Vol. 909 No. 2
6. Deputy Pearse Doherty asked the Minister for Finance if he will indicate the source and detail of the recommendation that the Government no longer seek the direct recapitalisation of banks (details supplied) through the European Stability Mechanism, ESM, fund; and when he will make this information available to the public, given his confirmation of this course of action. [10543/16]
I thank the Deputy for his question. As I have stated previously, I see no benefit in making an application for retrospective use of the ESM's direct recapitalisation instrument, DRI. During the period between June 2012, when the agreement was reached regarding retrospective recapitalisation, and December 2014, when the DRI tool became operational, the Irish economy recovered significantly and the options available to the State to recover its money invested in the banks expanded. This remains the case, with investors now willing to support Irish banks, the institutions having begun to repay capital to the State and the market value of our investments having improved accordingly.
The terms and conditions attaching to the use of the DRI are onerous, as it is designed to be used almost as a last resort after the creditor waterfall has been applied and other options have been exhausted. Moreover, the mechanics behind a potential retrospective application of the instrument, if such a decision could be agreed, would likely be equally if not more onerous and would not be in the best interests of the State at this time.
As the Deputy will be aware, the operational framework of the DRI includes stringent conditionality and any application would need to be unanimous among the other 18 ESM governors. Achieving such an outcome for a deal that valued our investments at a level significantly above what we might achieve in the market is unlikely, particularly given the strength of our economic recovery since 2012 and the other concessions won by Ireland in recent years.
The disposal of our bank assets is a process that will likely take place over a number of years and the best avenue to do this is through the financial markets. I have said before that my interest is in recovering the maximum amount of money for the Irish taxpayer from these assets over time but current market conditions are not conducive to achieving this objective. Fortunately, given that our public finances are once again on the right path, we are not under pressure to dispose of these assets in the short term.
On 6 April, the Minister stated in the House in response to me that while he did not believe that pursuing the matter was in our best interests "at this time", ultimately, "it will be an assessment as to which route - ESM or the markets - represents the best value which will determine these decisions." The Minister went to Brussels, spoke to the media and said that this was off the agenda for AIB and Bank of Ireland. He has just repeated that. While he stated "I have said before", he left out the crucial words "at this time". He is now saying that it is no longer on the agenda. Many of us suspected that it was never on the agenda or had not been on the Minister's agenda for a long time. He was trying to take the Irish people with him knowing full well that he was not going to make an application.
This is too serious an issue to be left at that. We are discussing a large amount of money that we pumped into AIB and Bank of Ireland. The Minister went to extreme lengths to get Angela Merkel out to tell the Irish people how special we were. He talked about the game changer that was getting the words "retrospective recapitalisation" written into the articles.
What reports, evaluations and types of consideration have gone into making the decision that we will no longer apply for retrospective recapitalisation? The Minister claims that achieving it or getting it at above what the market could offer might be difficult but what work has he done to find out what his counterparts on the ESM board would consider offering were we to apply for retrospective recapitalisation? This is a significant amount of money for the State and the matter should be considered thoroughly. What considerations, reports and evaluations have been made and what work has the Minister done with his counterparts to arrive at his assessment?
It was clear when the possibility was raised in the first instance and subsequently that any retroactive recapitalisation of the banks would require an exchange of shares in Irish banks for any money given through the ESM. One need not do much study to know that the potential for acquiring a great deal of capital through the sale of bank shares on the markets is now a more valuable option than going through a reluctant ESM, which requires unanimity among governors - in other words, finance Ministers - across the eurozone.
As to the evaluation, I spoke formally with the people involved in the ESM and asked about the potential. They pointed out that an application could be made but that it would require unanimous assent. Given my soundings over the year, I do not believe that we would have got virtually any support. Circumstances have changed dramatically and we are now the fastest growing economy of the 28 in the EU. We are certainly the fastest growing in the eurozone and are projected by the Commission to be the fastest growing again next year. We have the better option of going to the market when the time is right to recover the money that the taxpayer invested in the banks.
Within the Department, in particular given the preparations for an IPO of AIB, much evaluation work has been done. That advice is available to me.
