Tuesday, 20 Nov 2012

Written Answers Nos. 194-204

Banking Sector Issues

Questions (194)

Pearse Doherty

Question:

194. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 314 of 18 September 2012, if he will clarify the present valuation of Permanent TSB, noting that its free circulation shares are currently trading at two to three cents each; if he will confirm if any recent valuation of the company, other than a valuation based exclusively on the current share price, has been undertaken, and if so, if he will provide the results of that valuation and the present valuation of the State’s interest in Irish Life and the basis for the valuation. [51139/12]

Written answers

Minister for Finance

I invested on behalf of the State €2.3 billion in Permanent TSB Group Holdings (formerly Irish Life & Permanent Group Holdings) in July 2011 in return for 36,249,014,972 ordinary shares (at an issue price of €0.06345 per share), amounting to 99.24% of the shares in issue. The shares are held at their nominal value in the Finance Accounts. Permanent TSB plc also issued €0.4 billion of convertible contingent capital notes, with an annual coupon of 10%, to the Government as part of the recapitalisation of the Group. Interest payments of €40 million were received by the State in July 2012.

As the Deputy will be aware, the State paid consideration of €1.3 billion to acquire a 100% interest in Irish Life in June 2012. The shares are held at this value in the Finance Accounts and do not get revalued on a regular basis. In arriving at the consideration agreed in March 2012, we reviewed all information available to us from the sales process which was postponed in late 2011, developments since that time in Irish Life and the Irish economy, movements in industry peer group valuation multiples and improvements in bond yields, particularly in Ireland. We are not aware of any recent issues or events which would materially impact any valuation of Irish Life, positively or negatively, but cannot be definitive as the circumstances change on a continuous basis.

National Pensions Reserve Fund Administration

Questions (195)

Pearse Doherty

Question:

195. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Questions Nos. 314 and 315 of 18 September 2012, if any more recent valuation of the National Pension Reserve Fund's interest in Allied Irish Banks and Bank of Ireland has been undertaken since the Goodbody valuation of the interests at an overall total of circa €8 billion at 31 December 2011, in view of the results of both banks for the six months to 30 June 2012, if a more recent valuation has been undertaken and, if so, if he will provide the results of that valuation. [51140/12]

Written answers

Minister for Finance

I am informed by the National Treasury Management Agency (NTMA), as Manager of the National Pensions Reserve Fund (NPRF), that no valuation of the shareholdings in Allied Irish Banks and preference share holdings in Bank of Ireland held by the National Pensions Reserve Fund in Allied Irish Banks and Bank of Ireland has been undertaken since the Goodbody valuation as at 31 December 2011, which was finalised in May 2012. The shareholdings are valued at fair value in accordance with the accounting policies adopted by the Fund. The NTMA is currently in the process of engaging an independent valuation adviser to provide an independent fair value of the NPRF's shareholdings in Allied Irish Banks and of its preference shareholdings in Bank of Ireland. This valuation forms part of the preparation of the Financial Statements and Annual Report for the Fund for the year ended 31 December 2012 and is expected to be completed in early 2013.

NAMA Property Sales

Questions (196)

Pearse Doherty

Question:

196. Deputy Pearse Doherty asked the Minister for Finance if he will provide the policy adopted by the National Asset Management Agency with respect to reducing rents to commercial tenants, who are facing financial distress, of buildings under the control of NAMA borrowers or its receivers. [51144/12]

Written answers

Minister for Finance

The National Asset Management Agency approves requests for rent easement or abatement from its debtors where a tenant demonstrates that the rent payable under a lease is in excess of current market levels and that the viability of a business is, as a consequence, threatened. By the end of October 2012, the Agency had received 273 rent abatement applications through debtors/receivers: 210 had been approved, 4 were refused, 9 were non-Agency or otherwise inapplicable and the remaining 50 were under review at that point. Some 159 applications have been received since the Agency’s Guidance Note on Upwards Only Commercial Leases was published last December. Since the start of the year, NAMA has approved cumulative rent reductions through debtors/receivers of over €6 million, bringing the total rent savings to date since inception of this initiative to approximately €9.7 million with a further €3.4 million currently under review. NAMA proactively works through debtors/receivers to facilitate rent abatements where the contractual rent is in excess of prevailing market rates and where, as a consequence, the viability of tenant businesses is undermined. NAMA's Guidance Note on Upwards Only Commercial Leases is available on its website, www.nama.ie. The Agency engages with industry representative bodies in the retail sector to promote understanding of the Guidance Note and its applicability.

