Priority Questions.
86 Deputy Richard Bruton asked the Minister for Finance if the proposed banking inquiry will have constraints on its investigations or on the publication of findings; and if he will make a statement on the matter. [5683/10]
View answerThe Government has decided to establish a framework for a comprehensive investigation into the causes of the systemic failures in the Irish banking sector which culminated in the need for the State intervention in the sector. The framework for investigation will have two stages. The first stage will consist of the preparation of two separate preliminary reports from the Governor of the Central Bank and from Mr. Klaus Regling, a recognised international expert.
The second stage of the investigation will be the establishment of a statutory commission of investigation, which will be chaired by a recognised expert of high standing and reputation. The terms of reference of the commission will be informed by the conclusions of the two preliminary reports. It is envisaged its remit will be to examine and report on the causes of the systemic failures in the Irish banking sector which culminated in the need for the State guarantee, the recapitalisation programme, the nationalisation and rescue capitalisation of Anglo Irish Bank and the establishment of the National Asset Management Agency in order to preserve financial stability.
The terms of reference will not be set until we have the benefit of the preliminary reports from the Governor of the Central Bank and Mr. Regling and the views of the Oireachtas on them. In examining these issues, the commission of investigation will have the powers available to it under the relevant legislation, which the Deputy is aware are substantial. The report of the commission of investigation, when completed, will be laid before the Oireachtas for further consideration and action by an appropriate Oireachtas committee.
I am satisfied the mechanism for inquiry contained in the Commissions of Investigation Act 2004 provides a robust framework which has already been tested with regard to investigation of matters of significant public concern. This framework will allow the causes of the systemic failures in the Irish banking sector to be identified and fully investigated by the proposed commission of investigation.
I thank the Minister for his reply. When he uses the word "culminated" in regard to the bank crisis, is he still talking about a September 2008 end with respect to the investigation? Do we not have to learn whether the response to this crisis was adequate, just as much as we need to learn whether the preventative strategy in place before the crisis broke was adequate? Why should people's accountability end when the crisis breaks? Was it not the case that both the regulator and the Governor of the Central Bank were assuring the public that the banks had no solvency problems throughout the period after September 2008?
Do we not need to investigate the adequacy of the information flow to those people who are so advising us? I put it to the Minister that it is equally important that we learn whether the responses we now make to the crisis are correct as to look back in history to whether a preventative strategy could have been better. Will the Minister allow the investigation to extend beyond that arbitrary date that the Government has used in the past?
With respect to events or parties involved in the collapse of the banking and property sector, I have already made it clear and set out in Dáil Éireann that any wrongdoing which has come to light since September 2008 and any associated failure in the regulatory system to respond to that which was a continuation of previous practices should of course come within the scope of the inquiry of the commission of investigation. That is my view and I take it that the preliminary reports will be conducted on that basis.
With regard to interventions by the Government and by this House through the enactment of legislation, these matters were fully debated in this House at the time. The assessment of the adequacy of the response to the crisis is an entirely distinct exercise from an assessment of the evolution of the crisis in itself. It is quite clear that by September 2008 the crisis was of such gravity and scale that the nature of the various interventions which the Government has been obliged to make was unavoidable.
If I ever had the chance to be in the Minister's position, I would commit to open the inquiry. Although these measures have been fully debated, there have been honest different opinions as to which strategy was best, whether we made mistakes and whether the information provided to the Minister was adequate for him to make informed decisions. We need to investigate that if we are to learn how to prevent a recurrence in the long term. We must know that the response mechanisms were adequate.
Does the Minister agree, for example, with the Government's fateful decision to include subordinated bondholders in the guarantee? That deserves to be investigated because there is much honest difference of opinion in that respect. The Minister may have been right in his decision but do we not need to know if these decisions were correct, well-founded and based on evidence of the time? Is the evidence presented to the Minister to influence his decision not important to consider as part of the learning exercise?
We will be in a clear position to deal with the issue of subordinated debt on 29 September, and a very exact computation can be made at that stage of what cost, if any, that element of the guarantee occasioned to the State. On the information at my disposal to date, it is an issue of marginal significance.
