Written Answers Nos. 72-89
72. Deputy Pearse Doherty asked the Minister for Finance in respect of the report by PricewaterhouseCoopers into the disposal of the Irish Bank Resolution Corporation mortgage book if he will confirm if the price paid by Oaktree and Lone Star for the 64% of the loan book which they acquired was in excess of the run-off-value or the market-value. [18970/14]
View answerI have been advised by the Special Liquidators that the price achieved in the recent sale of 64% of the Irish Bank Resolution Corporation Limited (in Special Liquidation) residential mortgage book was in excess of the independent valuation obtained.
The Special Liquidators will not be providing information as to the actual sales proceeds received in respect of the loan sales process as this is commercially sensitive information.
73. Deputy Pearse Doherty asked the Minister for Finance further to the recent disposal by the special liquidators of the Irish Bank Resolution Corporation of 64% of its mortgage book to Lone Star and Oaktree, if he will confirm that both of these companies typically pursue returns on investment in excess of 15% per annum; if he will outline the way these companies might achieve such returns on the mortgages they have acquired from IBRC; and if he will make a statement on the matter. [18971/14]
View answerNeither I nor the Special Liquidators are in a position to comment on the intentions or subsequent actions of third party purchasers once they have purchased the loan assets.
I am advised that the contractual terms and conditions of all customer mortgages and other borrowings of Irish Bank Resolution Corporation have not changed as a result of the sale of these obligations to a third party. Purchasers of mortgage loans will be obliged to honour the legal terms of the loan agreements. Furthermore the Government has committed to bringing forward legislation to ensure mortgage holders maintain the protection of the CCMA. In the interim I am satisfied that the new purchasers have agreed to comply with the Code of Conduct on Mortgage Arrears.
74. Deputy Pearse Doherty asked the Minister for Finance in respect of the report by PricewaterhouseCoopers into the disposal of the Irish Bank Resolution Corporation mortgage book the reason why only ten potential buyers were pre-interviewed when the loan portfolio is so diverse; and if he will make a statement on the matter. [18972/14]
View answerI have been advised by the Special Liquidators that PwC conducted interviews with investor groups as part of the process of forming their independent valuation and sales strategy advice. The number of investor groups interviewed was a matter of professional judgement applied by PwC. The discussions related specifically to their independent advice for Project Sand.
I am further advised that on an overall portfolio basis, the Special Liquidators held in-bound and out-bound discussions with over 300 interested parties as part of the wider market sounding process.
75. Deputy Pearse Doherty asked the Minister for Finance if, following the recent disposal by the special liquidators of Irish Bank Resolution Corporation of 64% of the mortgage book, he has considered using his shareholding in Permanent TSB or Allied Irish Banks to persuade either institution to acquire the unsold mortgages; if he considers AIB or PTSB to be better able to manage mortgages than the National Asset Management Agency; and if he will make a statement on the matter. [18973/14]
View answerI am advised by the Special Liquidators that they are in the process of devising a further open market sales process in relation to the remaining mortgage books in IBRC the details of which will be communicated to all relevant parties in due course.
Any decision to acquire loan books is a commercial matter for the Boards and managment of the individual banks and as the Deputy will be aware under the Relationship Framework the State does not intervene in their management decisions regarding commercial matters.
76. Deputy Terence Flanagan asked the Minister for Finance his views on correspondence in respect of a person (details supplied) in Dublin 17 regarding a tax credit. [18984/14]
View answerTax relief is not available to parents in respect of creche fees or childcare costs. However, I can assure the Deputy that the Government acknowledges the continuing cost pressures on parents, particularly those with young children. In recognition of these cost pressures, a number of support measures are in place to ease the burden on working parents. These include the Community Childcare Subvention (CCS) programme, which funds community childcare services to enable them to charge reduced childcare fees to qualifying parents, the Childcare Education and Training Support (CETS) programme which provides free childcare places to qualifying FÁS and VEC trainees and the Early Childhood Care and Education (ECCE) programme which provides for a free pre-school year for children in the year before commencing primary school. Generous entitlements to paid and unpaid maternity leave as well as child benefit payments are also provided.
