Written Answers Nos. 115-134
115. Deputy Sandra McLellan asked the Minister for Finance the reason over a year after the Eurogroup statement of June 2012 was welcomed as a seismic shift Ireland continues to pay off banking debt as sovereign debt. [31867/13]
View answerThe Deputy will be aware that there were discussions with our external partners on the issue of payment to bondholders. I have advised the House on a number of occasions that our European partners expressed strong reservations about burden sharing with senior bondholders and the rationale for this position. This commitment was agreed with our external partners and was the basis on which Ireland’s financing strategy was built. However, the Deputy will also be aware that under the Irish Presidency significant progress in dealing with Ireland’s banking debt has been made. In February the successful conclusion of negotiations with the ECB facilitated the replacement by the Irish Government of the Promissory Notes issued to IBRC with a series of longer term, non-amortising floating rate Government bonds. This has resulted in significant benefits to the State including spreading the cost of the Promissory Notes from a weighted average life of c.7-8 years to c.34-35 years at a lower funding cost for the State, resulting in significant annual interest savings.
The Government has also successfully negotiated a further extension of the maturities of our EU loan facilities. Recently the EU Finance Ministers agreed in principle to further extend the maximum weighted average maturities on our EFSF and EFSM loans by up to 7 years, over and above the extension agreed in 2011. This further maturity extension removes a re-financing requirement of some €20 billion for the Irish state in the years 2015 to 2022. This extension of maturities has a number of significant benefits for Ireland, including smoothing our redemption profile, improving our long term debt sustainability and it has a positive impact on the cost of Exchequer borrowing through creating further downward pressure on our borrowing costs.
The Deputy will also be aware that under the Irish Presidency the European Union finance ministers agreed a deal on new rules that will force investors and wealthy savers to share the costs of future bank failures.The plan stipulates that shareholders, bondholders and certain depositors with more than €100,000 should share the burden of saving a bank, instead of a taxpayer-funded bailout.
These new rules will likely come into force by the end of the year and mark a revolutionary change in the way banks are treated and it is a major milestone in our effort to break the vicious link between the banks and the sovereign.
Finally, on the 20th June 2013 the Eurogroup of Euro-area Finance Ministers agreed the framework under which the European Stability Mechanism (ESM) will operate its direct bank recapitalisation instrument. It is expected that this facility will come into force towards the end of the first half of 2014. In addition the Eurogroup also agreed to include retro-active recapitalisation of banks in the framework, to be considered on a case-by-case basis once the instrument enters into force.
There is still a lot of negotiation to be done on this aspect of the facility but the agreement now in place keeps the possibility to apply to the ESM for a retrospective direct recapitalisation of the Irish banks open for us, should we wish to avail of it.
116. Deputy Willie O'Dea asked the Minister for Finance if he has revised the projected savings from a cap on the tax relief for pensions generating an income of €60,000; and if he will make a statement on the matter. [31925/13]
View answerIn my Budget 2013 speech, I announced that changes to give effect to the commitment in the Programme for Government to cap taxpayers’ subsidies for pension schemes which deliver pension income of more than €60,000 will be put in place in 2014. An examination of the various options for change is continuing.
An estimated full year saving of €250 million was provided for in respect of these changes, as outlined on page A 10 of the Budget 2013 booklet. The Budget 2013 booklet makes clear, however, that the savings figure is provisional as further detailed analysis of the necessary changes and their impact would be required. This detailed analysis is ongoing.
117. Deputy Pearse Doherty asked the Minister for Finance his views on the issue of the losses accrued by credit unions because of the liquidation of Irish Bank Resolution Corporation; the way these losses will affect members of the credit union movement; and if he is in contact with the credit union movement to discuss these losses. [31876/13]
View answerI am not in a position to discuss the specifics of any customer accounts in IBRC (in special liquidation). However, I am advised by the Special Liquidators that there are certain tracker bond products which were sold to a number of Credit Unions which were liabilities of IBRC at the time of the liquidation. I am further advised that these products have a structured deposit element which is covered by the Deposit Guarantee Scheme for that element of the product. As a result the first €100k of any claim from these depositors is covered under the DGS Scheme. I have been advised that the Special Liquidators are aware of a number of depositors who fall outside the eligibility criteria for the ELG Scheme due to the nature of the investment product. Unfortunately, if a deposit is not eligible under the ELG scheme the depositor will rank as an unsecured creditor in the liquidation. At the time that this investment product was purchased by Credit Unions, there was no additional guarantee provided by the State. It was always the case that the ELG scheme covered only those liabilities which were entered into during the issuance window.
