Written Answers Nos. 147-62
147. Deputy Michael McGrath asked the Minister for Finance his plans to deal with spiralling arrears in mortgages held by non-bank financial institutions; if he will make these institutions subject to targets for restructuring solutions; and if he will make a statement on the matter. [1884/16]
View answerI am informed by the Central Bank of Ireland ('the Central Bank') that non-bank financial institutions are not a regulatory category. However, Retail Credit Firms are authorised to provide credit, in the form of cash loans, directly to individuals (these firms are not licensed to accept deposits). Some firms authorised in this category are mortgage lenders. A register of all Retail Credit Firms is available on the Central Bank website at the following link: http://registers.centralbank.ie/DownloadsPage.aspx. The Deputy will be aware that all consumer and relevant SME loans sold by regulated financial institutions are now covered by the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015. Therefore borrowers are now restored to the protections they previously had, such as the Code of Conduct on Mortgage Arrears (CCMA), the Consumer Protection Code and the Code of Conduct for Business Lending to Small and Medium Enterprises. Borrowers who previously had access to the Financial Services Ombudsman also have this right restored by this legislation.
The Mortgage Arrears Resolution Targets (MART) were introduced by the Central Bank in March 2013, as a prudential policy measure, to set progressively more demanding quantitative targets for specified Credit Institutions to process mortgage arrears cases and achieve sustainable outcomes. Retail credit firms, which are not authorised to accept deposits, are not subject to the prudential standards set out in the MART. However, the same consumer protection framework applies to retail credit firms as to other regulated lenders, including the Consumer Protection Code and the Code of Conduct on Mortgage Arrears (CCMA). Any decision about extending the application of MART targets would be a matter for the Central Bank, but as the Deputy is already aware, the Central Bank announced last April that following a thorough assessment of it's supervisory approach to mortgage arrears, it has determined that relying on common quarterly solution targets across all banks is no longer appropriate.
The Deputy will also be aware that the CCMA sets out requirements for all mortgage lenders, including Retail Credit Firms, dealing with borrowers in arrears or pre-arrears on a mortgage loan which is secured by their primary residence. It 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. The Central Bank monitors Retail Credit Firms' treatment of borrowers under the CCMA and engages with them in relation to the Mortgage Arrears Resolution Process (MARP), as provided for in the CCMA.
You will be aware that on 23 June 2015 the Central Bank published the results of a themed inspection of lenders' compliance with its statutory CCMA, which found that, overall, lenders have implemented frameworks as required by the CCMA. These results are available at http://www.centralbank.ie/press-area/press-releases/Documents/230615%20Letter%20to%20Industry.pdf. I am informed by the Central Bank that Retail Credit firms were included in the scope of this themed inspection of the CCMA. The Central Bank has confirmed that it is currently reviewing responses received from all lenders that were subject to the CCMA themed inspection. It continues to engage with these lenders as part of it's on-going supervisory engagement to ensure compliance with the Code of Conduct on Mortgage Arrears (CCMA).
148. Deputy Michael McGrath asked the Minister for Finance to instruct banks to make greater use of split mortgages and other long-term solutions in preference to arrears capitalisation; and if he will make a statement on the matter. [1885/16]
View answerThe Deputy will be aware that the Central Bank of Ireland (Central Bank) publishes the Residential Mortgage Arrears and Repossession Statistics series on a quarterly basis which provides a comprehensive overview of the entire Irish mortgage market including information on arrears broken down by inter alia restructure arrangements broken down by type; and the performance of restructured mortgage accounts. Data is provided by all entities that hold loans secured on properties located in the Republic of Ireland including inter alia bank and non-bank entities. The most recent series (Q3 2015 data) was published by the Central Bank on 11 December 2015 and can be accessed at http://www.centralbank.ie/polstats/stats/mortgagearrears/Documents/2015q3_ie_mortgage_arrears_statistics.pdf. A total stock of 120,806 PDH mortgage accounts were categorised as restructured at end Q3 2015, reflecting an increase of 1.9% when compared with the previous quarter. Split mortgages and arrears capitalisations accounted for 20% and 28% of the total PDH restructures respectively, and showed significant increases over the quarter.
The Deputy will also be aware that I have no direct function in the relationship between the customer and banks. Notwithstanding the fact that the State is a shareholder in certain financial institutions, I must ensure that these banks are run on a commercial and independent basis to ensure the value of the banks as an asset to the State.