The Department of Social Protection provides financial support to families on low pay by way of the Family Income Supplement (FIS) and to one-parent families through the one-parent family payment.
In addition, a Single Person Child Carer tax credit of €1650 is provided as well as an additional standard rate band of €4,000. This credit and band is payable to any single person with a child under 18 years of age or over 18 years of age if in full time education or permanently incapacitated. The primary claimant may relinquish this credit and increase in the rate band to a secondary claimant with whom the child resides for not less than 100 days in the year. To claim the Single Person Child Carer Credit a claimant must not be married, in a civil partnership or cohabiting.
The Universal Social Charge (USC) was introduced in Budget 2011 to replace the Income Levy and Health Levy. It was a necessary measure to widen the tax base, remove poverty traps and raise revenue to reduce the budget deficit. It is a more sustainable charge than those it replaced and is applied at a low rate on a wide base with very few exemptions.
In Budget 2012 I announced that those earning less than €10,036 would no longer be subject to the Universal Social Charge. This in itself has removed almost 330,000 individuals from the charge and is of particular benefit to the low paid.
I have no plans to introduce tax relief to assist parents with the cost of childcare. As the Deputy will appreciate, I receive numerous requests for the introduction of new tax reliefs and the extension of existing ones. As the Deputy will also appreciate, I must be mindful of the public finances and the many demands on the Exchequer given the current budgetary constraints. Tax reliefs, no matter how worthwhile in themselves, reduce the tax base and make general reform of the tax system that much more difficult.
77. Deputy Pearse Doherty asked the Minister for Finance the impact of Government borrowing from the European Investment Bank on the State's debt-to-GDP ratio and deficit for each year from 2000 to 2013; and the annual cost to the State arising from interest charges on EIB investment loans to the State. [19083/14]
View answerThe following table outlines the European Investment Bank borrowing from 2000-2013 and the resultant impact on general government debt for this timescale.
Likewise the annual interest costs relating to the loans have also been included in addition to the consequent effect on the general government balance figures for the same period.
|
- |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013* |
|
EIB Loans outstand-ing €m |
541 |
454 |
274 |
178 |
120 |
118 |
120 |
112 |
29 |
0 |
0 |
0 |
100 |
100 |
|
Cash interest paid to EIB €m |
48 |
37 |
24 |
18 |
12 |
9 |
9 |
9 |
8 |
2 |
0 |
0 |
0 |
4 |
|
GG Debt |
39,094 |
40,525 |
41,540 |
43,556 |
44,056 |
44,329 |
43,689 |
47,147 |
79,600 |
104,540 |
144,163 |
169,222 |
192,467 |
202,920 |
|
GDP |
105,644 |
117,524 |
130,717 |
140,635 |
150,025 |
162,897 |
177,574 |
189,655 |
180,250 |
162,284 |
158,097 |
162,600 |
163,939 |
164,050 |
|
Impact on Debt |
0.51% |
0.39% |
0.21% |
0.13% |
0.08% |
0.07% |
0.07% |
0.06% |
0.02% |
0.00% |
0.00% |
0.00% |
0.06% |
0.06% |
|
Impact on GGB |
-48 |
-37 |
-24 |
-18 |
-12 |
-9 |
-9 |
-9 |
-8 |
-2 |
0 |
0 |
0 |
-4 |
|
Impact on GGB % GDP |
-0.05% |
-0.03% |
-0.02% |
-0.01% |
-0.01% |
-0.01% |
-0.01% |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Source: NTMA, Eurostat |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
*2013 figures are provisional and unaudited
78. Deputy Michael McGrath asked the Minister for Finance if compensation is available to customers of a company (details supplied) who have paid motor insurance premia but who are now effectively without cover; and if he will make a statement on the matter. [19149/14]
View answer99. Deputy Pearse Doherty asked the Minister for Finance the options available to customers affected by the collapse of the Setanta Insurance company; and if he will make a statement on the matter. [19416/14]
View answerI propose to take Questions Nos. 78 and 99 together.
