Vol. 678 No. 4
6 Deputy Pat Breen asked the Minister for Finance if he has requested a report from the regulator of credit unions on the ability of the sector and of individual unions to manage the problems thrown up by the crisis in financial institutions. [12523/09]
As Deputies will recognise, the current serious difficulties in the financial sector and the accompanying economic downturn are affecting all financial institutions, including credit unions. On account of the reduced availability of credit in the banking system, credit unions are now experiencing an increase in demand from their members for loans. There has also been some increase in bad and doubtful debts and, as is the case across the whole of the financial sector, there have been losses on credit union investments. It is not surprising that this combination of trends has led to a situation where credit unions generally have reported a decline in profits for 2008.
However, it is important to note that the Registrar of Credit Unions has highlighted that of the 419 credit unions registered in the Republic, only a handful are experiencing significant difficulties at present. The registrar is continuing to work closely with the boards of these credit unions. Very close oversight, monitoring and controls over these credit unions by the registrar is intended to assist them in addressing current issues and to ensure their long-term stability and sustainability. The registrar reports regularly to the regulatory authority to ensure early identification and response to any significant issues relating to the credit union movement or any individual credit union. In addition, the registrar briefs my Department on these matters on an ongoing basis and my officials keep me fully informed of relevant developments in the credit union sector. I did not, therefore, need to request a specific report from the registrar on the issue raised in the Deputy's question.
The Registrar of Credit Unions is responsible for the regulation and supervision of credit unions using the powers available under the Credit Union Act 1997. This rules-based legislation provides extensive powers of direction to the registrar to ensure the financial soundness and safety of credit unions and to protect credit union savers. The registrar can also issue regulatory direction and prohibition orders to credit unions in regard to a broad range of issues, including investments, raising of funds, loans, assets and liabilities ratios and the composition of their assets and liabilities.
Additional information not provided on the floor of the House.
He has extensive powers of inspection and investigation of credit unions as well as broad supervisory powers, including to appoint, suspend or remove a person as a director of a credit union or to remove auditors. A number of offences are also provided for in the Act.
The extensive powers currently available to the registrar under the Act are important in ensuring that the regulatory system is robust and effective and in particular safeguards members' savings. The rules-based approach to regulation embodied in the Credit Union Act has clearly served the credit union movement well, as is demonstrated by the small minority of credit unions which the registrar is currently monitoring closely in the current environment.
Perhaps the Minister will set out the extent to which credit unions hold seriously impaired assets such as bank shares. I understand some have held the securities which the Minister describes as toxic. Perhaps the Minister will give an indication of whether a problems arises in terms of credit unions that hold significantly impaired assets. Also, is he satisfied with the robustness of management standards in credit unions? The Minister indicated that only a few have significant difficulties. Has he received a report on the robustness of the management and protection systems to deal with any incidents in respect of individual credit unions?
On difficulties in individual credit unions, the registrar briefs my Department on a regular basis on the general position within the credit union movement. The credit union movement is in a relatively strong financial position with solid liquidity and reserves. The registrar has highlighted that of the 419 credit unions registered in the Republic, only a handful are affected by these difficulties. He continues to work closely with the boards of those credit unions that are encountering problems. Close oversight, monitoring and controls over those credit unions by the registrar is intended to assist them to address current issues and to ensure their long-term stability and sustainability.
In the context of savings in the credit union movement, which total approximately €14 billion, has the Minister given any consideration to a proposal by a number of people in the credit unions that credit unions be permitted to hold a national community savings bond via the National Treasury Management Agency? This would offer an alternative and safe savings mechanism for the credit unions as opposed to some of the types of product which, as Deputy Bruton stated, were aggressively sold to credit unions.
Will the Minister agree that credit unions represent a type of back to basics banking service at local level and that the importance of credit unions is significant now that people are experiencing difficulties? The Central Bank has stated that the figure for personal sector lending in Ireland was, at the end of the last quarter of 2008, €172,000 million. The high level of personal debt is causing huge problems for this country. Would the Minister consider a credit union community savings bond with the National Treasury Management Agency on the same lines as the recovery bond proposed by the Irish Congress of Trade Unions? People want to save with the Government in a safe way.
