Priority Questions

Budget 2013

Michael McGrath


1. Deputy Michael McGrath asked the Minister for Finance if he has raised with the Troika the possibility of substituting a range of alternative taxation measures for the property tax in Budget 2013; and if he will make a statement on the matter. [42464/12]

The Government has decided, as part of its obligation under the EU-IMF programme of financial support to Ireland, to introduce an annual recurring property tax. In the latest memorandum of understanding between the Government and the troika, a commitment is given to introducing the tax in the forthcoming budget. The introduction of a property tax has been a condition of the programme since it was first negotiated in November 2010, under the previous Government, and has remained a condition of the programme following subsequent reviews, which are agreed by all programme partners. As stated in the terms of reference of the interdepartmental group on property tax chaired by Dr. Don Thornhill, the property tax is to meet the immediate financial requirements of the EU-IMF programme. The fiscal consolidation conditions in the programme are set with a view to meeting the adjustment path agreed at the ECOFIN Council in December 2010 for the general government deficit, in order to bring it below 3% of GDP by 2015. For 2013, this adjustment path sets a deficit ceiling of 7.5% of GDP.

The memorandum of understanding for budget 2013 provides for overall fiscal consolidation of €3.5 billion, to be made up of €1.25 billion in tax measures and €2.25 billion in expenditure reductions. The memorandum of understanding does provide for substitution of measures in certain circumstances. It states that "without prejudice to the minimum consolidation amount referred to in the previous paragraph and to the requirements to achieve the agreed fiscal targets, the Government may, in consultation with the staff of the European Commission, the IMF, and the ECB, substitute one or more of the above measures with others of equally good quality based on the options identified in the Comprehensive Review of Expenditure (CRE)". Therefore any proposal to alter the proposed composition of tax or expenditure measures would need to be substituted with measures of equal value.

Furthermore, the memorandum of understanding states that the Irish authorities will "Consult ex-ante with the European Commission, the ECB and the IMF on the adoption of policies that are not included in this Memorandum but that could have a material impact on the achievement of programme objectives".

The property tax forms part of a long-term policy to broaden the tax base, to provide a stable funding base for local government and to assist the strengthening of democracy at local level. A Bill to introduce the tax will be published with the forthcoming budget. No final decision has been made as to the rate or basis of assessment of the tax.

I thank the Minister for his response. I acknowledge that the original memorandum of understanding in December 2010 provided for the introduction of a property tax in 2012. The Government introduced that in the form of a household charge. The memorandum further provided for an increase in the property tax in 2013. Having said that, it would be deeply unwise to proceed with a property tax at this time given the conditions that prevail in the economy. The Minister knows all the facts - 435,000 people on the live register; one in five owner-occupier mortgages in trouble; half of mortgages in negative equity; and 160,000 people having paid stamp duty of €10,000 or more in the past ten years. These are not all different people and some people fall into a number of these categories. However, a great many families simply do not have a spare €300 or €400 to pay a property tax. My question, which the Minister did not answer, was whether he has raised with the troika the idea of replacing the property tax in the budget for 2013 with alternative taxation measures of an equal value.

What alternatives does the Deputy have in mind?

I have a number of alternatives in mind.

Could we hear them?

I will help the Minister to come up with a taxation package of approximately €1 billion. The Minister needs €1 billion in new taxation measures in December's budget. I accept that all sides of the House have responsibility to come forward with measures. If the Minister agrees to abort his proposal for a property tax in the budget, I will sit down with him and come up with measures, amounting to €1 billion.

First, we have no intention of raising €1 billion by way of a property tax.

Second, the implication of the Deputy's question is that he has some alternative tax proposals to raise the amount of money we intend to raise by way of property tax.

For the purposes of helping the debate, I ask the Deputy to state now what his alternatives are.

As is the tradition, as an Opposition party, we are preparing our budget submission, which will be published in November - well in advance of the budget. It will set out a taxation package to meet our overall requirements. I have asked the Minister a simple question, which he has refused to answer so far. Has he raised with the troika the possibility of substituting other taxation measures for the property tax in December's budget?

This is all very interesting, but it was the Fianna Fáil-led Government in 2010 that committed to a property tax as outlined in the memorandum of understanding.

