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Thursday, 15 Feb 2018

Written Answers Nos. 112-122

European Fund for Strategic Investments

Questions (112, 113)

Niall Collins

Question:

112. Deputy Niall Collins asked the Minister for Finance the potential investment projects his Department put forward with regard to the task force report for the European Fund for Strategic Investments. [7990/18]

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Niall Collins

Question:

113. Deputy Niall Collins asked the Minister for Finance the progress being made in securing funding for potential investment projects under the European Fund for Strategic Investments; the projects that have been approved for funding in each Department; the projects put forward to his Department for inclusion in its task force report to the EFSI, in tabular form; and his views on whether they are still in contention for funding. [7991/18]

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Written answers

I propose to take Questions Nos. 112 and 113 together.

I take it that the Deputy is referring to the European Commission - European Investment Bank (EIB) - Member State Special Task Force to develop an Investment project pipeline for the EU in the Autumn of 2014.

The purpose of that exercise was to compile a list of potential investment projects across Member States, in order to quantify the investment need across the EU following the economic and financial crisis. The work of the Task Force informed the development of the EU's "Juncker Plan" which included the legislative proposal for the European Fund for Strategic Investments (EFSI), launched in November of that year.

Ireland, along with all other Member States, submitted a list of potential projects for inclusion in the Task Force's final report. That list which includes both public and private projects was compiled by the Department of Finance in very close coordination with the Department of Public Expenditure and Reform, given their responsibility for controlling public capital expenditure. The list was based on submissions from Departments with responsibility for particular sectors requiring investment, both public and private. The list, as noted by Government before submission, did not have any overall assessment or prioritisation of the projects and was not a national set of project applications. It was more accurately a contribution to an EU-wide scoping exercise to gauge the level of potential projects, during the 2015-2017 period, should investment resources become available.

The Task Force's final report was published in December 2014 and is available at http://www.eib.org/infocentre/press/releases/all/2014/2014-277-investment-offensive-for-europe-eu-task-force-identifies-2-000-potential-projects-worth-eur1-3-trillion.htm.

Since the EFSI Regulation's enactment in July 2015, it has been possible for any project promoter, either public or private, to engage with the EIB regarding the possibility of receiving loans or guarantees under EFSI for particular projects.

In general, Government Departments have existing relationships with the EIB so it has been a matter for each Department concerned to advance the projects in coordination with the Government's Capital Plan as coordinated by the Department of Public Expenditure and Reform. The Department of Finance has no role in assessing projects either public or private which may be the subject of applications for EFSI loans/guarantees.

In this way, EFSI is providing an important additional funding possibility alongside other possibilities such as the EIB's normal lending, the State's borrowings through the NTMA and other mechanisms such as PPPs and off-balance sheet vehicles. It should be remembered that each EFSI loan entered into by the State pre-commits funding for the repayment of such loans, and has to be considered in the context of the expenditure benchmark under the EU's fiscal rules.

Since inception, Ireland has seen the main potential beneficiaries of EFSI as being in the private sector including through PPP companies. In this regard, I am pleased that the Department of Health's Primary Health Care Centres PPP project has successfully drawn down EFSI funds. In addition, the Strategic Banking Corporation of Ireland (SBCI) has successfully engaged with European Financial Instruments such as the COSME and the InnovFin Guarantee Programme, both of which are made available under the EFSI SME Window. These support the financing needs of SMEs and ensure that there is an adequate supply of affordable and appropriate credit to meet their needs.

I can inform the Deputy that there is a publicly available list of Irish projects which have been approved for EFSI support by the EIB which is available on the EIB website at: http://www.eib.europa.eu/efsi/efsi-projects/index.htm?c=IE&se. The list can be viewed according to each Member State and I would ask the Deputy to be aware that the Irish list contains both private and public sector projects, and it also includes cross-border projects between Irish entities and entities in other Member States.

Pension Provisions

Questions (114)

Michael McGrath

Question:

114. Deputy Michael McGrath asked the Minister for Finance the details of the Revenue Commissioners investigation into claims that many pensioners who bought an annuity with a fixed cost of living increase or escalator have not been paid the pension amount they are entitled to; if the investigation will deal with claims that insurers and pension providers may have held funds in reserve and not paid them out on the death of the pensioner; the number and value of pensions potentially involved in the probe; and if he will make a statement on the matter. [8015/18]

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Written answers

The legislation governing the tax treatment of pensions is contained in Part 30 of, and Schedules 23 to 23C to, the Taxes Consolidation Act 1997. In addition, the Revenue Pensions Manual gives general guidance on, among other things, how this legislation is to be applied.

