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Dáil Éireann debate -
Thursday, 26 Nov 2020

Vol. 1001 No. 5

Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions

Banking Sector

Pearse Doherty


60. Deputy Pearse Doherty asked the Minister for Finance if proactive engagement will be undertaken with a bank (details supplied) regarding the reported closure of its branches and operations in view of the recent resignation of its chairman, the involvement of another bank in the strategic review of the operations of the bank and the potential sale of its loan book to a company; and if he will make a statement on the matter. [39489/20]

Ulster Bank plays a key role in our communities. It supports business, provides local jobs to 3,000 people in towns and cities across the State and has a strong branch network of 88 branches. NatWest, the parent company of Ulster Bank, has undertaken a strategic review of Ulster Bank's operation and its future operation in this State. It has been widely reported that NatWest is considering the full withdrawal of Ulster Bank from the State. The closure of Ulster Bank would be bad for customers, employees and the Irish banking sector. What actions has the Minister taken in recent weeks to deal with this issue?

As the Deputy will be aware, I met representatives of Ulster Bank on 21 October. I outlined that I expected that staff, customers and other stakeholders would be informed promptly about any decisions being made. I used that meeting as an opportunity to emphasise my concerns regarding the impact of such a decision on the economy, the banking sector, staff and those who depend on Ulster Bank for both lending and investment.

News of the review is unsettling for all stakeholders, especially staff and customers. I outlined to the bank my expectation that it will keep stakeholders, especially its staff, fully informed about any developments in the review and engage with them on any proposals or decisions that result from the review quickly. I also emphasised the importance of Ulster Bank to the Irish financial services market, the wider economy and the communities it serves. Ulster Bank confirmed to me that the strategic review is ongoing and no decision has yet been taken. It also confirmed that there is no set timetable for this review and that it is fully aware of the strategically important role that Ulster Bank plays in the provision of financial services to the Irish market.

The continued presence of a viable and active Ulster Bank in the Irish market would be a very welcome outcome. Ulster Bank is a significant employer and has 88 branches across the country and is very important for competition and services.

I note that the chairman of Ulster Bank has resigned for personal reasons. The bank has stated that his resignation is unrelated to the strategic review.

In the absence of direct knowledge about the involvement of any other party in NatWest's strategic review of Ulster Bank's operations, I cannot comment on possible outcomes but I confirm that I will continue to raise this matter with Ulster Bank and its parent company.

Last year, Ulster Bank provided €3.1 billion in new lending in this State. It provides 20% of lending to SMEs and has deposits of €22 billion. Ulster Bank is the third largest mortgage lender in the State. Its withdrawal from the State would lead to a duopoly in the mortgage market that would stifle competition and leave us vulnerable to higher interest rates.

Rumours abound that Cerberus, one of the most aggressive vulture funds in the State, is considering buying the entire loan book of Ulster Bank valued at €20.5 billion. This month we had the premature resignation of Ulster Bank's chairperson, Ruairí O'Flynn, less than two months into the role. This week, it was reported that Goldman Sachs is advising NatWest on the future of Ulster Bank in its strategic review, despite claims from Ulster Bank that this review was internal. It should not be lost on anyone that Goldman Sachs has set up vulture funds in this State to snap up distressed loans. Such a conflict of interest only adds to concerns. Has the Minister in his discussions or consultations with Ulster Bank requested or seen the terms of reference of NatWest's strategic review of the future of Ulster Bank? In line with his remarks to Ulster Bank at the meeting of 21 October and given that Ulster Bank is not keeping staff informed and is not being up front with them, does the Minister believe the staff and customers of Ulster Bank deserve the truth from NatWest? Will he relay that message to them?

I will continue to engage on this matter both with Ulster Bank and its parent company. As I said, I am well aware of the significance of Ulster Bank as an employer, a provider of competition and a supplier of services in the country, in particular the branches it has located in areas outside Dublin. It is a very important employer and bank. I emphasise that I and the Government do not have a formal role in this review. This is a bank which is owned entirely by another broader parent company. Notwithstanding that key point, I will continue to raise my concerns regarding the future of the bank in the country with Ulster Bank and its parent company, and its importance as an employer and a retail bank for Ireland.