The Deputy knows very well that the only way to move that out of the memorandum of understanding is if tax increases of equal value are substituted.

That is the thrust of the Deputy's question.

It is reasonable for me to request more information. What are his alternatives?

It is reasonable of me to ask the Minister to answer the question.

Otherwise I am simply buying a pig in a poke. If he is serious about this, he should make his alternative suggestions for me to consider. If they appear better than a property tax, we can look at them. At present the Government has decided to introduce a property tax, the details of which will be announced in the budget. It will not raise €1 billion. The Revenue will be responsible for its collection and the probable date for its introduction will be 1 July 2013.

May I clarify-----

Very briefly as we are out of time.

---- that the Minister is open-minded to revisit the decision to introduce a property tax if he is satisfied that there is an alternative of equally acceptable taxation measures that meet the fiscal requirements? Is he open to that possibility? It is clear from his response that he has not raised the issue with the troika because he does not see any alternative. If there is an alternative that meets with his acceptance, is he prepared to revisit the decision to introduce a property tax in December? That is a very straightforward question.

The Government has made decisions as I outlined. In the latest adjustment to the memorandum of understanding with the troika, we have stated that a property tax will be announced in December's budget. That is the firm Government commitment and we are not moving from that. If the Deputy believes he has a convincing way of influencing me to move from that by putting up "gentle" tax increases-----

They will not be gentle.

-----to substitute for property tax increases, I would like to hear them.

They will hurt people - they will not be gentle.

I believe he is simply involved in an exercise of bluff.

The Deputy's party in government brought in the commitment to introduce a property tax and he is now pretending he has some other way that people would not notice or feel to raise €1 billion.

They will notice.

We must continue now.

If he has, he should let us know. We would love to hear it.

Bank Debt Restructuring

Pearse Doherty


2. Deputy Pearse Doherty asked the Minister for Finance if he has contacted any of the EU counterparts following the statement issued by the Finance Ministers of Germany, Finland and the Netherlands last week; if so, if a deal on the banking debt is still possible and his views on the make up of such a deal; if he is attempting to secure a write down on the promissory note; and if the deal being sought on the recapitalising of the pillar banks is of the order of €24 billion as suggested by the IMF in the September 2012 country report. [42492/12]

The statement by three Finance Ministers from Germany, Netherlands and Finland on 25 September addresses issues already decided upon by eurozone leaders when they met in Brussels on 29 June. The Heads of State or Government made two important decisions at that time. The first was to "affirm that it is imperative to break the vicious circle between banks and sovereigns". The second was: "The Eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme. Similar cases will be treated equally." That commitment to equal treatment is very important.

Ireland continues to be fully engaged in the process within the euro group and among Heads of State or Government on how these commitments will be implemented. Apart from the various technical meetings with troika members, we are pursuing a diplomatic offensive which has included officials from my Department travelling recently to several capitals. My visits to Paris, Berlin, Rome and on to the informal ECOFIN in Cyprus and the Taoiseach's meeting with several colleagues at the level of Heads of Government are part of this process. All our interlocutors agreed that the imperative is to move ahead urgently to implement all of the important decisions taken on 29 June.

As we advance our ideas, other member states will also put forward their proposals. It is to be expected in such a dialogue that there may be some differences of interpretation but these must be within the context of the overarching principles agreed on 29 June. Ireland's position is clear on this, and work is continuing in line with the 29 June summit agreement to break the link between banks and sovereign and the principle that similar cases will be treated equally. We have followed up on that basis as a matter of urgency following the latest developments. Our ambassadors in the relevant capitals have undertaken high-level contacts with a view to underlining the importance we attach to following through on the commitments of the Heads of State or Government on 29 June.

On the funding of the IBRC and the promissory note issue, contacts are continuing with the troika as part of a process to find a long-term solution to that situation in order to enhance Ireland's debt sustainability in the best possible manner achievable while seeking to pay back our debts.

While I am fully aware of the content of the IMF country report, in terms of the deal being sought, the Deputy will appreciate that this is an active process of dialogue. However, I assure the House there will be no lack of ambition in our approach and that our goal in all our discussions with the troika and with our partners in Europe is to get the best possible outcome for the future.

