Written Answers Nos. 217-235
217. Deputy Terence Flanagan asked the Minister for Finance the amount of the €24 billion of taxpayers' funds used to assist the banks with over indebted customers that has subsequently been used to date to assist mortgage-holders in each institution; and if he will make a statement on the matter. [13825/13]
View answerThe Deputy will be aware that all banks are required to maintain certain levels of regulatory capital to the satisfaction of the Central Bank. As part of their ongoing prudential work, banks and the Central Bank monitor the level of capital and if a deficiency is identified, or if one could reasonably arise, the regulated bank will have to take action to address such a potential or actual shortfall. As part of its overall support for the Irish banking system, the State has provided a very significant amount of capital support to the covered banks with the most recent capital injection arising from the March 2011 Central Bank PCAR assessment of the covered banks. That capital assessment was based on certain macro economic and loan loss assumptions on all parts of the loan books of the covered banks, including mortgages. The capital provided to the covered banks allowed them to meet their regulatory capital requirements having regard to aggregate actual and protected loan losses and other costs and also, in respect of the continuing banks, to enable them to continue to operate as banks. The Central Bank has clearly stated that banks now have a substantial capital buffer with which to absorb losses on their mortgage portfolios and, as evidenced by the Central Bank statement last week on performance targets, the State authorities now require determined action by banks to systemically work through their mortgage book and to offer appropriate durable solutions to mortgage holders in arrears.
However, under the Relationship Frameworks put in place with the covered banks, the Boards of these institution, in the exercise of their fiduciary responsibilities, are responsible for the day to day operations of the banks including decisions on the commercial management and resolution, where appropriate, of individual loans and they are required to report, in line with prudential and accounting requirements, on the provisioning position of all individual loans in their interim and annual accounts. As Minister, I have no directive role or involvement in such decisions.
218. Deputy Derek Nolan asked the Minister for Finance his plans to introduce a pension levy for AIB management; if there will be any reduction in their pensions or increases in contributions to their pension fund; and if he will make a statement on the matter. [13822/13]
View answerAs the Deputy will be aware AIB announced in 2012 that it plans to close the defined benefit pension scheme to new accruals and as part of this process is in on-going discussions with staff and the Unions. AIB is committed to ensuring that all elements of pay, including base pay and benefits, are in line with the bank’s operating performance and recognise the materially altered environment for banks operating in Ireland. All changes need to be made against a backdrop of historical contracts that were put in place in a different operating and ownership environment. Following the publication of the Review of Remuneration Practice and Frameworks at the Covered Institutions, I have directed the covered institutions including AIB to come up with plans to meet the State’s objectives. Those objectives mean a saving of 6%-10% of total remuneration costs through reductions in payroll, pension benefits and other measures.
I also wish to point out that the Pension Related Deduction (PRD) which is known as the pension levy only applies to people belonging to public service pension schemes and does not apply to semi-states or the private sector. Irrespective of the Minister’s shareholdings in each of the covered institutions, no public service pension schemes exist in those institutions and therefore the pension levy does not apply.
219. Deputy John Paul Phelan asked the Minister for Finance the scale of Ireland's national debt at end 2007, both in real terms and as a percentage of GDP; if he will indicate the net increase of the national debt, in real terms, in each of the years 2008, 2009, 2010, 2011 and 2012; in the case of each year the amount of net debt increase attributable to banking measures and the amount attributable to borrowing to fund current expenditure; the scale of Ireland's national debt both at the end of 2012 and as of today, again both in real terms and as a percentage of GDP; and if he will make a statement on the matter. [13881/13]
View answerThe data requested by the Deputy relating to National Debt, covering the period 2007 to 2012, is listed in both Table 1 and Table 2. The National Debt, that is the net debt incurred by the Exchequer after taking account of cash balances and other related assets, stood at €163.354 billion at end-February 2013. Current estimates for Nominal GDP for both 2012 and 2013, at €163.2 billion and €167.7 billion respectively, were published as part of Budget 2013. As regards payments for banking recapitalisation which affected the National debt during the period of 2007 to 2012, the following was recorded:
- In 2009, the Exchequer injected €4 billion into Anglo Irish Bank.
