Committee Reports > List of Committees > Dáil > 1990 > Committee of Public Accounts > Final Report - Appropriation Accounts 1988

AN COISTE UM CHUNTAIS POIBLÍ

(Committee of Public Accounts)

Déardaoin, 15 Márta, 1990

Thursday, 15 March, 1990

The Committee met at 11 p.m.

Members Present:

DEPUTY G. MITCHELL in the chair

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

Chairman.—The Chairman and a delegation from the Committee have been invited to attend a conference in Rome of the Budget Committee of the National Parliament of the EC and of the European Parliament. The conference will take place on Friday, 25 and Saturday, 26 May next. The theme of the conference is community monetary policy and its impact on national fiscal policies. I presume, in principle, we can accept that invitation and we will make up the numbers at a later stage. Is that agreed? I am sure the Comptroller and Auditor General might like to accompany the delegation. I think he would be very helpful.

APPROPRIATION ACCOUNTS, 1988 — FINANCE GROUP OF VOTES.

Mr. Seán P. Cromien called and examined.

Chairman.—Good morning, the Committee of Public Accounts of Dáil Éireann is this morning examining the Secretary of the Department of Finance, Mr. Seán P. Cromien, in his capacity as Accounting Officer for that Department, on the audited accounts for 1988. You are very welcome, Mr. Cromien.

Mr. Cromien.—Thank you, Mr. Chairman.

Chairman.—We have a number of Votes to get through in relation to your portfolio and I think we will go straight into asking the Comptroller and Auditor General to comment on paragraphs 2, 3, 4, 5 and 6, which are standard paragraphs and need not detain the Committee too long.

Paragraphs 2, 3, 4, 5 and 6 of the Report of the Comptroller and Auditor General reads:

Outturn of the Year

2. The audited accounts are summarised on pages lxxxiv and lxxxv. The amount to be surrendered as shown in the summary is £193,898,726 arrived at as follows:—

This represents 3.01% of the supply grant as compared with 1.72% in 1987.

In no case has the provision made by Dáil Éireann been exceeded and no excess vote is, therefore, necessary.

Exchequer Extra Receipts

3. Extra receipts payable to the Exchequer as recorded in the Appropriation Accounts, amounted to £39,753,920.

Surrender of Balances of 1987 Votes

4. The balances due to be surrendered out of votes for the public services for the year ended 31 December 1987 amounted to £115,495,778. I hereby certify that these balances have been duly surrendered. I further certify that the excess on Vote 30 referred to in paragraph 3 of the report for 1986, amounting to £15,147,359 has been made good by a Vote of the Oireachtas granting a sum of £15,147,359.

Stock and Store Accounts

5. The stock and store accounts of the Departments have been examined with satisfactory results subject to the matter referred to in paragraph 55.

EXCHEQUER ACCOUNT

Receipts and Payments for the Year ended 31 December 1988

CURRENT RECEIPTS

CURRENT PAYMENTS

CAPITAL RECEIPTS

CAPITAL PAYMENTS

CAPITAL RECEIPTS

Mr. McDonnell.—Paragraphs 2 to 5 are just introductory paragraphs and paragraph 6 gives just the details of the receipts into and payments out of the Exchequer in 1988. The presentation of that paragraph, Chairman, is slightly different from previous years and it now shows the current deficit, the capital deficit and how the overall deficit is financed. The information there is essentially that which is included in the finance accounts and you yourself will recall that you suggested that it might be looked at to see whether the format of the finance accounts might be presented in a more user-friendly way. From my side, Chairman, I just wanted to say that my staff and some of the Department of Finance people have been doing this and some suggestions have been made and discussed. While what has been done so far may not necessarily represent the final shape that the finance accounts will take, I understand the Department are incorporating some of the changes in the accounts which are due to be published in June. I just wanted to update you on that, Chairman.

Chairman.—Mr. Cromien, really what we were suggesting, when I said user-friendly, was that perhaps for the use of the public, journalists and, in particular, for Members of the Oireachtas, the accounts might be made easier to read. Do you think we will be getting to a stage soon where that will be the case?

Mr. Cromien.—Yes, Chairman. We are taking account of the comments of the Comptroller and Auditor General’s officials. As he said, we are in discussion with his office about this and hope to introduce some changes. We introduced changes into the 1987 finance accounts and will introduce more into the later ones, which we hope you will find satisfactory.

Chairman.—Without any disrespect to either yourself or to the Comptroller and Auditor General, both yourself and the Comptroller are used to reading accounts. What I would really like to see is a set of accounts which the layman or lay Members of the Oireachtas, in particular, will be able to find readable. I hope you might both bear that in mind and might just mention it very gently. Can we note these paragraphs, 2 to 6?

Paragraph 7 the Comptroller and Auditor General reads:

Central Fund Services

Service of the National Debt

The Capital Services Redemption Account (CSRA) was established under Section 22 of the Finance Act, 1950. The Act provides for the amortisation over 30 years from current Revenue of Government borrowing for voted capital services. Each year’s Finance Act makes provision for the required annuity to be paid from the Central Fund into the account. In 1988, £417.7 million was issued to the CSRA under this arrangement and is included in the charge of £2.141 million to the Central Fund in respect of Service of the National Debt.

Section 67 (8) of the Finance Act, 1988 provides that in addition to the amount issued to the CSRA from the Central Fund each year, the Minister for Finance shall pay into the CSRA any sum received by him as a result of transactions of a normal banking nature which he is authorised by Section 54 (7) of the Finance Act, 1970 to engage in for the better management of the Public Debt. He shall also pay into the CSRA any sums received by way of interest on temporary deposits held abroad and on the Exchequer Account with the Central Bank and on moneys held in other banks in the State. In 1988 such receipts totalled £57.3 million, arising mainly from the conversion of some fixed interest rate debt to floating interest rate debt and vice versa by means of interest rate swap transactions with selected banking groups. This amount was paid to the CSRA (in addition to the amount of £417.7 million referred to above) and was also used to meet the cost of servicing the National Debt.

Mr. McDonnell.—This paragraph is really just for information also because there is a certain novel aspect about it. It draws attention to the fact that under the legislation as it now exists income is derived from using modern borrowing techniques and financial instruments which are now available and which are normal in the market. In using those in the management of the public debt portfolio it draws attention to the fact that the income generated is used directly to service the debt because — heretofore, it was all sourced from the Central Fund. It is just for information, Chairman, because of this new arrangement.

Chairman.—Mr. Cromien, the Committee, by and large have a historic role to play in so far as they look at accounts on a historic basis, with one exception that is in so far as the Committee traditionally approve any change in the layout of Estimates which may be contemplated by Government Departments. In the case of servicing the national debt there is a proposal to create some sort of an agency, an entity or a corporate body, I am not sure which. Can the Committee be assured that, in whatever arrangement is eventually arrived at, the whole question of parliamentary accountability will be uppermost in your Department’s mind, to ensure that the information which is normally transmitted to the Dáil and to the Committee of Public Accounts will continue to be transmitted?

