Ceisteanna Eile - Other Questions

Irish Fiscal Advisory Council

Richard Bruton


32. Deputy Richard Bruton asked the Minister for Finance if he has assessed the advice of the Irish Fiscal Advisory Council on the shape of the future budget; and if he will make a statement on the matter. [26405/20]

Richard Bruton


35. Deputy Richard Bruton asked the Minister for Finance if he has assessed the advice of the Irish Fiscal Advisory Council on the shape of the future budget; and if he will make a statement on the matter. [26522/20]

Gerald Nash


36. Deputy Ged Nash asked the Minister for Finance to outline his views on the pre-budget statement from an organisation (details supplied); his views on the need for a multi-year stimulus; and if he will make a statement on the matter. [26797/20]

I wish to recognise the foresight of the Minister of Finance in drawing up the budget last year as he left scope for many measures that are now helping to protect the economy. The Irish Fiscal Advisory Council has indicated that it believes substantial additional stimulus should be undertaken in 2021. I am keen to explore what this substantial additional stimulus will look like.

I propose to take Questions Nos. 32, 35 and 36 together.

The Irish Fiscal Advisory Council published its annual pre-budget statement on Wednesday, 16 September. As ever, this is valuable analysis and I welcome the council's contribution at an early stage of the budget process. It is also worth pointing out that around the same time, the Governor of the Central Bank wrote to me expressing broadly similar views to the council. The council noted that the macroeconomic outlook is exceptionally uncertain, with key risks relating to future waves of Covid-19 as well as the potential for bilateral trade between Ireland and the UK to be on World Trade Organization terms from next year. I agree with this assessment. Infection rates have increased further and additional measures have been put in place for some counties. Additionally, the Government has decided to base budget 2021 on the assumption of a disorderly end to the so-called transition period, given the high probability of it materialising. It is worth pointing out that the council is supportive of the unprecedented budgetary response that has been implemented by the Government in response to this terrible disease.

The council's view with regard to budget 2021 is that it should include a substantial multi-year stimulus so that targeted support measures are continued. Given the uncertainty remaining around Covid-19 and the future trading relationship between the EU and UK, the council further recommends an appropriately sized contingency to help to manage these key risks. Additionally, the council's view is that once recovery is established the public finances be brought back to a more sustainable trajectory. I broadly concur with these views.

Budget 2021 will prioritise a continued response to this crisis. The overall strategy will be to provide further countercyclical support to the economy. We will prioritise preserving and maintaining existing levels of service, make improvements where we can and where needed and target any additional supports to those sectors and workers who are most in need. I am also conscious of the need to put the public finances on a sustainable path. The Government will, in the first half of next year, set out a medium-term trajectory to restore balance to the public finances.

What is striking about the Irish Fiscal Advisory Council's advice is that it recognises the short-term extreme disruption the economy will go through and acknowledges that a new normal must arise. Something like a new deal needs to be developed in Ireland at this stage. Will there be a substantially larger public investment programme? It is important that we start to take the opportunity of a decline in private investment to accelerate. Can we get projects moving quickly enough to take up that opportunity?

I am also interested to hear the Minister's comments on some of the specific supports through activating and restructuring sectors, which need to take into account matters such as the challenge of climate change. Can we design instruments that will accelerate structural change in order that we can be ready for this new normal?

On the scale of the stimulus and the role of capital spending, the Minister for Public Expenditure and Reform, Deputy Michael McGrath, has committed to €9 billion of investment in capital projects next year. To put that in context, the figure at the start of the previous Dáil was between €3 billion and €4 billion. It is a huge increase on recent years. Unlike in other years when, due to our inability to fund public services, capital investment had to be cut back, the Minister, Deputy McGrath, earlier this year committed to maintaining capital investment at approximately €1 billion higher than it otherwise would have been, which is now a €9 billion figure. As for it going beyond that, the Minister, Deputy McGrath, is now looking at that as part of his engagement with all the spending Departments.

On the Deputy's point about retraining, we will be closely monitoring the take-up and use of all the different training posts and further education roles announced as part of the July jobs plan. I expect them to play a big part in our efforts for 2021 and beyond.

I am conscious there is significant opportunity and need for structural change in respect of climate action in many sectors of our economy, including the public sector. It would be very timely to commit not only to higher levels of investment but to accelerating that change and developing tools that will lead enterprise to accelerate those needed investments and to position itself for the new normal that will emerge. There is a need to look creatively at how investment can be accelerated and at how necessary change in the economy can be leveraged for the long term.

There is widespread relief this afternoon at the figures contained in the Department's outlook published today. In April, it was predicted that GDP would crash by 10.5%, whereas the figures published today suggest instead that it will shrink by 2.5% only, a significant figure but one we can accommodate. Worryingly, unemployment will be 2% higher than forecast at the peak of the first wave of the pandemic. With the prospect of a no-deal Brexit coming into view, as we all know, unprecedented action is very much needed.

IFAC signed off on the Department's numbers today, endorsing them. Clearly the Minister agrees with the council's earlier analysis that we will require a multi-annual stimulus approach to support our economy into the future. Does he agree that support should involve an investment of €10 billion, the quantum allocated to the investment that IFAC identified, and that it would be appropriately sized relative to what it advised?