Decisions taken by the banks are a matter for the board and management of the relevant institution. The relationship framework agreements define the arm's-length nature of the relationship between the State and the banks in which the State has an investment. All banks operating in the State are therefore entitled to pursue all options open to them within the significant constraints imposed by the regulator, the Central Bank and the law as it applies. In this context, I would remind the Deputy of the strong consumer protection framework provided by the CCMA, in particular provision 39 - Resolution, which requires each lender to explore all of the options for alternative repayment arrangements (ARAs) which it offers, when determining which ARA options are viable for each particular case.
149. Deputy Michael McGrath asked the Minister for Finance the efforts the Revenue Commissioners and Customs officials are making to clamp down on smuggling of tobacco and fuel; the cost to the State; and if he will make a statement on the matter. [1886/16]
View answerThe Revenue Commissioners advise me that it is inherently difficult to estimate the extent of any illegal activity with confidence and that it is not possible, therefore, to put a figure on the cost to the Exchequer of fuel fraud. The extent of the illicit trade in cigarettes is estimated, however, through annual surveys of smokers that are carried out for Revenue and the National Tobacco Control Office of the Health Service Executive by Ipsos MRBI. Assuming that the illegal cigarettes consumed displaced the equivalent full tax paid quantity of cigarettes, the results of the 2014 survey indicate that the loss to the Exchequer in excise duty and VAT attributable to the illegal trade was of the order of €214 million.
I am advised also that combatting the illegal tobacco and fuel trades is, and will continue to be, a high priority for Revenue.
Revenue's actions against the illegal tobacco trade include a range of measures to identify and target those who are involved in the supply or sale of illicit products, with a view to seizing those products and prosecuting the persons involved. This multifaceted strategy also includes ongoing analysis of the nature and extent of the problem, development and sharing of intelligence on a national, EU and international basis, use of analytics, deployment of detection technologies and optimising the deployment of resources.
Revenue has also implemented a comprehensive strategy to tackle the illegal fuel trade, based on the introduction of stringent supply chain controls, the implementation from April 2015 of a new fuel marker here and in the UK, and rigorous enforcement action.
In addition, Revenue cooperates extensively with An Garda Síochána in acting against these illicit trades, and the relevant authorities in the State also work closely with their counterparts in Northern Ireland, through cross-border enforcement groups, to target the organised crime groups that are responsible for a large proportion of these forms of criminality. I believe that this work to tackle cross-jurisdictional organised crime will be supported and reinforced by the establishment, in the framework of "A Fresh Start: The Stormont Agreement and Implementation Plan", of the Joint Agency Task Force, which includes the Revenue Commissioners.
Revenue's programmes of action against these criminal activities have achieved notable successes. During 2015, some 68 million illicit cigarettes and 2,364 kilograms of illicit tobacco were seized, and there were 40 and 75 convictions, respectively, for tobacco smuggling and the sale of illicit tobacco products. In addition, 15 filling stations were closed down and 215,000 litres of fuel were seized during the year, bringing total closures and seizures since 2011 to 149 stations and more than 3 million litres. 31 fuel laundries, where prescribed markers were illegally removed from fuel, were also detected and shut down during that time. The industry view is that the measures implemented have been successful in curtailing fuel fraud. This view is supported by a significant increase in tax revenues from road diesel over recent years. An analysis of long-term consumption trends for road diesel and marked diesel in Ireland undertaken by Revenue also pointed to a significant change in the pattern of consumption following implementation of the anti-fraud measures.
For my part, I have acted to ensure that the Revenue Commissioners have the statutory powers necessary for undertaking this important work.
In the case of tobacco, measures in the Finance Act 2012 clarified the legal basis for Revenue officers to open and examine the contents of postal and courier packets that are reasonably believed to contain untaxed tobacco products. In the Finance Act 2013, I introduced new offence and forfeiture measures relating to the illicit production of tobacco, including offences of keeping materials and equipment for the purpose of illegal tobacco production, and provision for forfeiture of any equipment, materials, or unmanufactured tobacco used for illicit production. The Finance (No. 2) Act 2013 strengthened the obligation of a person suspected of dealing in unstamped tobacco products to provide information to a Revenue officer or a Garda and to present any tobacco products concerned for examination. The measure also allows any bag or other receptacle that is reasonably believed to contain tobacco products that are concerned in an offence to be searched.