Mr. Cromien.—Yes. What I might do is explain about the national debt office. What is involved here is the setting up of an office which will manage the national debt in a new structure to be established by legislation. This was announced by the Taoiseach in November last, as a method of achieving better management of the national debt so as to achieve savings for the Exchequer. I take your point about parliamentary accountability and it is one of the elements which we are particularly concerned about in preparing the legislation. It will come before the Dáil and can be discussed at that stage, Chairman.

Deputy Rabbitte.—I suppose this is a naïve question, Mr. Cromien, and probably naïve to expect to get an answer to it. Do you think that in this new initiative there is any kind of admission that, perhaps, the management of the national debt was not as efficient up to now as it might have been? Is it envisaged that the recruitment of outside personnel may do it in a manner that savings would accrue to the Exchequer in the future? Or is it just that life is getting more complex and there is a necessity for this kind of expertise that might not have been available up to now?

Mr. Cromien.—I think, Deputy, it is the second rather than the first. We have been satisfied that management of the national debt has been done in a very effective way, given the instruments that were available at the time. But what has happened in that sphere is that all sorts of new financial instruments have been developed, which allow complex operations to take place and result in savings. One set of these is mentioned in this paragraph, interest rates swaps. These new instruments can produce quite substantial savings, so it is a question of doing better of what we think we have been doing well up to this.

Deputy Rabbitte.—What do we know about the shape of the new office at this stage and when will it be in place?

Mr. Cromien.—The shape of it has not been determined yet by the Government. We in the Department are preparing draft heads of a Bill which we will put to the Government and at that stage it will be brought into the Dáil as draft legislation. The shape of the office will be shown at that point. In relation to the timetable, we would hope that it would be introduced very quickly. I would like to see the office in operation perhaps by the middle of the year, or in the early second half of the year.

Deputy Flood.—Mr. Cromien, I see that in 1988 we had just over £2 billion servicing the national debt. What was the national debt at that time?

Mr. Cromien.—I have not got the figure for 1988, but I have it for end 1989 when it was £24.8 billion.

Deputy Flood.—That was at the end of 1989. How has that grown over the last four or five years?

Mr. Cromien.—In the early 1980s the debt was growing roughly at about £1,500-£2,000 million a year. In more recent years the annual increase has been much less, being roughly, £1,000 million, in 1988 and £500 million in 1989. The figure of borrowing for 1990 will be roughly £450 million.

Deputy Flood.—At what stage will the debt actually stop growing?

Mr. Cromien.—It would stop growing if the Government did not borrow any more money in a particular year; in other words, if it met all its expenditure out of its income in that year. The Government have indicated their intention of phasing out borrowing for current purposes by 1993, to the extent that that is feasible.

Deputy Allen.—There has been some speculation in recent times that the Government’s proposal to set up this new body is meeting with opposition from within the Department, hence the delay between the announcement date of the setting up of the new body and the publishing of the legislation. Would you dispel these rumours?

Mr. Cromien.—I would be delighted to dispel those rumours. They originated in the comments of one journalist in The Irish Times who has, I think, twice repeated this story. There is no truth whatsoever in suggesting that senior officers of the Department of Finance are not supportive of this proposal. We are fully supportive of it.

Deputy Rabbitte.—There is just one question on this that Mr. Cromien might address. Will control be maintained by the Department of Finance? Will the structure of the office be a kind of quango or will it be a consultancy body and will control continue to rest with the Department of Finance?

Mr. Cromien.—Roughly, the way we are thinking is that the Minister will apply certain conditions for the operation of the debt. Within those conditions the office will have freedom to carry out debt management, which is an executive function. The Minister will still determine broadly what way he wants the debt to be managed. The Office will be separate from the Department of Finance. It will have probably a chief executive, who will be responsible to the Minister. These are only early thoughts on the matter. We have not come to any final conclusion. Certainly, the Government have not come to any decision on it yet.

Chairman.—Could I ask one final question? Can we take it that there will be an Accounting Officer for this office who will appear before this Committee?

Mr. Cromien.—This is a consideration which is in our minds. As I said, we are concerned about accountability to the Dáil. We will bear in mind that this Committee would wish to continue to have responsibility in this matter.

Deputy McGahon.—For the benefit of the man in the street who does not understand higher finance — and I am one of them — could you tell the Committee what exactly is the national debt? Whom do we owe it to and is our credit indefinite? Were we at any stage threatened with curtailment of it and what exactly does the national debt represent?

Chairman.—Could you explain in long odds and short odds what you mean?

Deputy McGahon.—That is appropriate during Cheltenham week.

Mr. Cromien.—As the Deputy says, it is a debt that is owed to a number of people and institutions. It is both domestic debt arising from people subscribing, say, to national loans or putting money into the Post Office Savings Bank or otherwise and borrowing internationally. Our credit standing is very important, particularly in the second sphere. I am glad to say that it has improved in recent years. There are international agencies which produce a credit rating for all borrowers — states and corporations and so on. Our credit rating has been improved very much. It is in the AA category, which is very high. That was achieved only last year.

Deputy McGahon.—I wish my own credit rating was as high because I am being threatened.

Deputy M. Ahern.—Join us.

Deputy McGahon.—That is a fate worse than death.

Chairman.—The Dáil and the Public Accounts Committee, the Comptroller and Auditor General and you, sir, as the premier Accounting Officer, have a particularly important role in this whole area of accountability. Since you would be one of the few people who will see this legislation of the various entities to which we referred, the Committee will be looking to you to ensure that the whole question of accountability in terms of the Committee’s traditional role will be enshrined. That is the only concern that I would like to express to you this morning. The rest is a matter of policy for the Dáil and for the Government, but that particular role should be borne fairly strongly in mind.

Mr. Cromien.—Certainly, but it will be eventually a matter for the Government to determine in its proposed legislation, as you will appreciate.

Chairman.—We can note paragraph 7.

Paragraph 8 of the Report of the Comptroller and Auditor General reads:

Local Loans Fund

The Local Loans Fund (LLF) was established under the Local Loans Fund Act, 1935 which provides for advances to be made to it from the Exchequer or from other Government Funds for on-lending to Local Authorities to finance their capital expenditure other than on roads. The interest rate charged by the LLF to Local Authorities represents the rate at which the LLF received advances from the Exchequer. After meeting only the interest charges due to the Exchequer or other Funds, repayments made by Local Authorities to the LLF are used to make further loans to Local Authorities. Due to the increase in capital expenditure by Local Authorities, with the consequent increase in the cost of servicing their borrowing from the LLF, it became necessary over the years to provide loan charge subsidies from the Environment Vote to enable the Local Authorities to meet their repayments to the LLF; for instance, in the case of house construction, loan charges have been fully subsidised since 1977 and the rate of subsidy for sanitary services programmes has ranged from 40 per cent to 60 per cent. In addition, Local Authorities had to meet the unsubsidised portion of loan charges from the rate support grants provided from the Environment Vote, with the result that the Exchequer was in effect meeting the full liabilities of the Local Authorities in respect of most LLF loans.

