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Monthly Archives: June 2012
Senator Daly at Croke Park with the US embassy press secretary for a conference on job creation
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Senator Daly speaks on Redundancy Payments
Senator Mark Daly: 
I have a very short question. I ask the Minister to outline the details of an evaluation carried out by the Government prior to the introduction of the new redundancy arrangements, as they place a major onus on small businesses dealing with redundancies. It certainly does not help job creation. It acts as a deterrent to anybody considering employing a person.
Will the Minister outline the scheme and its effects on job creation?
Deputy John Perry: I thank Senator Daly for raising this very important issue. I am taking this Adjournment matter on behalf of the Minister for Social Protection, Deputy Joan Burton, who sends her apologies for not being present to respond in person to the Senator. The purpose of the redundancy payments scheme is to compensate workers, under the redundancy payments Acts, for the loss of their jobs by reason of redundancy. An eligible employee is entitled to two weeks statutory redundancy payment for every year of service, plus a bonus week. Compensation is based on the worker’s length of reckonable service and reckonable weekly remuneration, subject to a ceiling of €600 per week. Employees must have at least two years’ service to be eligible for a redundancy payment.
It is the responsibility of the employer to pay statutory redundancy to all their eligible employees. An employer who pays statutory redundancy payments to its employees is then entitled to a rebate from the State. I am sure the Senator is aware of these provisions. Where an employer can prove to the satisfaction of the Department that it is unable to pay the statutory redundancy to its employees the Department will make lump sum payments directly to the employees and will seek to recover the debt from the employer.
Both the redundancy and insolvency payments scheme transferred to the Department of Social Protection in January 2011. Payments under both schemes are made from the Social Insurance Fund, SIF, which is currently in deficit.
While the SIF is constituted primarily from employer’s contributions, the taxpayer’s contribution is also significant. Significant amounts have been paid out in redundancy rebates to employers from the SIF in recent years. The total amount paid out in redundancy rebates to employers was €152.2 million in 2006; €167.4 million in 2007; €161.8 million in 2008; €247.9 million in 2009; €373.2 million in 2010; and €185.3 million in 2011.
The deficit in the Social Insurance Fund is of significant concern at present and it is not considered that the country should continue to borrow money to plug the hole in the SIF in order to fund the cost of making people redundant — often from very profitable companies.
In the context of the 2012 budget, the Government decided that the 60% level of rebate was not sustainable in the current economic climate. As a result, the rebate was reduced to 15% for cases where the date of dismissal for the purposes of redundancy occurs after 1 January 2012. It is expected that this measure will save €81 million in 2012.
It has been acknowledged that this may cause difficulties for employers, and I appreciate the Senator is making this point, but it should be noted that redundancy rebate payments to employers are not common in many EU states or other jurisdictions. For example, in the UK the redundancy payment is funded by the employer and there is no recovery from the state. In Sweden there is no statutory system of redundancy payments from employers while in Spain the employer cannot claim back any amount from the state. This new arrangement brings Ireland more closely into line with practice elsewhere.
An Leas-Chathaoirleach: An bhfuil an Seanadóir sásta?
Senator Mark Daly: As the Minister of State will be aware, it was stated in the reply that people were made redundant “often from very profitable companies”, but at times they are seeking their redundancy payments from companies that are not profitable. This is militating against the creation of jobs.
The Minister of State is responding on behalf of the Minister for Social Protection and has been given the reply. However, I asked if a detailed evaluation was carried out prior to the introduction of the change in the scheme. I think the departmental officials did not read the question I asked, because I was looking for a cost benefit analysis and the impact on job creation, which should be done prior to the introduction of new measures.
I sincerely thank the Minister of State at the Department of Jobs, Enterprise and Innovation, Deputy Perry, for coming into the House to respond to the Adjournment, but unfortunately the reply he was given was not appropriate to the question I raised.
Deputy John Perry: I can answer that question. It is evident that an evaluation was conducted — the scheme cost €373.2 million in 2010, and if one considers that 1.8 million people are currently working in Ireland, of which 700,000 work in small companies, 137,000 work directly in IDA and an equivalent number in Enterprise Ireland companies, it is a question of affordability. Unfortunately, the evaluation of the Social Insurance Fund found that the tills are empty.
