BUSINESS OPINION: The relentless expansion of Dr Michael Somers' empire continues apace. This week a new Province will be formally annexed when the board of the National Development Finance Agency is announced, writes John McManus

The NDFA will operate under the auspices of Dr Somer's National Treasury Management Agency (NTMA), established in 1990 with a mandate "to borrow moneys for the Exchequer and to manage the National Debt on behalf of, and subject to the control and general superintendence of, the Minister for Finance and to perform certain related functions and to provide for connected matters".

Over the last 12 years these "certain related functions" have grown to encompass:

• Managing the €7 billion National Pensions Reserve Fund;
• Handling, via the State Claims Agency, personal injury and property damage claims taken against the State;
• Managing various other State funds including the Social Insurance Fund;
• Providing banking services (deposits and loans) to local authorities, health boards and Vocational Education Committees. It also manages a €240 million securitisation of local authority mortgages.

Other duties include: Running down the debts of Nitrigin Éireann Teoranta, (NET); Administering the Post Office Savings Bank; responsibility for Prize Bonds, Savings Certs, Savings Bonds, Savings Stamps and National Instalment Savings; the provision of advise and assistance to the courts service on the arrangements to manage the court funds and also managing the Dormant Account Fund.

As mentioned above, the NTMA will shortly take over the running of the National Development Finance Agency. In addition, the scope of the SCA will soon be extended to include medical negligence claims, although there is some doubt about whether the hospital consultants will agree to co-operate.

Surprisingly, despite the multiplication of its roles, the NTMA only employs around 10 more people than it did at its inception. According to the agency's most recent annual report, the head count in 2001 was 72, compared to 61 in 1991. However, some elements of the agency, including the SCA, are recruiting. Operating expenses also seem to have been kept under control. In 2001 they were €2.4 million, compared to £1.8 million (€2.29 million) in 1996.

Wages have risen moderately by Irish standards from an average of around €70,000 in 1996 to in the region of €80,000 in 2001. These wages are high by public sector standards and reflect the need of the NTMA to pay market rates in order to attract high-calibre staff with financial expertise. The average salary in the Department of Finance is nearer €50,000.

When all this efficiency is compared to the orgy of recruitment and spending that went on in the public service over the last six years, you start to see why the NTMA is held out as a model for how the public service should operate. You also see why the Government is so keen to hand over to the NTMA jobs that, in the normal way, should be handled by the Department of Finance.

In truth, the figures probably flatter the NTMA. Almost all of the Republic's national debt is now denominated in euros and the NTMA is only a minnow in the euro debt market, rather than the major player it used to be in the Irish pound debt.

Staff redeployed from its original debt management function, which has shrunk along with the national debt problem, are carrying out many of its new functions. Critics of the agency would argue that the €317 million in debt servicing costs "saved" by the NTMA last year were basically due to factors beyond its control such as interest rates and the savings would have been achieved anyway. The argument is that the NTMA has very successfully carried out the role it was set up to do, but now the job is done it should be subsumed back into the Department of Finance from whence it came.

Instead the agency has been allowed reinvent itself as a rival to the Department of Finance. The key to this is that the chief executive of the NTMA is appointed by the Minister for Finance and directly responsible to him and not the senior officials of the Department. As a result, as long as Dr Somers has the ear of the Minister there is little that can be done to stop him empire building.

Presumably, Dr Somers has convinced the Minister to give the NTMA various new functions because - based on its record - the agency will carry them out more efficiently than Merrion Street. But there is an inherent flaw in this argument.

What made the NTMA so effective in managing the national debt was it's very clear focus on one particular goal. The gusto with which the NTMA is now picking up new roles for itself means that there is a real danger that it will become the opposite of what it was intended to be. Instead of being a cohesive unit with a clear measurable goal, it will be a sprawling unfocused behemoth lacking specialist expertise in any thing.

In fact, pretty soon it will resemble every other Government department and no doubt will contract that most dangerous of diseases that is already endemic in the public service; consultantitis. This is because it is hard to see how an organisation with a small staff who are supposed specialists in the management of a sovereign debt portfolio, can have the in-house expertise to carry out functions ranging from fighting personal injury claims to deciding on the lease back value of a sewage plant.

It seems inevitable that the agency will descend into bureaucracy and start hiring advisers to beat the band. The nightmare scenario is that ultimately all that will differentiate the NTMA from the rest of the public service will be its higher wages and merchant bank pretensions, including marble bathrooms, a swanky office building and Christmas parties in Dublin Castle.