On Wednesday 16th April, 2014, Setanta Insurance Company Ltd ("Setanta") determined that the company was insolvent. This means that Setanta does not have sufficient funds to be able to honour its full obligations towards claimants, policyholders and other creditors. It is expected that Setanta will be formally placed into liquidation by the Malta Financial Services Authority in the coming days. Policyholders can expect to be given two months cancellation notification (in accordance with the Central Bank of Ireland's Consumer Protection Code 2012) during which period cover will remain in force. While policies will remain valid until the required notice period has been served, it is important to be clear that the amounts due under any claims may not be fully recoverable in all circumstances. In this light, it is important to note that the Central Bank of Ireland has advised all Setanta policyholders to arrange for alternative cover without delay.
The Motor Insurance Bureau of Ireland ("MIBI") have indicated that they intend to accept all third party claims in connection to Setanta policies. MIBI is a non-profit-making organisation which was established by Agreement between the Government and those companies underwriting motor insurance in Ireland. The principal role of MIBI is to compensate innocent victims of accidents caused by uninsured and unidentified vehicles.
First party claims on personal insurance policies will be payable from the Insurance Compensation Fund (ICF) once Setanta is formally placed into liquidation. Claimants will be eligible for 65% of the amount due or €825,000, whichever is the lesser. Under Section 3.6 of the Insurance Amendment Act 1964 (as amended) first party claims by a body corporate or unincorporated body are not covered by the ICF.
The refund of premiums for commercial and personal insurance policies is not covered by the ICF or MIBI. A portion of the premium refunds may, however, be available upon completion of the Setanta liquidation.
Until otherwise advised those customers which have been affected by the collapse should continue to contact to Setanta Insurance Services Limited at 0818 255 255 (if calling from outside Ireland +353 1 897 6300) or on support@setantainsurance.com.
79. Deputy Michael McGrath asked the Minister for Finance if he is satisfied with the regulatory model of the insurance sector in view of the collapse of two firms in the sector within a short period of time; and if he will make a statement on the matter. [19150/14]
View answer102. Deputy Pearse Doherty asked the Minister for Finance if he will review the regulatory environment to ensure another insurance company does not collapse as happened with Setanta Insurance leaving 75,000 policy holders without a policy. [19419/14]
View answer116. Deputy Noel Grealish asked the Minister for Finance if he will clarify the status of Setanta Insurance Limited in regard to its regulation both by the Maltese Financial Services Authority for prudential issues and the Central Bank of Ireland for the conduct of business; if EU freedom of services legislation and regulatory control is deficient in allowing a company to be registered in a country where that company does not transact any business, while trading in another country; and if he will make a statement on the matter. [19646/14]
View answerI propose to take Questions Nos. 79, 102 and 116 together.
Under EU law which governs non-life insurance, an insurer is required to inform the regulator in its home Member State (its home regulator) that it intends to pursue business in another Member State. The home regulator must then provide the host regulator with a certificate attesting that the insurer covers the EU Solvency Capital Requirement, as well as the nature of the business which the insurer intends to undertake. The insurer may start to pursue business from the date that the certificate is communicated to the host regulator, in this case the Central Bank of Ireland.
Setanta Insurance Company Limited ("Setanta") is a Maltese incorporated company which was both authorised and prudentially supervised by the Malta Financial Services Authority (MFSA). While its financial position is not supervised by the Central Bank of Ireland as the Central Bank has no role in that regard, the firm is supervised by the Central Bank for conduct of business rules, i.e. consumer protection obligations. I understand that the Central Bank has been in ongoing contact with the MFSA in relation to Setanta in recent times.
