Dáil Éireann debate -
Thursday, 22 Oct 2015

Vol. 894 No. 1

Finance (Miscellaneous Provisions) Bill 2015: Second Stage

Minister for Finance (Deputy Michael Noonan)

I move: "That the Bill be now read a Second Time."

I am pleased to present the Finance (Miscellaneous Provisions) Bill 2015 to the House. It should be noted that this Bill is very much of a technical nature and is designed primarily to address certain national and international obligations arising from a number of issues associated with the EU financial services legislative and transposition agenda. There is also a technical amendment to the National Treasury Management Agency (Amendment) Act 2014.

There are five parts to the Bill.

Part 1 is preliminary and general. This covers sections 1 and 2 which are provisions of a standard and general nature. Part 2 is the agreement on the transfer and mutualisation of contributions to the single resolution fund. This covers sections 3 to 5, inclusive, and is necessary to enable the ratification of this intergovernmental agreement which is required to allow the Single Resolution Mechanism, SRM, to operate.

Part 3 is the deposit guarantee scheme. This covers sections 6 to 14, inclusive, and involves a number of amendments to the Financial Services (Deposit Guarantee Scheme) Act 2009. These are necessary for two reasons, first, to put in place a transitional funding arrangement for the new deposit guarantee contributory scheme to underpin it while its accompanying fund is being built up, and second, to reduce the period within which the Exchequer should recoup the Central Bank where it contributes its own resources towards a deposit guarantee scheme compensation event. This is necessary to avoid the bank or the European Central Bank, ECB, engaging in monetary financing of the State.

Part 4 is the continuation of insurance regulations. This covers sections 15 to 20, inclusive, and the Schedule. This is necessary to ensure the continuation of insurance regulation for companies outside the scope of the solvency II directive which is due to come into force at the start of 2016. This will apply only to insurance entities below a certain premium threshold or in wind-down.

Part 5 is a technical amendment to the National Treasury Management Agency (Amendment) Act 2014. This covers section 21 and is necessary to remove any potential ambiguity with regard to whether a directed investment made by the National Pensions Reserve Fund commission and subsequently transferred to the Ireland Strategic Investment Fund pursuant to the National Treasury Management Agency (Amendment) Act 2014 remains a directed investment for the purposes of that Act.

I wish to inform the House that I will introduce an amendment on Committee Stage that will add an additional Part to this Bill. This will be a minor but important amendment that will alter section 851A of the Taxes Consolidation Act 1997 which contains provisions relating to the Revenue Commissioners' treatment of confidential taxpayer information. This section of the Taxes Consolidation Act 1997 provides reassurance to taxpayers that personal and commercial information revealed for tax purposes is protected against unauthorised disclosure. One of the circumstances in which it is permitted to disclose confidential taxpayer information is where a Revenue officer is satisfied that the work of a tax adviser or agent acting on behalf of a taxpayer does not meet the professional standards of the professional body of which the tax adviser or agent is a member. This amendment will allow Revenue disclose confidential taxpayer information to the Law Society of Ireland in such circumstances where the tax adviser or agent is a solicitor, ensuring equal treatment across the broad range of tax advisers.

I emphasise the importance of an early completion of the passage of this Bill to enable implementation of significant elements of the EU financial services legislative agenda. This will increase the stability of the financial system and increase protections for insurance policyholders, investors and depositors. In particular, I highlight the need to ratify the intergovernmental agreement before 30 November 2015 as failure to do so would almost certainly lead to a delay in the implementation of the Single Resolution Mechanism.

I will go into more detail about the main provisions of the Bill. Part 2 is the agreement on the transfer and mutualisation of contributions to the single resolution fund, sections 3 to 5, inclusive. The purpose of Part 2 is to enable the ratification of the intergovernmental agreement through the lodgment of the appropriate documentation with the general secretariat of the Council of the European Union. The intergovernmental agreement was negotiated to enable the single resolution fund, a key element of the Single Resolution Mechanism, to be operationalised with effect from 1 January 2016. Its primary purpose is to transfer the contributions raised at national level in accordance with the bank resolution and recovery directive and the Single Resolution Mechanism regulation to the single resolution fund and to facilitate a transition period of eight years to full mutualisation of the fund. It also prescribes how the single resolution fund will operate during the transition period. The agreement, which at 16 articles is relatively short, was negotiated to deal with a concern of certain member states that these changes could not be accommodated within the SRM regulation as, in their view, Article 114 of the Treaty on the Functioning of the European Union did not provide an appropriate legal basis to do so. Consequently, it was agreed that this issue should be dealt with through an intergovernmental agreement which would be formally ratified by each member state.

The legislation covers just the core points of the function of the Minister and the power to spend. The remaining commitments, like the agreement, are binding on the State at state level and therefore do not require domestic legislation to give effect to them. The Attorney General has advised that as the agreement constitutes an international agreement under Article 29.5.2° of the Constitution, and as it deals with funding, Dáil approval is required. Consequently, I intend moving a motion seeking its approval in parallel with this legislation.

I would like to say a few words about the Single Resolution Mechanism to give Members a sense of the importance of this intergovernmental agreement. In this regard, the Single Resolution Mechanism is the second pillar of the banking union and will ensure that if a bank subject to the Single Supervisory Mechanism, SSM, faces serious difficulties, its resolution will be managed efficiently with minimal costs to the taxpayers and the real economy through a single resolution board and a single resolution fund, financed by levies imposed on the banking sector. What this means in practice is that should any of our three major banks get into financial trouble, the decision about putting it into resolution will be made by the single resolution board rather than our domestic resolution authority. In addition, where bail-in of shareholders, capital instruments and eligible liabilities is insufficient to cover losses of the bank in question, there will be access to funds from the single resolution fund. This will contribute to breaking the link between the banks and the sovereign and should help avoid a repeat of many of the issues faced by countries during the recent financial crisis.