When the Government scrambled back from Brussels and went on our national airwaves to tell people about the game changer and the seismic shift, I appeared on the same radio station a little later. I said that the Government was holding the ball in its hands and was facing an open goal and that all it needed to do was put the ball in the back of the net but it has screwed that up royally. While we always knew that there was a need for unanimity and that the shares would be transferred, what was not known and is still not known is the value that would be attributed to the shares by the ESM. As we exited the recession and the economy picked up, it was always going to be more difficult to achieve that. For a long time, an application for an ESM recapitalisation of all of the banks - nothing in the Minister's statement claims that it must just be for the pillar banks - could have been made.
The House has major debates about selling shares in our airlines that are valued at a fraction of the assets that we hold in AIB and yet a Minister is deciding without any scrutiny that an option that is available to the State as we speak - it may not be achievable, but it is available - is off the table. The assets are worth in the region of €40 billion. This is not an acceptable way to do politics. The matter should be referred to a committee so that all of the options might be discussed-----
I thank the Deputy.
-----instead of the Minister going to Brussels with the notion that this should be off the agenda. If we want new politics, let us discuss the issue instead of relying on the likes of Rothschild and Goldman Sachs, some of whose advice to the Minister on what we should do with the banks is given pro bono and some of whose advice is not. Let parliamentarians decide with all of the information. The Minister has continued to make the wrong decision for a number of years. It is the Irish people that he has crucified with this debt. We should have been released from it a number of years ago but he has screwed up the situation.
I thank the Deputy but will he allow the Minister to respond, please? The Minister to conclude.
There are some matters that are for the competence of an individual Minister, such as the Minister for Finance, and there are other matters that are for the competence of the Government.
It is the job of the Parliament to hold Governments accountable, but the Parliament usually does not exercise executive functions along the lines the Deputy has suggested and I have not seen anything in the new reform programme for this Dáil that indicates that the Parliament is going to exercise an executive function. The Deputy is wrong in his analysis of what happened. We kept the matter under review and the banks are now functioning well. They are almost back to normality. They are quite profitable and valuable, but I have no intention of selling the shares until I am convinced we will get best value for the taxpayer. However, there is value in the banks and it is a question of when and how we will realise it. What I have indicated so far as a matter of policy is that the first step will be an IPO of 25% of AIB, but market conditions are not right. If we were to do it in the last quarter of this year, we would need to take steps now that the market might see as irrevocable. Therefore, it will be the first half of next year before an opportunity arises.
7. Deputy Michael McGrath asked the Minister for Finance if the National Asset Management Agency is on track to deliver on its commitment to provide 20,000 housing units; if it plans to revise the proportion which will be delivered as social housing; and if he will make a statement on the matter. [10515/16]
As the Deputy will be aware, the NAMA chairman and CEO appeared at the Oireachtas Committee on Housing and Homelessness on Thursday, 12 May. NAMA provided a presentation for the committee which outlined, among other useful information, the progress on its residential funding programme. The presentation is available on the Oireachtas and NAMA websites. Specifically, NAMA's key residential delivery figures are as follows: 2,768 units have been completed since early 2014; I am advised that, of the 20,000 units NAMA plans to fund by 2020, subject to commercial viability, 2,500 have been scheduled for delivery in the period from October 2015, when the target was announced, to the end of 2016 - intensive planning and other preparatory work under way will result in a significant increase in the number of completed units in 2017 and later years; at present, 3,096 units are under construction; planning permission has been granted for a further 5,176 units, while a planning application has been lodged for a further 5,066 units; and planning applications are expected to be lodged within the next year for an additional 6,627 units.
Therefore, it is clear that NAMA has a strong residential development pipeline of sites securing its loans. It has an active strategy for every acre of land under its control and I expect the agency to continue to progress towards its publicly stated target of delivering 20,000 units by the end of 2020 through working with key stakeholders to advance such sites through the planning and development phases. I note that the NAMA chairman stated at the Committee on Housing and Homelessness that the plan to deliver 20,000 new units was ambitious and challenging, but NAMA will carry it out in a manner consistent with its mandate. It is clear that the progress highlighted to date and the viable pipeline for future delivery justify NAMA's confidence in this regard.