The Minister said that the three Finance Ministers made a statement on matters that were already agreed at the summit on 29 June. However, it is worth reading the Finance Ministers' statement and the statement from the 29 June summit. Paragraph 6.2 of the Finance Ministers' statement made the key point that the legacy issues would not be dealt with and would be dealt with by the national states. Nothing in the statement agreed on 29 June dealt with the issue of retrospection. The Minister and the Taoiseach might have got a nod and a wink from their German counterparts, Italian counterparts or whoever else on the day. However, they made a major mistake by failing to secure the insertion of the word "legacy" or "retrospective" in the statement. While the Minister says that he continues to strive for the implementation of the 29 June summit outcomes, it does not deal with the issue of legacy or retrospection. It refers to separating banking debt from sovereign debt but it does not state whether this will be retrospective.

I must ask the Deputy to frame a question, please.

It is clear that the Minister's objectives in terms of securing a comprehensive deal lie in tatters. The Minister says there is no lack of ambition but he has failed on every occasion, either in this House or externally, to outline whether he is seeking a write-off of any debt in respect of the Anglo Irish Bank promissory note.

The Minister referred in his reply to officials and ambassadors who are doing the rounds across Europe. What engagement has he, as Minister for Finance, had with his counterparts, in particular the Helsinki three - the three finance Ministers who made the statement - since that statement was made?

The difficulty with Sinn Féin is that not alone does it predict failure on the part of the Government but it hopes the Government will fail because part of its strategy is to build a political movement on the prospects of the Government failing and people not getting any relief from the burden of the debt. That puts Sinn Féin in an awkward position when pressing its case. If it were to offer loyal opposition it would be wishing the Government success in having the burden of the debt removed from the shoulders of the Irish taxpayer and using all its influence to assist the Government in this regard. Instead, it wants to step into every little chink to ensure failure. Sinn Féin is not alone in this. Other Deputies also share that approach. By way of general comment, it is a pretty bad approach.

As regards what was said at the Heads of State and Government meeting on 29 June, the statement reads: "The Eurogroup will examine the situation of the Irish financial sector with a view of further improving the sustainability of the well performing adjustment programme." The following sentence reads: "Similar cases will be treated equally." This is where retrospection and legacy comes in. It is not possible to interpret similar cases will be treated equally. The issue being discussed was Spain and recapitalisation of its banks. As such, if Spain gets it then similar cases will be treated equally. This is where retrospection is hinged.

Deputy Doherty is probably not aware that on the night of the statement in Helsinki the Dutch authorities issued a statement clarifying what they meant by "legacy". It stated that legacy, in their interpretation of their statement, only applied to insolvent banks such as Anglo Irish Bank and not functioning banks. Banks that are functioning, as are our pillar banks, do not come within their definition of "legacy". Other clarifications were provided from other areas. The Deputy will have heard President Barroso's statement yesterday that the commitments of 29 June stood. President Schulz also stated in this House this morning that he supported the case that the commitments of 29 June be implemented in due course.

I have wished the Minister well prior to his Council meetings. I have also, on behalf of the State, wished the Government well in the negotiations. However, I will not stand on this side of the House and remain silent while the Minister spectacularly fails to demand any write-down on the Anglo Irish Bank promissory note. The Minister has again given the excuse that the legacy debt will, according to the Dutch, only apply to the pillar banks. Why should the Irish people carry on their shoulders the burden of €30 billion for a defunct toxic bank, which is currently under investigation in terms of criminal activity?

It is up to the Minister and the Taoiseach to fight Ireland's corner, which up to now they have spectacularly failed to do. All they will be doing over the next couple of weeks is attempting to claw back ground which they believe was secured on 29 June. The Minister has failed to say on any occasion - I invite him to do so now - if any proposal which he is putting forward will result in a reduction of the overall debt, in terms of the Anglo Irish Bank promissory note, with which the Irish people are currently burdened. Is this Government seeking a write-down of that debt or is it all smoke and mirrors, extensions and restructuring or will it seek alleviation of that debt from the Irish people?

The Deputy does not understand my position and never has because he does not listen carefully to what I say. The reason we are committed to the promissory note arrangement is it is a legal agreement entered into by the previous Government. Throughout the election campaign, the drafting of the programme for Government and up to now I have always committed to the objective of a restructuring of the promissory note and its replacement with something that would not be as burdensome on the Irish taxpayer. I said I would only act in consort and with the agreement of the European Central Bank. I will not put Ireland in a position of default because that is not in the national interest.

