Central Bank of Ireland Staff

Questions (41)

David Cullinane

Question:

41. Deputy David Cullinane asked the Minister for Finance if the appointment of the incoming Governor of the Central Bank will be suspended until all investigations in New Zealand involving them are completed; and if he will make a statement on the matter. [25524/19]

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Written answers (Question to Finance)

As the Deputy will be aware the New Zealand State Services Commissioner is carrying out an investigation into the unauthorised access of New Zealand Budget material and the events surrounding it.  I am not going to be drawn into speculating on a matter on which the New Zealand State Services Commissioner is currently compiling a report.

The State Services Commissioner, Peter Hughes, has stated that his office will not be making any comment on the matter until his investigation is concluded and all of the facts have been ascertained.  The investigation aims to conclude by 27 June.  

Consequently, it would not be appropriate for me or the Government to comment on the matter, particularly given we are not in possession of the facts.  The Government and others must await the facts to emerge. 

 Mr. Makhlouf has agreed to the ongoing review as the best approach to establishing the facts of the matter. 

He is continuing to work as usual in his role as CEO of the New Zealand Treasury. 

 I would caution against making claims about an individual who is not in a position to defend themselves.

The Government recommended the appointment of Mr. Makhlouf as Central Bank Governor to the President following a comprehensive, open, and international process.   

Mr. Makhlouf was the recommendation of the independent interview panel.  The process included a public call for expressions of interest, a comprehensive search using an independent executive search firm, a rigorous short-listing of applicants, psychometric testing of final interview candidates, and a final interview of five candidates. 

The President signed the warrant appointing Mr. Makhlouf to the role of Governor of the Central Bank of Ireland on 14th May 2019. 

Deputy Governor, Sharon Donnery, is acting Governor of the Central Bank from 1 June to 31 August.

My officials have been in contact with our Embassy in New Zealand to obtain updates on the matter. 

However, given the definitive statement by the New Zealand State Services Commissioner that his office will not be making any comment on the matter until his investigation is concluded and all of the facts have been ascertained, it would not be appropriate to contact his office at this time.

Tracker Mortgage Examination

Questions (42)

Brian Stanley

Question:

42. Deputy Brian Stanley asked the Minister for Finance if he is satisfied that all affected cohorts of tracker scandal victims have been treated fairly; and if he will make a statement on the matter. [25534/19]

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Written answers (Question to Finance)

The Central Bank’s Tracker Examination is focused on ensuring that lenders provide fair outcomes for all groups of customers impacted by tracker related failings both from a contractual and transparency perspective.  

The Examination is the largest, most complex and most significant supervisory review that the Bank has undertaken to date under its consumer protection mandate and requires all lenders, which offered tracker interest rate mortgages to their customers, to review all mortgage accounts, including accounts in arrears, to identify any tracker related failings both from a contractual and transparency perspective. The Central Bank does not make the decision on what is impacted or not, this is the responsibility of the lender. However, the Central Bank reviews and challenges the lender, where appropriate, on its conclusion.

Where affected customers have complained to their lender and remain dissatisfied with the outcome of the complaint, and do not accept the findings of the Appeals Panel, they also retain the option to bring a complaint to the Financial Services and Pensions Ombudsman  or FSPO. The FSPO presents customers with a means of resolving their complaint in an independent, fair and transparent manner that takes account of their unique personal circumstances, through an informal dispute resolution process or formal investigation.

As noted in the Central Bank Tracker Mortgage Examination Redress and Compensation penultimate Update, which was published in February 2019, the Examination has now been completed at the majority of lenders.  In the case of the remaining lenders, supervision work continues, as the Central Bank must ensure that the work carried out by lenders is sufficiently rigorous and thorough to have addressed satisfactorily any remaining issues affecting groups of customers and to ensure that all eligible groups of customers are included for redress and compensation.

In addition, the Central Bank Governor noted in his opening statement when he appeared before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach on 26 March this year that a total of €665 million has so far been provided to impacted customers. This figure includes €47 million for redress and compensation to impacted customers identified outside of the industry wide examination.

The Central Bank’s priority at all times throughout the Examination has been to make sure that all affected groups of customers have been identified and remediated.  The Government supports the work carried out by the Central Bank and I have been advised by the Bank that a final update on the Tracker Mortgage Examination will be published in the coming weeks.

Tracker Mortgage Examination

Questions (43)

Maureen O'Sullivan

Question:

43. Deputy Maureen O'Sullivan asked the Minister for Finance his views on the treatment of persons affected by a controversy relating to a bank (details supplied); the level of compensation offered; if he has a role in ensuring that customers receive fair treatment from financial institutions operating here in view of the fact he is a shareholder within the bank; and if he will make a statement on the matter. [25437/19]

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Written answers (Question to Finance)

I would remind the Deputy that as Minister for Finance there are strict rules around how I can intervene even in banks in which the State has a shareholding. The day to day operations of the banks are the sole responsibility of the boards and management teams and each bank must be run on an independent and commercial basis. The banks’ independence is protected by Relationship Frameworks which are legally binding documents that cannot be changed unilaterally. These frameworks, which are publicly available, were insisted upon by the European Commission to protect competition in the Irish market. 

However this Government has firmly supported the work of the Central Bank of Ireland to ensure that customers receive fair treatment from the financial institutions involved. As the Deputy will be aware, the industry wide Tracker Mortgage Examination review is the largest, complex and most significant supervisory review in the history of the Central Bank of Ireland in respect to its consumer protection mandate. It has revealed the unacceptable damage that misconduct can cause to consumers up to and including the loss of their homes and properties in some cases. To this end there has been €665 million of redress and compensation issued to customers at end February 2019.