Part 3 is the deposit guarantee scheme, and this covers sections 6 to 14, inclusive. As mentioned at the outset, the purpose of this Part is twofold, first, to put in place a transitional funding arrangement to underpin the new deposit guarantee scheme while its accompanying fund is being built up, and second, to reduce the period within which the Exchequer should recoup the Central Bank where it contributes its own resources towards a deposit guarantee scheme compensation event. The transitional funding arrangement is covered by sections 6 to 11, inclusive. Their primary purpose is to create a new legacy fund into which an amount equal to 0.2% of covered deposits of credit institutions will be transferred from the existing deposit guarantee fund, known as the deposit protection account, and to establish under what circumstances money can be paid out from this new legacy fund.

The background to this proposal is the transposition of the deposit guarantee schemes directive which is proceeding parallel to this legislation. The directive will change the nature of our deposit guarantee funding arrangements from what is currently a ring-fenced deposit held by credit institutions in the Central Bank to a contributory fund. The difference in approach is significant and without this legislation we would be required to return all the deposits in the deposit protection account to credit institutions. The legacy fund is necessary therefore to ensure we continue to have access to an adequate level of alternative funding during the period the new contributory fund is being built up.

The key sections for the transitional funding arrangement are as follows. Section 8 amends section 3 of the Financial Services (Deposit Guarantee Scheme) Act 2009 by providing for the establishment by the Central Bank of a new legacy fund consisting of funds transferred from the deposit protection account to the amount of 0.2% of covered deposits.

It also provides that the balance of the funds in the deposit protection account should be returned to credit institutions, and specifies when the legacy fund shall cease to operate.

Section 9 relates to the amount to be maintained in deposit protection account. This section amends the Financial Services (Deposit Guarantee Scheme) Act 2009, by replacing the existing section 4. It provides that a credit institution shall not carry out the business of such a body unless it has transferred 0.2% of covered deposits from the deposit protection account to the legacy fund on a date determined by the Central Bank.

Section 10 relates to order of payments. It provides for the insertion of two new sections, sections 5A and 5B, into the Financial Services (Deposit Guarantee Scheme) Act 2009. The purpose of the proposed section 5A is to set out the order of payments in the event of a deposit guarantee scheme compensation event arising to ensure a level playing field between existing credit institutions and new entrants to the market, and to provide that the amount a credit institution holds in the legacy fund is reduced on a yearly basis by its annual contribution to the contributory fund. The purpose of the proposed section 5B is to provide a basis for the return of legacy fund deposits - where there is any remaining - after three years to a credit institution which has ceased to carry on business.

Section 11 deals with charges etc. on the deposit protection account. This section amends the Financial Services (Deposit Guarantee Scheme) Act 2009, by replacing the existing section 6. It provides that any deposits by credit institutions in the legacy fund are protected from charges being placed upon them other than by the Central Bank. The reduction in the period within which the Central Bank is recouped by the Exchequer in the event that it contributes its resources towards a deposit guarantee scheme compensation event is covered by section 12. This section amends section 8 of the Financial Services (Deposit Guarantee Scheme) Act 2009, by reducing the period for recoupment from three months to two weeks. Such a provision is necessary to prevent the bank or the European Central Bank engaging in monetary financing of the State. The Central Bank has advised that the ECB believes the existing three month recoupment period is too long and that to ensure the prohibition on monetary financing is maintained a far shorter period is required. This explains why we are proposing to reduce this period to two weeks. Colleagues should also be aware that I am in the process of consulting with the ECB on this provision. Therefore, I should have greater insight into the ECB position on Committee Stage.

As a final comment on Part 3, Deputies should note that section 13 provides for the insertion of a new section 8E into the Financial Services (Deposit Guarantee Scheme) Act 2009. Its purpose is to enable, after the coming into force of this Bill, the return of any money recovered by the deposit protection account to credit institutions which results from a successful claim by the Central Bank against credit institutions or their liquidators which had commenced prior to its enactment. This provision is necessary because at this stage credit institutions will be holding their requisite balance of 0.2% of covered deposits in the newly established legacy fund and will, therefore, not owe it any more money.

Part 4 relates to the continuation of insurance regulations and covers sections 15 to 20, inclusive. The purpose of this part is to establish a regulatory regime for insurance undertakings that will be outside of the scope of the Solvency II directive. The directive excludes certain undertakings based either on size, for example, small insurance undertakings below a certain insurance premium threshold, or on the basis that they will have wound down their operation in advance of 1 January 2019. It is essential that we maintain the current regulatory regime for such undertakings to ensure there are no unregulated insurance undertakings in the State from 1 January 2016, when the Solvency II regime comes into effect. As the current regulatory regime is governed by EU directives that are to be repealed by Solvency II, continuation of that regime can only be done by primary legislation.

I will set out the key sections covering these changes. Section 16 covers the continuation of certain regulations. The Solvency II directive repeals a number of EU directives relating to insurance and reinsurance. Section 16 continues in force the regulations transposing those repealed directives in respect of the undertakings excluded from the scope of Solvency II. Section 17 deals with portfolio transfers. To ensure continuity and ease of reference, the provisions in the Solvency II directive governing portfolio transfers will also apply to the relevant undertakings covered by this Bill. I expect to table some technical Committee Stage amendments to this section.

The Schedule lists all the revocations to be carried out in terms of the current regulations as all or parts of those regulations are no longer necessary. Part 5 contains technical amendments to the National Treasury Management Agency (Amendment) Act 2014. These are contained in section 21. This is a technical amendment to the definition of a "directed investment" at section 37 of the National Treasury Management Agency (Amendment) Act 2014. Paragraph 21 of Part 6 of Schedule 4 of the National Treasury Management Agency (Amendment) Act 2014 provides that any direction given to the National Pensions Reserve Fund Commission under section 19A, 19AA or 19B of the National Pensions Reserve Fund Act 2000 before the Ireland Strategic Investment Fund constitution date shall have effect on or after that date, until revoked, as if given to the National Treasury Management Agency under sections 42, 47(4)(b), 47(4)(c) or 43 of the National Treasury Management Agency (Amendment) Act 2014, respectively.

