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Wednesday, 20 Nov 2013

Written Answers Nos. 72 - 78

Credit Availability

Questions (73)

Bernard Durkan

Question:

73. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he expects credit to become more available to the smaller indigenous business sector; and if he will make a statement on the matter. [49798/13]

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Written answers

Facilitating access to finance for SMEs is a key aspect of the Action Plan for Jobs 2013. It is the Government’s vision that all viable businesses operating in Ireland should have the opportunity to access sufficient finance to meet their enterprise needs in a manner that supports growth and employment in the economy. The Government has imposed SME lending targets on AIB and Bank of Ireland for the three calendar years, 2011 to 2013. Each bank was required to sanction lending of at least €3 billion in 2011, €3.5 billion in 2012 and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks achieved their 2011 and 2012 targets.

AIB and Bank of Ireland are expected to lend to viable businesses both for investment and working capital purposes. The Credit Review Office is available to assist businesses which have been refused credit. The recent CRO report shows that the Credit Review Office upheld the credit appeal in 150 cases or 55% of cases decided. The upheld appeals have resulted in €18.5 million in credit being made available to SMEs and farms, protecting 1,521 jobs. In the recent Budget, I increased the CRO appeals threshold from €500,000 to €3 million and I would strongly encourage SMEs refused credit to seek a review by the Office.

The Government has taken a number of actions to improve the situation in relation to credit availability to SMEs. The range of credit options available to SMEs now include the Microenterprise Loan scheme which can facilitate up to €40million in additional lending to microenterprises over the next five years. In addition, the Credit Guarantee Scheme is designed for SMEs who, because of lack of collateral or because of the specialised sector they operate in, face difficulties in accessing bank credit.

It is vital that the banks continue to make credit available to support economic recovery. However, it is not in the interest of the banks, businesses or the economy for finance to be provided unless the business is viable and has the capacity to meet the interest payments and repay the sum borrowed.

More generally, small businesses can benefit from support, guidance and advice provided at local level through the network of County Enterprise Boards which are currently being transformed into Local Enterprise Offices with closer links to businesses in their local area.

2014 will see the introduction of a new training programme for SMEs, designed to enhance the financial and business planning capabilities of participants and provide expert mentoring support. Launching initially on a pilot basis involving 1,000 businesses, the 2-day programme aims to equip SMEs with the necessary tools to improve their ability to secure business financing.

A full suite of developmental business supports, totalling approximately €2bn, is available from State bodies and agencies. The Government is developing a comprehensive communication strategy to increase awareness of these supports. This strategy will encompass the revised Credit Guarantee Scheme with a view to increasing awareness amongst SMEs.

Separately, as the Deputy is aware, the Taoiseach mentioned in this House last week that he had held discussions with Chancellor Merkel. Germany is keen to help and specifically to find ways to reinforce Ireland’s economic recovery by improving funding mechanisms for the real economy, including access to finance for Irish SMEs. The German Government has asked KfW, the German development bank, to work with the German and Irish authorities swiftly, in order to deliver on this initiative at the earliest possible date.

Economic Growth Initiatives

Questions (74)

Bernard Durkan

Question:

74. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he and his Department can repeat measures deemed to be most effective in the generation of economic activity and job creation throughout the economy in the past three years; and if he will make a statement on the matter. [49799/13]

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Written answers

Since the Government has taken office, all of its economic policies have been designed with the goal of strengthening economic activity and putting the labour market back on a sounded footing. In 2012 the economy recorded a second successive year of growth after three successive years of contraction. This recovery has been driven by strong export growth over the period reflecting, in part, the considerable competitiveness gains achieved in the last number of years. In addition to this, recent indications show that domestic demand is stabilising and is moving on to a modest recovery path. Personal consumption was up by 0.7 per cent in the second quarter of this year and healthy retail sales in the third quarter, along with improving consumer sentiment, bode well for the second half of the year. We have also seen a return to growth in ‘core’ (excluding planes) investment, with both construction and machinery and equipment growing in the second quarter. My Department projects economic growth again for this year as a whole.

Perhaps most pertinently, employment has now increased in each of the last four quarters, with employment up 1.8 per cent in the year to the second quarter, the strongest pace of job creation since 2008. Encouragingly this growth consisted of both full and part-time employment and was broad based across the different sectors of the economy. In addition, the standardised unemployment rate reduced further in October, to 13.2 per cent, which is the lowest level since March 2010, but still unacceptably high.