87 Deputy Joan Burton asked the Minister for Finance his views on projections that credit institutions operating here, including those covered by the bank guarantee and participating in the National Asset Management Agency, are likely to increase lending margins on mortgages and other loans by up to 100 basis points over the coming year; if his attention has been drawn to the financial pressure this put on hard-pressed households and businesses; and if he will make a statement on the matter. [5458/10]
View answerThe level of mortgage interest rates reflects a broad range of factors, including European Central Bank base rates, deposit rates, market funding costs, the competitive environment and an institution's overall funding. Decisions on the level of interest rates are taken autonomously by commercial lending institutions and are not subject to direction by the Minister for Finance.
I have already made my views known on the decision by Permanent TSB to increase variable interest rates by 0.5% with effect from last Monday. I repeat that I am disappointed by this decision. Unfortunately, the increase reflects commercial market realities, including the increased cost of accessing funds, notwithstanding the State guarantee.
A balance must be maintained by the Government between supporting banks through the bank guarantee scheme and other financial support incentives and broader policy objectives while at the same time ensuring that the daily running of these institutions recognises commercial realities. Interest rate increases will place a financial strain on some affected mortgage holders. Accordingly, in the revised programme for Government we have indicated that we will be introducing new measures to protect families having difficulties with their home mortgage payments, examining ways of expanding existing options available for dealing with debt and examining ways of expanding existing State-sponsored mortgage support measures.
I approved the setting up of the interdepartmental mortgage arrears review group, chaired by one of my officials for the purpose of bringing together all relevant information in the Departments and examining options, including initiatives in other jurisdictions, relating to support for home owners facing the problems of mortgage arrears and repossessions.
The Law Reform Commission, which is under the aegis of my colleague, the Minister for Justice, Equality and Law Reform, is addressing the issues of debt management and enforcement. In addition, I have discussed with Cabinet colleagues the broadening of the membership of the mortgage arrears review group and I will bring proposals to the Government in that regard.
On the position of mortgage holders generally, the Irish Bankers Federation published a statement of intent on 10 November 2009, agreed and supported by all federation members, which provides further reassurance to home owners genuinely unable to maintain mortgage repayments on their principal private residence.
Additional information not given on the floor of the House.
In addition, the IBF oversight committee on implementing the statement of intent includes representation from the Money Advice and Budgeting Service, MABS. This co-operative approach follows on from the IBF and MABS operational protocol on consumer debt, put into effect in September 2009, which will enable them to work together effectively when dealing with problems of personal debtors who approach the MABS service for assistance.
Other arrangements in place to assist consumers who have fallen into arrears or are in danger of falling into arrears include the mortgage interest supplement scheme, which provides assistance where the mortgage relates to a person's principal private residence, and MABS, which provides a national, free, confidential and independent scheme.
The Financial Regulator's consumer protection code requires that a regulated entity must contact the consumer as soon as it becomes aware that a mortgage account is in arrears and that it must have in place a procedure for handling accounts in arrears. The Financial Regulator also has in place a code of conduct on mortgage arrears which applies to mortgage lending activities to consumers in respect of their principal private residence in the State. This is mandatory for all mortgage lenders registered with the Financial Regulator.
I note the Minister is very fond of the word "disappointed" with regard to the wrongdoing of Seán FitzPatrick in the window-dressing of the balance sheet of Anglo Irish Bank at the end of a year, as well as the provisions of Permanent TSB to lend money. That was probably one of the most outrageous events in the history of Irish banking when the balance sheet of a major bank was altered, yet all the Minister could say was that he was disappointed. The Minister has again told us today that he is disappointed. Is he disappointed that every Irish banking institution appears ready to increase mortgage lending rates by 100 basis points? Would he agree that these mortgage rate increases are separate to the likely 100-150 basis point increases that are coming down the road from the ECB? Within a relatively short period of time, it is likely that many Irish mortgage holders will be hanging on by their fingernails. Does the Minister agree that keeping a roof over the heads of Irish families has to be public policy, especially when we have already bailed out the banks and will be doing so again?
There are no indications of any imminent increase in rates at the European Central Bank, but the rates are at very low levels and it is difficult to envisage interest rates remaining at those levels in the medium term. Most Members would recognise that. There is no indication of an imminent change on the part of other Irish banks, but any decision they take will be in the context of the commercial setting in which they operate and the cost of funds to them.