I thank the Minister for Finance for his comprehensive reply to the question tabled by Deputy Michael McGrath. I have been asked by the Deputy to ask the Minister whether he plans to revise the proportion that will be delivered as social housing. As the Minister knows from the debate last night and all the debates taking place, many more people will find themselves in trouble with mortgages. Therefore, there will be a greater need for social housing throughout the country. It would be appropriate, as a consequence, to revise upwards the proportion delivered as social housing. Is it the intention of the Minister to do so considering the current crisis and the crisis we will face in the future? All the indications are that more evictions will, unfortunately, take place in the coming year. That is something we all need to avoid.
I thank the Deputy for his supplementary question. It is not a matter for NAMA to determine the proportion of social housing that will be provided. The allocation of social housing units per development is prescribed by Part V of the Planning and Development Act at 10% of on-site units. As the Deputy will be aware, NAMA's commitment to funding residential development is not one to build or fund social housing units. In line with NAMA's mandate, under section 10 of the NAMA Act, it is an intention to fund the delivery of private residential units on lands securing NAMA debtor loans on a commercial basis in order to maximise NAMA's recovery on these loans. NAMA borrowers developing these sites will, of course, fulfil their Part V obligations to deliver 10% of residential units in the form of on-site social housing units. Given that the ultimate intention is to deliver 20,000 units, the corresponding 2,000 social units will be significant. These matters are being reviewed by the Committee on Housing and Homelessness. If it recommends a higher quota for private developments, a percentage higher than 10%, it will then be a matter for the Minister for Housing, Planning and Local Government who is responsible for housing to change the Planning and Development Act, including Part V. If he does, NAMA will comply.
That is welcome, but I believe we genuinely need to increase the percentage. I accept that we must await the recommendations of the housing committee but, judging by what we know will happen, it is extremely important that the proportion of social housing be increased. That is why Deputy Michael McGrath asked me to ask the Minister whether it was the intention of NAMA to increase it.
It is not the intention to increase it because NAMA does not have discretion to do so. It is involved in the promotion of private housing developments. It is committed to providing 20,000 units and will comply with Part V of the Planning and Development Act in order that 2,000 of the 20,000 units will be social units. If the law changes, it will comply with the new percentage, whether it increases or decreases.
8. Deputy Thomas Byrne asked the Minister for Finance when he will complete his review of the insurance sector; the process for implementing measures to reduce motor insurance inflation; and if he will make a statement on the matter. [10517/16]
We are all aware of the rising cost of insurance, particularly motor insurance, and will recall that the House allocated three hours to debate the matter on 20 April. I have noted the widespread concern across the House about insurance costs and noted the Dáíl statements made on that day. The ability of the Government to influence insurance practices and pricing is limited as insurance companies are required under European law to price in accordance with risk. Neither I, as Minister for Finance, nor the Central Bank of Ireland has the power to direct insurance companies on the pricing or provision of insurance products. However, that does not preclude the Government from introducing measures that may in the longer term lead to a better claims environment that would facilitate a reduction in claim costs.
The cost of insurance is a complex issue involving a number of parties, including Departments, State bodies and private sector organisations. My Department's review of policy in the insurance sector is being undertaken in consultation with the Central Bank of Ireland and other Departments and agencies and external stakeholders. The objective of the review is to recommend measures to improve the functioning and regulation of the insurance sector. The first phase of the review deals with the motor insurance compensation framework and this work is nearing completion. The next phase will deal directly with the issue of insurance costs and include an examination of the factors which contribute to the current rise in insurance premiums. The availability of relevant and timely data for the insurance sector to facilitate an in-depth analysis of the issues is also a matter to be addressed as the current lack of data presents difficulties from a policy analysis and development perspective.
The review of policy in the insurance sector will continue in the coming months and is expected to be completed by the end of the year. The final report will be presented to the Government in due course.