In relation to fuel, action was taken to ensure the necessary legislative underpinning for a range of key initiatives, including the strengthening of the licensing regime for auto fuel traders, the introduction of a new licensing regime for marked fuel traders, the putting in place of new requirements for recording and reporting of fuel transactions, and the introduction of the new fuel marker. Revenue's ability to combat fuel fraud was strengthened also by the introduction, in the Finance (No. 2) Act 2013, of a provision making a supplier who is reckless in supplying fuel for a purpose connected with excise fraud liable for duty at the standard rate of tax. In the Finance Act 2014, Revenue's entitlement to refuse or revoke a mineral oil trader's licence was augmented to cover situations including where a trader does not maintain adequate stock management systems and records, or provides false or misleading information.
I am satisfied that, as a result of these initiatives, the current legislative framework provides an effective basis for action by Revenue against fuel and tobacco offences, and I am assured by the Revenue Commissioners that action against such activities will continue to be a central element of their work.
150. Deputy Michael McGrath asked the Minister for Finance if he is satisfied with the pace at which the Ireland Strategic Investment Fund is investing the cash it has available and the economic impact of these projects; and if he will make a statement on the matter. [1887/16]
View answerThe Ireland Strategic Investment Fund (ISIF), managed by the National Treasury Management Agency (NTMA), has advised that it has committed €2.2 billion to investments in Ireland as at 31 December 2015. The Fund, which was established to invest on a commercial basis to support economic activity and employment in Ireland, committed €759 million to Irish projects in 2015 which are in addition to previous commitments of approximately €1.4 billion by its predecessor the National Pensions Reserve Fund (NPRF) made prior to 2015. The level of 2015 commitments is in line with the 2015 deployment target of €500 million to €1 billion. When combined with third-party capital, ISIF backed companies, projects and funds have attracted total investment commitments to date amounting to €5.2 billion.
Further information on the ISIF deployment objectives and targets is available at http://www.ntma.ie/business-areas/ireland-strategic-investment-fund/
The ISIF has also published its first semi-annual update of the economic impact of its investments, covering the six month period to 30 June 2015 (detail of commitments made as at 31 December 2015 will be published shortly):
- Over 12,000 jobs are supported directly and indirectly by the Fund's investments (In line with industry standards, an indirect employment multiplier is applied to direct jobs. The NTMA calculation of employment multipliers is based on Central Statistics Office methodology and has been verified by the CSO).
- The Fund's Irish investments are split approximately 50/50 between Dublin and the rest of Ireland.
- 85 Irish companies backed by the Fund generated turnover of €645 million in the first half of 2015.
- 35% of their turnover comes from exports.
- €218 million was earned in wages/salaries in the first half of 2015 by employees of these companies.
- Gross Value Added (GVA) from the Fund's investments was €276 million (GVA is a standard method to measure economic impact).
The full Economic Impact Report is available online at: http://www.ntma.ie/business-areas/ireland-strategic-investment-fund/
The Investment Strategy of the Fund published in July 2015 notes that deployment is subject to availability of suitable opportunities that meet the Fund's double bottom line mandate of commercial return and economic impact, that the nature of the opportunity set is uncertain and that investment by the Fund should not crowd out private investment. The Investment Strategy targets commitment of the full fund to investments in Ireland by end 2019.
I am satisfied with the pace of deployment and the economic impact achieved by the Fund to date and look forward to the future impact and benefits of the fund as its resources continue to be deployed in line with its investment plan.
151. Deputy Michael McGrath asked the Minister for Finance his views on the impact of tax relief changes introduced in budget 2014 on private medical insurance premiums; and if he will make a statement on the matter. [1888/16]
View answerSince 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 no longer qualifies for tax relief. Prior to this, income tax relief for medical insurance premiums was provided at source, at the standard rate of income tax, on the entire premium amount regardless of cost. Therefore, the State was paying 20% of the cost of all private medical insurance premiums.