I agree with Deputy Burton's point on the core issue, and that is why there are commitments in the programme for Government — which I outlined in my reply — that keeping the roof over the head of every Irish homeowner is an important policy objective for this Government. That is why we have set up the interdepartmental committee and why we have proposed to broaden its membership. I will be bringing proposals to the Government in that respect in a few weeks.
This crisis is affecting hundreds of thousands of families, many of whom are also facing severe salary cuts. I received a letter yesterday from a public servant who is going to private lenders to borrow in order to meet mortgage payments. Many of the private finance companies are charging a fee of €30 for every €100 borrowed, but that is the only recourse that many people have, and it is effectively money lending through finance companies.
The Minister referred to a committee in his Department that will deal with mortgage difficulties and mortgage arrears. Is the Minister suggesting, following weekend interviews by the Minister for Communications, Energy and Natural Resources, that he has made contact with Deputy Ryan and invited somebody from his Department to be part of this committee? We have never heard about the make up of the committee. There is no information available and the Taoiseach seemed to be completely at sea, as no proposals had come to the Government about mortgage difficulties.
The interdepartmental committee is up and running. The group's terms of reference include consulting with various expert groups as well as examining options to improve State support for homeowners with mortgage arrears, including schemes in operation in the US and the UK. The interdepartmental group is made up of public servants. I discussed the existence of the group with the Minister last week and I indicated to him that I would be bringing proposals to the Government to broaden the membership of the group. I said that in my reply already.
Would that include his representatives?
I would not have thought so, because his Department would not be of direct relevance in this area. However, there was such discussion and I will be bringing proposals to the Government on the issue.
We previously discussed a two year moratorium. The moratorium currently available is very short and sub-prime lenders do not offer it. Has the Minister done anything about extending the moratorium to two years, as we requested?
All these matters are under consideration at the interdepartmental committee.
88 Deputy Kieran O’Donnell asked the Minister for Finance his views on whether performance bonuses for certain senior public servants should be regarded as core pay; and the reason he believes the suspension of performance bonuses should allow high paid public servants take a lower pay cut from 1 January 2010. [5681/10]
View answerPerformance-related pay, while not part of the basic salary of assistant secretaries and deputy secretaries in the Civil Service and of related grades in other parts of the public service, has formed part of their remuneration package since 2001, on foot of a recommendation by the review body on higher remuneration in the public service in its report No. 38. The review body recommended that 10% of the bill for the grades would be set aside for performance-related payments. The Government accepted the recommendation. Accordingly, while the payments to individuals varied, the average payment was 10% of salary. It was decided in 2009 that the scheme would be terminated, but this was subject to discussion on the implementation of the decision with the relevant staff association.
It is not the case that the reduction for the grades in question is less than for other grades. In applying the recent reductions in pay, the Government considered that account had to be taken of the reduction in remuneration for assistant secretaries, deputy secretaries and related grades arising from the termination of the scheme of performance-related pay. In plain language, we decided to look cumulatively at the losses suffered by public servants in 2009. Otherwise, the total reduction in remuneration for these grades would have been greater than those for other public servants, including higher paid groups at the level of Secretary General or above. This would have been particularly unfair, given that the review body noted in its report that uniquely among all the grades they benchmarked against counterparts in four other countries, the salary level for assistant secretaries and deputy secretaries grades was broadly similar or lower.
In these circumstances, the Government decided that the reductions should comprise both a reduction in the salary scale and the termination of the scheme of performance-related pay that was previously payable to the grades. The resulting adjustments, including the effect of the termination of the scheme of performance-related pay, produce significant reductions in remuneration of 14% in the case of the grade of deputy secretary and 11.8% in the case of the grade of assistant secretary. These reductions are higher than those applying to other groups at the lower salary levels and significantly higher than the minimum reduction provided for under the legislation of 5%.
It is a fact that the scheme of performance-related pay provided an average payment of 10% of salary, although there were variations in the amounts paid to individuals. Therefore, this was an intrinsic part of the pay package for the grades and the termination of these payments cannot reasonably be ignored.