- In 2010, the Exchequer provided, by way of Special Investment Shares (SIS), €625 million to EBS and a further €100 million to INBS.
- In 2011, the Exchequer funded the first of the Promissory Notes payments to IBRC (formerly Anglo Irish Bank and INBS) and EBS. These amounted to €3,060 million and €25 million respectively. The Exchequer also provided a gross €7.6 billion towards the recapitalisation of Allied Irish Banks, Bank of Ireland and Irish Life and Permanent (ILP) in July 2011.
- In 2012, the Exchequer funded the second instalment of the EBS Promissory Note of €25 million. It also funded the €1.3 billion acquisition of Irish Life Limited from ILP.
Finally the bond issued to settle the 2012 IBRC Promissory Note also added to National debt in 2012. With regard to the purchase of Irish Life in 2012, the Deputy may be aware that the State recently sold Irish Life. This was a welcome development, representing the first time during the crisis that a company in which we have invested has been returned fully to private ownership.
Table 1. National Debt as % GDP
|
Year |
Nominal GDP |
National Debt |
National Debt as % GDP |
|
- |
€ billion |
€ billion |
% |
|
2007 |
188.7 |
37.6 |
19.9% |
|
2008 |
178.9 |
50.4 |
28.2% |
|
2009 |
161.3 |
75.2 |
46.6% |
|
2010 |
156.5 |
93.4 (1) |
59.7% |
|
2011 |
159.0 |
119.1 |
74.9% |
|
2012 |
163.2 |
137.6 |
84.3% |
Source: Department of Finance & NTMA
Data for 2007-2011 GDP figures based on outturn, 2012 GDP based on forecast from Budget 2013
Rounding may affect totals
Table 2. Breakdown of Year-on-Year increase of National Debt
|
Year |
Nominal GDP |
Y-on-Y National Debt Increase |
"Gross Banking Support" National Debt Increase Component 2 |
"Gross Banking Support" Debt 2 % GDP |
"Regular" Debt Increase Component |
"Regular" Debt % GDP |
|
- |
€ billion |
€ billion |
€ billion |
% |
€ billion |
% |
|
2007 |
188.7 |
1.7 |
- |
- |
1.70 |
.9% |
|
2008 |
178.9 |
12.8 |
- |
- |
12.8 |
7.2% |
|
2009 |
161.3 |
24.8 |
4.0 |
2.5% |
20.8 |
12.9% |
|
2010 |
156.5 |
18.2 |
0.7 (1) |
0.5% |
17.5 |
11.2% |
|
2011 |
159.0 |
25.7 |
10.7 |
6.7% |
15.0 |
9.5% |
|
2012 |
163.2 |
18.5 |
4.8 |
2.9% |
13.7 |
8.4% |
Source: Department of Finance & NTMA
Data for 2007-2011 GDP figures based on outturn, 2012 GDP based on forecast from Budget 2013
Rounding may affect totals
1. Issuance by the Government in 2010 of Promissory Notes to Anglo Irish Bank and INBS (subsequently renamed IBRC) and EBS increased the level of General Government Debt by almost €31 billion in 2010 alone. However, the Promissory Note payments only add incrementally to National Debt as the annual instalments are paid.
2. "Banking related debt” relates to the direct, gross impact on National debt of measures taken to support the Irish banking system through the Exchequer.
No allowance is made for any revenues flowing from the banking sector such as from fees for the Bank Guarantee, interest on contingent capital notes, dividends from the Central Bank to the State as a result of ELA provision or the proceeds from the sale of part of the NPRF Commission shareholding in Bank of Ireland in 2011. Similarly, the figures do not take account of the €20.7 billion gross in support provided directly from the NPRF, the Exchequer support provided to the credit union sector or the debt servicing costs of the associated Exchequer borrowing.
