Michael Moynihan
Question:6. Deputy Michael Moynihan asked the Minister for Finance the progress made to date on the NewERA project; and if he will make a statement on the matter. [43691/12]
Other Questions
NewERA Projects
In September 2011 the Government announced the establishment of the New Economy and Recovery Authority, NewERA, within the National Treasury Management Agency. NewERA has a centralised shareholder advisory role from a financial and commercial perspective in respect of corporate governance matters for five commercial semi-State companies: the ESB, Bord Gáis Energy, EirGrid, Bord na Móna and Coillte. This role, based on the shareholder executive model already established in a number of developed economies, involves advising on activities such as capital expenditure plans, corporate strategy, acquisitions and disposals. NewERA is already working closely with the relevant Departments and companies in this regard. The shareholder executive approach is designed to provide the Government with a portfolio view of investment returns from the sector and a means of assessing the likely impact of commercial developments in the sector on long-term Government investment plans.
NewERA is also charged with assisting the development and implementation of Government plans for investment in energy, water and next generation telecommunications, with the long-term objective of employment creation and has commenced work with the relevant Departments in these areas. It is an important element of the Government’s strategy to promote economic growth and create jobs.
Officials of my Department are liaising with the National Treasury Management Agency in preparing proposals for legislation to put NewERA on a statutory footing. I expect to bring forward these proposals as soon as possible once that work is completed.
As the Minister is aware, it was promised that some 100,000 jobs would be delivered during a five year period as part of the NewERA project. He poured some cold water on that promise, describing it as a PR add-on when the plan was launched. The establishment of NewERA was announced 14 months ago, but it has still not been placed on a statutory basis. The more important question, however, is what has it done in channelling investment to productive sectors of the economy. As I understand it, the intention is that the strategic investment fund will seek matching investment from third party investors. Will the Minister update the House on the success NewERA is having in attracting investment within Ireland or internationally?
I refer the Deputy to the core activities of NewERA such as undertaking a centralised shareholder advisory role from a financial and commercial perspective in respect of corporate governance matters for five commercial semi-State companies, namely, the ones mentioned. NewERA provides advice for Departments on a range of financial activities in these commercial State companies, including on investment proposals, corporate plans, capital expenditure projects, financial statements, funding proposals and other items, as stipulated under relevant legislation and the code of practice for the governance of State bodies. It has also engaged with organisations with a similar purpose, commonly called shareholder executives, responsible for the oversight of state owned companies in the United Kingdom, France, Sweden, Norway and New Zealand, using the output of these discussions and taking account of EU rules on unbundling and existing OECD guidelines in this area in the establishment of a shareholder executive, which would be appropriate in the Irish legislative environment to reflect global best practices. This shareholder executive approach would provide the Government with a portfolio view of its assets and the investment returns on them. NewERA is also assisting, from a financial perspective, in the development and implementation of Government plans for investment in energy, water and next generation telecommunications projects.
The key question is when will we see investments being rolled out through the strategic investment fund? Late last year a commitment of €250 million was made through the NPRF to the new investment fund. We were advised at the time that it was seeking up to €1 billion from institutional investors. Will the Minister update the House on the success NewERA has had so far? When will we see viable, commercial investment projects being rolled out around the country that will lead to the creation of jobs?
To give an example, NewERA is engaging with the Department of Communcations, Energy and Natural Resources on a range of potential projects across the telecommunications and renewables sectors, including broadband and biomass projects. As part of the broadband action plan, NewERA has been asked to assess the relevant assets owned and operated by State entities, both commercial and non-commercial, with a view to determining the extent to which there are opportunities to enhance the roll-out of high speed broadband on a commercial basis.
I have asked this question before. I hope to get some clarification on this occasion. As Deputy Michael McGrath said, the strategic investment fund is supposed to channel money from the National Pensions Reserve Fund into the productive economy. It cannot be done until the Government introduces legislation to amend the National Pensions Reserve Fund Act. The legislation in question will not be brought before us this year. It was announced in September 2011 that €250 million would be directed to a number of areas. The Government has not yet introduced amending legislation to allow the strategic investment fund to do this. There are real questions to be asked about the Government's commitment to stimulating the economy. Will the Minister clarify why legislation has not yet been introduced to give effect to the strategic investment fund that was announced in September of last year? We are now in November of the following year.
NewERA is up and running on a non-statutory basis. It has been involved in assessing the possibilities associated with the disposal of Bord Gáis Energy, the non-strategic power generation capacity of the ESB and the sale of Coillte's harvesting rights. The Government has given a commitment to put NewERA on a statutory basis. We are working on that. We will bring a Bill to the House to that end some time in the new year.