There are two points on that. I would be careful, as the Deputy acknowledged, about deriving a great deal of comfort from what has happened to national income growth because so much of the improved performance in national income has been driven by what has happened to our exports in a particular part of our economy. The reality of where we are is contained in the Deputy's point about what has happened to unemployment this year, which has, unfortunately, been in line with our fears of what could happen. While it is welcome that there has been a sharp decline in the number of those receiving the pandemic unemployment payment, it is still the case that there are far more people on it than we would ever want.

We will have to make a decision on budget day about the scale of the stimulus. As I indicated to Deputy Bruton, the figure is already at €9 billion. The only note of caution I would sound is that while we can commit to the principle of stimulus over a number of years, being able to forecast the level of stimulus that will be needed in 2022, for example, given the high degree of uncertainty surrounding us at the moment, would be a very demanding task. That is a decision that may be taken at another point.

Tax Credits

Marian Harkin


33. Deputy Marian Harkin asked the Minister for Finance if he will use budget 2021 to extend eligibility for the home carer tax credit to include single working carers and allow carers to claim tax relief on the cost of employing a care worker while also claiming the dependent relative or incapacitated child tax credit; and if he will increase the dependent relative tax credit in line with the incapacitated child tax credit. [26674/20]

Colm Burke


271. Deputy Colm Burke asked the Minister for Finance if consideration will be given to increasing the dependent relative tax credit in line with the incapacitated child tax credit in order that this tax relief can be made available to all full-time carers regardless of their relationship to the cared-for person; and if he will make a statement on the matter. [26417/20]

Colm Burke


272. Deputy Colm Burke asked the Minister for Finance if consideration will be given to the extension of eligibility for the home carer tax credit to include single working carers who, in cases, work part time while also caring for a dependent person; and if he will make a statement on the matter. [26418/20]

Colm Burke


273. Deputy Colm Burke asked the Minister for Finance if consideration will be given to allowing carers to claim tax relief on the cost of employing a care worker while also claiming the dependent relative or incapacitated child tax credit; and if he will make a statement on the matter. [26419/20]

Will the Minister use budget 2021 as an opportunity to extend the home carer tax credit to single, or lone, family carers, who cannot avail of it at present? Will he also consider allowing carers to claim tax relief if they employ a care worker while, at the same time, they can avail of the incapacitated child tax credit or the dependent relative tax credit?

I have a third question but the Minister will have received it in writing.

I propose to take Questions Nos. 33 and 271 to 273, inclusive, together.

Consistent with the programme for Government, it is not the intention to increase the value of income tax credits or bands in budget 2021. I note, however, that the Deputy raised three separate but related issues regarding important measures in the tax code that support caring for people in vulnerable circumstances.

Regarding the suggestion to extend eligibility for the home carer tax credit to include single workers, this credit was introduced in Finance Act 2000 specifically in the context of a planned move to full individualisation of the income tax system to ensure a balance was maintained for married one-income families where one spouse works primarily in the home caring for children, the aged or incapacitated persons. The home carer tax credit is, therefore, available only to jointly assessed couples in a marriage or civil partnership and not to single persons, as the issues the credit sought to address do not arise in their circumstances. Instead, the single person child carer credit of €1,650 and an increased rate band of €4,000 are available to single parents with caring responsibilities for a dependent child who is under the age of 18 or, if over 18, is an incapacitated child who satisfies the incapacitated child tax credit criteria.

As for the question of claiming tax relief on the cost of employing a care worker while also claiming the dependent relative or incapacitated child tax credit, there is no restriction on this and the tax relief is available at the individual’s marginal rate of tax.

I will outline further information in my follow-up response.

There is a considerable anomaly here. If a single carer, such as a widow or widower or someone who is divorced or separated, cares for a sister or mother, the carer cannot avail of the credit. Perhaps the person is doing it full time, or works eight hours part time for sanity or just to keep heat in the house. He or she cannot avail of the home carer tax credit. That is fundamentally unjust. I understand why it was put in place in the first instance, because it was intended that one person would work outside the home and the other predominantly in the home, but that second person could have part-time work. The Government is saying, therefore, that for two people who are jointly assessed, one can work outside the home, while the other can have part-time work and still claim that credit, whereas someone who is a lone carer, for whatever reason, cannot claim that credit and work outside the home.

While I know the Minister has said he will not increase tax bands or credits, that is a serious anomaly in its own right.

I will definitely consider the different issues the Deputy has raised. I appreciate that in any tax credit such as this, that is targeted and that is looking to support those who are doing important work in our society and for their families and so on, anomalies can be generated by it at times and I will look at the issue the Deputy has raised. I want to make the point that, for example, if we were to raise the dependent relative tax credit to €3,300, it is estimated that the additional cost for that would be €194 million. That is not to seek to diminish the value of the work that is being done. It is just to acknowledge the financial cost that would be involved in doing that. I will consider the observations the Deputy has made around those anomalies but I have to be open with her on the fact that the options for me for changing any credits in the upcoming budget are limited.

I appreciate the Minister's acknowledgement that there is an issue and that he will come back to it at some point. In the context of more people working from home or doing blended working, this issue will arise more. Also, some people need a few hours outside of the home for their mental health and sanity. Those people would not be able to get the home carer tax credit. As I said, it is fundamentally unjust. I know the legislation was not put in place with that perspective in mind but as the Minister and I both know, sometimes unintended consequences happen and that is, perhaps at best, what happened here. The Minister mentioned the dependent relative tax credit and the cost of same and I accept that but the Minister and I both know that family carers save the State huge amounts of money every year and that needs to be factored into any decision. I thank the Minister for his acknowledgement that he will look at this.

