Other Questions

Mortgage Arrears Proposals

Peadar Tóibín


6. Deputy Peadar Tóibín asked the Minister for Finance his plans for new initiatives to tackle the mortgage arrears crisis and the cases of long-term arrears in particular. [1337/16]

This question also relates to mortgage arrears. I do not believe that a householder in mortgage arrears which exceed the value of the house would consider a property tax a wealth tax. Also, the banking sector does not exhibit proper competition. It is, in effect, an oligopoly, with 85% of the market in the hands of two banks.

There are 91,291 families in mortgage arrears. If one accepts that there are typically three people in a household, this means approximately one third of a million people-----

The Deputy needs only to provide an introductory explanation of his question.

I usually get 30 seconds to do so.

I can assure the Deputy that he has been given his 30 seconds.

One third of a million families are locked into struggles on this issue.

The Deputy can put that question to the Minister later.

The Deputy will be aware that Central Bank residential mortgage arrears data published last month indicate that the level of mortgages in arrears continues to decline and has done so for the past nine consecutive quarters.  It is particularly welcome that the latest bulletin reported that all maturity categories of arrears, including the over 720 days' category, declined in quarter three of last year and it is to be hoped that this downward trend will continue.  In addition, the Central Bank data shows the impact that has been made when borrowers engage with their lenders.  Almost 121,000 principal dwelling home, PDH, mortgage accounts were classified as restructured at end-September, of which some 86.6% were deemed to be meeting the terms of their restructure arrangement. 

The Deputy will also be aware that on 13 May last the Government announced measures focused on strengthening the framework to support mortgage holders in arrears. More recently, the Minister for Justice and Equality, Deputy Frances Fitzgerald, signed the commencement order for an important recent reform under the Personal Insolvency (Amendment) Act 2015, which allows for an independent review by the courts if a fair and reasonable proposal for a personal insolvency arrangement, PIA, which includes mortgage arrears on the debtor's home, has not obtained the necessary majority consent from creditors.

In addition, the role of the Money Advice & Budgeting Service, MABS, has been enhanced.  The Minister for Social Protection, Deputy Joan Burton, launched the new dedicated mortgage arrears service before Christmas, which assigns to MABS a greater role in offering appropriate information, advice and assistance to mortgage holders through all stages of the mortgage arrears resolution process and beyond.  There will be three key strands to the dedicated mortgage arrears services, namely, the MABS helpline; specialist advisers to assist mortgage holders in identifying the best sustainable mortgage resolution option for them, and court mentors to assist home owners facing court proceedings.

It must be remembered that over 87% of principal dwelling home mortgages are not in arrearsIt is also worth repeating that where a borrower actively engages with a lender with a view to agreeing a sustainable arrangement to address his or her mortgage arrears, it is more likely that an equitable arrangement will be found and that the borrower will be able to remain in the family home.

The point I was trying to make earlier is that typically there are three people in a household and that given there are 91,000 mortgages in arrears this means that nearly one third of a million people are locked into this struggle, most of whom are people in my age category and are likely to have young families. There is a real human tragedy at the heart of this particular issue.

It is interesting that the former Governor of the Central Bank, Professor Patrick Honohan, has stated that he has major regrets with regard to the process of unwinding the mortgage crisis in this State. The only protections that the family had in law have been removed and have not been replaced with a proper replacement. The Central Bank has also diluted the code of conduct on mortgage arrears on behalf of the State. As such, many of the resolutions referred to by the Minister are repossessions or so-called voluntary repossessions. When these are aligned with split mortgages-----

A question, please.

-----this means that problems are either being kicked down the road or that a family will lose its home. Given this human catastrophe, which is affecting almost one third of a million people, what new initiatives does the Government propose to introduce to alleviate the pain for these families?

As everybody here knows, when this Government came into office five years ago, the situation in this area was disastrous and it appeared it would not be resolved. Following the putting in place of a series of measures, which have been constantly reviewed, significant progress has been made. It now appears that this is a solvable problem. Over time, as the economy improves, it is solvable.