220. Deputy Seán Kenny asked the Minister for Finance the minimum cash payments the Revenue Commissioners will accept from persons paying weekly instalments at a local service providers for the property tax; and if he will make a statement on the matter. [13898/13]
View answerI am informed by the Revenue Commissioners that a number of different payment options have been put in place to assist people in meeting their Local Property Tax (LPT) obligations, including the facility to pay by cash. Revenue’s strategy in this regard is to ensure taxpayers have a choice of payment options available to them from which they can choose the method, which is most suited to their individual circumstances. Revenue has appointed a number of payment service agents, An Post, Payzone and Omnivend Systems Ltd, to provide cash payment facilities for LPT. The payment service agents will not apply any minimum threshold for cash payments but will charge a transaction service fee, which will be borne by the customer. The three payment service agents have extensive networks and are easily accessible across the country. Taxpayers who choose to pay by cash on a phased basis should ensure that the full amount of LPT is paid by the end of the year in which the tax is due. Revenue has outlined details of the various payment options in its Guide to Local Property Tax.
221. Deputy Thomas P. Broughan asked the Minister for Finance if the assets of a developer being taken over by the National Asset Management Agency can include what was formerly a designated public road, that is, an access road into an unfinished housing estate; the number of such roads that NAMA has taken over across the country; if he will outline NAMA's obligations and responsibilities for any such roads under their control; and if he will make a statement on the matter. [13928/13]
View answerThe National Asset Management Agency (NAMA) has acquired loans from participation institutions. NAMA is not the owner of properties. The Agency’s role is that of a secured lender. NAMA’s acquisition of loans has no implications for the designated status of public roads. Such roads remain in the full control of the relevant roads authority. Where NAMA holds security over unfinished housing developments it, in line with the recommendations of the report of the Advisory Group on Unfinished Housing Developments, requires its debtors and receivers to prepare a Site Resolution Plan (SRP) with input from all stakeholders, including residents, the bond holder, the local authority and the funder. This process, which is advocated by the Minister of State with special responsibility for Housing and Planning, is designed to ensure, inter alia, the early resolution of all taking in charge issues, including the taking in charge of infrastructure such as roads within the development.
222. Deputy Michael McGrath asked the Minister for Finance if he will provide a list of the selling agents currently on the panel of selling agents who may act on behalf of the National Asset Management Agency in relation to the sale of properties; when invitations will be issued again for firms wishing to become members of the panel; and if he will make a statement on the matter. [13907/13]
View answerAs the deputy is aware NAMA has acquired loans and is not the owner or operator of properties. The Agency’s role is that of a secured lender. NAMA appointed a panel of property valuers in 2009 to assist in the valuation of property that was security for loans being acquired and that this process has now concluded. Other than properties that have been enforced, all of which are listed on NAMA’s website and which are managed by the appointed receivers, properties continue to be managed by their existing owners or their professional managers/agents. In managing the letting and sale of properties, owners and receivers are required to appoint selling agents on a competitive basis and under a duty of care to NAMA. Where NAMA directly procures services, it does so in accordance with the rules of public procurement. All tenders directly managed by NAMA are advertised on the NAMA website, www.nama.ie, and the public procurement website, www.etenders.gov.ie. NAMA recommends that interested parties monitor these sites to identify suitable tenders which may arise in the context of NAMA’s work.
223. Deputy Peadar Tóibín asked the Minister for Finance if he will list the locations and properties that have loans acquired by National Asset Management Agency in County Meath. [13962/13]
View answerNAMA is prohibited under Sections 99 and 202 of the NAMA Act from disclosing confidential information, which is specifically defined to include information relating to its debtors and details of their properties. Accordingly, the provision of the information sought by the Deputy would be in contravention of the NAMA Act. The Deputy will however note that a number of properties located in Meath are under the control of receivers appointed by NAMA and that details on those properties are available on the Agency’s website, www.nama.ie.
224. Deputy Pearse Doherty asked the Minister for Finance if consideration was given to the outsourcing of a call centre to a private company to deal with calls relating to the local property tax; if the cost of such a centre was estimated at €4.9 million; if it was intended that calls taken by that centre would then be processed back to Revenue; if he still intends to proceed with plans for a private call centre; if a direct call number has been established for local property tax queries; and the number of personnel who have been assigned to answering calls. [13992/13]
View answerI am advised by the Revenue Commissioners that the introduction of the Local Property Tax (LPT), amounting, as it does, to the largest extension of the self-assessment system in the history of the State, represents a very great administrative challenge for Revenue. As a new service that will have exceptional temporary pressures at particular stages of its initial implementation it proved difficult to predict the level of contact that would arise during its introduction and, consequently, the resource required to meet customer service demands. Revenue considered a number of options for the provision of a phone call service and estimated the cost of providing the service needed to meet the anticipated demands taking account of a number of resource options. These included the use of existing Revenue resources only; the recruitment of Temporary Clerical Officers (TCOs) for their 1890 service; the outsourcing of the entire service and a mix of existing staff, TCOs and external resources. Revenue chose the final option outlined, a mix of external and internal resources.