Setanta was regulated at EU regulatory level in accordance with a directive known as Solvency I which currently places requirements on the amount of regulatory capital European insurance companies must hold against unforeseen events. I understand that Setanta met its EU regulatory obligations and under EU law is therefore entitled to trade across EU borders.
Following negotiations that were completed at European level in November, 2013, a new regime known as Solvency II will commence on 1 January 2016, which will further strengthen the EU regulatory framework. The Solvency II EU Directive sets out new, stronger EU-wide requirements on capital adequacy and risk management for insurers with the key aim of increasing policyholder protection. The new regime will also ensure greater cooperation between supervisors.
The European Commission has also indicated that it will review whether any issues raised relating to the regulatory framework require action. My Department and the Central Bank will be reviewing the circumstances relating to Setanta and will be reporting to me on what lessons can be learnt and how the framework can be strengthened.
80. Deputy Michael McGrath asked the Minister for Finance the current balance on the insurance compensation fund; his views on whether this is adequate to meet all possible claims made upon it; and if he will make a statement on the matter. [19151/14]
View answer101. Deputy Pearse Doherty asked the Minister for Finance his plan to adjust the insurance levy or introduce any new levy in view of the collapse of Setanta Insurance. [19418/14]
View answerI propose to take Questions Nos. 80 and 101 together.
The Insurance Compensation Fund (ICF) levy being applied to home, motor and commercial insurance, and which came into effect from 1 January 2012, operates under the Insurance Act 1964. Its purpose is to protect policy holders in the event of their insurer becoming insolvent.
Under Section 6 of the Insurance Act 1964 the responsibility for deciding whether the ICF has sufficient funds available to it at any particular time is a matter for the Central Bank of Ireland. Where, in the Central Bank's opinion, the state of the Fund is such that financial support should be provided for it, it determines an appropriate contribution to be paid to it by each insurer calculated as a percentage, not exceeding 2% of the aggregate of the gross premiums paid to that insurer in respect of policies issued in respect of risks in the State. The levy is already at the 2% maximum level provided for under the legislation.
Because the ICF is not pre-funded, there is a provision in the 1964 Insurance Act which allows the Minister for Finance to provide the necessary monies in the form of a repayable loan where there are insufficient funds available.
The balance of the Insurance Compensation Fund as at the 25th April 2014 was €31,199,821.20. It is anticipated that the Insurance Compensation Fund will be adequately funded to meet all expected claims on the fund.
81. Deputy Michael McGrath asked the Minister for Finance the number of firms licenced to sell motor and general insurance here; the number that are regulated here for prudential purposes; the number that are regulated here for conduct of business purposes; and if he will make a statement on the matter. [19152/14]
View answerUnder EU law which governs non-life insurance, an insurer is required to inform the regulator in its home Member State (its home regulator) that it intends to pursue business in another Member State. The home regulator must then provide the host regulator with a certificate attesting that the insurer covers the EU Solvency Capital Requirement, as well as the nature of the business which the insurer intends to undertake. The insurer may start to pursue business from the date that the certificate is communicated to the host regulator, in this case the Central Bank of Ireland.
The table sets out the number of firms licensed to sell motor and general insurance in Ireland and the number that are regulated here for prudential purposes. The number of insurance firms that are regulated here for conduct of business rules is 744.
|
- |
Number of Insurers which sell motor and general insurance |
Gross Written Premium |
|
Prudentially regulated in Ireland which write Irish risk |
45 |
€1.9bn |
|
Prudentially regulated in Ireland which do not write Irish risk |
67 |
€12.5bn |
|
Total |
112 |
€14.4bn |
82. Deputy Michael McGrath asked the Minister for Finance if the additional 3% universal social charge paid by self-employed persons earning over €100,000 expires at the end of 2014; if the budgetary projection for 2015 published in the stability programme update takes account of this; and if he will make a statement on the matter. [19153/14]
View answerAs the Deputy will be aware, the USC was introduced from 1 January 2011 and replaced the Income and Health Levies. The marginal rate for each of these levies was 6% and 5%, respectively, or 11% in total. The marginal rate for the USC was 7%. Taken in isolation, the introduction of the USC therefore, would have had the effect of reducing by 4 percentage points the top marginal tax rates for both PAYE and self-employed income earners paying at those rates. At the same time, the PRSI ceiling for PAYE taxpayers, which then stood at €75,036, was abolished which had the result of increasing by 4 percentage points the top marginal tax rate for PAYE taxpayers. So the two changes - the introduction of the USC and the abolition of the PRSI ceiling - taken together meant that the marginal tax rate for PAYE taxpayers remained unchanged.