As regards any bond which the National Treasury Management Agency might enter into with the credit union movement, I am open to any proposals. I am also certain the NTMA would be open to any proposals formulated in that regard. I would examine them with great care because the Government values the enormous contribution which the credit union movement makes in the provision of credit and basic bank facilities throughout Ireland. However, I would point out that it is difficult as Minister to develop a consensus among the credit unions as not all credit unions are affiliated to the league. Also, even within the league there can be diversities of view in regard to particular issues. However, if any credit union expresses an interest in respect of such a bond, I will examine it.
On the Deputy's more general question which I appreciate does not arise directly on this question in regard to the provision of some form of savings bond by the National Treasury Management Agency for general investment, I am again open to the suggestion. However, I point out that the rates at which we obtain funding on world markets might be less than that which would command interest among investors. Also were we to offer such products through the post office or directly from the NTMA, an issue would arise in terms of the extent to which we would be simply transferring deposits from the banking system to the State banking system.
The credit union movement, which operates in every corner of Ireland, is fantastic. In terms of ensuring they are robust, I refer to a question raised by Deputy Bruton in regard to whether the registrar and Financial Regulator have carried out an investigation of credit union investments? This would provide certainty and security to the movement. Perhaps the Minister would respond on that specific matter.
Under the legislative framework set out in the legislation, the primary function of credit unions is to offer savings and loans services to their members. Due to significant growth in the credit union movement in recent years there has been a significant amount of resources for investment by credit unions to generate a return for members. Strict legislative control exists under section 43 of the 1997 Act which restricts investments to those trustees are authorised to invest in under the trustee authorised investment legislation.
The registrar has powers to give a regulatory direction to a credit union if he deems it appropriate in the interests of its members to limit investments of a specified class or description. Of course, it is the responsibility of the board of directors of each credit union to ensure that the investment policy is prudent and responsible and conforms to what is permissible under the Credit Union Act. To assist the boards, in October 2006 the registrar issued a detailed guidance note on investments to help safeguard the risk profile of credit union investments and to ensure that members' savings continue to be protected. This is the basis for the monitoring of the investment activities of credit unions by the registrar.
Following the changes in financial market conditions for investments since August 2007, the registrar has initiated a process, including consultation with stakeholders, with a view to revising the existing investment framework.
7 Deputy Joe McHugh asked the Minister for Finance if he will publish the latest comparison of price before and after tax between the Republic of Ireland and Northern Ireland; and the tax difference on excisable products between the two jurisdictions which currently apply. [12579/09]
I assume the Deputy is referring to the periodic informal survey of cross-Border prices undertaken by the Office of the Revenue Commissioners.
I wish to advise the Deputy that the Office of the Revenue Commissioners' periodic informal survey, which provides a snapshot of the retail prices for the main excisable commodities observed in market outlets in Dublin and Newry, was most recently carried out on 21 January 2009. A summary of the results of that survey and of a number of other surveys since February 2007 are published on Revenue's website at www.revenue.ie/en/about/publications/index-cross-border-price-comparisons.html.
In brief, the 21 January 2009 survey, when the euro to sterling exchange rate used was 0.9267, which is reasonably close to the current exchange rate, shows in particular that alcohol and tobacco products were considerably dearer in this State than in Northern Ireland. The price of petrol was about the same, auto diesel was cheaper in this State, while that of home heating — kerosene and diesel — was dearer. Of course, not all of the differentials can be accounted for by differentials in tax or excise treatment. Some of them reflect different prices being charged for the same product between the two jurisdictions.
It has to be recognised that we have a long-standing policy, for sound health and social reasons, of applying high excise rates to alcohol and tobacco products. Our excise rates on such products are higher than those in the UK, which has also followed a policy of imposing high excise rates on such products. Consequently, Ireland has the highest excise rate on wine in the EU. It should be noted that the difference between the excise rates that apply to wine in this State and in Northern Ireland is somewhat smaller than the difference between the rates that apply to other alcoholic products. Ireland has the second highest excise rate in the cases of beer and spirits. The difference between the prices of beer and spirits on either side of the Border is wider than the difference between the price of wine. Excise duty on beer has not been increased since budget 1994. Excise duty on cider has not been increased since budget 2002. Excise duty on spirits has not been increased since budget 2003. Excise duty on wine was increased in last year's budget by 50 cent, inclusive of VAT, per standard bottle, having remained unchanged since budget 1994.
