Questions-Written Answers
10. Deputy Aengus Ó Snodaigh asked the Minister for Finance if in the event of no deal being reached on the issue of the promissory note, that it is his intention to pay IBRC the €3.1 billion promissory due on 31 March 2013 and Bank of Ireland the sum due on the one year bond acquired in 2011 by that bank as part of that year's €3.1 billion promissory note payment to IBRC. [50519/12]
View answer57. Deputy Martin Ferris asked the Minister for Finance the date on which payments are due in 2013 to Irish Bank Resolution Corporation and Bank of Ireland arising from the Anglo Irish Bank promissory note schedule of payments of 2011 and 2013. [50515/12]
View answerI propose to take Questions Nos. 10 and 57 together.
As the Deputies are aware, the Irish Government has been working extremely hard to secure a deal on the Irish bank debt, including the IBRC Promissory Notes and detailed work will continue to ensure that the positive moves in Europe are harnessed to maximise the benefit to the Irish taxpayer. This is on the back of the Euro Area summit statement of 29 June of this year. All options for restructuring the notes are being considered including the terms of the source of funding, the duration of the notes, the interest rate etc. The future payment of the State under the Promissory Note arrangements will be dependent on the outcome of the on-going discussions and the work undertaken in this area is one of the Government’s key priorities.
With regard to the 2012 IBRC Promissory Note payment which was by way of Irish Government Bonds, the repurchase agreement with Bank of Ireland was for one year, ending 19 June 2013.
I may remind Deputies that the Government, together along with all other 26 member States at the Euro Summit in October last year committed that: "As far as our general approach to private sector involvement in the euro area is concerned, we reiterate our decision taken on 21 July 2011 that Greece requires an exceptional and unique solution. All other euro area Member States solemnly reaffirm their inflexible determination to honour fully their own individual sovereign signature and all their commitments to sustainable fiscal conditions and structural reforms. The euro area Heads of State fully support this determination as the credibility of all their sovereign signatures is a decisive element for ensuring financial stability in the euro area as a whole."
The Irish Government will honour this commitment and will ensure that we work with our EU partners to address the situation in relation to the overall cost to the State of resolving the difficulties in our banking sector. This Government has consistently worked towards a consensual approach to decisions made with our European colleagues.
11. Deputy Catherine Murphy asked the Minister for Finance the estimated loss to the Exchequer of tax returned in the years 2011 and to date in 2012 from black market activities; the sectors that have been identified as the main offenders; the action that has been adopted to date to curtail black market activities; the return on such activities; and if he will make a statement on the matter. [50235/12]
View answerI am advised by the Revenue Commissioners that they are very mindful of the unfair competitive advantage to be gained by those businesses that do not fulfil their tax obligations. Revenue’s tax and duty compliance programmes are under constant review to ensure that they are focussed on the areas of greatest risk, including risks from the shadow economy. Regarding the estimated loss to the Exchequer in 2011 and to date in 2012, I am informed by the Revenue Commissioners that given the nature of the shadow economy, there is no reliable system to measure the tax loss due to shadow economy activities. I am further informed that Revenue tackles the problem of the shadow economy through a range of compliance and audit interventions including targeted special projects. A variety of methodologies are used by Revenue to identify those who are operating in the shadow economy including covert surveillance, cold calls to businesses and venues as well as prearranged aspect queries on specific items. In addition, joint operations are conducted with the Department of Social Protection using Joint Investigation Units and there is a strong focus on cash businesses, given its potential high-risk nature.
I am confident that the Revenue Commissioners are pursuing a programme that is dealing in a very determined way with tax evasion in all its forms. In 2011, Revenue committed additional resources to tackling tax evasion in high-risk sectors and carried out over 11,000 audits and more than 546,000 assurance checks which between them yielded more than €483 million. Included in these numbers are the results of a particular focus on shadow economy activity in certain sectors:
- Construction: 1,833 audits yielding €58.8m
- Bars and restaurants: 613 audits yielding €16.9m
- Legal activities: 142 audits yielding €4.6m
- Landlords/rental properties: 908 audits yielding €35.1m
- Professionals (accountants, doctors, dentists): 350 audits yielding €8.9m.