In order to eliminate the circuitous channelling of funds and to reduce the cost of administration, the Government, in May 1987, approved a proposal by the Minister for Finance—

(1) to introduce legislation amending the Local Loans Fund Acts to provide for the writing off of certain outstanding balances due to the LLF in respect of loans made by it for certain specified purposes,

(2)to provide, in future, 100 per cent grants from voted moneys for capital programmes formerly financed through the LLF where the Exchequer already provided a 100 per cent or partial subsidy on the repayment of loans, to write off the outstanding principal and interest on such loans and to reduce the rate support grant by an amount equal to the unsubsidised portion of the loan repayments, and

(3)to continue subsidising the repayment of existing loans for capital programmes financed by non-LLF loans which qualified for Exchequer subsidy and, in future, to provide 100 per cent grants for such programmes.

The Local Loans Fund (Amendment) Act, 1987 gave statutory authority for these proposals and, accordingly, the 1988 Votes for Environment, Second Level and Further Education and Health have been revised to give effect to these arrangements.

Arising out of the waiver of the amounts due by Local Authorities to the LLF it was necessary to provide in turn for the waiver of the repayment of advances (including interest) made from the Central Fund to the LLF and such a waiver was authorised by Section 69 of the Finance Act, 1988.

The Minister is required to lay before the Oireachtas statements showing the amounts written off both in respect of LLF loans to Local Authorities and Exchequer advances to the LLF and accordingly in June and December 1988 such statements were laid before the Oireachtas as follows—

Mr. McDonnell.—Again, paragraph 8 is for information. It is a fairly long paragraph. It just outlines the way in which the Local Loans Fund was used as a means of financing capital expenditure by local authorities and how, through the provision of various loan charge subsidies to local authorities over the years, the State, I suppose you could say, ultimately became responsible for servicing a large part of what were its own loans. This was recognised as being administratively wasteful. The decision was taken to write off certain outstanding loans. I just want to make clear that there is no consequential loss to the State and, indeed, no gain to the local authorities and that having made the decision to do this, those very high value transactions which you see there at the end of the paragraph were necessary in order top keep the books straight. In fact, the Department of Finance, I think, estimated that there was quite a considerable administrative saving.

Chairman.—So this is really a question of removing circuitous channeling of funds and improving the accounting procedure? Is that the situation?

Mr. Cromien.—Yes.

Chairman.—I think we can note paragraph 8.

Paragraph 9 of the Report of the Comptroller and Auditor General reads:

Exchequer Receipts — Miscellaneous Capital

Sale of oil company shares

Reference was made in paragraphs 31 and 32 of the 1977 Report to the granting of petroleum exploration licences by the Minister for Energy under the provisions of the Petroleum and Other Minerals Development Act, 1960 and to the types of consideration which may be accepted by the Minister in return for the granting of such licences.

Arising out of licensing agreements concluded between the Minister for Energy and eight oil companies, shares in the companies were issued to the Minister for Finance between 1978 and 1987.

In July 1987 the Government, in the context of a review of expenditure programmes for the remainder of 1987 and 1988, directed that the State shareholdings in the oil companies, then valued at £4.8 million, should be sold through the Government stockbroker or other official channels on the most expeditious and advantageous terms possible and that the proceeds should be applied towards reducing the National Debt. In January 1988 the Departments of Finance and Energy sought the advice of the Government stockbroker on the general question of the sale of the shares and, in particular, on the timing of the sale. The shares were sold by the Government stockbroker in the period July-October 1988 and realised £2,729,330 which has been brought to account in the Exchequer as Miscellaneous Capital Receipts.

The Accounting Officer informed me that the Government decision of July 1987 to dispose of the oil company shares was based on the recommendations of a group set up by the Taoiseach in preparation for the 1988 budget to review all aspects of Government expenditure and to recommend reductions in expenditure, disposals of assets, etc. He explained that as the sale was intended to affect Exchequer borrowing in 1988 the sale procedure was initiated promptly on 5 January 1988.

Mr. McDonnell.—Paragraph 9 is self-explanatory. It deals with the sale of the State’s shareholding in eight oil companies. The decision to sell shares is obviously a policy matter which does not concern me. All I am concerned with is reporting, if you like, on the financial outcome of that policy decision.

Chairman.—Just very briefly, could you name the companies in which the shares were held?

Mr. Cromien.—I am sorry, I have not that information; but I could get it for the Committee.

Chairman.—The second thing is the composition of the group which reviewed the matter.

Mr. Cromien.—This was a group of Secretaries of Government Departments presided over by myself, with the assistance of an outside consultant, Mr. Colm McCarthy. We were concerned to examine the Estimates of every Government Department with a view to identifying proposals for savings. We put a list of proposals to the Government for reducing expenditure or increasing income. This was one of the proposals to bring in increased revenue.

Chairman.—And you are satisfied that the sale of these shares for £2.7 million was value for money?

Mr. Cromien.—It was. They cost us nothing and they brought in a good sum.

Chairman.—Would either of your colleagues have the list of companies in their brief?

Mr. Cromien.—I am sorry, we did not anticipate that question.

Deputy Allen.—You have covered most of the questions that I intended to ask. Could I ask the Accounting Officer what time lapse occurred between the decision to sell and the sale?

Mr. Cromien.—The Government decided that this was part of a packet of measures to reduce borrowing in 1988. From 5 January 1988 we initiated the proposal to sell. As members of the Committee will be aware, with a proposal to sell shares it is very important to get the timing right, particularly in relation to oil exploration. We had to be careful that the wrong signal was not given to the market at a time when exploration licences were being reviewed. We were advised by the Department of Energy and, in due course, by the Government stockbroker that the appropriate arrangement was to sell them over a period from July to October 1988.

Deputy Allen.—There is just another piece of information that I require. How and why did the Government acquire the shares?

Mr. Cromien.—My understanding is that it was part of the deal in giving licences to exploration companies. That was the arrangement that was made at that time. It is no longer the practice to require a State involvement in companies in issuing licences.

Chairman.—It was part of the consideration, in other words?

Mr. Cromien.—That is right.

Chairman.—Would the Comptroller and Auditor General have the list of companies?

Mr. McDonnell.—I have a list here which I can read out to the committee. The ones that I have are: Aran Energy, Atlantic Resources, Bula Resources, Conroy Petroleum, Ennex International, Gaelic Resources, Trans-international Oil and Tuskar Resources.

Deputy Allen.—Will the Accounting Officer elaborate more on the role of Mr. Colm McCarthy. Who is he and why was he brought in? Is he the Government stockbroker referred to in the report or, if he is not, why was he brought in?

Mr. Cromien.—Could I explain that he was not brought in specifically to comment on the sale of the shares? What he was brought in for was for a general expenditure review that was carried out at the request of the Government in 1988. If you recollect, it was Government policy in 1988 to curb public expenditure sharply. I was asked, as Secretary of the Department of Finance, to establish a committee which would allow me to discuss with the Secretaries of every Department what proposals for reduced expenditure could be agreed on between the Department of Finance and the other Departments. We thought it useful to have somebody from outside to provide a fresh mind on this and to ask questions about public expenditure. Mr. Colm McCarthy was engaged as a consultant, to help me and my colleagues in the Department of Finance to identify areas which might be considered by the Government for a cut in expenditure.