Commercial Rent Reviews

Questions (197)

Pearse Doherty

Question:

197. Deputy Pearse Doherty asked the Minister for Finance if he will provide the policy adopted by the Irish Bank Resolution Corporation in which he is the sole shareholder of 100% of the shares and on the board of which he has seconded a person (details supplied), with respect to reducing rents to commercial tenants, who are facing financial distress, of buildings under the control of Irish Bank Resolution Corporation borrowers or its receivers. [51145/12]

Written answers

Minister for Finance

The overriding mandate of IBRC is to maximise the recovery of loans on behalf of the State and to wind down over time. The underlying approach of the Bank is to work constructively with each borrower on an individual basis. I have been advised that the tenancy arrangements for commercial properties, financed by IBRC, are principally governed by contractual lease agreements between the borrower (or receiver) as landlord and the lessee (tenant). In circumstances where IBRC receives a request from a borrower (or receiver), to add its consent to an amendment to lease terms, agreed with the lessee, typically a payment concession in terms of a lower rent or a rental holiday, the Bank will undertake a thorough review through its multi-faceted credit processes. This will include a comprehensive assessment of the individual tenant’s financial profile and underlying business circumstances, in order to assess fully their ability to meet their existing contractual obligations. I have asked IBRC to review NAMA’s policy guidance on upward-only rent reviews to see if IBRC could implement this policy guidance or a variation of this policy guidance. I understand this matter is under consideration by the Bank. I should also note that the person referred to has not been seconded to the board of IBRC but to the bank’s senior management team as the Head of Market Solutions.

Commercial Rent Reviews

Questions (198)

Pearse Doherty

Question:

198. Deputy Pearse Doherty asked the Minister for Finance if he will provide the policy adopted by Allied Irish Banks in which he is the shareholder of 99.8% of the shares and is responsible for the appointment of persons (details supplied) as public interest directors on that bank’s board, with respect to reducing rents to commercial tenants, who are facing financial distress, of buildings under the control of AIB borrowers or its receivers [51146/12]

Written answers

Minister for Finance

I am informed by AIB that it is committed to operating its business activities on a commercial basis as it seeks to protect its economic interests. As such, the bank approaches each particular situation on a case-by-case basis to ensure the appropriate outcome is achieved. In the case of commercial properties, the legal relationship that exists is typically between the borrower and the commercial tenant. As such AIB does not typically have remit to intervene in this contractual relationship directly. However, where the bank does become involved in restructuring individual cases, AIB will examine and explore options with its borrowers with a view to structuring the best long-term economic outcome given current economic conditions for all parties.

Fiscal Policy

Questions (199)

Pearse Doherty

Question:

199. Deputy Pearse Doherty asked the Minister for Finance if discussions have taken place between him and his Department and the finance programme troika regarding the extension to the target year by which the State gets its deficit below 3%; and if he will make a statement on the matter. [51149/12]

Written answers

Minister for Finance

As 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, 16 October to Thursday, 25 October last. In line with each of the previous quarterly reviews, Ireland has met all of the commitments and our continued strong programme implementation has been recognised by the Troika. My colleague, the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, and I met 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. The fiscal consolidation path, in terms of extending the period, was not discussed.

We have agreed a timeline for correction of the deficit by 2015 with the European authorities. The fiscal consolidation path is set out in the Council Implementing Decision 2011/77/EU of 7 December 2010, and any change to this would require ECOFIN Council of Ministers agreement. In addition, the Deputy should recall that we previously secured an extension of this timeline from 2014 to 2015. Any further extension of the fiscal consolidation timeframe would most likely mean a higher peak debt ratio and more of the State’s resources going towards debt servicing costs. Both the debt and debt servicing costs are at a very high level already. It is important they are stabilised and then reduced as quickly as possible. The State entered into excessive deficit in 2008. Based on the current plan, the State will be in excessive deficit for seven years, coming out of it only in 2015. This is a long period of time to be running deficits in excess of 3% of GDP. The Government is of the view that a 2015 deadline for correcting the deficit strikes the right balance between allowing the economic recovery to take hold but at the same time restoring sustainability to the public finances in a phased, timely manner. The current consolidation strategy is delivering on its main aim of reducing the deficit and Government is of the view that it would not be wise to change course at this point.