In the case of the self-employed, there was no PRSI ceiling as the PRSI income ceiling for the self-employed had been abolished in Budget 2001. Therefore, without further change, the introduction of the USC would have reduced the top marginal rate for these taxpayers by 4 percentage points and would have had the unintended effect of benefiting high earning self-employed income earners, resulting in some high earning self-employed income earners actually making a gain from Budget 2011 in comparison to all other taxpayers.
To avoid the situation in which the top marginal rate for PAYE taxpayers remained unchanged while self-employed taxpayers benefited from a reduction of that rate by 4 percentage points, two further changes were made. A higher rate of USC of 10% was introduced for the self-employed in respect of income in excess of €100,000 and an additional 1 percentage point was added to the self-employed PRSI rate. This restored the self-employed top marginal tax rate to 55%, (41% income tax, 7% USC, an additional 3% USC on income over €100,000 and 4% PRSI), which is where they were in 2010 and ensured that high earning self-employed income earners did not actually make a gain from Budget 2011 in comparison to all other taxpayers.
I should point out that the 10% rate of USC only applies to income over €100,000. Self-employed individuals with income of less than €100,000 and PAYE employees pay tax, USC and PRSI at the same marginal rate of 52%.
However, the Deputy is undoubtedly aware that the previous Government, when they introduced the Universal Social Charge, legislated for the cessation of the additional 3% self-employed rate as well as the removal of exemption from the 7% rate for those on medical cards who have an aggregate income below €60,000 from 1 January 2015.
As these changes are provided for in the current legislation it follows that my officials would have factored this into the forecasts contained in the recent Stability Programme Update April 2014. However, any decisions regarding the extension of the relevant provisions will be taken in the context of my deliberations for Budget 2015.
83. Deputy Michael McGrath asked the Minister for Finance the circumstances which must exist for interest on the National Asset Management Agency subordinated debt to be paid; and if he will make a statement on the matter. [19156/14]
View answerThe conditions for the payment of interest on NAMA Subordinated Bonds are set out in the Subordinated Bonds Termsheet which is available on NAMA's website, www.nama.ie/about-us/how-we-fund-our-work/. Consistent with Section 49 of the NAMA Act, which governs NAMA's issuance of subordinated debt securities, the NAMA Board may declare interest payable on its subordinated debt if, at its discretion, the Board deems it appropriate to do so if NAMA is achieving is objectives. Interest not declared in any year will not accumulate.
84. Deputy Brendan Griffin asked the Minister for Finance his views on a matter regarding the collapse of a company (details supplied); and if he will make a statement on the matter. [19176/14]
View answerUnder EU law which governs non-life insurance, an insurer is required to inform the regulator in its home Member State (its home regulator) that it intends to pursue business in another Member State. The home regulator must then provide the host regulator with a certificate attesting that the insurer covers the EU Solvency Capital Requirement, as well as the nature of the business which the insurer intends to undertake. The insurer may start to pursue business from the date that the certificate is communicated to the host regulator, in this case the Central Bank of Ireland. Setanta Insurance Company Limited ("Setanta") is a Maltese incorporated company which was both authorised and prudentially supervised by the Malta Financial Services Authority (MFSA). While its financial position is not supervised by the Central Bank of Ireland as the Central Bank has no role in that regard, the firm is supervised by the Central Bank for conduct of business rules, i.e. consumer protection obligations. Setanta has been trading in Ireland since 2007. I understand that the Central Bank has been in ongoing contact with the MFSA in relation to Setanta in recent times.
