Mairéad Farrell
Question:85. Deputy Mairéad Farrell asked the Minister for Finance if he has had any engagements with the retail banks to promote switching for mortgage loans held by vulture funds into the mainstream mortgage market. [30158/23]
Ceisteanna Eile - Other Questions
Mortgage Resolution Processes
I raise again the plight faced by workers and families whose mortgages were sold on to vulture funds without their consent. These sales were supported and facilitated by both Fine Gael and Fianna Fáil. As a result of interest rate hikes, these borrowers are now facing rates of as high as 8%. They are forking out thousands more in interest every year because the vulture funds now hold their loans. What will the Government do to ensure the wrong that Fine Gael and Fianna Fáil facilitated and presided over is righted and redressed and these mortgage prisoners are protected?
Research has indicated that there is potential for existing mortgage holders to make mortgage savings by switching their mortgage. This is a particularly important consideration at a time of rising interest rates. In this regard, I have met the CEOs of the retail banks and a number of non-bank lenders and emphasised that they should take a consumer focused approach to encourage switching where possible. On behalf of my Department, the Economic and Social Research Institute, ESRI, is carrying out work which will inform the development of tools to promote switching. However, the work of the ESRI also serves to highlight consumer inertia as a critical issue in some cases, which deserves further attention. The Competition and Consumer Protection Commission, CCPC, and Money Advice & Budgeting Service, MABS, also play an important role in informing consumers about the options available to them.
It is a priority for me to ensure that the regulatory framework supports borrowers in the mortgage switching process. In the context of the review of the consumer protection code, I have indicated that the Central Bank should review the existing regulatory provisions and consider whether more dedicated mortgage switching resources, such as a stand-alone mortgage switching code, could better encourage and facilitate switching in the mortgage market. In that context, and in the context of the rise in the cost of living more generally, the Central Bank wrote to all regulated firms last November to set out its expectations on how regulated firms should support their customers. With respect to mortgages, the Central Bank is especially focused on ensuring firms have the resources and arrangements in place to assess applications from existing and new, or switching borrowers, in a manner that is timely and based on prudent lending standards applied consistently across all applicants.
The Central Bank is also scrutinising the switching and lending activity of the retail banks to ensure there is no discrimination based on who a borrower's current creditor is and it has confirmed that the work identified no evidence to date of such discrimination. I also note that the Banking and Payments Federation of Ireland, BPFI, and MABS recently announced the expansion of their 2017 BPFI-MABS framework agreement for late-stage mortgage arrears. Going forward, the agreement will include all customers, from pre-arrears to late-stage arrears.
I mentioned earlier that we had a number of people before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. James Byrne and Grainne Quinn were present and both had their mortgage loans sold by Permanent TSB to a vulture fund. James is now being charged an interest rate of 7.25%. He is waiting for another letter in the post to inform him of the most recent hike and is paying €8,000 more in interest than he was last year. He told the committee that there is no discretionary spending in his household. There are no family holidays and every penny is counted. Grainne is now being charged an interest rate of 7.5%. Her household costs have increased by €800 per month, which is nearly €10,000 per year. She has three young children. James and Grainne's cases are not unique. It is the situation of tens of thousands of households whose mortgages were sold to vulture funds without their consent. That is the reality they face and the Minister's party, as well as Fine Gael, supported this. The Taoiseach claimed that households would be no worse off when their mortgages were sold to vulture funds. How wrong he is. What an untruth he told. I ask the Minister again whether he believes there is a moral responsibility on the originating banks, the likes of Permanent TSB, AIB, and Bank of Ireland, to create a pathway for those loans to come away from the vulture funds and back into mainstream lending.
I ask Deputy Doherty to stick to the time allotted, please.
We need to see more switching activity, including from the non-bank sector to the banking sector. I have been very clear with the retail banks that I expect them to be receptive and welcoming of applications from customers who are currently in the non-bank sector. There will be mortgages that it will simply not be possible to switch. We are all aware of the requirement on banks to maintain a certain level of non-performing exposures, as in they must not rise beyond a certain point. The European Banking Authority, EBA, and the Central Bank of Ireland engage with the retail banks on that issue on a regular basis. That said, there are many mortgage holders with the non-banks who are fully repaying their mortgage, including the two the Deputy identified who appeared before the committee, and there are others for whom, with forbearance, a solution can be put in place and there is a pathway to them becoming fully performing. We need more switching activity and we need the banks to be more open and more welcoming of customers in the non-bank sector who want to switch their mortgages. I am engaging with the sector and with the Central Bank with a view to bringing that about.
