participating institution.
Section 35 provides that NAMA, within three months of the establishment day, is to prepare codes of practice for approval by the Minister for Finance. It is normal that codes of practice of a State agency are approved by the Minister with responsibility for that agency. Section 35(1)(f) allows the Minister to make codes of practice in regard to any other matter he considers necessary. The general power of direction to make codes of practice is sufficient and it is not necessary to add to the list of codes of practice as purposed.
I draw attention to the provisions of section 45, which states: “NAMA shall seek to ensure that each expert adviser or service provider ... makes every effort to avoid or manage conflicts of interest and to declare any such conflict (actual or potential) to NAMA”. Therefore, I cannot accept the amendment.
Acting Chairman:
Is a response necessary, Senator Twomey?
Senator Liam Twomey:
No.
Amendment put and declared lost.
Acting Chairman:
Amendments Nos. 11 to 14, inclusive, will be discussed together, by agreement. Is that agreed? Agreed.
Senator Alex White:
I move amendment No. 11:
In page 50, line 30, to delete “Éireann.”, and substitute the following:
“Éireann,
save that such evidence shall not include questioning or expressing an opinion on the merits of any policy of the Government or a Minister of the Government or on the merits of the objectives of such a policy.”.
This is a proposed amendment to section 58. The matter was ventilated in the House last night.
Senator Frances Fitzgerald:
At great length.
Senator Alex White:
It concerned the issue of the chairperson and chief executive officer of NAMA and the extent to which they ought to be restricted or constrained in what they say before the Committee of Public Accounts and what type of evidence they are entitled to give, as well as the level, basis or extent of the nature of the questioning that is entitled to be permitted. The Minister for Finance last night made a number of points, chief among which was that essentially this was a protection for the chairperson and-or the chief executive officer. He noted the fact, which is interesting, that the Standing Orders of the Committee of Public Accounts already provide for a restriction on the members of that committee and the type of questions they can put to persons appearing before that body. However, he felt he needed to go further with this formulation.
The position I outlined last night was that it is odd that something that purports to be a protection of an officer should be expressed in terms of prohibition on that person. If one wants to protect a person from something, why does this translate into a prohibition on that person?
There was some debate on this question last night and the Minister said he would leave over the matter to Report Stage. We had hoped he might come to the House with something in this line. He has not done so, although I note there are two amendments before the House, one of which is the Labour Party’s. It carves out of the evidence to be given by the officers concerned on the questioning or expression of an opinion on the merits of any policy of the Government or the Minister or the merits of the objectives of such a policy. It would meet the Minister’s objective in subsection (3) but without being as restrictive or draconian. In the circumstances and given what the Minister said, the amendment would provide for the protection of the chief executive officer and chairman. There is a list of items that constitute the evidence that may or should be given and there is an exception, namely, that the evidence to be given or the questioning to be allowed should not include the expression of “an opinion on the merits of any policy of the Government or a Minister of the Government or on the merits of the objectives of such a policy”. The amendment would meet the policy objective without being as draconian as the formulation included in the Bill.
Senator Ivana Bacik:
I second the amendment. I will speak to amendments Nos. 11 to 14, inclusive, which include an amendment in the names of Senators Norris and O’Toole. Theirs has a slightly different nuance, although it addresses the same point as that of the Labour Party.
Sections 58(3) and 59(2), both of which we propose to delete and replace, are very prescriptive and impose extreme restrictions on the chairperson and chief executive officer. The alternative wording in amendment No. 11 provides a somewhat more nuanced approach to the giving of evidence, while still meeting Government objectives, as Senator White stated.
Amendment No. 13 would have a somewhat different effect in that it would give more scope to the chairperson and chief executive officer to question or express an opinion on the merits of Government policy. It would simply allow them to decline to express or question an opinion. There is a difference between the amendments. If amendment No. 11 is rejected, amendment No. 13 can be put separately. I am not sure all the amendments should be grouped together. While I know we can vote on them separately, it must be noted there is a difference in their effect.
Senator David Norris:
My amendment is in the same area but different. The Labour Party’s amendment would go quite a way in the direction of that of the Government because it still states “evidence shall not include questioning or expressing an opinion” in other areas and in certain ways. Mine would simply replace the words “shall not” with “may decline to”. This meets the requirement the Minister stated last night he wished to defend, that is, to protect the rights of the chairperson giving evidence. He stated last night that he was very attracted to my amendment and I was very hopeful I would see a little asterisk indicating this like a token of affection. However, I do not see the asterisk and feel rather jilted. On the other hand, we made our point and it lodged with the Minister. He indicated he would seek further advice and place that advice before the House. I am not sure whether he was referring to the Attorney General or the Parliamentary Counsel but I am sure the Minister of State, Deputy Mansergh, will have reply for us.