Section 37(a) of the National Treasury Management Agency (Amendment) Act 2014 provides, inter alia, that a "directed investment" means an investment made by the National Treasury Management Agency pursuant to a direction under section 42 or 47(4)(b) or the proceeds held by the National Treasury Management Agency pursuant to a direction under section 47(4)(c). A potential ambiguity has been identified in respect of whether investments of the National Pensions Reserve Fund Commission, which were "directed investments" at the time they were made and at the time of their transfer into the Ireland Strategic Investment Fund, are captured by the definition of "directed investments" in section 37 of the National Treasury Management Agency (Amendment) Act 2014. The amendment clarifies that "directed investments" made by the National Pensions Reserve Fund Commission and subsequently transferred to the Irish Strategic Investment Fund by the National Treasury Management Agency (Amendment) Act 2014 are "directed investments" for the purposes of the Act.

In conclusion, I reiterate the importance of the swift passage of this Bill to ensure the implementation of a significant portion of the EU financial services legislative agenda. It will result in increased protections for insurance policyholders, depositors and investors. I am particularly keen that we ratify the intergovernmental agreement as soon as possible. This is an issue which Europe and the markets are watching closely, and failure to ratify it would have a negative impact on the wider banking union project. I commend the Bill to the House.

Deputy Michael McGrath

I welcome the opportunity to contribute to the Second Stage debate. This is the latest stage in the process of establishing what is described as banking union throughout the eurozone. The basic intention in the three-pronged approach to banking union, comprising the single supervisory mechanism, the single resolution authority and the deposit guarantee scheme, is to ensure that at no time in the future will there be another taxpayer-led round of bailouts of banks.

We have already had the bank resolution and recovery directive, BRRD, dealing with the hierarchy of creditors. It established the circumstances in which losses would be imposed on shareholders, unsecured creditors including junior and senior bondholders and, potentially, deposits of over €100,000. A single resolution fund to finance the restructuring of failing credit institutions is now planned to be established as an essential part of the single resolution mechanism. In previous debates I have questioned whether the size of the fund would be adequate to meet all the potential demands which could be put on it. While the general eurozone situation has stabilised since then, I believe this concern remains valid.

I would welcome some clarity from the Minister on when exactly the single resolution fund will be operational. I understood the original intention was that drawdowns could be made from 2018 where necessary, but there have been some calls for this to be expedited. Given that the crisis first began to unfold in 2007, no one could accuse the European authorities of being in a rush to take action to ensure that it never happens again.

The Bill also makes amendments to the Financial Services (Deposit Guarantee Scheme) Act 2009 in order to put in place a transitional funding arrangement for the new deposit guarantee scheme. It is questionable to state that we are witnessing the creation of a genuine banking union, underpinned by common deposit insurance, when earlier this year the Greek people had capital controls imposed upon them. Greek citizens were subject to withdrawal limits of less than €100 per day from ATMs. We saw scenes of old people fainting in queues as they waited to get their hands on their pensions.

In earlier stages in the eurozone crisis it was not uncommon for people to move money out of local banks in Spain, Italy and Cyprus to safer destinations. This sits very uneasily alongside the notion of full banking union. In essence, a Greek euro was perceived to be less safe than a German euro in recent months. The long-term damage that this will do to the eurozone project remains to be seen.

I note that earlier this month German finance Minister, Wolfgang Schäuble, sought to pour cold water on the common deposit insurance initiative. A German paper submitted to a meeting of EU Finance Ministers last month stated: "To now start a discussion on further mutualisation of bank risks through a common deposit insurance or European deposit reinsurance scheme is unacceptable." It now appears that the best we can hope for is a reinsurance fund which would contribute under certain conditions when national deposit guarantee schemes are called upon. We are still a long way from a common deposit insurance scheme, and for the time being a German euro will continue to be regarded as being worth more than a Greek euro.

While I am on the subject of the deposit guarantee scheme, I would like to mention the credit union sector in Ireland. It has put forward a reasonable suggestion, namely, that it be charged a lower levy for participation in the scheme than the 0.2% rate that applies to other financial institutions. This is fair, given the lower risk it poses. I also repeat my belief that it is wrong to limit the deposits it can take from customers to the €100,000 level of the deposit guarantee scheme. I understand some 55% of credit unions will be affected by this, based on their current customer profiles. It sends the wrong signal and puts the credit union sector at a competitive disadvantage relative to banks. I do not see the justification for this change, and urge the Minister to reconsider this decision and rescind the proposed cap on credit union savings.

There is also provision in the Bill to allow for the continuation of insurance regulation for companies outside the scope of the Solvency II directive. I have said in the past in this House that the system of regulation of insurance in Ireland and across European jurisdictions is inadequate. This was most recently demonstrated in the case of Setanta Insurance, but was also evident in the collapse of Quinn Insurance and the difficulties at RSA. What was particularly noteworthy in the case of Setanta Insurance was the apparent regulation shopping that went on, whereby the firm sought out the most favourable location in which to establish itself. Given that an insurance company which is prudentially regulated in one country can passport its services into another member state in the eurozone, it is essential that each member state take its national responsibilities in respect of regulation of the insurance sector seriously. The overall system of regulation is only as strong as its weakest link, as we saw in the Setanta Insurance case, an issue that is still being played out.