To give the Minister an example, James is meeting all his mortgage payments, has never defaulted and has never gone into arrears. Permanent TSB, his originator bank, is State-owned and the Minister is a majority shareholder in it. That bank will not even entertain James in relation to switching. It will not deal with him at all because he has a split mortgage. Permanent TSB actually established that split mortgage and did so in a way that it was deemed a non-performing loan, even though James met every single payment. These people are mortgage prisoners. They have never missed a payment in their lives yet they cannot switch to any bank. Bank of Ireland is the only bank that would actually engage with them and it was not able to cover the full extent of the mortgage. That is only James but there are tens of thousands of these cases. There are people who will be able to switch and they should do so and get professional advice. There are others who cannot because they are in arrears and have serious problems. There are others like James and all the rest who the banks will not entertain because they do not want the hassle of those types of mortgages. I ask the Minister for Finance to say very clearly, as I would, that there is a moral responsibility on those banks that originated these loans to now facilitate loans that can be met moving back into their banks. We have to create a pathway to do that. It is not normal lending; it has to be something unique given the uniqueness of this situation.
I have already publicly said, and I am happy to repeat that statement, that the banks have an important role to play in facilitating and welcoming switchers from all parts of the financial sector, including from the non-bank sector. There are many inherently good mortgages which may technically be deemed to be a non-performing exposure but which can be cured in that technical sense because the customers are co-operating and paying their mortgages in line with the agreement they have. There may be some mortgages where it is not possible to switch them back because they are deep in arrears or the customers are not co-operating or have not made a payment in six or 12 months. However, in the vast majority of cases, people are making a genuine effort and there is an obligation on the banking sector to engage in a spirit of co-operation and to positively welcome and be receptive to customers in the non-bank sector who are making a genuine effort to pay their mortgages. These customers should be welcomed in terms of a switching application process that leads to successful switching to a much greater degree than we are currently seeing.
Fiscal Policy
Robert Troy
Question:86. Deputy Robert Troy asked the Minister for Finance the key messages of his Department’s recent publication: Future-proofing the Public Finances – the Next Steps. [30039/23]
Michael Moynihan
Question:89. Deputy Michael Moynihan asked the Minister for Finance for an update on his proposals for a long-term savings fund. [30036/23]
I heard the Minister speak some time ago about the need to consider providing for future budgetary demands apart from the annual budgetary cycle. We all know that international events can impact very adversely and quickly on the economic health of a country. Not long ago, we all thought we would not have a war in Europe again. We know the devastating impact and loss of life the savage war inflicted on Ukraine by the Russian regime has had. We have also had the Covid-19 pandemic in the past few years. Does the Minister have a particular timeframe to progress the work on the establishment of a long-term public savings fund?
I propose to take Questions Nos. 86 and 89 together.
I thank Deputy Smith for his question. On 10 May, my Department published a scoping paper titled Future Proofing the Public Finances – the Next Steps, which outlines some of the merits of establishing a long-term public savings vehicle in Ireland. The paper highlights that corporation tax receipts have effectively doubled since just before the pandemic, with the evidence suggesting that much of this is windfall in nature. My Department estimates these windfalls reached almost €11 billion last year and similar windfalls are projected in the coming years. At the same time, demographic-related pressures on the public finances are building. By 2030, age-related expenditure is expected to be between €7 billion and €8 billion higher than it was at the start of the decade and these costs are set to increase exponentially thereafter.
In addition, other structural changes will also require a budgetary response, including financing the digital and climate transitions. Therefore, the key message from the paper is that the benefits establishing a long-term public savings vehicle would be twofold. First, it would help to ensure that potentially windfall corporation tax receipts are not used to fund permanent expenditure increases or tax reductions. Second, such a fund could contribute to meeting known future budgetary pressures. However, it is worth acknowledging that under almost all of the scenarios presented in the paper, drawdowns from such a long-term public savings vehicle would not be sufficient to cover the increase in ageing-related costs. This suggests other reforms to the pension system will be required. Work on proposals for establishing such a long-term savings vehicle is ongoing and will take into account the analysis contained in the Department paper, Future-proofing the Public Finances – the Next Steps.
I assure the Deputy the work is ongoing. I am examining the role windfall receipts are playing in the projected surpluses for the next number of years. How can we meet the needs of our economy and our society into the future, with respect to both demographic costs and climate costs, but also from an investment and infrastructure point of view in the short, medium and long term? I am also looking at the profile of the national debt to see what we can do to ensure our overall fiscal position is sustainable into the future. I welcome the contributions of the Deputy and others across the House to what are important issues for the future of Ireland.
I thank the Minister for his response. We are of course all very glad to have healthy public finances and long may that continue. I am glad the Minister referred to demographics and also infrastructure, especially in his remarks of a moment ago. We hear about the pressure from a demographic point of view due to people growing older, which is always welcome. When delivering public services, we do not ever seem to take into account how we are fortunate to have an increasing population throughout the country of all ages.