Revenue also prioritises the tackling evasion of taxes and duties in the oil and tobacco sectors. In 2012 to date, eleven oil laundries have been detected and in excess of one hundred and ninety nine thousand litres of fuel have been seized from these. Also, to date this year, thirty-eight filling stations have been closed down. During 2011, Revenue’s Customs Service seized a total of 109m cigarettes from 10,581 seizures. Commercial quantities in maritime freight traffic accounted for 76.4m cigarettes. Revenue also seized 11,158kg of tobacco in 2011.
Finally, I am further advised by the Revenue Commissioners that they hold regular meetings with trade and representative bodies through The Hidden Economy Monitoring Group where the risks posed by shadow economy activities are discussed. The Deputy should also note that changes are frequently made in tax legislation aimed at counteracting shadow economy activity. Two recent examples are the introduction of the electronic Relevant Contracts Tax regime and an enhanced penalty regime for employers who fail to operate PAYE regulations fully.
12. Deputy Joe Higgins asked the Minister for Finance if he will report on any recent discussions he has had with troika officials. [43026/12]
View answerAs the Deputy will be aware review missions to Ireland by the three external partners, the EU, the ECB and the IMF (the Troika) take place each quarter as part of the regular review process of our EU-IMF programme. The eighth review mission took place from Tuesday October 16th to Thursday October 25th 2012. In line with each of the previous quarterly reviews, Ireland has met all of the commitments and our continued strong programme implementation has been recognized by the Troika. My colleague, the Minister for Public Expenditure and Reform, Mr Brendan Howlin T.D., and I met with the EU-IMF delegation during the recent quarterly review of the EU / IMF Programme of Financial Support for Ireland. These meetings were also attended by senior officials from both Departments. A wide range of topics was covered at these meetings, including financial reforms, structural reforms, economic developments and the progress of the Programme. In addition, the nature of the review mission is that it involves a large number of technical meetings which were attended by officials from my Department, and when appropriate from other Departments, the Central Bank and the NTMA.
The quarterly review process is an integral part of our EU-IMF support programme. The process starts with a review mission and ends with consideration and approval by the EU (Commission and Council) and the IMF Executive Board. Following each review mission the external partners and the Irish authorities agree updated programme documents, specifically the Letters of Intent, the Memorandum of Understanding on Specific Economic Policy Conditionality, the Memorandum of Economic and Financial Policies and the Technical Memorandum of Understanding. Once finalised, the Letters of Intent are signed jointly by the Minister for Finance and the Governor of the Central Bank and are issued to the EU and the IMF, along with the accompanying programme documents. These documents are laid before the Houses of the Oireachtas and placed on the Department of Finance website following their transmission. The process is expected to conclude in December.
I would also point out that contacts at official level between the Irish authorities and the EU, the ECB and the IMF concerning the support programme continue between review missions.
13. Deputy Charlie McConalogue asked the Minister for Finance if he is concerned by reports of delays to processing of mortgage applications at Allied Irish Banks in view of the upcoming end of mortgage relief for first-time buyers and the significant financial cost that buyers will face if their transactions are not completed by 31 December 2012; and if he will make a statement on the matter. [50499/12]
View answerAIB has informed me that it is well aware of this impending deadline on the cessation of mortgage relief for First Time Buyers and will continue to work with customers seeking to avail of this relief to ensure that, where possible, transactions are completed in a timely manner. AIB is currently approving seven out of ten mortgage applications and is well ahead of target in terms of its aim to provide new mortgage lending of at least €1 billion sanctions in 2012. In addition, AIB’s mortgage rates for new business remain the most competitive in the market.
AIB’s share of mortgage loans drawn in quarter three 2012 is estimated at 43% compared to 25% in quarter three 2011. It has sanctioned 5,922 mortgages in the year to Sept 2012, a rise of 90% on the same period last year. AIB’s share of the broker market is now estimated to be 66%.
First Time Buyers form a significant part of AIB’s mortgage business with market share of 49% in quarter 3 2012, compared to 27% in Q3 2011. AIB’s improved turnaround time for completed applications has been central to this market performance.
