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Dáil Éireann debate -
Tuesday, 29 Jun 2010

Vol. 713 No. 4

Priority Questions

Pension Provisions

Olwyn Enright


32 Deputy Olwyn Enright asked the Minister for Social Protection if he has confidence in the ability of the Irish pensions industry to provide value for money, to minimise costs and to provide good returns for people; and if he will make a statement on the matter. [27534/10]

The pension rights of scheme members are protected through trust law and by provision in the Pensions Act 1990, as amended.

The downturn in financial markets has had a significant impact on pension funding and posed major challenges for the trustees of pension schemes in restoring scheme funding. In response to the significant loss in scheme funding, a range of administrative and legislative measures were introduced to assist schemes recover their scheme funding. These measures were designed to ease the funding pressures on pension schemes and provide additional legislative support to secure the viability of a pension and, in the event of a wind-up of a scheme, to ensure that the assets of the scheme were distributed in a more equitable manner.

The Pensions Board provides advice and guidance to scheme administrators. However, trustees of pension schemes and employers are responsible for the affordability of the pension scheme and must take into account the costs of administering the scheme and the investment risks to ensure the protection of the members' benefits and secure the sustainability of the scheme in the long term.

The national pensions framework includes a range of measures to strengthen the regulatory system. These include the powers of the Pensions Board in regard to the regulation of pension schemes will be reviewed; regulation will be introduced to increase the transparency of pension charges; the funding standard will be kept under review; and the information being provided to scheme members will be kept under review and enhanced as considered necessary. The framework also sets out a possible approach to restructuring a pension scheme which might be considered by pension scheme trustees and employees.

A technical implementation group was established in May to develop the legislative, regulatory and administrative infrastructure required to put the reforms announced in the national pensions framework into operation.

I tabled this question because I was alarmed — as was the Minister, I am sure — by the comments last week by the chief executive of the Pensions Board. The Minister will be aware it was announced that 75% of defined benefit schemes continue to be in deficit. When one combines all of these, the shortfall is €25 billion, as I hope the Minister is aware.

The Minister has enacted some changes that have assisted some, although not all, schemes. He spoke about the pensions framework but last week the chief executive said that substantial risks continue to be taken and if the same strategies that caused much of the recent losses continue to be used the chances of further losses are too high. That alarmed me and I would like to hear the Minister comment on it.

The Minister said responsibility lies with trustees and employers. I accept that and agree with it. However, there is also governmental responsibility regarding oversight of all the schemes. If these continue to operate in a manner that employs the same strategies that caused much of the recent losses, I wish to know what the Minister will do about this to ensure the schemes operate more responsibly.

The Government has introduced a range of measures to protect the interests of members of defined benefit schemes. In December 2008 a number of measures were introduced to ease the funding pressures on defined benefit schemes. These measures mean the Pensions Board can now grant additional time for the preparation of funding proposals aimed at restoring pension funds; deal as flexibly as possible with applications for approval of funding plans; allow a longer period for recovery plans — more than ten years in appropriate circumstances; allow the term of a replacement recovery plan to extend beyond the end date of the original plan where the scheme is part way through a previous recovery plan but is off-track due to investment losses; and take into account voluntary employment guarantees in approving recovery plans.

In order to ensure these extensions are not seen as a weakening of supervision the Pensions Board will reject recovery plans which fail to demonstrate an appropriate investment approach. The operation of these arrangements will be reviewed by the Pensions Board no later than January 2011.

The Minister's answer is fair enough, but it is dealing with a scenario when things go wrong. That is not my question. In spite of the fact that 75% of pension schemes will not deliver what people expect of them, what will the Minister do about the fact that according to the chief executive of the Pensions Board, the schemes are still operating in substantially the same way and that the same risk is there? What will he do to ensure that the pensions industry is more responsible and makes people aware of the risk they are taking?

The role of the Pensions Board is to ensure that best practice is being followed, which is why the question arises about the plans being approved by the board. There is very strong oversight from the Pensions Board. I was asked a question at the press conference attended by the chief executive and I said it was very important that people's pension funds are protected. If there is need for further steps to be taken, I will certainly look at them. I believe that management at the Pensions Board believe they have enough powers at the moment——

What worries me is that they have told us there is a problem, but they have not told us what they will do to solve the problem.