We have succeeded in bringing about a situation whereby, because of all of the initiatives applicable, there are very few repossessions of family homes. I provided the statistics in this regard in response to a previous question. As far as I can recall there were 420 repossessions last year, 215 of which were voluntary. The number of repossessions is, as I said, very small. The Government policy is that people will remain in their family homes. The restructuring process is working. Some 121,000 mortgages have been restructured, 86% of which are standing up. In other words, the householders can afford the new arrangements and are complying with the new rules. Things are improving. While there may be a small residue over time, which will not be in a position to make new arrangements, as the initiatives continue we would hope that resolutions will be found for them also.

Thank you, Minister. I will let you back in.

The initiatives are constantly reviewed. The initiatives introduced in the past 12 months by the Tánaiste and the Minister for Justice and Equality have added to the portfolio of interventions and have been successful also.

The problem I have is that voluntary repossessions are often recorded as solutions. I have worked with more than 100 people in mortgage distress. Voluntary repossession is often a euphemism for, "There's no choice left for you but to go".

I would like to focus at this point on the mortgage-to-rent scheme. According to the Labour Party, 3,500 people will avail of this scheme. Since last October, 246 have done so, which equates to approximately ten people per county. That is a phenomenally low figure which represents 0.002% of people in mortgage distress. In terms of the State-owned banks, this means 15 homes have gone into-----

Sorry, Deputy, this is Question Time.

It is Question Time.

Would you put your question, please?

I am building the context of the question, a Cheann Comhairle.

There is a time limit.

The point is that the State-owned banks have delivered only 15 mortgage-to-rent solutions.

A question, please.

I understand there has been-----

A question, please, Deputy. There are other backbench Deputies who want to have their questions answered.

There are elements of what the Government has done that we believe are unfair. What new initiatives is the Government-----

Sorry, Deputy, would you please resume your seat? Thank you.

-----going to introduce to ensure this-----

It is unfair to backbench Deputies that spokespersons run over time. It is now almost 10.30 a.m. and we are only on Question No. 6. Would you please resume your seat?

A Cheann Comhairle, this-----

I call the Minister to provide a short reply.

A Cheann Comhairle, in fairness-----

There will be no more questions.

The Minister, when responding, was given more than five minutes to do so.

Resume your seat, please.

We get very little time to ask questions.

Would you mind resuming your seat?

If the Ceann Comhairle did not continually interrupt me-----

Would you mind resuming your seat?

It is very hard for me to ask my question when I am being constantly interrupted.

Would you put your question?

I would be able to put my question in the time allocated if I was not being continually interrupted.

We are moving on to the next question.

Economic Growth Initiatives

Thomas P. Broughan


7. Deputy Thomas P. Broughan asked the Minister for Finance the status of Ireland's yield in growth, taxation and general Government revenue from the European Union quantitative easing programme; the impact on Ireland when the quantitative easing programme concludes; and if he will make a statement on the matter. [1275/16]

Over the past year I have asked many questions of the Minister in regard to the expanded asset purchase programme. Has the Department of Finance undertaken any real work to track the impact of quantitative easing on specific areas of the economy? Obviously, the growth rate in 2015 was very welcome, as was the additional revenue in taxes. Did quantitative easing not play a significant role in that, or has any attempt been made by the Minister to quantify it?

Under the European Central Bank, ECB, expanded asset purchase programme, often referred to as quantitative easing, QE, the eurosystem, comprising the ECB and the national central banks of the euro area, has been purchasing €60 billion of public and private assets per month and plans to do so until at least March 2017, or until inflation returns to levels consistent with price stability, defined as inflation close to 2%. Purchases of sovereign debt began on 9 March 2015.

While it is difficult to estimate directly the beneficial impact of QE on growth rates here since this policy began, it is nevertheless clear that QE has boosted nominal growth, and this is one factor behind the strong tax and general Government revenue growth in 2015.

Assessing what the final impact to the Irish economy will be by the time the QE programme concludes is also difficult to estimate at this stage, not least because of the contingent nature of the end date. The ECB has stated that QE will conclude only when euro area inflation returns to levels consistent with price stability. This outcome will help businesses across Europe to enjoy better access to credit, boost investment, create jobs and thus support overall economic growth, which should offset the impact of withdrawing QE. Thus, by helping to create jobs and supporting overall economic growth in all euro area countries, including Ireland, the withdrawal of QE will signal the resumption of more normal growth activity in the euro area.