Deputy Martin Mansergh:
I am taking the amendments together. It is standard practice to include a provision requiring the chief executive officer and chairman of a State agency to refrain from inquiring into or commenting on the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objective of such policy or policies. Therefore, this legislation is no different in that respect.
It is worth noting the orders of reference of the Committee of Public Accounts. In that regard, paragraph 7(b) of Standing Order 158(i) of Dáil Éireann states the committee shall refrain from “enquiring into the merits of a policy or policies of the Government or a member of the Government or the merits of the objectives of such policies”. The proposed amendment in the names of Senators Norris and O’Toole would put the CEO and chairperson in a very difficult position. It provides that they might answer questions or decline to do so. They would be under pressure from the committee to do so and might find it difficult not to do so. They should not be in a different position from other public servants vis-à-vis the Committee of Public Accounts. Therefore, I cannot accept the amendment.
The Minister deleted a proposed subsection (3)(b) which would have prevented the chief executive officer and chairman from commenting on policy in any document or report. He accepted that was excessive.
The Minister examined the Senators’ proposed amendments and consulted the Office of the Attorney General on the issue. I am certain he did not promise to lay the Attorney General’s opinion before the House because Ministers never do so. A trained lawyer such as the Minister would be least liable to make such a commitment. However, it is his view and that of those from whom he sought advice that the Labour Party’s amendment is not necessary. Its intention is captured in subsection (3).
I have a general comment on the notion that the provision under discussion comprises gagging or censorship. Within the framework of Government policy, it is possible to give a great deal of opinion, make assessments, etc. I know this from experience. I did a a lot of public speaking as an adviser. I did not depart from Government policy but noted there were many supplementary points one could make to help to explain in detail what was occurring. Therefore, the provision will not be a significant restriction. There is a clear division of roles. Governments decide on policy and it is normally set out in broad terms. Agencies are responsible for its detailed implementation. It is proper that the interest of any committee be in how the policy is being implemented. If one wants to debate the policy, there are adequate fora for doing so, namely, the Houses of the Oireachtas.
Senator Alex White:
That is a very disappointing response and it is not convincing. With regard to the contention that the provision represents standard practice, it emerged in the debate last night that provisions such as this appear in some Acts but not in others. It is clear it is not a universal provision affecting the types of officeholders in question. I accept the provision is included in some legislation but it seems perfectly clear that it is not contained in others.
I am not sure whether I misunderstand something. I certainly believed I understood the issue last night but now the debate has been reopened. Far from necessitating this amendment, the Standing Order, as read by the Minister of State, actually obviates the need for it. I would like an explanation. If the Standing Order states the committee is to refrain from asking the questions at issue, this is surely an argument not to prevent an individual from answering them. If the committee is not going to ask the questions, one does not have to legislate to stop somebody answering them. That is the point I was making. Unless I have missed something, I believe I am correct in that basic proposition which has not been addressed by the Minister of State. If I am correct in what I am saying, this helps rather than hinders our argument.
I am disappointed by the response from the Minister of State. The Minister for Finance, when in the House last night, appeared somewhat more open to addressing this particular objection. On the general question of gagging and so on, I do not know if this provision represents a wish to gag public officials, although I am suspicious it does. I believe people would be entitled to hold that view.
A controversy arose earlier this year in regard to the appearance of Dr. Somers at a committee of this House. At the very minimum, there was embarrassment, if not fury, on the part of Government when Dr. Somers delivered himself of the opinion that the National Treasury Management Agency had no experience of bank restructuring and was not adequately staffed to deal with it. The furore in regard to his relatively innocent remarks in that regard was extraordinary. I do not believe the response in this regard is unconnected to the attitude being taken by the Minister of State in regard to this amendment. That is my, not unreasonable, view.
Acting Chairman:
The Senator’s time has expired.
Senator Alex White:
I am not yet finished but will not be much longer.
Senator Eoghan Harris:
Is there any chance of gagging this debate?
Senator Alex White:
The House has not heard——
Acting Chairman:
I am seeking clarification from the Minister of State on half of the Senator who has made a specific request.
Senator Alex White:
I am not yet finished but I am almost finished. The House has heard very few speeches from the Labour Party benches for the past six hours. Perhaps the Acting Chairman will indulge me in regard to the two or three amendments which we will be pressing.