120. Deputy Mick Wallace asked the Minister for Finance in view of the phasing out of quantitative easing, which is likely to be followed by rising interest rates, his views on whether it is more imperative than ever to pursue policies that will enhance growth and reduce unemployment, particularly youth unemployment; and if he will make a statement on the matter. [31893/13]
View answerI have consistently said that addressing the deterioration in the labour market is the key macro-economic objective of the Government. All of the economic policies being implemented by the Government – restoring order to the public finances, repairing the banking system, promoting competitiveness improvements – are designed to generate sustainable economic growth, so that employment growth is sufficient to make inroads into current unacceptably high rates of unemployment. I would point out that progress is being made. For instance, employment has been expanding since the third quarter of last year, and the unemployment rate in May – at 13.7 per cent – was lower than the peak of 15.1 per cent recorded early last year. Having said that, I fully recognise that there is a long way to go and that much more needs to be done.
I am also conscious of the disproportionate impact that the crisis has had on the young, and in particular the rise in youth unemployment, both in Ireland and elsewhere in the European Union. This is why the European Council last week agreed on a comprehensive approach to combat youth unemployment and identified a number of measures to be implemented, including launching a new ‘investment plan’ to support SMEs and boost the financing of the economy.
Finally, I would like to emphasise the Action Plan for Jobs 2013 which set out over 333 actions to be undertaken in the coming year to support job creation and complement measures already undertaken in the Jobs Initiative and the Pathways to Work.
121. Deputy Mary Lou McDonald asked the Minister for Finance if he will provide an overview of the submissions made to the Central Bank’s review on the Code of Conduct on Mortgage Arrears; and if he will state the number of submissions that proposed the following, namely, a removal of the 12 month moratorium on repossessions, a removal or loosening of the three contacts rule with owners in mortgage difficulty, the facilitation of a movement off tracker mortgages in some cases, and the need for a greater role for Money Advice and Budgeting Service in the resolution process. [31866/13]
View answerThe Central Bank has now concluded a review of the Code of Conduct on Mortgage Arrears (CCMA), following a public consultation process, with in excess of 230 submissions received. The revised CCMA was published on 27 June 2013 and came into effect on 1 July 2013. The submissions made to the public consultation, as well as a feedback document which outlines the Central Bank’s response to the main issues raised in the consultation, have both been published on the Central Bank’s website www.centralbank.ie.
122. Deputy Pearse Doherty asked the Minister for Finance the reason he has not published the Irish Nationwide report to date; and if a banking inquiry is established, whether he will be forwarding the report to the inquiry team. [31862/13]
View answer227. Deputy Pearse Doherty asked the Minister for Finance when he plans to publish the report into Irish Nationwide, commissioned in 2009. [31773/13]
View answerI propose to take Questions Nos. 122 and 227 together.
I have been advised that given the on-going nature of the investigations by the authorities, including in particular the investigation being conducted under the Central Bank’s Administrative Sanctions Procedure into historic lending practices at INBS, as well as internal considerations within the bank, the report cannot legally be published at this time. Publication of the report may be considered when the Central Bank proceedings are concluded or when any Garda investigation has been finalised (or any proceedings arising from such investigation concluded).
If the Houses of Oireachtas Bill is approved by Oireachtas it will provide the necessary legal framework to allow a formal parliamentary inquiry to be held. The Department will co-operate fully with that inquiry and will forward all information which is legally possible.
123. Deputy Peadar Tóibín asked the Minister for Finance if he will report on progress on examining the use of equality proofing in the budgetary process this year. [31872/13]
View answerI would like to make the Deputy aware that the Programme for Government does contain a commitment to require all public bodies to take due note of equality and human rights in carrying out their functions. Furthermore, the Cabinet handbook requires a statement on the likely effects of the decision sought on equality and persons experiencing or at risk of poverty or social exclusion to be included in Memoranda to Government. Consequently, Government does consider each of these important issues at an individual policy or programme level. I would also remind the Deputy that the State and its bodies take the provisions of equality legislation into account in the development and delivery of its policies and services. Finally, as referenced in previous parliamentary questions, the often quoted Scottish model is expenditure focussed and as such is more appropriate to my colleague, the Minister for Public Expenditure and Reform.