European Banking Sector
Éamon Ó Cuív
Question:7. Deputy Éamon Ó Cuív asked the Minister for Finance the progress that has been made in implementing the banking union agreed at the 29 June 2012 summit of European Heads of State and Government; and if he will make a statement on the matter. [50501/12]
Thomas P. Broughan
Question:50. Deputy Thomas P. Broughan asked the Minister for Finance if he will report on European-wide proposals for new legislation on banking supervision and the likely impact of such legislation on the Irish banking sector; and if he will make a statement on the matter. [50269/12]
I propose to take Questions Nos. 7 and 50 together.
The European Council meeting of 29 June last considered a report from the President of the European Council, in co-operation with the Presidents of the Commission, the Eurogroup and the European Central Bank, which set out building blocks for future economic and monetary union. One of these building blocks is an integrated financial framework or banking union, which comprises three elements: an integrated system for the supervision of cross-border banks, a European deposit insurance scheme and a European resolution scheme. The euro area summit on 29 June last called on the Commission to quickly present proposals for the establishment of a single supervisory mechanism which would be considered by the Council as a matter of urgency. Significantly, it was made clear in the statement following the euro area summit that when such a mechanism is in place for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalise banks directly. The statement also committed the Eurogroup to examining the situation of the Irish financial sector with a view to further improving the sustainability of our well-performing adjustment programme.
The Commission presented legislative proposals in September for a single supervisory mechanism conferring powers on the European Central Bank for the supervision of all banks in the euro area, with a mechanism for non-euro countries to join on a voluntary basis. An ad hoc working group of senior officials has met regularly since the proposal was published and good progress has been made. The European Council discussed the single supervisory mechanism at its October meeting in the context of a report from President Van Rompuy on the work being carried out on the future of economic and monetary union. The timetable that was set in the October Council conclusions envisages that agreement on the legislative framework for the single supervisory mechanism will be reached by the end of the year. At this week’s ECOFIN meeting, the Presidency gave Ministers an update on progress on the single supervisory mechanism. The intention of the Presidency is that agreement on the regulation will be reached at the December meeting of ECOFIN.
Ireland supports in principle the development of a banking union for Europe. We view the single supervisory mechanism as an important element of the integrated financial framework which will break the link between the sovereign and the banking sector. We are seeking to ensure shared supervision is progressed as part of a package which will also address shared risk and mutualisation of debt. The question of the retrospective application of the European Stability Mechanism remains firmly on the table as far as Ireland is concerned. We expect to see more detail on how this can be addressed over the coming months. Any move to a banking union must respect the integrity of the Single Market and be consistent with the principle of free movement of capital throughout the European Union. The establishment of the single supervisory mechanism is a crucial and significant first step to completing the banking union. The banking union will also require further work to develop a common system for deposit guarantees and an integrated crisis management framework. Negotiations on the bank capital requirements under the fourth capital requirements directive should be also concluded, as called for by the Heads of State and Government at the October meeting of the European Council.
The establishment of a banking union is an important development in itself. It is something we welcome. The key issue for Ireland is that the establishment of the single supervisory mechanism is a prerequisite for any direct recapitalisation of banks. It is a precondition of any deal on Ireland's investment in the main banks here. The Minister recently had a bilateral meeting in Dublin with the German Minister for Finance, Wolfgang Schäuble. Mr. Schäuble indicated that the necessary conditions in which the direct recapitalisation of banks could take place would not be met before 2014. We should be straight with the people by setting out a realistic timeframe. Is it likely that another year or more will pass before a deal is concluded that will allow Ireland to use the European Stability Mechanism to deal with the legacy recapitalisation of AIB, Bank of Ireland and so forth?
The Deputy has quoted Wolfgang Schäuble correctly. Mr. Schäuble has suggested that nothing will be in place until early 2014. The President of the European Central Bank, Mario Draghi, has said it will be a 2013 project and will take six to 12 months to put in place. Mr. Schäuble's own Chancellor, Angela Merkel, has said it will happen in the last six months of 2013. I am not criticising anybody for having different views. Negotiations on the nature of common supervision are in progress. There is a very strong drive to put it in place from 1 January next. It will have to be implemented to see whether it is successful. The legal competence for supervision will be located at the European Central Bank in Frankfurt. Some of the supervisory functions will be decentralised to local regulators and local central banks. Common codes of practice are needed to ensure there is a high standard of regulation that is at least as good as what is in place already and preferably better. A rule book must be developed, followed by manuals to allow local regulators to implement the rules. Various protocols will be put in place. All of that work is taking place at present. Other decisions have to be made. Nobody is trying to delay it. An entire corpus of work is needed to get the supervision in place and working effectively.
