Vol. 742 No. 3
1 Deputy Michael McGrath asked the Minister for Finance the priority issues he intends to raise with the EU, ECB and IMF during their forthcoming mission review visit here with particular regard to the possible renegotiation of elements of the memorandum of understanding. [27800/11]
The fourth quarterly review of the EU-IMF programme of financial support for Ireland takes place from 11 to 21 October. The review will comprise a series of meetings to evaluate all the elements of the programme covering fiscal developments, including the comprehensive spending review and potential asset disposal, the macroeconomic outlook and progress on commitments in restructuring the financial sector and structural reform. It is clear that for the review the primary focus will be on our performance against the targets due to be met by the end of the third quarter of 2011 and assessing progress on targets due to be met in coming quarters. I have already signalled that notwithstanding the substantial consolidation already carried out — in particular, the amount being delivered this year — difficult decisions in respect of future consolidation remain. There is no doubt that the budget for 2012 will be another difficult one. Under the terms of the EU-IMF programme memorandum of understanding, an adjustment of at least €3.6 billion is to be implemented next year. However, as I have signalled, consolidation above this amount may be required if we are to adhere to the general Government deficit target set for 2012. That will become clearer in the coming weeks in the light of the continuing assessment of the most up-to-date information available.
The Government has repeatedly stated its commitment to the programme targets. Meeting these conditions on time and target is the best way to ensure we emerge successfully from the programme. That will mean that we can return safely to the financial markets for funding in as timely a manner as possible. This is one of the principal objectives of the programme. The Government's commitment to the programme does not stop us from seeking and agreeing changes to certain aspects of it. We have already done this successfully. The Government will continue to do so at the appropriate time.
I thank the Minister for his reply in respect of next week's visit to Ireland by representatives from the troika. There are two issues I wish to raise, the first of which relates to how the proceeds from the sale of State assets will be used. As the Minister is aware, the Government negotiated a memorandum of understanding last April which stipulates that the proceeds from the sale of such assets would be used to pay down debt. That matter was not dealt with in the original memorandum of understanding agreed last December. The Government negotiated the provision to which I refer, but it has now departed from it and appears to be of the view that some or all of the proceeds should be used to fund job creation initiatives. Is the Minister in a position to indicate whether that matter is high on the Government's agenda for next week's meeting?
The second issue about which I am concerned involves the commitments relating to income tax and social welfare into which the Government has entered. The Taoiseach recently seemed to indicate a change of position in this regard when he stated this was a matter for negotiation between the Government and the troika on foot of the contents of the memorandum of understanding. That is disingenuous because the memorandum clearly states that, in effect, it is the responsibility of the Government to draw up a package of measures that will be fiscally neutral and allow it to reach the €3.6 billion target. Does the Minister intend to raise this issue at next week's meeting?
The agreement negotiated by our predecessors in office envisaged an ambitious programme for the disposal of State assets.
That is not true.
However, an amount was not nominated in this regard.
We did not sign up to any ambitious programme.
In the programme for Government we indicated that a sum of €2 billion was to be achieved from the sale of State assets. The troika's view is that the proceeds of such sales should be used principally for debt reduction, while it is our view that a high proportion should be used for job creation and capital projects. The matter will have to be negotiated when the representatives of the troika come to town.
I require advice from the Leas-Cheann Comhairle on the Deputy's second supplementary question in view of the fact that a subsequent question on the Order Paper, in the name of another Member, relates to the same matter.
The issue about which I inquired is relevant to Question No. 1.
Should I provide an answer now or wait until the subsequent question is reached? I do not want to offend any other Deputy.
What was the nature of Deputy Michael McGrath's second supplementary question?
It relates to the Government's commitments on income tax and social welfare. The memorandum of understanding clearly states the Government may come up with alternatives which would raise the same amount of money as any proposed tax increases or payment cuts. Is that matter a priority for the Government in the context of the agenda for next week's meeting? This supplementary question is directly relevant to Question No. 1.
I am informed that there is no obstacle to the Minister dealing with the matter.