There is no strong case for the development of a single supervisory system for the insurance sector across Europe which would mirror that being developed for the banking sector. I am talking about going beyond the new directive in place for insurance. There is far greater cross-border sale of insurance products than other financial services, and citizens in one state should not be put at risk due to the failures of regulation in another member country. There is a need to better inform consumers in this jurisdiction about the fact that many insurance companies are not fully regulated here; rather, they are regulated for prudential purposes in other countries and passport in services. They are only regulated here for conduct of business purposes. Ordinary people do not make that distinction, and there is a far greater need for the Central Bank to inform people of the distinction between the systems of regulation that apply.

The Bill also makes a technical change to the definition of an investment in the directed portfolio within the Ireland Strategic Investment Fund, formerly known as the National Pensions Reserve Fund. This gives me an opportunity to refer to the major decisions that lie ahead in respect of the directed portfolio. The open market value of AIB is now put at up to €13 billion. In the next 12 months there is a reasonable prospect of the bank redeeming the contingent convertible capital notes and a significant proportion of the preference shares. These events will lead to a significant inflow of cash to the Ireland Strategic Investment Fund, yet there is precious little discussion as to what will be done with the proceeds. Earlier this year some cash was taken out of the fund to assist with the early repayment of IMF loans, which made good financial sense for the State, given the relatively high interest rate which attached to those loans. It was something I had advocated for some time.

It is not immediately obvious what the Minister would do with any upcoming windfalls from the sale of bank assets. There remains the option of using them to pay down debt. This is certainly worth considering, given the high debt-to-GDP ratio that the State still has, even though it has fallen. On the other hand, we are able to borrow at record low rates of interest, and the benefit in terms of interest savings from paying down debts is now a lot less than it was before. A further option is to deploy some of the cash from the directed portfolio to the discretionary portfolio, which is currently investing some €7 billion in economically productive investments. The fund has gotten off to a reasonable start, but it will take some time before we know the true impact of the investment it has made. It is reasonable to ask the Minister to bring forward a paper setting out in detail the options for deployment of the cash that will be realised over time from the sale of the directed portfolio, and I hope he will give consideration to that.

A discussion on legislation dealing with banking union would not be complete without reference to the June 2012 euro area summit statement, which pledged to "examine the situation of the Irish financial sector with the view of further improving the sustainability of the well performing adjustment programme." This was famously described by the Government as a game changer. The truth is that while the EU agreement appeared significant on the surface, it was dramatically oversold in Ireland. No sooner was the ink dry on the summit communiqué than some of the more powerful eurozone countries were putting an entirely different spin on what was actually agreed. The reference to specifically examining the Irish financial sector has not resulted in one cent of the €30 billion injected by Ireland to save AIB, Bank of Ireland and Permanent TSB being refunded in any way by the EU. Government leaders here were in such a rush to go further than each other in welcoming the agreement that they did not secure anything in it that would deliver with certainty a tangible and measurable deal to make our debt more sustainable and help Irish citizens. Over three years on, a deal on retroactive bank recapitalisation for Ireland seems as far away as ever.

The formal application process for ESM funding opened last November. At this stage, there is hardly a serious commentator left who believes that the Government will actually get the deal it was in such a rush to claim it had achieved. It appears an open-market sale of the banks remains the only game in town. This may result in the recouping of significant sums, but it is most certainly not what was promised three years ago.

Overall, we welcome the Bill. It is broadly technical in nature and the Minister has signalled a number of amendments he intends to bring forward on Committee Stage. We will work co-operatively with him in dealing with them. We hope for the early passage of the Bill, which is warranted and is of merit to the country.

Deputy Pearse Doherty

Cuirim fáilte roimh an Aire agus roimh an mBille seo. Is é an rud atá os ár gcomhair i ndáiríre ná ceithre Bhille ach iad go léir i mBille amháin. Chomh maith leis sin, fógraíodh ar maidin go bhfuil Bille eile le cur ina measc. Ciallaíonn sé seo go mbeidh thart ar chúig Bhille i mBille amháin. An é seo an dóigh is fearr le reachtaíocht a thabhairt os comhair Thithe an Oireachtais? An é seo an dóigh is fearr dúinn chun plé agus mionscrúdú a dhéanamh ar na hábhair seo uilig, go háirithe agus an tAire ag rá go mbeidh leasú eile ann ar Chéim an Choiste? Cuireann sé seo imní orm mar ní rabhamar in ann réamh-scrúdú a dhéanamh ar an leasú sin agus níl sé le feiceáil againn fós agus muid ar an Dara Céim den reachtaíocht.

What we have before us is really four Bills in one, and I will address each element of the Bill in turn, but if these issues are so necessary we need to question why they could not have been taken in turn by the House to allow for greater scrutiny in their own right. I note the fact some of these measures were supposed to be taken in individual pieces of legislation. While, as Deputy McGrath said, the measures are technical and there do not seem to be any major issues with what is in the legislation, the fact the Minister has signalled another change on Committee Stage does not lead to proper practice and scrutiny of issues. In this case, the issues are tax and tax disclosure to relevant authorities. This means we have missed two key stages, namely, pre-legislative scrutiny and Second Stage because we do not know what the Committee Stage amendment will contain, bar the 100 words the Minister has mentioned on Second Stage. I appreciate that sometimes issues come to the Minister's attention which need to be dealt with in a speedy manner and if it were not incorporated in a miscellaneous provisions Bill, which is the purpose of such legislation, it could be long fingered for months or years given the demands on time for legislation. I just want to make the point it is not best practice and it should be avoided at all costs. Perhaps the Minister will elaborate on why this has suddenly come about when he responds to the Second Stage debate or on Committee Stage.