The last time the Minister met Ulster Bank on this issue the chairperson was Ruairí O'Flynn, who has resigned from the job after less than two months. Has the Minister had an opportunity to speak to the former chairperson about his departure? Has he asked the CEO of Ulster Bank about the appointment of Goldman Sachs as advisers for NatWest's strategic review into the future of the bank, given its potential conflict of interest? We do not need a passive Minister in this. I understand that it is a private bank and so on, but we need the Minister to ask these questions. Did the CEO inform the Minister of this appointment? Has he been in contact with NatWest in recent days or weeks or, indeed, since 21 October when he last met Ulster Bank?

Last month, I requested that the CEO of Ulster Bank appear before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach to answer questions. The CEO of Ulster Bank refused. The finance committee is united in demanding that Ulster Bank appears before it. Will the Minister add his weight to that call?

We all know that the withdrawal of Ulster Bank from the Irish market would threaten competition in the market. No clarity or certainty has been given to staff, customers, mortgage holders and businesses. It is a grave situation. When does the Minister intend to sit down with or speak to NatWest and Ulster Bank again? Has he elicited any of the information that I have provided to him, particularly around the appointment of Goldman Sachs? What are the next steps that he intends to take?

The matters the Deputy referred to regarding whose services NatWest and Ulster Bank are procuring are not matters in which I am involved, as the Deputy knows. This is a bank in which the State does not have a formal stake or role. Who it procures to provide services is not a matter in which I have any role. Where I have a role is in relaying the strong concerns I have about changes that could happen in relation to the future of Ulster Bank. Far from being passive on this matter, as I informed the Deputy, I have already met Ulster Bank on this matter and I met the then chairman of Ulster Bank at that meeting. I became aware of his resignation at roughly the same time it became apparent to the public. I plan to meet and engage with Ulster Bank again in the coming weeks. I will continue to engage with its owner on the matters which, as Deputy Doherty says, are very serious for banking, employees and the economy.

Tax Avoidance

Richard Boyd Barrett


61. Deputy Richard Boyd Barrett asked the Minister for Finance if his attention has been drawn to reports that a company (details supplied) that generated €153 million in profits over a seven-month period turned those profits, through complex accounting procedures, into a loss and paid no tax; and if he will make a statement on the matter. [39491/20]

It was reported in the past week or two, and perhaps earlier, that a company set up by Goldman Sachs - it is a crowd called Tramore Funding DAC, a special purpose vehicle that is just two years old and is due to disappear shortly - and which had purchased loan portfolios off banks generated €153 million in tax-free profits from its backers but, through "complex accounting procedures", managed to turn those profits into a loss and paid no tax whatever. Is the Minister aware of this? What does he think about such an extraordinary situation where those kinds of profits are not taxed?

I thank the Deputy. As he is aware, I am not in a position to comment on the activities of individual taxpayers. However, I can give the following overview of section 110 of the Taxes Consolidation Act 1997 as it relates to the securitisation of mortgages.

Securitisation allows banks to raise capital and share risk. By providing a repackaging and resale market for corporate debt it lowers the cost of debt financing. It is accepted that having the option of more diversified sources of financing is good for investment and business. It is also important for financial stability in the economy, as the ability to securitise loan books plays an important role in allowing banks to meet their capital requirement obligations and continue lending to businesses and individuals.

The role of securitisation has been recognised by the European Commission through its work on capital markets union. However, this regime is subject to several anti-avoidance provisions. For example, the Finance Act 2011 restricted the ability of section 110 companies to avail of a tax deduction for interest payments to connected persons in respect of profit participation notes. The Finance Act 2016 put further restrictions in place.

I am aware that there are competing concerns in this area. On the one hand, there are ongoing concerns regarding loan book sales and the appropriate levels of taxation. On the other hand, it is recognised that bona fide securitisation is important for both consumer lending and bank capital requirements. My officials, together with officials in Revenue, will continue to monitor the sector with a view to taking action if necessary.

The securitisation of loans helped to crash the entire global economy in 2008. The Minister would have to do a fair bit of convincing to persuade me or most people that it is not a very hazardous practice. It is absolutely unacceptable that outfits like Goldman Sachs can purchase these loan portfolios and set up designated activity companies, DACs, in this case Tramore Funding DAC, that can generate €153 million in profits and somehow turn that into a loss. This is not just about that individual company. This is how a huge number of multinational corporations manage to pay nothing like the 12.5% tax rate. They pay next to no tax, or none at all, by using accountancy tricks to write down profits and turn them into losses. The Minister is allowing this to happen.