In that event, the Administration's position, as reiterated by the Taoiseach, is as set out in the programme for Government. In his recent remarks the Taoiseach merely pointed out that income tax increases amounting to approximately €250 million per year had been pencilled in for 2012 and 2013 and that we would be obliged to obtain the agreement of the troika to remove these commitments from the tax profile and replace them with other taxation measures of equal value. We do not see any difficulty in renegotiating that part of the programme. The Taoiseach wanted to be absolutely and factually correct when he stated that, as matters stood, that which our predecessors had negotiated included income tax increases. As stated in the programme for Government, we do not intend to have such increases in the forthcoming budget. However, there remains an element of negotiation with the troika on the matter.
Let us be clear on the sale of State assets, the original agreement reached last December committed the then Government to reviewing the McCarthy report with a view to setting targets for the possible privatisation of State-owned assets. In April this was upgraded when the Government committed to the phased privatisation of certain enterprises. In July the position was upgraded further when the Government signed up to an ambitious programme of asset disposals. As the Minister has admitted, the amount of €2 billion is the Government's figure, not one put forward by the troika. In recent months a number of Ministers have stated we have no choice in the matter and that the troika is forcing us to sell State assets in order to raise €2 billion or €5 billion. That is not the case. That is not the agreement to which we signed up.
The McCarthy report had been drafted but not published when our predecessors negotiated the programme with the troika and when the memorandum of understanding was put in place. It was clear that both sides were aware what the McCarthy report would contain, even though it had not been published. It was also clear what the intent was at that stage.
There was no commitment made in it.
We are not resiling from any matter. No figure was included in the original memorandum of understanding. We included a figure of €2 billion in the programme for Government and intend to realise that sum. However, we are obliged to negotiate with the troika on what we may do with the proceeds of the sale of State assets.
The Minister should stop blaming us for his being obliged to raise that amount.
I do not believe there is an issue of blame. I am in favour of and welcome the sale of State assets. There is no blame attached.
In that event, the Minister should inform his colleagues to stop blaming the troika.
2 Deputy Pearse Doherty asked the Minister for Finance the cost to the State of the promissory notes to Anglo Irish Bank and Irish Nationwide Building Society including the capital repayments, the interest payments to Anglo and Irish Nationwide and the cost of servicing the State’s debt in borrowing these sums; if he will provide an annual breakdown of the cost to the State of servicing these payments; the steps he is taking to reduce this debt burden on the taxpayer; and if he will make a statement on the matter. [27956/11]
The promissory notes were issued in various tranches with different interest rates. There were four tranches for Anglo Irish Bank and two for the Irish Nationwide Building Society. The total interest cost to the State for all tranches of the Anglo Irish Bank and Irish Nationwide Building Society promissory notes is approximately €17 billion, with annual repayments of €3.1 billion per annum. These annual repayments reduce over time as the various tranches of the promissory notes are repaid. The final payment on the promissory notes of approximately €100 million will be made on 31 March 2031. The total cost of the promissory notes, including the principal amount and interest, will be in the region of €47 billion over the life of the notes. The following is a detailed aggregated schedule of capital repayments and interest on the promissory notes.
|
€bn |
Total interest |
Repayments |
Total capital reduction |
|
31/03/2011 |
0.55 |
3.06 |
2.51 |
|
31/03/2012 |
- |
3.06 |
3.06 |
|
31/03/2013 |
0.49 |
3.06 |
2.57 |
|
31/03/2014 |
1.84 |
3.06 |
1.22 |
|
31/03/2015 |
1.75 |
3.06 |
1.31 |
|
31/03/2016 |
1.65 |
3.06 |
1.41 |
|
31/03/2017 |
1.55 |
3.06 |
1.51 |
|
31/03/2018 |
1.44 |
3.06 |
1.62 |
|
31/03/2019 |
1.32 |
3.06 |
1.74 |
|
31/03/2020 |
1.19 |
3.06 |
1.87 |
|
31/03/2021 |
1.06 |
3.06 |
2.00 |
|
31/03/2022 |
0.91 |
3.06 |
2.15 |
|
31/03/2023 |
0.75 |
3.06 |
2.31 |
|
31/03/2024 |
0.57 |
2.09 |
1.52 |
|
31/03/2025 |
0.45 |
0.91 |
0.47 |
|
31/03/2026 |
0.39 |
0.91 |
0.52 |
|
31/03/2027 |
0.33 |
0.91 |
0.58 |
|
31/03/2028 |
0.26 |
0.91 |
0.65 |
|
31/03/2029 |
0.19 |
0.91 |
0.73 |
|
31/03/2030 |
0.10 |
0.91 |
0.81 |
|
31/03/2031 |