To further support the work and power of the regulator, I am bringing forward the Central Bank (amendment) Bill which will introduce an advanced Senior Executive Accountability Regime (SEAR) which will, in tandem with new enhancements to the fitness and probity regime, help prevent something like the mortgage tracker issue happening again. 

The Central Bank has intervened on prevailing rate issues in line with its regulatory engagement via the Examination. This intervention is aligned with the Central Bank’s functions as part of the Examination to rigorously test and challenge, from a systemic perspective at the macro level, the position adopted by lenders to try and achieve the best result for all customers within a group.

The AIB prevailing rate customers have, directly as a result of the Central Bank’s intervention, been admitted to the Examination and will receive a compensation payment as well as an offer of the current prevailing rate, as opposed to the prevailing rate at the time their fixed rate expired.  By securing their admission to the Examination, the Central Bank has ensured that those customers have the opportunity to utilise to the full extent, the Examination’s appeals processes. Should they be dissatisfied with any aspect of their redress and compensation offer and can pursue their case based on their own unique circumstances with the Financial Services and Pensions Ombudsman.

The Central Bank examined AIB’s model to determine the then prevailing rate and concluded that based on the information then available, that it was reasonable. In relation to the contractual interpretation of the term “prevailing rate” the Central Bank formed the view at the time that at a macro level, it could not mount a legal challenge on behalf of all customers in the relevant group, that a rate other than the then prevailing rate should be offered.

Banking Sector Remuneration

Questions (44)

Joan Burton

Question:

44. Deputy Joan Burton asked the Minister for Finance his plans to lift the €500,000 pay cap for workers in the banking sector; the reports he has commissioned on the matter; his further plans to make such reports public; when such reports will be published; and if he will make a statement on the matter. [25317/19]

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Written answers (Question to Finance)

The Deputy will be aware that Government policy on banking remuneration has remained unchanged since the financial crisis. Extensive restrictions are in place and these are not simply confined to a handful of senior bankers whose pay is restricted by the €500,000 pay cap (excluding a standard pension contribution). These affect c.23,000 workers across the three banks in which the State has a shareholding. The policy dictates that variable pay including bonuses and any other fringe benefits including the likes of health insurance and childcare cannot be paid to any staff members from the most junior lowest paid staff to the most senior ranks.

A new regulatory framework has been put in place since the financial crisis across the EU, the economy has returned to near full employment, the remaining banks are profitable again – and in the case of AIB and BOI sustainably so. The State remains the largest shareholder in AIB, BOI and PTSB but following the successful IPO of AIB in June 2017 all three banks are also now on an equal footing with listings on the main market of the Irish and London stock exchanges.  

The skill set required in the banking sector is evolving with the greatest demand for staff now in areas such as the digital economy, risk management, legal and compliance. These skills are in demand right across the economy and so the banks are competing for this talent against companies who have more flexible and attractive remuneration structures. Brexit has only made this problem more acute.

In the senior ranks of the banks the substantial disparity in pay levels versus other Irish listed companies or peer banks in Europe is stark and introduces an obvious retention risk particularly in AIB and Bank of Ireland. I also need to be advised if this retention risk and a lack of alignment between the interests of executives and shareholders, undermines the Government's objective of recovering the State’s full investment in the banks.  

As a result I undertook last year to carry out a review of Government bank remuneration policy to determine if it remains fit for purpose.  My department held a full open EU public procurement to select a suitably qualified external consultant to assist it in completing this review. The specialist advisory division of International Firm Korn Ferry was subsequently appointed.

Engagement with a broad set of relevant stakeholders was an important part of the process. Stakeholders engaged with by Korn Ferry and my department included the major institutional investors in the banks, proxy advisory firms, the Financial Services Union (FSU), the chairs of the remuneration committee in each of the banks and representatives of the Single Supervisory Mechanism (SSM) in Frankfurt.

I felt it was also important to get the views of the Central Bank on this matter. I note the response from the Governor of the Central Bank in this regard which is available on the Central Bank's website. I have now received the report and once I have considered it, my intention is to publish it in due course.

Fiscal Policy

Questions (45)

Jonathan O'Brien

Question:

45. Deputy Jonathan O'Brien asked the Minister for Finance if funds held in the exceptional contingencies reserve fund, as currently designed under the National Surplus (Reserve Fund for Exceptional Contingencies) Bill 2018, could be withdrawn to invest in capital expenditure or fund welfare payments during an economic downturn, exceeding the Expenditure Benchmark under the fiscal rules. [25549/19]

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Written answers (Question to Finance)

There is a commitment in the Programme for a Partnership Government to establish a Rainy Day Fund. Creation of the Fund forms part of Government’s policy to stabilise the public finances and increase the State’s resilience to external economic shocks.

The National Surplus (Reserve Fund for Exceptional Contingencies) Bill 2018 was published on 24 October 2018 and is now before the Seanad.  

The actions of this Government and its predecessor including pro-active mitigation measures and preparation of better crisis management plans give me confidence that we are now better prepared to meet future crises. That said, with a strongly performing economy setting reserves aside now will further strengthen our position.

The RDF is intended as a reserve fund which may be drawn upon under certain circumstances, particularly severe economic downturns. Creation of the Fund forms part of the Government’s policy to stabilise the public finances and increase the State’s resilience to external economic shocks.

One criteria for drawdown of the Fund is that it can be used to remedy or mitigate the existence of “exceptional circumstances” in the State. Under the Fiscal Responsibility Act 2012 “exceptional circumstances” are defined as either a period of severe economic downturn or a period during which an unusual event outside the control of the State has a major impact on the financial position of the general government.