The last census recorded a population increase in every county for the first time in a long time. Our population is now in excess of 5 million people and that is a welcome development. The best way to strengthen our economy and the public finances in the long term is to ensure we have modern, up-to-date infrastructure. That is especially important in rural Ireland, where we do not have the road network we need, nor the water supplies or the work space at enterprise centres that can help to create jobs. The more jobs we can create, the more competitive we can help our enterprises and businesses to be. They would then be contributing big-time to the public finances. Let this debate consider demographics, but let it also consider the positive aspects of demographics from the point of view of the need to improve infrastructure in more rural areas in particular.
As Cathaoirleach of the Committee on Disability Matters, people with disabilities must be considered here. We have had a number of meetings and the building of capacity for people with disabilities across the country is hugely important. Over the last number of years the same level of investment has not been there and this area has been slow to get investment because of different regulations and hoops people must go through. We have surplus funding and that is welcome. Moving into Ireland’s future it is hugely beneficial, but we should also use it to ensure we are providing for the most vulnerable in society, including people with disabilities. We have seen many cases with respite and residential units. They must be prioritised as well and funding earmarked.
Following on from Deputy Smith’s point about infrastructure, how are we going to use this funding to future-proof our country? It is important we invest in all regions of the country and especially in roads like the Cork-Limerick road and others that are going to allow investment and ensure economic activity can continue to grow. We must make sure there is public funding into the future.
I thank the Deputies. They made some very valid points. They highlighted that there are many needs today. There are definite needs in the future. The demographic costs are real with respect to pensions, home care, nursing home care and so on. Those costs are real, we need to provide for them in the future and my colleagues have acknowledged that. We already have a significant national development plan, a public capital programme with a budget this year of over €12 billion. We also have the strategic investment fund, which has up to €4 billion available for investments in Ireland on a commercial basis. That offers some scope as well.
I am conscious that in the past when we have entered more difficult economic periods, suffered a shock or entered a downturn, the victim on the budgetary side has often been capital expenditure. We need to examine ways we can ensure we have funding there to ensure capital spending does not collapse in the event of a future economic shock.
I acknowledge the points the Deputies have made. Deputy Moynihan made the case for investment in disabilities and the need for more capacity there. Deputy Smith made the case for more investment in rural Ireland. I am signalling there is a willingness to do more on public capital investment. The Minister, Deputy Donohoe, is working closely with his colleagues across Government in the context of the public capital spending profiles and the national development plan. It will be a consideration in what we do overall as a Government with the projected surplus over the next number of years. The whole issue of capital investment is an important part of that mix overall.
I thank the Minister for his further response. He will recall that in our parliamentary party’s discussions on infrastructure the point has often been made that delayed investment frequently costs the State far more, so when the public finances are in a position to provide capacity to do more as a State then that is the time we should be doing it.
The road network is of critical importance from the point of view of everyday living. It is of critical importance from the point of view of jobs and enterprise. In County Cavan alone, 93% of the roads are non-national. By and large, our large and small enterprises are sited along regional and local roads. These are indigenous companies that are providing very valuable employment. Every day they have a truck delayed along a poor road it is costing them money. I remember arguing with others for the advancement of the M3. I got some of the major companies in Cavan to do a survey of the delays experienced by their vehicles on the old N3. The cost delays on roads were causing to business was frightening. The argument is well made that we need additional investment in out road network.
I thank the Deputy and acknowledge he has been consistently making the case for more investment in road infrastructure, and not just new infrastructure but maintenance of our local and regional road networks. As he knows, there have been underspends in a number of Departments in recent years. We have engaged with the Minister for Transport, Deputy Ryan, on the opportunity presented over the summer months for additional maintenance and restoration work to be done on our road network around the country. The Department is actively examining that issue and we hope there will be some positive word on that shortly. I acknowledge the Deputy's overall point on the need for continued investment. We are in a good position in terms of running budget surpluses. Looking over the next number of years, we need to make the most of the opportunity we have to make the finances safer for the future so we can avoid decisions that would otherwise need to be made in the coming years. There may well still be difficult decisions, but we must balance that with what more we can do in the short to medium term to improve infrastructure all over Ireland.
Departmental Schemes
Pauline Tully
Question:87. Deputy Pauline Tully asked the Minister for Finance for an update on the recommencement of the work of the Disabled Drivers Medical Board of Appeal; if alternative facilities and secretarial services have been established since the National Rehabilitation Hospital indicated that it wishes to cease its involvement with the scheme; the reasons given by the NRH to cease its involvement with the scheme; and if he will make a statement on the matter. [30174/23]
I ask the Minister for an update on the recommencement of the work of the DDMBA, if alternative facilities and secretarial services have been established since the NRH indicated it wishes to cease its involvement with the scheme, the reasons given by the NRH to cease its involvement with the scheme and if he will make a statement on the matter.