I ask the Minister, who is involved in the detailed discussions on the roll-out of the banking union, to give his best estimate of the date when it will be up and running and deemed to be effective. It will open the door to the possible use of the ESM to provide a deal for Ireland on banking debt. Will the Minister give us his view on when the necessary conditions for that to happen are likely to be met? At a recent meeting of the Joint Committee on Finance, Public Expenditure and Reform, the Minister made some comments on the issue of whether it is a good idea for the European Stability Mechanism to own stakes in Irish banks. I think it is a legitimate question to ask. Is it still the Government's objective and stated policy to move to a position where the European Stability Mechanism can take direct equity stakes in AIB, Bank of Ireland and so forth?
It is difficult to estimate when this supervision will be in place. The 27 countries that are involved in this process fall into three groups. The first group consists of the 17 eurozone countries, which want this to proceed in one way or another with slight variations in policy opinion. The second group consists of EU member states that are outside the eurozone but want to take part in the banking union and share in the supervision. The third group consists of EU member states that are outside the eurozone and do not want to participate in this process. Sweden, which is in the second group, is outside the eurozone but is anxious to be involved in this process because it has a significant international banking sector. The UK, which is in the third group, wishes the eurozone well in its endeavours to put a banking union in place but has made it clear that it does not want to participate in that union. There is a great deal to be done in this process, which has many moving parts. I have mentioned three estimates of when this will be done. I would be fairly confident that it will not be done in the first half of 2013. I would be hopeful that we can maintain the pressure in a way that might lead to Chancellor Merkel's estimate of the second half of 2013 being met.
I do not want to be specific because it is the early stages of negotiation.
What about the ESM?
On the ESM issue, the aspect the Deputy is highlighting was not actually the purpose of what I was saying. Everybody was saying that the ESM will have to recapitalise the Irish banks directly as part of the new deal. I was concerned lest people would think the Irish banks are not adequately recapitalised already, which they are. They have very high capital ratios, and that is why people are now prepared to invest in them. When people ask whether Irish banks will be recapitalised directly, they really mean will we get money to compensate us for the fact we recapitalised them and we did it on the back of our own taxpayers, not with European assistance. That is what I was getting at.
We all understand the difficulty in setting up the SSM and the timeframe. If it is the second half of next year, which it will at least be, that poses an issue because that is when the real discussions will take place in terms of trying to recoup the money we injected into the pillar banks. Does the Minister agree that, at that stage, this State needs to be, if not fully, then very close to being back in the bond markets? Although that is a good position to be in, it poses a difficulty in terms of trying to get money back.
The National Pensions Reserve Fund holds the shares in these pillar banks and there is a value on them at this time. Any payment by the ESM would, therefore, be into the National Pensions Reserve Fund in exchange for the shares it holds in both pillar banks. What would be the intention of the Government when we get this money, whether it is €14 billion, €18 billion or €24 billion? Whatever the figure is, it will be transferred to the National Pensions Reserve Fund, I would guess, in exchange for the shares. Are we going to then raid the National Pensions Reserve Fund or is it simply the case that we would replenish the fund? Has the Minister any idea what he intends to do if the negotiations are successful?
The object of the exercise which led, in the first instance, to the commitment at the Council of Ministers meeting on 29 June last is to examine the sustainability of Irish debt and to take action to make it more sustainable, even though that bit was not in the communiqué. That was then reinforced by the Taoiseach's meeting with Chancellor Merkel and subsequently with President Hollande in Paris, when both of them said more or less the same thing, namely, that Ireland is a special case in this respect because instruments were not in place at the time which are now available for the recapitalisation of banks and Ireland had to take it on its own shoulders. It stands to reason, if the policy is about ensuring the debt is more sustainable, that any benefit we get from it will be taken off the debt.
Tax Yield
Micheál Martin
Question:8. Deputy Micheál Martin asked the Minister for Finance his views on the trend in income tax and corporation tax receipts in recent months; and if he will make a statement on the matter. [50495/12]
Tax revenues at end-October 2012 were €96 million or 0.3% ahead of profile in aggregate terms. Both income tax and corporation tax are performing marginally ahead of expectations in the year to date and, given that these two tax-heads combined account for over half of total Exchequer taxes, this is a positive development.
