Written Answers Nos. 21 - 39
21. Deputy Peadar Tóibín asked the Minister for Finance if he is satisfied with the treatment of businesses which had loans at the Irish Bank Resolution Corporation during the liquidation process regarding their right to know who has bought their loan and the unregulated nature of some of the purchasers of loan books. [37215/14]
View answerI am advised by the Special Liquidators that it is policy to notify all commercial borrowers whose loans are sold as part of the liquidation of IBRC of the sale of their loan and the identity of the purchaser of that loan.
In addition, the Special Liquidators also require purchasers to send separate written notifications to borrowers, such notifications to include the identity of the purchaser and contact details should borrowers have any queries in relation to the transfer. This process ensures the borrowers know who has purchased their loans and who to contact should borrowers have any additional questions in relation to either their loan(s) or the purchaser.
The relevant code of conduct that can apply to certain business borrower lender relationships is the Code of Conduct for Business Lending to Small and Medium Enterprises (SME Code). The application of the SME Code varies depending on whether the relevant purchasing entity of the commercial loans is a regulated entity or an unregulated entity. If the purchasing entity is a regulated entity, it is required to comply with the SME Code. If the purchasing entity is not a regulated entity, it is not required to comply with the SME Code.
In terms of context, unlike consumer lending, business lending is not an activity which, in and of itself, must be undertaken by a regulated entity i.e. an unregulated entity could be established for the sole purpose of lending to SMEs and this would not require authorisation, and would not be subject to any legislation or codes.
It is also important to note that the sale of these loans does not change the terms and conditions of the loan agreement in any way. Irrespective of who acquires the loan(s) they will be required to honour the legal terms and conditions of the existing loan agreement(s).
22. Deputy Paul J. Connaughton asked the Minister for Finance the consideration given to removing the pension levy in the upcoming budget; and if he will make a statement on the matter. [37054/14]
View answerThe original 0.6% stamp duty levy on pension fund assets will end this year while the additional 0.15% levy is legislated to apply for this year and 2015.
Preparations for Budget 2015 and the consequent Finance Bill are ongoing. It would not be appropriate for me to comment on what changes, if any, are being considered in the pension fund levy or any other tax measure.
23. Deputy Mick Wallace asked the Minister for Finance his views in relation to the input into Europe-wide standards of financial regulation in order to ensure that there is no repeat of the economic crisis of 2007-2008 and the subsequent bailouts. [37017/14]
View answerA comprehensive overhaul of the regulatory framework in the financial sector has been pursued at EU level since the financial crisis. Through the introduction of various initiatives, the stability and resilience of the financial sector has been strengthened and restored to a position where it better serves the economies and people of Europe. We have played a crucial role in driving that reform agenda, none more so than during our Presidency in 2013.
A series of measures have been introduced to reduce the risks across the financial system and to minimise the adverse effects of future financial crises. The Deposit Guarantee Scheme Directive (DGSD) significantly enhances depositors' confidence by introducing faster pay-out and more credible funding of the various Deposit Guarantee Schemes. Agreement was reached during our presidency on the Capital Requirements Directive and Regulation which increases the level and quality of bank capital thereby improving banks' capacity to absorb losses. The package requires banks to build additional capital buffers in good times that can be used in periods of stress. The Directive for Bank Recovery and Resolution (BRRD) is geared at reducing the impact of bank failures on the economy and to help insure that the costs of future failures are not borne by taxpayers. It provides for a more orderly resolution of EU banks thereby minimising the risk of future state interventions to maintain financial stability.
Measures have also been introduced to address weaknesses in the institutional structures. In this regard, three new European Supervisory Authorities and the European Systemic Risk Board were established in 2011 to improve cross-border cooperation and to ensure consistent enforcement of rules and systemic oversight. The creation of the European System of Financial Supervisors (ESFS) and in particular the three European supervisory authorities, the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA), ensure a single regulatory framework and its uniform application across the EU. The Single Rulebook for all EU member states will mean a common set of rules on supervision, deposit insurance and resolution. Building on the single rulebook, the first pillar of banking union is the Single Supervisory Mechanism (SSM) which transfers key supervisory tasks for significant banks in the euro area to the European Central Bank. The second pillar of banking union, the Single Resolution Mechanism (SRM), provides for an integrated and effective resolution process for all banks in participating member states including Ireland.
Measures have also been brought forward aimed at improving the stability and efficiency of the single market in financial services. The Markets in Financial Instruments Directive (MiFID) and the Markets in Financial Instruments Regulation (MiFIR) aim to strengthen the protection of investors by making financial markets more efficient, resilient and transparent. The new framework will also increase the supervisory powers of regulators and provide clear operating rules for all trading activities. The European Markets Infrastructure Regulation (EMIR) provides for more stability, transparency and efficiency in derivatives markets regulation. The funds sector is being overhauled by the Alternative Investment Fund Managers Directive (AIFMD) and the Money Market Funds Regulation (MMF). The AIFMD provides Europe-wide regulation for the management of collective investment schemes aimed at professional or qualified investors while the MMF proposal provides for greater regulation of shadow banking thereby safeguarding the integrity of the internal market by addressing the liquidity and stability of money market funds.