The Minister appointed a review body on higher remuneration in the public sector to look at the salary scales of higher paid public servants. The body recommended an 8-12% cut in salary for higher paid public servants. It did this on the basis of their basic salary, but did not take their bonus into account. The Minister announced the budget on 9 December and brought in the Finance Emergency Measures in the Public Interest (No. 2) Bill 2009 on 15 December. In both cases, he basically stated that he would implement the recommendations of the review body. What change took place between 18 December, when the Bill went through the Seanad, and 23 December, when the circular was issued?
The Taoiseach stated that we cannot undermine the budget, while the reversing of budgetary decisions made two months ago is not an option. The decision to have an equitable system where the recommendations of the review body would be implemented was taken on 9 December. The Minister reversed that decision under the darkness of Christmas on 23 December via the circular. Furthermore, he will rely on section 6 of the Act, which states that exceptional circumstances will apply. When he spoke in the Dáil on 15 December, he stated that it was intended to exercise this power sparingly, and only when just and equitable. Does the Minister regard this as just and equitable? Why did the Minister not take on board the recommendations of the review body? Will the Minister explain what happened between Friday, 18 December, when this was put through based on the recommendation of the review body and Wednesday, 23 December, when the circular was issued? Surely this undermines the budget.
Nothing happened between Friday, 18 December and Wednesday, 23 December.
Clearly something happened.
Nothing happened. A circular may have issued during that period but it was on foot of a Government decision already taken. The Government considered all these issues when settling the legislation. Deputy O'Donnell referred to my contribution in the Houses. I was present during the debate on Second Stage and he correctly quoted from my speech. I was not in the Chamber during Committee Stage, when the matter may have been explored in greater detail. On Second Stage I drew attention to the fact that the section was there. The Government's view was that it was inequitable to that group to insist on a cumulative reduction in 2009 greater than that of the grade above it. The statistics on the changes in net pay from 2008 include the pension levy and taxation changes. A Secretary General at level 1 has had a net reduction of 33.9%, a deputy secretary general has had a reduction of 27.3%, an assistant secretary general -- the group we are arguing about -- has had a reduction of 24.9%, and a clerical officer has had a reduction of 7.3%. Let us be clear who is taking the reductions. In respect of their own salaries and arrangements, Members of this House should be aware how much misrepresentation can take place.
The Minister is working from the top down. What about the people at the lower end on €30,000 taking a 5% hit and those on €50,000 taking a 6% hit? How does the Minister regard this as just and equitable? When the Minister spoke on 15 December he referred to a substantial inequity. A substantial inequity is happening here, where the Minister is effectively ignoring the recommendations of the review body, which stated this category should take an 8%-12% cut. Once again, the small man is paying and this undermines the budget based on what the Taoiseach stated. How does the Minister regard these cuts as fair and equitable with regard to the lower paid?
What I regard as fair and equitable is to examine the cumulative position since 2008 for various grades. I will repeat them for Deputy O'Donnell. The reduction for a Secretary General at level 1 is 33.9%, 27.3% for a deputy secretary general, 24.9% for an assistant secretary general, 19.3% for a higher grade principal officer, which is the position we have as Members of this House, 16.8% for an assistant principal and 7.3% for a clerical officer. If Members of the House wish to devote themselves to the proposition that sections of the community can be entirely exempt from making a contribution to the economic crisis or the necessary savings that can be effected in the public service, well and good. However, these are the facts and they speak for themselves.
When was the Government decision taken?
89 Deputy Joan Burton asked the Minister for Finance his views on whether serious challenges will remain for the banking sector here after completion of the transfer of toxic loans to the National Asset Management Agency; if, post-NAMA, he foresees significant future losses on the banks’ remaining loan books including mortgages, consumer credit and commercial lending; his views on whether credit flows to businesses and households are likely to remain constrained for some time; if a continued credit famine is likely to constrain economic growth; when he expects the normal flow of credit to be restored; and if he will make a statement on the matter. [5459/10]
View answerI accept that serious challenges remain for the banking sector. I have said that following the transfer of assets to NAMA it is likely some institutions will require additional capital to absorb the losses on these loans. To the extent that sufficient capital cannot be raised independently or generated internally, the Government remains committed to providing such banks and building societies with an appropriate level of capital to continue to meet their requirements. This will have to be done in a manner consistent with EU state aid rules. The level of capital that may be required has yet to be determined, though the Financial Regulator and my officials continue to monitor the position. Capital needs will only be identified once there is an indication of the haircut levels being applied to individual banks.
