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Thursday, 15 Nov 2012

Written Answers Nos. 26-36

Insurance Industry Issues

Questions (26)

Barry Cowen

Question:

26. Deputy Barry Cowen asked the Minister for Finance when he expects a definitive update to be available on the cost of the collapse of Quinn Insurance; and if he will make a statement on the matter. [50489/12]

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Written answers

At the outset the Deputy should note that the nature of insurance is such that it is not possible to provide a definitive update on the cost of the collapse of Quinn Insurance until the bulk of the claims have been paid, which is unlikely to be for several more years yet. However the Joint Administrators when presenting their 10th report to the High Court in July 2012 indicated that the potential call on the ICF could be up to €1.65bn. The Joint Administrators pointed out in their report that the projected call on the ICF now includes accounting adjustments and considerable contingencies which it is hoped will not be called upon. They indicated that if they were to remove most of the accounting adjustments and use a “best estimate ” calculation, then the call on the fund is likely to be in the range of €1.1bn to €1.3bn rather than the €1.65bn for which they have provided.

I have been advised that the Joint Administrators have undertaken a number of actions in relation to claims settlement which can reduce the ultimate claims cost. These include as part of a new enhanced governance structure the establishment of a Claims Advisory Committee (CAC) to guide and advise them and QIL management on future claims strategy and policy.

Furthermore, to protect the Exchequer interests I have ensured that the State Claims Agency is more involved in the administration process, particularly in the claims management area, which is critical to keeping the call on the ICF down to its lowest level possible. In this respect it should be noted that, at my request, Mr Ciaran Breen, Director of the State Claims Agency has been appointed as Chair of the Claims Advisory Committee.

My Department proposes to continue to work with the Joint Administrators and to use the services of the State Claims Agency to monitor progress with a view to ensuring, in as much as it can that the most cost effective outcome to this process is achieved.

Fuel Prices

Questions (27)

Timmy Dooley

Question:

27. Deputy Timmy Dooley asked the Minister for Finance his views on whether it would be advantageous for transport providers and users if he followed the example of the new French Administration and reduced excise duties on fuel; and if he will make a statement on the matter. [45180/12]

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Written answers

Ireland, as with other countries, has experienced an increase in fuel prices. This increase is an international phenomenon. Fuel prices are driven by a number of factors including the price of oil on international markets, exchange rates, production costs and refining costs. The rise in oil prices over recent periods reflected additional factors such as geopolitical uncertainty in Northern Africa and the Middle East with potential supply disruptions. While fuel prices remain relatively high we have in recent times experienced a decline in prices. Any reduction in excise would give rise to significant costs to the Exchequer which would have to be met from increasing revenue in other areas.

Mortgage Arrears Rate

Questions (28, 102, 103)

Bernard Durkan

Question:

28. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he continues to be updated by the various lending agencies in the matter of mortgage arrears with particular reference to the extent of arrears and of repossessions in respect of family homes, buy-to-rent or commercial properties; if he has been apprised of how lending agencies have addressed the shortfall arising from the situation whereby properties in negative equity have been disposed of leaving a balance in some cases in excess of 50% of the current market value; if the lending agencies are known to have insured against such potential liability; if a pattern has emerged in regard to the level of repossessions or settlements as between different lending agencies; and if he will make a statement on the matter. [50255/12]

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Bernard Durkan

Question:

102. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which lending agencies have insured against bad debt; the extent to which any such claims have been made on an annual basis over the past four years and to date in 2012; and if he will make a statement on the matter. [50804/12]

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Bernard Durkan

Question:

103. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which lending agencies have suffered a loss arising from repossessions of family homes or commercial properties in each of the past four years and to date in 2012; the extent if any to which these losses have been offset by various forms of insurance cover; and if he will make a statement on the matter. [50805/12]

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Written answers

I propose to take Questions Nos. 28, 102 and 103 together.

As the Deputy is aware, the Central Bank receives quarterly submissions from all mortgage providers which detail the overall size of mortgage books and, in respect of such lending, data is also provided on:

- arrears levels;

- restructure levels;

- levels of Court proceedings and

- repossessions.