I fully accept that reducing the rebate to employers from 60% to 15% puts great pressure on small companies. The sad reality is that because we are borrowing from the IMF, it leaves the Government with few choices. An evaluation was carried out by the Department of the Finance which found that the scheme was no longer sustainable. The bottom line is that the scheme cost €247.9 million in 2009 and €373.2 million in 2010, which is a significant amount.
The backbone of our economy is the 200,000 companies employing fewer than ten people and giving employment to 700,000 people. The action plan for jobs is focused on increasing the number of jobs in SMEs by creating 100,000 new jobs by 2016. While the reduction of the redundancy rebate will have an impact, the Government has alternative schemes to encourage people to create jobs. The job of government is to make people employable and to encourage enterprise. The Government is incentivising companies to create jobs through the action plan for jobs, the lowering of the VAT rate, the reduction of the PRSI in the expectation, as the Taoiseach stated, that 50,000 small companies would each created one job at little or no cost to the State.
In 2010 it was costing the taxpayer €7 million each week to fund the rebate of the redundancy payment from the Social Insurance Fund. That is not sustainable. My job as Minister of State with responsibility for small business is to encourage employers and give them ten reasons to create a job and not ten reasons to make people redundant.
Senator Mark Daly: When I asked for an evaluation, I did not simply mean an evaluation in terms of pounds, shillings and pence and pence but an evaluation of the measures to create jobs. If an employer is thinking of employing an additional person and then looks at the changes to the redundancy scheme, it is aware it will cost it a fortune to let the person go. This is another barrier to creating jobs.
An Leas-Chathaoirleach: The Minister has given a comprehensive reply.
Senator Mark Daly: I thank the Minister for his response and I appreciate that he came into the House.
An Leas-Chathaoirleach: I thank the Minister, who is always welcome in this House.
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Senator Daly speaks on the NAMA and the Irish Bank Resolution Corporation Transparency Bill 2011
I move: “That the Bill be now read a Second Time.”
I welcome the Minister, Deputy Michael Noonan, to the House. This is important legislation and I ask the Minister to consider it thoroughly. The people of Ireland must have confidence in institutions of the State.
On 20 February 2012, the Financial Times described NAMA as one of the largest property companies in the world. On 26 January 2011, I raised this matter first in this House with the then Minister for Finance, Deputy Brian Lenihan, when I described situations where property developers were purchasing back land on which they had previously taken out loans for well under the current market value, and these properties were not being put on the open market. There is a growing concern throughout the country about the way NAMA and the IBRC are selling assets and loans. I was joined on 14 June in raising concerns in regard to developers buying back property from NAMA and from NAMA-controlled banks by the Taoiseach when he said: “I have had some indications of attempts to acquire property that was taken from… developers through a variety of methods.” That featured in the Irish Examiner when the Taoiseach was attending the British-Irish Interparliamentary Body meeting. The following day, the Taoiseach had to climb back from what he had said and he then said he had been reassured by NAMA this was not happening.
I can confirm it is happening. Ms Emily O’Reilly, the Ombudsman, is so concerned that on 10 March she again reiterated she would like to see NAMA brought under freedom of information legislation so all information in regard to property transactions with NAMA would be open and transparent. The difficulty and the consequence of freedom of information is that it is applicable only after the event. What we would then have is a post mortem examination of sales when what we should be looking for is transparency at every step of the process.
The NAMA Act set out clearly what should happen. Section 35 of the NAMA Act stated that a code of practice should be set up by NAMA on how it would dispose of assets. This code of practice was adopted three months later, when it said all credit facilities or securities on credit facilities would be sold in accordance with the code of practice for the governance of State bodies. What the guidelines outlined was as follows: “The disposal of assets of State bodies or the granting of access to properties should be by auction or competitive tendering process . . . The method used should be both transparent and likely to achieve a fair and market-related price.” That is simply not happening.
NAMA and I have been in constant contact and communication. It disputes whether the properties it has control of through banks come under this Act. We must ask ourselves, and any judge would ask himself or herself, what was the intention of this House when it passed the NAMA Act. The intention of this House was that all properties would be sold in an open and transparent manner.