As the Minister rightly said, there is shared concern right across the House about the escalation in motor insurance premium costs. The official statistics from the CSO show increases of 34% in the past 12 months. Premiums are up by a whopping 60% since January 2014. I accept that the Government does not control motor insurance premiums. As the Minister knows, I have advocated for the reinstatement of the Motor Insurance Advisory Board which was very successful, but as outlined in his response, he has opted instead for a Department-led review. When the motor insurance element is completed - he signalled that he expects it to be completed shortly - could it lead to policy initiatives or will he wait for the entire review to be completed?
As the Minister indicated, the review is likely to be completed towards the end of the year.
I will need to take advice on the issues the Deputy raises from the appropriate officials. I will contact him directly regarding the plans in that regard.
This issue cannot wait until the end of the year. Many factors are involved in the dramatic escalation in motor insurance premiums, including court awards, the need for a review of the Personal Injuries Assessment Board, legal costs, false and exaggerated claims, regulatory oversight and the lack of transparency regarding the profits earned by insurance companies. All these issues must be examined. While the industry has a role to play in this regard and must have its voice heard, the voice of consumers also needs to be heard. Deputies hear day in and day out about dramatic increases in motor insurance premiums. These increases are occurring across the board but younger drivers and the owners of older vehicles in particular are being hammered by increases in insurance premiums.
The current rate of increase is not sustainable as it will act as a drag on the economy and impact on the business community. We need to get to the bottom of the factors driving the increases and then tackle them. I encourage the Minister to arrange a further debate in the House as soon as motor insurance aspect of the review has been completed. I hope some degree of consensus would then be reached on the steps required to arrest the increase in premiums and hopefully reduce them.
I will discuss the Deputy's views with the officials involved in carrying out the review. I am not disposed to holding back any information and if there is useful information available, I will communicate it to Deputies.
9. Deputy Thomas Pringle asked the Minister for Finance the status of his engagement with the Central Bank in relation to the Irish League of Credit Unions' social housing proposal; and if he will make a statement on the matter. [10198/16]
The Department of the Environment, Community and Local Government is the Department primarily responsible for the formulation and implementation of policy and the preparation of legislation on housing.
My Department has received a number of different proposals from the Credit Union Development Association, CUDA, and Irish League of Credit Unions, ILCU. Proposals from both representative bodies on the funding of social housing are at various stages of development. In respect of the ILCU proposal, I have been informed that the Department of the Environment, Community and Local Government met representatives of the Irish League of Credit Unions in December 2015 to discuss its proposal to fund social housing developments. There have been a number of follow-up meetings between officials from my Department and the Department of Environment, Community and Local Government to consider any potential regulatory or legislative implications of credit unions becoming involved in social housing funding. In addition, a meeting was held between the Central Bank and the Departments of Environment, Community and Local Government and Finance on 21 April 2016 to provide information of a technical nature on social housing funding arrangements. This was done with a view to assisting the Central Bank in understanding how these arrangements operate, as it is the body which deals with issues arising from proposals put forward for credit union investment in social housing.
Two alternative models of funding were proposed by the Irish League of Credit Unions in respect of social housing and it was determined that the second of the two models would be best placed to achieve the objective of providing a mechanism for investment in social housing without negatively impacting on the general Government balance and keeping the funding off balance sheet. It was agreed that ILCU would progress the preferred model, with both Departments indicating their availability should any assistance be required regarding technical advice or further information. Officials from my Department also met representatives of CUDA on 8 April 2016 to assist in progressing its proposal on social housing.
The Registrar of Credit Unions at the Central Bank is the independent regulator of credit unions. Any decision regarding credit unions providing such funding would ultimately require regulatory approval prior to implementation.
The Minister indicated the Department favoured the second of two models proposed by the Irish League of Credit Unions. I did not catch the details of this model but perhaps the Minister will expand a little on it.
The Registrar of Credit Unions is responsible for the regulation of credit unions. The issue, however, is whether the Government views the proposals from the credit unions as a desirable policy direction, as this would significantly influence the level of engagement by the Registrar of Credit Unions with the credit union sector in advancing the proposal. Is the onus for developing a vehicle for funding the delivery of social housing on the credit union sector or would it work in partnership with the Departments of Finance and Environment, Community and Local Government to develop its proposed model?
I do not have a note on the alternative models. I will communicate directly with the Deputy by letter if that is acceptable.
