There was a review on here last weekend of the Government’s fetish with expert reports. Yesterday, we finally saw the expert report on implementing a Supreme Court ruling which touches on abortion. Next week, at the same time as we hear Minister for Finance Michael Noonan’s budget statement, we should get the expert report on the new property tax. An Taoiseach Enda Kenny indicated the expert report on bankers’ pay would be published before the budget announcements on 5th December 2012 – remember this is the report commissioned by Minister Noonan in June 2012 and they have been “experting” now for at least four months. Yesterday in the Dail, Minister Noonan gave us a little more information about the report and remarkably confirmed that although the report will look at the so-called “covered banks” – AIB/EBS, Bank of Ireland, Permanent TSB and IBRC – it will not look at salaries in NAMA or the Central Bank.
Minister Noonan was responding to a question in the Dail on the Mercer report, Mercer being the organization engaged at a cost estimated at €120,000 to …, well this was one of the questions, what were the terms of reference. The Minister was asked about timescales and if the timescales form part of the contract. The Minister was asked for a copy of the tender document – after all, this is going to cost us over €100,000 but the Minister ignored this request.
The response to the request for the terms of reference was the experts were going to “thoroughly review all remuneration practices at the covered institutions with the object of simplifying remuneration and compensation structures, discouraging excessive risk-taking and to better align pay and reward to long term value creation.” So, given the similarity between IBRC and NAMA, both run-off vehicles, both handling the same ballpark of loans – NAMA about €25bn, IBRC about €17bn – both scheduled to run down by 2020 and both dealing with mostly property-related loans, you might have expected NAMA to be part of the review. But no, Minister Noonan said neither NAMA nor the Central Bank formed part of the review.
At the Central Bank, we know that the Governor, Professor Patrick Honohan will this year be paid about €240,000 after he unilaterally waived what appears to be 40% of his salary. This means Professor Honohan gets paid less than his deputy, Matthew Elderfield who retains a salary of about €360,000.
Minister Noonan previously confirmed that he has not even asked for reductions in €200,000-plus per annum salaries at the Central Bank.
As for NAMA, by the standards of Irish banking, NAMA is a lean machine and its employees have waived salaries, and as an organization, there is no evidence of NAMA being inferior to the banks with which it competes when disposing of loans and underlying securities. So excluding NAMA from the review arguably removes a solid benchmark which would force cost savings on the banks.
As for timescales, the Minister indicates the report will be finalized by the end of this year, this is at odds with An Taoiseach telling the Dail recently that he expected it before the Budget 2013 announcements. The Minister was asked if there were timescales in the contract with Mercer but he ignored that question, something which fortifies the suspicion that the report was commissioned merely to deflect criticism of bankers’ pay and to kick the issue into the long grass.
Minister Noonan was responding to parliamentary questions from the Sinn Fein finance spokesperson Pearse Doherty. The full exchange is here and it should shortly be online at the Oireachtas website.
Deputy Pearse Doherty: To ask the Minister for Finance in respect of the appointment of Mercer in June 2012 to examine pay levels across banking institutions, if he will provide the terms of reference attaching to the appointment; the timescales for the production of research or reports; if such timescales form part of the contract with Mercer, the estimated fees payable to Mercer and a copy of any associated tender document, and an overview of the cost and description of any additional resources provided by the him or his Department to Mercer to facilitate the completion of the work..
Deputy Pearse Doherty: To ask the Minister for Finance in respect of the appointment of Mercer in June 2012 to examine pay levels across banking institutions, if salaries at the Central Bank of Ireland and National Asset Management Agency were included in the scope of the Mercer work when that company was appointed in June 2012.
Minister for Finance, Michael Noonan: I propose to answer questions 225 and 226 together.
The Deputy should note that I have already provided the information he seeks when responding to his parliamentary questions of 15th November 2012 (Ref No. 50509/12) & 20th November 2012 (Ref No. 51025/12).
For his convenience I am including the information below.
“The Deputies will be aware that my Department is presently engaged in a Review of Remuneration Practices and Frameworks at the covered institutions. I have recently engaged, as I informed the Opposition Spokespersons on Finance, the services of Mercer (Ireland) Limited following a limited competitive tender competition to assist my Department in bringing this exercise to a conclusion. The estimated cost of the review, at this stage, is approximately €120,000.
The object of the review is to thoroughly review all remuneration practices at the covered institutions with the object of simplifying remuneration and compensation structures, discouraging excessive risk-taking and to better align pay and reward to long term value creation. Present Government policy on remuneration dictates that no employee, at the covered institutions may receive more than €500,000 (excluding pension contributions) per annum and remains in force.
Numerous engagements by my officials and Mercer have taken place since the awarding of the contract. I am expecting the consultant’s report to be delivered by year end whereupon consultations with the various stakeholders will commence.
As I have said previously, I fully recognise that there is a real public interest in the levels of remuneration at the covered institutions and have committed to placing the details underpinning the review into the public domain”.
In relation to his further question on additional resources, no such resources have been provided by me or my Department to Mercer to facilitate the completion of the work.
As the review involves the Covered Institutions the Central Bank of Ireland & the National Asset Management Agency are not included in its remit.