I have a legal opinion from barrister Mr. Donal O’Laoire, which I can provide to the Minister, that all assets, whether they be properties or loans which NAMA has control of, should be sold under the code of conduct for the sale of State assets. Whether they are controlled by Bank of Ireland or AIB, ultimately, NAMA has given Irish taxpayers’ money to those institutions in order to keep those institutions afloat. What we have is a situation where, as we all know, NAMA is simply not following the laws set out by this House. That is why we are introducing the Bill, namely, to make clear that it should sell all properties and assets it has control of under the code of conduct — when I say assets, I mean loans as well as properties. To facilitate this, it should list them on a website.
I am not alone in this. I proposed this in January last year and, six months later, NAMA decided it would have a website and it would show properties it had control of only. After all the money it has given out, it only takes control of roughly 5% of the properties itself whereas it never takes control of 95%. What we are now looking at is examples which are coming to the fore. My colleague, Senator Paul Coghlan, and I have previously discussed a situation in Cork where land that was sold for €10 million was recently sold for €7 million to the person who had originally put together the entire deal, yet nobody in Cork, including the adjoining landowners and farmers, were aware this property was for sale. Irony of ironies, NAMA justified this by saying it had got a higher price than the valuation, which basically means the valuer got it wrong on the first day. It lauded the valuer and claimed it had got more money, when, in fact, if it had sold for less, what would it have done? Very little.
We included the former Anglo Irish Bank in this legislation arising from a situation where in regard to the Four Seasons Hotel, which had borrowed €50 million from Anglo Irish Bank, a director of that bank had co-ordinated the purchase of that hotel from NAMA, and, again, nobody knew this property was for sale. How is it possible that this is in the best interests of the taxpayer? Does this sound like insider trading? How could the Irish people have confidence in an institution that sells property back to directors of Anglo Irish Bank when Anglo Irish Bank had originally given out a loan on that property?
With regard to the reason behind this, a more disturbing case, the details of which I will give to the Minister, is the situation of Nos. 2 to 14 Baker Street, which is an extraordinary loss to the taxpayer. I see my colleague, Senator Paul Coghlan, shaking his head when he has not even heard the evidence, which I think means his mind is closed on this issue. For his benefit, let me outline what happened. In September 2005, Nos. 2 to 14 Baker Street was purchased from British Land for €47.5 million. When the bust came, they sold it after receiving planning for 50% more square footage on the site in 2009.
On 16 April they sold it back to British Land for €29 million, representing a loss of €28.2 million to the Irish taxpayer.
This property was not placed on the open market. How was that in the best interests of the Irish taxpayer? Could my colleague, Senator Coghlan, outline how on 16 April, a trust was set up in Jersey? A legal agreement signed in Westminster City Council shows that McAleer and Rushe had a beneficial interest in this trust. Was this to deceive the Irish taxpayer? On 21 September 2011, in a report and a press release to the market, British Land said:
We repurchased approximately 50% of the value it previously sold for in 2004. We structured a three-way deal to purchase the site from McAleer and Rushe, Bank of Ireland, with the consent of NAMA”, [ I ask Senator Coghlan to note]. This acquisition has already performed very well. Since purchased the valuers have increased the site value by 52%.
This is in one year. Does this tell us it was undersold? Does this tell us that the market value was achieved? It most certainly tells us that. I could get no answer from either Bank of Ireland or NAMA — as to why McAleer and Rushe when they went into that agreement with the consent of Bank of Ireland and with the consent of NAMA, were profit sharing, which means that the money achieved first day was not the entire market value. Was Bank of Ireland aware of this profit-sharing agreement? Was NAMA aware? I do not know the answer.
Senator Paul Coghlan: The Senator received a letter.
Senator Mark Daly: For the information of Senator Coghlan, I received a letter which told me they could tell me nothing. If a situation like Baker Street arose in the future, this Bill would ensure that everybody would know the property was for sale, that anyone could bid for it and there would be confidence in NAMA and the IBRC as a result. At present there are back room deals going on which are not anything to do with the Department of Finance. I have confidence in the people in NAMA but the way this is being structured at the moment, they are not selling it in accordance with the rules laid down by this House and by the laws passed in this House. There needs to be a website where everyone can see what is for sale otherwise the Irish taxpayer is continuing to lose money on a daily basis and not millions or tens of millions but hundreds of millions of euro.
I ask the Minister to consider doing what we have requested in this very straightforward Bill, to have a website showing every property for sale on behalf of NAMA or under its control and that such property would be on the website for four weeks before being sold.