I also asked about the direction of Government policy and its engagement on this matter and whether the onus will be on the credit unions to devise the logistics of the proposed model or whether this would be done in partnership with the two relevant Departments. I asked these questions because partnership will be key to having the Registrar of Credit Unions determine whether regulation is required to allow the proposal to proceed.
I would like to see a wider role for the credit union movement and there is certainly some potential for it to take a greater role in the housing area. While credit unions have significant funds on hand, we should remember that these funds are their members' savings. The regulator in the Central Bank would be averse to the credit union movement putting these savings at risk and would clearly assess any proposal from credit unions to fund housing against the potential risk to savings. This does not mean the proposal would have to be ruled out. Other lenders can manage risk and credit unions would have to do likewise.
I am actively encouraging the proposal and my officials have held meetings with representatives of the credit union movement and Central Bank of Ireland. The onus is now on the two credit union representative organisations to produce proposals. These will then be assessed and my Department will co-operate with them in every way. However, the final call will be made by the Central Bank because the supervisor of credit unions is located in the Central Bank.
The Minister indicated that the onus is on the Irish League of Credit Unions to develop its model and make proposals on how it would operate. Is this the most desirable approach to this process? If the Department considers credit union involvement in social housing desirable, why should the onus be placed on the Irish League of Credit Unions to develop the model and the logistics for implementing it? Surely this could be done in partnership with those who have expertise in this area, for example, the Central Bank or Department of Finance.
We will assist the credit unions in any way we can, as will the Department of the Environment, Community and Local Government. However, as the holders of the money, the credit unions must take the lead role, although we will certainly assist them in that regard.
10. Deputy Mattie McGrath asked the Minister for Finance his views on the use of compulsory purchase orders to acquire housing stock from the National Asset Management Agency to alleviate the social housing crisis; and if he will make a statement on the matter. [10199/16]
As the Deputy is aware, the National Asset Management Agency does not own or sell properties. NAMA acquired loans and the properties that secure these loans are owned by the agency's debtors. NAMA's legal relationship with these debtors is much the same as a bank's relationship with its mortgage holders where the bank holds a claim against the house as security for the mortgage. On 12 May 2016, NAMA's chairman advised the Committee on Housing and Homelessness that almost all of the 6,000 residential units owned by NAMA debtors are occupied by tenants. I assume the Deputy's question does not refer to the use of compulsory purchase orders, CPOs, for tenanted units, as such action would displace existing tenants. NAMA related residential units which are vacant are available for sale in the market by NAMA's debtors and receivers at market value.
Compulsory purchase orders allow a relevant statutory body to acquire an asset at market value from an otherwise unwilling seller. CPO powers are not necessary in the case of NAMA related residential units as such units are being sold willingly at market value and are, therefore, available to be purchased by local authorities or housing bodies.
CPOs allow a relevant statutory body to acquire an asset at market value from an otherwise unwilling seller. CPO powers are not necessary in the case of NAMA-related residential units, as such units are being sold willingly at market value and so are available to be purchased by local authorities or housing bodies.
Separately, NAMA has made a significant contribution towards social housing supply through its policy of providing first option to State bodies on the purchase of property. NAMA offered 6,637 residential units, the totality of NAMA's vacant housing stock at the time, to local authorities for social housing. Local authorities confirmed demand for 2,540 of these units, of which 2,042 have been provided for social housing at a cost to NAMA of more than €250 million. NAMA has no role in determining which of these units are taken up for social housing. That is a matter for the local authorities and housing bodies. I also understand that NAMA is currently re-examining its remaining portfolio to identify if any additional units may be available to offer to local authorities.
I certainly do not support taking houses from tenants but I want to discuss a particular issue. Edmund Honohan attended the Oireachtas Committee on Housing and Homelessness and what he said was very interesting. We all know how compulsory purchase orders have been used in the case of developing roads and other infrastructure but he put forward an imaginative suggestion that they could be used in the case of NAMA and of vulture funds. He suggested that where houses, with tenants or otherwise, are being sold from under the feet of people, the State should be able to come in and purchase those houses rather than have to add these people to the housing lists and go through the system of rehousing them. It should intervene at the time of the crisis.