It is also envisaged that the occurrence of a force majeure event could justify deployment of the Fund. This could include events such as: a natural disaster; public emergency; or other unforeseen one-off occurrences.      

The RDF is intended therefore to be used as a defined-purpose instrument to address severe events as opposed to the normal fluctuations within the economic cycle.

This approach would align it with the current EU fiscal rules framework, whereby it could be accommodated as an “unusual event” under the existing Stability and Growth Pact (SGP) provisions.

In the event of a severe downturn, the Fund could be used to support capital investment. This would enable us to maintain the infrastructural development to support future economic recovery and growth.

It is proposed that withdrawals from the RDF will be transferred to the Exchequer so as to support the State’s expenditure with positive supply side effects.

Fiscal Policy

Questions (46)

Eamon Ryan

Question:

46. Deputy Eamon Ryan asked the Minister for Finance the measures he will consider to support the economy in the event of a sharp recession caused by international risks, such as those referred to in the recent report of the Irish Fiscal Advisory Council. [25552/19]

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Written answers (Question to Finance)

The risks posed by an external shock to our economy have been consistently highlighted for some time by both myself and my Department. These risks are being managed by building-up our fiscal capacity through broadening our tax base, debt reduction, targeting improvement in the general government balance, and establishing the Rainy Day Fund.

The tax base has been broadened by a series of measures, most recently by extending the standard rate of VAT to the tourism sector. These policies will help improve the resilience of the public finances to shocks to various sectors of the economy.

Separately, our debt as a percentage of GDP has almost halved from a peak of around 120 per cent in 2012 and continues on a downward trajectory. However, our debt burden remains elevated when measured as a share of modified GNI. Accordingly, this Government has committed to further utilising resources realised from the resolution of the financial crisis towards reducing this burden.

A small Exchequer cash surplus was achieved last year, the first underlying surplus since 2006. A general government balance of 0.0 per cent of GDP was also achieved in 2018. A surplus of 0.2 per cent is targeted for this year, improving to 0.4 per cent in 2020 under current assumptions.

Furthermore, the Rainy Day Fund will be established this year with an initial capitalisation of €1.5 billion from the Irish Strategic Investment Fund. Some of the historically high levels of corporation tax will be set aside for this fund, with an annual contribution of €0.5 billion budgeted. From the perspective of the sustainability of the public finances, this means the risk of permanently increasing expenditure on the basis of transient receipts is reduced.

The potential impact of an external shock is being mitigated by focusing on competitiveness-oriented policies. Capital expenditure has been prioritised to address the bottlenecks to growth which emerged during the recovery, such as the need for more residential development and public infrastructure investment. Total capital expenditure is set to more than double from €4.2 to €8.6 billion between 2016 and 2021. Such sustained levels of investment will increase our capital stock, improve the long-term growth potential in the economy and help build resilience to external shocks.

The Summer Economic Statement, to be published later this month, will set out the Government’s overall economic and budgetary strategy and establish the parameters for the forthcoming Budget, particularly in the context of the increase probability being assigned to a disorderly Brexit.

Licensed Moneylenders

Questions (47, 70)

Pearse Doherty

Question:

47. Deputy Pearse Doherty asked the Minister for Finance his plans to tackle the high cost of moneylenders through legislative means; and if he will make a statement on the matter. [25525/19]

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Alan Kelly

Question:

70. Deputy Alan Kelly asked the Minister for Finance his plans for a cap on moneylender interest rates; the reports he has commissioned on the matter; his further plans to make such reports public; when they will be made public; and if he will make a statement on the matter. [25322/19]

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Written answers (Question to Finance)

I propose to take Questions Nos. 47 and 70 together.

My Department recently launched a public consultation process seeking views on capping the cost of licensed moneylenders and other regulatory matters in relation to moneylending. The consultation paper is available at

https://www.gov.ie/en/consultation/81d5a4-public-consultation-capping-the-cost-of-licensed-moneylenders-and-ot/ .

Deputies will be aware of the report by the Centre for Co-operative Studies, University College Cork entitled "Interest Rate Restrictions on Credit for Low-income Borrowers" which was launched late last year.

Subsequently, the Personal Micro Credit Task Force, which was established at the behest of SFF, engaged an independent social researcher, Dr Stuart Stamp, to investigate unlicensed moneylending. My Department is financially supporting this research in conjunction with the SFF and the Citizens Information Board. The report is expected later this year.

The closing date for the public consultation being undertaken by my Department is 31 July 2019. I will review the responses received after that date and consider the best way to proceed.  I would like to take this opportunity to encourage anyone who has an interest in this topic to look at the consultation paper and consider responding to some or all of the questions asked.

Insurance Costs

Questions (48)

Fiona O'Loughlin

Question:

48. Deputy Fiona O'Loughlin asked the Minister for Finance when the working group on the cost of insurance will complete its work. [25413/19]

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Written answers (Question to Finance)

I am very conscious of the difficulties that the cost and availability of insurance are having on many businesses, charities, community groups, sporting clubs and other groups in this country and can understand the frustration that many people have with the existing position.  Unfortunately, there is no single policy or legislative “silver bullet” to immediately stem or reverse premium price rises.  This is because there are many constraints faced by the Government in trying to address this issue in particular the fact that for constitutional reasons, it cannot direct the courts as to the award levels that should be applied and for legal reasons it cannot direct insurance companies as to the pricing level which they should apply in respect of businesses seeking insurance.