Well over half a decade has passed since the banking crisis that struck globally had such a catastrophic impact on this country. A recent ECB study showed how the resulting years have lead to a drop in wealth, which was greater in Ireland than any other eurozone country, including Greece. We were told that Europe needed to act and that new banking laws and regimes would swiftly follow, but what we have seen develop was not swift. Here we are today, in October 2015, still debating that new regime. What we have seen over recent years is a very definitive watering down of the concept of a banking union designed to break the link between sovereign and banking debt. When the final vote in the European Parliament was taken, my party did not support what had become a very diluted proposal. The new banking union does not break enough from the past. The logic that some banks are too big to fail is still inherent in the system. The taxpayer has not ended up sheltered from another catastrophe. After years of negotiations, EU leaders have come up very short of expectations.

The issue at hand today is accepting that we should wait eight further years for an EU-wide resolution system. Until then, so called national compartments within the fund will be the first port of call, then the bail out happens and then the State itself is tapped. Does this sound like the break between the sovereign and the banks which was promised? Even after eight years, the State is still in line before the ESM is called upon. We all recall that much was made of the existence of the ESM by the Government. It was, we were told, the reason we had to accept the austerity treaty rules. It was also to be the life saver and great avenger, which the then Tánaiste, Deputy Gilmore, and the Taoiseach, Deputy Kenny, told us could be used to get our money back in the spirit of these new times. We do not hear much about either of these uses of the ESM nowadays and, as this legislation shows, even in its primary purpose as a recapitalisation tool it is not designed to be ever called upon.

It is now ten months since the option of applying for that retrospective recapitalisation became available. Since then there has been nothing from the Minister. The excellent recent report from the Comptroller and Auditor General shows up the spin the Government and banks have been engaged in over recent years to try to minimise the actual losses and suffering the Irish people went through because of the banking crisis. It puts the net cost of the banking crisis as of the end of the year at €43 billion. It also talks about the interest accrued by the State which is paid annually as a result of the banking crisis. The Minister would have us believe we are moving towards somehow breaking even. It is in the power of the Government to apply for the retrospective recapitalisation of the pillar banks. As Deputy McGrath said, this option has been open to it since November last year. It is incredible and inexplicable that it has not yet applied. It stands out as one of the greatest failures of the many failures of the Government, which has claimed a game changer and a seismic shift but has failed miserably and totally on Ireland's banking debt. The toxic Anglo Irish Bank debt has been pushed out onto children's shoulders and the pillar banking debt will be paid by the people, but here we are being asked to say okay to a new system that will allow it all to happen again, perhaps with less impact, but the call on the State is still built into the system. The idea of a banking union which separates banking and sovereign debt has been thrown away along with the legitimate demand of the Irish people for justice on our debt. That debt still hangs like a huge shadow over our economic future and will do so even using the most optimistic forecasts. The mandate the Government received almost five years ago was to stand up for Ireland and this mandate has been squandered.

The second part of the Bill is to put in place a transitional regime for the deposit guarantee scheme. Currently, the deposit protection account holds €370 million, which is available for any calls under the deposit guarantee scheme. The plan is to hand €200 million of this money back to the banks and other financial institutions. The remaining €170 million will form the basis of a new legacy fund. This sum will cover the contributions of the financial institutions for the first two years. Rather than some sort of new insurance policy for many banks, this change will be, in the short term, a financial return. I note the issue of the ECB monetary financing prohibition is raised. The ECB has consistently raised concerns about the promissory note trick and its compliance with the monetary financing rules. It is more than likely that extra pressure will be placed on the Central Bank to dispose of the Anglo Irish Bank bonds sooner rather than later as a result. I question why only €170 million of the €370 million is being placed in the legacy fund and I will deal with this on Committee Stage.

It is important the Minister listens to the legitimate calls about the credit union sector, not only regarding the levies to be placed on them and the rate but also the cap on deposits. I am on the record as repeatedly stating the Central Bank fails to understand the importance and origins of the credit union sector and needs to understand in a better way the democratic and not-for-profit role of the organisation. On this note, I welcome the newly appointed Governor of the Central Bank, Professor Philip Lane. I wish him every success and I hope he comes down hard on the individual banks and the institutions which need to have a firm stick taken to them.

The Bill allows for the continuance of regulation on small insurance companies and those that are winding down. When I saw the Bill originally in its own right in the legislative programme last year I was hopeful it was an antidote to the situation regarding Setanta Insurance. I was disappointed to hear this is not the case. Why do we not have legislation to deal with the situation in which tens of thousands of Setanta Insurance customers now find themselves? Last week, the Oireachtas Joint Committee on Finance, Public Expenditure and Reform received an update from the Department of Finance telling us the Motor Insurers Bureau of Ireland, MIBI, was appealing the High Court ruling that it was liable for third party claims at Setanta Insurance. This was only the latest twist in this story. Initially, the Minister for Finance told me the MIBI would be liable. After concerns were raised by the MIBI, the Minister and the Minister for Transport, Tourism and Sport sought legal advice from the Attorney General. We are told the Attorney General gave unambiguous advice that the insurance compensation fund, and not the MIBI, was liable. The practical effect of this advice would be to limit the payments some claimants would receive and that the State would pay out from the insurance compensation fund directly. The Law Society stepped in and rightly challenged this decision to the High Court, which has backed its case and found the MIBI, contrary to the Attorney General's advice and the view of the Department of Finance and the Department of Transport, Tourism and Sport, is indeed responsible.

Now, as an appeal is pending and a stay is awarded, the claimants are back in the limbo they have been in for many months now. Some of these individuals are very sick and some may have shortened life expectancy, waiting for their claims to be paid. Not a penny has been paid because of this legal wrangle. What advice or reassurance can the Minister give to those customers and what is there in the Solvency Il directive to prevent another case similar to that of Setanta Insurance tomorrow?

