Richard Boyd Barrett
Question:1. Deputy Richard Boyd Barrett asked the Taoiseach if he will report on the most recent meeting of the Clearing House Group; and if he will make a statement on the matter. [56787/12]
View answerTuesday, 26 March 2013
Questions (1, 2, 3)
Gerry Adams
Question:2. Deputy Gerry Adams asked the Taoiseach if he will report on the work of the International Financial Services Centre Clearing House Group; and if he will make a statement on the matter. [2319/13]
View answer
Joe Higgins
Question:3. Deputy Joe Higgins asked the Taoiseach if he will report on the recent contacts that he has had with the International Financial Services Centre Clearing House Group. [12511/13]
View answerOral answers (27 contributions)
I propose to take Questions Nos. 1 to 3, inclusive, together.
I have had no direct contact with the IFSC Clearing House Group recently. My last direct contact was a brief meeting when the strategy for the international financial services industry was launched in July 2011. That group is chaired by the Secretary General of my Department, as has been the case since its inception in 1987.
The Clearing House Group last met on Thursday, 7 March 2013. The main agenda item was job creation and specifically the further potential for the international financial services sector to contribute to job creation and to address the challenges of unemployment. Several areas of potential were identified in this regard and these will be examined further in subsequent meetings of the Clearing House Group.
This afternoon, along with the Minister for Jobs, Enterprise and Innovation, I was delighted to announce the creation of 112 high quality jobs in Dublin by Zurich Financial Services. We are not yet past quarter 1 of 2013 and already we have seen several highly significant foreign direct investments from companies including Quantcast, Facebook, eBay and Sanofi. During my visit to the USA last week I was pleased to announce further investment by McAfee and Yahoo, creating more than 250 jobs.
As I have referenced in previous responses on this issue, my Department has supported the international financial services industry in Ireland since the establishment of the IFSC in 1987 by providing a forum for the exchange of views and the co-ordination of effort through the mechanism of the IFSC Clearing House Group and its related working groups. During this period the IFSC has grown to employ 33,000 people and to contribute over €1 billion annually through corporation tax and payroll taxes.
The primary focus of the group is on identifying and considering issues of importance to the long-term development of the international financial services industry in Ireland in line with the programme for Government. The programme states the Government "fully supports the future development of the IFSC as a source of future employment growth, subject to appropriate regulation" and commits to the development of the financial services sector to maximise employment opportunities. In line with the Government's focus on increasing the transparency and openness of government and a commitment I gave to the Dáil on 13 November 2012, a number of measures have recently been taken with regard to the IFSC Clearing House Group to improve transparency and accountability in its work. The minutes of meetings of the clearing house group which have taken place since my election as Taoiseach to the end of November 2012 have been published on my Department's website and merrionstreet.ie. The minutes of the group's meeting on 17 January 2013 will be published next month and the minutes of all future meetings will be published online three months after the date of each meeting. A report on the work of the group during this period was also published on the websites. The Secretary General of my Department and chair of the group has written to the Chairman of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform offering to brief the committee on the work of the group. I understand the committee will hold a hearing shortly.
It is vital that there be transparency and accountability in terms of the influence of this extraordinarily privileged group of bankers and financiers who have unprecedented access to the Department of the Taoiseach. The clearing house group is made up of J.P. Morgan, Citibank, State Street Bank, Barclays, Bank of Ireland, KPMG, Bank of America, Deloitte, AIB, Ernst & Young, PricewaterhouseCoopers and others. The fact that the Secretary General of the Department chairs the group, that it and its sub-committees meet in Government Buildings and that following last year's budget, the group had an effect on 21 sections of the Finance Bill to the benefit of the financial services sector is something the public needs to know. The public and I might well ask where is the group for the unemployed or pensioners-----
This is Question Time, not statements.