In recognition of some of the issues raised by Deputy Boyd Barrett and others, important changes were made in Finance Acts in 2016, 2017 and 2019 to deal with taxation of income and of these vehicles. I am not in a position to comment on any individual transaction but I wish to emphasise that tax liability arises on the distribution of the income to noteholders.

I can only say that whatever efforts the Minister claims he is making have made absolutely zero difference to the capacity of big financial corporations and other multinationals to use networks of subsidiaries in this way. They can generate profits in one subsidiary and through distributions, royalties or payments of interest on loans from other subsidiaries they magically turn a profit into a loss on the balance sheet. They can therefore tell the Revenue that they did not make any profits at all, even though these practices are reported on and celebrated by the companies in question. They boast about the tax-free profits they are making. A 12.5% share of €153 million is a lot, and we got zero. The Minister and his Government are allowing this to happen.

I am commenting generally in my reply. Tax is due when income is distributed to noteholders in section 110 organisations. I want to ensure that the tax laws governing these entities reflect the important role of securitisation in enabling our banks to function and fund themselves efficiently while dealing with issues that have rightly been raised in this House. That is why changes have been made. Tax is not due on transactions inside these units. Liability arises when the income is distributed.

Insurance Costs

Pearse Doherty


62. Deputy Pearse Doherty asked the Minister for Finance his views on the Second Private Motor Insurance Report of the National Information Claims Database; the action he will take in response to its findings; and if he will make a statement on the matter. [39490/20]

On 3 November the Central Bank published the second motor insurance report of the National Claims Information Database. The report is very clear. It sets out the facts in black and white for anybody to see. In the past decade the cost of claims per policy fell by 9% while the average motor insurance premium increased by 35%. The insurance industry generated a profit of €142 million last year, an operating profit of 10%. What actions will the Minister's Department take on foot of the report's findings? Will the Minister rein in the price-gouging that goes on in the insurance industry once and for all?

As the Deputy is aware, the National Claims Information Database was a key recommendation of the cost of insurance working group. It is intended to facilitate a more indepth analysis of annual trends in motor insurance claims. The second report, published earlier this month by the Central Bank, confirms that premiums for private motor insurance policies decreased by 9% from their recent peak in 2018 to the end of 2019. This is in line with the downward trend in the consumer price index of the Central Statistics Office, CSO, and reflects work done in recent years on insurance reform. I expect and hope that this structural trend has continued into 2020.

Regarding award levels, the report continues to highlight the fact that in the majority of personal injury claims there is not a significant difference between settlements reached using the Personal Injuries Assessment Board, PIAB, process and those pursued through litigation, with the latter subject to much higher legal costs and longer settlement times. I strongly believe the report shows that there is a clear benefit in getting more claimants to settle through the PIAB. This benefits the claimants themselves and also consumers generally, as increased costs for insurance companies are ultimately reflected in higher insurance premiums. This is an issue which the Cabinet insurance reform subgroup is prioritising. It will consider proposals on enhancing the role of the PIAB in due course.

The report also highlights the cyclical nature of the insurance market, in particular the growth in insurance premiums relative to the cost of claims and the growth in the profitability of motor insurance underwriting since 2015. This report should assist in dampening these extreme cycles of profit and loss in the motor insurance sector.

With regard to my next steps, I note that the report includes a significant amount of information and data, which my officials have worked on. This will be utilised by the Cabinet insurance reform subgroup as it carries out this work. That group is due to publish an action plan on further steps in the coming weeks.

The Central Bank's second report has completely and utterly destroyed the spin which the industry uses to justify the high cost of insurance premiums and which is all too often peddled by Fine Gael and Fianna Fáil Ministers and Deputies. For years the Government has told consumers that high premiums are solely caused by the high cost of claims, or that they are the result of some kind of delinquent compensation culture in this State.

The facts of the matter, however, show something very different. The Central Bank found that between 2009 and 2019 the cost of claims fell by 9%, the number of claims fell by 45% and, despite this, the average motor insurance premium was 35% higher in 2019 than in 2009. As I said, the industry is gouging customers and making superprofits and, mark my words, its profits will increase next year.