I would like to finish the point I was making in regard to Dr. Somers. I note RTE has stated that Dr. Somers is to leave his post next month. This was confirmed on the airwaves this evening. Dr. Somers has served the State well. It would be entirely wrong for us to be seeking in any sense to restrict or gag officials such as Dr. Somers, his successors or officials of NAMA who have such an important job to do on behalf of the State.
If the Acting Chairman does a word count on my contribution, she will find it is a lot shorter than many others——
Acting Chairman:
It will be shorter if the Senator finishes now.
Senator Alex White:
——including those who are calling for a shortening of the debate.
Acting Chairman:
I am indulging the Senator. There is no obligation on the Minister of State to reply unless he so chooses to do.
Deputy Martin Mansergh:
I do.
Acting Chairman:
I ask the Minister of State to be brief.
Senator David Norris:
I believe I have the right to speak to my amendment.
Acting Chairman:
I beg the Senator’s pardon. He had not indicated his wish to speak.
Senator David Norris:
I have reasonably good antenna and can tell how matters are progressing. I have no appetite for any further disclosures from the Minister. As the debate progresses I discover in myself an increasing appetite for the gag. I also have other more carnal appetites which I now propose to satisfy elsewhere. I will return for all votes.
Senator Eoghan Harris:
Is the Senator going to eat also?
Senator David Norris:
Yes.
Acting Chairman:
I call on the Minister of State to give a brief reply.
Senator Alex White:
On a point of order, before Senator Norris leaves the House, I wish to inquire, in terms of the business of the House, whether if the Labour Party amendment is pressed the outcome of that vote will in any way affect the possibility of Senator Norris’s amendment being put to the House.
Acting Chairman:
It will.
Senator David Norris:
I will be back to vote.
Senator Alex White:
I would not like to deprive Senator Norris the chance of pressing his amendment if the Labour Party amendment is defeated.
Acting Chairman:
We are discussing amendment No. 12——
Senator Alex White:
We have another amendment——
Acting Chairman:
I am replying to the Senator. If the Labour Party amendment No. 12 is agreed, Senator Norris’s amendment No. 13 cannot be moved.
Senator Alex White:
What happens if the amendment is defeated?
Acting Chairman:
Senator Norris’s amendment can be pressed. I call on the Minister of State to reply.
Deputy Martin Mansergh:
The equivalent of Committee of Public Accounts Standing Orders are being extended to the committee dealing with NAMA. The Minister’s view is that the point made in the Labour Party amendment is adequately covered by the text already in the legislation.
There are, in particular in regard to a body like NAMA, important confidence issues which cannot be disregarded. These apply to institutions such as the Central Bank and other institutions that have particularly sensitive functions, which makes this provision particularly important. I had not heard, as I have not had an opportunity to listen to any news bulletins, that Dr. Somers is retiring from his post. I have known Dr. Somers for a long time. I take this opportunity to pay tribute to him as an absolutely outstanding public servant——
Senator Paul Coghlan:
Hear, hear.
Deputy Martin Mansergh:
——in particular in his current role.
Question put: “That the words proposed to be deleted stand.”
The Seanad divided: Tá, 27; Níl, 25.
Tellers: Tá, Senators Camillus Glynn and Diarmuid Wilson; Níl, Senators Ivana Bacik and Alex White.
Question declared carried.
Amendment declared lost.
Amendment No. 12 not moved.
Senator David Norris:
I move amendment No. 13:
In page 50, line 35, to delete “shall not” and substitute “may decline to”.
Senator Paul Coghlan:
I second the amendment.
Question put: “That the words proposed to be deleted stand.”
The Seanad divided: Tá, 28; Níl, 24.
Senator David Norris:
I move amendment No. 31:
“In page 131, line 15, to delete “€1,000” and substitute “€5,000”.”
This amendment tries to deal with the lack of consistency in the fines. Where there is illicit interference with the processes of lending money, initiation of legal proceedings, legal proceedings in being, purchases for the sale for property and so on, then the penalty under section 221 is a fine of €1,000 or a prison term not exceeding six months, or both. Yet in much less serious situations outlined in the Bill, the individual is subject to higher fines. In other words, there is a serious discrepancy in the fines.
When I pointed this out earlier on to the Minister, he seemed to be sympathetic to it. In particular, he felt that the possible fine for somebody who made a malicious allegation might be a little bit severe. There should be a systematic application of a fine. A fine for a much more damaging offence that could be damaging to the economy should be at least on the level of the other matter.