Notwithstanding this, I wish to re-emphasise how important this issue is for the Government. Consequently, following the publication of its Report on the Cost of Motor Insurance in 2017, the Cost of Insurance Working Group undertook an examination of the employer liability and public liability insurance sectors.  This second phase culminated in the publication in January 2018 of the Report on the Cost of Employer and Public Liability Insurance.  I believe there has been significant progress already in the implementation of the two reports, including the following:   

- the establishment of the Personal Injuries Commission, and its subsequent recommendations relating to addressing award levels for soft tissue injuries – this has provided the objective evidence we need to be able to address award levels;

- the establishment of the National Claims Information Database in the Central Bank to increase transparency around the future cost of private motor insurance; the Central Bank is currently reviewing the possibility of expanding is scope to cover business insurance;

- reforms to the Personal Injuries Assessment Board through the Personal Injuries Assessment Board (Amendment) Act 2019;

- amendments to Sections 8 and 14 of the Civil Liability and Courts Act 2004 to make it easier for businesses and insurers to challenge cases where fraud or exaggeration is suspected;

- the reform of the Insurance Compensation Fund to provide certainty to policyholders and insurers; and,

- various reforms of how fraud is reported to and dealt with by An Garda Síochána, including increased co-ordination with the insurance industry, as well as the launch recently of Operation Coatee, a co-ordinated operation to tackle insurance fraud.  

The Deputy will be aware that both Reports contained Action Plans with timeframes for the implementation of Actions associated with the Recommendations.   I would note that this timeframe expired at the end of 2018 with regard to the Motor Report and is due to expire at the end of 2019 with regard to the Employer and Public Liability Report.  I would like to assure the Deputy that the Cost of Insurance Working Group will continue to focus on implementing the outstanding recommendations in both reports and it is hoped that this can be achieved by the end of this year.

In this regard, I consider that bringing the levels of damages awarded in this country more in line with those awarded in other jurisdictions is undoubtedly the single most essential challenge which must be overcome if there is to be a sustainable reduction in insurance costs. Work is progressing as a matter of priority on the Judicial Council Bill, and it is due to complete Report and Final Stages in the Seanad this week, prior to being submitted to Dáil Éireann shortly thereafter.  I would hope that we can collectively work together to ensure that the Judicial Council Bill is enacted by the summer.

Alongside this, the Law Reform Commission commenced its work to undertake a detailed analysis of the possibility of developing constitutionally sound legislation to delimit or cap the amounts of damages which a court may award in respect of some or all categories of personal injuries, as part of its Fifth Programme of Law Reform.  As everybody in this House will be aware, this is a complex task and appropriate consideration has to be given to the constitutional implications of such an exercise.

In conclusion, I believe that the reforms implemented to date are having a significant impact with regard to private motor insurance (CSO figures from May 2019 show that the price of motor insurance is now 24.5% lower than the July 2016 peak).  The Government is determined to continue working to ensure that these positive pricing trends can be extended to other forms of insurance, including those relevant to businesses.

Insurance Costs

Questions (49, 102)

Brendan Smith

Question:

49. Deputy Brendan Smith asked the Minister for Finance if consideration will be given to the request of a federation (details supplied) on the increasing costs of insurance which is having a negative impact on some businesses within the sector; and if he will make a statement on the matter. [25501/19]

View answer

Micheál Martin

Question:

102. Deputy Micheál Martin asked the Minister for Finance if he or his officials have received correspondence from an organisation (details supplied) regarding spiralling insurance costs; the actions he is taking to address the matter; and if he will make a statement on the matter. [25728/19]

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Written answers (Question to Finance)

I propose to take Questions Nos. 49 and 102 together.

I acknowledge the general problems faced by many small businesses, including hotels, in relation to the cost and availability of insurance as well as the frustrations that some may have with the pace of reform.  Unfortunately, there is no single policy or legislative “silver bullet” to immediately stem or reverse premium price rises.  This is because there are many constraints faced by the Government in trying to address this issue in particular the fact that  for constitutional reasons, it cannot direct the courts as to the award levels that should be applied and for legal reasons it cannot direct insurance companies as to the pricing level which they should apply in respect of businesses seeking insurance.

I wish to re-emphasise how important this issue is for the Government. Consequently, following the publication of its Report on the Cost of Motor Insurance in 2017, the Cost of Insurance Working Group undertook an examination of the employer liability and public liability insurance sectors.  This second phase culminated in the publication in January 2018 of the Report on the Cost of Employer and Public Liability Insurance.  As part of that process, both Minister of State D’Arcy and the Working Group met with a number of relevant representative bodies of businesses impacted, including the Irish Hotel Federation, to get a better appreciation of the issues they have experienced in their particular sectors.  Indeed, there is a specific section in the Report on the Cost of Employer and Public Liability Insurance on these issues.

While I understand that the Irish Hotels Federation may feel that there is a lack of progress being made, I believe there has been significant progress in the implementation of the two CIWG Reports. Examples include the following:

- the establishment of the Personal Injuries Commission, and its subsequent recommendations relating to addressing award levels for soft tissue injuries – this has provided the objective evidence we need to be able to address award levels;

- the establishment of the National Claims Information Database in the Central Bank to increase transparency around the future cost of private motor insurance; the Central Bank is currently reviewing the possibility of expanding is scope to cover business insurance;

- reforms to the Personal Injuries Assessment Board through the Personal Injuries Assessment Board (Amendment) Act 2019;

- amendments to Sections 8 and 14 of the Civil Liability and Courts Act 2004 to make it easier for businesses and insurers to challenge cases where fraud or exaggeration is suspected;

- the reform of the Insurance Compensation Fund to provide certainty to policyholders and insurers; and,

- various reforms of how fraud is reported to and dealt with by An Garda Síochána, including increased co-ordination with the insurance industry, as well as the recent decision by the Garda Commissioner to develop a divisional focus on insurance fraud which will be guided by the Garda National Economic Crime Bureau (GNECB) which will also train Gardaí all over the country on investigating insurance fraud, and the recent success under Operation Coatee, which targets insurance-related criminality.  