The Minister said it was very difficult to estimate. Last April or May, the Minister gave me a similar reply, and said he might be able to produce some kind of figures. He is indicating that the withdrawal of QE would have a very significant impact. The figures he and the CSO recently gave us on growth rates until 2021 show a significant decline in growth down to 2017 and 2018 for whoever forms the next Government. Is it likely that the withdrawal of QE will have this significant impact, or is it possible that QE will go on in some shape or form?

The Governor of the Central Bank of Ireland, Professor Philip Lane, and the governing council of the ECB are the people who take the key decisions on it. To what extent does the Irish Government impact on decisions?

We can attempt to measure the effect of QE. In the October 2014 budget, the growth estimate for 2015 was 4%. We put some money back into the economy, which increased demand in the domestic economy and drove the 4% higher. In 2015, two tail winds occurred which had not been accounted for in the budget. One of these was QE. Although I had campaigned for it for three years, I did not expect it to be introduced as early as March 2015. I thought it would be introduced in autumn 2015. Therefore, we had not factored it into the budget. The second tail wind was the unexpected decline in energy prices at the start of 2015.

If we take it that it would have been reasonable to expect growth of approximately 5% for 2015 as a result of the budget, QE has had some impact on the fact that growth was 7% in 2015. QE kept interest rates down and, more importantly, reduced the exchange rate of the euro. As a result, our export sector exported more and earned more money. However, it is very difficult to quantify.

Looking back, it is a pity in some respects that Mario Draghi and his colleagues did not embark on a QE programme earlier. The major down side to QE in the British and Japanese experience has been an increase in inequality. Owners of assets tend to do very well, going back to the point Deputy Healy made about the Credit Suisse report. Is this a concern for the Minister?

It is a matter of monetary policy and, while I have much control over fiscal policy through the budget, monetary policy is for the ECB and the national central banks. Monetary policy is for the new banking union, driven by the people in Frankfurt. I advocated QE when it was very unpopular to do so in Europe. I campaigned for it for approximately three years and, eventually, a majority moved on side making it possible for Mr. Draghi and the people in Frankfurt to move, without objections in the German constitutional courts, to implement QE.

QE seems to be working. Europe is slowly rising and across all countries, including Greece, there is positive growth, which many people attribute to QE. The commitment is that it will continue until 2017, when it will be reviewed to see if it will be continued. I cannot see it as a permanent feature of monetary policy. It will end at some stage. The most serious internal risk to our prosperity is the size of our debt, and we must keep pushing it down. The risk arises not from the debt itself but the interest on the debt. If QE is removed and interest rates increase, it will have an adverse impact. We need to be better positioned on the overall burden of debt by 2017, which we will be.

NAMA Operations

Michael McGrath


8. Deputy Michael McGrath asked the Minister for Finance when the National Asset Management Agency will complete its original mandate; what he expects the financial outturn to be; if he will formally expand the role of the agency; when he expects the agency to be formally wound up; and if he will make a statement on the matter. [1325/16]

As we move towards the end of the current Dáil, it is timely that the Minister for Finance give the House an update on the work of NAMA. When does the Minister expect NAMA to complete its original mandate given in 2009? What does he anticipate the financial outturn to be? Will he formally expand the role of the agency? It is moving towards taking the role of a development agency. When does he expect NAMA to be formally wound up?

I thank the Deputy for this very important question. Yesterday, I signed off on the most recent quarterly report for NAMA to go to the Government next week. We will publish it immediately after that, providing a very full update on the quarterly position with reflections back on the annual position.

Under section 10 of the NAMA Act 2009, NAMA's principal commercial objective is to achieve the best achievable financial return for the State, having regard to the cost of acquiring and dealing with bank assets and its own cost of capital and other costs. The NAMA board is seeking to fulfil this objective through three major strategic initiatives, each of which is predicated on conditions in the Irish market remaining favourable and on NAMA being in a position to retain specialist staff.