I have a simple question for the Taoiseach in the aftermath of the wipe-out of senior bondholders in Cyprus. Is the reason senior bondholders never took a hit in this country and that the Government will not introduce a financial transaction tax, instead of imposing a property tax on ordinary householders, the influence of the clearing house group? Is that the reason senior bondholders were never touched? Is it the reason the Government will not introduce even a small extra tax on the financial sector and just keeps hitting ordinary people? Is it the people in the clearing house group who are dictating financial policy in this country?
The answer to that question is "No."
That was an unusually short response.
It was to the point.
I welcome the initiative taken since this matter was last raised in the Dáil to publish the minutes of meetings of the clearing house group on the website of the Department of the Taoiseach. The minutes are interesting and reveal how the industry lobbied to have IFSC-based international insurers excluded from the Quinn insurance levy. As we know, a 2% levy was imposed on all non-life Irish insurance policyholders, but the Government changed legislation in order that foreign policholders whose insurance companies were based in the IFSC would not be levied. This demonstrates an interesting link between lobbying and the result.
I remind the Deputy that this is Question Time.
The minutes also reveal the extent of the industry's access to senior officials in the Departments of the Taoiseach and Finance, the Central Bank and the industry's regulator. The minutes of the meeting of 17 January 2013 are not yet available online. However, the minutes of the previous meeting, on 22 November, indicate that a number of-----
The Deputy should, please, put her question or Deputy Adams' question to ask the Taoiseach to report on the work of the IFSC Clearing House Group, not go through the minutes of meetings in the past few months.
I am giving a flavour of what is contained therein.
A question, please; this is Question Time.
A number of pre-budget submissions were received from the IFSC working group. Will the Taoiseach indicate precisely how many of these pre-budget submissions were received and elaborate on their main focus? With regard to the strategy the Taoiseach launched for the IFSC in July 2011, a commitment was given at the time to create 10,000 new jobs. How many of these new jobs have materialised since the launch of the strategy?
I do not have the details to hand of the number of pre-budget submissions made, but I will have it determined and come back to the Deputy on the issue. The question has been asked many times whether the special assignee relief programme, SARP, was introduced at the request of the IFSC Clearing House Group. It was introduced in the Finance Bill 2012 and no changes were proposed in the Finance Bill 2013. It is relevant to a range of priority areas heavily dependent on highly skilled personnel. They include the IFSC, but it is not a specific measure for it. It applies as much to the ICT sector or the life sciences, as it does to financial services. The strategy we launched sets out the scale of the potential to create new jobs determined by the industry on the basis of areas of expansion considered appropriate for the creation of new jobs. I will get back to the Deputy with an accurate figure for the number of jobs created since the document was launched some time ago.
Apart from representing the selfish interests of the financial services industry which comprises the main players in the world's financial markets, what benefits to society has the IFSC delivered for the people of Ireland in the past ten years? The Taoiseach has said the clearing house group has been meeting since 1987 when the IFSC was set up. Does he know whether, at any stage during the property bubble and the reckless speculation in the financial services and property sectors, this group alerted the Government to the disaster in the making to try to avoid the inevitable crash, or was it too engrossed in the profits that would be created for the industry? Does he agree that the IFSC Clearing House Group which met 29 times in 2012 and which offers ready access for the biggest players in the financial services industry - the major banks, bondholders etc. - to the Government and the most senior civil servants is nothing other than a massively glorified lobby group? Is it not the nirvana of lobby groups in that it has such incredible access to the Government at the highest level? If the Taoiseach believes this is constructive, would he consider creating similar facilities for groups such as homeowners in mortgage distress or people suffering from the horror of unemployment? Does he not see the huge dichotomy, divergence and inequality in this regard?
The Deputy has raised an interesting point about the IFSC Clearing House Group which is chaired by the Secretary General of the Department of the Taoiseach but which does not include Ministers in its attendance. Ministers, therefore, must read who was in attendance and what was discussed.