The board has general oversight over the pension funds. Through regulation, it can ensure that the proper mix of investments are made.

Róisín Shortall


33 Deputy Róisín Shortall asked the Minister for Social Protection the steps he will take to improve the adequacy and security of pension schemes. [28507/10]

The principle of providing an adequate and secure pension is enshrined in pension policy and reinforced in the Government's policy on pensions, as set out in the national pensions framework. A key aim of the framework is to increase pension coverage, particularly among low to middle income groups, and to ensure that State support for pensions is equitable and sustainable. This will be achieved by the introduction of a new auto-enrolment system. Employees earning above a certain income threshold will be automatically enrolled in this new scheme, with the employee, their employer and the State all making contributions. The Government is also committed to seeking to ensure that the State pension remains at 35% of average earnings.

The issue of the security of a pension scheme is a very important matter. A number of measures were implemented since December 2008 to ease the pressures being felt by many pension funds. Those measures were designed to ease the funding pressures on pension schemes, provide additional legislative support to secure their viability and, in the event of a wind-up of a scheme, to ensure that the assets of the scheme are distributed in a more equitable manner. Furthermore, the Pensions Act was amended to allow for the restructuring of underfunded schemes, to ensure a more equitable distribution of assets in the event of the wind-up of a defined benefit scheme, and to strengthen the powers of the Pensions Board in ensuring that pension contributions deducted from wages and salaries are remitted by employers to scheme trustees. This Act also introduced the pensions insolvency payments scheme to reduce the cost of purchasing pension payments by trustees of pension schemes for their members where the employer has become insolvent.

A technical implementation group has started work to develop the legislative, regulatory and administrative infrastructure required to put the reforms announced in the national pensions framework into operation.

We are in the midst of the worst pension crisis in decades. What, if anything, will the Minister do about that? How will he address the current funding deficits and how will he prevent those deficits occurring again in the future? The Minister quoted some actions taken by his predecessor since 2008. They really amounted to tinkering with the pensions system. What actions will the current Minister take to ensure that the pension situation is made more secure, given the scale of the deficits that exist at the moment? What will he do to lower the risk profile of Irish pension funds? Has he anything in mind to address that issue? Is he prepared to carry out a review of which investments are appropriate for pension funds? A key criticism made by the Pensions Board was that the investments that had taken place over recent years were high risk investments. That is why so much money was lost from pension funds.

Is the Minister prepared to get investment managers to clarify to their clients the risks that they are taking? Pension policy holders are simply not aware of these risks. Is he prepared to introduce a pension insurance scheme? Will he legislate to ensure companies can no longer walk away from defined benefit schemes that are insolvent? Will he consider extending the PIPS scheme?

The Deputy has asked many questions, but she will have another opportunity to speak.

The Deputy has asked many good questions. I would like to see the risk profile lowered and I will be talking to the new chairperson of the Pensions Board this week, as I believe that the pensions issue is very important. The first pension for most people is the contributory old age pension, and the objective is to maintain that at 35% of the average industrial wage. That is the first priority because we must ensure that the most universal pension is protected.

I am a little bit surprised at the question about the risk profile. The Government has been accused of not taking away policies because we ensured that people's investments in banks, bonds and so on were secure. Proposals are being put about by people that we should have put those bonds at risk. This would have meant that even what were considered safe investments would have become risky. The Government policy has been quite clear. We believe that what were considered safe investments by pension funds should remain safe investments, and that this would extend to bonds held in Irish banks, as well as to deposits held in Irish banks. This is fundamental to ensuring that safe investments continue to be considered safe.

The primary responsibility for the oversight of pension funds rest with the Pensions Board, but I will be entering into discussions with the board and if there is a need for further changes, I will certainly look at them.

Given the scale of the deficit, there clearly is a need for action to be taken. Does the Minister intend to provide more staff at the Pensions Board? It recently stated that it does not have the staff and expertise to carry out its functions adequately at the moment. There is a contradiction to this approach, because it also returned a surplus of €400,000 to the Department and reduced the fees to pension schemes by 7.5%. Does the Minister have confidence in the Pensions Board and in its ability to do the task given to it? This crisis has happened on the board's watch. How does he intend to proceed in respect of reform of the board?