Deputy Allen.—The name is familiar to me but could you tell me exactly his background? Is he a stockbroker or a chartered accountant?

Mr. Cromien.—He is an economist with a firm of stockbrokers in Dublin. Could I just finally add, by the way, that he was not in any way involved in the disposal of the shares; the shares were disposed of by the Government stockbroker. This is only one of, I would say, about 100 proposals that were put forward by this committee of which I was chairman.

Deputy Allen.—Could I just finally ask the Accounting Officer if the climate at the time for the sale of the shares was the best climate and if these shares had a far greater value in, say, the previous year or the year before that?

Mr. Cromien.—There is a difficulty always in selling shares. If any Deputies have had experience of selling shares on the Stock Exchange they will know it is very difficult to get the best time to sell so as to get the best value. You make the judgment at a particular time and, as long as you are getting a reasonable return, you can be satisfied with the price you get. I could mention that if the shares had been sold some months before they would have brought in £1.7 or £1.8 million. By being sold at the time that they were sold they brought in £2.7 million.

Deputy Allen.—I suggest you should go to Cheltenham this week where you might get a good run there.

Deputy Taylor.—On the other hand, some months before the shares had been valued at £4.8 million, thereby indicating that they dropped by some £2 million of a loss there. Is that right?

Mr. Cromien.—That was following the collapse in the Stock Exchange on Black Monday in October 1987.

Deputy Taylor.—It is easy to be clever with hindsight, but is it not a fact that since then these shares have gone up, or at least some of them have, very substantially?

Mr. Cromien.—That is true. That is my point: that it is difficult to sell at the perfect time. Anybody who has been involved in investing in the Stock Exchange will be aware that an invester is satisfied if he gets a reasonable profit, and in this case the State got £2.7 million profit. It is a pity we did not get £4 million but we could equally have got £1 million.

Deputy Taylor.—The shares were sold on the open stock market or by placing?

Mr. Cromien.—On the open stock market. as far as I am aware, Deputy.

Deputy Taylor.—Were inquiries not made as to perhaps placing a large block of shares of that nature to avoid getting a depressed price on the market place when a large number of shares like that would be put on the market in one go. Was that examined?

Mr. Cromien.—They were not put on the market in one go; they were sold over a period of months.

Deputy Taylor.—Have you any idea what the value of those shares would be today had they been retained? Approximately?

Mr. Cromien.—They would certainly have improved by this, but I am not quite sure what the figure would be. It may be something over the £3 million.

Chairman.—We can note this paragraph.

Paragraph 10 of the report of the Comptroller and Auditor General reads:

Post Office Savings Bank

As stated in paragraph 11 of my previous Report, the audit of the Post Office Savings Bank is now being carried out on my behalf by the auditor of An Post, subject to my retaining the right to undertake any further audit tests which I consider necessary. In May 1989 they reported to me on the scope of their audit of the 1986 and 1987 accounts. I accept their opinion that the accounts of the Post Office Savings Bank give a true and fair view of its transactions for those years and of the year end balances. I expect them to report to me shortly on their audit of the 1988 accounts. The transactions relating to the investment of POSB funds by the Department of Finance are examined by me.

The results of the operations of the Post Office Savings Bank for 1987 and 1986 are shown in the following statement:

The balance including interest due to depositors at 31 December 1987 was £956.4 million and at 31 December 1986 was £840.6 million including £568.1 million and £458.4 million, respectively, due to the Trustee Savings Banks. The estimated market value of securities held was £991.9 million at 31 December 1987 and £807.8 million at 31 December 1986.

Mr. McDonnell.—Paragraph 10 is simply the means by which I formally report on the audit of the Post Office Savings Bank, which I am statutorily required to do. As I mentioned to the Committee previously, the auditors of An Post carry out the audit on my behalf and I have said there in the paragraph that I was awaiting the 1988 report. I have since got that and there were no problems, Chairman. This arrangement is working quite satisfactorily and we will soon be discussing with the firm doing the audit on my behalf the starting of the 1989 audit.

Chairman.—Mr. Cromien, on your last appearance I asked you about the Post Office Savings Bank’s competitive arrangement — in other words, I suggested that they might compete more aggressively for their share of the market or for a share of the market. The building societies seem to be quite aggressive in getting business. What about the Post Office? Has it been revamped? Is it regularly reviewed? What is the current state of play?

Mr. Cromien.—My understanding is that it is, in fact, being promoted and will be promoted further. There is a difficulty about a lot of these small banks at the moment, particularly with 1992 coming up. It is necessary to review their effectiveness, but my understanding is that the Post Office Savings Bank is in fact gearing up to improve its effectiveness.

Chairman.—Could I suggest to you, Mr. Cromien, that whereas building societies have been opening at every crossroads, post offices have been closing down? Now I understand, particularly in Dublin that there is proliferation of post offices; but if they were actually aggressively campaigning for business it might well be that the proliferation of offices would be a good policy. I do not know. Secondly, there seems to be a problem. Whereas building societies are attracting in business almost at every crossroads, you find that when people go to post offices they often have to queue out on the streets. There are two post offices I am aware of myself where people have to queue on the streets. That certainly does not give the impression of an organisation which is clued-in to maximising its profits on behalf of the State. I wonder have you discussed this with the Post Office Savings Bank?

Mr. Cromien.—Not really, Chairman. This is a matter for An Post and I am not terribly familiar with their operations.

Chairman.—You are the Accounting Officer. Would it not concern you if, say, millions of pounds in potential investments were being lost by the Post Office Savings Bank because they were not competing?

Mr. Cromien.—I do not think that is the position, Chairman. I think they are competitive for the type of business that they do. Remember, what they are concerned with is small savings. They are not in the same operation as the building societies, for instance, or the banks. They do a particular specialised form of business to encourage small savings.

Chairman.—The post offices and banks are now encouraging students and all sorts of people to open accounts with them. I think it is something that the Post Office Savings Bank should review, because there is, in my view, a potential income for the State there which is not being properly pursued.

Mr. Cromien.—I take note of your views on that.

Chairman.—Would you raise it with POSB?

Mr. Cromien.—Certainly.

Deputy Flood.—Could you just explain to us the benefit to the State of the existence of the Post Office Savings Bank?

Mr. Cromien.—It is part of the Government borrowing programme. It provides resources from borrowing, just like foreign borrowing or national loans. That is its main purpose.

Deputy Flood.—How much has it realised in the particular year we are speaking about?

Mr. Cromien.—Deposits increased between 1987 and 1988 from £418 million to £524 million. That is roughly £106 million.

Deputy Flood.—In relation to the position of An Post in all of this, are they acting as some kind of an operator? Are they being paid for running the bank?

Mr. Cromien.—Yes, they act as the agent of the Minister for Finance in this and they are paid management expenses.

Deputy Flood.—Does the Minister lay down any terms on conditions along the lines referred to by the Chairman with regard to the condition of post offices and sub-post offices?

Mr. Cromien.—Not that I am aware of.