In relation to insurance regulation, the Solvency II proposal, coupled with Omnibus II, sets out stronger EU-wide requirements on capital adequacy and risk management for insurers with the key aim of increasing policyholder protection. This new risk-based system for the regulation and supervision of European insurance and reinsurance undertakings is necessary in order to ensure a safe and solid insurance sector that can provide sustainable insurance products and support the real economy through long-term investments and additional stability.
The reform of our statutory code for the financial services sector has been and continues to be driven by the comprehensive set of reforms that have been brought forward at EU level. However, a number of significant domestic legislative reforms have been undertaken towards building a strengthened regulatory framework for the financial services sector which complements the strategically important reforms at EU level.
The Central Bank Reform Act 2010 created a single fully-integrated Central Bank of Ireland with a unitary board, the Central Bank Commission, chaired by the Governor of the Central Bank. The unitary Central Bank structure gives the Commission members a more complete remit over prudential regulation and financial stability issues. In 2011 the new Fitness and Probity regime was rolled out by the Central Bank in accordance with the provisions of the Central Bank Reform Act 2010. The regime provides for new powers to be exercised by the Central Bank to ensure the fitness and probity of nominees to key positions within financial service providers and of key office-holders within those providers.
The Central Bank and Credit Institutions (Resolution) Act was also introduced in 2011. It provides the necessary mechanisms to enable the Central Bank to intervene where a credit institution gets into serious difficulty and is in danger of becoming destabilised or otherwise failing.
The Central Bank (Supervision and Enforcement) Act 2013 enhances the Central Bank's regulatory powers, drawing on the lessons of the recent past. It strengthens the ability of the Central Bank to impose and supervise compliance with regulatory requirements and to undertake timely prudential interventions. The Act also provides the Central Bank with greater access to information and analysis and underpins the credible enforcement of Irish financial services legislation in line with international best practice.
The EU financial regulation reform agenda is continuing to strengthen regulation and supervision to improve the stability and functioning of the financial system for the benefit of the economies and people of the EU. The financial system has changed significantly since the financial crisis and improved in areas of key importance. I and my Department will continue to work with our EU colleagues towards providing for a balanced regulatory framework that is consistent with both long-term growth and job creation and a more focused and proactive financial services sector.
24. Deputy Sean Fleming asked the Minister for Finance the importance he attaches to stability in Ireland’s corporation tax regime; and if he will make a statement on the matter. [37063/14]
View answerThe importance of maintaining the standard 12.5% rate of corporation tax to Ireland's international competitive position is fully appreciated by the Government. A competitive corporate tax rate is a tool to address the economic limitations that come with being a peripheral country, as compared to larger core countries. Ireland's corporation tax rate plays an important role in attracting Foreign Direct Investment ('FDI') to Ireland and thereby increasing employment here.
Further, it is clear that the certainty around the rate of Irish corporation tax is one of its biggest strengths, underlying the Government's commitment to the rate. This certainty is important for business here, both domestic and international as companies plan investment decisions over the medium to long-term.
With regard to international tax issues more generally, the ability of some multinationals to lower the amount of corporation tax they pay world-wide using international structures is an issue that has attracted a lot of public and media attention over the past 24 months.
The G20 have acknowledged that this is a global challenge that requires global action, and this is happening through the OECD Base Erosion and Profit Shifting ('BEPS') project.
Ireland is actively engaged in this process and it is anticipated that BEPS will result in changes being made to the international taxation rulebook which countries rely on for international trade. Ireland has always played by these rules and played to win as is evidenced by our successful track record for attracting FDI.
This will not change in the post-BEPS environment, and I believe that the BEPS project will create opportunities for Ireland.
For example, one of the key concepts of BEPS is the better alignment of substance with taxing rights. The alignment of substance with a competitive rate of tax has been the cornerstone of our CT policy since the 1950s so I believe that any change that may result from this process will lead to additional opportunities for Ireland. Ireland has not been and will never will be a brass-plate location. We only have and want real substantive FDI, the kind that brings real jobs and investment into Ireland.
Ireland's offering of a competitive corporate tax rate, the availability of skills, and a reputation for being business friendly is a huge advantage that other countries will struggle to match. As international tax loopholes progressively get closed down, our low general corporation tax rate will become even more attractive.
Indeed as we continue to improve our offering for knowledge based investment, R&D and intellectual property, I believe over the coming years we can continue to grow our share of FDI-related investment.