Yes, I do have confidence in the Pensions Board. We are in the midst of world turmoil and the Government has taken every step to create as much stability as possible in financial institutions here. We have not always had——

The board's representatives say that they do not have the capacity to do the job.

The issue of staff is being discussed with the Department of Finance. I will be discussing that issue with the Pensions Board and its new chairman, who was appointed yesterday.

Why did the board hand back nearly half a million euro?

The board gets its income from a levy, and it had a surplus.

Why did the board not recruit the experts that were needed?

Social Welfare Benefits

Olwyn Enright


34 Deputy Olwyn Enright asked the Minister for Social Protection the number of persons claiming rent supplement for more than 18 months for each of the past three years; and if he will make a statement on the matter. [28454/10]

The purpose of the rent supplement scheme is to provide short-term support to eligible people living in private rented accommodation whose means are insufficient to meet their accommodation costs and who do not have accommodation available to them from any other source. The overall aim is to provide short-term assistance and not to act as an alternative to the other social housing schemes operated by the Exchequer. There are currently more than 95,500 tenants benefiting from a rent supplement payment — an increase of 60% since the end of 2007. More than 37,800 have been in payment for 18 months or more.

The rental accommodation scheme, RAS, which was introduced in 2004, gives local authorities specific responsibility for meeting the longer-term housing needs of people receiving rent supplement for 18 months or more. Details of these cases are notified regularly by the Department to the local authorities. Local authorities meet the housing needs of these individuals through a range of approaches, including the traditional range of social housing options, the voluntary housing sector and, in particular, the RAS. Latest figures from the Department of the Environment, Heritage and Local Government show that a total of 27,240 transfers from rent supplement to local authorities have occurred since 2005 — 14,833 rent supplement recipients transferred to the RAS and a further 12,407 recipients transferred to other social housing options.

It is accepted that progress in regard to the RAS was initially slower than expected. However, the pace of delivery has improved significantly. In total, 14,000 recipients were transferred to RAS and social housing in 2008 and 2009, thus achieving the targets set for the RAS and social housing transfers for these years. The target established for 2010 is for a further 8,000 rent supplement tenants to be provided with a housing solution by local authorities.

Additional information not given on the floor of the House

In consultation with the Department, the Department of the Environment, Heritage and Local Government has approved a number of pilot programmes in different local authorities to increase the flow of transfers. These include allowing applicants for the RAS to seek out their own properties which, subject to compliance with the normal conditions and the agreement of the landlord, may then be taken into the leasing programme. Approved housing bodies under the leasing initiative have also been advised that they can seek applicants for social housing support directly from households in long-term receipt of rent supplement as part of a choice-based lettings approach to allocations.

The Department continues to work closely with the Department of the Environment, Heritage and Local Government and is represented on a number of the RAS implementation groups. The purpose of these groups is to ensure that the RAS meets its objective of catering for those on long-term rent supplementation while enabling rent supplement to return to its original role of a short-term income support.

The Minister said at the beginning of his reply that the rent supplement scheme was intended to a short-term support, and it is a very necessary one. I cannot envisage a situation in the near future where rent supplement will not be needed. Given that in excess of one third of recipients are in receipt of it for more than 18 months, my concern is that it is not achieving what it was supposed to achieve.

The Minister is responsible for the scheme. We discussed the concept of joined-up Government thinking at a meeting yesterday and this is another example of where there is not joined-up Government thinking. The transfer rates to the RAS are less than ambitious. The initial targets in 2005 or so were more ambitious than the current targets. What discussions has the Minister had with the Department of the Environment, Heritage and Local Government to ensure the rent budget is reduced by ensuring that the Department plays its part in ensuring people are transferred to the RAS? The figures the Minister gave for 2007 and 2008 included the RAS and social housing as distinct from the RAS alone. The RAS is popular with the public and with the people who need it but it is a major issue for people to be transferred to it.

I am sure the Minister will accept that it also beneficial in terms of eliminating poverty traps. One can be in receipt of rent supplement and then be assessed for the RAS and on being transferred to it a person can be lifted out of the poverty trap. It is only supposed to be a short-term support. What will be done to ensure that more people who have been on the list for 18 months will be transferred to the RAS?

We need to do a number of things. I agree with what the Deputy said. It is not satisfactory that people are in long-term receipt of rent supplement, particularly where there are children involved. Moving from house to house and from school to school can often create great instability. I agree with the Deputy that this issue needs to be tackled.