Setanta was regulated at EU regulatory level in accordance with a directive known as Solvency I which currently places requirements on the amount of regulatory capital European insurance companies must hold against unforeseen events. I understand that Setanta met its EU regulatory obligations and under EU law is therefore entitled to trade across EU borders.
Following negotiations that were completed at European level in November, 2013, a new regime known as Solvency II will commence on 1 January 2016, which will further strengthen the EU regulatory framework. The Solvency II EU Directive sets out new, stronger EU-wide requirements on capital adequacy and risk management for insurers with the key aim of increasing policyholder protection. The new regime will also ensure greater cooperation between supervisors.
On 16 April, 2014, Setanta Insurance Company Ltd ("Setanta") determined that the company was insolvent. This means that Setanta does not have sufficient funds to be able to honour its full obligations towards claimants, policyholders and other creditors. It is expected that Setanta will be formally placed into liquidation by the Malta Financial Services Authority in the coming days. Policyholders can expect to be given two months cancellation notification (in accordance with the Central Bank of Ireland's Consumer Protection Code 2012) during which period cover will remain in force. While policies will remain valid until the required notice period has been served, it is important to be clear that the amounts due under any claims may not be fully recoverable in all circumstances. In this light, it is important to note that the Central Bank of Ireland has advised all Setanta policyholders to arrange for alternative cover without delay.
The Motor Insurance Bureau of Ireland ("MIBI") have indicated that they intend to accept all third party claims in connection to Setanta policies. MIBI is a non-profit-making organisation which was established by Agreement between the Government and those companies underwriting motor insurance in Ireland. The principal role of MIBI is to compensate innocent victims of accidents caused by uninsured and unidentified vehicles.
First party claims on personal insurance policies will be payable from the Insurance Compensation Fund (ICF) once Setanta is formally placed into liquidation. Claimants will be eligible for 65% of the amount due or €825,000, whichever is the lesser. Under Section 3.6 of the Insurance Amendment Act 1964 (as amended) first party claims by a body corporate or unincorporated body are not covered by the ICF.
The refund of premiums for commercial and personal insurance policies is not covered by the ICF or MIBI. A portion of the premium refunds may, however, be available upon completion of the Setanta liquidation.
Until otherwise advised those customers which have been affected by the collapse should continue to contact to Setanta Insurance Services Limited at 0818 255 255 (if calling from outside Ireland +353 1 897 6300 or on support@setantainsurance.com.
85. Deputy Colm Keaveney asked the Minister for Finance if he will provide an estimate for the current size of the output gap; his views on the implications on same for taxation policy; and if he will make a statement on the matter. [19183/14]
View answerAs set out in the Stability Programme April 2014 Update, submitted to the European Commission yesterday, the output gap for 2013 is estimated at -1.3 per cent of GDP. A negative output gap indicates that the economy last year was operating below its potential. An output gap of -0.7 per cent is estimated for this year, on the basis of my Department's forecast for real GDP growth of 2.1 per cent.
These estimates are based on the revised methodology for estimating potential output recently endorsed at EU level. Given the openness of the Irish economy, however, there are major health warnings attached to estimates of the output gap for Ireland.
The output gap serves as a key input to estimating the structural budgetary position, that is the budget balance that would prevail in the absence of the economic cycle. In line with the fiscal rules, Ireland must return to a balanced budgetary position in structural terms by 2018.
The SPU set out projected tax revenues to 2018 consistent with this objective. Necessary revisions if any to spending plans or taxation policy required to meet this objective will be based on the most up-to-date economic and fiscal data available on Budget day each year.