0.01 |
0.05 |
0.05 |
|
16.8 |
47.4 |
30.6 |
*These numbers may not tot exactly as a result of rounding
The Deputy should be aware that the funds which become available to the State as a result of borrowing undertaken by the Exchequer are not generally assigned to one particular area of expenditure, rather they are available, with the funds sourced from revenues such as tax revenue, non-tax revenue and capital receipts, to fund overall expenditure. Accordingly, there was no one tranche of borrowing undertaken solely for the purpose of funding the promissory note payments to Anglo Irish Bank and the Irish Nationwide Building Society. The drawdowns of funds so far under the joint EU-IMF programme of financial support have been used for a range of purposes, including, of course, the general running of the day-to-day operations of the State. It is difficult, therefore, to isolate precisely the exact cost of the interest payments on the borrowing undertaken to fund the promissory note payments. However, for illustrative purposes, on the basis of the original 5.8% blended average interest rate which applied to borrowing under the programme, the interest costs on borrowing of €3.06 billion would be just under €180 million per annum. In the light of the recently agreed reduction in interest rates on funding available under the joint EU-IMF programme of financial support, however, the estimated interest cost on such borrowing reduces to approximately €115 million per annum.
Additional Information not given on the floor of the House.
While the State has budgeted to meet both the interest and cash requirements, I am eager to have the promissory notes examined to see if they can be re-engineered in a better way for the State such as, for example, by lengthening their maturity and reducing the interest rate on them. This re-engineering would have to be completed in a manner which did not impact on the capital position of Anglo Irish Bank and may or may not be feasible.
I had the opportunity to meet President Trichet on the margins of the ECOFIN meeting in Poland on Saturday, 17 September. He was very complimentary of the progress being made by Ireland and noted the narrowing of bond spreads that had taken place, which he would not wish to see put at risk. I mentioned to him and in a separate meeting to Commissioner Rehn the situation in relation to the promissory notes. I proposed that our technical experts get together to examine the technical aspects and the implications of any potential changes. They were agreeable to this on the basis that there was clearly no commitment on their part up front. We are proceeding on that basis.
When the first note was issued by the Department of Finance on the promissory note, it included the cost of capital payments and interest on these capital payments. It also included the cost of borrowing. In the response given by the Minister he has not included such a column. I do not dispute the €47.9 billion figure which takes in the capital and interest payments, but there is an issue with the cost of borrowing. If we are to assume we could borrow at the rates at which we borrowed in 2009 and 2010 — 4.7% — the overall cost of the promissory note, until the last payment on 31 March 2013, will be in the region of €74.63 billion. It is proper that this figure be noted in order that people will understand the full cost of the promissory note to Anglo Irish Bank. It is not conceivable that we will not have to pay anything to borrow this money and we could argue about the 4.7% rate which is probably conservative and could go down but it could also increase. We are, therefore, left with a ballpark figure of €75 billion to pay the promissory note. My question is the same as the one tabled to the Minister. What is he doing to reduce the cost of this debt on the taxpayer? Does he believe we should continue to pay €75 billion to Anglo Irish Bank? Why has the promissory note repayment schedule been extended to 31 March 2031 from 2025 in the original note? Why has the cost increased to that extent?
The cost is not €74 billion but €47.4 billion. One can think of it as a mortgage. A person making monthly mortgage repayments has a capital as well as an interest payment element. The interest represents the cost of borrowing, while the capital payment diminishes the debt. The Deputy is adding the interest rate cost of €16.8 billion to the €47.4 billion, but it is contained within it as the interest element. The table provided gives the capital reductions in the last column and if these figures are added to the interest rate payments in the first column, one is left with the figures in the middle column, the repayments on an annual basis. This is another issue we inherited when we went into government. This was the way arrangements had been made to fund Anglo Irish Bank. It is like an extremely expensive IOU. Nobody doubts how expensive it is.
