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Dáil Éireann debate -
Tuesday, 9 Oct 2012

Vol. 777 No. 4

Topical Issue Debate

I am pleased to have the opportunity to raise this important issue with the Minister for Education and Skills and I thank him for his attendance. The House will be aware that the Government has increased the pupil-teacher ratio in fee-charging schools to 21:1. It is 19:1 in other State-funded schools. Public debate on this issue has been shrouded in claims of elitism and privilege and a false perception, exemplified by the comments of the Minister of State at the Department of Transport, Tourism and Sport, Deputy Alan Kelly, that parents who make a choice and sacrifice to send their children to fee-charging schools can afford to pay more and more such that the State can pay less and less. Many fee-charging schools are being kept open by donations, trusts, legacies and by little cost to the taxpayer.

Protestant fee-charging secondary schools have a diverse and varied pupil make-up. They are located throughout the State. They comprise people from differing socio-economic backgrounds and different academic achievement. Many of these schools are struggling to stay open. Article 44.2 of the Constitution has been cited as a reason to change the status and fee-paying structure. This is a narrow interpretation and it fails to recognise the equality deficit in practice.

When planning his innovative free education scheme the late Donogh O'Malley acknowledged that because the Protestant minority of the population was so small and scattered the State would be unable to provide for their children in the same way as for their majority Catholic colleagues. Successive Governments have agreed to provide a special block of funding, currently to the tune of €6.5 million. There are 26 Protestant fee-charging schools and there is a need to recognise and preserve choice and diversity in education. There is a need to cherish the plurality of educational expression.

There are 26 such schools in 12 counties. Many people living in my constituency do not have a school in close proximity. Many of those who wish to avail of a Protestant or minority faith education must travel, while many must board. If the pupil-teacher ratio is to rise further, the cost of providing an education will rise, the range of subjects on offer will fall, schools will close and the result will be greater cost to the taxpayer.

I agree with Deputy Charles Flanagan's remarks. We are discussing this item as a Topical Issue because on Sunday evening a Minister went on television and stated the Government was considering removing the subvention for teachers who taught in fee-paying schools. I welcome all debates, discussions and comments from all sides on any matter to do with the budget. We should have an open budgetary process, about which I have been speaking for a number of weeks. My question for the Minister, whom I thank for being here, is whether it is true that the Government is considering this option. If so, let us have a full and informed debate on it and look at all the facts such as that while a €100 million subvention is paid to fee-paying schools to pay for the salaries of teachers, there is a saving to the State to the tune of €93 million, as it is €3,500 cheaper for it to have a child taught in a fee-paying school. This is something that must be recognised when we debate this issue. If we are trying to save money for the taxpayer, let us look at the actual saving to the State. If we are to have a debate on the education budget, let us look at all aspects of it. Let us look at the €63 million that will be paid next year in increments to teachers in schools, at the €50 million paid to teachers in primary schools for yard duty and at the options facing us in order that we can have a proper and informed debate on the matters that we need to discuss and the cuts that must be made in the forthcoming budget. If the issue raised is not being considered, I put it to the Minister that this is an indication that a Minister is able to fly a kite on a particular issue, yet new Government Deputies are being shut out of the process completely. Does he agree that we should be trying to open up the budgetary process to broader debate in the Dáil and among the public in order that people will not be misinformed about what the Government is thinking?

I thank Deputies Charles Flanagan and Eoghan Murphy for raising this sensitive issue. I welcome the opportunity to clarify the position on it.

Fee-charging schools do not receive capitation grants from the Department. Teacher allocations are approved annually in accordance with established rules based on recognised pupil enrolments. The most favourable staffing arrangements at post-primary level are targeted at disadvantaged schools. As Deputy Charles Flanagan indicated, all DEIS post-primary schools operate on the basis of a standard allocation of 18.25:1. All fee-charging schools operate on the basis of a standard allocation of 21:1. All other post-primary schools operate on the basis of a standard allocation of 19:1. The most recent statistics show that more than 25,600 pupils attend fee-charging schools. In total, there are 55 fee-paying schools, on which the State spends approximately €100 million. This money is spent entirely on teachers' salaries. As part of budget 2012, the standard staffing allocation for fee-charging schools was increased from 20:1 to 21:1.

