Skip to main content
Normal View

Thursday, 9 May 2013

Written Answers Nos. 51-58

Government Bonds

Questions (51)

Gerry Adams

Question:

51. Deputy Gerry Adams asked the Minister for Finance further to Parliamentary Question No. 157 of 30 April 2013, the reason the Central Bank of Ireland purchased the 2025 Irish government bond which was retained by Bank of Ireland; the reason this bond did not remain retained by Bank of Ireland; if he will explain if the Central Bank of Ireland is allowed purchase up to €3.1 billion of Irish government bonds and return the interest on these bonds to the Irish Exchequer; the reason the Central Bank of Ireland does not continue to engage in such practice for the foreseeable future in tranches of €3.1 billion of acquisitions per year; if he will explain how the Central Bank of Ireland purchasing rather than swapping as was the case with the promissory note restructuring of Irish government bonds from Bank of Ireland does not breach Article 123 of the Treaty on the Functioning of the European Union; if he will detail the way the Central Bank of Ireland financed this purchase and the available finance the Central Bank of Ireland has to conduct similar purchases of Irish government bonds on an annual basis of up to €3.1 billion in the future; and if he will make a statement on the matter. [21923/13]

View answer

Written answers

The Central Bank has confirmed that following the termination of IBRC’s market repo of the 5.4% Irish 2025 bond in the context of the special liquidation of IBRC, this particular bond was acquired by it. As the purchase was carried out on the secondary market, between the Central Bank and Bank of Ireland, the transaction did not breach Article 123 of the Treaty which contains a prohibition on primary market purchases only. The Central Bank has placed the bond in a special holding along with the other government bonds received in exchange for the Promissory Notes. While the Bank currently retains these bonds in this holding, it has indicated that it intends to sell them as soon as possible, provided conditions of financial stability permit. The Central Bank, in common with other National Central Banks of the Eurosystem, can hold financial assets only up to particular limits as part of agreements between the various members of the Eurosystem. The terms of such agreements and related issues are a matter for the Central Bank of Ireland and the ECB and not something that I can comment on. Other details in relation to the acquisition of the 2025 Irish government bond by the Central Bank of Ireland are matters for the Central Bank of Ireland.

IBRC Liquidation

Questions (52)

Gerry Adams

Question:

52. Deputy Gerry Adams asked the Minister for Finance further to Parliamentary Question No. 160 of 30 of April 2013, if he will confirm that the total unguaranteed liabilities of the Irish Bank Resolution Corporation that existed at the time of the IBRC liquidation outside of ELA liabilities in euro amounts, subject to currency fluctuations, is €658 million; if he will confirm further to Parliamentary Question No.194 of 23 of April 2013, that the two ELG scheme guaranteed bonds of €933.77 m were repaid in full; if the independent valuation of the total balance sheet of IBRC exceeds €12.928 billion, that the pool of excess credit developed through sale to the National Asset Management Agency or third parties at that independent valuation price is available to compensate the State for the Exchequer finances provided to satisfy these repayments; if he will confirm whether the €9.03 million the Central Bank of Ireland has paid to satisfy its obligations under the deposit guarantee scheme whether if the independent valuation of the total balance sheet of IBRC exceeds €12.928 billion, that the pool of excess credit developed through sale to NAMA or third parties at that independent valuation price is available to compensate the Central Bank of Ireland for this payment; and if he will make a statement on the matter. [21924/13]

View answer

Written answers

There are various unguaranteed liabilities of IBRC and the final liability will only become known at the conclusion of the liquidation process. The holders of the two ELG scheme guaranteed bonds with an equivalent scheme value of €933.77 million have been fully compensated from the ELG Scheme. The State will become an unsecured creditor in relation to this amount and will be paid according to the legal priorities as set out in the Companies Acts, depending on the asset realisations.

The proceeds from the disposal of IBRC’s assets will be used to repay creditors in accordance with normal Companies Acts priorities, and consequently preferred creditors will be paid first and then the debt which NAMA will have purchased from the Central bank will be paid. If there are proceeds available after the repayment in full of NAMA debt, these proceeds will be applied to the remaining unsecured creditors.

As the Deputy is aware payments from the Deposit Guarantee Scheme (DGS) are made from the Deposit Guarantee Fund which is operated by the Central bank and funded by deposit taking institutions. The Central Bank continues to pay out under the DGS Scheme and the final pay-out is expected to be in excess of €9.03million. The Deposit Guarantee Scheme will become an unsecured creditor in relation to these payments and will be paid according to the legal priorities as set out in the Companies Acts, depending on the asset realisations.