As potential buyers need to complete the purchase of a property by 31st December 2012 to avail of Tax Relief for Mortgage Interest Paid, all aspects of the transaction must be finalised including Legal, conveyancing, Life Assurance and mortgage drawdown.
Any new home buyer who is concerned about any issue in relation to their mortgage application should contact their Relationship Manager or Mortgage Co-ordinator who are always available to support customers in this major financial and personal decision.
14. Deputy Patrick Nulty asked the Minister for Finance if he will introduce equality proofing into the budgetary process here and in particular if he will address the core arguments made in the TASC research publication of May 2012, Untold Story of the Crisis, which specifically calls for equality proofing; and if he will make a statement on the matter. [50233/12]
View answerWith regard to budgetary matters, when focusing on the primary objectives of reducing the deficit and returning sustainability to the public finances, while they are currently no plans to specifically equality and gender proof Budget 2013 it has been of vital importance to the Government to spread the burden of the adjustments made in as fair and equitable a manner as possible, while also seeking to minimise their negative impact on economic growth. The Deputy might be aware that the Programme for Government does contain a clear commitment requiring all public bodies to take due note of equality and human rights in carrying out their functions. I would also remind the Deputy that the State and its bodies must, of course, comply with all provisions of equality legislation in the development and delivery of policies and services.
Furthermore, cabinet procedures require that proposals put to Government indicate clearly whether there is any impact of the proposal on, amongst other things, gender equality, persons experiencing or at risk of poverty or social exclusion and people with disabilities. The Deputy might also be aware that a distributional analysis of proposed budget measures is performed each year based on income levels.
15. Deputy Mary Lou McDonald asked the Minister for Finance when he will next be raising the issue of legacy debt in the pillar banks with his counterparts in Germany, Finland and the Netherlands and if his recent comments on the issue of the ESM's capacity to run banks at the joint finance committee dealing with the forthcoming ECOFIN meetings represents a shift in position away from seeking ESM funds to recapitalise pillar banks retrospectively. [50517/12]
View answerThe European Council in October reaffirmed that "the Eurogroup will draw up the exact operational criteria that will guide direct bank recapitalisations by the European Stability Mechanism (ESM), in full respect of the 29 June 2012 euro area Summit statement. It is imperative to break the vicious circle between banks and sovereigns." As the Deputy will be aware, the Taoiseach and Chancellor Merkel spoke together following the October European Council and discussed the unique circumstances behind Ireland’s banking and sovereign debt crisis, and Ireland’s plans for a full return to the markets. They reaffirmed the commitment from June 29th to task the Eurogroup to examine the situation of the Irish financial sector with a view to further improving the sustainability of the well performing adjustment programme. They recognised, in this context, that Ireland is a special case, and that the Eurogroup will take that into account. The Taoiseach also had a good discussion of these issues with President Hollande on 22 October.
When my colleague, Minister for Public Expenditure and Reform, Brendan Howlin, and I met with German Federal Minister for Finance, Dr. Wolfgang Schäuble, on 29 October in Dublin, this was also discussed, with Minister Schäuble publicly echoing his support for the communiqué issued by the Taoiseach and Chancellor Merkel.
I also had the opportunity to meet the incoming Minister for Finance of the Netherlands at this week’s Ecofin meeting.
With regard to my comments at the Joint Finance Committee in relation to the ESM, the fund is to be given the capability of recapitalising banks directly. However the primary decision that was made at the meeting on June 29 was for banking union, which will involve the establishment of an effective Single Supervisory Mechanism across the Euro area.
The establishment of this new supervisory mechanism is a prerequisite for direct banking recapitalisation, and so it has become obvious that reaching an outcome here will take longer than our discussions in relation to the promissory notes. Aside from the issue of when this new instrument will become available, there is a host of other issues that have yet to be worked through such as how the ESM would run these banks, what governance arrangements would be put in place between the fund and the banks themselves and indeed between the ESM and Member State governments. We need to consider these wider considerations in the months ahead and this is what I was referring to at the recent Finance Committee.
