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Dáil Éireann díospóireacht -
Thursday, 13 Jul 2017

Vol. 958 No. 2

Leaders' Questions

In the summer economic statement, published by the Government yesterday, the Government has placed an increased emphasis on capital investment. I believe there is a clear consensus across the House that there is a need to increase investment in the economy. This year we will probably spend approximately €4.5 billion from direct Exchequer funding on capital investment, which is pretty much half of what is was just under ten years ago when, at the peak, €9 billion per year was spent on capital investment.

It is Fianna Fáil's view that instead of redirecting money out of the rainy day fund, which is yet to be established, there are other avenues the Government should pursue more aggressively and more ambitiously to bring about greater capital investment. I cite the example of public private partnerships, PPPs. We are told by the National Treasury Management Agency, NTMA that Ireland should be doing more in the area of public private partnerships. We have pressed the Government on this issue and there will be a review of the domestic 10% rule on the amount of investment through public private partnerships. This is welcome. Will the Tánaiste confirm whether the review will be completed in time for the budget and for the announcement of the new national capital plan?

The European Investment Bank has made clear, publicly, that it is prepared to do more by way of investment in PPPs. When one looks at the unmet needs in the economy in Dublin and across the State - be they road projects such as the Cork-Limerick M20 motorway, public transport projects, the need for the roll-out of broadband throughout the country, investment in renewable energy projects, schools and third level institutions - it is our clear view that this avenue presents real potential for greater investment. We learned today that the NTMA has raised money on the markets at negative bond yields. This shows that investors are prepared to pay Ireland for the privilege of lending to us. One thing is absolutely certain, the favourable and benign investment environment that we have now will not last indefinitely. The wheel will turn and we need to lock investment into the Irish economy at the low rates currently available.

The second avenue the Government needs to pursue is the Ireland Strategic Investment Fund, ISIF. The fund has some investments here but more than €6 billion is invested outside Ireland. It is sitting on more than €6 billion in its global portfolio, which is invested in debt and equity instruments everywhere but Ireland. The fund is planning to transition that to Irish investment over a period of five years. Again, there is huge scope for ambitious investment on commercial terms in projects that are badly needed for the economy and for the citizens. Will the Government prioritise exploring those avenues, will it review the role of the Ireland Strategic Investment Fund and will it review the very conservative, and in our view overly restrictive, approach to PPPs for meeting the investment needs of the economy?

Deputy Michael McGrath is absolutely right when he said that capital investment fell severely because of the economic situation we faced. The crisis had its impact on our infrastructure and this is what we must now correct. The way we will do so is by prudent management of the economy and in making the very best use of the resources we have in the period ahead.

I will outline what the Government is actually doing. We are providing for a 66% increase by 2021 on the 2016 levels of capital investment. Effectively, this means the State is almost back to the levels of before the economic crash and the crisis. By any standard that is very significant in terms of the potential for investment in capital infrastructure.

The Deputy has made the point that every other avenue should be explored and of course I agree with him. In my own area of responsibility, for example, I recently met managers involved with the Ireland Strategic Investment Fund, ISIF, to discuss how we can support business. This is an area we need to focus on given the challenges posed by Brexit. I also wish to acknowledge the point - the Deputy has already referred to it - that Ireland's reputation is such that we are in the excellent position in respect of lending and getting the kinds of rates that make it feasible for us to continue to borrow at very suitable rates to invest in our infrastructure. The summer economic statement is all about how we do that in a way that is sustainable.

The Department of Finance is currently reviewing the role of the Ireland Strategic Investment Fund, which was established at a time when private investment was constrained and the banking system was restricted in its capacity to finance the real economy. Preliminary results acknowledge strong economic growth and an increased availability, as Deputy McGrath has rightly said, of private sector investment. This reflects the progress in the economy and the financial system since its establishment about which I have already spoken. Importantly, the Department has acknowledged that based on cashflow modelling, it will not be required to fully deploy its funds to meet its mandate. On this basis the Government will consider whether an element of the ISIF should be reoriented towards complementing the role of the rainy day fund.