I believe that these reforms are having a significant impact with regard to private motor insurance (CSO figures from May 2019 show that the price of motor insurance is now 24.5% lower than the July 2016 peak).  The Government is determined to continue working to ensure that these positive pricing trends can be extended to other forms of insurance, including those relevant to businesses.

Undoubtedly the single most essential challenge which must be overcome if there is to be a sustainable reduction in insurance costs particularly for small businesses is to bring the levels of personal injury damages awarded in this country more in line with those awarded in other jurisdictions.  In this regard, the Personal Injuries Commission has highlighted the significant differential between award levels in Ireland and other jurisdictions, and has made a number of recommendations to address this issue, in particular the establishment of a Judicial Council to compile guidelines for appropriate general damages for various types of personal injury.  Both I and Minister of State D’Arcy believe that this awards gap needs to be significantly closed and we are working with the Minister for Justice and Equality, Mr Charlie Flanagan TD, to ensure that this happens at the earliest opportunity.  In this regard, work is progressing as a matter of priority on the Judicial Council Bill, and it is due to complete Report and Final Stages in the Seanad this week, prior to being submitted to Dáil Éireann shortly thereafter.  I would hope that members of both Houses of the Oireachtas can collectively work together to ensure that the Judicial Council Bill is enacted by the summer.

Finally, I would like to assure the Deputy that the Cost of Insurance Working Group will continue to focus on implementing the recommendations of the Report on the Cost of Employer and Public Liability Insurance in parallel with implementing those from the Report on the Cost of Motor Insurance.  I am hopeful that the cumulative effects of the completion of the two Reports’ recommendations will include increased stability in the pricing of insurance for businesses and a more competitive insurance market.

Financial Services Sector

Questions (50)

Thomas P. Broughan

Question:

50. Deputy Thomas P. Broughan asked the Minister for Finance if he will report on his revised strategy for the development of international financial services here; the reason he is halving previously indicated levels of new job creation in the sector between 2020 and 2025; and if he will make a statement on the matter. [25230/19]

View answer

Written answers (Question to Finance)

The employment target in Ireland for Finance is to reach 50,000 people in direct employment in the sector by 2025. That is a net increase of 5,000 above the target employment level set for the previous strategy, IFS2020. The targeted increase in employment set out in IFS2020 was 10,000.

The target of an increase of 5,000 people in employment in international financial services reflects two key factors.

First, Ireland is at a different position in the economic cycle and, with the country close to full employment, setting jobs targets is somewhat contradictory.

Second, and more importantly, the impacts of technology on the employment in the financial services sector are also potentially transformative and this will put existing employment figures under considerable pressure. The Expert Group on Future Skills Needs reported that financial services is one of two sectors in the Irish economy which is not expected to employ more people in 2023 than in it did 2018.

While Ireland for Finance has an overall target for employment growth, it is also important that the strategy sets the aim of seeking to ensure that the posts located in Ireland will be high quality, well paid, and ‘sticky’ – that is, less likely to be outsourced or easily transferable. Higher value posts are also less likely to be affected by increased levels of automation in the sector.

A number of additional indicators of success have been selected to run concurrently with the jobs target. These include: trends in employment in international financial services; regional growth; new and specialised sub-sectors; high-level posts that will reflect a move up the value chain; the breadth of skills and sub-sectors; and the depth of specialised financial services available in Ireland.

Insurance Costs

Questions (51, 54, 55, 60, 68, 71)

Martin Heydon

Question:

51. Deputy Martin Heydon asked the Minister for Finance his plans to address the difficulties being faced by businesses nationally experiencing rising insurance costs; and if he will make a statement on the matter. [25611/19]

View answer

John Brady

Question:

54. Deputy John Brady asked the Minister for Finance the steps he is taking to support local businesses in County Wicklow with increasing insurance costs; and if he will make a statement on the matter. [25356/19]

View answer

Martin Heydon

Question:

55. Deputy Martin Heydon asked the Minister for Finance the actions he is taking to assist small businesses nationally which are struggling to renew their insurance policies and facing rising insurance costs; and if he will make a statement on the matter. [25610/19]

View answer

Aindrias Moynihan

Question:

60. Deputy Aindrias Moynihan asked the Minister for Finance the steps he is taking to reduce the cost of public liability insurance for community groups and community events; and if he will make a statement on the matter. [25568/19]

View answer

Niamh Smyth

Question:

68. Deputy Niamh Smyth asked the Minister for Finance his plans to address the rising cost of insurance for street performers and other artists; and if he will make a statement on the matter. [24329/19]

View answer

Willie Penrose

Question:

71. Deputy Willie Penrose asked the Minister for Finance his plans to address the rising cost of mart insurance premiums; if he has commissioned research or reports on the impact of high insurance costs on rural business and community development; and if he will make a statement on the matter. [22796/19]

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Written answers (Question to Finance)

I propose to take Questions Nos. 51, 54, 55, 60, 68 and 71 together.