16. Deputy Robert Troy asked the Minister for Finance the amount of loans outstanding from Directors at the State owned banks; if they are continuing to rigorously collect these loans; and if he will make a statement on the matter. [50506/12]
View answerI am informed by the State owned banks that the total amount of loans outstanding from Directors at 31 December 2011 was €1.5 million. Comprehensive disclosure on the amounts of loans outstanding to Directors is provided in the Annual Reports of the relevant institutions. As the Deputy is no doubt aware Bank of Ireland is not a State owned bank. The total amount of loans outstanding from Directors of the State owned banks and Bank of Ireland combined is €8.1 million.
I am informed by the banks that where there are loans and facilities to current Directors that all these loans and facilities are fully performing. I am informed by IBRC that it has no loans outstanding to current Directors. However it has been necessary for it to record provision against loans to former directors and former management as noted in its Annual Reports.
17. Deputy Caoimhghín Ó Caoláin asked the Minister for Finance if he will provide an update on the lending restrictions being placed by the Registrar of Credit Unions on credit union lending including the total number of credit unions to which these restrictions apply and the nature of the restrictions currently being applied. [50521/12]
View answerThe imposition of lending restrictions is the responsibility of the Registrar of Credit Unions, who is the independent regulator for credit unions. Within his independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members. As Minister for Finance, my role is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions.
The Registrar of Credit Unions advises me that it has been necessary to put lending restrictions in place in credit unions where there are regulatory concerns about the operation of these individual credit unions and the resultant risk to members’ savings. The number of lending restrictions is a reflection of the Registrar’s concerns about lending practices in the sector.
The Registrar has advised that currently about 57% of all credit unions are subject to lending restrictions. Almost all credit unions with a lending restriction in place have a maximum individual loan size restriction. Of the credit unions with lending restrictions, over 68% can lend €20,000 or more to an individual member which is a sizeable amount and should cover most circumstances.
Fewer than 2.5% of credit unions are restricted to issuing loans of less than €10,000 to an individual member, and fewer than 1% of credit unions are restricted to issuing loans of less than €5,000 per member. These are the cases where the Registrar has more significant concerns in terms of risk to members’ savings.
Commercial lending restrictions apply to approximately 40% of credit unions reflecting the need to limit credit union exposure to higher risk lending where skills and expertise are not adequate.
The Registrar has also advised that individual credit union lending restrictions currently in place are reviewed on a regular basis to determine whether they are still set at appropriate levels.
18. Deputy Brian Stanley asked the Minister for Finance the meetings he or his officials has had; the correspondence he or his officials have had; the action he or his officials have taken in the past two months with respect to those banks that are either refusing to pass on European Central Bank interest rate reductions to their variable rate mortgage holders or increasing the rate on these mortgages holders; and if he will make a statement on the matter. [50238/12]
View answerDuring the past two months, neither I nor my officials have had meetings or correspondence with banks regarding the European Central Bank interest rate reductions or increases in the rates applied to mortgage holders by lending institutions. I have no statutory role in relation to the issues raised by the Deputy. It is a commercial matter for each bank concerned. The Central Bank has responsibility for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements and for ensuring ongoing compliance with applicable statutory obligations. However, the Central Bank has no statutory role in the setting of interest rates charged by regulated entities apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997.
The lending institutions in Ireland are independent commercial entities. Ultimately the pricing of financial products, including, interest rates and products is a commercial decision for the management team and board of each lending institution, having due regard to their customers and the impact on profitability, particularly where the cost of funding to each lending institution, including deposit pricing, is under pressure.
Notwithstanding the fact that the State is a significant shareholder in some banks, it is imperative that the banks are run on a commercial, cost effective and independent basis to ensure the value of the banks as an asset to the State.
19. Deputy Seamus Kirk asked the Minister for Finance if he is considering introducing legislative provisions along the lines of a public service pension deduction in the case of pensions being paid to senior executives in State supported banks whose pension funds have also received substantial transfers since State support commenced; and if he will make a statement on the matter. [50494/12]
View answerThe Government shares the abhorrence of the public at these extravagant pensions but its scope for action to claw back or reduce such entitlements is limited due to constitutional and legal reasons which are well known to the members of the House. The Deputy will be aware of the action taken by Allied Irish Banks requesting a cohort of former senior executives to consider taking a voluntary reduction in their pension entitlement with one former CEO now agreeing to do so. The Government will seek to explore any other avenues and options to address this issue subject to the necessary legal constraints.