I thank the Deputy for raising this question. Following the resignation of all previous DDMBA members in November 2021, I had hoped that a new DDMBA would have been established by now and that the appeals process would have recommenced.
The Deputy should note that five members are legislatively required for a functional board, however the recruitment of these members has proved to be challenging. In this regard, four expressions of interest campaigns have been organised by the Department of Health, three of them last year and one in April of this year to replace a previously-nominated person. The necessary five members have been nominated by the Minister for Health, with Garda vetting currently being undertaken for the most recently nominated candidate. The process was completed for the other four candidates at the start of the year.
An added complication to the recommencement of the appeals process is that in February of this year, the National Rehabilitation Hospital, NRH, the body that has hosted the appeals board since 2000, indicated its intention to withdraw its services with immediate effect. Officials from the Departments of Finance and Health have been actively seeking to implement new arrangements since, including engaging with the NRH. Some progress has been made on this matter insofar as the NRH has indicated a willingness to once again host the appeals board and the Department is working actively with the NRH to ensure that issues in relation to processing funding are quickly addressed in order that the consideration of appeals can be quickly resumed. It is important to note that requests for appeal hearings can still be sent to the appeals board secretary based in the NRH. I acknowledge the willingness of the NRH to engage with my officials and those from the Department of Health with a view to finding a solution and getting the appeals process back up and running.
Assessments for the primary medical certificate, by the HSE, are continuing to take place. In this regard, an important point to make is that even though there has been no appeal mechanism since the previous board resigned, applicants who have been deemed not to have met one of the six eligibility criteria required for a certificate are entitled to request another assessment six months after an unsuccessful primary medical certificate assessment.
I welcome the fact that the NRH is willing to discuss coming back on board with the scheme and that the board is almost in place. There have been ongoing problems with the scheme, however. It is 18 months since the board resigned. They resigned because the criteria for admittance to the scheme are far too stringent. A review of the scheme had been promised by the Minister's predecessor, which never took place. That is what led the board members to resign. I welcome the Minister's announcement this week of additional relief under the scheme. The reliefs offered under the scheme are not the issue. They are all very welcome. It is admittance to the scheme that is the problem. The transport working group's final report, which was published in February of this year, acknowledged that the scheme is outdated and should be replaced by a needs-based assessment. We have now moved on several months and we need to see progress on this issue. It has not happened. Can the Minister give a date for when a new scheme will be put in place to replace what the Minister has admitted is and the transport group has identified as outdated?
As the Deputy said, the working group reported back in February and reached the conclusion that the existing scheme is outdated. It needs to be replaced with a needs-based, grant-based scheme. Last week in the House, in responding to the report from the Ombudsman, the Taoiseach gave a commitment to convene a meeting of all the relevant Departments to work now on an solution urgently. I expect that meeting will happen very shortly. My own officials stand ready to assist in any way we can. At the moment we have a tax-based scheme. The primary medical certificate terminology and criteria are out of date. That is generally accepted. The change I made this week will provide extra support to a very small number of people who need substantial adaptations carried out, generally abroad. It is not the full answer; I would readily acknowledge that. I am focused on getting the appeals board back up and running and on ensuring that we continue to administer the tax scheme while at the same time supporting the work of the Taoiseach and other Departments to put in place a new, appropriate, fit-for-purpose grant scheme. We will do all we can to help in that process.
The Minister referred to the Ombudsman's report. The one published last week is only the latest of many which have been critical of the various transport schemes for disabled people. The mobility allowance and motorised transport grant were found to be inequitable by an Ombudsman's report back in 2013, ten years ago. Instead of addressing the inequities at the time, the Government suspended the schemes with a promise to replace them with something much more equitable. It has not happened. When the Minister says this is going to be treated with urgency, it is very hard to see that happening when it has taken ten years to replace those schemes. People are applying for the disabled drivers and passengers scheme because there is no other option there. Not all of those people will qualify because the criteria are so stringent. People are applying for those schemes who do not need or want to drive or obtain a car. We are not addressing the needs of people who live in areas where they could have the mobility allowance or motorised transport grant to assist them. In fact, it is more inequitable now because people who were in receipt of the mobility allowance prior to 2013 are still receiving it and those who should qualify have not been able to apply or receive it. It is more inequitable than it was to start with.
What is needed here is a whole-of-government approach. Dealing with these issues does not sit in any one silo or Department exclusively. I welcome the initiative the Taoiseach is undertaking to pull together the key Departments to devise a coherent and comprehensive response to the working group report and address the issues the Ombudsman has justifiably raised. This has taken too long. The Government is now focused on bringing forward solutions, which will involve a new scheme. In the meantime, I will continue to ensure the existing scheme is administered. We have about 30,000 people benefiting from that scheme at the moment. We need to get the appeals board up and running. In the interests of natural justice, people deserve to have an appeal mechanism in place even though the success rate is very low, as the Deputy knows, because the criteria are so stringent. It is outdated, including the terminology. That is my focus, ensuring we continue to operate the scheme in parallel with the development of a new one, which I expect will now happen quickly.