25. Deputy Stephen S. Donnelly asked the Minister for Finance if he will provide a distributional analysis of budget 2015, by income decile, gender and age group, either on budget day, or within two weeks thereafter, in order that Dáil Éireann has that information available to debate the budget before voting on the relevant Bills. [37066/14]
View answerMy Department produces a large range of documentation to accompany the Budget. This documentation includes tables of distributional analysis at set income levels, of income tax, USC and PRSI changes. These tables also include changes to certain social welfare payments where appropriate. In addition, a number of illustrative cases are developed and published.
The Department of Social Protection usually publishes a social impact assessment (SIA) of the main welfare and tax measures, which estimates the likely distributive effects of welfare and tax policies on household income and social groups. This assessment is based on the tax and welfare micro-simulation model (Switch), developed by the ESRI, and is generally published approximately 4 to 5 months after the Budget. This combined social impact assessment takes time to finalise because of the many technical and policy issues involved. Therefore it is not possible to provide the information sought by the Deputy within the timeframe set out in his question.
26. Deputy Michael McGrath asked the Minister for Finance if his attention has been drawn to the additional funds raised from the increased pension fund levy in 2014 and 2015 which, in his Budget Statement, he said were required to make provision for potential State liabilities which may emerge from pre-existing or future pension fund difficulties; the circumstances in which such a call would arise; and if he will make a statement on the matter. [37060/14]
View answerI announced in my Budget 2014 speech that the 0.6% Pension Fund Levy introduced to fund the Jobs Initiative in 2011 would be abolished from the 31st of December 2014. I did, however, introduce an additional levy on pension funds at 0.15% for 2014 and 2015. I did this to continue to help fund the Jobs Initiative and also to help make provision for potential State liabilities which may emerge from difficulties facing pension funds.
The reduced VAT rate of 9% on tourism and certain other services was one of the very significant and successful measures introduced by the Jobs Initiative. It was due to end in 2013. In my Budget 2014 speech I announced the continuation of the reduced 9% VAT rate. I also announced that the Air Travel Tax is being reduced to zero with effect from 1 April 2014. The 9% VAT rate has helped to create thousands of new jobs as well as protecting existing jobs. Since the Budget announcement about the reduction in the Air Travel Tax, airlines have announced the opening up of new routes resulting in significant increases in passenger numbers with the associated increase in tourism activity and employment.
I also said in my Budget 2014 speech that the additional 0.15% levy for 2014 and 2015 would be used to help make provision for potential State liabilities which may emerge from pre-existing or future pension fund difficulties, although funds from the levy would not be hypothecated or specifically set aside for this purpose. The Government decided that such liabilities will be met by the Exchequer as they arise.
I am advised by the Minister for Social Protection that the drawdown of funds to meet existing or future pension fund difficulties will only arise in the event of the wind up of a defined benefit pension scheme, where the employer is insolvent and there are not sufficient funds in the scheme to meet 50% of the liabilities of the scheme in respect of all scheme members or up to €12,000 of pensioner liabilities.
27. Deputy Peadar Tóibín asked the Minister for Finance the position regarding the liquidation process at a credit union (detail supplied) in County Kildare; and on the future of the building that housed the credit union. [37216/14]
View answerOn 16 December 2013, Mr Jim Luby of McStay Luby Chartered Accountants was appointed by the High Court as liquidator of Newbridge Credit Union Limited (in liquidation).
I have been informed by the Central Bank that the liquidator is engaging with a potential purchaser of the Newbridge Credit Union Limited premises. All matters in relation to the sale of the premises will be dealt with by the liquidator.
28. Deputy Michael McGrath asked the Minister for Finance the number of initiatives he has announced which have not commenced as they are awaiting EU state aid approval; and if he will make a statement on the matter. [37056/14]
View answerLiving City Initiative
The Living City Initiative, announced in Finance Bill 2013, is a pilot project which provides certain tax incentives to make it more attractive for people to live in historic and culturally significant city centre houses. The initiative also offers incentives for retailers and small businesses in those areas. This Initiative is subject to EU State Aid approval and a commencement order. An ex ante cost benefit analysis was conducted in the summer of 2013 and published alongside Budget 2014. An application for EU State Aid approval was submitted in March 2013. It is hoped that this issue will be concluded in the very near future. An independent cost-benefit analysis concluded that the Initiative would create more than 1,000 jobs for each of the 5 years it will be in place. The analysis also concluded that the annual cost would be in the order of €3m per year.
Film Relief
The Film relief scheme has been in place since 1987. Finance Act 2013 introduced new provisions to ensure that Film tax reliefs will accrue to the producers rather than investors and result in tax savings for the Exchequer. Budget 2014 extended the definition of 'eligible individual' to include non-EU talent, in conjunction with the introduction of a withholding tax. It is intended to commence these provisions once EU State Aid approval has been given. The Department of Arts, Heritage and the Gaeltacht are progressing this State Aid approval with the EU Commission. Statistics are not available to show the actual number of persons employed in the film industry. However, it is estimated that in 2013 just over 27,000 individual employments (both part-time and full-time) were generated on film productions supported by Section 481 relief.