The cost of Income Tax relief in respect of medical insurance increased significantly in the years leading up to the introduction of the caps in Budget 2014, estimated at €404 million in 2011 and €448 million in 2012. Despite the increasing cost of the relief, the numbers insured were estimated to have reduced by approximately 150,000 over the same period, while at the same time the level of medical cover decreased on some policies. Against this background the increase in costs was unsustainable. If the relief had remained unchanged and the trend was to continue, it was estimated that the cost of the relief would have increased to approximately €1 billion per annum by 2020.
Relief through the tax system effectively means that some taxpayers who could never afford private health insurance, or who had to give up their policies due to personal circumstances, provide financial support to those individuals who can afford such insurance. In my view, taking into account the increasing costs and reducing coverage outlined above, it was unfair and unsustainable to allow unrestricted tax relief on private medical insurance premiums, particularly at a time when the general population has contributed so much to repairing the public finances. The ceilings ensure a level of continuing support via the tax system for those who purchase medical insurance policies, while reducing Exchequer exposure to more expensive policies.
It should also be noted that the 2009 Commission on Taxation recommended the retention of medical insurance relief, but that it should be limited. The introduction in Budget 2014 of an upper ceiling on the amount of medical insurance premiums that qualify for tax relief achieved this recommendation.
The potential yield to the Exchequer in 2014 of restricting tax relief on private medical insurance policies to the first €1,000 of a premium is tentatively estimated to be in the order of €151 million. This yield takes into account the difference between the actual cost of the relief in 2014 and the potential cost of an unrestricted relief, taking into account the increased numbers of policy holders following the introduction of lifetime community rating in 2014.
When the cap was introduced in Budget 2014, it was estimated that the yield to the Exchequer would be approximately €94 million in the first year and €127 million in a full year. The reduction in overall Exchequer cost from the last full year in which unrestricted relief was available (€448 million in 2012) was €94 million in 2014 and €123 million in 2015, based on the current estimates for Exchequer costs in those years of €354 million and €325 million respectively. On this basis, I am satisfied that the projected Exchequer yield in Budget 2014 was accurate, and that the current caps are functioning appropriately and as intended.
152. Deputy Michael McGrath asked the Minister for Finance if he has or intends to formally request the Central Bank of Ireland to review any aspect of its mortgage rules; and if he will make a statement on the matter. [1889/16]
View answerThe Central Bank of Ireland, in line with its mandate to safeguard financial stability, has put in place macro-prudential measures for new residential mortgage lending. These measures apply proportionate loan-to-value and loan-to-income limits to mortgage lending by regulated financial service providers in the Irish market. The key objective of these measures is to increase the resilience of the banking and household sectors to the housing sector and to reduce the risk of bank credit and house price spirals from developing in the future.
As the Deputy is aware, the Central Bank is independent in the formulation and implementation of these macro prudential measures. In that context, the Central Bank committed itself to monitoring the implemented measures and I have been informed by the Central Bank that it will publish studies assessing the operation of the rules and of what it is seeing in the market in the second half of 2016. While no further detail on the format of this work is available at this time, the Governor nevertheless did indicate that if the Central Bank sees strong reasons to vary the rules then it would be open minded about making an adjustment if the analysis suggests that a change, in either direction, is appropriate. However, this will be a matter for the Central Bank to consider in due course.
153. Deputy Michael McGrath asked the Minister for Finance the fiscal space that will be available in each of the next five years following the publication of the Exchequer returns for 2015; and if he will make a statement on the matter. [1890/16]
View answerThe projected fiscal space figures published in Table A8 on page C.50 of the Budget 2016 book are consistent with compliance with our obligations under the expenditure benchmark. Fiscal space is calculated in line with the trend potential growth rate of GDP less a convergence margin that applies as Ireland is not yet at its medium term budgetary objective under the balanced budget rule. It should be noted that changes in revenue levels are not relevant to the calculation of fiscal space unless it arises from a discretionary policy decision. Additional revenue arising from discretionary measures increases the overall fiscal space while the converse in relation to revenue reductions also applies.
The medium term fiscal space projections set out in Budget 2016 are not final as they are based on projections for the GDP deflators, reference rates, convergence margins and general government expenditure outturns for each of the relevant years. The actual GDP deflators, reference rates and convergence margins values used to assess compliance with the rules each year will be set by the European Commission using their estimates compiled in their Spring and Autumn forecasts. The general government expenditure values used to evaluate adherence to the rules will be the final Central Statistics Office (CSO) estimates from the National Income and Expenditure (NIE) and Government Finance Statistics (GFS).