124. Deputy Brendan Griffin asked the Minister for Finance if he will give serious consideration to removing VRT from potentially life saving additional safety features on new vehicles; his views on whether persons are choosing to go without optional extra safety features because of the VRT cost burden; and if he will make a statement on the matter. [31479/13]
View answerI am advised by the Revenue Commissioners that vehicle registration tax (VRT) is charged on the open market selling price (OMSP) which for new vehicles is defined in Section 133 (2) of the Finance Act 1992 as: (2) (a) For a new vehicle on sale in the State which is supplied by a manufacturer or sole wholesale distributor, such manufacturer or distributor shall declare to the Commissioners in the prescribed manner the price, inclusive of all taxes and duties, which, in his opinion, a vehicle of that model and specification, including any enhancements or accessories fitted or attached thereto or supplied therewith by such manufacturer or distributor, might reasonably be expected to fetch on a first arm's length sale thereof in the open market in the State by retail.
Safety features are an integral part of all vehicles and it would be impossible to distinguish some or all of these features and attribute a value to them for the purpose of excluding them from the OMSP. Therefore, I have no plans to reduce or scrap the VRT on safety features.
The Revenue Commissioners further advise me that they have no evidence to suggest that the charging structure is impacting on purchasing decisions in relation to extra safety features on new vehicles.
125. Deputy Micheál Martin asked the Minister for Finance if he has raised with his UK counterparts their plans for the future of Ulster Bank; his views on the importance of the institution to banking here; and if he will make a statement on the matter. [31914/13]
View answerAs the Deputy is aware, the UK Chancellor, Mr George Osborne in his recent Mansion House speech, in dealing with the future of the two UK banks in which the British Exchequer has a significant shareholding, made some references to Ulster Bank in the context of the future orientation of RBS. Earlier that day the Parliamentary Committee on Banking had issued its report and the Chancellor was using the opportunity of his Mansion House speech to provide some initial reaction to the report which contains references to RBS and Ulster Bank.
As the Deputy is aware, the Chancellor has proposed that RBS be split into a good bank and a bad bank. This proposal is the subject of a review to be conducted by the Treasury with external assistance within a short timeframe. As of now, the precise implications for Ulster Bank are unclear but given the important position of the bank in the Irish market it is and will be an issue my officials will be following closely as part of their normal engagement with their UK counterparts. In particular, I expect that my officials will be engaging with the Treasury to offer any necessary assistance that the UK authorities may require on Ulster Bank and in particular its role in the Irish market.
126. Deputy Michael Colreavy asked the Minister for Finance the budget adjustment in budget 2014 according to the plans he has sent to Ministers; the proportion of this adjustment which is tax related; and the proportion which is expenditure related. [31874/13]
View answerThe April Stability Programme update set out the consolidation path for 2014 and 2015 (Table 2 page 6), consistent with Budget 2013, showing the composition of revenue and expenditure measures. The general government balance (Table 8 page 22) was forecast using the technical assumption that the benefits of the promissory note restructuring would be used for deficit reduction. The exact quantum and composition of adjustment in 2014 will be considered in the context of Budget 2014 discussions later this year. As has been discussed previously, the additional fiscal space by the promissory note restructuring will be central to these discussions with consideration to the latest economic and fiscal information. The Department of Finance has recently presented the Budget Strategy Memorandum to Cabinet. This is part of the normal budgetary process and gives an outline of the emerging fiscal and economic outlook for this year and next. This is a confidential document and is not published.
I would like to reiterate that the Government remains committed to reducing the deficit below 3 per cent of GDP by 2015 and all budgetary decisions will be made with this overarching objective in mind.
128. Deputy Caoimhghín Ó Caoláin asked the Minister for Finance if he will provide a report on the Eurogroup summit of June focussing on the negotiations on the retroactive use of the European Stability Mechanism to recapitalise Ireland’s pillar banks. [31868/13]
View answerAs you are aware the Euro-Area Heads of State or Government agreed on 29th June 2012 to break the vicious circle between banks and sovereigns, and that when a Single Supervisory Mechanism is in place involving the ECB, the European Stability Mechanism (ESM) could recapitalize banks directly. The Euro-Area Heads of State or Government confirmed this position and mandated EU Finance Ministers to prepare an operational framework by mid-2013. A considerable amount of work has been undertaken at technical, senior official and Ministerial level on the ESM’s Direct Bank Recapitalisation Instrument. This work culminated in agreement on the main features of the operational framework for the ESM’s Direct Bank Recapitalisation (DBR) Instrument at the June 20th Eurogroup meeting of Euro-Area Finance Ministers in Luxembourg.
We have succeeded in having specific provision for retrospective recapitalisation included in the framework, which states that “The potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement.” There is still a lot of negotiation to be done on this aspect of the facility but the agreement now in place keeps the possibility to apply to the ESM for a retrospective direct recapitalisation of the Irish banks open for us, should we wish to avail of it.