The Central Bank publishes this data, on an industry aggregate level basis, each quarter and it is available on the Central Bank’s website (www.centralbank.ie ). To date, the data collected and published has been on mortgages in respect of private dwellings but this is now being expanded to also cover “buy to let” mortgages and the first publication of this expanded data set will take place before the end of this year.

The Central Bank advises that the level of repossessions has been low and so has the level of disposals of properties in possession. I am also advised by the Central Bank that the general approach of banks, following disposal, is to arrange payment plans to address outstanding shortfalls. However, such matters are commercial decisions of banks and individual circumstances and situations are usually assessed on a case-by-case basis. I am also advised by the Central Bank that insurance against such potential shortfall loss is the exception rather than the norm.

Banking Sector Remuneration

Questions (29, 63, 83)

Billy Kelleher

Question:

29. Deputy Billy Kelleher asked the Minister for Finance when the report from Mercer Consultants on remuneration in the banking sector will be completed; and if he will make a statement on the matter. [50492/12]

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Sandra McLellan

Question:

63. Deputy Sandra McLellan asked the Minister for Finance with regard to the ongoing review into bankers' remuneration, the date on which the review will be completed; the cost of the review to date; the estimated final cost of the review; the level of engagement by his Department in this review in terms of the numbers of meetings and estimated staff time allowed for this purpose; the terms of reference of the review; and if any consideration is being given to an increase in the cap. [50509/12]

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Gerry Adams

Question:

83. Deputy Gerry Adams asked the Minister for Finance the cost of hiring Mercer Consultants to consider the issue of pay among top executives in the Irish Bank Resolution Corporation. [50699/12]

View answer

Written answers

I propose to take Questions Nos. 29, 63 and 83 together.

The Deputies will be aware that my Department is presently engaged in a Review of Remuneration Practices and Frameworks at the covered institutions. I have recently engaged, as I informed the Opposition Spokespersons on Finance, the services of Mercer (Ireland) Limited following a limited competitive tender competition to assist my Department in bringing this exercise to a conclusion. The estimated cost of the review, at this stage, is approximately €120,000.

The object of the review is to thoroughly review all remuneration practices at the covered institutions with the object of simplifying remuneration and compensation structures, discouraging excessive risk-taking and to better align pay and reward to long term value creation. Present Government policy on remuneration dictates that no employee, at the covered institutions may receive more than €500,000 (excluding pension contributions) per annum and remains in force.

Numerous engagements by my officials and Mercer have taken place since the awarding of the contract. I am expecting the consultant’s report to be delivered by year end whereupon consultations with the various stakeholders will commence.

As I have said previously, I fully recognise that there is a real public interest in the levels of remuneration at the covered institutions and have committed to placing the details underpinning the review into the public domain.

Promissory Note Negotiations

Questions (30)

Seán Crowe

Question:

30. Deputy Seán Crowe asked the Minister for Finance if he will provide, in tabular form, the annual interest repayments owed for the next 40 years if the maturity of all remaining promissory notes currently owed to the Irish Bank Resolution Corporation was extended out to 2052 and if annual interest on the notes was charged at 3%, 4% and 5%; and if he will make a statement on the matter. [50246/12]

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Written answers

I am sure the Deputy will appreciate that financial crisis has had significant resource implications for my Department and as a result, I am not in a position to be able to provide hypothetical funding projections to Deputies. As set out in the repayment schedule below, there are significant capital and interest repayments pertaining to the existing IBRC Promissory Note. Any changes to the repayment scheduling of the capital balance will have an impact on the interest payments in the period as would any assumptions around how the funding was replaced, interest rate changes and other funding considerations. As the Deputy is aware, the Irish Government has been working extremely hard to secure a deal on the Irish bank debt 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 on-going work is one of the Government’s key priorities.

A significant item on the agenda in all discussions is the issue of the promissory note. I am glad to say that we meet with strong appreciation of our situation and we are able to have very constructive dialogue on our approach to this question. As discussions are on-going, it is not possible at this point to give a more detailed update or guide on the potential timing of any agreed approach but we will be continuing our engagement with the Troika and our partners in the European Union with a view to a satisfactory resolution of this issue and other related questions.