Tax scheme for the construction or refurbishment of certain aviation services facilities
A scheme of accelerated capital allowances for the construction and refurbishment of certain buildings and structures for use in the maintenance, repair or overhaul of commercial aircraft, and the dismantling of such aircraft for the purposes of salvaging or recycling of parts or materials was announced in Budget 2013 and an application was made to the EU Commission on 18 June 2013.
The Commission formed the view that the scheme in its current form is not compatible with State Aid guidelines. Following on from meetings and discussions with EU officials, a revised application was recently submitted to the Commission, which I hope will will lead to a positive result in the near future.
Exemption from Stamp Duty
Exemption from Stamp Duty on the transfer of shares of companies listed on the Enterprise Securities Market of the Irish Stock Exchange, is subject to State Aid approval. The proposed measure aims to encourage entrepreneurs and growing businesses to use public equity markets as a source of funding for growth and the creation of jobs.
CGT Entrepreneur Relief
A capital gains tax relief for entrepreneurs who reinvest the proceeds from the disposal of assets made on or after 1 January 2010 in certain chargeable business assets was announced in Budget 2014 and provided for in Section 45 of Finance (No 2) Act of 2013. Commencement of the legislative provisions is subject to EU state-aid approval. Discussions with the EU Commission about State Aid clearance are ongoing. I hope that these will result in a positive outcome in the near future.
29. Deputy Dara Calleary asked the Minister for Finance his views on the way capital taxes may be reformed to distinguish between passive and active investment; and if he will make a statement on the matter. [37061/14]
View answerI assume from the Deputy's references to capital taxes and investment that his question relates to capital gains tax (CGT).
The rate of CGT is currently 33% and has been increased four times since 2008 when it stood at 20%. These rate increases were necessary to protect the yield from CGT in the context of the rebalancing of the public finances. An increase in the taxation of capital is preferable from the point of view of its impact on the economy as compared to an increase in employment taxes such as income tax.
In common with all taxes, CGT is subject to on-going review and all reliefs and exemptions are carefully considered. In the circumstances in which we have found ourselves in recent years, and as opposed to embedding major long-term changes to the tax system which might prove controversial, divisive or unworkable, the approach (particularly in CGT) has increasingly been to introduce changes which are targeted and which apply for short-term periods to achieve focused outcomes.
For example, a CGT relief was introduced in Budget and Finance Act 2012 to incentivise the purchase of property between 7 December 2011 and the end of 2013 with the intention of stimulating activity in the property market. The incentive was subsequently extended to property purchased to the end of 2014. I stated recently that this relief will not be extended further as it has served its purpose.
The incentive applies to industrial, farmland, commercial and residential (buy-to-let) property (land and buildings) purchased to the end of this year. If the property is held for more than 7 years, the capital gains attributable to those 7 years will be exempt from CGT on a proportionate basis relative to the period of ownership. Property sold within the 7 year period subsequent to purchase will not qualify for relief.
Relief for farm restructuring was introduced in Finance Act 2013 on disposals of farm land for the purpose of farm restructuring or consolidation. The relief applies to a sale, purchase or exchange of agricultural land in the period from 1 January 2013 to 31 December 2015 where Teagasc has certified that a sale and purchase or an exchange of agricultural land was made for farm restructuring purposes.
Section 45 of Finance (No 2) Act of 2013 provides for a CGT relief for entrepreneurs who reinvest the proceeds from the disposal of assets made on or after 1 January 2010 in certain chargeable business assets. Commencement of the legislative provisions is subject to EU state-aid approval. Discussions with the EU Commission about State Aid clearance are ongoing. I hope that these will result in a positive outcome in the near future. Notwithstanding that the legislative provisions have yet to be commenced, the CGT relief will only apply, among other conditions, where new chargeable business assets acquired after 1 January 2014 and up to end- December 2018 are disposed of having been held for a minimum period of 3 years after acquisition in that period.
Over the years other reliefs that had been in place for a number of years were reviewed and abolished or restricted. These included roll-over relief and indexation relief. The relevance of these reliefs had to be weighed against what they were achieving, the cost of the reliefs and the opportunities for providing other more relevant relieving measures.
In the context of this year's Budget and Finance Bill process, I will again consider what changes can be made to the CGT regime in order to encourage and facilitate investment in our improving economic environment.