Senator Liam Twomey:
I second the amendment.
Deputy Martin Mansergh:
The purpose of these amendments appears to be to increase the penalty in respect of the offence of lobbying NAMA from €1,000 to €5,000 and to increase the maximum prison sentence from six months to 12 months. On Committee Stage, Senators compared the lobbying offence with the offence under the whistleblower’s provisions, and suggested that the penalty in respect of the lobbying offence is too low in comparison.
In the ordinary course of events, it is not an offence to proffer honest advice, make suggestions, or lobby a person or organisation as to how they should conduct their affairs. A special provision has been inserted to make an exception in respect of NAMA. The penalties for lobbying are rightly lower than that which would apply where a person knowingly, deliberately and in bad faith makes a false accusation of wrong doing. If an untruthful or misleading representation were made to NAMA by a developer, businessman or credit institution seeking to gain an advantage for themselves, then that could potentially be a far more serious offence. However, that scenario is catered for by section 7(2) and section 7(4) of this Bill. The maximum penalty in that situation is a fine of €5 million, or a sentence of five years imprisonment. In the case of a credit institution, that maximum fine is increased to €20 million. In these circumstances, I cannot support the amendment.
Senator David Norris:
We are talking about serious matters here. The Minister talks about honesty and good faith, but I do not see it. There was a very serious debate earlier in the day about section 221, and several Senators were very concerned.
Deputy Martin Mansergh:
As public representatives, we are quite often lobbied to do things that are not in our power to do or that we should not do. In most cases, although there are exceptions, people do not realise they should not really be asking us to do what they are asking us.
Question put: “That the figures proposed to be deleted stand.”
The Seanad divided: Tá, 26; Níl, 25.
Tellers: Tá, Senators Camillus Glynn and Diarmuid Wilson; Níl, Senators Eoghan Harris and David Norris.
Question declared carried.
Amendment declared lost.
Senator David Norris:
I move amendment No. 32:
In page 131, line 16, to delete “6 months” and substitute “12 months”.
If I thought one or two Members of the other side would absent themselves I would press this amendment, but I will not. However, I would point out how very close it was.
Senator Alex White:
Give Senator O’Toole a call.
Amendment, by leave, withdrawn.
Senator Liam Twomey:
I move amendment No. 33:
In the text of the Bill as amended by amendment No. 66 at committee stage, line 3 after the words “of the Board” insert “or members of the Oireachtas”.
(Interruptions).
An Cathaoirleach:
Members, please respect the House.
Senator Liam Twomey:
Where a whisleblower can go to either the Garda or a member of the board, after the words “of the Board” I want to insert “or members of the Oireachtas”.
Senator Frances Fitzgerald:
I second the amendment.
9 o’clock
Deputy Martin Mansergh:
This amendment appears to be intended to broaden the scope of the whistleblower’s provisions introduced on Committee Stage in this House to extend protection to reports made to Members of the Oireachtas. It is not appropriate that the protection be extended in this manner. In the event that a wrongdoing is to be reported, it is appropriate that it be reported to the board which is responsible for the conduct of NAMA and for the oversight of the agency or to the Garda Síochána which is the appropriate law enforcement agency to investigate criminal misbehaviour. There is no purpose to requiring that it be reported to a Member of the Oireachtas and the appropriate course for such a Member in that event would be to report it to the board or the Garda Síochána in any case. For these reasons, I do not support the amendment.
Amendment put.
The Seanad divided: Tá, 24; Níl, 27.
Senator Eoghan Harris:
I move amendment No. 33a:
In the text of the Bill, as amended by amendment No. 69a on Committee Stage, to delete the words “However, the text of this Act shall be published” and substitute “The text of this Act shall be made available”.
This is a purely technical amendment. It arises from amendment No. 69a which reads: “However, the text of this Act shall be published electronically in each of the official languages as soon as practicable after its enactment.” There is a legal or technical problem with the word “published” which we now need to amend. Therefore, I am introducing amendment No. 33a essentially to change the word “published” to the term “made available”, as the word“published” poses some legal problems in the context of electronic publication.
An Cathaoirleach:
Is Senator Alex White seconding the amendment?
Senator David Norris:
I would like to second the amendment, if the Senator does not mind, as I was the original seconder.
Senator Alex White:
I did not try to second it.
An Cathaoirleach:
Will Senator Norris second the amendment?
Senator David Norris:
Yes. I second the amendment.
An Cathaoirleach:
Would the Senator like to speak to it? If not, I call Senator White.