We are proceeding with the strategy I have outlined on several occasions. We will see how it plays out. The Deputy should not shout failure until he has seen the result, following which he can judge me.

We must move on now to Question No. 3.

The question was if the Minister is, in any of the proposals, seeking a write-down of the Anglo Irish Bank promissory note. I listened carefully to the Minister. I know that he is trying to get the promissory note restructured. The question is if he is in any proposal looking for a write-down.

We are over time on this question.

The purpose of restructuring is to make the debt less burdensome on the Irish taxpayer.

It is different from a write-down.

The Deputy may use whatever words he chooses to describe that.

Bank Guarantee Scheme Bond Repayments

Stephen Donnelly


3. Deputy Stephen S. Donnelly asked the Minister for Finance if he will identify the unsecured AIB bondholders who were paid €1,000,000,000 earlier in the week; the steps he has taken to date to identify them; and if he will make a statement on the matter. [42591/12]

As the Deputy is aware, and while recent media reports may suggest the identity of particular bondholders, the bank or Government has no substantive means of establishing the underlying ownership of these securities, which are freely tradeable once issued. These securities are publicly traded and dealt through market participants and settled by clearing house systems. An issuer does not have any access to the records of the clearing house. On maturity, the bank will instruct its paying agent to transfer the funds due to the clearing house, which will then distribute the funds to the holders of the securities as per their records. Even where the bank is presented with lists alleging to represent names of bondholders, I am informed there is no way for the bank or anyone else to completely verify the accuracy of such lists.

The Deputy will also be aware that when this Government took office it attempted to enforce burden sharing with senior unguaranteed bondholders in particular institutions that were no longer core elements of the Irish financial system. Intensive discussions were held with our European partners, in particular former President of the ECB, Mr. Trichet, in the run-up to the announcement of our stress tests on 31 March last year. Mr. Trichet believed at that time that such action was not in the interests of Ireland or the euro area. This matter was discussed again with former President Trichet on a number of occasions, including the ECOFIN meeting in Poland in September 2011.

I would also like to point out the differences between AIB and other non-core institutions currently in wind-down. The Deputy will be aware that AIB is a solvent, well capitalised bank with an important mandate to supply credit and essential banking services to Irish individuals, SMEs and businesses across the country. It is, therefore, important that its business model remains intact so that it can eventually regain access to international funding markets in a meaningful way and eliminate its dependence on the Government. This will also have the effect of enhancing its value for the State at a time of divestment. I note the bank’s successful re-entry to the public bond markets since the crises began, where it raised £395 million in May of this year, using UK residential mortgages as collateral. Nevertheless, I would like to again reiterate that the Government is currently in discussions with our European colleagues in regard to securing a deal on the Irish bank debt and further detailed work will be stepped up to ensure that the positive moves in Europe are harnessed to maximise the benefit to the Irish taxpayer.

The Minister made various points, to which I will try to respond. The scale of the €1 billion paid out, at current borrowing costs, is €60 million per annum forever. That is what it would cost us to fund €1 billion, which is equal to what it would cost to pay 2,400 new teachers every year forever.

The Minister said that former ECB president, Mr. Trichet believed it was not in Ireland's interest not to pay these bondholders. I accept the Minister would prefer not to pay them. However, I do not care what Mr. Trichet thinks is in the best interests of Ireland. I believe he is single-handedly responsible for a great deal of Europe's economic problems. I do not care what he thinks is in the best interests of this country rather I care what the Minister and Taoiseach think in this regard. The fact that Mr. Trichet believes we should pay the bonds is irrelevant.

On the substantive question of who are the bondholders, I do not know who is advising the Minister but his claim now that they cannot be identified is patently untrue.

In December 2010 the Minister called on Brian Lenihan to identify them and he went so far as to give him the name of a website he could visit to see who had bought the shares. Greece and Iceland managed to find out who the bondholders were and US banks regularly find out the identity of bondholders. It is not that difficult. It has nothing to do with clearing houses, or Anglo Irish Bank and AIB finding it too difficult. The Minister can call a creditors meeting and they will let him know who they are because they must engage with him to get their money. I do not know who is providing the Minister with this advice but it is contrary to what he stated as Minister for Finance in waiting approximately two months before the election. It does not seem to be beyond the ability of a range of other countries and financial institutions to find out who they are.