30. Deputy Pearse Doherty asked the Minister for Finance his plans to implement the recent OECD BEPS report, including through legislation. [37047/14]
View answerAs the Deputy is no doubt aware we are almost at the halfway point in the OECD BEPS project. Following on from the seven reports released two weeks ago, another batch of deliverables are due for completion in September 2015, with the remaining BEPS reports expected to be finalised in December 2015. We have welcomed the first set of reports as they are the first milestones in this project. However it is important to recognise that the timetable provides reporting timelines and not implementation deadlines. The BEPS actions will be implemented through a mixture of updates to OECD guidelines/recommendations which countries would have to strongly consider implementing in their domestic law, and updates to bilateral tax treaties, which the OECD plans to amend on a multilateral basis by means of an OECD Multilateral Convention. Of the seven recent deliverables, there are: two final reports (Action 1 Digital Economy and Action 15 - Feasibility of a Multilateral Instrument), one interim report (Action 5 Harmful tax practices) and four reports containing draft recommendations (Actions 2 Hybrid mismatches, 6 Treaty abuse, 8 Transfer pricing intangibles and 13 Transfer pricing documentation). The OECD has acknowledged that the recommendations remain draft in order to fully assess the interaction between all the different BEPS workstreams. Therefore the BEPS project is best seen as an overall package which is still in progress. While there is still significant work to be done in finalising the recommendations, the reports are a big step towards addressing problems in the international tax environment.
31. Deputy Clare Daly asked the Minister for Finance the communication he has had with the Department of the Environment, Community and Local Government in relation to simplifying the criteria regarding the way someone can claim an exemption from the local property tax where their home has had a building condition assessment indicating significant damage relating to pyrite, but where no actual test has been conducted. [37015/14]
View answerThe Pyrite Panel appointed by the Minister for the Environment, Community & Local Government recommended that consideration be given to providing an exemption from LPT where damage from pyritic heave had been proven by testing in accordance with a National Standards Authority of Ireland (NSAI) standard capable of determining if there was reactive pyrite in the sub-floor hard core materials, and if it had caused pyritic heave. I.S. 398 titled "Reactive pyrite in sub-floor hardcore material Part 1: Testing and categorisation protocol" was published on 29 January 2013 by the NSAI in response to the Panel's recommendation.
Accordingly, section 10A of the Finance (Local Property Tax) Act 2012 (as amended) provides that an exemption from the charge to Local Property Tax (LPT) will apply for a temporary period of at least three consecutive years for residential properties that have been certified under the Finance (Local Property Tax) (Pyrite Exemption) Regulations 2013 made by the Minister for the EC&LG as having "significant pyritic damage". The Regulations set out the methodology for the assessment of dwellings to establish significant pyritic damage. These Regulations require that homeowners demonstrate significant pyritic damage in accordance with the NSAI standard I.S. 398.
To be eligible for an exemption from LPT, a liable person must
1. have a Damage Condition Rating of 2 or a Damage Condition Rating of 1 with progression, established on foot of a Building Condition Assessment ("BCA") carried out by a competent person in accordance with the NSAI standard, and
2. have a sub-floor hard core material classified by the appropriate competent person(s), as susceptible to significant or limited expansion, established on foot of testing the sub-floor hard core material.
The purpose of the Building Condition Assessment is to demonstrate damage and to inform whether sampling and testing of the sub-floor hardcore of the residential property should be undertaken in order to confirm that such damage arises from pyrite. The Building Condition Assessment does not involve any invasive internal or external inspections to a residential property and, on its own, cannot be used to state conclusively that reactive pyrite is present in the sub-floor hardcore of the property.
Officials of my Department, with officials of the Department of Environment, Community & Local Government, have been examining the alternatives other than testing that may be available in order to confirm entitlement to a Local Property Tax exemption. I expect to make a decision in the matter shortly that will be consistent with the original objectives of the legislation and the report of the Pyrite Panel and I will communicate my decision to the Deputy immediately it is made. I thank her for bringing this matter to attention.
32. Deputy Stephen S. Donnelly asked the Minister for Finance if he will provide an update on the Irish Nationwide Building Society mortgages that were not sold in the initial tranche, and which it was suggested may be bought by the National Asset Management Agency, including if these mortgages have now been sold; if so, to whom; and if not, the current status of the sales process. [37067/14]
View answerThe Special Liquidators continue to implement the orderly and efficient wind down of IBRC in accordance with the provisions of the IBRC Act and the instructions issued by the Minister for Finance under the IBRC Act 2013.
As the Deputy is aware, for operational reasons, the loan assets of IBRC were divided into six portfolios: Evergreen, Sand, Rock, Salt, Stone and Pebble.
The Sand portfolio comprised 12,702 Irish originated residential mortgages with a par value of €1.8bn, most of which had transferred from Irish Nationwide Building Society. 64% of the Sand portfolio were sold to two buyers, namely Lone Star and Oaktree Capital Management, L.P.