Banking Sector Remuneration

Questions (200, 201, 202)

Pearse Doherty

Question:

200. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 44 on 7 November 2012, if he will provide the salary paid to the chief executive officer of the National Asset Management Agency, Mr. Brendan McDonagh, in each of the calendar years 2009, 2010, 2011 and an estimate for the full year 2012; and if he will provide a listing and quantification of any additional benefits paid; and in respect of any expenses allowance, if he will confirm if such allowances are paid only in respect of vouched and receipted expenditure. [51153/12]

Pearse Doherty

Question:

201. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 46 on 7 November 2012, if he will confirm if the chief executive officer of the National Asset Management Agency, Mr. Brendan McDonagh, is employed on a temporary contract; the date on which this contract was entered into; the termination date of this contract; and if he will quantify any termination payments provided for under the contract. [51154/12]

Pearse Doherty

Question:

202. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 46 on 7 November 2012, if the chief executive officer of the National Asset Management Agency, Mr. Brendan McDonagh, is employed on a continuing or permanent contract and if he will quantify any termination payments provided for under the contract. [51155/12]

Written answers

Minister for Finance

I propose to take Questions Nos. 200 to 202, inclusive, together.

I am informed by NAMA that the remuneration packages of the NAMA chief executive is published in NAMA’s Financial Statements and included in its Annual Report which is available at www.nama.ie. It is summarised in the following table:

-	2011	2010
Salary	€430,000	€430,000
Taxable benefits (car and health insurance)	€24,483	€23,036

The application of the 15% reduction requested by the Minister brings the Chief Executive’s salary to €365,500. The increase in taxable benefit in 2011 relates to inflation increases applied by the health insurance provider. The Chief Executive waived any consideration for performance-related pay in respect of 2010 and 2011. The Chief Executive was appointed to his position on 22 December 2009. His contract as NAMA Chief Executive is a specified purpose contract, linked to the lifespan of NAMA. There are no termination payments linked to the ending of this contract. The NTMA does not operate an expense allowance for any employee, including the CEO of NAMA. Any expenses, wholly and necessarily incurred in the performance of duties, are reimbursed.

Employment Investment Incentive Scheme

Questions (203)

Eoghan Murphy

Question:

203. Deputy Eoghan Murphy asked the Minister for Finance further to Parliamentary Question No. 129 of 8 November 2012, if he will consider an investment scheme that applied to all businesses below a certain size, so that this would not skew the market towards one area, and would not risk starving larger companies of capital in view of the fact that the amounts being considered would be relatively low say something similar to the film section scheme for example but not confining the relief to one’s own tax band. [51161/12]

Written answers

Minister for Finance

I assume the Deputy is referring to the provision of a tax incentive to micro businesses which would be more attractive than that available under the Employment and Investment Incentive. As indicated in my previous response to the Deputy on this topic, EII is already available to the majority of SMEs including micro businesses. My concern in relation to providing a more attractive tax incentive for micro businesses is that it would draw investments away from other small businesses that do not meet the definition of a micro business which includes having less than 10 employees. It is likely that any incentive scheme that is more attractive than another, in terms of tax relief or reduced risk, would draw investors in the first instance to it. Only where such investors had access to greater amounts of capital to invest than allowed under the terms of the more attractive scheme, would they consider making other investments. In this regard, it is worth pointing out that the high earners' restriction imposes a limit on the amount of specified tax reliefs that can be claimed in a single tax year of €80,000 or 20% of adjusted income, whichever is higher.

Universal Social Charge Payments

Questions (204)

Dominic Hannigan

Question:

204. Deputy Dominic Hannigan asked the Minister for Finance if contractors from outside the State who are on contracts with the State agencies and Department have to pay the universal social charge for the duration of their contract; and if he will make a statement on the matter. [51180/12]

Written answers

Minister for Finance

I assume the Deputy is referring to contractors engaged under contracts for services; i.e. who are self-employed. The position is that the tax and USC status of contractors from outside the State who are on contracts with State agencies and Departments, is dependent on whether they are resident in the State and the place where the trade or profession is exercised. An individual who is tax-resident in the State for a tax year is liable to Irish tax including USC on his or her worldwide income for that tax year. An individual who is non-resident in the State for the tax year in respect of which tax and USC liabilities are to be calculated is, for that tax year, liable to Irish tax including USC on his or her income derived from any trade or profession exercised in the State. Further details on the Universal Social Charge are available from the Revenue website at www.revenue.ie/en/tax/usc/index.html.