The Government has and continues to prioritise getting people back to work. It has implemented a range of measures that have been effective in job creation over the past few years. I feel all the various initiatives have worked in unison to bring about the labour market improvement.

For instance, the Action Plan for Jobs 2013 builds on the success of the Action Plan for Jobs 2012, by focusing on creating an environment conducive to job creation. It will support job creation by:

- Building Competitive Advantage;

- Assisting Indigenous Business to Grow;

- Driving Entrepreneurship at Community and Local Level;

- Developing and Deepening the Impact of FDI; and

- Fostering Sectoral Opportunities.

In addition to the Action Plan for Jobs, Pathways to work 2013, published in July 2013, is a 50-point action plan that focuses on labour market activation and builds on the success of Pathways to Work 2012.

This plan focuses on:

- More regular and on-going engagement with the unemployed;

- Greater targeting of activation places and opportunities;

- Incentivising both the take-up of opportunities and employers to provide more jobs for people who are unemployed; and

- Reforming institutions to deliver better services to the unemployed.

In addition to these economy-wide initiatives, the Government has also introduced sector-specific initiatives aimed at supporting job creation. Take for example the tourism and hospitality sector where The Gathering Ireland 2013, along with the reduced VAT rate of 9 per cent introduced for the tourism and hospitality sectors in the May 2011 Jobs Initiative, has supported the 8 per cent increase in employment in the year to the second quarter of 2013.

All of these initiatives are having a positive effect, but this is still clearly lots to do. The task now is to build on this by maintaining the momentum generated by these successful measures.

Question No. 75 answered with Question No. 68.

International Tax Strategy

Questions (76)

Bernard Durkan

Question:

76. Deputy Bernard J. Durkan asked the Minister for Finance the steps taken unilaterally or in conjunction with his EU colleagues to rebut suggestions of the existence of a tax haven here; and if he will make a statement on the matter. [49801/13]

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Written answers

As I outlined in my Budget speech on 15 October last, reputation is becoming more and more a vital factor in winning foreign direct investment. In the past year the issue of the taxation of multinational corporations has come increasingly to the fore. These are global challenges which require global solutions. Countries cannot resolve these problems by acting on their own. As I have said previously I want Ireland to be involved in this process and that is why on Budget day I published Ireland's International Tax Strategy which sets out Ireland's objectives and commitments in relation to these issues. In addition I have included a change in the recent Finance Bill that will mean Irish registered companies cannot be stateless in terms of their place of tax residency. The Deputy will be aware that within the EU, Governments retain sovereignty over their taxation systems. In that context, I would not be seeking support from my EU colleagues about mis-informed comments about Ireland. Commentators of whatever ilk, are entitled to decide for themselves how to define a tax haven. However, the internationally accepted standard is set down by the OECD, who have identified four criteria to define tax havens. Ireland does not meet any of these criteria. Indeed the Secretary General of the OECD as well as the OECD's head of taxation policy have on several occasions stated quite clearly that Ireland is not a tax haven.

The Deputy will recall that the European Commissioner for Taxation, Algirdas Semeta, was quite categorical about Ireland not being a tax haven when he appeared before a Dáil Committee as part of the preparations for Ireland's Presidency of the EU.

Bank Charges

Questions (77)

Bernard Durkan

Question:

77. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which bank charges continue to be monitored by his Department; and if he will make a statement on the matter. [49802/13]

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Written answers

I, as Minister for Finance have no statutory role in relation to bank charges imposed by regulated financial institutions. This is a commercial matter for the lending institutions concerned. The Central Bank has advised me that under Section 149 of the Consumer Credit Act, 1995 (as amended), credit institutions, including prescribed credit institutions, and bureaux de change must notify the Central Bank of Ireland if they wish to introduce a new customer charge or increase an existing customer charge, for providing any of the following services:

- making and receiving payments;

- providing foreign exchange facilities;

- providing and granting credit;

- maintaining and administrating transaction accounts.

The Central Bank assesses these notifications based on four criteria as set out in the legislation:

- The promotion of fair competition;

- The commercial justification;

- The effect new charges or increases in existing charges will have on customers; and

- Passing on costs to customers.