The final element of this Bill is the amendment to the National Treasury Management Agency (Amendment) Act. It is clear that this amendment has only one purpose, which is to make it easier to sell AlB. This year the State received €280 million in dividends from its shares in AIB and €160 million in interest on its contingent convertible, CoCo, shares. We will receive another €160 million from these CoCo shares next year, plus the redemption capital of €1.6 billion. The Minister has stated he will not sell the ordinary shares in AIB before the election, and I welcome that. A strategic, coherent vision of how to use our banking assets is missing, however, and it seems the only vague vision is to sell back to the private investors that cost the public billions of euro.

I recently received a response to a freedom of information request to the Department of Finance focusing on the Minister's meetings with the banks last month on the issue of the standard variable rates that they charge. For each of the other banks, the agenda was straightforward. The two items were standard variable rates and mortgage arrears. However, the agenda for the meeting with AIB was far more detailed and examined many issues, including lending to agriculture. There were ten- or 12-line items, compared with two-line items for all the other institutions. This is not reflective of the type of relationship the Minister likes to portray of a strictly hands-off role as owner of the bank. There is clearly a different approach from the Department of Finance with AIB when compared with Bank of Ireland, Permanent TSB and other institutions that we have either recapitalised or regulated. I welcome that, but it is important to note there is a different relationship. The Minister is clearly acting more in the role of a director or manager, which is good. AlB is a valuable State asset and it is right that democratic influence can be brought to bear on it. I hope it marks the beginning of a more realistic way of using the influence bought, at much cost to the Irish people, at that bank.

I was disappointed that the chief executive officer and chief financial officer of Bank of Ireland were unavailable to meet the Minister last month. I know he met a delegation from the bank but I hope he followed up with Mr. Boucher personally when he returned to these shores. It is clear that his bank has been the most reluctant to move in the standard variable rates issue.

With regard to AIB, it is potentially the biggest sale of a State asset encountered in this country. Many people rightly see AIB as a debt or burden and the Irish people took that on at much cost to themselves, our society and our economy. The bank has a value today and, as Deputy Michael McGrath mentioned, it is in the region of €13 billion. This is about more than the nominal value, as it has worth as the engine which can drive forward economic activity. As the Minister discussed with representatives of AIB some weeks ago, this can be through lending to the agricultural sector, small businesses in different sectors, and the elderly. We will not have such influence with the KBCs of this world or any other foreign bank where we do not have a shareholding.

There is a serious need for a real, calm and logical discussion of what can be done with one of the biggest assets that this State holds. Do we sell it to private investors so we can write down our debt? That is likely to happen with any income we receive from a portion of the sale of AIB. It was pointed out to the banking inquiry by a director of AIB, who served in a senior position at the National Treasury Management Agency, that this would be foolish because we can borrow so cheaply in the international markets; the amount of revenue we receive from AIB on an annual basis would exceed the cost of servicing that debt into the future. All of those issues must be considered, and we must see what is in the best interests of the State and its finances and what policy can be pursued to deal with all issues of lending to the productive sector and ensuring that finance is available for house building, particularly social housing, and other matters related to the banking sector.

I welcome the Minister's indication that he will not sell the AIB shares prior to the election, but we need more than that. There must be a committee structure - similar to the finance committee - that will take in experts, listen to opinions and consider all the options for the assets we now hold within our banks. That is to see what is the best use for them. Having experts within the banking sector writing a report for the Minister on a pro bono basis is not good enough, and this process must be democratised. It must be inclusive and shared with all parties in this House, as well as Independents, who have very strong views on the matter. We must be able to examine the evidence, consider the different opinions and create a path for what to do in the next number of years with regard to assets, particularly in AIB and Bank of Ireland.

Acting Chairman (Deputy Derek Keating)

Deputies Clare Daly and Finian McGrath wish to share time. Is that agreed? Agreed.

Deputy Clare Daly

I wish to speak about one aspect of the Bill that will enable ratification of the intergovernmental agreement to the Single Supervisory Mechanism in order to make it operable. As we know, this is part of a suite of measures introduced at European level to bring about banking union. As the fairy tale unwinds - we had to listen to it earlier - we are expected to believe that the great shining knights of the political establishment across Europe will come in and valiantly battle with the big, bad wolf of the banking sector and defend little Red Riding Hood; essentially, if the banks get into trouble again, the public will not be bankrupted because of it. My only answer to that is, "Yeah, right." That we are discussing this is an irony in that this week figures emerged revealing that within Europe, the Irish public suffered a per-head reduction in wealth far in excess of any of our European counterparts. The reduction was €18,000 per head. The ordinary people of Spain and Greece were similarly decimated, but at the same time wealth in the Netherlands and Germany rocketed. Given that we know that Ireland's wealthiest citizens have seen their wealth rise substantially, the overall loss is doubly hard to take, as the ordinary citizens would have paid a price even beyond the reported figure.

If this was truly a solution to the bank bailout issue, it would be great, but it is not. It is appropriate to examine bailouts that took place across the eurozone since 2008, which cost €1.7 trillion. The cost to the Irish public was €64 billion, and we spent €2.3 billion this year alone servicing the debts to the banks, which were paid for by the unrelenting cuts in public services, social welfare, housing, jobs and decent pay and conditions for workers. It is a very painful and vivid memory that the poorest and weakest of our citizens have had to endure. Across Europe there is a structural reorganisation of society or, in some instances, a political counter-revolution. Many of the gains in social welfare and post-war reforms that were delivered have been rowed back on in the name of finance capital. Many people do not want to remember the bank bailout - it is a painful memory for Fianna Fáil - but the Government told us before the last election that not one red cent would be paid. It would be Labour's way or Frankfurt's way and so on. As it has developed, history has turned out radically different.

While on the face of it a system to bring about an orderly resolution of the banks seems like a great idea, we have to be very clear that the proposal on the table is not that and has little promise of delivering an end to the bailouts by the public. The Single Resolution Fund is only €55 billion, which is chicken feed in the world of banking. According to back-of-an-envelope calculations by one of the Financial Times economists, the banks could be holding bad assets to the tune of about €2.6 trillion. In that context, €55 billion is a pittance.

