Written Answers Nos. 38-45
38. Deputy Michael McGrath asked the Minister for Finance if, in view of the State support afforded to Allied Irish Bank to date, the spiralling mortgage arrears crisis and the link between high mortgage rates and the level of arrears, he will engage with AIB regarding its intention of increasing its standard variable rate for residential mortgage customers; and if he will make a statement on the matter. [10593/13]
View answerThe setting of rates is a commercial matter for the management and the Board of the Institutions. As the Deputy will be aware the Relationship Framework with the bank provide that the State will not intervene in the day-to-day operations of the bank or their management decisions. However I understand that the Central Bank of Ireland pays attention to such matters and would no doubt be concerned if banks were exacerbating their arrears problem and as such impairing their on-going viability, from such actions. These frameworks are published on the Department of Finance website at http://banking.finance.gov.ie/presentations-and-latest-documents/.
39. Deputy Sandra McLellan asked the Minister for Finance if he has carried out an impact assessment on the potential effect on the numbers in mortgage distress if local property tax is introduced. [10566/13]
View answer42. Deputy John Halligan asked the Minister for Finance if he has done any analysis on the projected impact on consumer spending and the current mortgage crisis of his plans to introduce the local property tax; and if he will make a statement on the matter. [10633/13]
View answerI propose to take Questions Nos. 39 and 42 together.
The Government has considered the impact of the Local Property Tax (LPT) on those in mortgage distress. In designing the LPT the Thornhill Group acknowledged that in current circumstances an additional case should be made to target assistance on owner occupiers suffering severe financial stress as a result of housing mortgage commitments undertaken during the housing boom period, aggravated in some cases by reductions in income. The Group recommended increased deferral thresholds in cases where the mortgage was taken out between 1 January 2004 and 31 December 2008.
The Government accepted the Thornhill Group’s recommendation but decided not to limit the increased thresholds to those who purchased properties during a particular time period. Therefore, an increased income threshold applies in the case of properties occupied as a sole or main residence and subject to a mortgage. In such cases, the gross income thresholds may be increased by 80% of the mortgage interest payments. A deferral option in qualifying cases in this regard will apply until the end of 2017 and will assist individuals currently in mortgage distress. Where a liable person no longer satisfies the necessary conditions, amounts deferred prior to the date on which eligibility ceased may continue to be deferred. Interest of 4% per annum will apply to any amounts deferred. Liable persons may also qualify for a 50% deferral of local property tax where gross income does not exceed €10,000 over the increased deferral thresholds.
The Finance (Local Property Tax) (Amendment) Bill 2013 provides that a person who has entered into an insolvency arrangement – i.e. a Debt Settlement Arrangement or a Personal Insolvency Arrangement under the Personal Insolvency Act 2012 – may qualify for a deferral of the LPT that falls due for payment by that person during the period for which the insolvency arrangement is in effect where a valid claim is made to the Revenue Commissioners.
Subject to the enactment of the Finance (Local Property Tax) (Amendment) Bill 2013 further new measures will provide for the possibility of a deferral for liable persons who cannot without excessive hardship pay local property tax when it becomes payable, as a consequence of a significant and unexpected financial loss or expense (subject to the application for a deferral from the liable person to the Revenue Commissioners, in line with Revenue guidelines to be published, and notification from the Revenue that a deferral is allowed).
In relation to consumer spending, the main parameters of the Government’s multi-year fiscal plan have been set out in broad terms since Stability Programme Update (SPU) 2011, published in April of that year, just after the Government came into office. Budget 2013 then set out the quantum to be raised from an LPT on the revenue side. However it must be borne in mind that since SPU 2011, the impact of revenue measures on GDP in the 2012-15 period had already been factored into growth forecasts, through the fiscal multiplier effect on private consumption.