He has also raised an interesting point about those who are in mortgage distress, those who are unemployed and those who have societal problems. People in these sectors have direct access to the Government. They meet Ministers and members of the Government on a regular basis. I meet them all the time. We are unashamedly pursuing the creation of jobs and job opportunities. That is why the Minister for Jobs, Enterprise and Innovation has published his second action plan for jobs, with particular reference to the role of small and medium-sized enterprises in increasing indigenous confidence. The Government has proven that it is more open to job opportunities than most Governments over many years. It is working with small and large businesses in the interests of job creation and opportunity.
The Deputy asked what the IFSC Clearing House Group has been doing since 1987. Over many of those years, it has been working with the financial services industry, which has grown to substantial proportions. It now employs 33,000 people in well-paid jobs. The international finance industry provides an enormously important service for us here in Dublin and in Ireland. I have to testify, on the basis of my dealings with our counterparts in Britain, Europe and the United States, that the IFSC's reputation is exceptional. It is a small but critically important element of Ireland's reputation as an advantageous centre in which to conduct financial services business. That is why, for example, Zurich Financial Services announced today that it intends to employ 112 specialist personnel in the area of cyber-defence analysis. It would not have made that decision if it did not feel Ireland was an appropriate country for those positions to be located, or if it thought the required quality of personnel was not available.
The IFSC Clearing House Group conducts regular meetings with the financial services industry, and rightly so, in the interests of increasing and expanding those opportunities. It reports to me and publishes its minutes publicly. The challenge for everybody is to provide jobs and thereby reduce the number of unemployed people on the live register. I am glad that an average of 1,000 jobs a month have been created in the private sector over the last 15 months. We hope to make an impact through the expansion of the IFSC and the opportunities that will come from the action plan for jobs. It is a challenge for everybody. Like all the members of the Government, as Taoiseach I am very open to receiving proposals, ideas and contributions from individuals and small or large businesses and organisations about how this might be put into practice. It is in everybody's interests for the vast majority of people - the maximum number possible - to be able to contribute to the economy and to the quality of their own lives.
Does the Taoiseach agree that the level of influence and privileged access given to the Clearing House Group is completely disproportionate to that given to other sectors? I ask that question with particular reference to what has happened in Cyprus. The people of Cyprus have learned to their cost what can happen as a result of over-reliance on a financial services sector that is involved in trading money across global markets, etc. We have also learned from Cyprus that it is possible to burn senior bondholders. We were told that could not happen here.
Will the Deputy get back to Dublin?
Is it not a dangerous strategy for this country to give privileged access to a group that has clearly had a major influence on policy, for example, in the case of the proposed financial transactions tax? A new tax exemption in the area of derivatives and securitisation was introduced in the recent Finance Bill. Some 21 amendments were made to last year's Finance Bill. This group gets more privileged access to the Department of the Taoiseach and the Government than other sectors of our society. Is that not an accident waiting to happen?
My party initiated the financial services centre in Dublin over 25 years ago. The IFSC has created sustained and significant employment for more than 25 years. I am sure the Taoiseach will agree that it is important, as a policy objective, for this country to keep track of the issues and the evolution of the industry. This is one of a range of industries that need to be maintained and sustained in employment terms.
I have many misgivings about the Cypriot deal. A Rubicon has been crossed with the decision to raid deposits. More fundamentally, it seems that the troika and the European institutions have essentially dealt a death blow to the financial services industry in Cyprus.
That is a separate question.
It is not, actually. I would like to make my point. I know an argument can be made about Russian money, etc. Some high profile banks from mainland Europe have been found guilty of massive money-laundering as well. Have the Taoiseach and the clearing house assessed the implications of the consequences of the Cypriot deal for the financial services centre there? Have they reflected on the potential for the future evolution of troika and EU policies that might apply to the financial services centre to have a negative impact on our financial services? The proposed financial transactions tax is one such policy. We know the Germans tried at an early stage to blame the centre for what happened in one or two banks, even though much of the fault lay closer to home than they liked to admit. There are concerns that a fairly brutal decision was made to take out the financial services sector of the small Cypriot economy, which does not have much else - tourism and a few other industries - to sustain it into the future. At least we have had the technology and life sciences industries here for the last 30 years. They have helped us during this crisis. Other countries do not have such industries. I suggest there is a certain callousness in the approach that is being taken.