I acknowledge the general problems across the country as a whole faced by many small businesses (including marts), community and voluntary groups, as well as other sectors such as street performers in relation to the cost and availability of insurance. I also appreciate that there is some frustration about the perceived pace of reform.  Unfortunately, there is no single policy or legislative “silver bullet” to immediately stem or reverse premium price rises.  This is because there are many constraints faced by the Government in trying to address this issue in particular the fact that  for constitutional reasons, it cannot direct the courts as to the award levels that should be applied and for legal reasons it cannot direct insurance companies as to the pricing level which they should apply in respect of businesses seeking insurance.

However, I wish to re-emphasise how important this issue is for the Government. Consequently, following the publication of its Report on the Cost of Motor Insurance in 2017, the Cost of Insurance Working Group (CIWG) undertook an examination of the employer liability and public liability insurance sectors.  This second phase culminated in the publication in January 2018 of the Report on the Cost of Employer and Public Liability Insurance.  I believe there has been significant progress in the implementation of the two CIWG Reports. Examples include the following:

- the establishment of the Personal Injuries Commission, and its subsequent recommendations relating to addressing award levels for soft tissue injuries – this has provided the objective evidence we need to be able to address award levels;

- the establishment of the National Claims Information Database in the Central Bank to increase transparency around the future cost of private motor insurance; the Central Bank is currently reviewing the possibility of expanding is scope to cover business insurance;

- reforms to the Personal Injuries Assessment Board through the Personal Injuries Assessment Board (Amendment) Act 2019;

- amendments to Sections 8 and 14 of the Civil Liability and Courts Act 2004 to make it easier for businesses and insurers to challenge cases where fraud or exaggeration is suspected;

- the reform of the Insurance Compensation Fund to provide certainty to policyholders and insurers; and,

- various reforms of how fraud is reported to and dealt with by An Garda Síochána, including increased co-ordination with the insurance industry, as well as the recent decision by the Garda Commissioner to develop a divisional focus on insurance fraud which will be guided by the Garda National Economic Crime Bureau (GNECB) which will also train Gardaí all over the country on investigating insurance fraud, and the recent success under Operation Coatee, which targets insurance-related criminality.  

I believe that these reforms are having a significant impact with regard to private motor insurance (CSO figures from May 2019 show that the price of motor insurance is now 24.5% lower than the July 2016 peak).  The Government is determined to continue working to ensure that these positive pricing trends can be extended to other forms of insurance, including those relevant to businesses.

Undoubtedly the single most essential challenge which must be overcome if there is to be a sustainable reduction in insurance costs particularly for small businesses is to bring the levels of personal injury damages awarded in this country more in line with those awarded in other jurisdictions.  In this regard, the Personal Injuries Commission has highlighted the significant differential between award levels in Ireland and other jurisdictions, and has made a number of recommendations to address this issue, in particular the establishment of a Judicial Council to compile guidelines for appropriate general damages for various types of personal injury.  Both I and Minister of State D’Arcy believe that this awards gap needs to be significantly closed and we are working with the Minister for Justice and Equality, Mr Charlie Flanagan TD, to ensure that this happens at the earliest opportunity.  In this regard, work is progressing as a matter of priority on the Judicial Council Bill, and it is due to complete Report and Final Stages in the Seanad this week, prior to being submitted to Dáil Éireann shortly thereafter.  I would hope that members of both Houses of the Oireachtas can collectively work together to ensure that the Judicial Council Bill is enacted by the summer.

Finally, I would like to assure the Deputy that the Cost of Insurance Working Group will continue to focus on implementing the recommendations of the Report on the Cost of Employer and Public Liability Insurance in parallel with implementing those from the Report on the Cost of Motor Insurance.  I am hopeful that the cumulative effects of the completion of the two Reports’ recommendations will include increased stability in the pricing of insurance for businesses and a more competitive insurance market.

Tax Code

Questions (52)

Pearse Doherty

Question:

52. Deputy Pearse Doherty asked the Minister for Finance when the Revenue Commissioners will complete its review of flat rate expenses regimes in place; the way in which he will ensure that changes are politically proofed; and if he will make a statement on the matter. [25526/19]

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Written answers (Question to Finance)

I am advised by Revenue that their review of the flat rate expenses regime is ongoing and that it is intended to have the review completed by the end of 2019.  The Deputy will be aware from my previous replies on this matter that Revenue confirmed an implementation date of 1 January 2020 in respect of any changes that may be made to the flat rate regime, to ensure they do not impact on any specific group earlier than the rest. Revenue has advised that this position is unchanged. 

The flat rate expenses regime is a concessionary practice operated by Revenue where both specific commonality of expenditure exists across an employment category and the statutory requirement for the tax deduction as set out in section 114 of the Taxes Consolidation Act 1997 is satisfied. To qualify for a deduction under that section, an expense must be “wholly, exclusively and necessarily” incurred in the performance of the duties of the employment and paid by the employee.  The purpose of the flat rate expenses regime is to simplify tax administration for both taxpayers and Revenue by making it easier for large groups of employees working in the same sector to avail of their entitlement to tax relief in respect of allowable expenses incurred in the performance of their employment duties.

The Deputy will be aware from my previous replies to questions on this matter that I am aware of Revenue’s programme of work in this area.  Furthermore, the Deputy will be aware that the administration of the tax code is exclusively a matter for Revenue who are independent in the performance of their functions.  Any changes in practice to the flat rate expenses regime are therefore a matter for Revenue, but I understand that any withdrawal of the practice can only take place if Revenue are satisfied that there is no longer a legally valid basis to give the concession, after engagement with the relevant representative body acting on behalf of the various categories of workers.