The Deputy has pointed to a number of potential anomalies and issues, which she has explained to me in the question she has put forward. I have looked to explain why the tax credit is at the level it is and I have noted what the financial cost would be in any such change. As I have already said to the Deputy, I am acknowledging the financial cost involved in a change such as this. In doing that, I am not looking to diminish the incalculable value of those who are caring for those in their families or communities who need care. As I have said to the Deputy, in order genuinely to manage expectations around this issue in the approaching budget, the ability to make changes to tax credits or rates or to any personal tax measure that would be relevant to this House is limited in the context of this budget for all of the reasons Deputies know.

Banking Sector

Brendan Smith


34. Deputy Brendan Smith asked the Minister for Finance if he has had discussions with a company (details supplied) in relation to the need to retain a bank and its network of branches here; and if he will make a statement on the matter. [26774/20]

Mick Barry


41. Deputy Mick Barry asked the Minister for Finance the contacts he has had with the management of a bank (details supplied); the steps he will take to protect jobs, services and the rights of mortgage customers in the event of the bank being sold by its parent company; and if he will make a statement on the matter. [26683/20]

As the Minister is aware, there are widespread concerns in many communities about the statement by NatWest that it is considering all strategic options in the future of Ulster Bank. Ulster Bank has 88 branches in our State, it has more than 2,500 employees and it has a substantial presence in the Border region, particularly in my constituency of Cavan-Monaghan, with three branches in County Cavan and one in Monaghan. It has been an integral part of Irish commercial life and it has been trading in our country for almost 200 years. Any thought of the closure of this bank and its branch network would be devastating for so many communities and for the employees of the bank as well.

I propose to take Questions Nos. 34 and 41 together.

I am aware of the reports that NatWest is engaged in a strategic review of its operations, including those of Ulster Bank Ireland. The Government has no formal role in such a review or in any commercial decisions that result as these are a matter for the board and management of the bank and its parent company, NatWest. I understand that the process is ongoing and that no decisions have been made. Therefore, I will not comment or speculate on possible outcomes as there is no basis for such speculation available to me and any comment I might make could be open to misinterpretation. As the Deputy has just done, however, I want to acknowledge that news of this review is, of course, unsettling for all who could be affected by it, especially for the staff and the customers and communities who depend on this branch network. I expect Ulster Bank to keep all its stakeholders, especially its staff and customers, fully informed about any developments in the review and to engage promptly with them in relation to any proposals or decisions that result from the review.

The continued presence of a viable and active Ulster Bank in the Irish market has been an important dimension of how banking has been organised and supplied in Ireland over many years. Ulster Bank is a significant employer and it has 88 branches across our country. It is also important in terms of providing competition in the Irish retail banking market. The bank will have to keep the Central Bank of Ireland fully informed and comply with its requirements in its decision-making process.

I reiterate that I have no role in any review undertaken by a commercial entity but I and my officials will carefully monitor any developments in this area.

As I said, there are 88 branches serving 88 communities. They are large communities nowadays because a lot of branches were closed over the years due to rationalisation measures and there has been a loss of services to many communities. Any further diminution in banking competition in this country would be concerning. Ulster Bank is the third largest bank and we lack banking competition in this country.

The Minister previously told me, in reply to a parliamentary question, that he would expect the bank to keep its customers and employees up-to-date with whatever it was planning or proposing. I would also like the Minister to convey the concerns of communities and employees throughout the country on these suggestions and this narrative that have been in place for some time. I am concerned and I know the Minister has no formal role but there is nothing to stop communication being made through the Central Bank or the Department on the importance of this bank to so many communities and employees. God forbid the branches would close when one considers the small enterprises that have been affected by Covid-19 that are struggling to survive through the pandemic. Where would they go to transfer to another bank if they lost their current banking arrangement?

The issue here is the threat to the future of Ulster Bank. We are talking about 2,500 jobs and 88 communities in which the bank is based and in many cases it is the only bank serving those communities. We are also talking about the interests of many thousands of mortgage holders who will fear Ulster Bank being transferred into new hands and those new hands having claws in them in the form of vultures. They will fear what will happen to their mortgages if they fall into arrears or if they have arrangements with the bank that expire and new arrangements have to be put in place. The Minister has indicated that he would trust that Ulster Bank will keep stakeholders informed. I do not trust Ulster Bank to do that. We found out about this from a leak in the parent company. The Government has to be poised for action here. The question of nationalisation in order to defend jobs, mortgage holders and services will need to be put on the agenda and it will be part of the debate on this.

My exact wording was that I expect Ulster Bank to keep stakeholders, the Government and those who depend upon them for their jobs or for lending informed. Deputy Brendan Smith raising this question has given me the opportunity to make clear my expectation on that communication. As I did with the earlier question that was put to me, I want to acknowledge how valuable Ulster Bank is and will continue to be from an employment and a lending point of view within our country. I am well aware of the value of the role it plays in the communities Deputy Brendan Smith is referring to and I will continue to monitor developments carefully in this area.

I am available to Deputies who are particularly concerned about this matter for any further question or comment.

I thank the Minister for his reply. In my constituency, we have Ulster Bank branches in Ballyconnell, Cavan, Ballyjamesduff and Monaghan town. Traditionally, Ulster Bank has very much been associated with the Border region and it has had a very successful business, by and large, for the most of 200 years in communities right throughout our country. As the third largest bank in the country, we cannot afford to lose it.