Revenue rules in relation to "Increases of Pensions in Payment" are set out in Chapter 6.8 of the Revenue Pensions Manual. These rules allow a pension in the course of payment to be increased up to the level of the maximum approvable at retirement (after deducting the annuity value of any pension exchanged for a lump sum benefit or allocated to a spouse, civil partner or dependant). For example, depending on service, the maximum pension an individual can receive at normal retirement age is 2/3rds of final remuneration. However, if the rules of the pension scheme allow, an employee may elect to commute part of the pension for a lump sum. Any such election will cause the amount of the pension in payment to be reduced.

Guaranteed increases of a pension in payment under Chapter 6.8 of the Revenue Pensions Manual may be made by using either of the following formulae-

- a fixed increase of not more than 3% per annum compound, or

- an increase linked to the Consumer Price Index, or another similar agreed index.

The purpose of these rules is to maintain the real value of pension payments and consequently these rules allow for the real value of pensions in payment to be maintained over the course of a pensioner’s lifetime. The rules in question have been in existence for over 30 years.

I understand that in the past few days there have been reports to the effect that some pension providers are not "paying out" on what are known as 5pc escalators (that is, a fixed yearly increase of 5% in the amount of pension payments) in cases where the increase had been paid for at the time the pension was purchased.

I am informed by Revenue that it is currently engaging with the pensions industry in order to establish the facts surrounding this issue, the extent of the issue, and whether the practice is in line with pension tax legislation and with published Revenue practice in this area. Revenue’s enquiry will include the issues raised by the Deputy. However, as the enquiry has only started within the last few days, the details the Deputy has requested with regard to the number of individuals affected and the amounts involved is not yet available.

Bank Debt Restructuring

Questions (115)

Michael McGrath

Question:

115. Deputy Michael McGrath asked the Minister for Finance the details of the proposed loan portfolio sale by a bank (details supplied); the nature of the loans concerned; the number and book value of the loans; and if he will make a statement on the matter. [8017/18]

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Written answers

As the Deputy is aware non-performing loans (NPL's) remain at an elevated level across the European banking system and addressing this issue is one of the key priorities for the Single Supervisory Mechanism (SSM). In Ireland significant progress has been made across the banking sector in reducing the level of NPLs since the financial crisis. Despite this progress, the level of NPLs in the Irish banking sector remains well above the European average.

Hence the SSM has tasked the management and board of each institution with developing and implementing a strategy to address this challenge. In recent years banks have introduced multiple engagement channels to facilitate customers, including those who are reluctant to engage directly with them. Having exhausted these initiatives, if meaningful engagement is not forthcoming from customers or where affordability does not exist or cannot be established. the bank may be left with no option but to look at alternative solutions. These could, as a last resort, include the sale of the loan.

The Deputy will be further aware that I have no role in the day-to-day commercial and operational decisions of any of the banks' in which the State has a shareholding. Under the Relationship Framework Agreements (RFA) the disposal of loans is a commercial decision for the management and Board of each individual institution.

I have received the following response from the bank:

"For commercial reasons the bank is unable to outline any details in relation to specific loan sales at this stage.

AIB has reduced its impaired loans to c. €7.3bn from a peak of c. €29bn over the past three years. During this period some impaired portfolios were sold and case by case restructurings continued.

The reduction was achieved primarily by working through loans on a case by case basis. AIB remains focused on reducing impaired loans to a level more in line with normalised European peer levels and will continue to implement sustainable solutions for customers who engage with the bank where feasible. The bank has c.1,500 people continuing to work in this area and they are supporting and finding solutions for customers.

AIB continues to review all options in relation to reducing impaired loans including further sales".

Bank Debt Restructuring

Questions (116)

Michael McGrath

Question:

116. Deputy Michael McGrath asked the Minister for Finance the progress a bank (detail supplied) has made in selling non-performing loans; the number and names of the bundles of loans set to be sold; the type of loans contained within each bundle; the value of each bundle; and if he will make a statement on the matter. [8045/18]

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Written answers

I can confirm for the Deputy that I have been informed of permanent tsb’s decision to launch a sale process involving a portfolio of non-performing loans. This transaction was confirmed publicly by the bank earlier this week and has been dubbed Project Glas. This decision is being taken to help reduce the bank’s high level of non-performing loans and is a move prompted by SSM regulatory requirements.