€bn

Total interest 

Paid: A

Total Capital Reduction: B

Repayments:

A + B

31/03/2011

            0.55

              2.51

            3.06

31/03/2012

               -  

              3.06

            3.06

**

31/03/2013

            0.49

              2.57

            3.06

31/03/2014

            1.84

              1.22

            3.06

31/03/2015

            1.75

              1.31

            3.06

31/03/2016

            1.65

              1.41

            3.06

31/03/2017

            1.55

              1.51

            3.06

31/03/2018

            1.44

              1.62

            3.06

31/03/2019

            1.32

              1.74

            3.06

31/03/2020

            1.19

              1.87

            3.06

31/03/2021

            1.06

              2.00

            3.06

31/03/2022

            0.91

              2.15

            3.06

31/03/2023

            0.75

              2.31

            3.06

31/03/2024

            0.57

              1.52

            2.09

31/03/2025

            0.45

              0.47

            0.91

31/03/2026

            0.39

              0.52

            0.91

31/03/2027

            0.33

              0.58

            0.91

31/03/2028

            0.26

              0.65

            0.91

31/03/2029

            0.19

              0.73

            0.91

31/03/2030

            0.10

              0.81

            0.91

31/03/2031

            0.01

              0.05

            0.05

            16.8

              30.6

            47.4

* These numbers may not tot exactly as a result of rounding

** The March 2012 repayment was settled with a long term Government bond.

Banking Sector Staff Issues

Questions (31)

Robert Troy

Question:

31. Deputy Robert Troy asked the Minister for Finance his plans to review the remit of the public interest directors in the State supported banks; and if he will make a statement on the matter. [50508/12]

View answer

Written answers

As I detailed in the answer to question numbers 167, 168 and 172 which were taken together on 9 October 2012, the legal position is that any director appointed to the board of the covered institutions whether under the Credit Institutions (Financial Support) Scheme 2008 or otherwise is subject to the requirements of company law in relation to the discharge of their responsibilities as a company director. As such, the director is legally bound to act in what he or she believes are the interests of the separate legal entity that is the institution itself. These are the directors so called fiduciary responsibilities. To address the scope for actual and perceived conflicts between the fiduciary duties of the directors of financial institutions under company law and the wider public interest in circumstances where those institutions have received huge financial support from the State, legal clarity, not just to the role of the public interest director but to that of the entire boards of those institutions, was provided under Section 48 of the Credit Institutions (Stabilisation) Act 2010. It provides that the overriding duty of directors of the covered institutions relates to the public interest as set out in the Act. Accordingly, public interest directors do not have a formal reporting relationship to the Minister or to the Department of Finance. As the Deputy will be aware, the terms of the Relationship Frameworks with AIB, Bank of Ireland, IBRC and Permanent TSB set out the form of the on-going relationship between the State and these institutions. We have been operating under these framework agreements since March 2012. Any changes to the Relationship Frameworks would require the approval of the Competition Division of the European Commission.

As Minister for Finance, I am strongly committed to ensuring that the boards of the covered institutions act at all times in a manner fully consistent with key public interest objectives for the banking sector.

Economic Growth Rate

Questions (32)

John McGuinness

Question:

32. Deputy John McGuinness asked the Minister for Finance if he concurs with the assessment of the European Commission in respect of growth prospects for 2013; the impact this potentially has on the public finances; and if he will make a statement on the matter. [50497/12]

View answer

Written answers

The European Commission published its forecasts in early November and forecast real GDP growth of 1.1% in 2013. This is slightly lower than my Department’s most recent forecast, published yesterday in the Medium Term Fiscal Statement (MTFS), which projected real GDP growth of 1.5% for the year as a whole. I would point out however that some domestic commentators have recently suggested growth of 2.1% next year. The consensus forecast, the median of the private sector forecasts, at the end of October was 1.5%. The achievement of fiscal targets is driven by a range of factors, including overall economic performance as well as specific developments which effect revenue and expenditure patterns in a given year.