I seek clarity on the issue and ask the Minister to refer to the original note produced in November 2010 which included the cost of borrowing on the markets, assuming an interest rate of 4.7% at the time. It also included the capital repayments and the interest rate charged to Anglo Irish Bank. As with a mortgage, it is not just a case of repaying €30.6 billion; as the period spans 20 years, the total cost is €47.9 billion. Is the Minister indicating that the total cost of the promissory note is €47.9 billion, including the cost when the State will have to go to the markets to borrow the money to give to Anglo Irish Bank each year up to 31 March 2031? For example, if there was a way by which the Minister's negotiating skills could result in the €30.6 billion Anglo Irish Bank promissory note being wiped away, my assumption is the State would save €74.6 billion.
That is incorrect; €47 billion would be saved.
3 Deputy Tom Fleming asked the Minister for Finance the nature and content of contracts for or employment which the National Asset Management Agency has given to individual developers to run their former companies which are now in NAMA; the remuneration details of every developer currently in receipt of such remuneration; and if details will be published on the NAMA website. [27799/11]
The National Asset Management Agency, NAMA, has been established as a body corporate which is required to carry out its functions in a commercial manner. In this regard, it must consider on a case-by-case basis the overhead costs associated with leaving a debtor in place to manage his or her business at an agreed salary level versus the alternative of appointing an insolvency expert. I am advised by NAMA that when it decides that the better option for the taxpayer is to leave the debtor in charge of his or her business, it sets a limit for the overheads in the company or business and that this cap must cover all costs, including the debtor's own salary. NAMA takes a large number of factors into account before approving the overhead allocation for any debtor to operate the business. These include the debtor's knowledge of the assets, the overall value of the assets, his or her experience, NAMA's view of the extent to which he or she can add value and his or her level of co-operation with NAMA, including, where applicable, voluntary reversal of asset transfers and the pledging of unencumbered assets.
I understand from NAMA that, as part of its business plan agreements with debtors, it normally looks for and obtains a reduction of 50% to 75% in overhead costs and that any remuneration paid to debtors is payable from this much reduced budget. The chairman of NAMA has recently stated the majority of debtor remuneration packages fall into the €75,000 to €100,000 range, including all benefits-in-kind. I understand in two cases the debtors' remuneration package, authorised by NAMA as part of the budget for overheads, exceeds €100,000 and that the highest is in the order of €200,000.
The terms and conditions under which debtors work with NAMA constitute commercially sensitive, confidential information. I am informed that, under sections 99 and 202 of the Act, it cannot disclose the names of or details relating to individual debtors because companies and individuals whose loans have transferred to NAMA and who are meeting their obligations are entitled to have this information kept confidential.
I firmly believe the figures given by the Minister, ranging from €75,000 to €200,000, for remuneration are exorbitant, given the state of the country, particularly as these are confidential contracts. Nobody should have the right to enter into such arrangements. The people concerned broke the country and are now being paid by the State and taxpayers. We do not want to see a repeat of the recklessness of the past decade, the past five or six years in particular. Everything should be above board and transparent. NAMA has no right to deal with the people concerned in such a manner.
May we have a question, please?
The Minister spoke about the confidentiality aspect, but such issues should not be removed from the view of the general public. I ask that such details be put on the NAMA website because of the seriousness of the matter. Will the Minister specify if there are incentives to reach certain targets for the people concerned, including potential contractual incentives? If the elements in NAMA return to profit, will they be sold to the people concerned at lower prices?
Many people would share the Deputy's views and concerns. However, NAMA had to make a pragmatic business decision on this. The alternative is to get in experts on credit to run the business, and we have experience of those already with NAMA assets that have gone into receivership. The receivers are a fine body of people but they charge €180 per hour. That amount over the year is far higher than the cost of the developer, who knows the assets, running the system under strict controls. Again, the range of salaries is between €75,000 and €100,000. There are two salaries above that; one is between €100,000 and €200,000 and one is €200,000. They manage billions of euro worth of assets and run them in a very tight situation. A business plan must be agreed first and there is a great deal of negotiation whereby assets that are transferred out of the control of the company must be restored and so forth.
I am satisfied in general that what NAMA is doing at present is appropriate but it must be constantly under review. Where developers have broken the terms of their business plans, the arrangement has ceased and some of those companies have gone into receivership.