Property Taxation Exemptions

Questions (53)

Noel Grealish

Question:

53. Deputy Noel Grealish asked the Minister for Finance the way deferral of local property tax and the subsequent 4% charge will be of any benefit to those qualifying persons already in debt distress; and if he will make a statement on the matter. [21930/13]

View answer

Written answers

The deferral arrangements in the Finance (Local Property Tax) Act 2012, as amended, are focused on particular categories of householders and enable cases where there is an inability to pay the Local Property Tax (LPT) to be addressed. To qualify for a deferral, the residential property must be occupied as a sole or main residence. The gross income thresholds for a full deferral are €15,000 for a single person and €25,000 for a couple, whether married persons, civil partners or qualified cohabitants. A person may claim a deferral if their gross income will not, “as can reasonably be foreseen at the liability date” exceed these thresholds in that year.

A deferral of up to 50% of the LPT liability will be possible where the gross income of the liable person does not exceed €25,000 for a single person or €35,000 for married persons/civil partners/cohabitants.

The full and partial deferral thresholds may be increased 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. The deferral option in such qualifying cases will apply until the end of 2017.

Additional reliefs introduced in the Finance (Local Property Tax) (Amendment) Act 2013 provide that a person who has entered into an insolvency arrangement under the Personal Insolvency Act 2012 may apply for deferral of the LPT that is due during the period for which the insolvency arrangement is in effect. The 2013 Act also provides that a person who suffers both an unexpected and unavoidable significant financial loss or expense, as a result of which he or she is unable to pay their LPT without causing financial hardship, may apply for full or partial deferral.

Interest of c. 4% per annum is charged on deferred amounts. This is half the interest rate charged in cases of non-compliance.

Deferrals allow tax not paid in a year to be rolled forward to be paid at a later date. Elections for deferrals are voluntary, subject to eligibility. Where properties change hands through gifts or inheritances, the charge need not be paid and the deferral option may continue and accumulate, provided the new owners meet the eligibility requirements for deferrals provided for in the legislation.

Taxpayers who had deferred payment, but who are no longer eligible for deferrals due to improved financial circumstances, have the option of leaving the original deferrals in place in respect of previous tax liabilities, or of paying them off either in single payments or gradually.

Any amount deferred will be a relatively small part of the overall value of the property, even where the deferral lasts for a number of years or in cases where the higher rate of 0.25% applies to a portion of the value.

Tax Yield

Questions (54)

Alan Farrell

Question:

54. Deputy Alan Farrell asked the Minister for Finance if he will advise on the revenue collected in 2010, 2011 and 2012 from capital gains tax; the prospective collection will be in 2013; and if he will make a statement on the matter. [21942/13]

View answer

Written answers

The information requested by the Deputy is set out in the table showing the amounts received into the Exchequer in respect of Capital Gains Tax (CGT) in the years 2010 to 2012. The figure for 2013 is the current estimate of CGT for the year which is consistent with current forecasts published in the Stability Programme Update on the 30th April 2013.

€ million

2010

2011

2012

2013

Capital Gains Tax

345

415

415

360

Totals are rounded to the nearest €5 million.

Money Advice and Budgeting Service Reports

Questions (55)

Alan Farrell

Question:

55. Deputy Alan Farrell asked the Minister for Finance his views on the Money Advice and Budgeting Service report outlining its concerns that split mortgages will not be a solution for the bulk of homeowners in distress in view of the fact that its findings revealed that the majority of homeowners in distress are between 41 and 65; and if he will make a statement on the matter. [21943/13]

View answer

Written answers

The Report referred to by the Deputy was prepared by MABS NDL (National Development Limited). The stated aim of the Report is to provide an analysis of the experience of MABS clients with mortgage difficulties, often in addition to other debts and other issues, as well as the experience of MABS money advice staff working with those clients to come to a resolution that is “mutually acceptable, affordable and sustainable.” Regarding the particular issue of split mortgage, the Deputy will be aware that split mortgage was one of a number of possible arrangements suggested by the 2011 Inter-Departmental Mortgage Arrears Working Group (Keane Group) report to address significant mortgage difficulty. Other options such as trade down mortgages, mortgage to rent scheme and negative equity mortgages were also referenced in the Keane report. The split mortgage concept involves splitting a distressed mortgage into an affordable mortgage and warehousing the balance. The Central Bank has advised that the majority of lenders have introduced, or are in the process of introducing a split mortgage arrangement. While lenders have taken the broad approach set out in the Keane report, the particular split mortgage details can vary from lender to lender.