It is inevitable that the public will be called upon again to bail out the banks. The fund will only come in eight years from now. If a bank gets into trouble before then or if there is a need for a bailout beyond the €55 billion provided, the only backstop is the ESM and we all know what that means because we only have to look at what happened when the Spanish Government went to the ESM to recapitalise the banks in 2012. What was the price the Spanish people had to pay? They had to sign up to massive policy conditionality, including demands to increase the cost-effectiveness of their health care sector, pension reforms, labour market reforms, reforms of public transport, massive privatisation and so on, a similar demand to that made of the population of Greece. Yes, we will give you some of this money, but in return we want you to decimate your public services, we want you to unleash privatisation and we want you to sacrifice everything to the altar of neoliberalism.

What we are looking at is a banking union with a resolution mechanism that is not near enough. That is obvious even at the start. It is likely that as the negotiations go further in terms of banking union, the banking lobby will dictate the pace because we have seen it do that throughout the process. In the meantime, there will be no end to the creation of speculative financial instruments which have caused so much damage in the first place. According to analysis from Finance Watch, with which I agree, a bank resolution system that, as in this case, does not contain ambitious preventative measures such as dealing with the "too big to fail" problem, the "too interconnected to fail" problem and the "too complex to resolve" problem is just not credible. This has not been addressed in any way by the provisions before us. We will have a European banking sector that remains as interconnected as ever and as dominated by the megabanks, which are not going to be of any benefit to the citizens of Europe and certainly not to the citizens of Ireland. As Finance Watch says, "if banks are not reformed such that they pose less of a systemic risk they will simply block the mechanisms designed to resolve them". That is what we have had from this process. The banks have blocked the mechanisms designed to resolve the problems and they will continue to do so as long as this Government and its counterparts in Europe continue to enslave themselves to the ideas of neoliberalism.

The Minister touted the slogan during his budget speech that he would deliver an end to boom and bust politics and all this, but he is not going to do that because it is an inherent part of neoliberalism. It cannot be done, and the imposition of an unrelenting sacrifice on the citizens of Europe will not be tolerated. It is guaranteed that boom and bust and the struggle to resolve that situation will be part of our history because the citizens of Europe certainly cannot afford to shoulder the burden of the banks any longer.

Deputy Finian McGrath

I thank the Acting Chairman for the opportunity to speak on this important legislation, the Finance (Miscellaneous Provisions) Bill 2015. This is a very important debate as it is crucial to have our public finances in order, to have a sustainable economy, a fair tax base that treats our citizens equally and distributes these finances fairly, and common-sense priorities, particularly since the economic crash and the scandal of the banking crisis. We all have to learn lessons from the past and build a new Ireland with sustainable finances, but always built on the foundations of social justice. If we all do that, we can look forward to a bright and fair future. Hence my emphasis on "fair". We want a fair future and fairness in dealing with the public finances and the broader issues like taxation and public expenditure. Before I go into the details of the Bill, and especially the four key aspects of the legislation, it is important not to run away from the core issue of our public finances and the tax issue. We are a great little country for hammering the regular man and woman or the poor people in society. It is time now to open our eyes and see the bigger picture in respect of our finances.

The finance Bill has a fourfold purpose. It will enable the ratification of the intergovernmental agreement to the Single Resolution Mechanism, it provides for a transitional funding arrangement for the new deposit guarantee contributory scheme, it ensures the continuation of existing regulations for the insurance undertakings not covered within the scope of the Solvency II directive on insurance and reinsurance, and it proposes technical amendments to strengthen the legislation surrounding directed investments in the National Treasury Management Agency. Those are the four key aspects to this legislation.

In dealing with our finances and tax, we must have a broader view and not only an insular one. A global problem in respect of tax needs a global response. We saw the recent base erosion and profit shifting proposals. Will they lead to more of the $240 billion in OECD estimates being lost? We are talking about €2 billion or €3 billion in Irish society, but in the context of this broader debate, when figures like $240 billion could be collected Europe-wide and internationally for different countries around the world, we need to examine, be brave and speak out on these issues. We also need to be brave, assertive and aggressive to challenge aggressive multinational tax planning in this society. We seem to be running back and hiding under the stones in dealing with this issue. It is very important, especially for countries that do not have the massive resources many countries have. It is equally important for countries that are not very well off.

On the tax issue, not a word was mentioned anywhere in the Dáil or in broader society about the €44 million extra that was taken in by Revenue following a trawl of wealthy individuals in Ireland over the summer weeks, ahead of the June deadline. This involved only 137 cases but the average settlement was in the region of €320,000. That was fair enough. Some might say €44 million is no big deal. However, looking at the work that Revenue has done over a number of years since it started doing this, it has managed to rake in €2.7 billion on 35,000 cases. That is a massive amount of resources. Those who say there is no money in broader society and that we are all taxed to death need to understand these figures exist. They are not my figures, they are Revenue's figures. In recent years, €2.7 billion was brought in by Revenue and fair play to it on that.

The three main aims of the Single Supervisory Mechanism are to ensure the safety and soundness of the European banking system, which we all want, to increase financial integration and stability, and to ensure consistent supervision. Some people have concerns about the second proposal. We cannot go back to the days where banks were allowed to carry on in the way they did. The problem is a broader political one. Some senior bankers and major speculators destroyed the country and our economic and financial system. Others participated in this as well and it is very important to highlight that.

Those involved in politics often get the blame for the actions of others. I would like a little more personal responsibility to be taken when we deal with the broader issue of what happened during the crisis and the so-called Celtic tiger era. There are many who say that we all partied. I reject that assertion. Many of us did not party during the period in question, so that view must be challenged. There were some who partied but they never accepted personal responsibility. That is an aspect of the matter to which consideration must be given.