Deputy Flood.—So, therefore the opening and closing of post offices are not affected at all by the ability of An Post to run a proper and efficient Post Office Savings Bank?

Mr. Cromien.—I do not wish to discuss the opening and closing of post offices because I am not really briefed on that. It is not my area of responsibility. I would assume that there are economic grounds for opening and closing of post offices by An Post. They, I would assume, would also apply in relation to business of the Post Savings Bank through those offices.

Deputy Flood.—It just seems that the return from the savings bank is very small. This suggests to me that perhaps a savings bank of that kind could be better organised, more efficiently organised on behalf of the State. Has this ever been considered?

Mr. Cromien.—Not really, Deputy. It is, in a sense, an on-going operation in the Post Office Savings Bank. It is something that certainly can be considered, or should be further considered in relation to the general management programme of the Government.

Deputy Flood.—I am just raising this now on the basis of efficiency and value for money. I think it is appropriate that we should raise it here. I would suggest that perhaps that should be looked at. The return appears to be very small and I would be interested to know the cost involved and the payments made to An Post in a particular year for the provision of this service.

Mr. Cromien.—I have not got those to hand here, but I can give them to the Committee, if you wish.

Deputy Flood.—I would be interested in seeing those figures.

Deputy Connor.—Mr. Cromien, you describe post office savings as being akin to, or alike, or analogous to foreign borrowings or, indeed, any kind of borrowings, national loans etc. Could you tell the Committee how good a value they are to the State in terms of the repayment we must make? You mentioned a figure of £500 million. Do I take it that that is the settled amount of money that in recent years is there in the fund and that is available to the State to draw on as a borrowing? My question again is: how good a value is it in terms of interest repayments which the State has to make on these, by comparison with other borrowings, if you liken them solely to borrowings, if you liken the post office savings accounts to any other borrowing?

Mr. Cromien.—The rate of interest will be broadly the same as borowers will get anywhere else — in other words, they have to be competitive with other vehicles of saving. The money is very often left in the bank. The Post Office Savings Bank is a vehicle where people often leave money for long periods and in that way it is valuable to the State. It is not like a current account in a bank where money is going in and coming out very quickly. It is generally fairly long term saving.

Deputy Connor.—But is it good value to the State by comparison — for instance, if the Government had access to £400 million on foreign borrowing and they have access to this internally generated borrowing, if you want to call it that, to the post office savings account? The Government make their repayments in interest to the foreign lender and in that context, how does it compare as value to the State’s indebtedness?

Mr. Cromien.—It is very welcome to the State because it is money owed to Irish persons in Irish pounds. You have not got an exchange risk as you would have in borrowing from a foreign lender. It is also, as I say, fairly long term. You are not under pressure for the Government to repay it after a fixed period, although, of course, it is available at any time to people. It is just that they leave their savings there for a along time.

Deputy Connor.—And would the interest rate, generally speaking, the interest rate paid back to the people lending, not be less than it would be to a borrowing of another kind?

Mr. Cromien.—It has to be competitive with banks and building societies for the type of business that is done. Otherwise you would not get the money.

Deputy Connor.—So it is competitive?

Mr. Cromien.—It is competitive in relation to those vehicles which are like it; but not, of course, to a different type of borrowing.

Deputy Connor.—But not necessarily better value. You describe it as competitive, full stop.

Mr. Cromien.—I think it would be good value and it is welcome. If the State had not got that money it would have to borrow from abroad, perhaps, to supplement domestic borrowing. This could be more expensive at the end of the day if there were exchange rate changes.

Deputy Taylor.—What limitations are there on the range of banking activities that the Post Office Savings Bank are allowed to undertake?

Mr. Cromien.—I think they are basically a traditional form of small bank. They have not developed some of the newer forms of business which other banks have been using.

Deputy Taylor.—The fact that they have these limitations on how they operate is very restrictive. Would it be fair to say that the Post Office Savings Bank, if it were given a free hand to operate as a State-owned banking institution, could do very well if it were given its head and given a free hand to compete realistically with the other lending and banking institutions in the private sector?

Mr. Cromien.—It certainly could be expanded in that way, if it were Government policy to do that.

Deputy Taylor.—And the fact that it is not, it is fair to say, means a substantial loss in the profits that a bank of that nature could make?

Mr. Cromien.—I do not accept that. What is being done is reasonable for the provision of savings to the Exchequer. This is basically what this bank is used for. It is used to borrow money for the Exchequer, to save the State borrowing in other ways.

Deputy Taylor.—Is it not so that the rates of interest which the Post Office Savings Bank pay are less than are obtainable elsewhere from commercial banks, from the building societies and so on — traditionally less?

Mr. Cromien.—No, it is broadly in competition with them. At times there are complaints that the State is favouring its own vehicle of savings like savings certificates and the Post Office Savings Bank by its rates.

Deputy Taylor.—What is the relationship between the Post Office Savings Bank and the Trustee Savings Bank?. What is the interplay there?

Mr. Cromien.—The Trustee Savings Banks are independent banks which also raise savings which are made available to the Exchequer.

Deputy Taylor.—And are they made available directly to the Exchequer or through the medium of the Post Office Savings Bank?

Mr. Cromien.—They use the vehicle of the Post Office Savings Banks, as far as I recollect, Deputy.

Deputy Taylor.—So that the money coming from the Trustee Savings Bank goes to the Government through the Post Office Savings Bank? Is that right?

Mr. Cromien.—Yes, the Post Office Savings Bank Fund manages the Post Office Savings Bank and Trustee Savings Bank deposits.

Deputy Taylor.—Is that not a rather tortuous and circuitous financial arrangement, that these funds are coming from the Trustee Savings Bank to go to the Government? The only reason why they could not shortcircuit that and go directly, be deposited directly with the Department of Finance, is that they have to go into the Post Office Savings Bank at the first instance. There they are dealt with and earn an agency fee for management deducted off that and credited to An Post itself. Then they go from there to Finance and follow the same circuitous journey on the way back. Is there not a loss of revenue involved in that circuitous operation and similarly as in regard to the Local Loans’ Fund? I would be interested to hear what both you have to say about that and what the Comptroller and Auditor General might have to say about it.

Mr. Cromien.—Well, the Post Office Savings Bank Fund is managed by the Department of Finance and the deposits from the Post Office Savings Bank and the Trustee Savings Bank both go into it. There is no problem of management expenses; deposits come into the Exchequer.

Deputy Taylor.—I know they go into the Exchequer ultimately. But is there any reason why the Trustee Savings Bank funds that are heading for the Exchequer and destined for the Exchequer should not go directly there instead of having to go through the medium of the Post Office Savings Bank, with all the commission involvements that arise?

Mr. Cromien.—I am sorry. I may not have explained this properly. It is a Post Office Savings Bank Fund that we are talking about, not the Post Office Savings Bank. The Post Office Savings Bank Fund has two streams of money going into it — one, the Post Office Savings Bank deposits and the other the Trustee Savings Bank deposits.