Under initial instructions from the Minister for Finance, NAMA were obliged to purchase the unsold loan assets at their independent valuations. The Special Liquidators have confirmed that the proceeds raised from the sale of IBRC assets will be sufficient to fully repay the IBRC debt to NAMA (previously the Central Bank of Ireland). Therefore I have instructed the Special Liquidators that NAMA will now not be obliged to purchase the unsold assets as previously outlined.
As a result, the Special Liquidators have devised a further sales process in respect of the unsold residential mortgages (which is referred to as Project Pearl) so as to maximise the return to all remaining creditors of IBRC, including the State. This new sales process is currently underway.
As part of this new sales process, the Special Liquidators corresponded with all remaining residential mortgage holders of IBRC providing them with an opportunity to make written representations on the method of disposal of their loans and the criteria for determining who may bid for loan assets. Consideration has been given to these Borrower representations and the Special Liquidators are in the process of responding to these Borrower representations. Having given due consideration to the representations and the professional advice received, the Special Liquidators have divided the remaining residential mortgages into two tranches and will therefore not be selling any mortgages on an individual basis. The Special Liquidators expect the sales process for Project Pearl to be completed before 31 December 2014.
33. Deputy Seán Kyne asked the Minister for Finance the progress of the living city initiative; the response of the EU regarding the application under state aid rules; if there are figures on the number of properties and locations which have benefited from the scheme; if there are plans to increase the areas eligible; and if he will make a statement on the matter. [37052/14]
View answerOfficials from my Department have held preliminary discussions with the relevant local authorities to identify the areas of the six cities, Cork, Dublin, Galway, Kilkenny, Limerick and Waterford, which might fall within the scope of the scheme. Each of the local authorities have submitted proposals on the areas which they believe should be included.
My officials have also been in contact with the EU Commission on the application for State Aid approval for the Initiative and this process is expected to be concluded shortly.
I will not be announcing the areas to be designated until this approval has been received and the initiative is to be commenced.
I would expect that I will be in a position to make an announcement in the near future.
It is important to note that I do not see this as a wide-spread Initiative, as it is targeted at those areas which are most in need of attention.
34. Deputy Stephen S. Donnelly asked the Minister for Finance if his attention has been drawn to the research from a personal insolvency practitioner (details supplied) that shows that more than seven banks lost €5 million by vetoing insolvency deals; his views that banks are prepared to cost themselves millions of euro to PIAs. [37069/14]
View answerAs the Deputy is aware, the Personal Insolvency Act 2012 was a complex piece of legislation that significantly modernised Ireland's insolvency regime. However, as with any such major reform, I have been advised that the Department of Justice and Equality will keep the effectiveness of the legislation under review to ensure that it achieves the objective of providing an efficient way of resolving unsustainable personal debt positions in a way that is as fair as possible for both debtors and creditors. Indeed, there have already been some amendments to the legislation during 2013 which were of a minor nature and primarily operationally focussed.
The recent Insolvency Service of Ireland (ISI) Quarterly Statistics were published in July (http://www.isi.gov.ie/en/ISI/ISI_Statistics_Quarter2.pdf/Files/ISI_Statistics_Quarter2.pdf). In summary, during Quarter 2, 67 Debt Relief Notices (DRN), 30 Debt Settlement Arrangements (DSA), and 27 Personal Insolvency Arrangements (PIA) were approved. The statistical report shows that three out of every four proposals for arrangements (for both DSAs and PIAs) result in acceptances.
In addition, there were 98 bankruptcy adjudications in the second quarter of 2014 following the reduction in the duration of bankruptcy to three years. In the year to the end of the second quarter there has been 164 bankruptcy adjudications compared to 58 in the whole of 2013. The Deputy will also be aware that at his appearance before the Oireachtas Committee on Finance, Public Expenditure and Reform, the Director of the Insolvency Service of Ireland said that monitoring creditor engagement will be a key focus of the ISI.
The ISI established a Debt Solutions Protocol Steering Group earlier this year to develop Protocols for both the Debt Settlement Arrangement (DSA) and Personal Insolvency Arrangement (PIA). These Protocols can be used by personal insolvency practitioners when making straightforward proposals to creditors for either a DSA or PIA. The DSA protocol was finalised in July 2014 and can be accessed at the following link - http://www.isi.gov.ie/en/ISI/Pages/Protocol_Team. The development of a protocol is in line with best practice in other jurisdictions and does not require amendments to existing legislation. A similar protocol was developed in the UK for their Individual Voluntary Arrangement (IVA) which is comparable to the Debt Settlement Arrangement here in Ireland. The UK protocol, once it was agreed and adopted apparently resulted in significant acceptance rates by creditors there - exceeding 90%. Work began on a PIA protocol in August with a target date for completion of the end of the year.