As I have said on previous occasions, there has been no change to the general rule set out in legislation so all employees retain their statutory right to claim a deduction under section 114 TCA for any valid expenses incurred wholly, exclusively and necessarily in the performance of the duties of their employment, to the extent which the expenses are not reimbursed from any source.  So while certain employees may no longer claim a deduction on a universal “flat rate” basis, they may still be able to still claim a deduction on a specific “vouched basis”.

Housing Policy

Questions Nos. 54 and 55 answered with Question No. 51.

Questions (53)

Richard Boyd Barrett

Question:

53. Deputy Richard Boyd Barrett asked the Minister for Finance his plans to implement new regulations of vulture and cuckoo funds to ensure that those in search of affordable homes are not losing out to international speculators; and if he will make a statement on the matter. [25589/19]

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Written answers (Question to Finance)

The key to resolving current issues, including affordable housing, in the housing market is increasing supply. This is why the Government is committed to increasing the supply of all types of housing including social, affordable and private. Institutional investors represent one aspect of the housing market and have a role in increasing supply, particularly the supply of urban apartments.

The Deputy  should be aware that a Department of Finance staff paper on institutional investment in the housing market, published in February 2019, found that property funds, real estate firms and REITs (Real Estate Investment Trusts) account for a relatively small proportion of housing transactions. In 2017, the latest year for which official data is available, such firms purchased a net 1 per cent of transacted units. However, it is clear the number of transactions from such investors is increasing. 

The National Planning Framework (NPF) identified greater apartment construction as a policy objective. Approximately 12 per cent of the national housing stock is in apartments, in comparison to many European countries where it is normal for 40-60 per cent of households to live in apartments.  Given Ireland’s population growth, a movement towards smaller average household size and greater mobility in the labour market, apartments will need to become a more prevalent form of housing, particularly in urban areas. Many institutional investors specialise in providing such accommodation.  However, as Rebuilding Ireland makes clear, professional landlord investment can only be one aspect of a multi-pronged response to addressing current issues in the market.

Introducing regulation of the investment activity of institutional investors to limit or exclude them from housing, if it is possible to do, would be likely to have the major unintended consequence of reducing supply.

Questions Nos. 54 and 55 answered with Question No. 51.

Tax Avoidance

Questions (56)

Joan Burton

Question:

56. Deputy Joan Burton asked the Minister for Finance his views on the plans of the OECD for a minimum effective corporate tax rate to cut down on tax avoidance; and if he will make a statement on the matter. [25318/19]

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Written answers (Question to Finance)

The Deputy will be aware that the current proposals flow from earlier discussions at both OECD and EU level to address taxation issues arising from the growing digitalisation of the economy.  The OECD published a work plan on 31 May setting out the broad direction of travel for the period ahead. This work plan was endorsed by G20 Finance Ministers on 9 June and work will continue over the next 18 months with a view to reaching final agreement by end 2020.  

It is important to note that the work plan remains on a "without prejudice" basis and that a lot of work remains to be done before we have a sustainable agreement.  

I have been very clear that further change to the international tax framework is necessary to ensure that we reach a stable global consensus for how and where companies should be taxed.  A certain, stable, and globally agreed international tax framework is vital to facilitate cross border trade and investment.

When I look at the proposals currently being discussed at OECD I believe that proposals examining the issue of where companies generate their value and whether new concepts of value creation need to be recognised, might provide a basis upon which a sustainable agreement could be found at the OECD.

However, proposals to introduce a minimum effective tax rate remains problematic, not least because of a lack of clarity as to what it is the proposal is trying to achieve.

Ireland is supportive of measures to limit companies’ capacity to engage in aggressive tax planning. Artificial profit-shifting for tax purposes poses a real challenge and must continue to be addressed. However, I do not support measures which have as their core objective the end of legitimate and fair tax competition.

The benefits of tax competition have long been recognised by the OECD and others, as long as this competition is fair.

I believe that fair tax competition is a legitimate tool for small peripheral countries to balance against size, geographical location or resource advantages other countries enjoy, and this is supported by a wealth of economic research.

Ireland is positively engaged in the discussions at OECD and remains open to solutions which respect our right to compete fairly and which respect the legitimacy of Ireland’s longstanding 12.5% corporate tax rate.

Tax Code

Questions (57, 72)

Maureen O'Sullivan

Question:

57. Deputy Maureen O'Sullivan asked the Minister for Finance if he will report on efforts to broaden the tax base; and his views on whether reliance on corporation tax is unsustainable. [25438/19]

View answer

Jonathan O'Brien

Question:

72. Deputy Jonathan O'Brien asked the Minister for Finance the way in which he plans to broaden the tax base in a progressive manner further to the criticism of the Irish Fiscal Advisory Council of the over-reliance on corporate tax receipts; and if he will make a statement on the matter. [25550/19]

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Written answers (Question to Finance)

I propose to take Questions Nos. 57 and 72 together.

Ireland has been consistently successful over several decades in attracting leading multinationals to base here and given our high level of integration with the global economy, it is not altogether surprising that our corporation tax base has become concentrated, as it has been for a number of decades.

Nonetheless, I would acknowledge that there are risks associated with this increase in corporation tax receipts. A fiscal vulnerability exists in the form of an exposure of the public finances to fluctuations in corporation tax receipts, which last year were at their highest ever share of Exchequer revenues at 18.7 percent of overall tax receipts. By way of context VAT and Income Tax receipts accounted for approximately 64 percent of our overall tax receipts. 