I outlined to Deputy Doherty my position on burden sharing with senior bondholders and it remains the same. I would like to do it but I will only do so in agreement with the European Central Bank. Deputy Donnelly has a different view. He believes the Government should move unilaterally and, in effect, refuse to pay through the agency of AIB. However, we need AIB to be a working pillar bank for the economy and if we followed his advice it would have defaulted, so we did not have a choice. Deputy Donnelly's position is not fully thought out. He is applying now the type of formula that might have been desirable for Anglo Irish Bank in 2010 to a working bank such as AIB on which so many people are dependent.

On the issue of the identity of the bondholders, I challenged the late Brian Lenihan in the Dáil on their identity, because at the time a website had published a list of names which purported to be the bondholders. However, this list was never verified and at a minimum it was probably incomplete. I am giving Deputy Donnelly the answer he gave in the same terms.

Perhaps the website had a very large degree of accuracy on the identity of the bondholders, and I have no doubt some of the names mentioned in the newspapers recently as AIB bondholders were correct, but there is no way of verifying a complete list of bondholders other than the method Deputy Donnelly mentioned, of calling a creditors meeting. However, as soon as one brings the creditors together, one has taken an irrevocable step of going towards default. One can shake it out but one has gone beyond the point of no return. If Deputy Donnelly visits or he will see the transactions because they are holding agencies for the bonds. It is possible to make assumptions because of the trades but I do not have access to a complete list which would verify who the bondholders are in any particular institution, principally because they get sold on and the original bondholders usually are not the bondholders who are extant.

On the repayment of the bondholders, the logic the Minister has just given is Fianna Fáil economics, which is that we need to borrow and therefore we will pay off all of these debts because if we do not, people will not lend to us. Exactly the opposite is true and my position is very well thought through. Fianna Fáil's position was not thought through and I suggest the Minister's position is not thought through. By paying off everybody's debts, which the new AIB does not owe because it was taken over by somebody else when it was bankrupt, one removes the ability of AIB to borrow further. This is exactly the incorrect logic that ended us up in a troika programme.

On the identity of the bondholders, I appreciate the Minister's acceptance that he could call a creditors meeting and could find out who they are. I believe it is reasonable to tell the people of Ireland who are stumping up this money that we did not know who they were so we called them in. The Minister does not even have to say they will get a writedown. He can say that before they are paid we want to know who they are because we have stepped in to cover the debts. It would be the right thing to do for the people of Ireland as a minimum step to let them know to whom they are paying their money.

Is Deputy Donnelly seriously suggesting that AIB, which is in recovery and as one of the pillar banks financing the economy, should have defaulted on money it raised in 2009 and called its creditors together and gone bust?

This was unguaranteed. It was not 2009.

Is Deputy Donnelly seriously suggesting this would be a prudent course of action?

No. The Minister's information is incorrect. It was not 2009.

It is a ridiculous proposition.

It was an unguaranteed bond which means it was before September 2008. Does the Minister not even know the difference between a guaranteed and an unguaranteed bond?

Deputy Donnelly please. The Minister has the floor.

Does the Minister think he just paid a guaranteed bond? Is this what the Minister is saying?

The Deputy cannot speak when the Minister has the floor.

The bogus bonds issued by Deputy Donnelly were not guaranteed.

That is ridiculous.

The Minister is replying.

The Deputy was involved in a publicity stunt.

Did the Minister just suggest that what was paid was a guaranteed bond?

A populist publicity stunt on the pretence he is knowledgeable on these matters.

Is the Minister for real? Does he believe the €1 billion cheque he paid on Monday was to guaranteed bondholders?