Deputy Taylor.—Why does the Trustee Savings Bank not make its lodgments, as it were, directly with the Exchequer? What is the purpose or what is the need to have it go through, whether it is the bank or the fund? Would it not be simpler and cheaper and involve less administration if it went directly from the Trustee Savings Bank to the Exchequer funds? Maybe the Comptroller and Auditor General might have some comment on it, I do not know.

Mr. McDonnell.—I think the Accounting Officer perhaps to some extent has allayed Deputy Taylor’s concern. One aspect of it is that the Trustee Savings Bank funds do not go to An Post. That might have been a misapprehension. They go into the Department of Finance directly together with the money coming from An Post, which is the manager, if you like, of the Post Office Savings Bank. They are, therefore, together accounted for in one account within the Department of Finance and transferred to the Exchequer. There is no additional administrative cost. There is no management fee involved. It is simply that they have an accounting process of collecting them together within a fund in the Department of Finance which is part of the overall cash position of the Paymaster General and so on.

Deputy Taylor.—There is no unnecessary circuitous movement of funds?

Mr. McDonnell.—No, there is not.

Deputy Taylor.—There are balances of £568 million and £458 million for the two years which were due by the Post Office Savings Bank to the Trustee Savings Bank at the end of the accounting years, were there not?

Mr. McDonnell.—Those are the moneys which have been transferred to the fund from the Trustee Savings Bank. That, obviously, is the depositors’ money, which is at the end of the day due to the depositors. Therefore, it would have to come back from the fund to the Trustee Savings Bank if all the depositors demanded their money.

Deputy McGahon.—Mr. Cromien, I want to ask you about the involvement of An Post with the prize bonds. They are responsible for prize bonds, which are the cinderella area of the most seductive gambling inducements offered to gullible people by the State. Nevertheless, they are very much a better bet than the impossible dream offered by the National Lottery. How do the prize bonds stand? Is there much money in that area? I have noticed in recent times that An Post have been advertising them. Has there been an increase in interest? Have they been swallowed up or swamped by the immediate attractions of the National Lottery?

Mr. Cromien.—This really arises under the Department of Finance Vote which comes along later. Perhaps, I could explain here that the prize bonds were run for a long time by the Bank of Ireland. Last year it was decided that they would be transferred to a new body to run because the Bank of Ireland did not wish to continue with their involvement with them. The prize bond scheme is currently operated by a prize bond company, which is a joint venture between An post and the Foreign Exchange Company of Ireland. They have been awarded the contract to operate the scheme for a ten year period from the 1 May 1989, so they will be looking at the prize bonds to see how they can be sold better. In fact, they are beginning to do this. The Foreign Exchange Company provides the computer facilities which are needed. An Post provides the marketing and has outlets for the prize bonds. I agree with you that they have not been as lively as when they were introduced first. They were a very interesting idea when they came out first, but they have been only a smaller contributor to State borrowing in recent years.

Deputy McGahon.—They have been overshadowed by the Natonal Lottery. But I have said before at this meeting that people have as much chance of being hit by a bus as winning a million pounds. The odds are just crazy. The attractions of prize bonds are permanent and can be passed from generation to generation. I believe that they should be advertised more aggressively. Can you tell me is there much money unaccounted for or has there been substantial prize money that has not been claimed?

Mr. Cromien.—For the prize bonds, I am sorry I have not got that information. But I could just mention, on your earlier point, that there is a difference between putting your money into the lottery and putting it into prize bonds. When you put your money into prize bonds you get your money back at the end of the day. What you are taking the gamble on is the interest payment, which is put into a fund for prizes. It depends on what people want to do with their money. If they want to invest it with the certainty of getting their money back but having a gamble they go for prize bonds. If they want to take the risk of investing their principal and losing it but with the chance of a much larger prize they go for the lottery.

Chairman.—We have drifted a little bit from the Post Office, but since we are on it, Mr. Cromien, perhaps you would send us a note on the outstanding balances. I take it that people who win lottery moneys are notified? They do not just print the numbers in the paper?

Mr. Cromien.—Prize bond winners are notified.

Deputy Rabbitte.—Mr. Cromien, roughly what proportion of the national debt originating domestically is accounted for by moneys loaned from the Post Office Savings Bank?

Mr. Cromien.—I will have to do more precise calculations later, but the figures, roughly, show that the total national debt at the end of 1989 was £24.8 billion. The balance due to depositors in the Post Office Savings Bank at the end of 1988 was roughly, I think, £900 million.

Chairman.—We can note this paragraph. Paragraphs 15 and 16 are related, so we will take these two paragraphs together.

Paragraphs 15 and 16 of the report of the Comptroller and Auditor General read as follows:

Subhead L.—Repayment of Advances

15. I referred in paragraph 11 of my 1985 Report to the issue of repayable Exchequer advances totalling £12.967,000 by the Minister for Finance to the Industrial Credit Corporation (ICC) between 1970 and 1980 under Section 4 of the Industrial Credit (Amendment) Act, 1959 and to the waiver by the Minister of the repayment of some of the advances and interest thereon. The advances had been made to ICC to finance certain loan schemes intended to provide working capital and fixed asset loans in excess of the amounts which would be justified by normal banking criteria to undercapitalised small and medium sized enterprises. The statutory authority to enable the Minister for Finance to waive repayment of advances is provided by the Industrial Credit (Amendment) Act, 1983 which also provides for the repayment to the Exchequer out of moneys voted by the Oireachtas of amounts of principal waived. Of the total of £12,967,000 advanced from the Exchequer, £7,647,627 had been repaid by ICC up to 31 December 1988 and £3,097,623 principal had been waived by the Minister and repaid to the Exchequer out of voted moneys including £110,656 charged to the subhead in 1988. Interest totalling £2.1 million due up to 31 December 1988 had also been waived.

The balance of the charge to the subhead viz. £2,937,226, represents the write off of Exchequer advances made under a scheme introduced in 1961 to encourage the building of ships at Irish shipyards by providing low cost loans to shipowners through shipping Finance Corporation (SFC), a subsidiary of ICC. Funds for the scheme were provided to SFC through the issue of repayable advances from the Exchequer to ICC under Section 4 of the Industrial Credit (Amendment) Act, 1959 and the interest rate on loans made by SFC to the shipowners was subsidised from the Vote for Industry and Commerce.

In June 1986 a shipowner defaulted on loan repayments to SFC in respect of loans totalling £ 10.8 million provided by SFC in 1973-74 for the building of two ships at Verolme Cork Dockyard. Arising from negotiations between the parties on a loan restructuring package, SFC, with the approval of the Department of Finance, agreed to write-off £2,937,226 of the principal then outstanding viz. £4,859,526. The Department of Finance also agreed to a corresponding waiver of repayment by ICC of Exchequer advances from which SFC loans had been financed and this amount was accordingly repaid to the Exchequer from voted moneys. Between October 1988 and March 1989 the balance of principal due, £1,922,300 was paid by the shipowner to SFC and the corresponding Exchequer advances were then repaid.

Subhead M.—Losses in respect of Certain Loans for Industrial Development Purposes Advanced by Industrial Credit Corporation plc.