I thank the Minister for his response. There should be far more accountability on this. NAMA should be answerable to the Minister and all these matters should be vetted. The people who are funding this, the general public, are entitled to know the status of these and the names and details involved. I ask the Minister to reconsider that.
I am advised that much of the information the Deputy wishes the public to have is commercially sensitive. There is a prohibition under the National Asset Management Agency Act, which was sponsored by my predecessor and passed by the Oireachtas, which prevents this information being given.
4 Deputy Michael McGrath asked the Minister for Finance in view of the fact that he has now received the report form the group chaired by Mr. Declan Keane established to examine ways to assist persons in difficulty with their mortgage, if he will set out his views on the recommendations of the report; and the actions, and when, he intends to take arising from this report. [27801/11]
The Government is acutely aware of the increasing financial stress that some households face arising from difficulty in meeting their mortgage commitments. Against this background, the Government's economic management council, prior to the summer recess, requested an interdepartmental group to consider further necessary actions to alleviate the increasing problem of mortgage over-indebtedness and to report to it by the end of September.
The outcome of the work done by the group, which was chaired by my Department and comprised representatives from other relevant Departments, the Central Bank and expertise from the banking sector, has been presented to the economic management council. I will bring the report to Cabinet next week, after which it will be published. I anticipate that the Dáil will be given an opportunity to fully debate the contents and findings soon afterwards. Until the report has been considered by Government and released into the public domain, I do not wish to make any further comment on the contents.
I welcome the fact that the Minister will publish the report after the Cabinet has considered it. I hope he will publish it next week. It is important that all of us, who have a collective responsibility to assist people who are in difficulty with mortgages, have an opportunity to debate the report and to contribute to the decisions that will be made. A greater sense of urgency is required on this issue. I acknowledge that the Government considered it necessary to set up another review and its report has now been completed. However, people who are in difficulty with their mortgages want to know when the Government will take decisions that will assist them. How soon after next week are we likely to see legislation, if necessary, to implement the recommendations of the report? Elements of it have been leaked in recent days, and reports of its content are not terribly inspiring. However, we will wait to see the detail.
Would the Minister agree that what is really needed is independent intervention whereby binding solutions can be put in place? Fianna Fáil is of the view that a debt settlement and mortgage resolution office must be established to deal with a person's entire debt, including his or her personal debt as well as mortgage debt. An individually tailored solution can then be put in place for each person's circumstances. Does the Minister agree that is the way forward?
Various solutions were examined by the interdepartmental group. Considering that it spanned the holiday period, I believe the group treated the matter with great urgency. It briefed the economic council and provided me with a full report before the end of September. The report would have gone to the Government yesterday except I was attending an ECOFIN meeting in Brussels. I will bring it to Government next week.
Every Deputy here is not only aware of the situation but can offer examples of people who are experiencing difficulty with their mortgages. I will not approach this on the basis of us having all the solutions. I will bring the report to the House and if Deputies on either the Government or Opposition benches offer additional proposals that I think will run, we can include them in the final draft. The idea is to bring a report to the House and to act on it quite quickly.
Will the Minister give a commitment to publish the report next week? Can he give us a sense of how quickly decisions will be taken and subsequently implemented? Will the decisions be implemented before the budget? Does the Minister anticipate that there will be legislation on this issue in the next couple of months? People cannot afford to wait until the budget because this issue could get lost in the wider issues that will be debated at that time in the context of the budgetary adjustment. It should be dealt with urgently before the budget.
I am committing to taking the report to the Government next week and if the Government clears it, we will publish it straight away. However, one never knows what might arise between now and next Wednesday, so I do not wish to give an absolute commitment to publish it next week if the Government does not clear it. There is no reason the Government would not clear it and I expect that it will be published next week. We can then have a full discussion about it in the House and talk about a time line for implementation.
5 Deputy Richard Boyd Barrett asked the Minister for Finance his negotiating position with the EU-IMF troika regarding the sale of State assets; and if he will make a statement on the matter. [27641/11]
The fourth quarterly review of the EU-IMF Programme of Financial Support for Ireland takes place from 11 to 21 October 2011. The review will comprise a series of meetings to evaluate all the elements of the programme covering fiscal developments, including the comprehensive spending review and potential asset disposal, the macroeconomic outlook, progress on commitments in restructuring the financial sector and structural reform.
