In 1990 the scale of Ireland's economic problems was readily apparent from some key statistics. Four out of every five pounds raised in income tax were needed to service the annual cost of the national debt, which then stood at 100 per cent of GNP. But by last year, it took just 15 per cent of income tax revenues to pay for those annual interest charges, while the debt ratio had shrunk to 25 per cent of GNP. Today Ireland has one of the lowest public debt ratios in the EU.
For that achievement, in large part, one can thank the budgetary policies of successive governments whose common aim and priority was to reduce the national debt burden. But one may also praise the National Treasury Management Agency (NTMA). It too has played a significant role in a remarkable success story. The NTMA's role has attracted international interest in the Irish model of national debt management, as other countries have sought to learn from the agency's experience and to emulate its performance.
In 1990, the NTMA was set up as an independent State agency with a mandate to manage the public debt in a cost efficient manner. Previously, it had operated as the national debt management division within the Department of Finance. But the inflexibility of the prevailing public service pay structures had meant the department was losing its key people from that division to the private sector, while also failing to attract those with the necessary specialist skills in debt management. The solution to the brain drain problem was the creation of a State agency, which was outside the Civil Service structure, and exempt from its restrictive pay guidelines.
A state agency that began with a single remit, the NTMA has since acquired new roles and fresh responsibilities. In 2001, it was assigned the management of the National Pension Reserve Fund, which was set up to pre-fund, in part, the future exchequer cost of social welfare and public service pensions. The fund, which now stands at €21 billion, has produced a 6.5 per cent annualised rate of return on investment since inception.
In its role as the State Claims Agency, where the NTMA manages the personal injury and property damage claims taken against the State, there has been a significant decline in employer liability and public liability actions. And in 2003, it was also given responsibility for the National Development Finance Agency on public investment projects.
At a time when some State agencies are clearly underperforming, the NTMA has accepted new challenges with remarkable confidence and great professional skill.