Written Answers Nos. 30-36
30. Deputy Michael McGrath asked the Minister for Finance the timetable he envisages for restructuring of credit unions in financial difficulty; the way the sector can be supported to ensure it can continue to make a significant contribution to social and economic wellbeing here; and if he will make a statement on the matter. [49204/13]
View answerThe Credit Union and Co-operation with Overseas Regulators Act 2012 provides the statutory basis for the restructuring of credit unions and placed the Credit Union Restructuring Board - ReBo - on a statutory footing from 1 January 2013. ReBo will oversee and facilitate restructuring on a voluntary, incentivised and time-bound basis, and is working towards the timetable set out in the Commission on Credit Unions Report, which sees the process being completed by the end of 2015. The Government has made available €250 million in the Credit Union Fund for the voluntary restructuring of credit unions.
The Commission on Credit Unions, in its Report, made a number of recommendations regarding the future of credit unions. These include the important role credit unions will play in financial inclusion and social lending and also sets out a new business model which is being implemented in the tiered regulatory approach and will see some credit unions opting to provide additional services. The core objective of these reforms is to provide the most effective regulatory structure for credit unions, taking account of their not-for-profit mandate, their volunteer ethos and community focus, while paying due regard to the need to fully protect members’ savings and financial stability.
The Government has accepted fully the Commission on Credit Union’s Report and the recommendations are currently being rolled-out under the Credit Union and Co-operation with Overseas Regulators Act 2012.
31. Deputy Richard Boyd Barrett asked the Minister for Finance if he has drawn to the EU's attention, the fact confirmed in EUROSTAT figures, that the average cost per Irish citizen of the European bank bailout was €8,981 whereas the average cost per EU citizen was €192; and if he will make a statement on the matter. [49252/13]
View answerThe enormous cost being borne by the Irish taxpayer as a result of the recapitalisation of the Irish banking system is a topic that this Government continues to raise at a European level on a regular basis. The successful restructuring of the Promissory Notes in February of this year is evidence of progress in this regard. The Government continues to work constructively with our European partners in respect of these issues and we will continue to participate in the development of the ESM and the structuring of the Single Supervisory Mechanism to ensure that Ireland will benefit, on similar terms to other member states, from developments in this regard. As the Deputy will be aware, before this government entered office, taxpayers’ money amounting to €46.3bn was injected into the banks, in the form of capital support, most of which went into the former Anglo Irish Bank. Subsequent to the formation of the current government the banks were required to raise a total of €24bn as a result of the Central Bank’s 2011 Prudential Capital Assessment Review (PCAR). However, primarily as a result of successful private equity contributions, asset sales and burden sharing with bondholders, the Government only had to inject €16.5bn into the relevant institutions. In all the State’s Total Capital Investment in the Banks amounted to €64.1bn at its peak. This figure represents the gross capital or money committed to recapitalising these institutions and does not take account of revenues received directly or indirectly from the banks in return for State support, or indeed from disposals.
The State has now started the process of exiting its bank investments and should the opportunity arise to sell any further investments, this will be considered having assessed the best interests of the State. These disposals assist in reducing the ultimate cost of the recapitalisations for the taxpayer.
33. Deputy Michael McGrath asked the Minister for Finance the actions he is taking to ensure the importance of Ireland’s corporation tax policy to the success of the economy is communicated to the European Commission’s current review on the subject; and if he will make a statement on the matter. [49205/13]
View answerThe Competition Directorate of the European Commission is currently conducting a review of corporate tax ruling procedures in various EU Member States in order to assess such practices under EU State Aid rules. What is involved at this stage is a preliminary gathering and examination of information on the part of the Commission for the purposes of getting an overview of the different tax ruling procedures in various Member States. I should add that this is not a formal EU State Aid investigation nor is it an enquiry that is specific to any one Member State.
Ireland is fully co-operating with the Commission in this exercise. While the Commission are already aware of the importance of Ireland’s corporation tax policy to the success of our economy, the present process relates to the Commissions duty to protect the operation of the single market.
34. Deputy Pearse Doherty asked the Minister for Finance if his attention has been drawn to the recent comments by Nobel Prize winning economist, Joseph Stiglitz, that Ireland is facing a lost decade and that austerity never works and his assertion that the cost of bailing out European banks has been paid by Irish citizens; and if he will make a statement on the matter. [49199/13]
View answerThe deterioration in Ireland’s public finances from 2008 was driven by a number of factors including the banking crisis. While significant debt was accumulated as a result of financial sector support, large underlying primary deficits (that is, the deficit net of interest payments and financial sector support) have been recorded in every year in Ireland since 2008. These deficits were as a result of both an over reliance on construction-driven revenue which resulted in a large hole in the public finances when the property market collapsed and through increased public expenditure including on income supports. A credible fiscal adjustment strategy was required to ensure that debt was not put on an unsustainable path. The Government fully recognises the negative short term effect on output that fiscal consolidation has and that it is a difficult balancing act between the need for consolidation on the one hand and the need to support the emerging recovery on the other. However, I believe we are getting the balance right.
