NTMA may become national claims agency

The National Treasury Management Agency (NTMA) has won substantial new powers under legislation proposed by the Government.

The new legislation will allow the NTMA to set up a State claims agency, a central treasury service as well as giving it important new powers to operate a fund management service.

The fund management service will give the NTMA a possible role investing the funds raised from the Telecom Eireann privatisation and other surplus Exchequer funds. This move is likely to meet with criticism from fund managers, who had hoped to win a share of this business, particularly in the area of public sector pension provision.

According to the Minister for Finance, Mr McCreevy, the new legislation will give the NTMA a formal investment role. He added that the Government's professional investment expertise is concentrated in the NTMA and this will give it an enabling power so that it can become active in that area.

"The proposal will enable the NTMA to manage and invest long term funds held by the State," the Department said in a statement.

The NTMA already manages funds for the Post Office Savings Bank and the High Technology Fund set up last year by the Government to fund investment in training in this area.

The new legislation is likely to mean that the NTMA could manage any future infrastructure funds or pension funds which the Government decides to set up. The Government has been considering setting up a fund from which money to pay for infrastructure spending will come. It could have a surplus of revenue over spending as high as £5 billion this year, and it will be impossible to deploy all this money into investment projects immediately, leaving the establishment of a special fund as an option.

There have also been moves to set up a fund to pre-fund some public sector pensions. These liabilities are now paid out of day-to-day Government spending. This would ease the burden on the State's finances in the future. But many private sector investment managers have been lobbying hard for the business.

Ms Ann FitzGerald, secretary general of the Irish Association of Investment Managers, said they would be looking hard at the proposals.

The proposed new legislation is likely to be the subject of debate. According to Dr Dan McLaughlin, chief economist at ABN Amro, it makes little sense to give the NTMA a role in managing the assets, as well as the liabilities of the State. Under its other new powers, the NTMA will also handle accidental personal injury and property damage compensation claims against the State and provide advice on risk management. It will also set up an insurance scheme to cover these claims. Mr McCreevy said the present arrangements for handling claims against the State are totally unsatisfactory and the new legislation will put in place a "structured and coherent" response to meet these claims.

This is expected to result in reduced settlement costs, legal charges and the incidence of claims, according to the Department.

Under the central treasury service, the NTMA will offer advisory and cash management services including deposit, overdraft and loan facilities to health boards, vocational educational committees, local authorities and other public bodies.

This move will reduce the banks' role in managing these deposits. According to Mr McCreevy, it will mean a competitive service for various bodies with a view to achieving savings for the Exchequer.