In recent years, I have taken steps to broaden our corporation tax base, including through the introduction of the 80 per cent cap on capital allowances for intangible assets in Budget 2018 and the introduction of a broader Exit Tax regime in Budget 2019.  Measures have also been introduced in recent years which will ensure a continued broadening of the overall tax base. These include the introduction of the Universal Social Charge, the Local Property Tax and the sugar-sweetened drinks tax. Further measures that I have taken which will enhance the tax base include the increase in the VAT rate, for tourism related goods and services, from the 9 per cent rate to the 13.5 per cent rate in Budget 2019. For 2019 all of these measures are projected to raise revenues equivalent to approximately 1.5 percent of GDP or 5.7 percent of overall general government revenue. 

Further steps which I have taken include an increase in the commercial (non-residential) Stamp Duty rate from 2 per cent to 6 per cent in Budget 2018 and an increase in the betting duty levy from 1 per cent to 2 percent in Budget 2019. I have also removed some tax reliefs, such as the Home Renovation Incentive and the Start your own Business Relief, and continued a roll-out of enhanced taxation compliance measures. However, I would note that further potential for base broadening exists, particularly in the environmental area where important policy priorities exist.

The ongoing systematic review of tax expenditures, taken in line with my Department’s Tax Expenditure Guidelines, will assist in this process, through identifying deadweight, resource misallocation and assessing if tax reliefs still meet their initial policy objectives. This will also provide a ‘health check’ as to whether they accord with the OECD tax hierarchy in terms of their impact upon economic growth.  

My Department will shortly publish a paper to highlight some of these in-built vulnerabilities to our tax revenues and to quantify where possible, the impact of a shock to our corporation tax receipts. Potential solutions to this are presented in order to prompt a policy discussion around how best to mitigate against this emerging over-reliance. It is my intention to give consideration to these, and possibly other, suggestions with a view to making recommendations to Government in the autumn.

Tax Code

Questions (58)

Thomas P. Broughan

Question:

58. Deputy Thomas P. Broughan asked the Minister for Finance if further to the fiscal assessment report of June 2019 from the Irish Fiscal Advisory Council, he is examining further measures to broaden the tax base; and if he will make a statement on the matter. [25229/19]

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Written answers (Question to Finance)

I  can confirm that I and my Department continue to seek ways to broaden the tax base that do not run contrary to the growth focus of this Government.

Certain measures have already been introduced which will ensure a continued broadening of the overall tax base. These include the introduction of the Universal Social Charge, the Local Property Tax and the Sugar Sweetened Drinks Tax. Further measures that I have taken which will enhance the tax base include the increase in the VAT rate, for tourism-related goods and services, from the 9 per cent rate to the 13.5 per cent rate in Budget 2019. For 2019 all of these measures are projected to raise revenues equivalent to approximately 1.5 per cent of GDP or 5.7 per cent of overall general Government revenue. I would also note that further potential for base broadening exists, particularly in the environmental area where important policy priorities exist.

Also in Budget 2019 the income tax package was primarily comprised of an increase of €750 in the point of entry to the higher rate of income tax, a reduction in the third rate of USC and an extension of the income range on which the second rate of USC will be charged. This continued the focus on reducing the tax burden on low to middle income earners, while maintaining a broad tax base.

The Deputy will be aware that in recent years I have taken steps to broaden and enhance the stability of our corporation tax base, including through the introduction of the 80 per cent cap on capital allowances for intangible assets in Budget 2018 and the introduction of a broader Exit Tax regime in Budget 2019. Given that Ireland has been consistently successful over several decades in attracting leading multi-nationals to base here and given our high level of integration with the global economy, it is not altogether surprising that our corporation tax base has become concentrated.

Nonetheless, I would acknowledge that a fiscal vulnerability exists in the form of a significant and growing exposure of the public finances to corporation tax receipts, which last year were at their highest ever share of Exchequer revenues at 18.7 per cent of overall tax receipts. My Department will shortly publish a paper to highlight some of these in-built vulnerabilities and to quantify where possible, the impact of such a shock. Potential solutions to this are presented in order to prompt a policy discussion around how best to mitigate against this emerging over-reliance. It is my intention to give consideration to these – and possibly other suggestions – with a view to making recommendations to Government in the autumn.

Exchequer Payments

Question No. 60 answered with Question No. 51.

Questions (59)

Thomas P. Broughan

Question:

59. Deputy Thomas P. Broughan asked the Minister for Finance if he will report on Exchequer debt servicing costs for the first quarter of 2019; the way in which the refinancing of Exchequer debt since the beginning of 2018 is impacting on those costs in 2019 and 2020; and if he will make a statement on the matter. [17779/19]

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Written answers (Question to Finance)

I am informed by the National Treasury Management Agency that Exchequer debt service costs in the first quarter of 2019 were just over €2 billion, a decline of 6.2% on the same period last year. They were also marginally below expectations.

Exchequer debt service costs peaked in 2014 and have been falling since. The NTMA expects them to fall further this year and next, as high coupon debt matures and is replaced with lower coupon debt.

A fixed rate Treasury bond with a coupon of 4.5% matured in October 2018 while new bond issuance in 2018 was completed at a weighted average yield of just below 1.1%.

Two benchmark bonds mature this year. The first, which matured yesterday on Tuesday, 18 June, had a coupon of 4.4%. The second, which will mature in October, has a coupon of 5.9%. The NTMA advises me that new bond issuance so far in 2019 was completed at a weighted average yield of just under 1.2%.

In the April Stability Programme Update, Exchequer debt servicing costs for 2019 were estimated at just above €5.3 billion. That is close to €0.2 billion lower than was estimated in Budget 2019. Similarly, the debt service estimate for 2020 was reduced by over €0.25 billion.

There are also two benchmark bond maturities in 2020, one in April and the second in October. These bonds have coupons of 4.5% and 5% respectively.

Question No. 60 answered with Question No. 51.