Although 2015 tax revenue was ahead of expectations due to overall economic growth and buoyancy, it will not impact on the fiscal space available for 2016 and subsequent years. 2015 Exchequer spending, which is the largest component of general government expenditure, was in line with Budget day projections and will have little impact on the availability of fiscal space.
The first official estimates for general government expenditure for 2015 will be compiled by the CSO for the end March 2016 Excessive Deficit Procedure (EDP) transmission to EUROSTAT. Following on from this and the next iteration of the European Commission's forecasts in February, revised projections of fiscal space for the next five years will be published by my Department in the Stability Programme Update 2016.
154. Deputy Michael McGrath asked the Minister for Finance his plans to return Allied Irish Banks to the private sector; the issues that need to be addressed in the Irish banking sector generally before this happens; and if he will make a statement on the matter. [1891/16]
View answerI have made it clear that the decision to sell any part of our shareholding in AIB will be one for the next Government.
The State's stake in AIB is a valuable asset. As the deputy will know, in December of 2015, AIB successfully completed the reorganisation of the bank's capital, including the return of almost €1.7 billion to the exchequer from the redemption of Preference Shares. This was possible because the bank have made significant progress on a number of fronts, such as returning to profitability, reducing non-performing loans and increasing lending into the Irish economy. In this context, I think it prudent to explore the options available to us, with a view to ultimately recouping the significant investments that the State made in AIB during the financial crisis.
There is still work to be done in assessing how we might structure our gradual exit from the bank and particularly when we should start this process. My Department have recently appointed an Independent Financial Advisor, Rothschild, to provide advice in this regard. The appointment will help provide the next government with all the information and optionality they need to make an informed decision about our investment.
The Irish banking sector has made substantial progress in improving profitability, reducing impaired loans, and increasing lending particularly to SMEs. Where legacy issues remain in the sector - such as the elevated, though declining, number of mortgages in arrears - it is the remit of the Central Bank to monitor these and intervene where required. All progress toward a more stable and active banking sector will have positive implications for the value of the State's shareholdings in the banks.
155. Deputy Michael McGrath asked the Minister for Finance when an updated projection of the final outcome of the Irish Bank Resolution Corporation liquidation will be available; if the State expects to pay all unsecured creditors including junior bondholders; when cash will be returned to the State; and if he will make a statement on the matter. [1892/16]
View answerThe Special Liquidators intend to provide an update on the winding up of Irish Bank Resolution Corporation Limited (in Special Liquidation) by way of their third progress update report in the first quarter of 2016.
I am advised by the Special Liquidators that they currently have a cash balance in excess of €2.1 billion on hand which will be available for distribution to creditors.
The ultimate level of dividend paid, if any, to each creditor cannot be known until such time as all loan assets are sold, the total level of adjudicated creditors is finalised and the other contingent creditor claims which may crystallise, including those from litigation, are known.
I am advised by the Special Liquidators that they continue to adjudicate on claims by each creditor class. As the Deputy is aware the payment of proceeds from the liquidation, the costs and expenses of the liquidation, preferred creditors and senior unsecured creditors will all rank in priority to the holders of subordinated debt. Each class of creditor will be paid according to their legal priority as set out in the Companies Acts.
The priority for the distribution of assets under the Companies Act’s is generally:
1. Costs and expenses of the ongoing liquidation (these claims are certain to be paid in full);
2. Preferential creditors, including certain taxes and employee and pension claims arising prior to the date of liquidation (these claims are certain to be paid in full);
3. Amounts owing to NAMA under the Facility Deed acquired from the Central Bank which were secured by a floating charge over the bank’s assets (these claims have been fully repaid and the floating charge has been released);
4. Unsecured creditors, including:
- Debts owing to the Minister/NTMA under ELG
- Debts owing to the Deposit Guarantee Scheme
- Unguaranteed debt/depositors
- Unknown, including:
* Local authority development bonds
* Suppliers / other "normal" unsecured creditors
* Employees that are not preferential creditors
* Contingent creditors and other potential costs principally relating to litigation, etc.