Reference was made in the previous paragraph to certain loan schemes operated by ICC up to 1980 which were funded by Exchequer advances and were intended to provide working capital and fixed asset loans in excess of the amounts which would be justified by normal banking criteria to small and medium sized enterprises. In 1980 it was agreed with the Department of Finance that ICC would introduce a similar scheme under which ICC itself would finance such high risk loans from its own resources but that, in the event of default by borrowers, the Exchequer would meet the losses incurred by ICC on the high risk element of the loans, subject to meeting a maximum of 50 per cent (reduced to 40 per cent in 1985) of the total amount of any loan. Loans provided by ICC under these arrangements between 1981 and 1988 included £56 million which ICC regarded as being in excess of the amounts which would be justified by normal banking criteria.

It was also agreed that £ 4 million of bilateral assistance which had been paid to ICC in 1979 and 1980 by the Dutch Government under arrangements made for Ireland’s entry into the European Monetary System would be held by ICC as a reserve against any losses which would have to be met by the Exchequer under the scheme.

By 1986 such losses exceeded this reserve and further loses totalling £4,231,000 have since been met from the Vote — £367,000 in 1987 and £3,864,000 in 1988. At 31 July 1989 ICC estimated that a further £9.5 million of the high risk element of loans would eventually be written off — representing 43 per cent of such amount then outstanding, £21.9 million. In June 1988 the Department of Finance decided to phase out the scheme by October 1990 and to limit the additional amounts to be provided in respect of the high risk element of loans to £6 million in the period 1988 to 1990.

Mr. McDonnell.—These paragraphs are related. I included paragraph 15 to explain what was covered by this rather general title of “Repayment of Advances”. What repayment here means, in practice, is actually the write-off of an asset in the form of amounts due to the Exchequer for repayable advances made by it in previous years. The technique used in that kind of situation is that the Dáil is asked to reclassify the expenditure and to regard it as a final charge on public funds by voting the amount as a repayment to the Exchequer. Then the book-keeping is carried out after that.

In paragraph 15, the charge in respect of repayment to the Exchequer which, as I say, represents a write-off of Exchequer assets, comprises two items, the first being a relatively small item of £110,000 due from the ICC on foot of loans made to certain business enterprises from funds provided to the ICC from the Exchequer. You will note there, when you take account of previous similar write-offs, that at the end of 1988 just over £3 million of an original sum of £13 million has now been written off. I do not know whether that was the level of write-off which was envisaged when this scheme was initially introduced or, indeed, whether there are any more write-offs in the offing.

The second item in paragraph 15 is a once-off thing, if you like. It is referring to a £2.9 million write-off of shipbuilding financing. I suppose you could say that it is a further cost which now has to be met over and above the normal level at which shipbuilding was subsidised over the years. It is a once-off item and that is the end of that.

Paragraph 16 involves loans made by the ICC — high risk loans — but in this instance the funds were made available by the ICC from their own resources. The State guaranteed the high risk element as determined by the ICC, up to certain maximum limits. When this scheme was being introduced it was hoped that it would not involve any great cost to the Exchequer but, as you will see from the paragraph, it has turned out to be fairly costly. I will up-date figures given in the paragraph, which was at the end of 1988. At the end of 1989, losses involved in the high risk element of these ICC loans had amounted to £11.8 million, of which £4 million was met by this Dutch bilateral assistance money. And then there is a figure of £6 million which is expected to be a further write-off in this case. You could say the second scheme has cost £18 million in total. So, there are two things. There is the original write-off in paragraph 15 of earlier Exchequer advances made to the ICC and there is the direct payment in paragraph 16 of losses arising on loans from the ICC’s own funds.

Chairman.—Are you saying that the total is £18 million or just the latter part is £18 million?

Mr. McDonnell.—I am saying that in the latter one the figure of £18 million is what you would expect the cost ultimately to be of which about £12 million has arisen to date. In the first one, where you are writing off advances made in earlier years, the write-off will ultimately be something over £3 million. I am sorry, it is already over £3 million. Then there is another £3 million from the shipbuilding situation, but that is an isolated matter.

Chairman.—Mr. Cromien, how does this compare with normal banking transactions for the same period?

Mr. Cromien.—The write-off would be much greater in the case of these loans because, by definition, they were high risk loans. The purpose of the scheme was to provide finance for what were considered worthwhile but high risk industrial and tourism projects, the promoters of which would not have been able to get finance from normal banking sources. The State agreed to subsidise the lending in these cases. There are three types of scheme involved here. I calculate that default on the special loan scheme described in subhead L. is about 24 per cent, which is high, but understandable in view of the nature of these loans. One would say that they have been successful as to the balance of 76 per cent. so that the State did get some benefit from them. The scheme mentioned in subhead L. was terminated in 1980. The scheme in relation to the ships has not been used for quite some years and it is unlikely to be used again. The scheme in subhead M. is being terminated this year.

Chairman.—Would it be fair to say that over a 20-year period, say from 1970 to 1990, the State will be down something of the order of £24 million?

Mr. Cromien.—That was the price that was paid to encourage these small firms.

Chairman.—It turned out to be extremely costly, Mr,. Cromien. Have we learnt lessons from this particular cost?

Mr. Cromien.—I would not disagree with you, Chairman, on this. As I say, these schemes have now been terminated.

Chairman.—With effect from October 1990, is that right?

Mr. Cromien.—Yes, that is in relation to the scheme under subhead L.

Chairman.—In relation to this one particular payment — £2.9 million to the shipping company — that was paid in 1986, is that correct?

Mr. Cromien.—That is right, yes.

Chairman.—Which company were the recipient?

Mr. Cromien.—I understand it was a German shipowner. I have not got the name of the company here, but they defaulted on loans to the subsidiary of the ICC.

Chairman.—This shipowner, presumably, has some sort of corporate entity. Did that entity go into liquidation or did the State simply not continue to pursue the matter?

Mr. Cromien.—A loan restructuring package was agreed which involved writing off the £2.9 million. The balance then was repaid to the company by the shipowner.

Chairman.—Well, it is an expensive lesson, but I suppose if the State does not get involved in these rescue packages there is no way that you will learn the lesson. It is a lesson we have all learnt for the future.

Deputy McGahon.—Twenty-four per cent is a relatively high percentage of non-payments and while I appreciate that the economic climate at that time was not particularly good, it still remains a high percentage. My concern would be that people who allowed the company to collapse or did not utilise the money in the right way, can manifest themselves in another reincarnation. I would like to think that the State would be very careful to vet personnel rather than company names. People who have bad records should not be given the benefit of State funds at any other time in their career.

Mr. Cromien.—I understand that this is a consideration in relation to the Companies Bill that is being discussed at the moment.

Deputy M. Ahern.—Under what criteria do ICC operate at the moment? Are they the same as with commercial banks?

Mr. Cromien.—They are strictly commercial, except in the case of this type of loan for which they were required to act as the agent of the State.

Chairman.—We can only note these paragraphs.

Deputy Rabbitte.—Will your answer to the question Deputy Ahern asked be different after the dissolution of Fóir Teoranta?