The service was initiated on 7 March, the contact number is 1890 200 255 and it operates on the basis that calls are handled by the service provider in the first instance. Complex matters that cannot be handled by the service provider are escalated to a team of Revenue staff. The call management and reporting systems are monitored by Revenue and also the actual delivery of the service. The number of staff allocated to the call centre service, both in Revenue and externally will vary in response to the levels of demand, but for the Deputy’s information, current indicative numbers are 40 external staff with up to 27 Revenue staff available as required.
The outsourcing of peak call handling in respect of the LPT will ensure that skilled Revenue staff can continue to provide the necessary customer service to meet their long term, on-going demands and commitments in relation to the strategic priority of maintaining and improving levels of tax and duty compliance. It meets the specific and unusual need which has arisen in the context of the roll out of the new tax. It might also be noted that, following a full hearing, the Civil Service Arbitration Board determined that the proposal to outsource this service is entirely consistent with provisions of the national agreements on the provision of outsourced services, including specific provisions in Towards 2016 and the Public Service Agreement 2010-2014.
The €4.9 million figure quoted by the Deputy does not represent the estimate of the cost of the outsourced call centre service. This figure was Revenue’s estimate of the total cost of providing a service using internal and external resources. The nature of the contract is that the cost will depend on the volume of calls handled, but I am informed by the Revenue Commissioners that it is expected to be very much lower than the figure quoted by the Deputy. I am further informed that in accordance with the relevant Government decision, the Revenue Commissioners publish quarterly lists of payments over €20,000 and payments made under this contract will be included in future lists.
The proposal to address the simpler LPT queries through the outsourcing of limited call services offers a flexible, scalable response to an unpredictable demand. It will also provide assurance that the introduction of LPT will not damage Revenue’s overall capacity to deliver for the Exchequer and for the Irish people, an important consideration at any time and vital in the current economic circumstances.
225. Deputy Sean Fleming asked the Minister for Finance the steps he will take to ensure that the pay cuts in line with the Croke Park II agreement for the public service are extended to the bailed-out banks; and if he will make a statement on the matter. [14017/13]
View answerWhen publishing the Review of Remuneration Practices and Frameworks at the Covered Institutions, on 12 March 2013, I indicated that the Government had formed the view that with the remaining covered institutions still incurring losses it was an inescapable conclusion that the cost base of the institutions needs to be reduced further. This is essential if they are to return to profitability, be in a position to support the economy and repay the State’s investment through a return to private ownership. On behalf of the Government, I have now directed the banks to come up with plans as to how they intend to address this issue in a manner that can help meet the State’s objectives. I expect the value of those plans to mean a saving of 6% - 10% of total remuneration costs, through reductions in payroll and pension benefits, new working arrangements and structures that deliver efficiency gains.
I acknowledge the sacrifices and changes made by bank employees to date at all levels and recognise that this has been achieved without major industrial unrest in what is a critically important sector. However, it can never be forgotten by management and employees of these banks – both past and present – that without enormous cost to Irish taxpayers these institutions would not have survived and that this needs to be borne in mind during future discussions.
226. Deputy Sean Fleming asked the Minister for Finance the parliamentary oversight provisions he has established in relation to the liquidator appointed to Irish Bank Resolution Corporation in liquidation; and if he will make a statement on the matter. [14019/13]
View answerI can advise the Deputy that I have put in place a comprehensive process for the oversight of the liquidation of IBRC. In common with the interest of other creditors I and my officials have been in contact with the Special Liquidators throughout the process to date to understand how the winding up has been proceeding. Weekly briefings have been established between officials of the Department of Finance and the Special Liquidators. This constant engagement and oversight will continue throughout the course of the liquidation and will be supported by a monthly report to me by the Special Liquidators. The first of these reports has been received and is currently being considered. As the report contains information that is commercially sensitive I am not in a position to publish these reports.