5. Subordinated creditors
6. Members of the company - the Minister currently holds 100% of all shares and preference shares in the company.
156. Deputy Patrick O'Donovan asked the Minister for Finance the status of an application by a person (details supplied) in Dublin 11 for an exemption from vehicle registration tax; and if he will make a statement on the matter. [1901/16]
View answerI am advised by Revenue that an application for an exemption from Vehicle Registration Tax (VRT) was made by the person concerned in November 2014. The letter of acknowledgement issued by Revenue following receipt of the application contained details of a Revenue contact phone number, postal address, email address and a named Revenue official.
Revenue made numerous unsuccessful attempts to contact the person concerned, at the contact address and telephone number provided in the application, as regards additional information required to facilitate consideration of the application. In the circumstances, the application was eventually refused by Revenue in May 2015. I understand from Revenue that efforts to deliver a registered letter advising of the refusal were also unsuccessful.
157. Deputy Michael McNamara asked the Minister for Finance if he will outline the status of the PDFORRA claim to the Revenue Commissioners for a flat rate expenses allowance under section 114 of the Tax Consolidation Act 1997; and if he will make a statement on the matter. [1930/16]
View answerThe legislation governing the deductibility of expenses incurred in employment, as set out in section 114 of the Taxes Consolidation Act 1997, provides that, for an expense to qualify as a deduction against income from an office or employment, the expense must be wholly, exclusively and necessarily incurred in the performance of the duties of the office or employment.
For ease of administration, where a large number of employees incur similar qualifying expenses which are not reimbursed by their employer, the Revenue Commissioners have over the years provided a facility whereby a flat rate expense allowance may be claimed. Such a flat rate is agreed between the Revenue Commissioners and persons representing the relevant group of employees, typically a trade union or similar body. In agreeing a flat rate expense, an entitlement to a deduction must first be established by reference to the nature and amount of the expense incurred. It must also be established that any such expense is not reimbursed by the relevant employer(s), either directly or by way of an allowance or other means. As part of this process, it is necessary to clarify the extent to which expenses are similarly incurred by all relevant employees.
I am advised by the Revenue Commissioners that they are currently in discussions with PDFORRA regarding a claim for a flat rate expense allowance for certain members of the Defence Forces. The discussions involve an examination of the categories of duty carried on by the relevant members, the types of expenses wholly, necessarily and exclusively incurred in such duties and the nature and purpose of any allowances currently paid in respect of those duties.
158. Deputy Michael McGrath asked the Minister for Finance if he has revised his budget 2016 day forecast of €6,614 million for corporation tax receipts in 2016, given the outturn for 2015; and if he will make a statement on the matter. [1991/16]
View answerMy Department issues official taxation forecasts twice a year, firstly as part of the annual Budget, which is published in October each year and then updated, if necessary, in the Stability Programme Update (SPU) in April of the following year. Therefore, the next official forecast for 2016 in respect of corporation tax will be contained in the 2016 SPU. As part of the SPU process my Department will continue to examine, with the assistance of the Office of the Revenue Commissioners, the very strong corporation tax performance in 2015. Any revision of the 2016 forecast will take this analysis and any further developments, including the outturn for the first quarter of 2016, into account.
159. Deputy Robert Troy asked the Minister for Finance if the guaranteed income of €12,700 associated with drawing down a private pension early is remaining at the current rate or if it will be increasing back to over €18,000; and if he will make a statement on the matter. [2037/16]
View answerIn Finance Act 2013, I rescinded the Finance Act 2011 changes to the specified or guaranteed pension income requirement for Approved Retirement Fund access which had increased that income requirement from €12,700 to a variable limit based on 1.5 times the State Pension (Contributory) which amounted to €18,000 per annum. At the same time, I also rescinded the Finance Act 2011 change which had increased the maximum "set aside" amount required to be invested in an Approved Minimum Retirement Fund (AMRF) from €63,500 of the remaining pension fund (after taking the permissible tax-free lump sum) to a variable amount equal to 10 times the annual State Pension (Contributory) rounded to the nearest €100 which amounted to €119,800 or the remainder of the pension fund if less than this increased amount. Investment in an AMRF is a requirement for individuals with Defined Contribution pension arrangements who do not meet the specified income requirement and choose not to purchase an annuity.