I also announced in budget 2012 that the Department would conduct an analysis of tuition fee income available to schools in the sector and its utilisation. This analysis will inform future policy on the potential extent and nature of Exchequer investment, including funding for teacher posts in the fee-charging sector. The analysis conducted by the Department involves looking at the level of fee income based on fee rates and pupil numbers. It has taken account of Exchequer investment forgone, in terms of teacher allocations and recurrent grants, because such schools are charging fees. In this way, the additional or discretionary income available to fee-charging schools relative to other schools can be assessed. This information was shared with the schools involved and each was provided with an opportunity to provide further information on its finances and liabilities that might impact on the level of income available to it. This analysis is nearing completion and the final report will feed into the consideration of the budget. As I have said on several occasions, no decisions have yet been taken on the forthcoming budget. However, the Cabinet must examine all available options.

I thank the Minister for his comments and the clarification that no decision has yet been made on this issue, notwithstanding the current budgetary process. On minority faith schools, particularly those of the Protestant persuasion, I refer to the block grant of €6.5 million. I impress on the Minister the importance of retaining the full sum, having regard to the points I made and the difficulties being experienced by these schools.

I thank the Minister for being here to discuss this issue. I welcome some of his comments and clarifications, particularly that the Department recognises the investments already made by individuals in fee-charging schools that have meant the State has not had to carry the burden. When the report is finalised, Members of the Dáil should have the opportunity to discuss it and look at all of the details before a decision is taken in the budget in December.

Much of the information is being given to us from the schools on condition that a certain degree of confidentiality is maintained. I have to consider that request if we are to have a meaningful discussion on the issue prior to the budget.

The programme for Government contains a commitment to a provision for diversity in the education system. There is diversity in many directions dating back to before the foundation of the State when all second level schools had a contract with it which ensured teachers' salaries were paid in all schools. The payment of salaries was in return for schools teaching the State's curriculum, including for the intermediate certificate examination, as it was known at one time, and all subsequent examinations.

As Deputy Charles Flanagan stated, in the 1960s Donagh O'Malley introduced free education. The deal was simple: if schools voluntarily chose to enter the scheme, they would forgo the fees they charged in return for a capitation grant which, in theory, was supposed to replace their lost income. There was a scale of fees for different kinds of schools across the country, with which everybody was familiar. Because of the scattered and low density nature of the reformed church community, a special provision was made for that community whereby in order for it to administer a free fees scheme, it received a block grant, to which Deputy Charles Flanagan referred, which it administered in its own way. That system has been operated since the 1960s and there are no proposals to change it. The remaining schools are of the Catholic tradition of varying size in various parts of the country. As I stated, we have asked them to indicate to us what their income is and what it is used for - for example, whether it underwrites the cost of new buildings or is used to pay for additional services and tuition. We are in the process of completing the examination and will then consider what options, if any, are open to us.

No section of the budget has been ring-fenced or is sacrosanct other than what is protected by the Croke Park agreement. That will remain the case until a new deal is put in place. If there is to be a new deal, it is up to all involved to decide what they want to put on the table.

Property Services Regulation

I thank the Minister for Education and Skills, Deputy Ruairí Quinn, for taking the time to listen to my concerns about this issue. I want to highlight a number of issues that affect management companies and the residents who constitute their members. I raise this issue on foot of a report in The Irish Times on Friday last on a potentially serious situation which was developing with regard to a large management agent, Assured Property Management. At one point this company managed approximately 40 estates or apartment complexes and many homeowners are dependent on it. One of these developments is located in my constituency. I will not name it, but I can say residents have been in touch with me since Friday and are genuinely very worried about what this means for their homes.

According to the newspaper article, the company was listed to be struck off the Companies Register.

I checked the Company Registration Office website today and the status of the company has changed back to normal.

This episode highlights the fragile situation of residents of developments served by management companies. If such a company was struck off, clearly the creditors would be exposed but the implications for residents could include no home insurance, no refuse collection and no maintenance of their estates. These are very serious issues. It is important to remember that these are ordinary people who go out to work and who pay their management fees. They should not be at the mercy of a company failing and not meeting its obligations. Most of these people bought their homes during the boom and are also affected by negative equity. As residents, they are members of the management companies, but this means that when situations such as the one referred to arise, they are expected to deal with complex legal and financial matters. In most cases, they are not equipped to do so. These are people who have paid for their homes, who go to work and have lives to live and this extra burden is very time consuming and stressful for them. I spoke to one affected resident who told me she had to take a day off work last week to deal with management company issues.