I thank the Tánaiste. My core point is that direct Exchequer funding of capital investment needs to be ambitiously complemented by additional investment through public private partnerships and the role of the strategic investment fund. Instead of looking at the fund with a view to putting it into the rainy day fund, the Government needs to ensure that the transition of the fund into Irish investment, from the global portfolio with more than €6 billion, must be accelerated. There are projects in every Department and in every part of this country that could be implemented and commenced on commercial terms. The fundamental point is that we are in exceptionally benign times in the context of the investment market. We are raising money at negative interest rates for the first time in our history as far as I am aware. Now is the time to lock in investment at those favourable terms because I can assure the Tánaiste of one thing; those terms will not last forever. Now is the time to do it. There is no point in coming back to the well in a few years' time when we are paying multiples of what we currently pay on interest rates. I ask that the Government explores these avenues in an ambitious way. It will find support from our party in respect of the budget and the investment plan, if it does this in a meaningful and tangible way.

The Deputy makes very relevant points on this being a good period for investment. The Government is keenly aware of that. As the Deputy is aware, the Minister, Deputy Donohoe, has been making visits across the EU to discuss that very issue. For the first time the European Investment Bank now has a centre in Dublin. This is very important and is another sign of its support for Ireland. The potential for investment is clearly there.

I agree with Deputy McGrath, as does the Government, that other avenues should be explored for capital funding. That is what we will be doing in the months ahead and in the lead-up to the budget. The bottom line is that compared with where it was, the economy is in such good shape that in the next few years, we will go back to those pre-crash levels of investment in capital infrastructure that everybody knows are badly needed.

The Tánaiste is aware that in May, 1,300 families were living in emergency accommodation funded by the Department of Housing, Planning, Community and Local Government. That is almost 3,000 children who are living in hotels, hostels and bed and breakfast accommodation. These figures do not include the hundreds of adults and children living in Tusla-funded domestic violence emergency and step-down accommodation. Nor do the figures include the 247 adults and 152 children trapped in direct provision who have leave to remain but are unable to secure housing. The Government's monthly homeless report significantly underestimates the numbers of adults and children living in State-funded emergency accommodation. Child homelessness, as I have said many times before on the floor of this Chamber, has increased by a shocking 300% in the six years that Fine Gael has been in government.

Even more shocking is the length of time these families and children are being left languishing in hotels and bed and breakfast accommodation. Some 70% of homeless families have been in emergency accommodation for more than six months, with 40% in hostels and hotels for more than a year, and there are at least 200 families in emergency accommodation for between 18 and 24 months.

On taking office, the Minister for Housing, Planning, Community and Local Government, Deputy Eoghan Murphy, announced what many of us knew for months, which was that the July target set by the previous Minister, Deputy Coveney, to move families out of hotels and into permanent housing was not going to be met. Instead of permanent homes, these families have received letters telling them what kind of accommodation they will get at some point in the future. According to the Minister, one third are to be moved into permanent homes, one third into short-term and insecure housing assistance payment, HAP, tenancies and one third into family hubs.

I accept that purpose-built emergency accommodation for families is better than a hotel or bed and breakfast accommodation. However, it is not a home and cannot be presented as a solution to the homeless crisis. Yesterday, two important reports were published, one by the Irish Human Rights and Equality Commission and the other by Drs. Murphy and Hearne of NUI Maynooth. Both warned that family hubs run the risk of replacing one problem with another. They warned of long-term institutionalisation and of what one author called therapeutic incarceration. Thankfully, both reports make clear recommendations on how to avoid this. They call for independent inspections of all emergency accommodation, particularly where there are children, a three-month legal limit to the length of time a family would stay in emergency accommodation, clear rehousing targets to give these families the homes they so desperately need and a legal sunset clause that all hubs would be closed by 2019.

My question is very simple. Will the Government support and fully implement these key recommendations?

My first point relates to the actions that are being taken under Rebuilding Ireland, the Government's multi-stranded action plan to deal with the housing and homelessness issue, with which the Deputy is very familiar. We are creating the right conditions and the environment to increase housing supply, especially in our cities and large towns, and we are encouraging competition among developers. We are making the land available and there is fast-tracking of planning. All those issues will ensure more housing supply will come on stream. We are ring-fencing €5.3 billion in the budget to 2021 to deliver 47,000 additional social houses. All that will help the very families about whom the Deputy is speaking.

The Government agrees that commercial hotels, in the first instance, are not appropriate places for families to live. Of course they are not. Family hubs will provide more appropriate and suitable accommodation for families than hotels. Family hubs are an important first response for families who become homeless and have no alternative to commercial hotels. However, to be clear, we do not believe, and I know the Deputy does not either, that family hubs are a long-term housing solution. There is no question of that. Those families will move into houses and apartments that will be provided under the social housing supports as supply becomes available.