I want to know what concrete actions the Minister will take. Will the Government, for example, stop blocking for another year my legislation, including key sections agreed by the House? Will the Minister lift the block on that legislation and show us for once and for all that he is really serious about taking on this industry instead of being in its pocket? The latter is the only conclusion I can draw as customers are ripped off over and over again and the Minister decides personally, after having sat with the industry earlier this year, to block key sections of my legislation.

This is typical of Sinn Féin. Its members come in here and levy accusations about me, my party and the Government being in the pocket of an industry, whereas the truth is that I am focused on trying to ensure, through policies that can make a difference and laws we can implement, that we can deliver lower premiums for businesses, families and motorists over time. The Deputy does not make any reference to the fact that the data set published by the Central Bank shows that motor premiums have fallen. Deputy Doherty knows that the insurance market in 2009 that he is using as his base had a level of competition and pricing in it that went on to have a whole other set of consequences. It is below the Deputy, and he belittles this as an issue, to come into the House and make cheap claims about me or anybody else being in the pocket of this industry. I am working on policies that have made a difference and that continue to make a difference. The action plan on the sector that the Government will publish will reflect our seriousness about making a difference, not producing, like the Deputy does, cheap claims and accusations that progress nothing but his own interests.

This House agreed key legislation after it had been blocked by the Government for two years with a money message trick. It is on the record of the House that the Minister sat down with the industry. The industry asked him to stall key sections of the legislation. What did the Minister for Finance do? He bowed to the industry. Who pays the price for this? People who are being ripped off do. The facts are the facts. Insurance premiums have gone up by 35% in the past ten years, the cost of claims has fallen by 9%, the number of claims has fallen by 45%, and next year this industry will make bigger profits.

I will ask the Minister about another piece of legislation and a key report I gave to the Central Bank which triggered its own examination of dual pricing, a practice that is going to be banned in Britain and is banned in 20 states in America. Let us put the Minister to the test on this one. I will publish legislation in the coming weeks to ban this policy outright. Will the Minister for Finance say he supports this or does he again need to find out what the insurance industry wants on this issue?

The Deputy is not being serious on this matter. He comes in here and roars at me on different matters. I know how important these issues are. If I do not meet the insurance sector to raise the issues of competition and of ensuring that those to whom the sector provides policies are treated fairly, he will come in and roar at me about that as well. He will condemn me for not meeting the insurance sector-----

For blocking legislation.

-----and when I do meet the insurance sector, Deputy Doherty walks in here and roars again. He stands up and gives, as I have said before of him, the single transferable roar, depending on what the issue of the day is. He and other Members of the House, I remember very clearly, called on me to meet the insurance sector in order to raise the issues he and others have raised. Then, when I do so, he comes back in here and accuses me of being in the pocket of the industry.

The Minister blocked legislation agreed by the House.

I am not interested in sound bites on this; I am interested in making progress on an issue I know is very serious. The data the Central Bank has published show the progress that has been made on motor insurance premiums.

Let the Minister correct the record-----

Táimid ag bogadh ar aghaidh anois.

Covid-19 Pandemic Supports

Denis Naughten


63. Deputy Denis Naughten asked the Minister for Finance the expected cost to the Exchequer of the stay-and-spend scheme in 2021 and 2022; and if he will make a statement on the matter. [38837/20]

The Department of Finance expected people to spend over €7 million per day on the stay-and-spend scheme. We now find that people are spending just €1 million per month. I want the €100 million underspend to date on the scheme to be used to underwrite a gift voucher guarantee for the tourism and hospitality sector. I hope the Minister will look positively on this proposal.

The stay-and-spend scheme provides tax relief by means of a tax credit at the rate of 20% on qualifying expenditure of up to €625 per person, or €1,250 for a jointly assessed couple. It opened on 1 October 2020 and is scheduled to run until 30 April 2021. The tax credit is worth a maximum of €125, or €250 for a jointly assessed couple. The purpose of stay-and-spend is to provide targeted support to businesses within the hospitality sector whose operations are likely to be most affected by continued restrictions.