Residents are entirely dependent on the management agents so a high bar must be set for the operation of such companies. I appreciate that the recently established Property Services Regulatory Authority, PSRA, is there to license and regulate property services providers but home owners need to have faith in the system. The issue here is the application of the law and in that context, I have two particular questions. Is the Director of Corporate Enforcement sufficiently resourced and staffed to enforce corporate law, particularly in respect of management companies? Does the PSRA have the budget and staff to fully carry out its role?

Under the Multi-Unit Developments Act, common areas are meant to be vested with management companies and sinking fund accounts are supposed to be set up. I know of cases where this has not happened yet but the only recourse the residents have is to the District Court. Again, this is another time consuming and complex area for residents to have to get involved in and represents another burden for them.

I appreciate that Deputy Ruairí Quinn is not the line Minister responsible but I look forward to his response.

I am taking this matter on behalf of the Minister for Justice and Equality. Property management agents are regulated by the Property Services Regulatory Authority, PSRA. The Minister for Justice and Equality established the authority on a statutory basis on 3 April 2012. The main function of the authority is to control and regulate property services providers, that is, auctioneers, estate agents, letting agents and management agents. This includes the licensing of all such services providers, the establishment of a complaints investigation and redress system for consumers, the setting and enforcement of standards in the provision of property services, the administration of client accounts, the establishment and maintenance of a compensation fund and the creation of a residential and commercial property register. On 6 July 2012 the authority introduced a new licensing system for all property services providers and the new residential property prices register on 30 September 2012.

In relation to company law, the current framework to address the late filing of company annual returns and accounts was introduced in 2001 in order to address the very low compliance rate with annual return obligations. In 1998 only 14% of companies were filing on time, while the compliance rate now stands at 89%. Under the Companies Acts, 1963 to 2009, a company is required to file prompt and accurate annual returns with the Companies Registration Office, CRO, whether the company is trading or not. A company can have up to nine months and 28 days from its financial year-end to complete its accounts and file its annual return. Where it uses the electronic filing system provided by the CRO, it can obtain a further 28 days to deliver the documents to the registrar. The fee for filing an annual return on time is €20 for an electronic filing and €40 for a manual filing. The CRO issues a reminder letter to every company about one month before its annual return date.

A late filing penalty of €100 becomes due in respect of an annual return on the day after the expiry of the filing deadline, which deadline is 28 days after the effective date of the return, with a daily penalty of €3 accruing thereafter, up to a maximum penalty of €1,200 per return. This penalty is in addition to the standard filing fee of €40 per return. If a company's annual return for the current year or the previous year was not filed on time, the company cannot avail of the audit exemption. Where an annual return is filed late in the year in which an exemption is claimed or in the preceding year, the company loses its entitlement to claim audit exemption not only for the year in question but for the following year also. It may only claim back the audit exemption in the third year if it files correctly and on time in the second year. Although the loss of audit exemption may have harsh consequences for late filing companies, it serves an important purpose, namely the encouragement of compliance with basic corporate filings. In tandem with the revisions to late filing fees, the potential loss of audit exemption has proved to be an effective way of encouraging a culture of compliance. It is important to note that companies have at least ten months after their financial year-end in which to file their annual return.

In addition, a company may be struck off the register and dissolved for failure to file an annual return. If a company is struck off, the assets of the company become vested in the Minister for Finance and if the business continues to trade, the owners will no longer enjoy the benefit of limited liability and so are personally responsible for any debts incurred so long as the company remains dissolved. Any person who was a director of a company at the date of sending to that company of a strike-off notice due to the non-filing of annual returns, may be disqualified from acting as director by the High Court, where the company is struck off leaving outstanding liabilities. Such order may be made by the court on the application of the Office of the Director of Corporate Enforcement.

I mean no disrespect to the Minister - I know it is not his fault - but I could have found out all of that information myself today. It is absolutely deplorable to be given such a response on a matter of urgency that was raised in a national newspaper last week and which affects thousands of people in houses and apartments all over the country. The reality is that unless there are enough resources and staff to implement the regulations that are in place, management companies are at the risk of failing. We had an example of that with Assured Property Management last week.

Many people are left wondering what would happen if their management company were to fail. They do not know, for example, if it will affect their home insurance, which is particularly worrying if something were to go wrong with their homes and indeed, we know that there are problems with many developments built during the boom. People may be left with no home insurance and with nowhere to turn. The law as it stands may address this matter but it makes it very complex and difficult for ordinary people, many of whom are working full time, because they must become directors of the management companies. In reality, many of these management companies are questionable and are often two sides of the same coin, with close links to the developers of the estates or complexes.