However the sustainability of a split mortgage, like all other forbearance and modification arrangements, is based on affordability and other relevant factors having regard to the specific circumstances of the individual case and the legitimate long term interests of both borrower and lender.

State Banking Sector Regulation

Questions (56)

Brendan Smith

Question:

56. Deputy Brendan Smith asked the Minister for Finance the position in relation to interest rate increases other than those linked to ECB movements of financial institutions substantially owned by the State; his policy on same; if the financial institutions involved must notify or seek approval from his Department before implementing such increases; the number of cases that have been granted or refused approval in the last two years; if he will list the State owned institutions; in the last two years, if he will indicate the number of increases that each has made above the ECB tracker movements; the sum percentage total of these increases for each of these institutions; if he will outline the gap in the spread between tracker and actual rate currently in use or announced for each institution; the way he will explain to a person with an AIB loan the reason they will not issue instructions to AIB, being State owned, not to proceed with such rate increases; and if he will make a statement on the matter. [21950/13]

View answer

Written answers

As the Deputy will be aware the Relationship Framework with the banks provides that the State will not intervene in the day-to-day operations of the banks or their management decisions. This framework is published on the Department of Finance website. I must ensure that the bank is run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State, as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. Neither the Central Bank nor the Department of Finance has a statutory function in relation to interest rate decisions made by individual lending institutions at any particular time. It should also be noted that the Relationship Framework references decisions regarding pricing as being commercial decisions for the banks.

With regard to AIB and PTSB the state owned institutions I have been supplied with the following details with regard to mortgage rate increases over the last two years.

AIB

The ECB rate changed 6 times since 2011, 2 increases and 4 decreases. In the same period, AIB variable rates changed 4 times, 1 decrease and 3 increases with an overall net increase of 1.15% for Standard Variable Rates (SVR’s). The gap between the average AIB variable mortgage interest rate and tracker mortgage interest rate is currently 2.5% or 3.1% effective from 5th June 2013.

ECB Rate Changes

-

AIB SVR & LTV Variable Rates

-

-

-

PDH SVR

PDH LTV Variable

New Rate

AIB Effective

Change

New RateChangeNew Rate

(Range from)

1.25%

n/a

unchanged

3.25%unchanged3.09% to 3.49%

1.50%

n/a

unchanged

3.25%unchanged3.09% to 3.49%

1.25%

22/11/2011 - 03/09/2012

-0.25%

3.00%-0.25%2.84% to 3.24%

1.00%

n/a

unchanged

3.00%unchanged2.84% to 3.24%

0.75%

n/a

unchanged

3.00%unchanged2.84% to 3.24%

04/09/2012 - 12/11/2012

+0.50%

3.50%+0.50%3.34% to 3.74%

13/11/2012 – present

+0.50%

4.00%+0.50%3.84% to 4.24%

0.50%

-

-

-

-

Effective from 05/06/2013

+0.40%

4.40%+0.25%4.09% to 4.49%

EBS

The gap between the average EBS variable mortgage interest rate and tracker mortgage interest rates is currently 2.6% or 3.1% effective from 1st June 2013.

ECB Rate Changes

-

-

EBS PDH SVR

-

-

ECB Change

Change

New Rate

EBS Effective

Change

New Rate

-

-

-

01/04/2011

+0.60%

4.43

April 2011

+0.25%

1.25%

01/05/2011

unchanged

4.43

Jul 2011

+0.25%

1.50%

01/08/2011

+0.25%

4.68

-

-

-

01/10/2011

+0.25%

4.93

Nov 2011

-0.25%

1.25%

01/12/2011

-0.25%

4.68

Dec 2011

-0.25%

1.00%

01/01/2012

-0.35%

4.33

Jul 2012

-0.25%

0.75%

01/08/2012

unchanged

4.33

May 2013

-0.25%

0.50%

01/06/2013

+0.25%

4.58

PTSB

As of today, 8 May 2013, Ptsb svr rate is 4.34%.

Since 21 November 2011, the svr rate has dropped 1.35% from 5.69%. The svr rate was reduced as follows

- 0.25% on 21 Nov 2011

- 0.25% on 29 Dec 2011

- 0.50% on 14 May 2012

- 0.35% on 30 July 2012

Since 13 July 2011, the ECB rate has dropped 1.00% from 1.50% to 0.50% as follows

- 0.25% on 2 Nov 2011

- 0.25% on 7 Dec 2011

- 0.25% on 4 July 2012

- 0.25% on 2 May 2013

In relation to the gap in the spread between tracker and svr, it must be noted that not everyone on a tracker mortgage has the same tracker rate; the margin over ECB ranges from 0.45% to 3.35% so the interest rate on these loans ranges from 0.95% to 3.85% (margin + ECB rate).