I am sure the Deputy is interested in the figures involved. The total private and voluntary transfers to the RAS was 505 at the end of 2005, 2,333 in 2006, 2,918 in 2007, 3,645 in 2008, 3,999 at the end of 2009, and 1,433 for the current year to May. When those figures are broken down between the 30 or so local authorities, those involved do not constitute a huge number. I will discuss with my colleague the Minister of State, Deputy Finneran, how we might progress this matter. I will also meet representatives of the various groups, namely, Simon and Threshold.

As the Deputies will probably be aware since I took up this office I have been very busy. One reason I am looking forward to the plenary sessions of the Dáil ending is that much of the work that needs to be done with the Departments, officials and so on, is done when the Dáil is not in session. We have to try to get to a situation where there is a much bigger transfer of people from the temporary solution of rent supplement to a permanent solution of either social housing or the RAS. One of the attractions of the RAS is that it creates greater integration in housing rather than the social exclusion of some estates in the past.

Has the Minister had discussions with the Minister of State, Deputy Finneran, on this matter? The Department of Social Protection has done what it can, regardless of whether we agree with it, in terms of cuts in the rent supplement. The Minister has made it as unattractive as he possibly can and while that might not have been the intention, that is what he has done. There is some merit in some of the ways he went about doing that. His most recent decision at least took into account varying prices in different areas, which I welcome. The Minister cannot do all that is required unless the other Department plays its role. From the point of view of having cohesive Government, will we see action on this and will the Minister try to force action on the part of his ministerial colleagues in Government to ensure that this problem is tackled? It involves €0.5 billion a year out of a budget that he knows will be squeezed.

The Minister of State, Deputy Finneran, is working hard on this question. Some of the issues I examined regarding the scheme in my Department were not focused on the transfer issue, which is important, but on the scheme.

The Deputy mentioned the level of rent and dealing with that issue involved a considerable amount of time. I am happy that the level of rent reflects prices in the market. Determining the right level of rent is an issue when the rent subsidy scheme is such a big player in the market. I do not want to try to price anybody out of the market but I do not want to have unnatural subsidies for landlords as well.

Many issues arise here, some directly and exclusively related to the rent subsidy scheme. I want to discuss it with the various housing groups and following that if I consider it would be beneficial to have further discussions with the Minister of State, Deputy Finneran, I will do so. There is a need for joined-up Government thinking on this issue. We also have to examine issues relating to the rent subsidy scheme, having regard to the way differential rents are charged which are different from that pertaining to this scheme, to ensure that there are no disincentives to transferring.

Olwyn Enright


35 Deputy Olwyn Enright asked the Minister for Social Protection the reason the promised vouched fuel allowance scheme has not been developed to offset the increases for low income families at risk of fuel poverty in view of the introduction of the carbon tax on 1 May 2010; and if he will make a statement on the matter. [28455/10]

The Department of Social Protection already assists low income households with heating costs through their basic payments, through the fuel allowance scheme and through the household benefits package of electricity and gas allowances. These schemes have been improved significantly in recent years. Since 2001, increases in social welfare rates, including fuel allowance, have exceeded energy product prices.

The fuel allowance is paid for 32 weeks each year from end September to end April. In the 2009-10 heating season more than 340,000 recipients benefited from the allowance at a cost of over €231 million. Some 376,000 pensioners are receiving the household benefits, which provides 2,400 electricity units per annum, or the gas equivalent, over the year and it is estimated that some 140,000 of these households are receiving both fuel allowance and the electricity units-gas allowance under the household benefits to assist with the heating and other energy requirements. The household benefit package cost €184 million in 2009.

Proper household insulation is absolutely vital in tackling fuel poverty. Initiatives such as the warmer homes scheme, operated by Sustainable Energy Ireland, under the aegis of the Department of Communications, Energy and Natural Resources, have a very valuable role to play in that regard, as does funding from the Department of the Environment, Heritage and Local Government to improve the quality of existing local authority housing and the housing adaptation grants for older people and people with disabilities. Considerable progress has been made in this area in recent years.

In his carbon budget statement, the Minister for the Environment, Heritage and Local Government outlined details of €130 million in funding for insulation, €76 million of which will be used to assist low income families. The Department of Communications, Energy and Natural Resources has overarching responsibility for the energy portfolio and has convened an interdepartmental agency group on affordable energy to co-ordinate and drive Government policy in this area.