Budget Process
Brendan Griffin
Question:88. Deputy Brendan Griffin asked the Minister for Finance the date he expects to announce budget 2024; the factors he will consider when deciding the timing of the event; and if he will make a statement on the matter. [30085/23]
This is a question about the timing of the forthcoming budget, whether the Minister could inform the House if a decision has been made on its timing and the factors that are being considered.
I thank the Deputy for his question. While no decision has yet been formally made by the Government, the normal date for the budget is the second Tuesday in October and I anticipate that will be the date. The decision will be formally made by the Government when I and the Minister, Deputy Donohoe, bring a memo to Government to set the date. I expect we will do that very shortly.
I thank the Minister. I welcome his brevity and clarity. I felt that last year the September budget was a positive precedent. September is a month of renewal. A lot of people are planning ahead and the earlier budget helped people to plan for the winter and the months ahead. It should be considered and would be a positive development if we established September as the regular month for the budget. I remember way back coming home from school and there was no "Dempsey's Den" on television because the budget was on, and it was January. That is going back a long time ago now. Then we moved it to October. I certainly feel it would have been a very healthy practice to maintain a September budget and ask if it could be continued and that we do it again on the last Tuesday in September.
An enormous amount of work has to go into the development and preparation of a budget on both the expenditure and the taxation sides. The Minister, Deputy Donohoe will have to go through a detailed round of Estimates, discussions and negotiations with all of his colleagues. The preparation of the documentation is quite a process. On my side, the taxation side, this year we have a particularly extensive Finance Bill because of the introduction of pillar 2 of the OECD base erosion and profit shifting, BEPS, agreement on corporation tax. That will add substantial additional text to the Finance Bill. My officials are working very closely with the legislative division within the Revenue Commissioners on the development of that Finance Bill. There is a huge amount of work to be done. The intention would be to go with the normal date.
Question No. 89 answered with Question No. 86.
Insurance Industry
Ruairí Ó Murchú
Question:90. Deputy Ruairí Ó Murchú asked the Minister for Finance if he can detail the work being done with local authorities in regard to extending insurance for local community events and festivals; and if he will make a statement on the matter. [30110/23]
Will the Minister detail the work being done with local authorities? He spoke about insurance companies that are working with the local authorities. There was talk of extending this for local community events and festivals. We all know the issues that exist in regard to public liability insurance. This is not the first time we had this discussion. Any updates relating to that would be helpful.
I thank Deputy Ó Murchú. The Government is aware and we have discussed the difficulties being experienced by a small number of sectors in insuring some of their events and festivals. We do not take lightly the challenges that they and other areas have experienced with regard to the availability and affordability of insurance. We engaged with a range of stakeholders, including Fáilte Ireland, to understand the depth and scope of that. As the Deputy is aware and we said before, neither the Minister for Finance nor the Central Bank of Ireland can interfere in either the provision or the pricing of insurance products to specific businesses or individuals. That position, as we have discussed, is reinforced by the EU Solvency II directive insurance framework.
Local authorities are responsible of course for their own insurance provision, including the terms and conditions of same and the Government has no direct role in that regard. However, both the Minister, Deputy Michael McGrath, and I, have raised the Deputy’s concerns and similar issues directly with the CEOs of insurance firms, including with industry representatives such as Insurance Ireland. Furthermore, both I and officials from the Department have spoken to providers in the activities and festivals sectors and are aware of some potential developments, which may be of assistance. We will continue to work on that in the coming weeks and I will continue to monitor the area as it progresses. It has been a feature of the Irish insurance market historically that some smaller sectors have traditionally been dependent on specialist UK providers passporting into Ireland. As a consequence of the UK’s decision to leave the EU, that practice ended. It became much more expensive and difficult for niche underwriters from the UK to provide their products here. That is beyond the direct control of the Government. However, we have tried to help in other ways. I have spoken with the Deputy before about assisting various sectors in coming together about pricing insurance difficulty. I might pick that up on the supplemental.
We all see the benefits, where it can be done, of groups coming together. That is not always feasible for all sorts of businesses and organisations. However, we all know the issues that have existed for many years. We can talk just about companies that deal with inflatables, before we deal with the entire remit of adventure tourism and all the stuff in the public domain in regard to risking closure. It is an absolute necessity that pressure is maintained on insurance companies. Obviously, I would like to see Deputy Doherty's legislation come into play because we know there has not been enough impact in regard to the personal injury guidelines and the fact that there are fewer claims and all those significant pluses. I would still like to know when the duty of care legislation will be done, dusted and enacted. Then there will be a need to make sure that the impact is felt by those who are paying huge premiums at this time. The Minister spoke before about outsurance coming to this State. Has she seen anyone else, particularly anyone looking at offering insurance within the public liability sector, rather than just home and motor insurance?