Through the fiscal adjustment measures that the Government has implemented, stability has been restored to the public finances, the economy is growing and jobs are being created. Having met and exceeded all of our deficit targets to date, we remain on track to bring our deficit below 3 per cent of GDP in 2015. A second consecutive year of growth was recorded in 2012 and the economy is predicted to grow at a modest 0.2 per cent this year. Employment grew by 1.8 per cent in the second quarter of 2013. In line with these developments, the Live Register based unemployment rate continued to fall to 13.2 per cent in October, having peaked at over 15 per cent in early 2012.
Irish sovereign yields are now at about 3½ per cent, a fraction of the highs of nearly 15 per cent reached in summer 2011. This is due in no small part to successful re-negotiation of the terms of the EU-IMF programme and the promissory note deal, as well as the overall confidence in the future of economic and monetary union. However, the improvement in yields is also down to the Government’s fiscal strategy which has seen the consistent deficit reduction. A reduced cost of borrowing for the Government reduces the interest bill which has to be paid by the taxpayer, and, over the long term serves to keep economy-wide interest rates low in order to stimulate investment. On foot on this progress and prudent debt management policies, Ireland’s debt ratio is now expected to decline in 2014 and remain on a downward trajectory thereafter. Budget 2014 also forecasts a modest primary surplus next year. This means that, excluding debt service costs, revenues are sufficient to meet expenditures.
On the issue of the cost of the banking crisis, I would ask the Deputy to note that the State has already recovered a significant portion of the cost of financial supports provided to the Irish financial sector with almost €10 billion recovered to date. This has come from many sources including the disposal of ordinary shares in Bank of Ireland to private investors, the sale of contingent convertible notes that had been issued to the State by Bank of Ireland, the sale of Irish Life, coupons received on preference shares and contingent convertible notes, and fees received under both the Credit Institutions (Financial Support) Scheme and the Eligible Liabilities Guarantee Scheme.
35. Deputy Pearse Doherty asked the Minister for Finance if he will establish an independent investigation into the handling by the Central Bank and the special manager of the situation at Newbridge Credit Union. [49196/13]
View answerI am satisfied that the transfer of the assets and liabilities of Newbridge Credit Union to Permanent TSB was the correct course of action in the absence of a willing and suitable credit union transferee. The transfer has brought stability and certainty to the situation and specifically to the members and staff of Newbridge Credit Union and has provided an alternative to liquidation. This transfer also means that Newbridge Credit Union members can be assured that they can continue to operate their loans and savings accounts as normal. The Central Bank has released extensive details of the process on its website including the resolution report and the relevant affidavit. These documents provide full disclosure on the process including the many efforts made to find a credit union-based solution over an extended period of time, as well as the regulatory history and financial details regarding Newbridge Credit Union.
The Central Bank papers document in exhaustive detail the level of bad practice at Newbridge over many years, which created this serious situation and which can be illustrated in the following key lending statistics:
- An individual loan of €3.2 million, which was in excess of the Credit Union Act restriction of a max of 1.5% of the total assets;
- 52% of the loans exceed five years duration, as opposed to the maximum set out in the Credit Union Act of 20%;
- The average loan in Newbridge Credit Union was €17,281 as compared to the average Credit Union loan which is €7,764;
- There were 26 loans of an average value of €550,000, which were seriously distressed.
These figures illustrate that Newbridge Credit Union was operating in a very different way from a normal credit union. The structure of some loans was more akin to development loans with "bullet" repayments as opposed to regular repayments. These factors contributed to its financial difficulties and ultimately meant that no credit union considered that it was in its best interests to combine with it, even in the context of extensive taxpayer support.
The intervention at Newbridge Credit Union was the first resolution action to be taken under the Central Bank and Credit Institutions (Resolution) Act 2011. As with any new process, there will be lessons learned which will inform any future resolution process and it is important that there is time to reflect on this over the coming weeks.
While I do not agree with the suggestion that an investigation ought to be held, I think it is helpful that the Governor is afforded an opportunity to share his views on the process when he meets the Public Accounts Committee shortly.
36. Deputy Lucinda Creighton asked the Minister for Finance the levels of consultation he had with the Department of Health in advance of altering the restrictions on tax relief on health insurance; his views that referring to insurance policy holders who would be affected in the budget as just the gold plated policy holders was misleading; and if he will make a statement on the matter. [49258/13]
View answerAs I previously stated, in my reply to Parliamentary Question Number 166 (ref number 45941/13) of 5 November 2013 put forward by the Deputy, decisions regarding tax matters are primarily a matter for my Department and the Office of the Revenue Commissioners. However, the Budget was agreed by the Government before its announcement on Budget day. In addition, as the Deputy is aware, that from 16 October 2013, tax relief for medical insurance premiums has been restricted to the first €1,000 per adult and the first €500 per child insured. Any portion of premium paid in excess of these ceilings will no longer qualify for tax relief.
The Commission on Taxation in its 2009 report recommended the retention of medical insurance relief but that it should be limited. The Government is satisfied that the introduction of the new ceilings will achieve such an outcome.
It is envisaged that the introduction of the new ceilings will ensure some continuing support via the tax system for those who purchase medical insurance policies, while reducing Exchequer exposure to more expensive policies.