Under the EU-IMF programme, the Government is committed to considering options for an ambitious programme of asset disposals, based on the programme for Government and the report of the review group on State assets and liabilities, and to preparing a draft programme of asset disposals in this context to be discussed with the troika in advance of taking final decisions on the programme to be pursued. This draft programme is to include the identification of the potential assets to be disposed of, any necessary regulatory changes and a timetable for implementation. As a signal of its intent in this area, the Government has announced that it is prepared to dispose of a minority stake in the Electricity Supply Board.
The use of the proceeds of any such asset disposals will be a key issue for discussion with the troika. The Government has already signalled its wish to retain some of the proceeds for reinvestment in job creation initiatives in the economy as part of the NewERA programme. Beyond this, it would not be appropriate to discuss any further details of our negotiating position in advance of our discussions with the troika on the matter.
It is very hard to get straight answers about the outrageous plan to dispose of State companies and State assets, in part or in whole. As I understand it, and the Minister can correct me if I am wrong, there is no specific requirement in the EU-IMF memorandum of understanding that we sell State assets. It says that the Government will consider options for an ambitious programme of asset disposals based on the programme for Government. Will the Minister clarify that it is his Government that wishes to privatise these assets? It is not a specific demand of the EU-IMF. The Government wants to do it, but it wishes to put the blame on the EU-IMF for carrying through this deranged proposal to get rid of this country's family silver. These are precisely the assets we need to invest in to maintain and create jobs and to fuel economic growth.
Will the Minister clarify that issue for Members? Will he also clarify whether we are talking about €2 billion or €5 billion of State assets? The report suggests it wants €5 billion of State assets. Is the Minister now saying €2 billion will be used to pay the bankers' gambling debts and that some or all of the rest of the €5 billion, which he may or may not be considering, will be used to invest in jobs programmes as he has suggested?
What justification can the Minister or the troika, if he is saying it is it which is making this demand, give for privatising successful State companies, such as the ESB, or other State assets? It is a drop in the ocean in terms of the debt. It will make very little difference to the debt. What is the rationale for selling off the family silver other than for corporate vultures to use the economic crisis, facilitated by the Minister, to asset strip this country of vital State companies?
The European authorities and the IMF require the sale of State assets as part of the programme. I am sure the Deputy is au fait with the debate in Greece and Portugal. One could see the difficulty in Greece when the troika visited Athens and insisted on a very large privatisation programme. There was no similar outcry in Portugal but there was a requirement for a very significant sale of state assets there also.
The Government, which supports the sale of non-strategic State assets, has put the only figure on the table and that is in the programme for Government. We said we would sell non-strategic State assets to the value of €2 billion. We know from informal suggestions from the troika that it regards that as a modest initiative but it has not nominated a higher figure. These issues will be thrashed out in the discussions starting next week.
In terms of the proceeds of the sale of assets, it would be our preference to use the proceeds for a stimulus package to create jobs in the economy through the provision of modern infrastructure.
The Minister is not answering the question. What is the rationale which the troika or he is putting forward for the sale of State assets? How is it of benefit to this country and its prospects for economic recovery or growth? I cannot see any other logic behind the demand of the EU-IMF, or the Minister's support for the sale of State assets in the programme for Government, other than asset stripping. The Minister is not saying how it will benefit us.
Is the Minister aware that when state companies in Europe are privatised, in particular energy companies, investment in them falls because the private shareholders in them demand dividends on their shares? It does not lead to increased investment in the economy or jobs growth. It often goes in the opposite direction. Is that not the real danger if we go down this road?
Will the Minister please define what the hell a non-strategic State asset is? How can the ESB be in any way described as a non-strategic State asset?
The movement towards the private sector holding infrastructural assets, such as those about which we are talking, rather than the public sector has been a part of economic management in all modern economies for the past 30 years, of which I am sure the Deputy is well aware. The European authorities are of the view — it is supported by any economic theory one would like to read — that assets in private hands will be used more efficiently for the public good than assets in public hands in general terms.
Did it work with the banking sector?
The line is drawn between what is strategic and non-strategic. A minority shareholding in any State company is not strategic.