On the duty of care legislation, the amendment of Occupiers' Liability Act, as the Deputy is aware, is being led by the Minister for Justice. We hope that it will be passed by the House, should time be available at both Houses, before the summer recess. That is certainly the intention. Overhauling that legislation should help to address the "slips, trips and falls" piece and it is an important piece of the conversation we are having around adventure tourism and the provision for festivals and so on. There is a piece of work to do over the next number of weeks and over the summer. I hope to be able to update the Deputy in a more complete way in the autumn. I hope he might give me the time to do that. The programme of work we are doing has yielded results. We spoke before about the impact of motor insurance and where premiums have been in relation to that. We have the Office to Promote Competition in the Insurance Market, which I chair.
The Deputy is correct to highlight outsurance entering the market towards the end of that year. This is subject to Central Bank of Ireland approval and I understand an application has gone in. Also, Coverys International and Revolut will also provide enhanced competition to the established providers. We also note last week's announcement that Generali Italia, which is the largest Italian insurance group, will be buying Liberty Insurance's operations here. It is a large global insurer. It called Ireland "an attractive market", which is to be welcomed. I hope it will be able to expand here.
I look forward to hearing hopefully good news in regard to those developments. We know they are necessary. There is a huge number of businesses under severe pressure at this point in time in regard to premiums. Local community groups with which I deal, such as the WATCH club in Dundalk that offers tandem bikes to take kids with disabilities and others on the tandem, are having difficulty. Those involved with Cycle Ireland are insured but those dealing with a kid who may show up to an event, are not covered. Hopefully we will get something like that worked through. There is no end to the issues that are being caused in this regard. It is really good news in relation to more players looking at this particular market. We need to keep the insurers' feet to the fire. However, are we getting the players that will make a significant impact in regard to public liability insurance? Are any of them making the necessary moves?
I thank Deputy Ó Murchú for placing this question. I have a conflict of interest to disclose. As a director and promoter of a music festival, we hold our breath every year when we have our music festival because insurance is a major issue. If there are claims, that could put a not-for-profit festival out of being. It is apt that the Deputy has raised this issue in regard to what are smaller festivals and community events and the challenges they have in terms of insurance. I agree with the Minister that Ireland is becoming a far more attractive environment in regard to insurance, given the reforms that we have seen. Unfortunately, however, we are not seeing the level of new entrants in terms of competition in public liability that we need to see. Some of those the Minister of State mentioned are looking at motor insurance. However, we need to see an increased level of competition. Will the Minister give us an update in relation to the Office to Promote Competition in the Insurance Market that has been ongoing for some time now, particularly and solely focused in terms of public liability insurance? Is there a pipeline of new entrants? Is there concern in relation to some of the existing players here, some of the big sister large players, maybe leaving the market?
On the public liability piece, the legislation is a crucial part of that. I do not believe that the insurers will have any conversation about barriers in regard to it after that. We have that conversation with existing providers and with new providers coming in. We have found solutions. It is not all bad. We found solutions by working with groups in various areas, as the Deputy said, such as inflatables hire, equestrian activities, childcare and non-standard buildings. Incumbent providers are expanding their product offerings into areas such as SMEs, agriculture and renewables. That is a sign of confidence. We have to acknowledge that progress is working. The conversation about more providers coming in is very important. We had outsurance come in, such as Coverys and Revolut. We are looking at Generali Group and how that might be.
The legislation that Deputy Doherty introduced last week to interfere in the commercial decision-making of insurers would be a direct barrier to the decision-making to come in. Ireland would no longer be an attractive market if the Government was going to require insurance companies to make commercial decisions in a particular way. We have to have a complete conversation about that.
Defective Building Materials
Pearse Doherty
Question:91. Deputy Pearse Doherty asked the Minister for Finance for an update on his engagement with mortgage lenders and representative bodies with respect to forbearance measures, financing solutions and the mortgage loan treatment of mortgage holders where their loans are secured against properties affected by defective blocks; and if he will make a statement on the matter. [30178/23]
I want again to raise the difficulties being experienced by homeowners in my own county of Donegal and elsewhere in regard to those affected with defective blocks. They were failed by the Government scheme, which failed to provide 100% redress. Despite this, homeowners are doing their best to work with the scheme and rebuild their homes and lives. However, serious problems remain from funding shortfalls they face around terms and conditions to their mortgage agreements. I acknowledge the Minister agreed to meet with the group and I appreciate that, in relation to our last engagement, when he indicated that. I know that has happened. Will the Minister update the Dáil on the engagement he had with the lenders and with the representative group to address these problems?