As some of my colleagues have said, the value of AIB is in the region of €13 billion. That is a major asset. I would issue a word of warning here. When we come to consider the proposals that will be put forward - as the Minister indicated, this will happen after the election - any recommendation to sell off AIB or to identify other options in respect of it or the other banks should be examined thoroughly, professionally and independently. When one has a €13 billion asset which can act as a major engine for the economy, one must obtain the best advice. Sadly, in the past we did not obtain such advice. It is important to highlight this matter.

There are other issues relating to the banks about which I have, at times, criticised the Government. The interest payments on the bailout money alone continue to cost as much each year as all of the tax cuts and the spending increases. We need to examine that. We talk about a democratic revolution but we need to get on with it and we must also ensure that there is more accountability and transparency when dealing with the public finances. That is why we always must be vigilant when talking about the Economic Management Council and its role in society.

I reject some of the comments made last week by the Minister for Public Expenditure and Reform when he criticised Greece and inquired as to where are the supporters of Syriza now. The Minister forgot two things: first, the Greek Prime Minister, Mr. Tsipras, won the election; and, second, Germany and Poland were among those countries which attacked Greece at the onset of the crisis. It must be remembered that Germany defaulted unilaterally in the 1930s and received massive debt relief in 1953, and that Poland, another EU member state, had large debts written off in 1989. I accept that Greece was in a bad way but it is the duty of all of us in the European Union to assist other countries. I am of the view that we need a collective response, not an isolationist policy.

Returning to the legislation, the purpose of the provision in section 4 is to allow the Minister to carry out all such things as are necessary and expedient for the purpose of the State performing its functions under the agreement, particularly those specified in subsection (2). Section 5, which relates to the defrayal of certain expenses, indicates that any expenses incurred by the Minister under section 4 shall be paid out of the Central Fund. I raise these issues because the issue of expenses being paid out of the Central Fund is important in the context of the public finances.

When discussing the spending of State funds, we need to be vigilant. I am particularly concerned about this matter in the context of the broader debate on housing. Many have raised the issue of rents, the housing crisis and the homelessness crisis. Most economists, if one looks at it objectively, say that rent control does not work. I strongly support the view that we need to be vigilant and increase rent supplement to match market prices. I am also strongly supportive of building more social housing, improving the position with regard to security of tenure and putting in place stronger regulation in respect of landlords in order to support families. We should not be afraid to consider proposals in this regard. We should certainly not shirk away from such proposals.

I accept that there are instances of some landlords getting a rough time from tenants. Having tenants who do not pay their bills is never an option. Every tenant who I know, particularly the poorest of the poor, will make his or her best efforts to pay the rent. However, there are some others who will not do so. Recently, I dealt with a number of cases in my constituency where landlords have been supportive of certain tenants but who have not been paid rent for six, seven or eight months. These landlords are not getting any justice either. An issue exists in this regard and we need to examine it. If certain tenants are not paying their rent and if there are others who find themselves in dire straits, I would seek to house the latter. It is as simple as that. We need to wake up and face reality.

We also need to look at the issue of the empty plots and sites around Dublin city. While the Minister is present, I wish to inform him that I would introduce a use-it-or-lose-it tax to force speculators to sell to developers. I would also bring forward a tax on land-holding because such a measure would help to reduce the costs relating to this issue. I raise these matters in the context of the legislation and of the broader debate as well.

In the wake of the economic and financial crisis that started in the eurozone in 2008, the European Commission recognised the need for stronger and better regulation and supervision of the financial sector. One can say that again because it was out of control. Since 2010, the Commission has proposed 28 new rules to better regulate, supervise and govern the financial sector. This is important. The key terms there are, "regulate", "supervise" and "govern the financial sector". These rules aim to provide the basic framework for the EU and to underpin a properly functioning Single Market for financial services. That is important in the context of the broader debate.

When we are talking about the public finances, spending and taxes, we also need to know that it is not only about an economy. We have a society. For me, society is people. Without people, there is no society. We need to redevelop trust and community spirit by insisting on people-centred policies and actions. I have dealt with the practical issues but that is the broader vision. I would like to see a new Ireland that is built on equality and social justice. Above all, however, such an Ireland must be built on a sustainable economy.

Deputy Anthony Lawlor

I will be as brief as possible. There are only a couple of points I want to raise.

I have spoken to the Minister, Deputy Noonan, with regard to how we can broaden out the home improvement scheme. I understand that people can claim back the VAT paid against their income tax. Perhaps he might given consideration to a particular cohort, namely, those senior citizens who may have money coming in from other sources. The amount of money involved would not be classified as income or would not be sizeable enough to attract income tax. Would it be possible to allow those to whom I refer to write that money off against some of the DIRT they are obliged to pay? Will the Minister give consideration to this proposal?

With regard to the capital gains tax for innovators and new companies starting up, I wonder if the Minister would look at the position in the United Kingdom, our main competitor, whose capital gains tax rate on that is 10%. Perhaps he could indicate whether he will make provision for a step process in the coming years in order to allow the capital gains tax rate to be reduced to 10%.

I wish to make two other points. I welcome what the Minister has done in the context of those who had shares in Standard Life. He allowed this matter to be dealt with using a mechanism similar to what which applied in the case of Eircom and I very much welcome that. I have spoken to him on a number of occasions about this and I am delighted that a suitable provision has been included in the Bill.

Finally, I have a point on farmers who have forestry on their land. Such farmers harvest their trees in one go and they are liable for a considerable income tax bill at that stage. Would the Minister consider allowing them to harvest it in one year and spread the tax payment out over a number of years in order that they would not be liable for the entire amount in one go?

Debate adjourned.