Broadly speaking, nominal GDP developments drive revenue growth, and nominal GDP growth has been slightly above expectations this year. These developments in nominal GDP are one of the reasons why, notwithstanding lower real growth forecasts, the Commission is still projecting a similar deficit to my Department for next year.

Under the revised Excessive Deficit Procedure (EDP) Recommendation issued by the ECOFIN Council in December 2010, the State’s General Government deficit must not exceed 7.5% of GDP in 2013. On the basis of the most up-to-date economic and fiscal data available, the deficit limit is viewed as being achievable on the basis of the implementation of the €3.5 billion consolidation package in 2013, as outlined in the MTFS.

Ireland is committed to implementing further consolidation in the coming years in order to correct our excessive deficit, put debt on a downward trajectory and sustain investor confidence. This should assist in keeping the cost of borrowing as low as possible so as to minimise the cost to the taxpayer of debt interest payments. Indications of the success of this approach are already evident in the form of the lowering of bond yields since early summer and the NTMA’s continuing access to the debt markets.

Promissory Note Negotiations

Questions (33, 41, 44)

Martin Ferris

Question:

33. Deputy Martin Ferris asked the Minister for Finance if he will provide an update on the ongoing negotiations with the troika on the resolution of the Anglo Irish Bank promissory note; if the technical paper that was to be agreed in February 2012 has yet to be agreed; if it has not been agreed, the date on which he thinks it will be completed; the reason for the delay and the obstacles that are preventing agreement between the troika and the Government on this issue. [50516/12]

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John Halligan

Question:

41. Deputy John Halligan asked the Minister for Finance if there is any further update on dealing with Ireland's legacy debt following the ECOFIN meeting; and if he will make a statement on the matter. [50523/12]

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Thomas P. Broughan

Question:

44. Deputy Thomas P. Broughan asked the Minister for Finance the position regarding negotiations on a deal on the Anglo Irish Bank promissory notes; the proposed timeline for reaching agreement on the promissory notes; and if he will make a statement on the matter. [50268/12]

View answer

Written answers

I propose to take Questions Nos. 33, 41 and 44 together.

As the Deputies are aware, the Irish Government has been working extremely hard to secure a deal on the Irish bank debt 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. A significant item on the agenda in all discussions is the issue of the promissory note. 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. This on-going work is one of the Government’s key priorities.

I am glad to say that we meet with strong appreciation of our situation and we are able to have very constructive dialogue on our approach to this question. As discussions are on-going, it is not possible at this point to give a more detailed update or guide on the potential timing of any agreed approach but we will be continuing our engagement with the Troika and our partners in the European Union with a view to a satisfactory resolution of this issue and other related questions.

Tax Code

Questions (34)

Jonathan O'Brien

Question:

34. Deputy Jonathan O'Brien asked the Minister for Finance if relevant contracts tax is to be made applicable to some minor school maintenance work and repairs; if consideration has been given to the likely heavy administrative workload to be incurred by boards of management and the possible difficulties that may arise with regards to ensuring tax liability and compliance; and if he will enter into negotiations with Revenue in order that some consideration is given to introducing a reasonable minimum threshold for RCT and distinguishing between normal maintenance or repairs and large-scale system upgrades, refurbishment or construction works. [43106/12]

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Written answers

I am informed by the Revenue Commissioners that contracts for routine maintenance work do not come within the scope of RCT. However, RCT applies to all construction works ranging from major construction projects to general repair works. Repair work includes the replacement of constituent parts of a building or structure. Maintenance on the other hand includes cleaning, removal of graffiti and the unblocking of drains, etc. The need to ensure tax compliance by subcontractors is particularly important where the Exchequer is the ultimate source of the funds being paid out by school Boards of Management and other principal contractors. RCT plays an important role in ensuring tax compliance by subcontractors in these sectors. Therefore, it would not be appropriate to introduce a threshold for this type of work.

In the light of the difficulty some school Boards of Management may be having in fulfilling their obligations under the RCT system, the Revenue Commissioners have made available detailed guidance notes specifically tailored for Boards of Management regarding the operation of RCT. These guidance notes, which clarify the position in relation to repair work and maintenance work, have been published on the Revenue website www.revenue.ie.