First, NAMA aims to, and remains confident it will, redeem all of its senior debt, originally €30.2 billion, by 2018. This is two years ahead of schedule. By the end of 2015, it had redeemed a cumulative 73%, or €22.1 billion, of its senior bonds, and it is well on its way to meeting its end-of-2016 target of 80%, or €24 billion.

Second, NAMA has committed to facilitating the timely and coherent delivery of key grade A office, retail and residential space within the Dublin docklands strategic development zone, SDZ, where a number of assets secure NAMA loans. Already, out of a total of 3.8 million sq. ft. of commercial space to be ultimately delivered, 2.5 million sq. ft. is either under construction or has received or sought planning permission.

Third, NAMA has committed to funding the delivery of 20,000 residential units on a commercial basis by the end of 2020 on sites securing NAMA's loans in the greater Dublin area and in other locations.

NAMA is satisfied, based on current market conditions, that these commercial and residential delivery programmes can be funded without compromising its debt redemption targets and will enhance its projected terminal surplus.

I thank the Minister for the reply. Can the Minister confirm that the estimated financial surplus at the end of NAMA's work is approximately €2 billion? NAMA paid approximately €32 billion for loans with a total book value of €74 billion. The fact that NAMA plans to support the construction of 20,000 homes on a commercial basis by 2020 is to be welcomed, provided it does not become a recipe for high cost housing and a source of huge financial returns for professional advisers. These homes are needed and will probably represent only approximately one fifth of the total number of extra homes that will be needed over the period.

Is NAMA moving from being an asset management agency to development agency? Does the Minister still envisage that it will complete its work by 2020 or even sooner, or does he envisage a longer term role for NAMA as a development agency as opposed to what was originally intended?

There are three points to be made.

When the chairman of NAMA, Mr. Frank Daly, spoke at a meeting of the Joint Committee on Finance, Public Expenditure and Reform, he said that subject to market conditions remaining favourable, NAMA "will have generated a surplus of the order of €2 billion to hand over to the Exchequer". That has been confirmed by the chairman. There was market failure on the housing side, as the Deputy knows, but it is repairing itself very rapidly now. To compensate for the market failure, we have got NAMA to provide houses. They are starter homes, by and large, as well as some apartments. There is a mix. I think there is a split of approximately 70:30. They are well under way. NAMA is seeking to meet its quota for 2016. It is doing this on commercial grounds. There is no anti-competitive practice or anything like that.

Although the provision of 20,000 homes by 2020 would be an important contribution towards meeting the housing supply need that undoubtedly exists in this country, the Minister will appreciate that it would represent just a fraction of the total requirement. Other issues in the private sector, including access to finance and the viability of development projects that are seeking to get under way, still need to be tackled in conjunction with the work that NAMA is doing. Can the Minister confirm his plan for NAMA as it goes forward? It has to conclude its existing mandate under the relevant Act. The Minister has given his approval for NAMA to be involved in the construction of 20,000 homes by 2020, principally in the greater Dublin area. Does he envisage that this work will mark the end of NAMA's role? When will NAMA cease to exist?

NAMA expects that its deleveraging work will be completed by 2018. Its focus over the period from 2018 to 2020 will be on the completion of the docklands residential funding programme. As I have said, NAMA is in a position to fully pay all of its senior bonds. It also expects to pay its subordinate debt in full by 2020. In light of the extensive work and challenges that face NAMA over the coming years, I have no plans to formally expand the role of the agency beyond its current remit. It is also too early to speculate whether NAMA will have made sufficient progress on its various strategies to warrant consideration of its dissolution in advance of 2020, which is the date that was originally envisaged. We are leaving 2020 there as the relevant date. Perhaps NAMA will make more rapid progress than we envisage. I would like it to complete two important economic and social projects - the strategic development zone in Dublin and the house-building programme - that will stretch out for five years after its deleveraging work has been completed satisfactorily.