40. Deputy Pearse Doherty asked the Minister for Finance the number of staff at Irish Bank Resolution Corporation that have been re-hired and the number of those re-hired who earn less than €100,000, between €100,000 and €200,000, between €200,000 and €300,000, between €300,000 and €400,000 and those who earn more than €400,000. [10561/13]
View answerI am informed that on the appointment of the Special Liquidator, 809 employee contracts were terminated in the Republic of Ireland. 802 employees were re-hired by the Special Liquidators on short term contracts to assist with the liquidation of Irish Bank Resolution Corporation Limited. The Special Liquidators confirmed to the employees (by letter dated 7 February 2013) that their “salary and frequency and method of salary payments” will apply at the same level that was in operation immediately prior to the appointment of the Special Liquidators.
With regard to salaries in the IBRC, as the Deputy will be aware officials in my Department and Mercer have been working on a remuneration review of the covered banks. I have committed to publishing the details underpinning the review in view of the public interest in the matter. The report will provide a comprehensive and professional analysis of remuneration structures and levels across the covered banks both now and before the onset of the banking crisis. The report is expected shortly.
41. Deputy Pearse Doherty asked the Minister for Finance if he has carried out any assessment on the economic impact of the sale of the bonds which replaced the promissory notes by the Central Bank at an earlier date than predicted by his Department; and if he will make a statement on the matter. [10560/13]
View answerThe Government bonds are now held by the Central Bank of Ireland following the liquidation of IBRC. Eight new Floating Rate Treasury Bonds have been issued to discharge the Promissory Notes liability consisting of: a 25 year bond of €2bn maturing in 2038 with an interest rate of 6-month Euribor plus a margin of 2.50%; a 28 year bond of €2bn maturing in 2041 with an interest rate of 6-month Euribor plus a margin of 2.53%; a 30 year bond of €2bn maturing in 2043 with an interest rate of 6-month Euribor plus a margin of 2.57%; a 32 year bond of €3bn maturing in 2045 with an interest rate of 6-month Euribor plus a margin of 2.60%; a 34 year bond of €3bn maturing in 2047 with an interest rate of 6-month Euribor plus a margin of 2.62%; a 36 year bond of €3bn maturing in 2049 with an interest rate of 6-month Euribor plus a margin of 2.65%; a 38 year bond of €5bn maturing in 2051 with an interest rate of 6-month Euribor plus a margin of 2.67%; and a 40 year bond of €5bn maturing in 2053 with an interest rate of 6-month Euribor plus a margin of 2.68%. The bonds will pay interest every six months (June and December).
The Central Bank of Ireland will sell the bonds but only where such a sale is not disruptive to financial stability. The Central Bank has undertaken that a minimum of bonds will be sold in accordance with the following schedule: €0.5bn by the end of 2014, €0.5bn per annum from 2015 to 2018, €1bn per annum from 2019 to 2023 and €2bn per annum from 2024 onwards.
Any hypothetical acceleration in the bond sale schedule could potentially impact to some extent on sovereign borrowing costs and the pass-through to the real economy, if any, could occur through the impact on the interest rate conditions faced by households and firms. The impact on the economy would also depend on the interest rate environment and liquidity conditions (globally and nationally) which prevail at the time of the sale of the bonds, which are impossible to predict over the very long term.
45. Deputy Colm Keaveney asked the Minister for Finance in view of the fact that Irish Bank Resolution Corporation Act 2013 grants him the power to direct the special liquidator in the carrying out of his or her duties, the way he proposes that the issue of the mortgages and loans owing by the former employees of IBRC be addressed, noting that these loans are not being transferred to National Asset Management Agency but are remaining with the liquidator; and if he will make a statement on the matter. [10495/13]
View answerAs set out in the Irish Bank Resolution Corporation Act 2013, NAMA will not be required to make a bid for “any credit facility pursuant to which IBRC (or Nationwide Building Society (“INBS”)) has made facilities available to current or former employees and/or officers of IBRC or INBS.” No other directions have issued in respect of these credit facilities and they will be managed by the Special Liquidators who will devise strategies on a case by case basis. There is an obligation on the Special Liquidators to ensure that the assets of IBRC are managed in a way which maximises the overall return for all its creditors including the State.