We had a presentation on this crisis today in the AV room. The crisis is huge, is escalating and we cannot hide from it. Hundreds of repossession cases per day are lined up for the courts. Legislation in other jurisdictions, in America in particular, ensures the vulture funds and others must take the good with the bad. Interventions are made and properties are bought back from them, despite the fact they bought them at rock down prices in order to make a killing. These other jurisdictions buy these properties back under this kind of legislation. If people are living in them, they can continue as tenants and if not, the properties are provided to people who are homeless.
The difficulty is that if an investment fund buys an apartment block, for example, it is buying an apartment block which is almost fully tenanted because the value lies in the fact the tenants are paying rent. If they were to help in resolving the housing crisis, they would need to be buying vacant properties. They do not look for vacant possession because of, as we can see, the adverse implications of that.
If there was a supply of vacant housing, local authorities should certainly apply that for social housing. However, the supply of vacant and available property is limited. NAMA has some vacant and available supply and offered that to local authorities. Sometimes local authorities do not have money, so NAMA has a kind of special purpose vehicle that leases property to a local authority on a 20-year basis. I believe it is leasing approximately 1,600 houses on that basis currently and there may be further potential in this regard. The CPO route acquires property at market value from an unwilling vendor. NAMA is not an unwilling vendor but wants to sell what it has at market value.
I mentioned the issue of vacant properties in my question and we would like those types of properties to be taken in hand. We need some kind of imaginative examination of the situation to give some indication to people being made homeless that the Government is doing something to find a solution. We want some indication vulture funds are not just being allowed to come in and sweep up these properties. Our nearest neighbour across the pond has proposed legislation in this regard now. Are we just going to wring our hands and accuse people like Deputy Michael McGrath who introduced this type of Bill last night of scaremongering while doing nothing ourselves? We cannot sit idly by any longer. This crisis is going to overwhelm us because action has been put off time after time. Deputy Noonan is as well aware as I am of the situation and that repossession cases are lining up for the courts. There is significant angst, anxiety, sickness and trauma. Indeed, it seems like terrorism from the institutions of State for people in this situation. Surely we can use CPOs or some other imaginative legislation to try to secure properties, especially from vulture funds which are not buying them at market value but trying to make a killing on them, whether vacant or otherwise.
We must think outside the box here. The Oireachtas Committee on Housing and Homelessness is discussing the problem and other groups are also trying to address the problem. What good will that do if the Oireachtas does not legislate imaginatively to create a new solution?
I did not accuse Deputy Michael McGrath of scaremongering but he may have mentioned that I was scaremongering.
The Minister did last night. I was here.
I think Deputy Mattie McGrath has reversed the dialogue. I have great respect for Deputy Michael McGrath and did not do that.
This is the first week the new Government is functioning. A special housing committee, chaired by Deputy John Curran, was set up in response to the emergency. I appeared before the committee and it seems to be that it is doing constructive work and moving quickly through its agenda. At the same time, Deputy Simon Coveney has been given special responsibility as Minister to resolve the housing crisis. He is moving as quickly as possible on that and one of the first Cabinet sub-committees to have been set up is the Cabinet Sub-Committee on Housing and Homelessness. This committee has met already and will meet again this coming Friday. There is a lot happening. Nobody has a monopoly on ideas to solve this problem. I do not contradict what Deputy McGrath has said but his ideas should be fed through the housing committee for analysis.
11. Deputy Mary Lou McDonald asked the Minister for Finance the cost of the commitment to phase out of the universal social charge; and the level of economic risk he attributes to this policy. [10544/16]
A fair, efficient and competitive income tax system is essential for economic growth and job creation. I have long said that the burden of the income tax system in Ireland is too high, that it is acting as a disincentive for work and investment in Ireland and that I would seek to reduce it as soon as it was prudent to do so.
In the programme for a partnership Government, there is a commitment to ask the Oireachtas to continue to phase out the USC as part of a wider medium-term income tax reform plan that keeps the tax base broad, reduces excessive tax rates for middle income earners and limits the benefits for high earners. Reductions will be introduced on a fair basis with an emphasis on low and middle income earners.