I met the banking and insurance defective block redress focus group yesterday to discuss its concerns, which included the issues raised by the Deputy. The focus of the meeting was on mortgages. I understand the very difficult situation faced by homeowners whose houses are affected by defective concrete blocks, and the Government is determined to assist households impacted by this terrible situation. As the Deputy is aware, the Government response on this issue is led by my colleague the Minister for Housing, Local Government and Heritage.
I understand from his Department that, following the enactment of the Remediation of Dwellings Damaged by the Use of Defective Concrete Blocks Act 2022, the necessary regulations under that Act are now close to finalisation. While I do not have a regulatory role in respect of banks and other mortgage creditors, that is an independent matter for the Central Bank, I believe the existing consumer protection regulatory framework is strong and should be fully applied to assist households impacted by defective blocks. This regulatory framework seeks to ensure that mortgage creditors are transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle.
In particular the Central Bank code of conduct on mortgage arrears, CCMA, requires regulated entities to have fair and transparent processes in place for dealing with borrowers in, or facing, arrears on a mortgage secured on a primary residence. This applies irrespective of the particular issue that is giving rise to the mortgage difficulty. All CCMA cases must be handled in a sympathetic and positive manner by the regulated entity and the entity must explore all of the options for an alternative repayment arrangement or any other relief method which may be offered by that mortgage creditor.
In relation to any request for new credit, while the decision on such applications is a commercial matter for the lenders within the regulatory framework, such applications should be processed and assessed in an efficient manner, in line with the timeframes as set out in the consumer protection code. Perhaps in subsequent replies I can give a flavour of the issues we discussed yesterday.
I thank the Minister for meeting with them. This is an ongoing process. When banks were issuing this loans, no one foresaw that we would see a scenario whereby thousands of homes need to be demolished and rebuilt. I know some of the individuals who are already in the process of doing so. It means they have to get bridging finance in the region of €70,000. Many families are not going to get that type of a loan. There is a serious issue regarding the application of the scheme despite its flaws and its faults. There has to be some type of bespoke arrangements within the banking sector to recognise that there are unique sets of circumstances here where houses that underpin these mortgages are going to be knocked down and rebuilt. There are also issues in relation to the terms and conditions, bridging financing and to the fact that the Government is not providing the 100%. Many of the people involved are at pension age. They have to knock down their homes and they do not know where they are going to get the rest of the money. The banks have a responsibility to put in place structured and affordable forbearance measures for them. We have engaged with the banking sector in relation to this. I have engaged with the Central Bank. I know the Minister has met the group. Has the Minister now had these conversations with the banks? I know it was only yesterday that the Minister met the groups. Is the Minister going to have those conversations with the banks and the Central Bank and what action does he plan to take?
I did engage with Banking and Payments Federation Ireland, BPFI, in recent weeks on these issues. I know that BPFI met the mortgage group on 29 May and provided me with an update from that meeting. Having met the homeowners yesterday on the specific mortgage issues, I think the asks they have are quite reasonable in the main. They want dedicated contact points in place within the institutions concerned. Bridging finance or interim funding will be an issue for many of them. We will of course discuss this issue with the banking sector. The group also raised the issue of covenants and some of the terms of the existing mortgage clause. For example, where a home is demolished because of defective blocks, it should not allow the bank to essentially nullify and call in a mortgage. The group's issues are legitimate in the round and we will engage further now with the sector. We will certainly keep the channel open and continue to work with the group on the particular mortgage issues they raised with me.
I welcome the Minister's engagement on this issue. I say this with respect but this is an example of how a scheme is devised by the Government without understanding how it flows through. We now have a situation, as I said, where people have to find bridging finance of €70,000 and more to fund the rebuild of their homes. The mortgage terms and conditions, which are legally binding, say that if a person demolishes their home, he or she needs the permission of the bank. For the bank to give that permission, it needs assurances that the home can be rebuilt in full. There are also questions about where a person can get the rest of the money. We need the Government and the banking sector to come up with a unified scheme. I know this scheme is being held now because there are still issues in relation to the new scheme. We need to see that published as soon as possible but it needs to be correct. There is no point publishing a scheme that does not work in reality. That is why I urge the Minister to talk to his Government colleague about the new scheme to make sure that the issues being experienced by homeowners are addressed. The Department needs to be talking to the banks to make sure that an all-in-one system is put in place.
The real problem here is that the Government is asking almost 4,000 people to be self-builders. We should not be asking people to demolish their own homes and rebuild them. The Housing Agency should be dealing with this from start to finish.