Mr. Cromien.—The operation of the ICC will continue to be commercial.

Deputy Rabbitte.—But your Minister has given the impression to the House that once the Bill to dissolve Fóir Teoranta goes through the House, it may be that the kind of lending Fóir Teoranta engaged in might now be available from the ICC in perhaps more selective cases.

Chairman.—I am afraid you will have to ask the Minister to clarify his view on that. I am not sure that you have got what the Minister had in mind. My understanding is that a mechanism has to be found to handle existing Fóir Teoranta loans and that is all that is involved.

Deputy Rabbitte.—I apologise if I misunderstood the Minister. Sometimes he assists one in misunderstanding him. Does that mean that the kind of facility that was offered by Fóir Teoranta is definitely now terminated and that there is no such facility available to industry after we conclude the Bill?

Mr. Cromien.—That is my understanding.

The paragraphs are noted.

VOTE 1 — PRESIDENT’S ESTABLISHMENT

Mr. S. Cromien called.

No question.

VOTE 7 — OFFICE OF THE MINISTER FOR FINANCE

Mr. S. Cromien called and further examined.

Chairman.—The legislation which the Committee recommended to update the powers of Comptroller and Auditor General still has not been published. I know the General Election, the formation of a Government, the Budget and that sort of thing intervened. Is there anything you could suggest that would assist in forwarding this important legislation, which is long overdue? The present legislation is based on legislation passed in 1866.

Mr. Cromien.—I have mentioned at previous meetings of the Committee that the Department of Finance has been engaged in reviewing the role of the Comptroller and Auditor General with a view to suggesting quite considerable improvements in that role. The Department have prepared views on this and have submitted them to the Minister and they are at present being considered by him.

Chairman.—Could I propose that a deputation from the Committee might go privately to meet the Minister to try to get his agreement to bring this forward? I know he has a lot of things on his plate, but if we could persuade him gently he might give this a bit of priority. Would that be acceptable? You might try to arrange that, Mr. Cromien.

Mr. Cromien.—Certainly, Chairman.

Chairman.—Any other questions on this Vote?

Deputy Taylor.—On subhead N — Fund for Distribution of surplus of National Lottery (Grant-in-Aid)—how does that arise? What has that to do with?

Mr. Cromien.—Under the terms of the National Lottery Act all proceeds from the sale of the National Lottery tickets, less sales agents’ commissions and the smaller instant prizes, are paid into the National Lottery fund in the Central Bank. Disbursements are made from the fund to cover the National Lottery’s operating costs and the larger prizes. A surplus then arises on the fund which is brought into the Exchequer as non-tax revenue and goes out again through this fund. That is mentioned in the Finance Vote — The Fund for the Distribution of the National Lottery.

Chairman.—Any other questions on the Vote? Noted.

VOTE 11 — STATE LABORATORY.

Mr. S. Cromien called and further examined.

Chairman.—In regard to Subhead C — Postal and Telecommunications Services — there was no question of deferred liability arising in that case? The note says: “The saving was due to expected payment not arising until 1989.”

Mr. Cromien.—No. I understand what happened in this case was that the bills for the December quarter were not presented by Bord Telecom until January 1989.

Chairman.—So there was no question of a deferred liability?

Mr. Cromien.—No. Chairman.

Chairman.—Noted.

VOTE 12 — SECRET SERVICE

Mr. S. Cromien called and further examined.

Deputy McGahon.—May I deign to ask a question on this, though I realise it is taboo. Nevertheless — and I realise that men have been bought since the time of Christ — it is not a system I am very happy with. However, in the world of today, I have to accept that it is sometimes necessary to pay to contain crime. Can I ask Mr. Cromien is the State getting a return, does it help in detecting and minimising crime in this country?

Mr. Cromien.—I am sorry I am not able to answer that because I have no information on it. The Deputy will appreciate that what happens in this case is that if a Minister wishes to have money for this purpose he sends an application to the Minister for Finance. Subject to the approval of the Minister for Finance, the required advance is made by the Department to the Minister, who at the end of the year gives a certificate to the Minister for Finance that the amount was actually spent. Neither the Minister for Finance nor the Department are aware of what the money is spent for and, indeed, neither is the Comptroller and Auditor General, who is concerned only with a certificate by the Minister concerned.

Deputy McGahon.—That would be the Minister for Justice?

Mr. Cromien.—It is a number of possible Ministers. They are usually not mentioned here either.

Deputy McGahon.—Maybe it is Santa Claus then. It is certainly Santa Claus to somebody.

Chairman.—It is the procedure, Mr. Cromien, that it is the Minister for Finance and any other Minister. It is not just any two Ministers, is that not correct?

Mr. Cromien.—No, it has to be the Minister for Finance.

Chairman.—Any other questions on this? I think it is fair to say that this is money which by and large is used by the security forces of one Department or another in intelligence work.

Mr. Cromien.—I assume so.

VOTE 15 — MISCELLANEOUS EXPENSES

Mr. S. Cromien further examined.

Chairman.—How many centenarian’s bounties were paid in the year in question?

Mr. Cromien.—There were 61 payments made. Provision had been made for 52 but it turned out in the end that there were 61 people entitled.

Chairman.—What is the bounty now?

Mr. Cromien.—It is £250.

Chairman.—It has been at that level since 1986

Mr. Cromien.—Since 1986.

Deputy McGahon.—Could I have mine in advance?

VOTE 19 — SUPERANNUATION AND RETIRED ALLOWANCES

Mr. S. Cromien further examined.

Chairman.—I note on this Vote that one person retired and on a pension received £36,544 in addition to pension for services rendered. What services were rendered in that case?

Mr. Cromien.—Could I just preface my remarks by saying that, in general, in the Civil Service when a pensioner is retained in a Civil Service position in the public interest, his or her pension is abated to the extent of the new income that he or she is receiving but reemployment on a fee or contract basis does not constitute an appointment to a Civil Service post and the pension is not abated. It is policy not to encourage employment of people in this way, except where they are absolutely necessary. There was only a very small proportion of people involved in this. There was one person who was involved as parliamentary draftsman in the Office of the Attorney General and that is what is referred to.

Chairman.—What other payment would that person have received in addition to the £36,000-odd referred to here? How much of a pension?

Mr. Cromien.—I do not know whether it is fair to mention that person’s salary. He could be identifiable.

Chairman.—Maybe it is not, but the point is that at some stage if a person is retired and is getting on in years you are going to have to replace that person. Presumably there are barristers around who would be quite capable of carrying out the work in question. It does seem a substantial amount of money to pay to somebody who is also drawing a retirement pension from the State.

Mr. Cromien.—I think it would be considered good value in view of the person’s experience.

VOTE 46 — INCREASES IN REMUNERATION AND PENSIONS

Mr. S. Cromien called.

No question.

VOTE 47 — PUBLIC SERVICE EARLY RETIREMENT PAYMENTS

Mr. S. Cromien called.

No question.

CONTINGENCY FUND DEPOSIT ACCOUNT

Mr. S. Cromien called.

No question.

The witness withdrew.

The Committee adjourned.