The banks have made, and will no doubt continue to make as necessary, provisions in respect of their mortgage books, consumer lending and commercial lending. It is a matter for each institution to decide within the appropriate regulations the level of provisions to set down for future write-downs. It would therefore be inappropriate for me to comment or speculate on the loan books of individual institutions.
The second Mazars report on credit availability, published in December, confirmed that while some SMEs are facing significant challenges accessing credit, and the sector in general is more conservative in its borrowing, nevertheless new lending is still taking place. However, the proportion refused credit, especially in certain sectors, remains a concern for Government.
Under NAMA legislation I will shortly issue guidelines to all banks participating in NAMA who lend to SMEs, to ensure that SMEs, sole traders and farm enterprises will have recourse to an independent, external review of decisions of credit refusal by the banks. I hope that banks not participating in NAMA or covered by the Government guarantee will also decide to participate. My aim is to have a simple, effective review process, run by people with experience and credibility. The banks must comply with the recommendations of the review process or explain why they cannot do so.
In addition to dealing with individual cases, the credit review system will examine the credit policies and practices of the banks in respect of SMEs. This will help me to decide what further action might be necessary to secure the flow of credit. I intend to publish the analysis from the review process so that the performance of the banks participating in NAMA will be clear to all. Work has been ongoing since December on the logistical aspects of the review system and it is envisaged that this will be completed shortly.
With regard to mortgages, the latest Central Bank statistics report, for December 2009, shows that residential mortgages outstanding were 0.3% below the figure for December 2008. However, the rate of reduction in activity in the third and fourth quarters of 2009 moderated. Many lenders are conducting extensive advertising campaigns, showing that competition is a real factor on the mortgage scene. The existence of that level of competition in the mortgage lending market is sufficient to ensure that credit institutions will lend to suitable qualified customers to remain competitive and retain their share of the market.
Does the Minister agree the NAMA process is going far more slowly than predicted during the discussion on the Bill in this House? Most of us have heard the horror stories emerging from all sides in banking. A great number of distressed loans were undertaken with almost no collateral. There is great confusion about who has title to loans. Many loans were on foot of solicitors' undertakings that have not been properly completed. Professional advisers, at €240 million per year thanks to the generosity of the Minister, are crawling all over the loans. Professional advisers such as accountants, lawyers, estate agents, valuers, quantity surveyors and chartered surveyors cannot sign off these loans as high-quality loans when there is no proper title. Therefore, the NAMA process is effectively moving at a snail's pace. Does the Minister have a date for when he expects the NAMA process of transferring loans to commence?
The NAMA process of valuation and transfer of loans is well under way. Work in several major institutions will be finalised in respect of major lenders at the end of this month. Work is proceeding with considerable expedition. It is essential that the work continues with expedition.
Professional fees are being set at the lowest possible level on foot of the tenders issued by NAMA. I am satisfied these precautions are essential to protect the taxpayer in respect of the acquisition of these loans, something that was very much to the fore in parliamentary debate on this subject.
The Minister made an announcement about the delegation of a significant range of banking functions to the NTMA. It seems the agency is taking over a significant quantum of functions in respect of banking that the Department of Finance used to provide. The NTMA is now to deal with the capital needs of institutions, realignment and restructuring within the institutions and the general advice on banking matters. The original date for a significant tranche of NAMA loans to be completed was pre-Christmas. In his reply the Minister has now moved that date back by about two and a half months. Countries in banking crisis, such as Sweden, acted swiftly and rapidly. It is now more than a year since Anglo Irish Bank was nationalised and more than a year since the layout of NAMA was discussed. The Minister is now saying there will be a two-month delay, at a minimum, on the start of transfer of loans. Will the Minister tell the House why he has decided to decant a significant range of functions with regard to banking, from the Department to the NTMA, given that the NTMA is also looking after NAMA? Is it that the Minister has lost confidence in the Department of Finance because of the way it has performed in the financial collapse? Has the Minister been advised by the European Central Bank what view it will take? What is the status of NAMA bonds on their six-month maturity? Can they be cashed?