I understand that there is a further meeting today between the Department of Housing, Local Government and Heritage and the homeowners' group with the view to getting the scheme up and running. I also understand that BPFI is going to meet the Department as well in order that they fully understand the intricacies and the detail of how the scheme will operate. We also need to ensure that the non-bank sector is involved here because some of the homeowners have mortgages with the non-bank sector. The starting point here should be an acknowledgement by everybody that all of these homeowners are potentially vulnerable clients and need to be treated accordingly. They were at pains to emphasise to me, as I know they have done many times to the Deputy in his constituency, the anxiety, stress and anguish they have to live with every day. If I can help in any way, as I have said before, to make the process more palatable and accessible for them, I will do so. I will take an ongoing interest in this and I will work with the Deputy and his colleagues and the homeowners action group to try to deal with these mortgage issues as best I can.
Inflation Rate
Aindrias Moynihan
Question:92. Deputy Aindrias Moynihan asked the Minister for Finance his views on the continuing high inflation and the eroding real wages in Ireland, with disposable incomes and living standards continuing to be under strain; and if he will make a statement on the matter. [30149/23]
Inflation has put huge pressure on household incomes over the last two years. People are struggling to make ends meet. Figures from the European Commission indicate that Ireland is now the most expensive country in the EU, with Irish consumers paying more for goods and services. Will the Minister outline the plan he has to deal with such stresses and strains on people across the country?
Over the past year, Ireland, along with almost all other advanced economies, has had to grapple with the effect of surging global energy prices triggered by the Russian invasion of Ukraine. These price pressures quickly spread to non-energy goods and services, creating broad based inflationary pressure. In practical terms, it has squeezed real incomes of households and has also come at a time when many have had to contend with tightening financing conditions. Since last summer, the ECB has increased interest rates on eight consecutive occasions. Although necessary to avoid inflationary pressures becoming entrenched, this has raised debt servicing costs for many households.
Despite these formidable challenges, the timely and targeted nature of Government supports has helped ensure the resilience of the domestic economy. Nowhere is this resilience more clearly evident than in the labour market, where there are now more people employed than ever before and the unemployment rate has fallen to just 3.8% in May, a record low. The strength of the labour market has supported broad-based growth in the domestic economy at the start of this year, with modified domestic demand increasing by 2.7% in the first quarter.
I am also pleased to highlight that inflation has passed its peak and is now on a downward trajectory. Having peaked at 9.6% this time last year, the latest data show that inflation had fallen to 5.4% in May, a decline of more that four percentage points. Looking ahead, my Department expects the inflation rate to fall further over the remainder of the year. This, in turn, should support a return to growth in real incomes. Of course, significant challenges remain on the horizon, including increasingly binding capacity constraints with the economy at, or possibly beyond, full employment. Core inflation remains persistently high, while the risk of a wage-price spiral should not be discounted. My Department is cognisant of these risks and will continue to monitor all of these developments closely.
First, I wish to acknowledge the measures that the Government took in dealing with the cost of living issue. Measures such as those to help with energy costs and the school bus ticket, among many others, were very welcome. They helped with the more intense pressure. Inflation has eased, as the Minister said.
It still remains high and the pressure is on people. Food prices, for example, in May were running 12.5% higher than they had been in May of last year. Mortgage interest rates have gone from 0.5% to 4% over the last year. Households have to find several hundred euro extra each month, which is very difficult. As the Minister says, real wages have been dropping by €76 over the last two years, according to a survey by the Unite trade union. This pressure on people’s income means that people will be looking either for wage increases or possibly the easing of tax burdens. I want to try to get an understanding of what direction the Minister is looking at in supporting them.
The truth is that it will be through a combination of measures. Incomes will rise next year. I believe that in the main incomes will rise ahead of the rate of inflation next year. In real terms, people will make gains relative to the cost of living next year. The last 12 months have been really difficult for many people. Even though there was a whole range of cost-of-living measures, costing approximately €12 billion, we acknowledge that the full impact of inflation was not offset by those measures for everyone. However, there will be an opportunity, as we move to a lower, more normal inflation environment over the next 12 months and beyond, for people to make real gains in disposable income.
There will be changes in taxation to put more money back into pockets. There will be a core welfare package to try to improve the incomes of people who are on fixed incomes. We will also continue to examine what more we can do in areas such as childcare, education and healthcare costs to reduce the overall burden that people are facing in their day-to-day lives. It will be a matter of a combination of measures. There will hopefully also be the agreement of a new public service pay deal over the next number of months. It will therefore be a combination of pay, reducing the burden of tax, reducing charges and increasing people’s incomes through the decisions taken by the State.
Is féidir teacht ar Cheisteanna Scríofa ar
www.oireachtas.ie
.
Written Answers are published on the Oireachtas website.