The interdepartmental agency group has been asked to draw up an energy affordability strategy. This strategy will set out existing and future approaches to addressing energy affordability and will have regard both to the impact of the carbon tax on low income households and the range of supports outlined above in making its recommendations. As part of its work, the group was asked to make recommendations on the precise package of measures, including in the area of income support, that should be put in place to assist those at risk of fuel poverty. These recommendations will be considered as part of the overall strategy to deal with energy affordability.

I am pleased to be permitted finally to ask this question. There was much toing and froing in regard to it yesterday, with two separate letters being issued to me. The first indicated that the question could not be taken as a priority question, and the second indicated the question was not in order. It was only when I pointed out that my colleagues and I have already posed the same question three or four times that I was allowed to submit it.

I have absolutely no faith in the inter-agency group. The first time its members attended a meeting of the Oireachtas Committee on Social and Family Affairs three or four years ago was probably the worst joint committee meeting I have ever attended. All members were horrified at the lack of information the delegates were able to provide. They attended a later meeting and that was somewhat more useful. Nevertheless, the group has been meeting for some years but we are yet to see a report. When will it be published?

My question specifically asks what will be done to offset the increase in fuel costs for low-income families arising from the introduction of the carbon tax. The Minister studiously avoided that point in his reply. The fuel allowance scheme, as it is currently comprised, was utterly unresponsive to people's emergency needs during the recent harsh winter. Is the group taking that aspect into consideration? Will the Minister deal with the specific question of how it is proposed to offset the increase in fuel costs for low-income families as a consequence of the carbon tax?

The Deputy has asked this question on previous occasions and I have had no difficulty in answering it. I expect to receive the report to which she referred over the summer period. As the Deputy rightly points out, and as I have said from the beginning, the months during which significant heating costs arise are those from October through to spring, that is, the months for which the fuel allowance is payable. As I said, I am awaiting the report of the strategy group. It will have to go to Cabinet, after which we will make a decision on how to assist those at risk of fuel poverty. I envisage a dual approach in this regard. The Deputy has focused on cash assistance, but the other side of the coin is equally important, namely, the question of how we can help people to reduce their energy requirements. Yesterday, we discussed the transfer of the schemes. I expect activation to play a role in insulating some houses.

An issue that is relevant to this and to the Deputy's previous question relates to my discovery, having begun to examine data on fuel poverty, that people living in rented accommodation are far more likely than those in owned occupation to complain that their homes are cold. This is a factor that I must take into consideration not only in regard to this issue, but also in the context of the previous question.

It is a matter for the Private Residential Tenancies Board to ensure rental accommodation is adequate. I have not lost focus on the other side of this issue, as the Minister claims. The warmer home scheme is fantastic if one can manage to avail of it. The problem is one of accessibility. While the various penalties have all been introduced, action to introduce measures to assist people in ensuring their homes are warm has not kept pace. Everybody was hit with the carbon tax on 1 May regardless of income. Some can afford to insulate their homes and others cannot; my concern is that we have not bridged that gap.

The Minister says the report will be available soon, and I have no choice but to take him at his word. We have submitted questions time and again on this issue, and on each occasion the response was that the report would be published "soon". Can the Minister offer an assurance that a decision will be made in the autumn session to assist people on low incomes to meet the additional costs of the carbon tax?

That is the intention, and I will be pushing to ensure it is done. I have not seen a report from the strategy group, but we will continue pressing for it to be brought forward, after which we will have to make decisions on it. To clarify, from the time I came into the Department it was my understanding that the deadline by which action would have to be taken to implement supports for low-income households in terms of fuel affordability was the autumn, when the heating season begins, rather than the summer.

Olwyn Enright


36 Deputy Olwyn Enright asked the Minister for Social Protection if he will provide details on the review of the mortgage interest supplement scheme; the changes that are envisaged under this review; if he will publish the report; and if he will make a statement on the matter. [28456/10]

There are 16,800 people in receipt of mortgage interest supplement this month, compared to 8,091 in 2008. Expenditure for the year ending December 2009 was €60.7 million, and the Estimate for 2010 is €63.9 million. The mortgage interest supplement scheme is currently under review. The main purpose of this review is to examine how the scheme can best meet its objective of catering for those who require assistance on a short-term basis. The review group includes representatives from my Department, the community welfare service, Department of Finance, Department of the Environment, Heritage and Local Government, and the Office of the Financial Regulator.