Ireland charges the highest excise rate on, and price for, cigarettes in the EU. The excise rate on cigarettes, inclusive of VAT, has been increased in the last three budgets by a total of €1.30. As Deputies will be aware, there are ongoing demands for the rate of excise on cigarettes to be increased by significantly more. Any further increases in the rate of excise on tobacco will have to be considered in the context of the law of diminishing returns that applies to tax increases.
Additional information not given on the floor of the House.
Due to our high excise rates and higher VAT rate, taxes contribute to our higher prices for alcohol and tobacco products. Non-tax costs also contribute to our higher prices, however, especially in the case of beers, spirits and most wines and, to a lesser extent, in the case of cigarettes. In the case of beer, non-tax cost differences are high. The overall price differences for cans and bottles of beer varies from 55 cent to 76 cent. Excise duties and VAT account for between 21 and 24 cent of the difference. Non-tax trade costs account for the remainder of the difference. In the case of petrol, following an excise increase of 8 cent per litre, inclusive of VAT, in budget 2009, the price per litre is broadly the same in both jurisdictions, as is the tax take and the non-tax cost. Auto diesel is approximately 15 cent per litre cheaper here, due to lower taxes. As I have already said, the price of kerosene is higher in this State due to higher taxes and, particularly, higher non-tax costs. Overall, diesel for heating purposes is dearer here despite the tax take being lower than in Northern Ireland.
In comparing indirect tax, we must remember that taxation strategies generally reflect the political choices made by Governments to meet their specific needs and requirements. In this regard, Ireland has focused on achieving a low taxation economy, especially in the area of direct taxation, which includes income tax and corporation tax. This has delivered significant advantages for Ireland's competitiveness. In ensuring a relatively low level of direct taxation on income, we have had marginally higher indirect taxation.
In conclusion, I emphasise that the considerable weakening of sterling relative to the euro has had a far more significant impact on changes to relative prices between this State and Northern Ireland than any tax changes, including those made in the standard VAT rates. For example, sterling has weakened by 36% since early August 2007, and by 18% since early October 2008. The extent of the depreciation of sterling can best be illustrated by cross-Border comparisons of petrol prices. In January 2004, petrol in this State was approximately 27 cent cheaper per litre than in Northern Ireland. Prices are now broadly the same in the two jurisdictions. I use petrol as an example because the Irish and UK excise rates have moved by broadly similar amounts over the last five years. It is clear that exchange rate movements, rather than tax changes, are driving price differentials. I am informed by the Revenue Commissioners that a further cross-Border price survey is being undertaken. In line with usual practice, the results of the survey will be posted on the website of the Revenue Commissioners.
I apologise for getting out of the traps a little too fast earlier. I got out of my seat as quickly as people are crossing the Border to spend money. I accept that the Minister will say that the contents of the forthcoming budget are private and confidential until the Budget Statement is made. Will he consider providing some type of stimulus package in the budget? Sweden has introduced a 0% VAT exemption in the case of domestic housing services. Germany has put in place a €2,500 scrappage scheme for cars. Similar incentives and tax initiatives are being offered in various countries. Will the Minister consider reducing the 21.5% VAT rate? It deserves serious consideration in light of the Minister's acknowledgement that €700 million has left the Irish economy since the last budget.
Will the Minister pay particular attention to the price of certain goods, such as baby products? A Cow & Gate baby food product that costs €12.64 in Tesco in Letterkenny costs just €7, on average, in Sainsbury's in Derry. Will the Minister consider reducing the rate of VAT that applies to certain items, such as baby products? He should incentivise people to buy certain products, such as building materials, ecologically friendly products, garden plants and trees. We need to use our imagination and creativity. The reality is that in certain parts of the country, such as my home county of Donegal, the Exchequer is not getting any revenue from the 21.5% VAT rate that was introduced by the Minister last year. Nobody is selling cars. People are not buying products. There is not much point in collecting 21.5% of nothing. Will the Minister consider this imaginative and creative proposal?