Senator Alex White:
I was not trying to usurp Senator Norris’s position. I have no difficulty in supporting the amendment. While I do not want Members to groan about the matter of one word, I want to be clear that it was the intention to remove the word “However” from the text, as it changes the meaning slightly. Second, we have not been told the reason the amendment is necessary to substitute the term “made available” with the word “published”.
An Cathaoirleach:
The Minister of State will deal with the matter now.
Senator Alex White:
I can understand the reason it might be done but we should be specifically told.
Senator David Norris:
That is the point I was making. The Cathaoirleach was ruling me out of order. As the seconder of the amendment, I am entitled to speak.
Senator Alex White:
He was not.
Senator David Norris:
He was indicating; the gesture was fairly unambiguous. I am well versed in the interpretation of hand gestures in this country, if not of law.
An Cathaoirleach:
The Senator should speak on the amendment.
Senator David Norris:
This is an amendment to an amendment in the names of Senator O’Toole and myself that was accepted by the Minister earlier today. It was about the use of the Irish language. I am happy to second the amendment largely because it will save a lot of fuss. I compliment Senator Harris on having an amendment in his name on this very important Bill. Although it is a technical amendment, it is rather nice.
(Interruptions).
An Cathaoirleach:
Please, Members. I ask Senator Norris to resume.
Senator David Norris:
Order, order.
An Cathaoirleach:
I call the Minister.
Senator David Norris:
I share Senator Alex White’s reservations. It seems the Attorney General is being spectacularly nitpicking about language, about which he appears to know singularly little in terms of its felicities and beauties. Otherwise he would never have used a word such as “disapplication”, which is horrendously ugly. Senator Alex White is quite right, however, that the deletion of “However” does slightly confuse the matter so the amendment does not actually clarify an awful lot, with the exception of demonstrating that the Attorney General appears to believe that, by using the word “publishing”, one is affecting other legislation. “Publishing” has been defined in other legislation and might have a knock-on effect. He feels his stance is necessary because of the electronic implications. I rather doubt it because, on the basis of my knowledge of language rather than law, “electronic publishing” is a well-known phrase in common usage. Perhaps the Minister of State will be able to tell us this is a case where the language of the law differs from the language of the ordinary person.
Senator Eoghan Harris:
I am dreadfully afraid that Senator Norris perceives——
An Cathaoirleach:
I cannot allow Senator Harris a second time. I can allow him to contribute after the Minister of State replies.
Deputy Martin Mansergh:
I accept the amendment to the amendment and I am grateful to Senator Harris for moving it. The language the Attorney General is paid to watch, monitor and vet is very different from the type of language with which Senator Norris soars to the ceiling.
Senator David Norris:
I hope the record will show that hand gesture. I can almost——
An Cathaoirleach:
I ask Senator Norris to resume his seat. This is a serious Bill.
Deputy Martin Mansergh:
The Attorney General has raised an issue in respect of the wording of the provision and is of the view that the use of the word “published” in the context of an electronic publication such as is envisaged by the inserted provision could have implications for other statutes. The word “published” has a specific meaning in a different context and should be avoided in this statute in this context.
Amendment agreed to.
Senator Alex White:
I move amendment No. 34:
In page 145, line 41, to delete “shall” and insert “may”.
This matter is not being pressed.
Amendment, by leave, withdrawn.
Question put: “That the Bill, as amended, be received for final consideration.”
The Seanad divided: Tá, 28; Níl, 23.
National Asset Management Agency Bill 2009: Report and Final Stages.
Wednesday, 11 November 2009
Senator Liam Twomey:
I thank the staff of the Seanad for all their hard work in recent days and the officials from the Department of Finance. I thank the senior Minister, all the other Ministers who came to the House and my Seanad colleagues who participated in the debate in the past three days.
Even though we voted against the legislation and have serious reservations about it, we will get no pleasure whatsoever if NAMA fails. We will be praying that this measure will get credit flowing in the economy because the taxpayer is taking a massive gamble on the legislation to the tune of €54 billion. Many concerns have been expressed about the sort of creative accounting that has been used to some degree to get the measure approved by the European Commission. Who knows, if it works out, it might not be such a bad idea.
I regret to say that there are two other issues we failed to address in the legislation. First, we failed to put into legislation any sense of a social dividend. Any amendments with that intention were not accepted by the Government. Second, we have not included the level of strong oversight we wished to see in the legislation, not just in regard to the Comptroller and Auditor General but in terms of having a dedicated Oireachtas committee to examine NAMA and to have the Freedom of Information Act apply to it.