Tax Compliance

Richard Boyd Barrett


9. Deputy Richard Boyd Barrett asked the Minister for Finance his stance on the European Union investigation into Apple's tax affairs here over recent years, particularly given the potential enormous sums at stake for the Irish Exchequer; and if he will make a statement on the matter. [1345/16]

The EU Commission suspects that Apple owes this State up to €19 billion in taxes. It suspects that Apple evaded those taxes. That money could be used to solve our housing and hospital crises and to build the water infrastructure that this country needs without a requirement for water charges. It seems that the Minister does not want this money, however. Why does he not want it, given that the State so desperately needs it?

In June 2014, the competition directorate of the European Commission announced its intention to open formal state aid investigations into tax rulings provided by a number of companies in various member states of the European Union.  This announcement is part of a much wider review of tax ruling practice that is currently being undertaken by the European Commission. In late 2014, the Commission announced that it was broadening its inquiries to include all 28 member states.  As the Commission has acknowledged, Ireland has co-operated fully with the process to date. We will continue to do so. I emphasise that while the Commission has opened a formal investigation in relation to one particular case involving Ireland, it has not made a final determination on the matter.  Ireland has provided a detailed and comprehensive response to the Commission investigation, demonstrating that the appropriate amount of Irish tax was charged in accordance with the relevant legislation, no selective advantage was given and there was no state aid. It would not be appropriate at this stage to speculate on whether the Commission would seek recovery in the event of it hypothetically making a finding of state aid.  I remain of the view that there was no breach of state aid rules in this case and that the legislative provisions were correctly applied. Even if the Commission formed the view that there was state aid, Ireland is entitled to challenge this decision in the European courts.  As the Government has already indicated, we will take such a course of action if necessary to continue to vigorously defend Ireland's position. As I have said previously, there is simply no question that the Irish authorities sought to give the company in question any kind of special tax deal.

The dogs on the street know that companies like Apple and other fantastically wealthy multinationals have used every means and mechanism available to them in this country and all over the world to avoid paying billions of taxes that are needed by this State and other states to fund the provision of services and infrastructure. The Minister is telling us that if the EU Commission finds that Apple should have paid this money - it is blatantly obvious to me that it should have done so because it was using a "double Irish" arrangement to evade tax - he will fight that. Rather than saying we want that money and asking for it to be given back to enable us to fund housing, water infrastructure and health systems and other services - we would still have money left over - the Minister intends to say he does not want it so that he will not upset Apple and the other multinationals. When one considers that people are suffering because of the lack of housing and other services, it beggars belief that the Minister does not want this money.

The dogs on the street that the Deputy calls as his witnesses have never been renowned as great tax advisers. I suggest that he needs to base his argument on stronger evidence. The position is that the EU Commission and the competition authorities in Europe have challenged the tax treatment of Apple by the Irish Revenue Commissioners and the Irish authorities on state aid grounds. There is no suggestion that there is anything wrong with our tax system. It is a state aid case. The most recent position is that they have sought additional information from the Department of Finance and Revenue. We have provided them with that information. I understand they have also sought additional information from the company in question. Their consideration of the position is continuing. We will wait for the result of that process before we decide on our next course of action.

If we had listened to the dogs on the street during the boom period, we might have avoided the disastrous crash. The OECD and the European Commission are finally catching up with the dogs on the street when it comes to the multinationals that are doing their best to avoid paying tax and thereby starving states of billions in revenue that is needed for services and infrastructure. It is obvious that Apple and other companies were using elaborate mechanisms, including the so-called "double Irish" arrangement, to avoid tax. I find it hard to believe the Minister is already indicating that if the EU Commission finds against this State in this regard, he will go to court to ensure the State does not get €19 billion. We should be trying to get that money because it is desperately needed.

What the Deputy has outlined is not the basis of a state aid case. State aid cases always have at their centre the contention that one company or one set of companies was treated more favourably than another company or set of companies involved in similar activity. That is the essential piece.

It is not about how taxes are applied. The matter I have set out is at the core of what is being examined.

Those two things work together.

We will co-operate fully with the authorities in Europe. We will provide them with all the information they have requested. We will await their adjudication. Then we will see what the next step will be.

Written Answers follow Adjournment.