I am grateful to Deputy McHugh for tabling Question No. 7 and thereby allowing me to correct certain matters that were misrepresented in a recent newspaper article. A report on the implications of cross-Border shopping, which I commissioned on foot of a request made by Deputy O'Donnell at a meeting of the Joint Committee on Finance and the Public Service, was published recently. The report establishes that in 2008, the value of cross-Border shopping was between €350 million and €550 million. It estimates that the potential loss in Exchequer revenues as a consequence of cross-Border shopping, taking VAT and excise yields into account, was between €58 million and €90 million in 2008. In addition to the VAT and excise loss, there was a possible corporation tax revenue loss, tentatively estimated at between €15 million and €24 million. It should be noted that all estimates for corporation tax revenue are provisional and should be seen as indicative of the potential loss involved. If the exchange rate remains close to current levels throughout 2009, it is estimated that the volume of cross-Border shopping in 2009 will be worth between €450 and €700 million. It has a remote connection with the VAT rate in this jurisdiction — it primarily relates to the differential price arrangements between the sterling and euro areas. The estimated loss of VAT and excise receipts to the Exchequer resulting from that will be between €72 million and €112 million.
I assure Deputy McHugh that I will examine any proposal that might help to stimulate the economy. Two crucial points should be noted in that context. Differentials in prices between Northern Ireland and this State do not always relate to the tax treatment of those items. Some differentials are rooted in the comparative underlying prices of products in the two jurisdictions. It is important that we address those underlying factors in other ways. It should be noted that the United Kingdom's stimulus package, which involves the reduction of the top rate of VAT in that jurisdiction to 15%, has not succeeded in stimulating the UK economy. It is clear from newspaper reports today that the measure in question has brought the UK into a position of some fiscal exposure. Rather than reversing that country's economic decline, the stimulus package has brought about the depletion of the tax base in the UK.
I came into the Chamber to ask the Minister for Finance a single question. Having listened to him, I am reminded of the lines of a song:
There are more questions than answers
And the more I find out the less I know.
Do I understand correctly that the figure of €700 million to which the Minister referred is the putative loss to the economy — the gross loss, rather than just the VAT loss — in a full year?
Yes. That has been said on many occasions.
The Minister mentioned a newspaper article on this important matter. Many people think cross-Border shopping, which is hurting many people, does not involve people outside Deputy McHugh's part of the country. The traders in Balbriggan could tell Deputies that it is also affecting people in my constituency of Dublin North. I accept the Minister's point that it is not all about tax. If it is clear that our VAT rates are causing a problem, we should reduce them. Specifically, I have twice asked the Taoiseach to consider reducing the VAT rate that applies to the cervical cancer vaccine from the higher rate to the lower rate. An increase of 10 cent in the price of wine, cider, spirits or beer would meet the cost of a reduction.
I accept that the law of diminishing returns applies to tax increases. I am sure some officials from the Irish Cancer Society would love to meet the Minister. I am sure he would look after them. The society has proposed an increase of €2 in the price of a packet of cigarettes, principally to reduce consumption. Such a move might cause the law of diminishing returns to apply not only to the tax take but also to the number of heart attacks and cases of cancer. Will the Minister remove cigarettes and other forms of tobacco from the consumer price index?
The Deputy has moved well beyond the scope of Question No. 7. I will allow some latitude on a Thursday evening.
The Deputy cannot have it both ways. If he is concerned about the impact of shopping in Northern Ireland on his constituents and on various sectors of our economy, he must realise that Northern Ireland's major pull factor is the sale of alcohol and cigarettes. All traders in Border counties will advise that fundamental point. If I propose an increase in excise duties on 7 April for the approval of the House, Deputies will have to carefully assess the impact such a measure would have on Exchequer revenue and on the degree of shopping that takes place outside this jurisdiction. It is clear——
The housewives of Ireland do not go to the North to buy alcohol and cigarettes.
I am not suggesting——
They go there to get staple goods for their families and their children.
I ask the Deputy to allow the Minister to respond to his questions.
I will but I cannot let him away with what he has said.