I assure Deputy Boyd Barrett that there is no privileged access in this regard. I made the point to Deputy Higgins that the Clearing House Group dealing with the IFSC has played an important role over the last 20 years or more. It is not a question of privileged access. It is able to discuss the expansion of the industry, which has grown from employing very small numbers to employing more than 33,000 people at present. I think Deputy Boyd Barrett will agree that these jobs make an important contribution. This is a mobile industry, as the Deputy is aware, so it is in Ireland's interest to continuously monitor the issues that affect the financial services sector. That is why the Clearing House Group meets as representatives of the industry. I have met them on two or three occasions. It is important to hear their views. As I said to Deputy Higgins in response to the suggestion that this constitutes privileged access, any citizen in the country can access the Government directly by meeting Ministers. The Deputy is aware that this happens on a regular basis.
Clearly, Cyprus is in a very different position from Ireland. It is now entering a very difficult and challenging programme, whereas we are exiting our programme. Our banks have been recapitalised. The Minister for Finance has made the Government's attitude towards small and large depositors in this country perfectly clear. The measures in the Cypriot programme reflect the disproportionate size of the banking sector in relation to the Cypriot economy as a whole. The nature of the liabilities in this case become clear when one considers that the Cypriot banking sector is eight times the size of the Cypriot economy.
I am sure the Deputy can empathise with the distraught citizens of Cyprus in regard to the decisions taken, whereby banks have been closed and are still closed, and capital controls will apply in respect of ATM machines, albeit for a limited period. This country is in a very different position from Cyprus. Clearly, it is in the interests of Europe that there be stability and understanding of the challenges that any country faces in having to deal with a situation on the scale of what Cyprus is now having to deal with.
The issue here is that the decision made on 29 June last to break the link between sovereign and bank debt was made by the European Council. That decision stands and has not been altered by the comments of anybody since then. Because that is so, that decision leading to the possibility of recapitalisation by the ESM is important because Ireland was mentioned specifically in that decision. That is now the focus of the discussions at the Eurogroup in regard to single supervisory mechanisms leading to banking union, and our challenge is to retrieve as much as we can for the taxpayer out of that proposition. It will, of course, have to define what legacy assets are, and that is part of the nature of the discussions that will take place.
In Ireland's case, this is now an historical fact that is over but not done with in terms of our people. That is why it is necessary that we continue to focus on the fundamental issue of that decision and on the fact Ireland was specifically mentioned and had its particular and unique circumstances referred to by both the French President and the German Chancellor in regard to their being taken into account as part of those discussions. There is obviously now a very difficult position for the citizens of Cyprus but, as I said, they are beginning to enter a programme and a very difficult challenge whereas Ireland is about to exit its programme, hopefully, by the end of this year and return fully to the bond markets next year.
The part played by the IFSC in our economy and the position about transparency, openness and accountability is there for all to see in regard to the publication of the minutes, and that will continue. As I said, I believe I have met with the IFSC Clearing House Group twice over the past 18 months or so and will continue to meet and engage with it as might be appropriate.
To clarify, I asked the Taoiseach about any pre-budget submissions that might have been made. Clearly, I do not simply want the number of submissions that were made. What would be interesting, useful and essential to have on the public record would be the nature of those submissions and what exactly they asked for.
It is reasonable that the Government would meet with representatives of essential sectors of the economy - that stands to reason. The worry here is that this kind of privileged access - I believe that is the right terminology - affords to this sector privileges that are not enjoyed by others. In addition, given the economic catastrophe that has been visited on this State because of the bad behaviour and, in some cases, the corruption of financial institutions, there is now a more acute sense among the public of the necessity to have plain dealing and transparency, particularly around the financial services sector. When he responds, will the Taoiseach confirm that he will give full details of any pre-budget submissions and their content?