20. Deputy Caoimhghín Ó Caoláin asked the Minister for Finance his views on the concerns expressed by the Irish League of Credit Unions with respect to the proposed provisions in the Credit Union Bill 2012 relating to term limits and exclusions from credit union boards and the impact of these proposals on smaller credit unions; and if he will consider amendments to the relevant section of the Bill. [50522/12]
View answerThe Credit Union Bill 2012 is consistent with the Final Report of the Commission on Credit Unions, which was agreed over a nine-month period by all Commission members, including the Irish League of Credit Unions. The Credit Union Bill delivers on over 60 of the recommendations in the Commission Report. I am aware of the concerns expressed by the Irish League of Credit Unions on the provisions of the Bill regarding term limits and board membership, notwithstanding that the Bill implements the Commissions agreed recommendations on these issues. I will reflect on the matters raised during the second stage debate on the Bill, including those raised on behalf of the Irish League of Credit Unions. I look forward to the opportunity to discuss constructive amendments from Deputies at Committee stage.
21. Deputy Pádraig Mac Lochlainn asked the Minister for Finance in view of the fact that 30 persons in Irish Bank Resolution Corporation earn more than €300,000, the collective payment in base salary for the highest paid 30 employees as of end of 2010, 2011, 2012, 2013 and the number in 2011 and 2012 who have seen an increase in base salary, pension and expenses; and if he will itemise same. [50514/12]
View answerI have been advised that there are currently 7, and not 30, employees of IBRC whose base salaries are above €300,000 per annum. The total of the highest 30 base salaries from end 2008 to 2012 is outlined in the following table
|
2008 |
2009 |
2010 |
2011 |
2012 |
|
€10,279,397.88 |
€7,845,471.13 |
€8,875,847.91 |
€8,801,292.68 |
€8,160,352.94 |
From 2008 to 2012 there has been a 21% reduction in the collective 30 highest base salaries in the Bank. In more detail there has been:
- A decrease of 23% from 2008 to 2009 following the departure of former Anglo Irish Bank senior management.
- An increase in 2010 in line with the process of recruiting a new Group Executive team.
- Further reductions since 2010 as the organisation structure is further rationalised.
I have been advised that during the two years in question, a small number of employees have received an increase in remuneration in line with increased responsibilities following the Bank’s staffing rationalisation.
The responsibilities of the Board, management and staff of IBRC are onerous and the experience and skills required to manage the wind down and mitigate the cost to the State are critical to achieve an appropriate outcome.
22. Deputy Seán Crowe asked the Minister for Finance if he supports the concept of equality budgeting; if his attention has been drawn to the fact that the Scottish Government provides an equality budget statement alongside each annual budget; his plans to provide an accompanying equality statement along with budget 2013; and if he will make a statement on the matter. [50247/12]
View answerWith regard to budgetary matters, when focusing on the primary objectives of reducing the deficit and returning sustainability to the public finances, it has been of vital importance to the Government to spread the burden of the adjustments made in as fair and equitable a manner as possible, while also seeking to minimise their negative impact on economic growth. The Deputy might be aware that the Programme for Government does contain a clear commitment requiring all public bodies to take due note of equality and human rights in carrying out their functions. I would also remind the Deputy that the State and its bodies must, of course, comply with all provisions of equality legislation in the development and delivery of policies and services.
Furthermore, cabinet procedures require that proposals put to Government indicate clearly whether there is any impact of the proposal on, amongst other things, gender equality, persons experiencing or at risk of poverty or social exclusion and people with disabilities.
The Deputy might also be aware that a distributional analysis of proposed budget measures is performed each year based on income levels. I also feel that is important to highlight the progressive nature of the Irish taxation system when discussing these matters. Research by the ESRI has shown that, when analysing the impacts of policy changes since the beginning of the crisis, losses imposed by policy changes in tax and welfare have been greatest for those on the highest incomes, and smaller for those on low incomes. In other words, the measures have been progressive in nature.