227. Deputy Sean Fleming asked the Minister for Finance if employees who are willing to cooperate with the liquidator of Irish Bank Resolution Corporation in liquidation to ensure a satisfactory outcome for the taxpayer will be compensated for their ongoing co-operation by way of making available the previous redundancy programme that existed in the bank prior to the liquidation in view of the fact that the liquidator can make payment to unsecured creditors whose co-operation is required for a successful conclusion to the process; and if he will make a statement on the matter. [14022/13]
View answerAs the Deputy is aware, following the appointment of the Special Liquidator IBRC employee contracts were terminated in the Republic of Ireland. As a result of the termination of the employment contracts, employees are entitled to apply for a statutory redundancy payment and a statutory notice payment, subject to the limits prescribed by statute. The vast majority of employees have been re-hired by the Special Liquidators for a minimum period of 3 months to ensure an orderly wind-down of the business. I am sure the staff will continue to work to ensure a satisfactory outcome for Irish taxpayers while they remain in employment under the liquidation process. Furthermore, some staff may, in time, be re-hired by NAMA or other purchasers of the assets. I am informed by the Special Liquidators that there is on-going communication between them and the staff of IBRC to discuss their issues. The Special Liquidators are highly cognisant of the issues that staff and the IBOA have been highlighting and that significant steps have already been taken to address those concerns. The Special Liquidators have advised that they continue to engage with the staff and their representative bodies.
228. Deputy Micheál Martin asked the Minister for Finance if he has spoken to or met the Governor of the Central Bank of Ireland recently to discuss the ongoing mortgage crisis; and if he will make a statement on the matter. [10966/13]
View answerBoth I and my Department maintain close contact with the Central Bank on a range of financial sector issues including the development and implementation of measures to address the mortgage arrears problem. In that regard the Deputy will of course be aware that last week the Deputy Governor of the Central Bank and myself announced additional new measures to tackle the mortgage arrears problem including the publication by the Central Bank of performance targets for the main banks to require lenders to systematically work through their mortgage book and to offer durable solutions to mortgage holders in arrears.
229. Deputy Brian Stanley asked the Minister for Finance noting that on properties sold to tenants under various State sales schemes a significant discount is applied to an agreed market value, thereby reducing the price paid by the tenant to the local authority and in view of the fact that the local authority does not receive market value on the sale of a housing property, his views on whether it is appropriate that market value be used when calculating the basic rate of local property tax. [12817/13]
View answerI am informed by the Revenue Commissioners that the chargeable value is defined in the Finance (Local Property Tax) Act 2012 as the price that the unencumbered fee simple of a residential property might be expected to fetch on a sale on the open market were that property to be sold on the valuation date of 1 May 2013, in a manner that would secure the best possible price for the property. Therefore, in assessing the market value of a residential property it would be inappropriate that account be taken of whether the property was purchased by its current owner at a discount to market value, whether from a local authority or any other previous owner. The Local Property Tax (LPT) is a self-assessed tax, therefore it is a matter for the property owner to calculate the tax due based on his or her assessment of the chargeable value of the property. Certain Government backed schemes have been and continue to be available, aimed at helping lower-income households buy their own homes by allowing properties to be purchased at prices significantly less than their market value. I am advised by the Department of the Environment, Community and Local Government that under the Affordable Housing Scheme, launched in March 1999, local authorities provide additional housing on land, which they own, to low-income purchasers at cost price. A mortgage subsidy is payable to qualifying households based on income bands. The Shared Ownership Scheme facilitates access to home ownership in two or more stages for those who cannot afford home ownership immediately. In the case of qualifying households a subsidy towards the rent payments for that portion of the equity not yet purchased, based on income bands, is payable by the local authority, and recouped by the Department of the Environment, Community and Local Government. There are transitional arrangements for subsidy payments to avoid disincentives in the scheme as income rises.