As I cannot interfere in the day to day operations of the bank nor the interaction with its regulator, these are decisions for the management and board of the bank and do not require my consent. Should the portfolio sale process reach an advanced stage, and if it is of a material scale, I would expect to be formally consulted under the bank’s Relationship Framework.

I understand that the vast majority of the loans for sale are in deep arrears including many that have not engaged with the bank in recent years. However as the proposed transaction is commercially sensitive, and I must respect stock exchange Market Abuse regulations, it would not be appropriate for me to provide any further commentary on the matter at this point.

While loan disposals are regrettable, as Minister for Finance I am conscious of the need for the bank to continue on its path to recovery. Permanent tsb is a very important part of the Irish banking sector and hence the economy, with over 1 million customers, €21bn of mortgage loans (gross) and €17bn of customer deposits. The bank also employs c. 2,500 staff.

Stamp Duty

Questions (117)

Michael McGrath

Question:

117. Deputy Michael McGrath asked the Minister for Finance the estimated revenue to be received from non-residential construction stamp duty in each of the years 2019 to 2021; the estimated number of transactions in each of these years; and if he will make a statement on the matter. [8046/18]

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Written answers

I am advised that, while forecasts for 2019 to 2021 are not available, Revenue provide estimates of receipts for the current Budget year. Revenue’s estimates for Stamp Duty from non-residential property transactions 2018 are based on receipts for previous years, as well as impacts of earlier policy changes and assessment of significant once-off transactions that are not expected to reoccur on a regular basis. These estimates are produced on a conservative and prudent basis.

I am informed by Revenue it is estimated that Stamp Duty receipts from non-residential property for 2018 will be in the region of €600 million. An estimate for the number of transactions is not available.

Tax Data

Questions (118)

Michael McGrath

Question:

118. Deputy Michael McGrath asked the Minister for Finance the estimated cost of the increase in the standard rate tax band from budget 2018 in each of the years 2019, 2020 and 2021; the estimated number of persons to pay the marginal rate in each of these years; and if he will make a statement on the matter. [8047/18]

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Written answers

The standard rate cut off point increased by €750 in Budget 2018 for all earners, e.g. from €33,800 to €34,550 for single individuals and from €42,800 to €43,550 for married one earner couples.

As published in Budget documentation, at the time of Budget 2018 it was estimated that the first year (i.e. 2018) cost of the increase would be €132 million, and that the full-year cost of the measure (applying from 2019 on) would be c. €152 million.

The Post-Budget 2018 Ready Reckoner published by the Revenue Commissioners shows (on page 3) the estimated number of taxpayer units paying tax at the standard and marginal rates in 2018: https://www.revenue.ie/en/corporate/documents/statistics/ready-reckoner.pdf. Estimates for the number of taxpayer units paying tax at the marginal rate in 2019 (and beyond) are not available.

Data contained in the Ready Reckoner are estimates for 2018, using actual data for the year 2015 (the latest year for which data are available) adjusted as necessary for income, self-employment and employment trends in the interim. They are provisional and may be revised.

Government Bonds

Questions (119)

Michael McGrath

Question:

119. Deputy Michael McGrath asked the Minister for Finance the NTMA's plans to raise funds from the market for the remainder of 2018, 2019, 2020 and 2021; the detail of the estimated value to be raised in each of these years; the estimated interest on these bonds; and if he will make a statement on the matter. [8048/18]

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Written answers

As the Deputy may be aware, last December the National Treasury Management Agency (NTMA) announced that it planned to issue €14 - €18 billion of Government bonds over the course of 2018.

It has already issued €5.25 billion of benchmark bonds so far this year. This is one third of the mid-way point of the €14 - €18 billion range.

The volume of new bond issuance required in the years 2019 – 2021 will depend on a whole range of factors. These include the Exchequer Borrowing Requirement (EBR), the volume of maturing debt that needs to be refinanced, targeted cash balances and funding from other sources such as short-term paper and State Savings products.

As is customary, the NTMA will, in December of each year, announce its planned bond funding range for the following year.

Owing to the pre-emptive action taken in recent years, the expected volume of new debt issuance required to refinance maturing debt in the coming years is considerably lower than it was three years ago.