From speaking with employees and interaction with private individuals and people with small and medium enterprises, I know Ulster Bank's business is across all sectors of our economy. From the perspective of employees, business and enterprise and so many communities, it is essential a clear message goes to NatWest that we want to see Ulster Bank retained in its current format with its 88 branches and more than 2,500 employees.

There is concern among employees and I would like to know if the Minister has any indication if an announcement is imminent on NatWest's intentions.

The Minister has said he will monitor the matter very carefully, which is good, as we will monitor it very carefully too, as I am sure the workers in Ulster Bank will do as well. The concern here is that a bank that has made much profit through the years has hit a bump in the road and lost €276 million, according to its report for the first six months of this year, because of the Covid-19 crisis. The bank is going to make a short-term decision to put profit above the needs of the workers, mortgage holders and communities. That must not be allowed to happen.

There has been some speculation that a bank in which the State has majority ownership, Permanent TSB, could potentially take over if there was an attempt to withdraw Ulster Bank from the market here. This would effectively be a form of nationalisation, although I would like to see a form of nationalisation that would really prioritise the needs of the workers, the mortgage holders and the communities. We will also be monitoring the position very carefully.

The concern of the employees and those who use the facilities of Ulster Bank, particularly, as Deputy Smith notes, in constituencies like mine and the Border constituencies where the bank still has a significant presence, despite a retrenchment over recent years, is if the Minister will communicate directly with NatWest. Does the Government intend to engage actively in the process or will the Minister just monitor this as everybody else will do?

I know the Minister for Finance is not the shareholder and the bank is owned by a party in another jurisdiction. Has the Minister any intention to reach out or engage with parties? Is there any plan B? We need competition and for staff employment to be retained. We need that presence in communities, many of which are rural. There are options to increase the presence of existing banks or, as we have seen, new players in the market. Unfortunately, these new players do not seem to want a physical branch structure but nonetheless, there may be opportunities. Does the Minister intend to engage directly with those involved?

I thank Deputies Barry, Smith and Doherty for their questions. I have already contacted the parent bank, NatWest, to ascertain the status of the alleged reports. My contact with the bank has informed the answer I gave to Deputies this afternoon. As the process develops within NatWest, I will of course raise issues and perspectives that I have in this regard. I absolutely understand the concerns that employees will have at this point, not to mention the businesses that are depending on Ulster Bank for lending and investment.

I have personal experience of the unsettling effect of an announcement like this for those who work for the bank. I understand the concerns about their future. I must emphasise, as Deputy Doherty acknowledged, that the State does not have a share in this bank. The parent bank is located in the UK and Ulster Bank is part of its broader structure and company. Notwithstanding those constraints, I will contact the parent bank on the matter.

Questions Nos. 35 and 36 answered with Question No. 32.

Banking Sector

Éamon Ó Cuív


37. Deputy Éamon Ó Cuív asked the Minister for Finance the effect the reclassification of future Covid-related payment breaks as non-performing loans would have on the capitalisation requirements of the banks and subsequently on their ability to lend money at competitive rates; and if he will make a statement on the matter. [26625/20]

The reclassification of loans with future Covid-related payment breaks as non-performing loans could have serious consequences. Will the Minister outline the effect this will have on the capitalisation requirements of the banks and, subsequently, their ability to lend money at competitive rates?

Payment breaks have provided substantial and rapid relief to allow homes and businesses to absorb the shock and impact of Covid-19. The expiry of the guidelines do not prevent banks from engaging with customers who continue to experience difficulty beyond the deadline and all applicable consumer protection remains in place. Borrowers who cannot return to full repayments following the conclusion of their payment break should engage with their lender as early as possible and the Central Bank expects lenders to take a consumer-focused approach at this worrying time.

The longer term impact of Covid-19 on bank capital levels will take some time to materialise. However, some increase in non-performing loans is to be expected. It is nonetheless important to note the efforts undertaken by the Central Bank of Ireland and the EU institutions to ensure banks can absorb losses and continue to lend into the economy. The Central Bank has reduced the countercyclical capital buffer from 1% to 0% and it estimates this will free approximately €940 million of capital across the Irish retail banks to facilitate lending or help banks absorb losses.

At an EU level, a number of support measures have already been put in place. The European Central Bank announced that banks can temporarily operate below the capital conservation buffer and member states also passed a package of temporary measures designed to reduce the economic consequences of Covid-19 on the banking system and ensure that banks have sufficient capacity to lend.

The matter raised by Deputy Ó Cuív is very important but measures have been taken to try to ensure banks have the ability to continue to lend across this very important time. Due to measures taken in the past to deal with or reduce non-performing loans, our banks have funding on their balance sheet to deal with the matter raised by the Deputy.

I thank the Minister for his reply. If the Minister had extended the payment break before 30 September for a further six months, would it have prevented the reclassification of these loans as non-performing loans under the rules? As a consequence, this may have avoided the capitalisation problems outlined by the Minister while still having all the EU and other money provided.

Will the Minister confirm if other EU countries extended the break for a further six months? Did the Minister examine the reasons they did so? I am interested to know what other countries in the EU extended these payment breaks.

The guidance from the European Banking Authority on the matter was that economy-wide payment breaks should not be extended. As of yet I am not aware if other governments or regulators have decided to extend further the measures they have in place. Comparing where we are versus other countries, those other countries have put in place very different arrangements. Superficially they may in some ways look more attractive but they are more limited and, in many cases, they have not seen the breadth of impact seen with the measures we introduced in Ireland.