European Stability Mechanism

Michael McGrath


4. Deputy Michael McGrath asked the Minister for Finance if he or the National Pensions Reserve Fund has examined the implications of the European Stability Mechanism investing in the pillar banks; if he has studied the mechanism by which this may take place; if an up to date valuation of the State's investment in the pillar banks has been prepared; if the joint technical paper with the Troika in respect of the promissory note has been completed; his plans for its publication; the progress that is being made in respect of restructuring the promissory note; the date on which he expects this to be concluded; and if he will make a statement on the matter. [42465/12]

As the Deputy is aware, the Government has been working extremely hard to secure a deal on the Irish bank debt and detailed work will continue to ensure the positive moves in Europe are harnessed to maximise the benefit to the taxpayer. This remains one of the Government’s key priorities. We will continue to target the reduction of the burden to the State of funding the bank recapitalisation and due consideration is being given to various mechanisms to achieve this goal. On 19 July 2012, the National Pensions Reserve Fund, NPRF, published its annual report. This contained an accounting valuation of the NPRF's ordinary and preference shareholdings in Bank of Ireland and Allied Irish Banks at 31 December 2011. As at 31 December, the NPRF accounting valuation of its investments in Irish banks stood at €8 billion. Its investments in AIB at this date were valued at €6.1 billion comprising preference shares of €2.2 billion and ordinary shares of €3.9 billion. Its investments in Bank of Ireland were valued at €1.9 billion consisting of preference shares of €1.5 billion and ordinary shares valued at €0.4 billion. In addition, the State holds direct equity investments in the Irish Bank Resolution Corporation, IBRC, and Permanent TSB, now separated from Irish Life. The State also invested €3 billion in contingent capital instruments across the banks which are scheduled to be repaid to the State in 2016.

Given that the State may enter discussions on these investments, it would be inappropriate for me at this point to provide further details on any valuation assessment of these instruments. I would acknowledge, however, that since the end of last year, banking shares have rallied strongly across Europe and the share price of Bank of Ireland has benefited from this positive sentiment, rising by 18%.

With regard to the promissory notes, and as previously advised to the house, ongoing discussions with the troika are considering all options for the restructuring of the notes in terms of the source of funding, the duration of the notes, the interest rate applicable.

The very welcome euro area summit statement of 29 June represents a major shift in European policy in terms of breaking the vicious circle between the banks and the sovereign. More recently, with the announcement on 12 September of a single EU banking supervision mechanism, the European Commission President outlined his vision for the banking sector, in which the ECB would be given supervisory powers over all banks in the Union, which is an important step with regard to the ESM and its potential to recapitalise banks.

It is not possible to give guidance on the timing of these negotiations as to do so could impede our ability to achieve the best possible results for the Irish taxpayer, but every effort is being made to expedite the ongoing process.

I thank the Minister for his reply. I acknowledge two separate channels are open here. One is the possible ESM investment in the banks and the second is the Government's efforts to restructure or re-negotiate the promissory note arrangement in some way. I also recognise the real deadline on this issue is next March, when the next €3.1 billion falls due and when the 2012 €3.1 billion must be refinanced. The Minister will face a €6 billion issue in less than six months time, which is hugely significant for the country.

The promissory note issue is widely misunderstood, by commentators as well as politicians. People speak about the interest rate and the coupon being paid to the IBRC which, in the fullness of time, will be largely irrelevant. The promissory note is essentially being financed by relatively cheap emergency liquidity assistance from the Central Bank, so restructuring it in the absence of a writedown - which is the preferred option - in a way that would be advantageous to Ireland is not as easy as people make out and I acknowledge this. Its structure is widely misunderstood.

What is actually happening? How are these negotiations taking place? Is it at official level at this point? Are officials going over and back to Frankfurt? How much of the Minister's time is taken up with advancing the promissory note issue? The ECB is clearly the key stakeholder there. Will the ESM investment in AIB and Bank of Ireland be on the agenda of Eurogroup and ECOFIN later this month or possibly the European Council summit in about three weeks' time? I welcome the statement by the President of the European Parliament today but we need to have a re-affirmation from the European leaders of the June summit. We need that re-stated and reiterated this month.

Yesterday, President Barroso publicly re-affirmed the Commission's commitment and understanding of the commitment of the 27 Heads of State and Government to that which was agreed and expressed in the communiqué of 29 June 2012. I agree with the Deputy that the promissory note is a complex piece of financial structuring and restructuring it is also complex. Many issues arise but we will work our way through it. The context for negotiation, as in all these matters, is the troika. Of course, the ECB is also independent in the exercise of its functions. For example, I went to Frankfurt and had direct conversations with Mario Draghi some time ago. I also said in reply to an earlier question that I had met with the relevant finance Ministers of Paris, Rome and Berlin quite recently. Both issues were the topic of discussions there.