As it is a demand-led scheme, it is difficult to forecast its cost to the Exchequer in 2021 and 2022. When it was announced in late July, it was estimated that the scheme would involve an Exchequer cost of up to or approximately €270 million. This was an outside estimate based on 2.15 million individual taxpayers availing of the tax credit. In addition, as I indicated at the time, the measure was introduced in anticipation that the economy would be on the way to being fully open and there would be mobility across the country. A number of weeks after we announced the scheme, that all changed. The scheme is due to operate until April of next year, but the flexibility exists for me to extend its operation next year beyond that date. As for uptake and the eventual cost across next year and the year after, a lot will depend on how matters unfold in the weeks and months ahead. As at 18 November, the Revenue Commissioners advise that total qualifying expenditure recorded on receipts uploaded was €2.2 million, with total tax credit of €440,000 due to taxpayers.

The objective behind the stay-and-spend scheme was to tap into pent-up savings in order to save jobs in the tourism and hospitality sector. The Government, as the Minister says, has set aside €140 million for the stay-and-spend scheme up to 31 December. As a result of the lockdown, that will not happen. Rather than losing this money for the sector, however, I ask the Minister to ring-fence the €100 million underspend to date and to use it to act as a guarantee for those who purchase gift vouchers in the hospitality sector between now and Christmas. We have seen iconic attractions such as Dublin Zoo under threat of closure. This will make many people wary of purchasing gift vouchers for hotels, restaurants and tourist attractions as they fear they may not reopen. However, the purchase of gift vouchers would provide vital cash flow to those businesses, ensure they remain open next year and, importantly, encourage people to holiday at home in 2021. I therefore urge the Minister to consider this proposal.

I remind the Deputy that, unfortunately, much of the money to which he refers is money that we are borrowing, so if the stay-and-spend scheme ends up costing far less than I expect, much of that will be due to reasons that are beyond my control. This means, in effect, that we are borrowing less and adding further debt onto this generation and generations to come. The scheme's underperformance, for reasons the House will be aware of, is one of the reasons I decided to introduce the lower VAT rate on the hospitality and service sector, along with precisely the reasons Deputy Naughten has identified. I recognise the work the Deputy is doing in promoting and advocating for the interests of tourism in the midlands, which I know is important to him.

The extension of the scheme to include vouchers is something I have considered but there is a significant amount of complexity and difficulty involved in doing that. It is something I will keep under review, but much of what the Deputy is referring to will now be advanced by the lower VAT rate.

I welcome the fact that the Minister is considering extending the scheme beyond April. That is positive news. However, the reality is that it is far better to borrow money to protect jobs in the tourism and hospitality than to borrow money to pay social welfare. I ask the Minister to again look at this issue urgently.

Employers have the option of giving staff tax-free vouchers worth up to €500 at the end of the year as a bonus. As a once-off measure, will the Minister consider increasing that limit to €750 on the condition that the vouchers are for local shops to encourage people to support local business this Christmas? It would help recognise the work done by many staff during a very difficult year with the pandemic and also, more important, it would help to protect the viability of many local businesses across the country.

That is another constructive suggestion from the Deputy. We evaluated what opportunities there were for supporting local spend and supporting activity in local shops which, as the Deputy stated, have had a very, very difficult year this year. It was in recognition of the challenges retailers faced that the Government in the July jobs plan lowered the standard rate of VAT. As the Deputy will be aware, that was aimed at trying to give small and medium-sized retailers additional profitability and additional support if needed to continue to have the chance to stay open or reopen and keep on their current employees. The reason I ultimately did not go with the additional tax support for the voucher to which the Deputy referred is that I cannot make that conditional on the voucher being spent in Irish-owned retail businesses below a certain scale. If one brings in a voucher such as that, it would be for use in all retailers, regardless of how they are owned. As such, there is every possibility that a significant amount of the money would then not be used in the way for which the Deputy is advocating.

Primary Medical Certificates

Mattie McGrath


64. Deputy Mattie McGrath asked the Minister for Finance the date he will bring forward an amendment to the Finance Bill 2020 to provide for the existing medical criteria in primary legislation to allow for the primary medical certificate assessments to recommence. [38925/20]

When will the Minister bring forward an amendment to the Finance Bill 2020 to provide for the existing medical criteria in primary legislation to allow for primary medical certificate assessments to recommence?