Potential future capital consequences can be avoided on a bank-by-bank basis through engagement between customers and banks. One of the most important ways the issue the Deputy refers to can be avoided is for such engagement to take place, restructured loans to be agreed upon and those restructured loans to be honoured.

Can the Minister explain this to me? As I understand, these loans are to be reclassified as non-performing loans. When loans are classified as non-performing on a bank's balance sheet, the next temptation is to sell them off to vulture funds in tranches. We know the consequences of that. The Minister talks about the same conditions applying. Everybody who has dealt with people in the hands of vulture funds knows the consequences of having a loan transferred to one. Can the Minister confirm that the risk of such transfers is higher once loans become non-performing because borrowers have been made unemployed by the pandemic?

I was contacted by someone who told me that their monthly repayment has increased quite considerably because their loan is non-performing due to unemployment. This will have future consequences for them. It will mean an extra cost of about €10,000 over 20 years when compared to the effect of the previous arrangement, that is, the mortgage payment break. That is the difference between the original six-month arrangement and what the Minister has allowed to happen.

The Minister said the European Banking Authority guidelines suggest not extending a payment break. That is not what the guidelines allow for. In fact they allow for any extension to take place on the condition that it is announced and applied for before tomorrow. That is where the Minister has failed to deal with this issue. Deputy Ó Cuív is completely right. If this was done, banks would not have to hold additional capital and loans which cannot go back to full repayment of capital and interest would not be classified as non-performing. Crucially, the SMEs and mortgage holders in question would not be given a negative rating by the credit register. That rating will impact their terms of borrowing for the next several years. That is the consequence of the Minister's unfortunate inaction.

Deputy Doherty is referring to alleged inaction. As I pointed out to him earlier, payment breaks were made available in the first place because the Government took action. This has been a huge help to so many families and businesses at a time when it was needed. We have seen the number of people who need these payment breaks begin to decrease, quite considerably in the case of some banks. Engagement between borrowers and lenders is the key to reducing the risk of loans becoming non-performing in the future, leading to the kind of vista to which Deputy Ó Cuív has referred. I believe it will be possible for a restructured agreement to be put in place for many of the loans we are referring to, and I hope it will be possible for all of them. This issue is now developing in many countries, which points to the need for this to be dealt with in a co-ordinated way at European level to avoid creating a further risk in trying to get countries and people back to work in the coming months and next year.

Financial Services Sector

Eoghan Murphy


38. Deputy Eoghan Murphy asked the Minister for Finance the strategy for the financial services sector here. [26676/20]

I wish to ask the Minister for an update on the international financial services strategy. It is not specified in the question, but I was hoping to focus on the regional aspects of the plan. I might make a few additional points when I comment again.

I thank the Deputy. As he will be aware from his recent role in the Department, a whole-of-Government strategy for the development of the international financial services sector up to 2025 was launched in April 2019. The strategy, known as Ireland for Finance, is structured around action measures grouped together under several pillars: operating environment, technology and innovation, talent and communications, and promotion. There are also horizontal priorities - regionalisation, sustainable finance and workplace diversity - which apply across all four areas. The vision of this strategy is for Ireland to be a top-tier location of choice for specialist international financial services and to enhance and protect our future competitiveness.

The employment strategy aims to see 50,000 people in direct employment in the sector by 2025. According to enterprise agencies, approximately 47,000 people worked in international financial services at the end of 2019, which represented an increase of approximately 11,500 from 2015. I am pleased to report that the Ireland for Finance strategy was included in the programme for Government. We expect to bring an updated Ireland for Finance action plan 2020 to the Government for approval and publication in the next few weeks. Stakeholders have been working on the action measures in this draft of the strategy. The updated strategy was delayed because of the general election, as it includes policy measures which could only be taken by an incoming Government. The Covid-19 pandemic has added further delay, but the updating of the strategy is now in its final stages. I am also working on a finance plan for 2021. We have sought and received representations from most of the stakeholders involved and we hope to complete the plan in December, for publication early in 2021.

I thank the Minister of State. This is an exciting portfolio and I wish him well in it. A lot of the work depends on how much the Minister of State's senior Minister delegates to him, but I have no doubt that he will be very generous in that regard because I know how busy he is. As the Minister of State mentioned, I was one of several Ministers with responsibility for the previous international financial services strategy, IFS2020. A key commitment of that plan, which has been retained in the current Ireland for Finance strategy, was a focus on developing financial services jobs outside of Dublin. From memory, approximately one third of our financial services jobs are located outside of Dublin. They are not all back-office jobs. Deputy Nash, who was here earlier, knows all about the M1 payments corridor, which proceeds north from here to Letterkenny in Deputy Doherty's constituency, which is a very important hub for insurance services. Tralee in County Kerry hosts financial technology companies. Kilkenny is another financial services hub. Cork is obviously our second city for financial services and is doing incredibly well in that regard.

The decision on Brexit was made in 2016 and it immediately presented opportunities for us. Covid-19 also presents opportunities for the relocation of businesses and working from home. This aligns with the national planning framework and Project Ireland 2040. Has the Minister of State met with the regional chambers of commerce in relation to beefing up action 7 of the relevant pillar of the strategy? The regional chambers really do have the expertise when it comes to attracting businesses to their own areas.

If I may comment very briefly on the same issue of the regional balance of financial services, has the Minister met with the Carrick-on-Shannon Chamber of Commerce? As he will know, Avantcard is based in Carrick-on-Shannon. It is doing tremendously on its own. A massive facility and a skilled financial services workforce is available there. We need to redouble efforts to land new financial services investment in Carrick-on-Shannon and at that site.