While the initial take up of insolvency solutions has been low, the fact that the ISI is now in place has acted as a catalyst to encourage debtors and creditors to reach bilateral deals to address their insolvency. In the absence of bilateral agreements, the new statutory frameworks are a mechanism requiring all relevant creditors to engage with and respond to an insolvency arrangement proposed by a debtor. Of course both debtors and creditors have rights in a financial contract and these must be respected, but in the event that either a DSA or PIA cannot be agreed, the ultimate resolution option is judicial bankruptcy.
35. Deputy Thomas P. Broughan asked the Minister for Finance the estimated spend on interest on the national debt for the years 2014 to 2018; and if the estimations contained in the stability programme update published in April 2014 will be revised in view of the recent agreement to pay down the IMF portion of the EU-IMF programme of assistance. [36862/14]
View answerMy Department published the Stability Programme Update (SPU) in April this year which contained fiscal forecasts out to 2018. As general government debt expressed as a percentage of gross domestic product is the standard metric internationally for assessing debt levels, general government interest rather than national debt interest is the more appropriate metric to look at. The SPU general government interest costs are set out in the following table.
|
€m |
2014 |
2015 |
2016 |
2017 |
2018 |
|
General government interest |
7,966 |
8,452 |
8,836 |
9,251 |
9,573 |
Budget 2015 on 14 October will contain updated fiscal forecasts, including interest expenditure. The forecast of interest expenditure will take into account any change in the Exchequer Borrowing Requirement (EBR), repayment profiles and the interest rate environment. It should also be noted that the SPU estimates of general government interest were calculated in accordance with the standards set in the 1995 European System of Accounts (ESA95) while the Budget estimates will be calculated on an ESA 2010 basis that entered into force with effect from the 1st of September this year.
In relation to the proposed early repayment of IMF loans, the proposal is to make an early repayment of a portion of those loans and final agreement on this is subject to the necessary national approval procedures. Annual savings achieved on interest expenditure due to any early repayment will depend market conditions at the time of any such repayments, however the cash savings achieved over the maturity of the loans are expected to be in the region of €1.5 billion.
36. Deputy Pearse Doherty asked the Minister for Finance his plans to tackle the increasing number of mortgages in long-term arrears. [37045/14]
View answerAs the Deputy is aware, the Central Bank has the power, from both a prudential and consumer protection perspective, to require banks to meaningfully and sustainably address mortgage arrears cases on their books. The Central Bank's Mortgage Arrears Resolution Targets (MART) process, as announced in March 2013, sets time bound and measurable targets for the main banks requiring them to systematically address their arrears book. Under this rolling process, quarterly performance targets have been set to require the banks to propose and put in place durable, long term solutions to address individual cases of mortgages in difficulty where the mortgage is more than 90 days in arrears. In that context, the Deputy will be aware that the Central Bank has now indicated that it expects that 'proposed' solutions be made in respect of 85% of principal dwelling houses (PDH) and buy-to-let (BTL) arrears cases and that 'concluded' solutions be made with 45% of arrears cases by the end of 2014.
The Central Bank's Code of Conduct on Mortgage Arrears (CCMA) sets out requirements for mortgage lenders dealing with those borrowers facing or in mortgage arrears. The CCMA provides a strong consumer protection framework to ensure that borrowers struggling to keep up mortgage repayments are treated in a fair and transparent manner by their lender and that long term resolution is sought by lenders with each of their borrowers in genuine mortgage difficulty.
The Central Bank's latest 'Residential Mortgage Arrears and Repossessions Statistics' publication for the end of Quarter 2 2014 (http://www.centralbank.ie/polstats/stats/mortgagearrears/Documents/2014q2_ie_mortgage_arrears_statistics.pdf), shows that the number of mortgage accounts for principal dwelling houses (PDH) in arrears, fell for the fourth consecutive quarter and at the end of June 2014, 90,343 (11.8 per cent) primary dwelling mortgage accounts were more than 90 days in arrears, representing a decline of 3% over the quarter.
Separately from Central Bank quarterly reports, a monthly reporting regime on mortgage restructures and arrears for the six main banks covered by the Central Bank's Mortgage Arrears Resolution Targets (MART) has been put in place by my Department. The latest publication, with data to the end of July, shows that the number of PDH mortgage accounts in arrears of greater than 90 days has fallen by over 7,000 accounts when compared to the end of Q1 2014 while the total number of PDH mortgage arrears has fallen by 8,800 accounts in the same period.
The data published by my Department, as well as the Central Bank data, would appear to demonstrate some success by the lenders in addressing the accounts in mortgage arrears as well as measures to prevent borrowers from going into arrears. However, increased engagement in this area by the financial institutions will be necessary to address the situation of those remaining householders facing difficulties in meeting their mortgage commitments.