The Deputy has asked a very wide range of questions. I should make it clear that as Minister I will continue to be fully responsible and accountable to the Oireachtas and that these arrangements relating to the NTMA will not result in any change in that regard. As the banking crisis has evolved, officials of my Department and the NTMA have worked together very closely. The demands of the crisis have required significant adjustments in the deployment of resources in both organisations. The recent passage of the NAMA legislation, together with the appointment of a new Secretary General at my Department, who took up work on Monday last, provided me with an appropriate opportunity to consider further the division of work between my Department and the National Treasury Management Agency. The Department will remain necessarily very closely involved with banking and financial services issues. However, the NTMA will be involved in discussions with the covered institutions on their capital needs and it will lead those discussions — although officials from my Department will be present because that is an area in which they have considerable expertise. They will be involved in discussions with financial institutions on realignment or restructuring within the banking sector. They will be responsible for managing the Minister's shareholding in the credit institutions and they will have some residual functions under the guarantee schemes.
It is important it is understood that the NTMA and the Department are working very closely together. A draft delegation order is currently being discussed with the Office of the Attorney General and I intend to remain fully accountable to the House for all these matters.
I wish to ask a very brief supplementary question.
We are three minutes over time. The last supplementary question was a very long series of supplementary questions.
The Minister read out a very long answer and my question is very brief.
I am afraid we need to move on.
If I could have a question from the Deputy.
The NTMA is not directly answerable to the Dáil so we are now——
Deputy Burton, please.
Sorry, this is a very real point. The Minister read out very long answers——
Deputy, please, you are four minutes over time on this one question.
Sorry, the Minister read out very long answers——
Other Deputies have to be accommodated.
This is very brief. Where is the NTMA if it is not answerable to the Dáil?
I am accountable to this House and I can give directions to the NTMA.
On a point of order, there is an important issue here as to whether the Minister has just promised a piece of secondary legislation that will come into the House for debate. Could I clarify, with the assistance of the Leas-Cheann Comhairle, whether the Minister just announced that there will be secondary legislation that will come to the House for debate?
That is a matter on which we can check the record of the House and see exactly what the Minister said, unless the Minister wishes to clarify now.
Secondary legislation will be required to implement the announcement I made yesterday.
On a point of order, this was already requested of the Taoiseach who did not seem to know what we were talking about this morning.
That is not a point of order.
Will the Government provide time in the House for a full debate on this new division of functions——
That is something appropriate——
——and arrangements with the NTMA?
——to the Order of Business or another matter. We are in the middle of Priority Questions and I call Priority Question No. 90.
The Taoiseach and the Government did not give us the answer. Can the Minister give us the answer?
90 Deputy Richard Bruton asked the Minister for Finance the initiatives under study by the new group considering debt distress and home repossession; and the timeframe set for implementation of agreed measures. [5682/10]
View answerAs I have said on many occasions in this House, the Government is conscious of the high value Irish people place on home ownership and the growing problem of indebtedness and mortgage arrears that home owners face in the current economic climate. The renewed programme for Government sets out the Government's commitments for addressing these issues under the headings Protecting the Family Home and Helping Those in Debt.
I approved the setting up of the interdepartmental mortgage arrears review group, chaired by one of my officials, for the purpose of bringing together all relevant information in Departments and examining options, including initiatives in other jurisdictions, in relation to the matter of support for home owners facing the problems of mortgage arrears and repossession. The Law Reform Commission, which is under the aegis of my colleague, the Minister for Justice, Equality, and Law Reform, is addressing the issues of debt management and enforcement. In addition I have discussed with Cabinet colleagues the broadening of the membership of the mortgage arrears review group and I will bring proposals to Government.
The mortgage arrears review group is examining options to improve State supports for home owners with mortgage arrears, including schemes in operation in the USA and UK. These schemes are designed to address particular problems for particular groups of home owners and include options for re-financing mortgages, modifying the terms of existing loans, shared equity and purchase of mortgages for the purpose of renting back to the home owner. Other matters to be considered by the group will include the recommendations coming from the review of the Department of Social and Family Affairs mortgage interest supplement scheme, when it is completed, as well as suggestions for improving existing advisory services for persons who are in arrears with their mortgages.