The research also acknowledged the overall distributional pattern of Irish austerity measures as among the most progressive in 6 EU countries examined in a recent study by the European Commission.
It is also worth acknowledging that Ireland has been consistently assessed highly by the OECD for the progressivity of our taxation system. In the OECD rating system on the progressivity of taxation, where less than 100 is regressive and above 100 is progressive, most EU countries had a progressivity rate of between 120 and 140. Ireland, in comparison, had a progressivity rate of 182.
23. Deputy Willie O'Dea asked the Minister for Finance if he has given detailed considerations to the benefits and costs associated with the European Stability Mechanism taking equity stakes in the State owned banks; and if he will make a statement on the matter. [50503/12]
View answer52. Deputy Brendan Smith asked the Minister for Finance the alternatives to the European Stability Mechanism of taking a direct equity state in the pillar banks, such that the bank debt will be reduced in a manner consistent with the declaration at the June summit; and if he will make a statement on the matter. [50505/12]
View answerI propose to take Questions Nos. 23 and 52 together.
As you will be aware, the Euro Area Summit Statement of 29th June affirmed that it is imperative that the vicious circle between banks and sovereigns be broken. The Statement of 29th June also stated that it has been agreed that when an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area, the European Stability Mechanism (ESM) could have the possibility to recapitalise banks directly. This would be dependent on appropriate conditionality, including compliance with state aid rules, which should be institution-specific, sector-specific or economy-wide and would be formalised in a memorandum of understanding.
Work is continuing at a technical level to put in place both the single supervisory mechanism, and the European Stability Mechanism’s direct banking recapitalisation facility, at the earliest possible date. Ireland is participating constructively in these technical discussions.
The most recent European Council on 18/19 October 2012 concluded that: "The Eurogroup will draw up the exact operational criteria that will guide direct bank recapitalisations by the European Stability Mechanism (ESM), in full respect of the 29 June 2012 euro area Summit statement. It is imperative to break the vicious circle between banks and sovereigns. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly." It is important from Ireland’s perspective, that progress towards these goals is made as quickly as possible, and as I have already mentioned we are playing our full part in this work.
The implications of any ESM participation in Irish banking recapitalisation are being considered as part of our overall approach to these discussions. However, at this stage it is not possible to form a definitive view on this matter. The government is pursuing a twin track approach in relation to our banking related debt with the other track designed to secure a better deal on the promissory notes in IBRC. Both routes are designed to enhance our well performing adjustment programme and put Ireland’s economy and indebtedness on a more sustainable path.
24. Deputy Joan Collins asked the Minister for Finance his views on whether a 10% super-tax on all incomes in excess of €100,000 would yield more than €2 billion; and if he will make a statement on the matter. [50524/12]
View answerI am advised by the Revenue Commissioners that the full year yield, estimated by reference to 2012 incomes, from imposing a income levy of 10% on all income that is currently liable to the Universal Social Charge (USC) would be of the order of €1,840 million. It should be noted, that the estimated yield is based on applying a 10% levy to all the income of income earners who earn in excess of €100,000, that is, to the income they earn below €100,000 as well as to the income earned above €100,000. The figure is an estimate from the Revenue tax-forecasting model using actual data for the year 2010 adjusted as necessary for income and employment trends in the interim. It is, therefore, provisional and likely to be revised.
25. Deputy Niall Collins asked the Minister for Finance if he is satisfied with the pace of progress of investigations into the collapse of the Irish Nationwide Building Society; if his attention has been drawn to the timetable under which they will be completed; and if he will make a statement on the matter. [50487/12]
View answerI have been advised that an investigation is being conducted under the Central Bank’s Administrative Sanctions Procedure into historic lending practices at INBS. For legal reasons, including the Bank’s confidentiality obligations pursuant to section 33AK of the Central Bank Act 1942, no further details can presently be disclosed. An appropriate number of enforcement staff, commensurate with the investigation’s complexity, is dedicated to it. Investigation resources are kept continuously under review.
The investigation is on-going. For the reasons already explained, no further details can be disclosed. Until the investigation has concluded, no decisions may be made as regards any future potential action.