The next ECOFIN and euro group meeting is on Monday and Tuesday in Luxembourg, as is customary for the month of October. There will not be a specific agenda item referring to these matters for Ireland but, of course, I will take the opportunity on the margins of that meeting to engage with various colleagues to whom it would be in our interest to advance the case.

Deputy Michael McGrath, briefly.

When one reads the June summit statement, it seems that the possible investment by the ESM in the pillar banks is some distance away. Not only does the supervisory system need to be up and running, its effectiveness needs to have been tested. That is re-affirmed in the statement by the finance Ministers. I am not sure how much progress the Minister will make on that issue in the short term.

The Minister referred to the promissory note issue. There was talk for a long time about technical paper and talks with the troika. Are we moving to a position where there is an agreed paper between the Government and the troika? Clearly, there are sticking points, which is why it is not progressing as quickly as the Minister would have liked. Are we down to net issues at this stage? Are we getting close to a finality? Is the broad structure of the new arrangement agreed? My question on the promissory notes essentially relates to how much progress has been made.

The Minister will give his final reply.

Negotiations are ongoing and progress has been made insofar as people are coming to a better understanding of their positions and moving towards a mutual understanding of the situation. In terms of process, we are separating the timeline on the promissory note and recapitalisation of the banks because, as the Deputy said, on 29 June, it was a condition of any direct recapitalisation of banks that the European supervision system would be put in place first. However, from our perspective, when the objective is to get back into the markets at low interest rates, the actual date of the recapitalisation, if and when it comes about, is not the relevant date. What is relevant is the definitive statement that it is going to happen because as soon as that is done, it would be priced in to the cost of Irish paper. As a consequence, we could avail of that. To a large degree, that has already been done. The statement of 29 June was priced in and was interpreted as that in the future, the Irish debt position will be more sustainable. After the Helsinki statement by the three finance Ministers, our nine-year bond went up about 20 basis points and our five-year bond went up about 10 basis points. However, that has all come back so the markets are convinced from the way they are pricing Irish paper that the commitment of 29 June holds. I do not know what is the intention of the Heads of State and Government at the next meeting. I believe it will be made clear that what has been agreed is agreed but I do not know whether that will be formally expressed.

Property Taxation Application

Pearse Doherty


5. Deputy Pearse Doherty asked the Minister for Finance the advice he has received from the inter departmental tax strategy group on the property tax he intends to introduce in Budget 2013; if he will make the advice of this group public in advance of the Budget; if this group has raised any concerns regarding the property tax as was the case with the tax strategy groups concerns with the household charge in 2011; and if he has or if he will undertake an impact assessment of any property tax on household income and levels of financial stress being experienced by those liable for the tax. [42493/12]

The Department of Finance participated in the interdepartmental group, reporting to the Minister for the Environment, Community and Local Government, the terms of reference of which were "to consider the design of a property tax to be approved by Government to replace the household charge and that is equitable and is informed by previous work and international experience". The report of that group is being considered in preparation for budget 2013. The Deputy referred to a tax strategy group in the context of the household charge in 2011. The tax strategy group is an interdepartmental committee chaired by the Department of Finance, with membership comprising senior officials and advisers from the Departments of Finance, the Taoiseach, Health, Environment, Community and Local Government, Jobs, Enterprise and Innovation, Social Protection and the Revenue Commissioners. Papers on a wide range of tax related issues are prepared for consideration by the tax strategy group in the period prior to the budget each year.

I presume that the concerns to which the Deputy refers are comments within one of the recently published papers which were presented to the tax strategy group in 2011 on taxation of property. That paper outlined advantages and disadvantages of the household charge, which is appropriate in a forum where various policy options are being discussed at official level. The paper also outlined the advantages and disadvantages of various other possible property taxation options. The paper pointed out that a flat rate charge, such as the household charge, delivered a tax on property, which was an element of structural reform suggested by the troika, and that it had the most potential of any short-term property tax option to be implemented quickly.