I thank the Deputies. I have not yet met with any of the regional chambers but I will be happy to do so. I thank the Deputies for publicly prompting me, especially in view of the fact that so many jobs in this industry are located in the regions. Today I chaired a meeting with the industry advisory committee, which brings representatives of all the sectors in this area together with relevant senior public servants. That joint group holds a quarterly meeting. We discussed our plans for 2021. As part of that conference I spoke by video link with representatives of State Street bank in Kilkenny. I also spoke with representatives of Fexco, which is located in Kerry. There is a big regional spread in this sector, with approximately one third of jobs located in the regions. We want to develop that further. People now want to migrate closer to home. The industry is very alive to the fact that increased working from home is one of the outcomes of Covid-19. I will take up those suggestions and I thank the Deputies.

It is great to hear that the Minister of State is driving this personally. It needs to be driven by the Minister of State in order to be successful. It is also great to hear that he has committed to meeting with the chambers of commerce to help to develop the action on regional spread. As it is written the action is quite broad, but it could be fleshed out for future iterations of the plan. I would also add that the last progress report included a spotlight on the south east.

That was a good thing to include in it. Perhaps the next progress report could contain a similar spotlight on another part of the country.

I appreciate the constructive and helpful suggestions being made by Deputies as I deal with the insurance, financial services and credit union sectors. I was specifically dealing with this area all day today. The 2021 plan on which we are now working will feature strongly the issue to which the Deputies referred, especially in the context of the regions. One of the issues at which we are looking is the impact of Covid-19. Many people are working from home, accommodation is cheaper and, although there are major issues with broadband in large parts of the economy, it is quite surprising that there are so many good connections such that people can work successfully in many parts of the country. It has been highlighted that this is not the case in certain areas. This issue leads to bigger questions relating to whether everybody will be centred in Dublin. One issue we must address is that of those who are working from home from abroad. It is important that we get all those workers back to Ireland as soon as possible.

Tax Collection

James Lawless


39. Deputy James Lawless asked the Minister for Finance if he will provide a report on European Union digital taxation plans. [26733/20]

I ask the Minister to provide a report on EU plans for digital taxation.

The European Commission first proposed a digital services tax in early 2018. After a period of intensive technical and political discussions among member states, a revised proposal for a digital advertising tax was brought to ECOFIN in March 2019 but no agreement was reached there. It was subsequently agreed that member states would focus on supporting the ongoing discussions at OECD level on addressing the tax challenges of digitalisation.

If the OECD work is successful in reaching consensus, pillar 1 of that work should address the same concerns that a digital services tax was trying to address.  How pillar 1 is ultimately implemented will depend on the nature of the eventual agreement reached at the OECD.  The European Commission has indicated it will revisit the issue if agreement is reached at the OECD on the ongoing work. In her recent state of the Union address, Ms Ursula von der Leyen, President of the European Commission, reiterated her support for reaching an international agreement on digital taxation, but highlighted that should an agreement not be made at the OECD, the EU will move forward with its own proposals next year.

Separately, the issue of digital taxation or some form of digital levy has been discussed in the broader context of the EU identifying new EU resources to fund the EU budget.  To date, no proposal has been made in this area.

  I have consistently stated that unilateral digital taxes only serve to increase international trade tensions and undermine the trust required to achieve a lasting global agreement at the OECD. Ireland is committed to finding a global consensus-based solution to issues that have arisen in the international tax framework as a result of increasing digitalisation. I believe the OECD is the best forum at which to achieve this aim. The OECD base erosion and profit shifting, BEPS, inclusive framework is due to publish an update on its ongoing work to address tax and digitalisation in October.  We will engage positively in that work.

I was aware that there were efforts afoot at OECD level and, to a certain extent, at EU level in that regard. I understand EU officials have stated they will seek to press ahead with proposals for a digital tax on technology companies at the end of the year if the wider collection of 137 or more countries fails to get a multilateral deal from the OECD. My understanding is that the US withdrew from OECD talks earlier in the year. It may have rejoined, but my understanding is that it is out for the moment. That may change in November. In any event, it highlights the difficulties of securing a deal or agreement at OECD level. Pascal Saint-Amans, director of the OECD tax policy centre, stated that Ireland will suffer more than most countries if those efforts to secure a global digital tax agreement fail, triggering an international trade or tax war. I agree with the Minister that it would be destructive and politically and economically detrimental were those events to unfold, but we must be as proactive as possible in trying to prevent that. The Minister wishes for an accord at OECD level, as do all Members. He warned recently that the State could lose up to €2 billion of corporate tax revenue under those proposals or approximately 20% of our corporate tax rate. Tax sovereignty is an important issue. It underpins our approach to the Apple tax matter and many issues that are key to the health of our economy. What is our plan B?

The question from the Deputy highlighted how challenging this environment will be. In last year's budget and much of the work that led up to it, I made the point that our corporate tax revenues, which have increased in recent years, will fall. The reason for that fall is highlighted in the question asked by the Deputy. If agreement is not reached, the risks related to double taxation will pose a direct challenge to the revenue we currently collect. If agreement is reached, it is very likely that there will also be challenges and risks to the revenue we are currently collecting. There will be effects on the tax we collect in the future, and on corporate tax revenue in particular, if agreement is reached or if it is not reached. I believe the OECD is the best place to try to get agreement for the key reason that if agreement is reached inside the OECD, at least it minimises the risk of a tax issue flowing into trade difficulty. Trade difficulty in this area would be an even bigger challenge for Ireland.