As outlined in the programme for a partnership Government, the reductions in personal tax rates, such as the phasing out of the USC, needed to reward work and support enterprise and employment will be funded largely through: extra revenues from not indexing personal tax credits and bands; the removal of PAYE tax credit for high earners and other measures to ensure the tax system remains fair and progressive; higher excise duties on cigarettes and increased enforcement and sanctions on the illegal importation and sale of cigarettes; increased enforcement and sanctions on fuel laundering; a new tax on sugar sweetened drinks; and improving tax compliance.
The medium-term income tax reform plan is to be published for consultation with the Oireachtas committee on finance in July or August and will be put to the Oireachtas for consideration and approval in October. The plan is being developed over the next number of weeks and, as such, the expected cost is not yet finalised. The Revenue Commissioners have published a ready reckoner on their website, which provides estimates of costings for various tax changes. For example, the full year cost of abolishing the 1% USC rate is €237 million, while the full year cost of reducing the 5.5% USC rate to 4.5% is €348 million.
Additional information not given on the floor of the House
The income tax reform plan will aim to support job creation and reward work which is a key driver of growth and prosperity in the economy. In developing the plan, available resources will be a key consideration along with safeguarding the economic stability of the public finances and the wider economy.
This issue was debated quite a bit during the general election campaign and while there is variance in the programme for Government, it seems the Government is still committed to abolishing or phasing out the USC instead of looking at the issue of tax credits. The Minister is aware from parliamentary questions we have put to him over quite a period now that we have been examining the issue of tax credits while leaving the USC in place.
I believe abolishing the USC is a reckless proposal. We will have opportunities to debate this issue during the Finance Bill and throughout the period leading to the budget. Fine Gael says we can afford to abolish it but we cannot afford it. There is ample evidence across the State to show we cannot afford it. While Fianna Fáil presents the Fine Gael plan as reckless and its plan as great, the idea of taking €3 billion a year out of the tax net through its plan is equally reckless. The Fine Gael plan is just a bit worse. We cannot afford this.
It is actually quite funny to listen to both parties talk about how we need to invent special vehicles so we can spend more money on social housing.
We need to spend more money on social housing but we cannot because we agreed to the fiscal compact, which limits the amount of money we have to spend. However, if one takes €4 billion per year out of the tax net it is further reduced. What is the level of economic risk analysis with regard to this policy proposal in the programme for Government?
Deputy Doherty and I will have to agree to differ on this. It is not the first time we have debated it. It was debated last year and was debated right through the general election. Deputy Michael McGrath's and the Fianna Fáil position is not too far away from the Fine Gael position. He pitched middle-income people as earning less that €80,000 and Fine Gael defined it as less than €70,000. The Labour Party position is not very different either. The three traditional parties, if you will forgive me for calling them that, are in and around the same space.
Conservative.
Sinn Féin is the most conservative party in the House.
Will you stop.
Sinn Féin is not a left-wing party at all. It is a conservative nationalist party.
Can I ask the Minister to resist the temptation to talk about party make-up and stick to the question?
I will not be provoked and will resist the temptation. The best thing I can commit to is ensuring there is a full debate. The Spring Economic Statement will become a summer statement and it should be ready by June. There will be a full debate in the House. I am providing all the text papers to the finance committee so that there will be a full debate on taxation at that point, in advance of the budget.
It is a bit of craic to discuss the question of which party is more conservative than the other, and the marriage between Fianna Fáil and Fine Gael can be part of that banter but this is deeply serious. I sat on the banking inquiry and we saw the graphs. The Fianna Fáil-PD Government of the time cut income tax, the most stable tax available, and it was replaced by other taxes. The USC will bring in €4.6 billion in 2020 and a full debate is nonsense without a full analysis of the costings, etc. The idea of coming in year after year and tinkering with the charge so that it goes after five years is wrong. This is a policy decision that needs proper economic assessment in terms of the risk to this economy.
I believe what Fine Gael and Fianna Fáil are proposing is reckless. If we have learned anything from the last catastrophe this State faced it is that one does not reduce taxes to this level. It may be affordable today because we have a boost in corporation tax and other taxes but it is not affordable in the long term. Every penny we take out of the USC is a penny we are not investing in health or social housing. I ask the Minister to commit to a proper economic analysis of the risks of this policy rather than just a debate in this Chamber.