The Joint Committee on Finance and the Public Service did a great service to the State when it insisted that a more scientific study of this matter should be undertaken. That study was done. A question on the number of visits people make to Northern Ireland is to be included in the quarterly national household survey. It is important to get an accurate scientific handle on this phenomenon. The evidence available to us to date, which is subject to correction, suggests that the purchase of cheap alcohol is the primary pull factor. I accept that the other main pull factor — the price of baby products — was mentioned by Deputy McHugh. We are beginning to identify the precise products that are creating concern.
Does the Minister, as a distinguished senior counsel, know much about the psychology of shopping? I will tell him a little about what happens when one looks at the prices of jackets and dresses in the British multiples on Grafton Street. Although sterling and the euro are very close, one can pay up to 40% more because the differences in sterling are not being passed on, particularly by the high street chains and the large grocery multiples such as Tesco. They can talk all they like about price reductions but the women of Ireland know that the price reductions are not being passed on.
Would the Minister ever go shopping? Would he take his Cabinet colleagues with him shopping? Would he say to people in Ireland, and get RTE to follow him and broadcast it on the "Six One News", that there are many products in the Republic to which no VAT applies and still we are paying more for them than we are paying for them in the North of Ireland where VAT is actually applied on a wider basis? In order to instill some confidence and encourage people to go back out shopping for value, could he crack the whip?
I will allow Deputy Bruton a brief final supplementary.
Against the background where the Minister was reported to have indicated that he felt he had made a mistake in increasing the VAT rate in the budget, would he consider the sort of suggestions put forward by Deputy McHugh of maybe selecting products that are particularly vulnerable and applying the lower rather than the higher rate of VAT to them?
I will not divulge any budgetary proposals at this stage. There was no reporter present at this meeting. What I said was that in the light of the fact that the Chancellor in the United Kingdom introduced a change after my budget, I felt somewhat contrite about the change that I had introduced.
I thought he said it was a disaster.
That was all I said on that occasion.
It was a mistake.
That is all I am prepared to say at this stage as well about the budget.
Will the Minister go shopping?
Ceist Uimh. 8 in ainm an Teachta Noel J. Coonan, le do thoil.
A firm act of contrition must be accompanied by a resolve to correct the mistake, is that not the case?
A firm purpose of amendment.
We must safeguard our revenue as well.
The Minister would feel better.
A firm resolve to amendment, is that right?
A firm purpose of amendment, yes.
We all can make mistakes.
The firm promise of amendment. I will give a firm promise of amendment all right but I can tell Deputy Bruton that the United Kingdom has had a very unhappy experience in the reduction of VAT rates.
Ceist Uimh. 8.
So have we.
We have had an unhappy experience due to the increase.
8 Deputy Noel J. Coonan asked the Minister for Finance if he will request the consumer director of the Irish Financial Services Regulatory Authority to examine the extent to which banks have backed their fixed rate mortgages by long dated securities, in order to establish whether the penalty for switching from fixed rate commitments could be reduced. [12537/09]
The Deputy's question refers to the redemption fee or breakage costs applied by mortgage providers in circumstances that a customer seeks to break a fixed rate mortgage to avail of lower variable interest rates. At the outset, as much as fixed rate mortgages provide certainty and security to mortgage holders, it is clear that many fixed rate mortgage holders are tempted to switch for a better deal when interest rates are low. In circumstances that many households are faced with significantly increased financial pressures, the current environment of very low interest rates clearly highlights to many fixed rate mortgage holders the saving that would be available if they benefited from a variable interest rate.
Securing a better interest rate is only one part of calculating the benefits of switching. As the Deputy's question indicates while a fixed rate mortgage offers stability in monthly repayments, one of the biggest drawbacks is the prospect of a financial penalty incurred when the fixing period is broken. It is important to make the point that these redemption fees are also a feature of markets such as France and Germany where long-term fixing is the norm.
The issue of early repayment was analysed in detail in the report of the Mortgage Funding Expert Group established by the European Commission in its report published at the end of 2006. The expert group highlighted that from a lender's perspective if a consumer repays a mortgage loan earlier than scheduled the mortgage lender will not be able to generate the expected interest and fee income and therefore will incur a loss. If the mortgage lender has raised funding with a stated maturity and coupon specific costs will arise, the availability of an early repayment option to the mortgage borrowers, therefore, has a direct connection with the lender's profitability and therefore has a value and cost. If this value is conferred on the borrower the cost has to be borne by the lender.