People need to know that if their management company fails, there will be some sort of compensation or support for them, possibly through the local authorities. We had a near miss last week with Assured Property Management. According to the website of the CRO, that company is now back in a normal state but the consequences of such a company failing are too drastic to contemplate. Residents would find that their refuse would not be collected, their estates would not be managed and ultimately, their home insurance would be invalid, despite having paid high management fees, not to mention the original cost of their homes.

I acknowledge that the Minister was asked to read the reply today and it is not his responsibility but I am highly dissatisfied that this is the type of response given to a public representative who raises a matter of national importance.

I can understand the Deputy's frustration. I am here on behalf of the Department of Justice and Equality and what I have in front of me is entitled Notice of Matter for the Adjournment. We abolished matters on the Adjournment at the start of this Dáil session and they are now called Topical Issues. The reply states clearly that the topic is the enforcement of company law in relation to property management agents. I do not know if that is exactly what the Deputy put down.

There is a shared responsibility for the vagueness of the reply.

The heading on the reply incorrectly describes it as a matter on the Adjournment.

The response was not specific to the case described by Deputy Lyons. I will draw the attention of the Department of Justice and Equality to the facts outlined by the Deputy and ask it to provide a comprehensive response outlining the rights and safeguards available to his constituent in everyday English, as distinct from a litany of legalese and a set of a steps that could only be followed by a full-time professional without another occupation to pursue.

Pension Provisions

The pension time bomb has never ticked more loudly. A recent unpublished report commissioned by the Government indicates that the gap between future social welfare liabilities, of which pensions are a large part, and the revenue to fund them stands at a staggering €324 billion. The time was never less appropriate for people to make provision for themselves. We are living through the worst economic turbulence in the history of the State. Hundreds of thousands of people are living from day to day and cannot even imagine putting money aside for their future but, even if they did, where would they put it, in view of the number of privately run pension schemes which are technically insolvent? Approximately 772,000 people are enrolled in pension schemes in this country, half of whom are in the public sector. A further 200,000 self-employed people also have pensions. Given that there are 2 million people in the workforce, these are extremely worrying figures. It is even more worrying that more than 80% of private defined benefit pension schemes, or four out of every five, are technically insolvent. The response of the Government to this problem was to turn the screw even more, thereby forcing many household names to contemplate winding up their schemes. I refer to AIB, Arnotts, Independent News and Media and even IBEC. This decision will leave those who are yet to retire with far less than they expected, and many will be left with nothing.

Temporary relief was provided by deferring the deadline for trustees and employers to submit recovery plans and by section 50 of the Pensions Act 2009, which allows distressed schemes to reduce member benefits. These measures had as much impact on the pension problem as they had on the temperature in Timbuktu. More than 80% of schemes remain technically insolvent.

The problem is not confined to the asset side, because asset values have generally recovered from the low point reached in March 2009. Arguably, the main problem is now on the liability side. The biggest problem for Irish defined pension schemes is that the minimum funding standard requires them to have sufficient assets to purchase annuities even though they do not have to do so in practice. The annuity rates of so-called safer countries have fallen to very low levels in the past three years, thereby driving up the cost to pension schemes of buying out pensioners. It now costs approximately €210,000 to secure an annual pension of €10,000 for a man aged 65, compared to €140,000 a few years ago. The only concession offered by the Government is to give the trustees the option of buying sovereign annuities for their pensioners, assuming they would purchase such annuities in the event of a wind-up. This approach has been widely criticised because of the substantial risk element involved. Sovereign annuities have a role to play but they are clearly unfit for widespread use. Earlier this year the Government introduced legislation which required defined benefit pension schemes to build up an additional risk reserve of 15% over the next 11 years. Surely this is the worst possible time for such a measure when most schemes cannot even address their current liabilities.

The main selling point for private pensions is tax relief on contributions. A survey published last week by Irish Life, which is Ireland's largest private pension provider, found that four out of ten of its customers would stop funding their pensions or sharply cut back on their contributions if the Government lowered tax relief in the budget. This is extremely serious, especially when further survey evidence indicates that 100,000 of those already in schemes can no longer afford to make payments and that the number of private pension scheme members has decreased by 38,000 since 2010.

I raise this issue because it is a cause of concern for a large number of people and companies. I ask whether the Government has developed any plan to begin the process of remedying the problems that have arisen.

I am taking this topical issue on behalf of my colleague, the Minister for Social Protection, who is currently travelling overseas.