I proposed the inclusion of Members of the Oireachtas on the list of people to whom whistleblowers’ complaints could be made. That should be a core part of all whistleblowers legislation. We are elected by the people and it is wrong for Members to vote against a proposal that we would be considered suitable individuals to whom people could come with concerns about any aspects of the State’s service. Members on the Government side should have had the courage to support that proposal and stand up for it. Members of both Houses of the Oireachtas should be considered suitable persons for people to come to under any circumstances in respect of oversight on any aspect of what the Government does. Those issues will come back to haunt us at a later stage.
I regret the lack of success we had in terms of transparency and accountability and those issues that are so important to such legislation. I mentioned on Second Stage that I was in the Lower House when we debated the legislation to establish the Health Service Executive. I heard all the concerns about the health boards and how the HSE would be so different. I heard that there would be accountability, transparency and communication with Members of the Oireachtas. History will show that in the five years since that legislation was passed, we did not achieve those aims. I hope the same does not happen with this legislation as well. NAMA is as fundamental to the financial services area as the HSE is to the health service. I hope NAMA works. We will do our best in whatever way we can to hold the Government to account and to ensure the best outcome is secured for the taxpayer.
Senator David Norris:
I endorse most of what Senator Twomey said. This was an outstanding series of debates, one rolling into the next, with some fine and passionate speeches on Second Stage, followed by Committee Stage where the arguments for the various amendments were clearly put forth. The Minister accepted a small number of those amendments. I take this opportunity to express my admiration for my colleague, Senator O’Toole, in terms of his political astuteness as well as his capacity to reason. In particular, the amendment concerning the establishment of a finance committee is a highly significant provision for which the people may well thank this House. I was honoured to be in this Chamber to argue the case with Senator O’Toole and to lend my name as seconder to those amendments.
I disagree with certain aspects of the National Asset Management Agency. I have had ideas on this issue for a long time and would have taken a different approach. I would unrepentantly have nationalised the banks and unrepentantly have allowed Anglo Irish Bank to sink. It was clear as the Minister explained the situation that he understood that certain of the measures which many of us on this side of the House proposed could only come about as a consequence of nationalisation, but he chose not to go down that path. If anything gave me confidence, it was the performance, bearing and capacity of the Minister for Finance, Deputy Brian Lenihan.
Senator Eoghan Harris:
Hear, hear.
Senator David Norris:
It was a remarkable virtuoso performance and he showed himself to be fully in command of the brief. He was not deterred. He did not appear to be afraid to face the situation but showed himself to be a man of courage, integrity, decency and considerable intellectual resource. It always impresses me if a Minister can take the comments on his or her feet and give an appropriate, accurate answer. Time and again that was true of the Minister, Deputy Brian Lenihan. The other Ministers always performed well, but in varying degrees. We were extremely lucky to have Senator Marc MacSharry leading the fight for the Government side. He was extraordinary. We all get confused on certain occasions, and I gave a good example of it this evening when I could not find the document I was seeking. Ministers also get confused. We are all human. I was terribly impressed on several occasions when Senator MacSharry intervened and like the Minister, Deputy Brian Lenihan, and perhaps also an echo of his father, was able to direct the intellectual inquiry, although I did not always agree with him.
Many of us share concerns and worries about this Bill. Like Senator Twomey, I have fears, but they are just fears and I hope they are unjustified. I wish the Bill well and I hope, from the core of my heart, that it does what is intended and starts to resolve this problem because it has a really serious human impact. That impact was remarkably illuminated by our colleague, Senator Eoghan Harris, when he spoke so passionately and from the heart.
I should hand bouquets out to everybody but it is not really appropriate or timely. However, without demeaning anybody else who takes the Chair from time to time, Senator Fiona O’Malley was a remarkable Chairman for a number of sessions. We all get a little silly and it is good to have fun but people became extremely repetitive and it could be very aggravating. People played their little games but Senator O’Malley moved the debate on with resolute determination. If there was a free vote and not the usual party fix-up, many Members of the House, having witnessed that performance, would vote for Senator Fiona O’Malley as Cathaoirleach of this Chamber. That is without disrespect to any of the others who are all talented people. Senator O’Malley would definitely have my vote.
Senator Fiona O’Malley:
The Senator is looking for my vote.
Senator Jerry Buttimer:
I would vote for Senator Paddy Burke any day.
Senator Frances Fitzgerald:
So would I.
Senator David Norris:
Senator Paddy Burke is wonderful. He is too soft, just like me.