The Programme Documents (the Memorandum of Understanding on Specific Economic Policy Conditionality and the Memorandum of Economic and Financial Policies) agreed following the 10th Review of the EU-IMF Programme of Financial Support include a commitment to carry out an assessment of banks’ fee income by end-December 2013 as follows:

The authorities will assess banks’ fee income relative to peers in selected other jurisdictions. Based on this assessment they will complete an external review of the regulation of bank fees.

This review is ongoing and is scheduled to be completed by end December 2013. On completion of the current review I will determine the appropriate steps to take in relation to Section 149 of the Consumer Credit Act 1995.

Mortgage Arrears Proposals

Questions (78)

Bernard Durkan

Question:

78. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which any efforts are being made to address the damage to credit ratings in the small business sector with particular reference to situations where household mortgage arrears have begun to affect business in this context; and if he will make a statement on the matter. [49803/13]

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Written answers

In June 2013 the Central Bank set quarterly institution-specific performance targets for covered banks to move distressed SME borrowers on to longer-term solutions. The targets set reflect the banks’ capacity, processes and systems. I should stress that the Credit Review process remains available to any SMEs whose credit has been reduced or withdrawn by the pillar banks as well as when credit is refused by them. The recent Credit Review Office report shows that the Office upheld the credit appeal in 150 cases or 55% of cases decided. The upheld appeals have resulted in €18.5 million in credit being made available to SMEs and farms, protecting 1,521 jobs. In the recent Budget, I increased the CRO appeals threshold from €500,000 to €3 million and I would strongly encourage SMEs refused credit to seek a review by the Office.

The Government recognises that SMEs are the lifeblood of the economy and will play a vital role in the recovery of employment growth in our country. It also recognises that businesses with legacy debts may be viable. One of the key priorities of the Programme for Government is to ensure that an adequate pool of credit is available to fund SMEs in the real economy during the restructuring and downsizing programme.

Regarding mortgage debt and personal debt, following on from the recommendations of the 2011 Inter-Departmental Report on Mortgage Arrears the Government has put in place a comprehensive strategy to address the problem. The main elements of this are:-

Innovative Personal Insolvency Reform: The Personal Insolvency Act, in place since the end of 2012, now provides accessible statutory insolvency frameworks to allow debtors and creditors reach arrangements to resolve unsustainable mortgage and personal debt positions. The Insolvency Service of Ireland, which was officially launched in April, is now in a position to process insolvency applications from debtors.

Comprehensive Advice and Guidance: In addition to existing arrangements, the Government has introduced a range of information and guidance resources to assist mortgage holders through what can be a difficult and stressful process. A dedicated website, www.keepingyourhome.ie, has been put in place to provide general public information on mortgages arrears issues. In addition, there is a Mortgage Arrears Information Helpline, which was established under the aegis of the Citizens Information Board, to provide more tailored information to individual callers. Finally, a panel of accountants has been put in place to provide “one to one” independent advice to borrowers who have been provided a long term forbearance resolution offer by their lender in respect of a mortgage on their primary home. All of these information services are provided at no direct charge to the users of the service.

Keeping families in their homes: As a social housing response, a “mortgage to rent” scheme is now in place on a nationwide basis. This option is available to households who have unsustainable mortgages and who would qualify for social housing support. Provided they meet this and other appropriate criteria, this allows families, in the context of an agreed resolution to an unsustainable mortgage, to remain in their home.

Mortgage Arrears Resolution Strategies: The implementation of sustainable mortgage arrears solutions by individual banks for their distressed customers, with Central Bank oversight, is a key element of the overall framework to address the mortgage arrears problem. The Central Bank Mortgage Arrears Resolution Targets (MART) initiative announced last March, sets time bound and measurable targets for the main banks requiring them to systematically address their mortgage arrears book. In particular, the Central Bank is requiring the main mortgage lenders to propose sustainable solutions to 20% of mortgages that are in arrears (of over 90 days) by end June 2013, to 30% by the end of September 2013, to 50% by the end of December 2013 and to 70% by end March 2014. In addition, the Central Bank has also set targets to require these banks to conclude sustainable agreements with 15% of the relevant mortgage arrears cases by end 2013 and with 25% by end March 2014. Also, the Central Bank is implementing a pilot initiative for the restructuring of multiple personal debt situations to test the viability of a negotiated approach where there is more than one lender involved.

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