I re-introduced the original specified income requirement (€12,700) and maximum AMRF set-aside amount (€63,500) on the grounds, among other reasons, that without an appropriate transition period, the 2011 Finance Act changes would detrimentally affect the plans of many individuals preparing for retirement over the medium term. The intention at the time of Finance Act 2013 was that the 2011 changes would be re-introduced in 2016.
In the context of the preparations for Finance Bill 2015 I chose not to re-introduce the 2011 changes and have no specific plans to do so at any particular point in the future.
160. Deputy Sean Fleming asked the Minister for Finance the status of the payment of claims by Setanta Insurance; the level of payments that are expected to be made; the approximate timeframe for this matter to be dealt with; and if he will make a statement on the matter. [2098/16]
View answerThe liquidation of an insurance company is a legally complex process. Setanta is a Maltese incorporated company and, therefore, the Setanta liquidation is being carried out under Maltese law.
Progress in the liquidation of Setanta Insurance has been awaiting the outcome of legal proceedings in the case of the Law Society of Ireland versus the Motor Insurers' Bureau of Ireland (MIBI). On 4 September 2015, the High Court held that the MIBI is liable in respect of claims against the policy holders of Setanta. This decision is currently being appealed by the MIBI and the appeal hearing took place last week (on 12, 13 and 14 January 2016). As this case is sub judice, there are certain matters which I am not in a position to comment on at this time. Thus, I am responding to the Deputy's question as best as I can within these constraints.
The Liquidator for Setanta has informed me that:
- The number of open claims was 1,696 as at 30 November 2015.
- The claims reserves position stands at between €87.7 million and €95.2 million.
- The Liquidator is continuing to accept new claims up until May 2016, two years after the insurance policies issued by Setanta were cancelled.
- Final settlements can only be paid out after all of the company's liabilities are quantified, including claims.
- The Liquidator reports that it is proving difficult to settle claims in advance of the outcome of the MIBI appeal.
I expect to be in a better position to inform the House after the legal proceedings are concluded and the implications of the outcome of those proceedings have been assessed.
161. Deputy Joe Costello asked the Minister for Finance if he has examined the benefits and drawbacks of the European Central Bank increasing its inflation target from 2%; and if he will make a statement on the matter. [2109/16]
View answerThe Treaty on the Functioning of the European Union (TFEU) assigns responsibility for monetary policy to the European System of Central Banks (the ECB and national central banks). Article 127 of the TFEU provides that the "primary objective of the European System of Central Banks (ESCB) shall be to maintain price stability". This article goes on to say that "without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Union". While the TFEU does not give a precise definition of what is meant by price stability the ECB's Governing Council has defined price stability as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below (but close to) 2%.
The TFEU provides, at Article 130, for the independence of the ECB, the ESCB and national central banks in carrying out the tasks and duties conferred on them by the Treaties and in particular that the "Union institutions, bodies, offices or agencies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the European Central Bank or of the national central banks in the performance of their tasks".
In this context, I should point out that inflation in the euro area has been below levels consistent with price stability for some time. The "flash" estimate shows the euro area annual rate is expected to be 0.2 per cent in December 2015 and inflation has been close to zero over 2015. The ECB's priority is to return inflation to levels consistent with price stability. In January 2015, the ECB decided to take additional monetary policy measures as it considered the prevailing degree of monetary accommodation to be insufficient to adequately address heightened risks of too prolonged a period of low inflation.
In that regard, under the ECB's Expanded Asset Purchase Programme ("Quantitative Easing"), the eurosystem (comprising the ECB and the national central banks of the euro area) has been purchasing €60 billion of public and private assets per month and plan to do so until at least March 2017, or until there is an improvement in inflation to levels consistent with price stability.
162. Deputy Patrick O'Donovan asked the Minister for Finance the estimated cost of abolishing the universal social charge on incomes below €80,000; and if he will make a statement on the matter. [2151/16]
View answerI am advised by the Revenue Commissioners that the estimated first and full year cost of increasing the USC (Universal Social Charge) exemption threshold from €13,000 to €80,000 is in the order of €1,584 million and €2,148 million respectively. This costing assumes that the current USC rates and bands as set out in Budget 2016 remain in place for those earning in excess of €80,000 per annum.
These figures are estimates from the Revenue tax forecasting model using latest actual data for the year 2013, adjusted as necessary for income, self-employment and employment trends in the interim. They are estimated by reference to 2016 incomes and are provisional and may be revised.