Additional information not given on the floor of the House.
The expert group agreed that prepayment should be compensated and the compensation formula should be clearly established, transparent and easy to understand for consumers. A majority of the expert group believed that all relevant lender losses should be covered in order to ensure the provision of low cost loans. The European Commission committed in its White Paper on Mortgage Integration to assess the costs and benefits of different policy options for early repayment, including the level of compensation.
Under the domestic legislative framework interest-related charges are market determined on the basis of commercial considerations and neither I nor the Financial Regulator would have any statutory role in this matter. The Deputy will recognise that direct regulation of interest-related charges would represent a very significant intervention in commercial conduct which could not be justified unless there was significant evidence of substantial market failure. There are significant benefits for both individual householders and for the stability of the housing and financial sector overall from greater take-up of fixed rate mortgages. I do not believe, therefore that it is wise to embark on any course of action which could impact adversely on the cost and availability of fixed rate mortgages in the future.
In conclusion, I should add that I understand that the Financial Regulator's consultative consumer panel has shown a particular interest in the low take-up in fixed rate mortgages in Ireland as compared to other EU member states and has commissioned research on this issue. I share the panel's assessment that it is important for us to examine how we can ensure greater stability in our housing market in the future through greater stability and predictability in mortgage finance.
The Minister is missing the point of the question. The question was whether he would arrange an examination of the financial institutions to see to what extent they have entered into these long-dated security commitments that would justify them imposing these penalties of €20,000 for people to switch. My point is that with the taxpayer now underpinning much of the banking activity, if there is not reasonableness in these charges we should move to get rid of them and give some people relief.
If there is a genuine commercial penalty we can understand why that would be the case. We need to investigate our banks holding long dated securities because my impression is that long dated securities are almost impossible to get. I suspect that they are not holding them and that the justification for the penalty does not stand up.
I will raise the issue, but the consumer director is independent in these matters and has sufficient powers to investigate the matter on her own initiative. I understand that as she is already aware of the level of charges — and should the Financial Regulator feel that such charges do not represent recovery of funding costs — the cost structure can be fully investigated under section 149 of the Consumer Credit Act 1995. In those cases the charges would need to be approved by the Financial Regulator in advance.
The statutory presumption is that these breakage charges relate to the cost of funding the advance that is made to the borrower. Financial institutions use formulae for calculating these charges and the formulae contain parameters relating to the cost of the original fixed-rate loan and to the new or refunded loan.
The terms applying to the redemption of a fixed-rate mortgage held with a particular financial institution operating in the Irish market are as follows. The charge is applied to a fixed-rate loan where during the term of the fixed-rate period the full loan is repaid early, or a lump-sum repayment over the multiple of €1,200 per annum is made, or the loan is converted to a variable rate loan or another fixed-rate loan. In these circumstances the customer must pay a sum equal to the lesser of six months' interest charge or the economic breakage charge. There is a formula for the calculation of the economic breakage charge which is a multiplier of the redeemed amount multiplied by the original cost of funds less the current cost of funds multiplied by the time remaining until the end of the fixed-rate period and divided by 365.
That is clear.
Would the Minister ask the director of consumer affairs in the Irish Financial Services Regulatory Authority to undertake an investigation of this? Like the previous question on shopping, what we are looking for is positive signals where a consumer is in a fixed-rate mortgage. The Minister must remember he told me yesterday that at the end of December last there was €147 billion in house mortgage finance in this country. I do not know whether he knows how much of that is in fixed-rate mortgages and for what duration. While everything is so flat and today's figures for the drop in spending are so bad, the Minister must identify actions which will show consumers and mortgage holders that there is hope for them, that something that has worked out as being very unfair in the current climate can be investigated and addressed fairly rapidly. That is how we will start to generate consumer confidence and get people spending again.
I share the concerns of other Deputies about this matter. We are all aware of individuals who see the very low interest rates that now obtain and contrast the high interest rates which they are locked into by agreement with the financial institutions. It is a matter for the consumer director to examine at all times, whether the strict legal position is being observed. I certainly will seek confirmation from her that such is the case.