I am familiar with the two reports that were published yesterday and to which the Deputy referred. They make some interesting points about ensuring these family hubs do not become normalised, are seen as short-term solutions and in no way become a longer-term solution for families, and that they continue to be used and seen as short-term accommodation. The key point is to provide more housing for the families using them. The multi-action plan will ensure that. The Minister will examine the recommendations to see if some of them need to be in place, including the legislative recommendations in terms of placing an obligation on local authorities to ensure families do not end up staying on a longer-term basis in family hubs.

I thank the Tánaiste for the response although she did not answer the question I asked. I did not ask what the Government is doing in other aspects of housing policy, and I would have much to criticise in that regard, but what the Government will do specifically to ensure family hubs do not become long-term institutionalised settings for the families there.

The problem is that emergency accommodation is already a long-term reality for families. I quoted the figures to the Tánaiste. Some 70% of families with children currently in emergency accommodation are in there long term. That is according to the six-month definition set in Government policy. It is not enough for the Government to say it does not want hubs to become a long-term intervention. It has to take specific action to prevent it, and I would strongly recommend the actions included in the two reports.

When direct provision was introduced, people warned that what was promised as a temporary intervention would become permanent, and they were right. I appeal to the Tánaiste to respond directly to the four recommendations in these two reports. Will the Government support them and fully implement them?

Everyone, including housing authorities, is working very hard to ensure the progression of homeless families to independent tenancies as quickly as possible. Every action that is being taken is targeted at ensuring people will not have to stay in that type of accommodation over a longer period. We have to recognise the numbers that have moved into secure accommodation from homeless accommodation in the course of the past year and the turnover that has been there, although homelessness continues to be a challenging issue and is a priority for the Government to tackle.

Many of the recommendations made by the chief commissioner of the Irish Human Rights and Equality Commission, Ms Emily Logan, are already in train or complete. The Rebuilding Ireland action plan provides for early solutions to address the high number of households in emergency accommodation, including, as I have said, the delivery of social housing supply through the new build, acquisition and refurbishment schemes and independent tenancies for homeless households in the private rental sector through housing supports such as the enhanced housing assistance payment. All that is under way and will ensure families will not spend lengthy periods in these new style family hubs.

The Tánaiste will be aware that the OECD has completed a review of the second public service reform programme. There is a lot of good to be found in the review. It found that improved transparency and accountability has been delivered, in large part because of the legislation we enacted to regulate lobbyists, to open up freedom of information and to protect whistleblowers. It also confirmed that public servants are delivering additional services with fewer staff and at less cost, which we knew. However, as I said earlier in the debate on the summer economic statement, this proves that the so-called hidden fiscal space is a ball of smoke, but I want to leave that discussion to another time.

The chief negative finding of the OECD report was that outsourcing has not emerged as a systemically viable option for providing public services. This finding will be welcomed by many people who have question marks about the operation of outsourcing initiatives. It also has a much deeper implication, including an implication relating to the continuing delivery of public services via section 39 agencies. These bodies, most of which started out as small scale charities, are often now very large operations. Unlike public services, the people working in them do not have guaranteed wage rates or protected terms and conditions of employment, except it seems for some of those who run such bodies. We have had controversy over section 39 agencies in the past. In case anyone has forgotten about them, the Tánaiste knows them.

The internal audit that was focused on today in the Irish Examiner makes for stark reading. This is an audit of the Catholic Institute for Deaf People. There were pay levels in excess of HSE levels, multiple credit cards in use, including credit cards in the names of people who had left the organisation, and high levels of expenditure on meals, bottles of whiskey and jewellery. Ten years after the scandal of the FÁS expenses and having had, since 2014, the scandals relating to the section 38 and section 39 agencies, what action will be taken by Government to address the particular example highlighted in the Irish Examiner this morning? More significantly, will the Tánaiste outline the general Government view on the provision of services through section 38 and section 39 agencies?

Is it now appropriate to begin the task of bringing all public services directly under the ambit of the State so that State-funded services will be provided by the State with all the controls and accountability that would bring?