As part of the initial review, guidelines on specific and immediate operational issues were drawn up and circulated to the community welfare officers. These guidelines are available on the Department's website. The group is examining trends in programme and administrative costs, the impact of the Financial Regulator's statutory code of practice on mortgage arrears and legislative and operational issues arising. The review is also considering whether alternative approaches to achieving the scheme's objectives are warranted in light of recent changes in the economic climate and the mortgage market.

More recently, the Government has established a broader and more comprehensive review of mortgage arrears and personal debt. The mortgage arrears and personal debt review group, under the independent chairmanship of Mr. Hugh Cooney, comprises representatives from my Department, the Department of Finance, Department of the Taoiseach, Department of the Environment, Heritage and Local Government, Department of Justice and Law Reform, and the Department of Communications, Energy and Natural Resources. In addition, the group has representatives from the Office of the Financial Regulator, the ESRI, the Irish Banking Federation, the Free Legal Advice Centres and the Law Reform Commission.

The terms of reference for the group are based on the renewed programme for Government, with an emphasis on protecting the family home. They include a review of the statutory code of conduct on mortgage arrears and the recently agreed protocol between the Irish Banking Federation and the Money Advice and Budgeting Service on debt default, with a view to expanding the options available for dealing with debt situations in order to avoid foreclosure. In addition, the group is examining measures adopted in other jurisdictions and considering ways of expanding existing mortgage support measures. I understand the group will report to the Minister for Finance in the coming weeks.

As I understand it, the Cooney group was due to report to the Minister by tomorrow. On behalf of the Joint Committee on Social and Family Affairs, the Minister's colleague, Deputy Thomas Byrne, and I met with the Cooney group to discuss this issue. I have a concern in that whatever decisions the group reaches, the Minister's Department is solely responsible for the operation of the mortgage interest supplement scheme. The departmental review of this matter, which I understand is to be published soon, has been ongoing since the Minister's predecessor and her predecessor were in situ. In other words, three Ministers have overseen a review that has not as yet produced a report. Has any such report been completed and has it been seen by the Cooney group? It is difficult to see how the latter can come to any decisions without having at its disposal practical information as to the application, whether good or bad, of the mortgage interest supplement scheme. Has the group looked at the inconsistencies in the application of the scheme throughout the State? Colleagues and I are aware that different decisions are being made in different areas.

Given that there is a significant overlap in departmental representation on both groups, the two reports will have to be brought forward together. As I said, there will be a separate departmental report on the mortgage interest supplement scheme, but that must mesh in with the work of the Cooney group. I expect both reports to be published at approximately the same time, as the same departmental staff are involved in both. I have spoken to Mr. Cooney about this issue and am in constant contact with my officials. I hope this matter will be progressed in the coming weeks. The Government agrees that decisions are required urgently on this matter.

I appreciate that the reports must be brought to Cabinet, but what type of timeframe are we looking at in terms of getting a response for struggling home owners? They are now worried about the possibility of having to pay a property tax in addition to everything else, especially those who are in negative equity. A report in one of today's newspapers indicated that a decision would be made in October. However, the longer this is let slide, the greater the numbers who will experience hardship and the more difficult it will be to assist those whom it is possible to assist — and there are many such — to keep their homes.

I am not trying to avoid any questions. I have not seen the Cooney report and, as such, am not aware of what delivery mechanisms are proposed, whether they can be implemented immediately or whether there will be a lead-in time. As I said, both reports should be available in the coming weeks and decisions will be made speedily thereafter. I do not know what the complexities of implementation would be but I agree about the urgency of this issue and the importance of saving people's homes where possible. This is different from looking at the mortgage interest supplement on its own because in many cases we are looking at a range of debts, not just the mortgage. Without taking a total view, it is not possible to resolve people's financial issues and that is an important part of the Cooney report.

The community welfare officers are not allowed to take a total view at the moment.

These are the issues that must be examined. This is where MABS has a big role to play in drawing up financial plans after getting all of the information from clients; if a client only gives half of the information, the problem cannot be solved.