86. Deputy Colm Keaveney asked the Minister for Finance with reference to the technical assumptions made on page 5 of the Stability Programme April 2014 update, his estimate of the year-on-year percent change for both real GDP and real GNP if oil were to be $110 per barrel for each year from 2014 to 2018, inclusive; and if he will make a statement on the matter. [19184/14]
View answerRelative to other countries in the EU, Ireland has a high energy dependency rate, that is, it is highly dependent on imports to meet domestic energy demands. Eurostat figures show that Ireland's energy dependency rate stood at 85 per cent in 2012, the fourth highest in the EU and over 30 percentage points higher than the EU average of 53 per cent. This dependency leaves Ireland vulnerable to energy price shocks in relative terms. An increase in energy prices above the baseline assumption would, inter alia, reduce household discretionary income by pushing up domestic energy prices. It would also lead to a deterioration in the terms of trade (the ratio of export prices to import prices) which would have a negative impact on Ireland's international competitiveness.
If oil prices were to rise significantly higher than the Department's baseline assumption this would also negatively impact on growth in our main trading partners and would therefore lead to a fall in demand for Irish exports internationally. In this regard the Sensitivity Analysis chapter in the recently published Ireland's Stability Programme April 2014 Update (tinyurl.com/spu14), may prove informative. As part of this analysis a quantitative estimate of the impact of a 1 per cent variation in world output on Irish output was prepared (this can be found on page 26). The analysis suggests that such a shock would decrease Irish GDP by around 1 per cent by 2018, due to the openness of the Irish economy. It should be remembered that, at the margin, these estimates are broadly symmetrical so any unanticipated decline in energy prices would be likely to result in a net positive impact for the Irish economy.
While there is little Ireland can do in the short term to counter the impact of an increase in the price of oil, the Department of Communications, Energy and Natural Resources has set out ambitious targets to 2020 for increasing the contribution of renewable sources of energy which are aimed at optimising energy efficiency in Ireland.
87. Deputy Eamonn Maloney asked the Minister for Finance if, in view of the recovering and growing economy and in view of the restricted access to credit from the banking industry, his views on whether the section 35 restriction on credit union activity should be removed from those unions with resources and financial well being, thereby allowing them to engage, not alone with individual members but also with SMAs and self employed members based in their communities; and if he will make a statement on the matter. [19238/14]
View answerCredit Unions have an important role to play in providing credit in local communities around the country.
Section 35(2) of the Credit Union Act, 1997 permits a credit union to have up to 30% of its loan book outstanding for more than 5 years and up to 10% of its loan book outstanding for more than 10 years.
Based on the most recent information provided by credit unions to the Central Bank in the December 2013 quarterly prudential returns, average lending over 5 years as a percentage of gross loans was some 11%, while average lending over 10 years as a percentage of gross loans was about 2%. These figures indicate that, in general, credit unions are currently well within the limits as set down in the 1997 Act.
On foot of recommendations from the Commission on Credit Unions, section 11 of the Credit Union and Co-operation with Overseas Regulators Act 2012 substantially amends section 35 of the 1997 Act. These amendments provide for new Central Bank regulations to deal with a range of lending issues including:
- the classes of lending that a credit union may engage in, for example business lending;
- the duration of loans;
- large exposures; and
- concentration limits.
Section 11 will be commenced in tandem with the new Central Bank regulations, which are to be introduced as part of the tiered regulatory approach recommended by the Commission. This tiered approach will address a range of areas including lending, investments, savings, borrowings, additional services, reserves and liquidity.
The Central Bank has issued a consultation paper on the tiered regulatory approach in order to provide an opportunity for stakeholders to set out their views across a range of issues, including how credit unions might engage in business lending in the future. The Central Bank is currently considering the submissions received and is planning further consultation and a regulatory impact assessment.