The Deputy raised a number of issues. He started by referring to public sector reform and the OECD report. That report noted that the Public Service Reform Plan 2014-2016 was very successful, by and large, in terms of completing the majority of the activities it set out. The report outlined key lessons and findings. On the subsequent points raised by the Deputy on sections 38 and 39 organisations, it is clear that the section 38 agencies are bound by public service pay policy. Section 39 agencies are somewhat different. However, the key point about this morning's reports is that the HSE itself conducted these audits and found these discrepancies. There has been a history with these issues in the past in other agencies. Now the audits in the agencies are being conducted by the HSE, it is finding out these facts and bringing them to public attention and for action by the Government. That is critical. In addition, the new Charities Regulator has been in place in recent years and is doing very effective work. We now have an organisation tasked with dealing with charities that do not have proper governance and are not abiding by the rules. The regulator has the ability to initiate and carry out inquiries and it has already done that. The charities sector is becoming increasingly aware of the challenges around governance and the need for proper financial reporting, auditing and so forth.

The Deputy referred to the mix between the public and private sectors in the health services. We have that mix at present. There is also the history of the religious being involved. The Minister for Health is bringing forward actions to begin to address this. He will analyse it and decide what is the way forward in terms of separation. Currently, there is a mix of voluntary and public hospitals, as can be seen with the example of Holles Street hospital, and there is also the involvement of the religious in the past. There would be many complex issues in a move to a purely State-run hospital service as we have many voluntary hospitals. However, the Minister is determined to examine and address that and to assess what the pathway forward might be.

I thank the Tánaiste for indicating that there is a review of these matters. We must make a policy decision now. There will be a long-term process to implement it, covering the lifetimes of many Dáileanna and Governments. However, we are delivering public services in an ad hoc manner now, at a cost of billions of euro and through a myriad of agencies. Some of those agencies are service providers because they were charities originally. There is no uniform national baseline in terms of resources, staffing or quality of service. That is no longer valuable. Will the Government go further than simply examining the voluntary hospitals and examine all public service provision to assess whether we can have the objective of having the State, which funds all the services in any event, providing and being responsible for those services, as is the case in most progressive western European countries?

What the Deputy said has widespread implications for the role of the community and voluntary sector in providing services. That role has been very valuable and is hugely valued by our communities. We have some excellent services. The idea that every service would solely be in the charge of, and run by, the State would require a great deal of consideration and might not even be desirable. What we need are clear governance arrangements and clear partnership where there is that mix of the public and private sectors. To suggest moving to a model that is one dimensional would be very extreme. As I said, the Minister is examining that mix in the health service. However, it would have huge implications and huge budgetary implications, as the Deputy knows. The Deputy has raised a topic on which there will undoubtedly be more discussion, but I believe the mix we have in the country at present is valuable. A complete separation sounds like an extreme response to the situation we have been discussing in some of our services.

Earlier we discussed the summer economic statements, but perhaps the biggest challenge facing the country is the massive size of Ireland's national debt and the huge chimney stacks of debt, as they are called, which must be refinanced between 2018 and 2020. The 2016 National Treasury Management Agency, NTMA, annual report and the annual report on public debt in Ireland by the Department of Finance make it clear that the national debt is the elephant in the room of the national finances. At the end of 2016, general Government debt stood at €201 billion, which represents between €42,000 and €46,000 for every man, woman and child in the country. The national debt represented 274% of general Government revenue and was nearly 250% of the national wage bill. By these measures Ireland remains one of the most indebted countries in the world alongside Japan, Portugal and Greece. Indeed, on the new reference point of GNI* our national debt is 100%.

The stacks of debt from the crash years must be refinanced in 2018 to 2020 when five benchmark bonds are due to mature. The total balance outstanding on these bonds is currently more than €42 billion. The majority of the bilateral loans received from the UK, Sweden and Denmark after the crash also mature over the same period, so the total refinancing amount is more than €46 billion. Many economists believe that the huge refinancing in 2018 to 2020 carries terrible risks given the emerging fiscal unknowns in this country. For example, Professor Colm Fitzgerald of the school of mathematics and statistics in University College Dublin, UCD, wants the Government and the NTMA to take immediate action to refinance the €50 billion bonds maturing in the next three years now that bond yields are low but are expected to rise. He and other concerned citizens refer to warnings given in 2006 and 2007 by people such as Professor Morgan Kelly.

Ireland is moving into an era of great uncertainty. Almost every day we are startled by another emerging impact of Brexit, as happened recently with fisheries. The Irish Fiscal Advisory Council, IFAC, has rightly warned of the vulnerability of corporation tax receipts. They now account for 15% of our tax, which is twice the EU average. It is somewhat reminiscent of stamp duties before 2008. Most of all, Professor Fitzgerald and other academic economists are worried about the growing asset price bubble being driven by the quantitative easing, QE, programme of the European Central Bank since March 2015. That programme has been tapered down to €60 billion per month and is expected to end in spring 2018. Quantitative easing is printing money primarily to benefit the wealthy in society, those with bonds and other assets whose prices increase. That leads to bubbles and suffering for ordinary citizens, such as people trying to buy houses. However, the double whammy of QE is that it will be followed, as night follows day, with quantitative tightening, as is happening in the United States, and higher interest rates.