The fallacy in the Deputy's argument is in the fact that the Government is not committing to reduce the tax take - it is committing to reduce tax rates. We will collect more taxes and the projections for taxes for the next years show that each year the tax take will increase. Within the envelope of additional taxes it is quite affordable to remove an emergency tax-----
That is what happened in the years Charlie McCreevy was Minister. Taxes went up.
We can afford to remove a tax introduced at a time of great emergency. Anybody carrying out an economic analysis will agree that personal tax rates in Ireland are too high and are having an adverse effect on economic growth and activity.
What is the growth rate this year?
The economy is buoyant and we have very strong growth rates.
The USC is still there.
The projected tax take is increasing. For the past two years we have reduced the incidence of USC and that has relieved the burden, especially on low-paid and middle income people.
12. Deputy Brendan Smith asked the Minister for Finance his proposals to implement additional measures to deal with cross-Border criminality such as the smuggling of diesel and tobacco products and other illicit trade; and if he will make a statement on the matter. [10136/16]
Combating cross-Border smuggling is a high priority for Revenue. Mineral oil and tobacco smuggling are crimes that require both national and international responses.
I am advised by Revenue that it works closely with law enforcement partners both at home and abroad to disrupt and deter smuggling activities. Revenue co-operates extensively with, inter alia, An Garda Síochána in acting against illicit trades. The relevant authorities in the State also work closely with their counterparts in Northern Ireland through cross-Border enforcement groups to target the organised crime groups that are responsible for a large proportion of these forms of criminality. There is close co-operation with other international law enforcement agencies, in particular HM Revenue and Customs in the UK.
As has been reiterated in the programme for a partnership Government, the work to tackle cross-jurisdictional organised crime will be supported and reinforced by the establishment, in the framework of A Fresh Start, the Stormont agreement and implementation plan, of the joint agency task force, which includes Revenue. In this context the development of strategic and tactical plans has been agreed by all key stakeholders to further support effective action against cross-Border excise fraud. This interagency national and international co-operation is complemented by Revenue's use of intelligence gathering, its profiling of suspects and effective intervention programmes to counter the threat posed by criminal activities such as fuel and tobacco fraud.
Over the past number of years Revenue has implemented a number of strategies against both fuel fraud and the illegal tobacco trade, underpinned by an extensive and effective legislative framework to maximise its impact on the illegal operations referred to in the Deputy's question. I am satisfied that the current legislative framework provides an effective basis for action by Revenue against fuel and tobacco offences, and I am assured by Revenue that action against such activities will continue to be a key focus of its work.
In this House over the years, I have consistently raised the need to implement the most severe measures possible to deal with illicit trade which, as the Minister for Arts, Heritage and the Gaeltacht, Deputy Heather Humphreys, will know, is a particular problem for the Ulster counties on both sides of the Border. A year ago, I introduced legislation in this House calling for the establishment of a cross-Border multitask agency to deal with this illicit trade. I recognise and welcome the fact that some of the measures proposed in the Fresh Start agreement follow some of what we proposed. In view of the ongoing illicit trade and loss of revenue to our State, however, can the Minister now give further consideration to the establishment of a single cross-Border agency encompassing representatives of the Department of Finance, Customs and Excise, An Garda Síochána and the Environmental Protection Agency with their counterparts in the appropriate statutory authorities north of the Border? Not alone does the illegal trade in fuel, tobacco products and other products cause loss of revenue to the State and huge damage to legitimate businesses, particularly small businesses, there is also a threat to our environment with the dumping of sludge and material arising from the washing of diesel. It will cause damage to the reputation of our farming industry as well, and the authenticity and provenance of our food production can be threatened by this dumping of sludge and other raw materials. I hope the Minister will give further consideration to the establishment of a cross-Border agency to ensure we stamp out the illicit trade which is doing so much damage to so many people and to society.
I ask the Minister to respond in writing to the Deputy because the time allocated for Questions has elapsed.