It is acknowledged that the fundamental problem facing occupational pension schemes is that pensions are significantly more expensive due to increasing life expectancy and lower than expected investment returns, which are reflected in increased annuity rates. The pensions regulator suspended the funding standard four years ago, following the downturn in the financial market, to give trustees and employers an opportunity to assess the impact on pension funds and allow time to develop responses to the challenge. The re-introduction of the funding standard was delayed on a number of occasions pending changes to legislation which were designed to help trustees respond to the funding challenges facing pension schemes. The Government also introduced the following measures to ease the funding pressures on defined benefit schemes while the funding standard was in abeyance: the removal of the priority given to post-retirement increases for pensioners to ensure a more equitable distribution of assets in the event of the wind-up of a defined benefit scheme; the establishment of the pensions insolvency payments scheme to reduce the cost of purchasing pensions for trustees where the employer has become insolvent; and the introduction of the sovereign annuity initiative.

The purchase of a sovereign annuity is an option that the trustees of a scheme can exercise in order to reduce scheme liabilities. The sovereign annuity market is still in its early stages and demand for sovereign annuities remains to be seen. However, last August the National Treasury Management Agency announced details of the sale of just over €1 billion of Irish amortising bonds with durations of between 15 and 35 years. It is anticipated that the NTMA will be in a position to issue additional bonds as pension fund trustees complete their funding plans in line with the funding standard. The funding standard provides a benchmark against which the health of a scheme can be tested. The existence of the standard is not the central issue in whether a scheme is properly funded because the responsibility rests with the employer and trustees for ensuring that a scheme is properly funded and managed. However, the funding standard provides the regulatory mechanism for ensuring that a scheme can live up to the promised level of pension benefits.

The requirement for a risk reserve is also being introduced from 2016 to provide a level of protection for scheme members against future volatility in financial markets. It is accepted that the requirement for a risk reserve presents an added challenge for schemes but guidance issued by the regulator identifies options that schemes can consider in meeting this requirement by 2023. This guidance is being kept under review. Overall, the changes made to defined benefit schemes are intended to bring increased stability to pension promises in the future and reduce schemes' exposure to risks.

Despite the changes the Minister has outlined, which are welcome as far as they go, the problem remains that at least four out of every five defined benefit pension schemes are technically insolvent and a number are in imminent danger of closing down. I do not understand why he stated "The existence of the standard is not the central issue in whether a scheme is properly funded because the responsibility rests with the employer and trustees for ensuring that a scheme is properly funded and managed." Surely the ability of an employer or trustee to afford to fund a scheme in these difficult times depends on the funding standards he or she is required to meet.

Does the Minister accept that independent economic experts have criticised the sovereign annuity system because of the level of risk and for other reasons? Does he agree that the results of the Irish Life survey show that approximately half of those who are currently contributing to defined benefit pension schemes would either cease their contributions or sharply reduce them if the tax regime is changed?

Can the Minister give us any assurance in that regard, in view of the fact this has been mentioned as a potential target in the forthcoming budget?

It is important to point out that the pensions regulator is independent and that we have an independent regulatory system for pensions. In Ireland, we are all suffering the consequences of the bad financial regulation of the banks, when the Financial Regulator did not require the banks to make proper provision for losses. I suppose what the pensions regulator is trying to do is to ensure that does not happen in the case of pensions and that they are properly funded. When many of these pension funds were established, it was not thought that people would live so long. Thankfully, now they do. Also, the contributions being made by employers and employees were inadequate over the years. This has had to change.

With regard to the issue of the funding standard, the reply given to me by the Department means that even if there was not a funding standard, it would still be the responsibility of the trustees and employers to make sure the scheme was properly funded. With regard to the NTMA bonds, this is something new, but it has the potential to work well. The NTMA offers a good interest rate on those bonds.

I cannot make any comment on the budget. As the Deputy knows, last month we had the highest consumer confidence recorded in five years, although the figure was low by historical standards. Within a month that had fallen by ten points, probably due to Ministers and others talking about child benefit cuts, property taxes and all sorts of things.

I could not agree more.

Therefore, I will be my better self and not engage in speculation on what is in the budget. I take the Deputy's point with regard to the impact a reduction in the tax relief might have on people's behaviour.

As we have no other Deputy present, we will move on to the next business.

Deputy Pádraig Mac Lochlainn was to be next.

We are not taking it if he is not here.

Sitting suspended at 5.55 p.m. and resumed at 6.05 p.m.
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