I thank all my colleagues for their input and the Minister for his reply. I am not happy that the Government has come up with a number of reasons that, in themselves, are at variance with some of the facts. As I and colleagues have outlined, NAMA proposed a website six months after I proposed it but it is limiting its one only to properties of which it has taken title control. That represents a very small fraction of all the loans it has given out. My proposal is that NAMA would put all properties it is allowing to be sold onto the website.
What we must understand here is that section 35 of the NAMA Act asked the organisation to set up a system whereby all its assets would be sold, whether they were property or loans. That was the legislation; it was our intent. Within that, NAMA had to come up with its process within three months. That process is the same as that for selling a State asset, which must be done by tender or public auction. The reason I asked the Attorney General to come to the House is that I cannot understand why NAMA is not selling the property and the loans under its control as laid down by the NAMA Act and as signed off by the Minister, Deputy Noonan’s colleague. Why is NAMA not doing that? We have legal opinion on both my side and NAMA.s side. It claims it does not have to do this while my legal opinion states it should do so but is simply not doing so.
The result is a lack of transparency. I do not accept the point about commercial sensitivity. Senator Clune would be aware of this from her own constituency. How is it in the best interest of the taxpayer that 450 acres of land in Cork was sold without anybody knowing about it? How is that in the interests of anybody? It is only in the interest of the people who bought it quietly from the bank, with the agreement of NAMA. Colleagues have pointed out that I have not produced the evidence. I have produced evidence, namely, the property on Baker St. The company which bought it said that in one year the value had gone up 54% from 2010 to 2011. That can only suggest that it was undersold in the first place. Commercial property in Baker St., London, did not increase by 54% in one calendar year. What also happened was that the people who had taken out a loan of €49 million were part of the profit share on the sale. It is stated by British Land which is now in control of that property that NAMA and Bank of Ireland agreed to all this. The Irish taxpayer has suffered a loss of €28.2 million on one sale.
I am talking about simple transparency. Like Senator Coghlan, I am an auctioneer. If every property for sale by banks which had been given a loan by NAMA was put on a website there could be no doubt. Would the taxpayer lose if there was a website? The taxpayer is losing already to the tune of €28 million on one sale. I will give the evidence to anyone. Let no one come into the House and say “Mark Daly did not produce evidence”. I am presenting the evidence. Senator Coghlan is welcome to talk to the individual or to anyone. When I asked about this at Bank of Ireland it referred to commercial sensitivity.
Senator Paul Coghlan: Has the Senator his own correspondence with NAMA about this property?
Senator Mark Daly: I not only have correspondence, I have had meetings with it. It said it had nothing to do with it. British Land states that NAMA had given agreement for the sale to go ahead. McAleer and Rushe which owes the Irish taxpayer money will make a profit from this land even though it still owes us €28 million. I ask Senator Coghlan to outline how that is in the best interests of taxpayers. This was not done in an open and transparent manner. If it had been we would have go the upside. When Senator Coghlan reads this and he gives me a comprehensive reply I will write an apology. However, my apology will not be coming his way.
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Senator Daly with Mr Tony Culley Foster and the Olympic Torch outside Leinster House
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Senator Daly believes third level grant changes will hurt Kerry families
Kerry Fianna Fáil Senator Mark Daly has called on the Minister for Education to reconsider proposed changes to the third level grant system that will discriminate against hundreds farmers and self employed workers across in Kerry.
Minister Ruairí Quinn has confirmed to Fianna Fáil that plans to include capital assets in …the means-testing for third level grants are at an advanced stage.
Senator Daly has described it as a retrograde step that will put third level education out of the reach of hundreds of Kerry families.
“This policy will discriminate against hundreds of farming families and self employed workers in Kerry who are on low incomes and are dependent on state support to send their children to college,” said Senator Daly.
“The fairest way to assess eligibility for third level grants is based on income and not on the not on the notional value of productive assets. There are so many families across Kerry who have land or a business that is earning very little in the current climate, and their low income means they are struggling financially. Including their capital assets in the means-testing for grants will give an inflated impression of their earnings, and will put them in an extremely difficult situation when it comes to third level costs.
“There is no doubt that this policy will put third level education out of the reach of many younger people from farming or self-employed backgrounds. The long-term economic and social effects of this for Kerry and for rural Ireland are considerable. I am pleading with the Minister to reconsider before it’s too late.”See more
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