The short answer is that to deal with that matter I have brought forward an amendment to the Finance Bill to provide for the existing medical criteria in primary legislation and I hope it will be accepted by the House on Report Stage next week. That will allow the continuation of the issuing of certificates once the Bill is passed. This is only an interim solution. On Committee Stage, I confirmed that we will open a review of the operation of the scheme to deal with all of the issues relating to the scheme that are being raised by Deputies across the House. When the Bill is ratified and signed by the President, the issues to which the Deputy refers will be addressed. In parallel with that, there will be a review involving my Department and the Department of Children, Equality, Disability, Integration and Youth to look at what is the role of a scheme such as this.

That sounds like good news but the Supreme Court made its decision on 18 June 2020, more than six months ago. There has been significant delay and inconvenience to people. I understand the scheme is still operating and that all persons and suitable charitable organisations that currently access the scheme can continue to do so, but the problem is in respect of new applicants. I am aware of one such new applicant. She is an elderly lady of aged 79 years who suffers from severe scoliosis and COPD and is unable to walk or get around or get into a car. The situation is very problematic for her. I welcome the fact that the Minister tabled an amendment, but it will only be an interim solution. Why has it taken six months to get this sorted out? Why will the review only kick in after the Finance Bill is passed? As Deputies will be aware, legislation can be passed by the Houses and signed by the President but then left to lie dormant. What is the timeline for the review? How long will it take? When will we have this situation sorted out for good? It is unfair to new applicants who have come into bad health through no fault of their own and who need this scheme badly.

When the Bill is enacted, it will allow for assessments to recommence in circumstances where the legal basis for such assessments is clarified. The Deputy asked why this is only being done now. The answer is that it must be done by means of amendment through a finance Bill. Finance Bills are progressed at budget time, so I had to await the opportunity of this year's Finance Bill to make the change. That is what I have done.

On the issue of any delay in the ratification of the Finance Bill, as the Deputy will be aware, that is rarely be the case with a finance Bill because its enactment by the President then allows the operation of many important tax measures for the start of the following year. I expect the review will be complete so that we can then deal with its recommendations and consequences for the finance Bill next year.

This is not a scheme for people who may fall into ill-health; it is a scheme for citizens who have the most acute levels of disability and legitimately and deservedly need additional support from the State to allow them to be mobile.

What does the Minister mean by stating it is not a scheme for people who fall into ill-health? People who were good and healthy but get scoliosis or a similar serious medical condition, which means they are unable to walk or get into a car, qualify for the scheme. Obviously, that is a medical decision, rather than a decision for the Minister or myself, thankfully. He sounds a bit harsh in that regard.

The woman I am talking about has not left her house once during the eight months of the Covid-19 pandemic. She is suitable for the scheme because she is severely physically disabled. As I stated, six months have gone already. Is the Minister telling us now that the Bill will be signed into law and that he hopes the amendment will be passed - I do not foresee anybody opposing it - and the review will then be carried out? He mentioned it will form part of the finance Bill next year. How can it take 18 months or nearly two years to rectify a loophole the courts have identified in respect of this scheme that has been operating for decades? We want certainty here. I cannot wait until the finance Bill of 2021 for it to be rectified. The Government regularly brings in legislation to suit banks and vulture funds. Hearsay legislation was brought it in through the health regulations. This issue needs to be dealt with. It is a very important scheme for people who fall ill or become disabled. I am not talking about getting the flu or Covid; I am talking about physical disability. I know what I am talking about and the Minister does too. There is no point being flippant about it. We want definite dates for this loophole to be plugged.

The Deputy speaks with real pedigree regarding emergency legislation that he voted for being brought in. He voted for some of the legislation that had the most damaging effect on the State and burdened generations to come with the debt with which we are still dealing. I do not know where in my statement he got any hint of harshness. I think he must have been distracted and looking at something else because I said that I recognised how important this scheme is and that it is made available for those who need it the most. It plays a very valuable role in looking after those who have a very high level of need. I amended the Finance Bill at the earliest opportunity. The first chance to address this issue was in the Finance Bill following the Supreme Court ruling. I have no doubt that if the House co-operates in the speedy passage of the Bill, it will then be enacted by President Higgins and the procedures and assessments that need to happen will commence soon after that.