The group will engage with various experts bodies involved in mortgage arrears such as the Money Advice and Budgeting Service, Economic Social Research Institute, the Irish Banking Federation and the Free Legal Advice Centres, among others, as part of its consultations. The Government is aware of the growing pressures on home owners in keeping up with their mortgage repayments, due to unemployment, reduced earnings and increases in interest rates and the need for early action. Nevertheless, the Deputy will appreciate that the overall consideration in terms of timeframes must be that decisions taken to improve current Government support measures involving taxpayers' money are taken in the full knowledge of the overall cost to both State and taxpayer. The group has met on several occasions and work has commenced on bringing forward options for dealing with these matters.
Additional information not given on the floor of the House.
The Law Reform Commission's consultation paper on personal debt management and debt enforcement, published in September 2009, contains an extensive list of provisional recommendations for reform of the law on personal debt that includes provision for a system of non-judicial debt settlement. The commission has indicated that the date for completion of submissions on its paper is the end of January 2010. It aims to have its final report available by end of August 2010.
The Enforcement of Court Orders (Amendment) Act 2009, provides that certain safeguards will apply to the provisions under which a court may hear an application or grant an imprisonment order against a debtor who has failed to comply with an instalment order. The Act ensures that the court will not imprison the debtor unless it is satisfied that he has the means to pay and may also postpone the execution of an imprisonment order until such time as it thinks just. In addition, the court will inform a debtor of the risk of imprisonment and of his entitlement to apply for legal aid. The Act gives the court a clear power to vary the terms of an order to pay by instalments or alternatively to refer the parties for mediation.
We have two versions of what is happening. One version is that the Minister is extending the membership of a think-tank and the second version is the one that has come from the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, that the Government is preparing a new scheme to bail out mortgage holders and that Cabinet will approve an implementation committee for this new scheme. Which of those two versions of events is the correct one? While this deliberation is going on, will the Minister extend the moratorium of one year for 6,400 mortgage holders who are now one year in arrears and are at serious risk? Is the Minister on board for the idea, which underlined Fine Gael's proposal, of the banks writing down some of the value of the loans? This has implications for recapitalisation and for the banks' capital. This is the essence of any of these schemes. Does the Minister accept that principle?
The Deputy asked three questions. First, with regard to the position of the Minister, Deputy Eamon Ryan, and his observations on this matter, clearly he was referring to the commitments in the programme for Government which are very explicit in regard to this matter and the various options set out there which can assist mortgage repayment. That is within the remit of the current review group and as I indicated on foot of my conversations with the Minister, Deputy Eamon Ryan, I am bringing proposals to Government to broaden the membership of the group. The third issue the Deputy asked me about was the Fine Gael proposal on write-downs.
The second issue was whether the Minister will arrange to extend with the covered banks the moratorium which is now coming to an end for 6,400 people.
That is an issue that obviously has to be examined by the committee and I am not in a position today to make an announcement in that regard.
With regard to the question of write-downs, Deputy Bruton's question draws attention to the fact that were we to write down mortgage debt in the manner he suggests, then clearly that would accelerate further losses in the banks requiring further capitalisation. While decisions will be required on capitalisation before the summer, and clearly in that context, consideration will be given to the exposure of the banks right across their loan portfolios in the years ahead.
I want to press the Minister on this matter. The essence of any of these arrangements is that there is some write-down by the banks of the value of their loan. In principle, is this something the Minister is willing to contemplate, otherwise much of this work will be for naught. I ask the Minister to understand there is a great deal of pressure out there. While an extension of the moratorium would be welcome, most people would like to see the Minister engaging directly with the banks to ensure they show forbearance while we work out the details of our proposals. People do not want to see the establishment of a think tank to consider the extension of the moratorium.
The banks are well aware that this is a high priority for the Government. The one-year moratorium was introduced at the time of the recapitalisation of the two main institutions because of our concern about this issue. It is not correct to say the matter has been consigned to a think tank or that I do not accept personal responsibility as Minister for taking initiatives in this regard. Far from it. However, the issues involved are complex. For example, our statistical base is somewhat inadequate in regard to the nature and scale of the problem. A diversity of approaches have been attempted in other jurisdictions with varying degrees of success. Discussion about write-downs in unqualified terms can lead to a perception on the part of those who are in a position to pay their mortgage debt that they need not do so. Governments must be cautious about their utterances in this regard.