37. Deputy Michael McGrath asked the Minister for Finance the reason the National Asset Management Agency has not made greater progress in supplying social housing to date; the way this can be addressed; and if he will make a statement on the matter. [37059/14]
View answerThe Deputy's premise is incorrect as NAMA has made significant numbers of housing units available through the Housing Agency to local authorities and approved housing bodies. As the Deputy is aware, NAMA was established firstly to acquire property and related loans from five financial institutions so as to remove this systemic risk to the Irish banking system and secondly, to obtain the best achievable financial return to the State from these acquired loans. It is not part of NAMA's statutory remit to supply housing. However, consistent with its overall commercial objectives, NAMA is making a very significant contribution in facilitating the delivery of social housing. It has made 5,455 houses and apartments, one third of the completed housing stock held by its debtors and receivers in Ireland, available to local authorities and approved housing bodies for social housing and has invested over €20m to date in delivering homes for social housing where local authorities have confirmed demand.
The Deputy may not appreciate that NAMA has no role in terms of determining the take-up of properties that it has made available for social housing as this is a matter for local authorities. Of the 5,455 properties made available by NAMA, local authorities have confirmed demand for just over 2,000. NAMA expects that it will exceed the target of delivering 1,000 of these homes for social housing by the end of the year with the remainder being delivered over the following 12-18 months.
Once demand is confirmed by local authorities through the Housing Agency and contracts have been entered into by local authorities or approved housing bodies, NAMA immediately makes the properties available. This often involves significant investment by NAMA to complete building works and significant work to resolve often complex compliance issues in relation to, amongst other things, planning conditions, regulatory standards and Multi-unit Development requirements. There are no shortcuts in this process. NAMA is facilitating the delivery of homes for individuals and families through this very welcome initiative.
The Deputy may also be aware that NAMA has established a special purpose vehicle, National Asset Residential Property Services Ltd. (NARPS), to expedite the delivery of housing. Through NARPS, NAMA acquires houses and apartments from debtors and receivers and directly leases them to approved housing bodies under long-term leasing arrangements. In conjunction with the establishment of NARPS, NAMA has introduced standardised leasing terms to further streamline the process.
NARPS has proven to be an effective method of delivery and NAMA recently announced its intention to provide future Part V housing on NAMA-funded residential developments through this mechanism. This is a very important initiative, which will mean that NAMA will bear the upfront capital cost of delivering Part V housing on estates that it funds and that such housing will be delivered on site in line with Government policy aimed at ensuring greater integration in housing.
I am confident that NAMA, within the context of its overriding commercial objective, has done everything it can do to facilitate the delivery of social housing to Local Authorities and approved housing bodies through the existing residential stock securing its loans and it has clearly signalled its commitment to doing likewise through its funding for new residential development.
38. Deputy Michael McGrath asked the Minister for Finance the current status of plans to repay Ireland’s IMF loans early; when the formal process of repaying loans is likely to begin; and if he will make a statement on the matter. [37058/14]
View answerAs the Deputy will be aware, I am proposing to make an early repayment of a portion of Ireland's IMF programme loan. Specifically the proposal is to make an early repayment of up to €18.3 billion of our €22.5 billion IMF loan, which is the portion subject to the highest rate of charge, and to replace it, in a measured way, with less expensive market funding subject to prevailing market conditions.
For this to succeed, a waiver is required of the mandatory proportional early repayment clauses which are included in each of our loan agreements with the EFSF and the EFSM, and with our bilateral lenders, the U.K., Denmark and Sweden.
This proposal was discussed at the meetings of the Eurogroup and ECOFIN Ministers last month. There was broad political support among the Ministers for the proposal. However, this support is subject to necessary national approval procedures including parliamentary approval in some Member States. This includes Sweden, where parliamentary elections have recently taken place.
On 19 September I wrote to the 5 EU lenders, i.e. the Commission for the EFSM, the EFSF, and the U.K., Sweden and Denmark, to formally request the waiver of the mandatory proportional repayment clauses.
It will not be possible to give a definitive timeline until all the necessary approvals are in place. However, I expect that they will be received in sufficient time to allow the NTMA to start early repayments before the end of this year.
39. Deputy Catherine Murphy asked the Minister for Finance if his Department has had any discussions with the Department of Social Protection regarding the introduction of a favourable tax incentive targeted at landlords to take on persons in receipt of rent supplement, for a limited period of time; and if he will make a statement on the matter. [37214/14]
View answerI have had no discussions with the Minister for Social Protection in relation to providing tax relief for landlords who accept tenants in receipt of rent supplement. I have no plans to introduce such a relief.
As you will appreciate, I receive numerous requests for the introduction of new tax reliefs and the extension of existing ones. You will also appreciate that I must be mindful of the public finances and the many demands on the Exchequer. Tax reliefs, no matter how worthwhile in themselves, reduce the tax base and make general reform of the tax system that much more difficult.