The refinancing requirement over the period 2018 – 2020 has effectively been halved.

Through the early repayment of IMF and Swedish and Danish bilateral loans together with the early buyback and switching of near term maturing bonds for longer maturity bonds the 2018 – 2020 refinancing requirement has been reduced by some €16 billion, from €60 billion to €44 billion. Furthermore, reflecting the NTMA strategy of pre-funding, Exchequer cash balances stood at over €17 billion at the end of January.

The interest on the debt to be issued in the coming years cannot be predicted with certainty. However, by lowering our refinancing needs to such an extent, we have effectively taken out insurance and reduced our sensitivity to higher interest rates.

Government Bonds

Questions (120)

Michael McGrath

Question:

120. Deputy Michael McGrath asked the Minister for Finance the impact on the interest rate on Government bonds of the European Central Bank halting its quantitative easing programme; the impact on same of the ECB reversing its quantitative easing programme by selling €10 billion worth of bonds per month; the impact on same of the ECB raising interest rates by 0.25%, 0.75% and 1% respectively; and if he will make a statement on the matter. [8049/18]

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Written answers

Having already been reduced in size twice, Quantitative Easing (QE) is now scheduled to run until at least September 2018. This was confirmed by the European Central Bank (ECB) at its most recent Governing Council meeting in January, when it stated that net asset purchases under the Programme are intended to run until the end of September 2018, or beyond if necessary. The Governing Council also repeated its expectation that key ECB interest rates will remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.

While it is not possible to predict the future path of ECB monetary policy or interest rates, the strategy of the National Treasury Management Agency (NTMA) in recent years has been to take advantage of the favourable market conditions for sovereign issuers wherever possible. Through taking pre-emptive action over the past three years, it has significantly improved our debt redemption profile in the coming years and lowered our debt interest bill.

The refinancing requirement over the period 2018 – 2020 has effectively been halved.

Through the early repayment of IMF and Swedish and Danish bilateral loans together with the early buyback and switching of near term maturing bonds for longer maturity bonds the 2018 – 2020 refinancing requirement has been reduced by some €16 billion, from €60 billion to €44 billion. Furthermore, reflecting the NTMA strategy of pre-funding, Exchequer cash balances stood at over €17 billion at the end of January.

In addition, the accelerated buy-back and replacement of Floating Rate Notes from the Central Bank of Ireland also locks in current interest rates.

These actions reduce refinancing risk for the Exchequer and offer insurance against the possibility of interest rate increases in the coming years.

Finally, I should also mention the positive impact these actions have had on the cost of servicing our National debt. The interest bill, which was as high as €7.5 billion as recently as 2014, fell to just under €6.1 billion last year.

Flood Risk Management

Questions (121, 122)

Michael Harty

Question:

121. Deputy Michael Harty asked the Minister for Public Expenditure and Reform if the OPW has included in the flood defence proposal the major pinch point at Plassey along the River Shannon; if not, the reason therefor; his views on whether this will mean that the Springfield flooding will deteriorate by increasing the flow of the River Shannon; and if he will make a statement on the matter. [7839/18]

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Michael Harty

Question:

122. Deputy Michael Harty asked the Minister for Public Expenditure and Reform when the OPW last met with the Shannon co-ordination group; and if he will make a statement on the matter. [7840/18]

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Written answers

I propose to take Questions Nos. 121 and 122 together.

The Shannon Flood Risk State Agency Co-ordination Working Group was established in early 2016 by the Government across all of the State Agencies involved with the River Shannon. The Group is building on the existing work and commitment of all the State Agencies involved in flood risk and continues to enhance the ongoing co-ordination and co-operation between members.

The most recent meeting of the Group was on 23 October 2017, at which the Group decided to progress the development of a proposal for the removal of a series of pinchpoints or constrictions in the navigation channel between Meelick Weir and Athlone, in the Callows area. Constrictions on other stretches of the Shannon, such as that near Plassey are not included in this particular proposal. However, the Group has discussed and is currently considering issues in relation to the Lower Shannon.

The Callows proposal is currently being developed by OPW and Waterways Ireland and requires a hydraulic analysis, environmental assessment under the appropriate legislation and will be subject to planning. The required planning process would be a matter for Waterways Ireland. As part of the development of this proposal, the potential impact on flows will be assessed to ensure that any works do not have a negative impact further downstream. The proposal is due to be discussed further at the next meeting of the Group in late March.

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