9 Deputy Joe Carey asked the Minister for Finance the Departments which have been reviewed to date by the McCarthy spending review group; if a series of options for expenditure savings in these Departments has been drawn up; and the form of evaluation of the options that is planned. [12532/09]
The special group on public service numbers and expenditure programmes was established to examine the current expenditure programmes in each Department and to make recommendations for reducing public service numbers so as to facilitate the Government's task of returning the public finances to a sustainable position.
The special group began its work in December. Each Department was asked to prepare an evaluation paper for the special group setting out an analysis of expenditure programmes and identifying possible savings options. The relevant areas in the sectoral policy division of the Department of Finance are also preparing material for the group's consideration.
To date, the special group has met with 11 of the 15 Departments scheduled for review. The group is considering the outcome of each of these meetings and following its meetings with the remaining Departments and other entities, will finalise its work when all relevant savings options have been explored.
The special group's analysis and recommendations will be taken into account as appropriate by the Government in framing budgetary policy.
The Minister implied that although the group is finalising its proposals at the end, the Minister is receiving them as they are done, Department by Department. To what form of evaluation will these reports be subjected? Does he regard them as part of the deliberative process of the budget and, therefore, not available to the House? Can he make them available to the House so there can be a debate on the potential for savings in the management of key Departments? Finding efficiencies and savings is not the unique interest of Government. It would be useful if the Oireachtas committees in each of these areas had access to these reports earlier rather than later. I would be interested to hear the Minister's view on that.
I will consider what Deputy Bruton said, but to date I have not had the benefit of a detailed report on any of the Departments concerned although an amount of work has been done. Deputies will appreciate that the individual reports in different Departments have to be finalised, but regarding the forthcoming budget I arranged to meet the chairman and to be briefed by him in general terms on possible areas of saving.
In terms of some of the information we have received and information in the public domain, I am concerned about the operation of the group on the capital programme. In general, it has been indicated that the 2009 capital programme is approximately €8 billion and that €6 billion of that is committed or contracted for in some formal way. We have had some breakdowns in the information service and during briefings from the Minister's officials, but we have no information on what are the projects. One would not have to be a genius to work out that the uncommitted €2 billion is most at risk.
I am most concerned that the uncommitted €2 billion includes a very high figure for education. Large numbers of school building programmes have not been subject to full commitment because of how the schools building programme works. From talking to principals and others, I understand that is over €600 million. In terms of generating construction activity, it is far more important to spend the €600 million on schools than some of the committed projects under the €6 billion, because that will give jobs to construction workers on a wide basis throughout the country. It is really important that we have some answers. Otherwise, one could spend on commitments which generate very little in jobs and reflation of local economies. That is where the Opposition needs information on the strategy.
In this context, "committed" does not mean politically committed but legally committed.
I mean contractually; I am not talking about politics.
Exactly, but it is not a budgetary option available to a Government to break a contract with a contractor engaged in a capital project. There could be a substantial exposure for the State in the sums which could be recovered by damages and penalties were the State to breach a contract which is contractually committed in the public capital programme. In examining the scope for any savings, I assume the officials are identifying the areas for the Deputy which are not contractually committed as these are the areas available for any reductions. Where there is a contractual commitment, it is not open to us to do so.
We have no definition of what that means.
To take an example, the national roads programme in the context of the main inter-urban routes is contractually committed until the end of 2010.
However, many of the schools are not, and that is where one will get employment.
It is true that the bulk of the areas that are not contractually committed tend to be the smaller roads in the Department of Transport, schools, water projects and social housing projects in the Department of the Environment, Heritage and Local Government because these projects are smaller in scale.
They generate jobs locally around the country.
I welcome the Minister's willingness to consider sharing these reports with the appropriate committees. Has the wisdom of the Comptroller and Auditor General, who has substantial experience in this area, been brought to bear on this work? Has the Government imposed any embargoes on recruitment in the public service? Some people seem to be working under embargoes while others do not. Can the Minister clarify the Government's position on recruitment and replacement?
I am not aware of whether Mr. McCarthy has consulted the Comptroller and Auditor General but I will draw Deputy Bruton's suggestion to his attention. A Government decision has been made on the restriction of recruitment in the public sector and that decision was finalised over the weekend.
Written Answers follow Adjournment Debate.