I agree with almost everything the Minister has stated. President von der Leyen, to whom the Minister alluded, indicated in the context of the EU Covid budget and recovery package that member states, whether the so-called "frugal four" or otherwise, must repay by 2058 any borrowing they receive under the €750 billion once-off recovery fund which is to be borrowed on the markets by the Commission and then distributed to member states in grants and loans. My understanding is that the Commission has asked member states to put proposals in place in that regard. As the Minister is aware, the EU has the power to impose pan-EU levies that would be used for repayments. In other words, the €750 billion rescue package would be underpinned by pan-EU fundraising or revenue-raising initiatives which would include a digital tax and a carbon levy with a view to introduction by 1 January 2023, which is not very far away. Ireland would have to sign up to that. I understand it would be possible to use a veto as unanimous agreement by member states would be required. How stands Ireland on that matter? I realise it is challenging issue, but it is an important one.

That is the challenge we face. That agreement brings consequences, but agreement not being reached also brings consequences. The Deputy is correct in his summary of the matter. Several proposals are being put forward within the EU to generate what are called "own resources". They are, in essence, taxes the revenue from which goes back to the European Union. There are several such taxes that I believe we will be able to support, such as some of the proposals in favour of a plastics tax, but there are other proposals relating to digital taxation and the whole addition of a carbon and border adjustment tax that raise very big issues for any exporting country within the European Union, not to mention the EU as an exporter in many important parts of the global economy. That said, the only way we can deal with these issues is to try to engage with them constructively and see whether some kind of agreement can be reached in these areas that gets the balance right between our own interests in this area and the broader European needs which the Deputy described. We will engage on this constructively. I thank the Deputy for raising this important issue.

Question No. 40 replied to with Written Answers.
Question No. 41 answered with Question No. 34.

Tax Reliefs

Denis Naughten


42. Deputy Denis Naughten asked the Minister for Finance if consideration has been given to the tax reliefs currently available for those working from home; and if he will make a statement on the matter. [26654/20]

Denis Naughten


61. Deputy Denis Naughten asked the Minister for Finance if consideration has been given to the tax reliefs currently available for remote working; and if he will make a statement on the matter. [26655/20]

House-hunters are returning to their native counties as they turn their backs on city living and take advantage of remote working. That will have a significant knock-on benefit in terms of housing pressure and demand in Dublin. Properties with home office potential are being snapped up around the country. Seamus Carthy, a neighbour of mine in County Roscommon, has 43 potential buyers on a waiting list for homes with garden space. However, direction and support from the Government are needed if this is going to happen.

I propose to take Questions Nos. 42 and 61 together.

The 2020 programme for Government contains several commitments related to working from home, the responsibility for which falls to my Department. There is also a commitment to the development of a "national remote working strategy", and to that end a remote working strategy group has been established. A number of issues are being considered as relevant to these commitments, the results of which will be made public in due course.

In terms of the current tax treatment of the costs associated with working from home, I would note that any such costs incurred wholly and exclusively for the purposes of the business by an employer may be deducted by the employer in the normal course of calculating the tax liability of the employer's business.

From the perspective of the individual employee, there is no specific tax credit available to employees where they work from home. The consideration of the introduction of any such credit would need to balance a number of factors, including issues of equity, noting that not every worker is able to work remotely or from home for a variety of reasons, including the nature of his or her work and the nature of his or her home environment.

I am advised by Revenue that where e-workers incur certain extra expenditure in the performance of their duties of employment remotely or from home, such as additional heating and electricity costs, there is a Revenue administrative practice in place that allows an employer to make payments of up to €3.20 per day to such employees, subject to certain conditions, without deducting PAYE, PRSI, or USC. I am advised that Revenue has published detailed guidance on these arrangements in its tax and duty manual, which may be found on the Revenue website.

The Minister talks about the issue of equity but there is not much equity for those young couples who are on the housing ladder trying to get a house in Dublin at present. There is not much equity for families who are spending hours sitting in traffic or queuing to try and get childcare places. We have a situation where we have the schools, the childcare facilities and streets that have not seen a child kick a ball on them for a generation across rural communities and there is an opportunity here to achieve a balance where pressure is being taken off the infrastructure in Dublin and life is being brought back into rural communities. There needs to be a concerted positive effort in terms of the tax code to support either people to work remotely or blended working.

It sounds from the way the Deputy introduced the question that there is already much demand in the homes that he referred to and the Deputy has that work well under way already. How could I not be aware of so many more people now working from home? Of course, they are making the choice regarding where that home will be located. There are supports available within the tax code for this already. Of course, in the context of the budget, this is something that we will re-examine.

I would make the point though that we need balance in all of this. With our continued efforts to look after the health of our country, I believe we need to find a safe way over time in which we can encourage those who want to work in offices to be able to go back into their offices where they were located and, as the Deputy has said, for those who either do not want to do it or whose employer says they do not need to do it, a way in which working from home can be sustainable. This is an issue of much debate among families as they look at what 2021 could bring, but we need to get the balance right.

I will pick up on the Minister's last point. There is a reference attributed to him in the Sunday newspapers where he is privately concerned about the amount of empty office space across Dublin and elsewhere as employees are encouraged to work from home. I would be concerned that this could be a vehicle used to undermine the objective of blended working and remote working to shore up the pension funds - pension funds that could convert this office space into housing accommodation to meet the needs of people in the city of Dublin.