There has been no decision on the final version of the tax but my officials will analyse its impact on household incomes, as is customary when budget changes are being considered.

It was interesting to listen to the Minister's engagement earlier with Deputy Michael McGrath. The Minister knows very well that Sinn Féin presents its pre-budget submissions every year and they go by the wayside as he does not take the points in them on board. There are many points and the Minister may not agree with all of them but he could, for example, standardise discretionary tax reliefs. I do not know what the Minister is planning to introduce in respect of property tax but I am sure standardising discretionary tax reliefs would bring in more than the figure of €500 million brought in through the property tax mentioned by the Taoiseach. That is one alternative among many others. Hopefully, if the Minister is sincere, he will look at alternatives because this property tax will weigh very heavily on people, particularly those on low and middle incomes, and on the economy.

I know the Minister for the Environment, Community and Local Government commissioned the report. It was believed that it would be under his remit before he made a mess of the previous tax. Will the Minister publish the advice of the expert group before he introduces this tax? The President of the European Parliament spoke here earlier and we talked about the importance of the role of national parliaments and the European Parliament. If the Minister wants a real engagement on budgetary policies, he should publish the advice he has been getting from the Department. He should not allow it to come out a year after the Minister for the Environment, Community and Local Government introduced the household tax and we then see that advice was given to the Department that there would be major issues in terms of collection and enforceability. He should publish the advice so that we can have a proper, robust debate because nobody in this Chamber wants to put forward proposals that do not stack up and cannot be robustly defended. The Minister has the benefit of having that advice so will he publish the expert group's proposals and views in respect of the property tax, and any analysis that will have been done within the Department on the impact on the domestic economy and low and middle-income earners?

The group that was chaired by Dr. Thornhill was constituted by the Department of the Environment, Community and Local Government and the report of that group was sent to the Department so in strict terms that Department has ownership of that report. I assume the Department will publish it in due course but I do not know its timeline for publication. I stated what the Government has decided earlier on. A property tax will be introduced in the budget.

It will probably be effective from 1 July 2013 but that date is to be confirmed. The Revenue Commissioners will collect the tax. We will not be collecting €1 billion, as the IMF advised. Otherwise, the detail has to be worked out. Some of the detail will pertain to the recommendations contained in the Thornhill report and some will not. As with all such matters, taxes are announced on budget day. One does not usually have rehearsals of tax announcements: taxes are announced on budget day and one can debate them subsequently during the passage of the Bill that implements them.

I understand there are talks taking place among the Whips to have a debate on the economy the week after next. The Deputy will have a full opportunity to state his position on the economy and the fiscal measures he believes would be of most benefit thereto.

I appreciate the Minister's comments. While I completely understand that it is he, as Minister for Finance, who will announce the tax, if it is introduced, on budget day, I believe the key question pertains to the need to furnish us with information on property tax. While the information in the report may be ignored by the Department of Finance, it is important that it be circulated to Opposition Deputies so they, too, will have the benefit of expert advice on the matter. The idea that the report is that of the Minister for the Environment, Community and Local Government, Deputy Phil Hogan, is inaccurate because the Minister for Finance will introduce the legislation; it is now under the remit of the latter. Therefore, I cannot believe the report is not now on his desk and with his Department.

My second question was not only on the Thornhill report but also on the impact of the tax on low- and middle-income earners. The Minister is well aware that Allied Irish Banks raised its variable interest rate by 0.5 percentage points yesterday. It also did so at the end of July. Given an average mortgage of €200,000, some 70,000 people have seen their mortgage interest payments increase by €1,800. That is a lot of money. How is the Minister factoring in the impact of imposing a property tax on these people who are already being shafted by the likes of Allied Irish Banks, to which the taxpayer has given €21 billion in the past year to prop it up? Is any consideration being given to the impact on the domestic economy and low- and middle-income groups? Has the Minister commissioned any studies in this regard? Will he do so before the tax is introduced?

There is a wealth of analysis on the impact of property taxes on an economy as a whole. Normally, it is positive rather than negative. An increase in income tax, for example, would be far more negative. A property tax is applied on a fixed basis in that everybody who owns property pays unless he is subject to an exemption, for example. The data are available. The impact on individuals will be assessed in the preparation for the budget.