This overall framework builds upon the agreement secured on the 29th of June 2012, and is an important step in the Eurozone’s efforts in this regard. It is expected that the earliest date that the ESM Direct Bank Recapitalisation Instrument can come into effect will be towards the end of the first half of 2014, given the need to satisfy national procedures, and also the requirement to have the Single Supervisory Mechanism in place and operational beforehand.
129. Deputy Mick Wallace asked the Minister for Finance his views on recent research by the Nevin Economic Research Institute which states that a combination of a stimulus programme, tax adjustments and savings from the recently restructured deal on promissory notes, rather than extensive public expenditure cuts could be used to reduce the State's deficit to 3% of GDP by 2015; and if he will make a statement on the matter. [31892/13]
View answerThe Government is eager to hear reasonable proposals for budget measures from all interested parties and organisations. We will consider them fully and give them due consideration. The April Stability Programme update set out the consolidation path for 2014 and 2015 (Table 2 page 6), consistent with Budget 2013, showing the composition of revenue and expenditure measures. The general government balance (Table 8 page 22) was forecast using the technical assumption that the benefits of the promissory note restructuring would be used for deficit reduction.
The exact quantum and composition of adjustment in 2014 will be considered in the context of Budget 2014 discussions later this year. As has been discussed previously, the additional fiscal space by the promissory note restructuring will be central to these discussions with consideration to the latest economic and fiscal information.
130. Deputy Barry Cowen asked the Minister for Finance the timeline he envisages for the completion of talks on putting in place a Europe wide bank resolution mechanism; the obstacles that exist currently to the completion of such an agreement; and if he will make a statement on the matter. [31904/13]
View answerOn 26 June 2013 European Finance Ministers agreed a common position on the bank recovery and resolution directive. This agreement provides a negotiating mandate to enter into discussions with the European Parliament. Trilogue discussions (Council/Parliament/Commission) will commence next week under the Lithuanian Presidency and are expected to conclude by the end of this year. This timeline was endorsed by EU leaders at last week’s European Council, which welcomed the agreement in the Council on the bank recovery and resolution directive, inviting Council and Parliament to start negotiations with the aim of concluding before the end of the year.
Ireland fully supports conclusion of these talks by the end of the year. The introduction of an EU-wide bank recovery and resolution process, which would set out the framework for how banks in distress are to be resolved, is one of the key elements of the EU Banking Union initiative which is intended to break the link between sovereigns and banks. There is a shared ambition amongst Member States and MEPs to progress these negotiations and the urgency of bringing these talks to a conclusion has been highlighted many times by the European Council.
To complete the Banking Union, the Commission will bring forward a proposal in the summer for a Single Resolution Mechanism (SRM) for banks covered by the Single Supervisory Mechanism. We will engage constructively in the Council consideration of these proposals.
131. Deputy Brendan Smith asked the Minister for Finance the reason bank stress tests will not take place prior to the planned end of Ireland's EU-IMF programme; and if he will make a statement on the matter. [31926/13]
View answerThe original timeline for Ireland’s next stress test under the Troika programme, was linked to the EU wide EBA stress test timeline, and has changed in light of the evolving calendar for the next EU-wide bank diagnostic exercises in the lead-up to the Single Supervisory Mechanism (SSM). The intention is to ensure that appropriate preparations are made early so that the Irish banks are in the strongest possible position when the ECB fully assumes its supervisory role under the SSM. This is expected around mid-2014.
Consequently, the Irish authorities, in consultation with the troika, will this year conduct a series of diagnostics to provide greater clarity regarding the underlying quality of banks' balance sheets. A key element will be a comprehensive Balance Sheet Assessment to be finalised by end-November 2013. The various preparatory supervisory steps that the authorities are undertaking will ensure that a stress test of the Irish banking sector will be conducted ahead of, but in close proximity to, the EU-wide exercise in 2014.
132. Deputy Patrick Nulty asked the Minister for Finance the reason he continues to oppose the introduction of an EU wide financial transactions tax. [25453/13]
View answerAs I have previously stated, Ireland's position is that a Financial Transactions Tax (FTT) would be best applied on a wide international basis to include the major financial centres. If it cannot be introduced on a global basis, it would be better if it were introduced on at least an EU-wide basis to prevent any distortion of activity within the Union. This is in line with the Commission’s desire that the tax should be applied on a global basis. Such an approach would avoid the danger of activities gravitating to jurisdictions where taxes are not levied on financial transactions. The FTT that is currently being discussed at EU level is not an EU-wide FTT – 11 Member States are considering adopting an FTT by way of enhanced cooperation. Therefore our position has not changed. I have also previously indicated Ireland’s principled opposition to dealing with tax measures under “enhanced co-operation”.