There is a once-in-a-lifetime opportunity to support remote and blending working but it needs leadership from Government. We should set an objective within Government to have one third of our employees working from home or a remote location within the next five years.

I support remote working. Previously, I asked the Minister about our financial services strategy and making sure that we are focusing on jobs outside of Dublin.

Picking up on Deputy Naughten's point, we are looking at a long-term impact on the city centre where people may not be returning to work, at least five days a week, and a permanent reduction in footfall. There is an opportunity for existing developments which may have been for one purpose, that is, office space, to become something else and therefore support the economy locally here in Dublin city centre which continues to be damaged because of the more permanent changes that people are making in their working lives.

I am not privately concerned about the prospects of offices being empty for the foreseeable future. I am publicly concerned about it. Looking at where we are now across September and October, a time in which many new employees are starting work in new employers throughout the country, for example, for them not to have the opportunity to be able to go into an office to sit with peers and learn from them and for them not to have the opportunity of the normal ways of developing skills and developing their careers is something that I am concerned about. I am also concerned about what it could mean if we prolong a reality of many people working from home and not being able to access the kind of skill development and knowledge that happens when they are sitting near and working with other colleagues.

However, that is not as inconsistent with the Deputy's view as he might infer. I am simply saying that we have to get the balance right. What is beneficial about where we are now is we have relearned that certain kinds of work can be done in more places than we thought possible. Of course, as the Deputy has said, where possible, there may well be opportunities for that to happen outside of our cities. However, this is not a Dublin-specific comment. It is a comment about the well-being and the future development of workers, particularly those who are in the early phase of their careers because the development of their skills and well-being is at the heart of how our economy can grow in the future.

We will move to Question No. 44.

I have time for one more intervention. There were two questions grouped. I am glad that the Minister clarified that. It is important that we try to get the balance right and that we look at blended employment.

I can confirm for the Minister that there is demand, but it is only a drip at present. That could be progressed along the lines Deputy Murphy spoke about. We need to look, and we are looking as part of the pre-budget submission that I forwarded to the Ministers, at developing an initiative similar to the bike-to-work scheme to encourage people to work from home or adapt their home to meet the demand and facilitate the national broadband plan as it is being delivered throughout the country. In the context of the budget, I would hope that the Minister can come forward with some constructive proposals to support this drip that is happening so that we have a greater balance of people moving out to rural communities while at the same time providing much-needed accommodation in this city.

I take the Deputy's point. That is the kind of balance we need to try to move to, where we have offices being used in a way that is different from how they were used in the past but have people in them who are learning, who are healthy and who are safe.

The most important priority is to try to keep people safe and try to reduce the spread of this disease. That is why our public health efforts are so important. As we move through our battle with this disease, I hope we will come up with ways in which it will be safe for large employers to have more of their staff in the office more of the time than is the case at present. That is so important from a skills, productivity and well-being point of view. However, we can genuinely do what the Deputy is outlining at the same time as trying to make progress on what I am referring to.

Question No. 43 replied to with Written Answers.

EU Issues

Eoghan Murphy


44. Deputy Eoghan Murphy asked the Minister for Finance the status of progress towards a capital markets union. [26677/20]

This is to ask for an update on the capital markets union. A new action plan was agreed only five days ago. For five years now, the plan has been making progress towards that union. This is to see if the Minister could inform the Dáil on that updated plan.

That work is under way. An updated report has been published. It is an action plan towards a capital markets union which looks at the different steps member states may be able to take to accelerate progress in how we can arrive at new ways of funding investment and delivering lending, particularly to smaller companies across the EU.

I will work in particular with Commissioner Dombrovskis and hopefully, if she is successful in her hearing on Friday, Commissioner McGuinness, to examine how we can re-energise the agenda. There is a huge difference between the economy of the EU and the eurozone in particular compared with other really big economies in other parts of the world.

It is very important that we continue with the progress we are making in the capital market union to protect the European Union from negative external shocks, in terms of capital flowing in and out of the EU. If we can be more autonomous in how we fund small businesses, we can pursue our own agenda in green financing, digital transition and the important things that underpin the reason for the capital markets union. We can also ensure our pensions and savings are safe in those more turbulent times.

I join with the Minister in wishing Ms McGuinness well and hope she will be confirmed as the new Commissioner for financial services. Hopefully, when she is in position, we can find further progress in this important area.

It is about jobs, how we can use people's savings to fund within Europe investment that can create more jobs and better income in future. That is the purpose of capital markets union. We have not made the progress on it in the EU in recent years that we had planned and wanted. I believe the kind of context the Deputy referred to will be cause for more ambition and energy in this area. It is about how we come up with new ways of funding jobs and investment and delivering better living standards in the future. That is the only thing that capital markets union is about.

One important part of that action plan is improving financial literacy. As we introduce measures for new sources of funding and finance to support local business and new parts of the economy, we must also look for new ways to educate people on how these new systems will work to ensure that we do not fall foul of some of the problems of the past in relation to bad financial transactions.

The best way we can begin to do that work is in our schools. The curriculums in business studies and economics and how the basics of mathematical literacy are taught in secondary school, using real-life examples in relation to finances and work, are the foundation towards beginning that. In future, the products that will be available to families and businesses may be safer in many ways, in their regulation and where the funding comes from to enable the products, but as we know too well, financial risk is always there for countries, families and businesses. The more we can encourage literacy in the area, the better we can manage risk in the future.