Income tax receipts were €69 million or 0.6% ahead of profile at end-October. However, it is the case that income tax has weakened somewhat since the mid-year point, particularly over the third quarter. Of course, there can be significant variation in receipts in different months but the key point is that, on a cumulative basis, income tax is ahead of profile at end-October. As income tax returns from the self-employed are concentrated in the month of November, the outturn for this month will be vital in determining the overall position for income tax come year-end. November is the most significant month of the year for income tax, with €2.5 billion or 16% of total income tax revenues profiled for collection in this month.
Similar to the situation with income tax, corporation tax is also ahead of profile on a cumulative basis at end-October. Receipts in the first ten months of the year were €26 million or 1% better than expected. As with income tax, corporation tax receipts have disappointed a little in recent months, which was almost exclusively due to a significant shortfall of €225 million last month. However, this shortfall was not unexpected, based on advance information supplied by the Revenue Commissioners to my Department and relayed to me earlier this year.
Again, November is by far the most significant month of the year for corporation tax, with €1.2 billion or 30% of the annual total profiled for collection in the month. The outturn in November will in all probability determine whether the annual target is achieved.
This is a critical month in terms of the Exchequer returns both for income tax and corporation tax. Overall, the figures are on target, which is to be welcomed. The corporation tax receipts in October were a concern and, while Revenue pointed out it was not unexpected, that is not the same as saying it is going to reverse over the coming months. I know from talking to many small business owners that they are really struggling when it comes to siting down with their accountants, finalising their returns and making the payments to Revenue. Is the Minister confident, based on the information he has to hand, that November will hold up and the closing position will be on target overall in terms of tax receipts?
Profiling is an inexact science but the profiling section in the Department of Finance has been very accurate, month after month this year. While there are swings and roundabouts within margins, overall, it has got it pretty well spot on. I have confidence what it is profiling for November can be achieved, although there are always variations. It sometimes depends on whether the last day of the month is a Saturday or Sunday, as people must file on Friday and if they do not file until Monday, it goes into the next month. There are variations like that so one has to look at the overall picture. It is not a question of being confident that the tax flow is coming in, because I have no evidence of whether it is or not, but I am confident that the people who profile in the Department of Finance, who are in regular contact with Revenue, are doing a very good job. I hope they are all on profile for November.
I have one further question and if the Minister does not have the answer to hand, he can revert to me on it. The carry-forward effect into next year was estimated to be approximately €300 million but it has now reduced to some €220 million in a medium-term statement. Is there a particular reason for that €80 million drop-off?
The Estimates were done in preparation for the budget and, over the course of the year, things are re-estimated and there is more data at hand for the officials who do that kind of work. In light of the additional data they had, they marked it down.
I agree with the Minister that the profiling of tax returns by his Department has been impressive, and I have said that personally to individuals within the Department. It is great to see that targets set 12 months in advance are being achieved and, hopefully, those targets will continue to be achieved during the course of November.
The Minister will be aware, and we discussed it during the last round of questions, that there is much discussion in other countries about Ireland's corporation tax, not the level of the tax but the fact some corporations pay a very low effective tax rate. Google, for example, is reported to be paying an effective tax rate of 3% here. The Parliament at Westminster has had investigations into this and has discussed the system we allow to operate here, and the Americans have done the same.
Without a doubt, the Dáil has unanimously sought to protect this, or if it is not unanimous, at least Sinn Féin, Fianna Fáil, Labour and Fine Gael have agreed that the corporation tax rate should remain the same. However, is the Minister concerned that major multinational companies are only paying an effective tax rate of 3% in some cases? I have tried to ascertain figures from the Department but they have not been forthcoming, although I accept the Department is considering issues around their release. There are systems within Irish tax law which allow for the siphoning off of profits in the form of royalties to other companies, which avoid paying tax on corporations that are based or headquartered here. Is the Minister concerned about the issue or does he have proposals to address it?
We operate in accordance with our corpus of tax legislation and the Irish tax code is recognised internationally as being a very good one. We have tax treaties with other jurisdictions. I cannot comment on the tax affairs of any particular individual or company because I do not know the details.
Those are confidential matters between the PAYE system and the Revenue Commissioners. From a policy point of view, if there are concerns about the issues to which Deputy Doherty refers, they arise not from any lacuna in the Irish tax code but from opportunities presented by tax codes elsewhere. We have no ability to do anything about those.
That is not the case.