To the extent that those who purchased a property under such schemes are on a low income, they may be in a position to qualify for either a full or a partial deferral of payment of Local Property Tax. The income thresholds for a full deferral are €15,000 for a single person and €25,000 for a couple. The thresholds for a partial deferral are €25,000 for a single person and €35,000 for a couple. These thresholds may be increased by up to 80% of mortgage interest payable – this increased threshold is available until 2017.
230. Deputy Brian Stanley asked the Minister for Finance his views on whether local authority emergency or transitionary housing, unoccupied local authority units awaiting demolition or regeneration are liable for local property tax. [12818/13]
View answerFor Local Property Tax (LPT) purposes, a residential property is defined as any building or structure (or part of a building) which is used as, or is suitable for use as, a dwelling and includes any shed, outhouse, garage or other building or structure and includes grounds of up to one acre. The Finance (Local Property Tax) Act 2012 (as amended) provides that a liability for LPT will arise where a person owns a residential property on the liability date which will be 1 May 2013 for the year 2013 and for subsequent years 1 November in the preceding year.
The Act provides that local authorities will be liable to pay LPT on their properties in the same way as any other residential property owner, unless the properties are used to accommodate people who have special housing needs. Special housing needs refers to the provision of housing and support for people who have a particular need in addition to a general housing need to enable them to live in the community. I am advised by the Revenue Commissioners that they are currently drawing up guidelines that will facilitate social housing providers, including local authorities, in identifying which of their properties are used to provide special needs housing and are, therefore, exempted from the charge to LPT. In keeping with the Department of Finance’s mission to play a central role in the achievement of the Government’s economic and social goals, as set out in my Department’s Annual Review of 2012 , officials of my department, along with the Revenue Commissioners, are actively engaging with social housing providers, including, for example, Focus Ireland, in this regard.
It is not possible to give a definitive view on whether local authority emergency or transitional housing will be exempt from LPT without further information on the nature of the housing and any supports provided.
As already stated, one of the criteria for liability to LPT is that a building is suitable for use as a dwelling. The fact that a building is unoccupied will not of itself mean the building is exempt from LPT. It will be a question of fact in each case whether a particular building awaiting demolition or regeneration is suitable for use as a dwelling. It is not possible to provide a general reply that will address each case; for example, a perfectly habitable property may be awaiting demolition simply because a local authority intends to re-develop an area.
The Finance (Local Property Tax) Act 2012 (as amended) provides that where local authority owned properties are not exempt from LPT, the market value of any such property will be deemed to fall into the lowest valuation band of €0 to €100,000 up to and including 2016. This will result in an LPT charge of €45 per property for 2013 and €90 per year for 2014 to 2016. In addition, section 119 of the Act also gives local authorities until 1 January 2014 to pay the 2013 tax.
I am informed by the Revenue Commissioners that they are liaising with the Department of the Environment, Community and Local Government to establish how local authorities will provide the Revenue Commissioners with information in relation to their LPT liability and the timing and manner of the payment of this liability.
231. Deputy Sandra McLellan asked the Minister for Finance if he will consider extending the living city initiative pilot project to the walled town network and-or the walled towns historical initiative; and if he will make a statement on the matter. [13125/13]
View answer232. Deputy Sandra McLellan asked the Minister for Finance if he will broaden the remit of the living city initiative to include a broader range of houses with the specific aim of maximising the regeneration process and ensuring that it is more community based; and if he will make a statement on the matter. [13126/13]
View answer233. Deputy Sandra McLellan asked the Minister for Finance if he will explain the link between the selection of Limerick and Waterford due to their extremely low ranking on the Relative Deprivation Index for Irish Cities, –6.66 and -4.51 respectively, for inclusion in the pilot project for urban regeneration under the living city initiative and the refurbishment of owner occupied Georgian homes; the rationale for selecting this particular scheme; the way he expects it to address the related issues of chronic unemployment and high levels of deprivation; and if he will make a statement on the matter. [13128/13]
View answer234. Deputy Sandra McLellan asked the Minister for Finance if he will extend tax breaks under the living city initiative to small retailers who rent premises adjacent to historic buildings and quarters; and if he will make a statement on the matter. [13135/13]
View answer235. Deputy Sandra McLellan asked the Minister for Finance if he will outline in detail the way tax breaks for the refurbishment of owner-occupied Georgian houses as outlined in the living city initiative will assist the regeneration process in Limerick and Waterford; and if he will make a statement on the matter. [13127/13]
View answerI propose to take Questions Nos. 231 to 235, inclusive, together.