88. Deputy Clare Daly asked the Minister for Finance the person who authorised the opening of a bank account in Belfast with reference to a person (details supplied) in County Limerick; the person who authorised account openings and transfers from Belfast to Jersey-Belfast; and if the Revenue Commissioners' claims on the person due to the illegal opening of an account in Belfast by the Limerick branch of AIB are covered under the one hundred million DIRT settlement. [19286/14]
View answerI have been informed by AIB that the matter referred to has been the subject of investigation and correspondence over an extended period in which the Bank's position has been clearly set out to the customer concerned. However, for confidentiality reasons AIB is not in a position to discuss details of the individual customer circumstances.
Regarding DIRT, the Revenue Commissioners are not in a position to advise me based on the information supplied but if the Deputy could supply further details I will ask them to reply directly to you.
89. Deputy Jerry Buttimer asked the Minister for Finance his views on the benefits of tax credits for persons using child care; if such a measure would assist working parents and if he will consider introducing such a measure; and if he will make a statement on the matter. [19354/14]
View answerI understand that comprehensive analysis of the options to support the provision of affordable and accessible childcare was undertaken in 2005.
Having considered the options available, the then Government introduced the early childcare supplement, providing a direct payment to all families with young children. In addition, certain other incentives were introduced in order to encourage an increase in the supply of childcare places.
At that time, tax relief for childcare costs was considered but not introduced, as it would only have been of benefit to those in the tax net and would most likely have been absorbed by childcare providers in the form of higher prices. Analysis showed that a standard rated childcare costs allowance of €4,000 per annum would cost the Exchequer €64 million per annum and would have resulted in a reduced liability to income tax of only €15 per week for those availing of it.
The Deputy will be aware that the early childcare supplement has since been abolished as the measure was very costly, poorly targeted and possibly led to increased charges. In its stead, the Early Childhood Care and Education (ECCE) programme, which provides for a free pre-school year for children in the year before commencing primary school, was introduced.
In my view the concerns raised in the 2005 analysis regarding tax relief for childcare costs are still valid. This is particularly the case considering the major changes in the economy that have occurred in the intervening period. Furthermore, I would have concerns about basing any analysis of the cost of making childcare tax deductible on data provided in reports that were compiled nine years ago.
Notwithstanding the absence of tax relief for childcare costs, the Government acknowledges the continuing cost pressures on parents, particularly those with young children. For this reason a number of support measures are available.
These include the Community Childcare Subvention (CCS) programme, which funds community childcare services to enable them to charge reduced childcare fees to qualifying parents, the Childcare Education and Training Support (CETS) programme which provides free childcare places to qualifying FÁS and VEC trainees and the ECCE programme as mentioned above. Generous entitlements to paid and unpaid maternity leave as well as child benefit payments are also provided.
The Department of Social Protection provides financial support to families on low pay by way of the Family Income Supplement (FIS) and to one-parent families through the one-parent family payment.
In addition, a Single Person Child Carer tax credit of €1650 is provided as well as an additional standard rate band of €4,000. This credit and band is payable to any single person with a child under 18 years of age or over 18 years of age if in full time education or permanently incapacitated. The primary claimant may relinquish this credit and increase in the rate band to a secondary claimant with whom the child resides for not less than 100 days in the year. To claim the Single Person Child Carer Credit a claimant must not be married, in a civil partnership or cohabiting.
The Universal Social Charge (USC) was introduced in Budget 2011 to replace the Income Levy and Health Levy. It was a necessary measure to widen the tax base, remove poverty traps and raise revenue to reduce the budget deficit. It is a more sustainable charge than those it replaced and is applied at a low rate on a wide base with very few exemptions.
In Budget 2012 I announced that those earning less than €10,036 would no longer be subject to the Universal Social Charge. This in itself has removed almost 330,000 individuals from the charge and is of particular benefit to the low paid.
As the Deputy will appreciate, I receive numerous requests for the introduction of new tax reliefs and the extension of existing ones. As the Deputy will also appreciate, I must be mindful of the public finances and the many demands on the Exchequer given the current budgetary constraints. Tax reliefs, no matter how worthwhile in themselves, reduce the tax base and make general reform of the tax system that much more difficult.