The average margin on a tracker rate is 1.25 % meaning that the interest rate as of today including the latest ECB rate reduction is 1.75 %; 2.59% less than the current svr rate.

Fuel Rebate Scheme

Questions (57)

Heather Humphreys

Question:

57. Deputy Heather Humphreys asked the Minister for Finance the criteria that hauliers will have to adhere to in order to be eligible for the essential fuel rebate due to come into effect on 1 July 2013; and if he will make a statement on the matter. [21963/13]

View answer

Written answers

Provision has been made in this year’s Finance Act for the repayment, to qualifying road haulage and bus operators, of part of the mineral oil tax paid on the auto-diesel used by them in the course of business. This relief will apply to purchases made on or after 1st July this year. The amount to be repaid will vary according to a sliding scale, by reference to the price at which auto-diesel is purchased. The maximum amount repayable will be 7.5 cent per litre. To qualify for the repayment, road haulage operators in the State must hold either an international road haulage operator’s licence or a national road haulage operator’s licence, issued under the Road Traffic and Transport Act 2006. Road haulage operators established in another Member State must hold an equivalent licence recognised under EU law.

Bus operators in the State will be required to hold an international road passenger operator’s licence or a national road passenger operator’s licence issued under the Road Traffic and Transport Act 2006. Bus operators established in another Member State must hold an equivalent licence recognised under EU law.

The auto-diesel must, in the case of road haulage, be used in a road haulage vehicle with a maximum permissible gross laden weight of not less than 7.5 tonnes. For passenger transport, the vehicle concerned must conform to certain classifications set down in the EU “type approval” Directive. This includes buses and minibuses with seating for a minimum of nine passengers.

I am informed by the Revenue Commissioners who have responsibility for the operation of the repayment scheme that, except where the auto-diesel is purchased in bulk by the qualifying transport operator, payment must be made by means of a fuel card approved by Revenue for that purpose. Revenue will approve a fuel card where the fuel card provider undertakes to provide such information as they require in relation to the fuel card purchases, and continues to act in accordance with that undertaking. The fuel card must be approved before any repayment claim is made in relation to fuel card purchases.

Any operator who claims a repayment, and who is established in the State, must hold a current tax clearance certificate. Any claimant who is established in another Member State must show that he or she is tax compliant in that Member State.

Qualifying road transport operators will be required to register with Revenue before any claim for repayment is submitted. Claims will be made in respect of auto-diesel purchased during a three-month repayment period. Revenue is currently developing the IT systems for submission and processing of repayment claims, with a view to issuing the first repayments before the end of the year. The detail of the requirements for the administration of the scheme, and the Revenue Commissioners regulations to support them, are also in preparation, and there is ongoing consultation with trade interests in that regard.

Croke Park Agreement Issues

Questions (58)

Mary Lou McDonald

Question:

58. Deputy Mary Lou McDonald asked the Minister for Finance further to Parliamentary Question No. 319 of 16 April 2013, if he will confirm that his Department did not calculate the specific reduction of GDP growth directly attributed to the proposed Croke Park 2 cuts to public sector pay and pension of €1 billion between 2013 and 2015. [21966/13]

View answer

Written answers

As the Deputy is no doubt aware, fiscal consolidation in the form of adjustments to both expenditure and taxation is being implemented in order to reduce the fiscal deficit. In turn this lowers the cost of borrowing, helps to put public debt on a declining path and contributes to increased investor confidence. Having said that I fully recognise that there will be a short-term reduction in economic activity before these medium to long-term growth benefits associated with a lower sovereign risk premium and the subsequent pass-through to private sector sentiment is realised. In recent years this strategy has shown some results for the non-traded sector. Inward investment remains strong and exports from Ireland are now considerably above their pre-crisis level. In addition, bond yields on government debt have fallen sharply. The economic forecasts underpinning Budget 2013 were drawn up to be consistent with the expenditure consolidation set out on Budget day and included provisions for savings through a reduction in the public service pay bill of €300m in 2013 and an overall reduction of €1bn by 2015. As set out in the forecasts, the government consumption component of GDP is set to decline in every year to 2015, consistent with policy-related objectives of reducing the wage bill. These forecasts were updated at the end of last month for the Irish Stability Programme – April 2013 Update. They continue to reflect the consolidation envelope laid out at Budget time as well as the outturn for 2012 as estimated by the CSO.

Top
Share