As a matter of curiosity, would he have had sight of any such submissions? Is it simply officials who deal with them or would he have had occasion to read and consider these types of documents?
I would put it to the Taoiseach straight that it is time to stand down this IFSC Clearing House Group in its present manifestation and that it cannot be defended in view of the gross inequality vis-à-vis the rights of citizens and the bulk of taxpayers, who do not, in any sense, have such structured, high level and regular access to Government. It flies in the face of any concept of equality and simply provides a gilt-edged opportunity for those seeking massive profits in the financial services industry to seek and to achieve the change of Government policy.
In terms of looking into the future and learning from the past, is the Taoiseach aware that the massive deregulation and liberalisation of the financial sector in the 20 years preceding the crash of 2007 led directly to that crash, with horrific consequences for hundreds of millions of people around the globe - the poor, the oppressed and working people? Is he aware that this deregulation and liberalisation was a direct result of the huge influence achieved by the financial industries on an international basis, with leaders going back to Prime Minister Thatcher and President Reagan onwards to their successors, including President Clinton, who appointed some of the highest bankers in the United States to his own Administration? Can the Taoiseach not learn from that experience to ensure there is not a repetition as a result of this kind of inordinate influence by major profit-seeking entities, which have wrought huge suffering on society already?
In respect of the point raised by Deputy McDonald, I will give some information regarding employment. From 1999 to 2012, the employment levels grew from 8,500 to 33,000. The IDA produced a significant number of investments and more than 3,000 jobs have been approved in the international financial services sector since January 2011.
I do not know that the IFSC Clearing House Group receives individual pre-budget proposals. Clearly, quite a number of firms will send pre-budget proposals to, I would assume, the Department of Finance, which is a matter for them individually, but I do not believe they submit pre-budget submissions to the IFSC Clearing House Group. For example, I meet with the American Chamber of Commerce Ireland a couple of times a year. It co-ordinates its activities in regard to issues it would feel important, such as clarity about the corporation tax rate, which is 12.5% and is not being raised, and other issues as it would foresee opportunities for development of jobs beyond the current position here in Ireland.
Deputy Higgins referred to regulation over the years in different locations around the world. Clearly, greed was an issue as well as the incompetence which led to the collapse of the positions of banks in various locations.
With regard to the green IFSC and green finance, which are now an inherent part of all of this, the report from Ernst & Young noted that the clean and green tech sector has a capacity to create 80,000 jobs by 2020, and this is an important part of the Government's services centre strategy, to which the Deputy referred and which was published. The various types of green climate finance and asset management are a key focus of that. This includes back, middle and front office asset management and builds upon Ireland's existing fund industry, which services more than €2 trillion in assets and supports 12,000 jobs directly. The green IFSC is a strategy and a context, building the public private partnerships of the IFSC Clearing House Group.
It reports to the clearing house group itself. The activities of green IFSC are led by a steering group comprising the Government, enterprise agencies, the Department of the Taoiseach and leading financial institutions and professionals. That is on the basis of the potential for 80,000 jobs.
The fact that we look continuously for new areas of opportunity within the financial services industry is important. Areas being explored at the moment are financial services technology, intellectual property, e-finance and electronic trading, debt capture and predictive analytics, risk management, service innovation, collaborative research development and innovation, pensions and green finance. They all complement existing opportunities being pursued by the IDA with the IFSC.
Clearly, this is an important and potentially expanding area of financial services with great possibilities for future employment. The fact that the minutes are published means there is no secrecy about it, because the issues are there for people to tease out. I will check whether individual pre-budget submissions were made by the IFSC. To my knowledge, that is not the case, but I understand that many individual firms may make submissions to the Department of Finance in the context of the preparation of the budget and the Finance Bill.