Banking Sector Remuneration
Pádraig MacLochlainn
Question:9. Deputy Pádraig Mac Lochlainn asked the Minister for Finance if he will provide, in tabular form, with respect to Bank of Ireland, the number of staff whose annual salary at 31 December 2011 fell into the following bands: €400,000 and above, from €300,000 to €399,999, from €200,000 to €299,999 and from €150,000 to €199,000. [50513/12]
Bank of Ireland has provided me with the following information on annual salaries as at 31 March 2012.
|
Basic salary |
Number of staff |
|
€150,000 - €199,000 |
84 |
|
€200,000 - €299,000 |
66 |
|
€300,000 - €399,000 |
19 |
|
€400,000 + |
24 |
I have responded to similar requests by way of parliamentary question for the other covered institutions today and recently. The Government shares the outrage of the public concerning these levels of remuneration. It must be acknowledged that without the assistance of citizens, such levels of remuneration at these institutions would only be aspirational. There are constitutional and legal issues to be considered when dealing with these pay and pension issues, but the Government will explore any avenues and options to address this, subject to the necessary legal constraints and our obligation to protect taxpayers' interests in the banking sector.
There is public outcry about bankers' remuneration and salary packages. The Minister has stated that the new appointment that was made was within the salary cap, so the appointee is getting only €500,000. It is time to wake up. This country is broke and the Minister cannot afford to pay someone a basic salary of €500,000 out of taxpayers’ money. That is simply not acceptable. The country is broke and the Minister will ask people within three weeks to take more pain, despite the fact that they did not cause the crisis, yet somehow he justifies bankers receiving pay packets of €500,000 under his watch.
I agree with the Minister that many of the bankers discussed in the media and in this House were awarded contracts by the previous Government, but when the information became known under the Fianna Fáil-led Government the Minister called on it to introduce emergency legislation. The late Brian Lenihan, God rest him, sat in the chair where the Minister is sitting and said that he could not do so because of constitutional barriers. The Government has introduced pension reductions for public sector workers up to a value of 20%. Has that been passed on to bankers? The Minister has not written to Irish Life or the other institutions asking them to forgo 15%. Will he tackle this issue? The outcry from the Government is fake. This has been ongoing for a year and a half, and if it were not for the fact that questions were tabled to elicit this information we would not have heard the comments made today by the Minister or previously by the Tánaiste, Deputy Gilmore. This is a fake outcry. It is to do with a report. The Minister is satisfied with the situation because he is still granting packages of €500,000 today.
We are out of time. I call on the Minister to reply.
The levels of salary and pension applying to certain bankers are outrageous. It is not true to say that we are only reacting now because there is a public outcry. For example, I wrote to the chairman of IBRC some time ago asking him to get his board to impose a 15% pay cut on all staff. I also appointed Mercer last June to examine pay levels right across the banking institutions. I did so precisely because of the outcry. My officials are in regular contact with the banks. The new chief executive of AIB, David Duffy, has taken on board the views expressed and has imposed, by agreement, pay cuts on staff at many levels. He is also proceeding with a large redundancy package. Those who work in banks are not beneficiaries of public service pensions; therefore, laws designed to cut or place levies on public service pensions are not applicable to banks. For residual reasons, everyone is aware, as I am sure the Deputy is, that the Constitution has strong property rights enshrined in it. The legal advice, which has been tested in court, is that a pension is a property right and taking someone’s pension or a disproportionate amount of it away is akin to taking someone’s land or part of it away. That is the difficulty, but I am proceeding on one basis with IBRC and I am proceeding with the other covered banks. I will act when I receive the Mercer report at the end of the year.
What the Deputy is doing in the House is beneficial to my position, because many decent people who have retired from those institutions have seen that the crash has resulted in changed circumstances and are subject to moral persuasion. Week after week, people right across the public service are yielding up parts of their emoluments to the State. I know this because I have to sign the acceptance order when the money is given to the Exchequer. On the initiative of Mr. Duffy, who wrote to all of his high-profile pensioners and asked them to make a contribution, at least one positive reply was received and a significant contribution has been made. I would like the message to go out from this House that such remuneration is not acceptable as far as we are concerned, but it was a different country when the payments were negotiated. Now there are families struggling to survive on very little and it is an obscenity that people who participated in the destruction of the economy are beneficiaries of huge pensions. It is not good enough.
Written Answers follow Adjournment.
The Dáil adjourned at 5.46 p.m. until 2 p.m. on Tuesday, 20 November 2012.