From 1 January 2012, the Revenue Commissioners have substantially modernised the operation of RCT following the introduction of a dedicated online facility, which offers principal contractors a fast, efficient and paper free system. This has significantly reduced the administrative burden associated with RCT.

Finally, having regard to the pressures on the public finances, it is important that the RCT system is implemented correctly in order to minimise tax evasion in the construction sector particularly where the project involves substantial State funding. The new online system introduced by Revenue has significantly simplified the RCT process for principal contractors, including school Boards of Management.

Mortgage Arrears Proposals

Questions (35)

Dara Calleary

Question:

35. Deputy Dara Calleary asked the Minister for Finance if he will request the banks to make information on options available to customers in financial distress in an easily accessible manner on their websites; and if he will make a statement on the matter. [50485/12]

View answer

Written answers

I have been advised by the Central Bank that banks must comply with the requirements of the Code of Conduct on Mortgage Arrears. Provision 12 requires that ‘A lender must prepare and make available to borrowers, an information booklet providing details of its Mortgage Arrears Resolution Process, which must be drafted in accordance with the requirements set out in provision 10 and must include:

a) an explanation of its MARP, including the alternative repayment measures available to borrowers and outline in general terms, the lender’s criteria for assessing requests for alternative repayment measures;

b) a statement that the borrower will not be required to change from an existing tracker mortgage to another mortgage type;

c) information about the potential availability of relevant State supports such as mortgage interest relief or Mortgage Interest Supplement;

d) relevant contact points (i.e., the dedicated arrears contact points not the general customer service contact points); and

e) reference to relevant website(s) operated by the Money Advice and Budgeting Services.

Furthermore, Provision 13 requires that ‘A lender must have a dedicated section on its website for borrowers in, or concerned about, financial difficulties which must include:

a) the information booklet required under provision 12;

b) information on the level of charges that may be imposed on borrowers that do not co-operate with the lender; and

c) a link to any website operated by the MABS that contains information about mortgage arrears.

The information on the web-site must be easily accessible from a prominent link on the lender’s home page. Some lenders have developed budgeting tools, videos to help

customers complete the Standard Financial Statement and FAQ sections on mortgage arrears and forbearance arrangements on their websites.

The Central Bank recently wrote to all lenders to remind them of these Provisions and that their MARP booklet and websites should be updated to include the longer term options as they are rolled out and to make reference to the Government initiatives in this area. A copy of the "Code of Conduct on Mortgage Arrears" and of the "Mortgage Arrears - a Consumer Guide to Dealing with your Lender", is available at www.centralbank.ie

General Government Debt

Questions (36)

Pearse Doherty

Question:

36. Deputy Pearse Doherty asked the Minister for Finance the level that the general Government deficits from 2008 to 2009 would have been excluding deficit increasing direct payments to the banks from the general Government sector and excluding deficit reducing direct receipts from the banks to the general Government sector and what this is expected to be for 2012; and if he will make a statement on the matter. [50237/12]

View answer

Written answers

Although the previous Government issued a Guarantee to the banks in September 2008 there was no negative impact on the General Government Deficit in that year. Fees from the covered institutions for the Guarantee lowered the General Government Deficit by €110 million and €439 million in 2008 and 2009 respectively. In addition the receipt of preference share dividends from Bank of Ireland and Allied Irish Banks lowered the General Government Deficit in 2009 by €387 million. In 2009 the General Government Deficit was worsened by the €4 billion capital injection into the then Anglo Irish Bank. In addition, the National Pensions Reserve Fund invested €3.5 billion each in both Bank of Ireland and Allied Irish Banks. However, these payments did not affect the General Government Deficit.

The General Government Deficits for 2008 and 2009 were €13.1 billion and €22.5 billion respectively. Excluding the effects of these interventions, GGB would have been €13.3 billion and €19.3 billion in 2008 and 2009 respectively. The Medium Term Fiscal Statement published yesterday, 14th November, shows an expected General Government Balance for 2012 of €13.5 billion, or 8.3% of GDP.

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