Section 30 of the Finance Bill 2013 introduces a scheme of tax incentives, focussing on the regeneration of the historic centres of some of our main cities. The scheme, which will be introduced by Ministerial order, is entitled the Living City Initiative and will apply, in the first instance, on a pilot basis, to specified regeneration areas in Waterford and Limerick. My Department have prepared an information note on this Initiative which was published on the Department’s website on 13 February last.
The historic centres of some of our cities have suffered for a long time from gradual depopulation and the relocation of family homes and businesses out to the suburbs, particularly during the period of the “Celtic Tiger”. These centres have also suffered greatly from the general economic downturn of the past few years and while I am not suggesting that this scheme is capable, on its own, of reversing that trend, I am convinced it has a part to play especially with regard to helping to rebuild confidence in those areas. The particular focus of the scheme is as follows:
- to encourage people back to the centres of Irish cities to live in historic buildings, in particular Georgian houses, and
- to encourage the regeneration of the retail heartland of central city business districts.
I indicated in my Budget speech in December last year that I would examine proposals for a targeted incentive for already identified regeneration areas. The tax relief which will apply under this scheme will operate for 5 years from the date of commencement. However, it is my intention that before it begins, the scheme will be the subject to an ex-ante cost benefit analysis. Subject to a positive outcome from that analysis, I will seek EU approval under State Aid rules for this initiative to be commenced for Limerick and Waterford cities. I have not yet decided on the exact boundaries of the regeneration areas in these cities but I will be consulting with my Government colleagues and the relevant local authorities before I make any final decision.
There are 2 strands to the scheme. The first involves a tax relief for the refurbishment or conversion of Georgian houses for residential purposes. The relief will only apply to owner/occupiers and not for rented residential accommodation. The relief will be spread over 10 years at the rate of 10% of the expenditure per annum, provided the property is occupied as the principal private residence of the individual during that time. No relief can be transferred to any subsequent purchaser. It will be necessary for the individual to have received confirmation from the relevant local authority that the property conforms to planning permission (if required), appropriate building regulations and floor area limits and that the cost of the works seem reasonable, before the relief can be claimed.
The second strand is a scheme of accelerated industrial buildings allowances for the conversion and refurbishment of retail premises, although other business services will also be allowed where the premises is a Georgian building. In such cases, the commercial element will be confined to the ground floor or basement with the residential element upstairs. The allowance is at the rate of 15% per annum for 6 years with 10% in year 7 and is subject to the normal balancing charges or allowances if disposed of within that time period. The standard restrictions on the sideways setting of unused capital allowances against other income will apply and there will be no exemption from the current treatment of the termination of the carry-forward of certain unused capital allowances for passive investors. Furthermore, the high earners restriction, which applies across the full range of reliefs such as this, also applies to this relief.
I am hopeful that these reliefs will help restore some of these inner city areas to their former glory. The prevalence of Georgian houses is a peculiar characteristic of the built-environment of many Irish cities and while some of these Georgian buildings have fallen into a state of disrepair and dereliction, my colleague, the Minister for Arts, Heritage and the Gaeltacht and myself have been exploring ways in which to promote and support the regeneration of these city centres. If EU State Aid approval is received, I will then consider extending the scope of the Initiative to other clearly defined areas within cities, but I do not believe that it would be prudent to go beyond the areas which are already identified at this stage.
The reliefs which I am introducing are an attempt to encourage people back into these cities, to rear their families and if possible, to operate their business from there. It will not be possible to revitalise these inner city areas without this happening. Pobal, the state agency that supports local communities has developed a sophisticated index which measures deprivation in different local areas across Ireland. Taking into account the deprivation statistics from the 2011 Census, both Limerick and Waterford score as the most disadvantaged of our major cities. Furthermore, unemployment rates in these cities are also the highest, significantly worse than the national average. Both have their own unique problems regarding unemployment and social problems and for these reasons I have selected these for the pilot phase of this initiative.