Will the Government encourage or direct the NTMA to refinance those stacks of debt, amounting to more than €46 billion or a quarter of the total debt, as urgently as possible while interest rates are low and given the worrying risks in the external economic environment?

I ask the Deputy to acknowledge the progress that has been made. He did not support many of the policies that got us to the point where our economy is now doing so well and where we have seen a drop-----

I opposed the bank guarantee that got us into this and which was supported by Fine Gael and Fianna Fáil.

-----in unemployment from 15% to 6%. The NTMA is an extremely professional body. It has managed us through the crisis and overseen a situation where we have moved from being charged interest rates of 14% to one where they are down to 1%. I have confidence in it to continue to manage the debt. That the economy is in the current position is extremely important in terms of the rates at which we can borrow. It means we can continue to have a balanced approach to dealing with our debt, which we must do. The Deputy regularly calls for investment in infrastructure and our social services. We must also do that. We must achieve a balance between managing the debt and getting the debt-to-GDP ratio down and continuing the investment that is so necessary. That is the approach the Government is taking. The Minister for Finance, Deputy Donohoe, made that clear yesterday when speaking on the summer economic statement, which sets out a practical approach for the careful and prudent management of our economy.

At the same time, it will ensure we invest in the services we need, negotiate pay agreements that are manageable and affordable and, above all, make the kind of decisions that ensure citizens have a good quality of life because we have good transport infrastructure and good health, education and other services. Just this week, we made a decision to invest in more special needs assistants in schools. We can make this type of decision because we have the right approach to managing the economy and the national debt and we are ensuring we can continue to invest.

The Tánaiste did not remotely answer the question. The State has spent more than €40 billion on interest repayments since the crisis of 2008-09, which Fine Gael and Fianna Fáil got us into. Even this year, we will spend €7 billion on interest payments, which is almost as much as the budget of the Department of Education and Skills. We cannot even discuss this issue because this money goes straight to the Central Fund.

I am well aware of the efforts being made by the National Treasury Management Agency, NTMA, to reduce risks to Ireland in refinancing the 2018-20 bonds. In its 2016 report, a copy of which I have before me, the NTMA refers to locking in low interest rates and longer maturities while interest rates remain at historically low levels. The agency has reduced the global figure from approximately €70 billion to approximately €46 billion and last year, it issued the country's first 100-year bond. It also has €21 billion in the kitty. Just a few weeks ago, Mr. Conor O'Kelly, the NTMA's chief executive officer, and Mr. Frank O'Connor, its director of funding, visited Leinster House to brief me extensively on this matter.

Professor Colm Fitzgerald and others still fear the Government and NTMA are taking too much of an accounting rather than actuarial approach to the national debt. Asset prices have increased fuelled by quantitative easing and low interest rates, while fiscal shocks are likely when the money pump is switched off. No one can predict the impact of the unstable Trump Presidency. If Britain leaves the European Union in March 2019, the economy will be in some danger. We could be about to enter a perfect fiscal storm. Some economists believe there is a danger of a return of the troika. Will the Tánaiste ask the Taoiseach and Minister for Finance to meet representatives of the National Treasury Management Agency to encourage the agency to move fast to refinance our debt in the 2018-20 period? The Minister for Education and Skills, Deputy Bruton, should note that this is a serious matter because the next Government will have to deal with it.

We had to borrow in recent years because we wanted to protect our investment in public services, which is what the Deputy and all other Deputies would have wanted.

The Fine Gael Party voted to slash public services when a few of us stood alone. Fine Gael and Fianna Fáil got us into this and destroyed our public services.

Most Deputies support borrowing to continue the investment during a period of crisis.

The Tánaiste talks about section 39 bodies. Her Government is responsible for getting us into this mess.

The important point is that we were able to borrow at manageable interest rates. As a result of Government action and because our reputation has been restored, we have been able to borrow at rates that are sustainable, having declined from 14% to 1%. The Deputy should also recognise that the unemployment rate has decreased from 15% to 6%, which makes a difference to his constituents who want public services maintained. The prudent management of the economy has allowed us to do that.

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