An FTT could impact the financial services industry, especially in the IFSC, and lead to some activities moving abroad, particularly if it was not introduced on an EU wide basis.
An FTT could affect transactions in Irish Government bonds, including in the secondary market, and may also affect the ECB’s ability to give effect to its own monetary policy via the repurchase (“repo”) market. A significant number of countries have also raised this point in respect of their own debt management. Members of the Economic and Financial Committee Sub-Committee on EU Sovereign Debt Markets have recently stated that the introduction of the FTT would have a significantly negative effect on Sovereign Debt Markets and may impair the good-functioning of secondary markets for sovereign debt resulting in reduced liquidity, reduced investor demand and therefore higher financing costs for States. The European Investment Bank (EIB) has also expressed concerns and has suggested that serious consideration be given to the general exemption of all transactions on sovereign bonds, EIB bonds and bonds issued by Multilateral Development Banks from the scope of the FTT.
We are also concerned that the Commission’s own projections are that an FTT could reduce EU growth and raise the cost to ordinary, non-financial companies for their use of financial products. Both these aspects would be harmful to EU recovery.
If Ireland were to participate in the FTT it would require us to abolish our current tax on financial transactions, a Stamp Duty on transfers of shares in Irish incorporated companies, which currently stands at 1%.
One of the Commission’s aims in introducing an FTT was to ensure that the financial sector makes a fair contribution to the cost of the crisis. Ireland is committed to the principle that the banks will contribute to the cost of State’s support – the banks have been charged for the Government’s guarantee of their liabilities and the NAMA Act provides for a surcharge on the banks should NAMA result in a loss for the taxpayer. The Central Bank and Credit Institutions (Resolution) Act 2011 provides for the introduction of such a levy on authorised credit institutions, to be paid into a bank resolution fund.
The draft Proposal for a Council Directive implementing enhanced cooperation in the area of financial transaction tax is currently being discussed in the relevant Council working group. As the Deputy is aware, Ireland held the Presidency of the EU from January to June 2013 and during our Presidency we aimed to progress this file as transparently and inclusively as possible. The first read-through of the draft directive is not yet complete, further amendments to the text are likely and it is unclear what the final form of the Directive will be.
As of 1 July, Lithuania has assumed the Presidency of the EU. Ireland intends to fully contribute to future Working Party meetings. We will continue to monitor discussions on the FTT to ensure the compatibility of any proposed measure with the internal market and with existing taxes on financial transactions, including our Stamp Duty; and with a view to protecting our existing financial services business.
The Deputy may be aware that the UK has challenged the legality of the decision of 22 January 2013 of the Council to authorise enhanced cooperation on a common framework of FTT and the scope and objectives of the initial Commission proposal.
133. Deputy Mary Lou McDonald asked the Minister for Finance if he will outline where and when the National Asset Management Agency intends to spend the €2 billion it has announced as part of its investment plan which will see it overhauling assets underlying loans in the south of Ireland. [31880/13]
View answerI refer the Deputy to pages 29-31 and pages 53-54 of NAMA’s Annual Report and Financial Statements for 2012, which contain detailed information on the Agency’s funding in Ireland to enable construction projects currently in progress to be completed and to develop new projects to meet prospective supply shortage in certain market segments. The Report includes examples of some significant capital projects currently approved for funding by NAMA. I am advised by NAMA that it has, to date, approved development funding of over €800m for projects in Ireland that over €500m of this has been drawn down in respect of a range of commercial, retail and residential projects, including projects located in Dublin, Cork, Drogheda, Galway and Kildare. NAMA is seeking investment propositions to deploy its development capital on a commercial basis.
134. Deputy Joe McHugh asked the Minister for Finance if he will give an update on his response to the proposed reduction to 12.5% of Northern Ireland's corporation tax rate; and if he will make a statement on the matter. [24138/13]
View answerAs a rule we do not comment on the tax regimes of other jurisdictions. However, the OECD has consistently stated that low corporation tax rates combined with a broad base is the best way to encourage economic growth while still maintaining tax revenues. That is what we have being doing for many years and what we will continue to do. A reform of the Northern Ireland corporation tax rate and base has the potential to generate benefits in that part of the island, as well as on this side of the Border. Some commentators might see it as a case of Northern Ireland entering into direct competition with us on corporation tax, but I do not see it that way – I see it as having the potential to benefit both sides of the Border thereby providing an impetus for the island as a whole.
Of course there is strong evidence that a low corporation tax rate on its own will not be enough to attract significant FDI and we have consistently demonstrated that Ireland’s attractiveness for foreign multinational corporations is based on a whole range of factors – one of which happens to be our 12.5% tax rate.
