84. Deputy Brendan Howlin asked the Taoiseach the projected costs in regard to the Commission of Investigation into IBRC. [46455/19]View answer
Written Answers Nos. 84-103
84. Deputy Brendan Howlin asked the Taoiseach the projected costs in regard to the Commission of Investigation into IBRC. [46455/19]View answer
From the time of its establishment in June 2015 to the end of October this year the IBRC Commission of Investigation spent €6,682,000 approx. This does not include third party legal costs which have been incurred but not yet paid.
The Commission’s Sixth Interim Report, dated 27 March 2019, provided an estimated final cost of the completion of the first module of its investigation, regarding the Siteserv transaction, of €11 million to €14 million. However, this estimate assumes the investigation is completed in accordance with the timetable set out in the Interim Report and excludes costs or delays associated with judicial review hearings. The Commission also acknowledges that it also involves a substantial degree of uncertainty regarding the amount of costs actually recoverable by parties before the Commission, and it assumes the Commission’s Legal Costs Guidelines are not successfully challenged.
As I have informed Opposition party representatives, my Department continues to be of the view that the final cost is likely to significantly exceed the Commission's estimate, and could be of the order of €30m.
85. Deputy Bobby Aylward asked the Taoiseach and Minister for Defence the position regarding the patrol vessel LÉ Ciara; his plans to upgrade same; and if he will make a statement on the matter. [46743/19]View answer
My priority as Minister with Responsibility for Defence is to ensure that the operational capability of the Army, Air Corps and Naval Service is maintained to the greatest extent possible. This is primarily to enable the Defence Forces to carry out their roles as assigned by Government as set out in the White Paper on Defence. Equipment priorities for the Army, Air Corps and Naval Service are being considered in the context of the lifetime of the White Paper on Defence as part of the capability development and equipment planning process.
The White Paper underpins the ongoing replacement of the Naval Service fleet. A significant investment over recent years has been on the procurement of new Off-Shore Patrol Vessels (OPVs) for the Naval Service. The fourth ship in the programme, LÉ George Bernard Shaw, was commissioned into service in May 2019 reflecting an investment by the Government of over €250 million in the new ships programme since 2010. The four ships are performing well in operational service.
Naval Service ships are required to complete drydock maintenance, survey and inspection, twice during each ship five (5) year cycle. An intermediate drydock is carried out between two and a half (2.5) and three (3) years. A full drydock is carried out at five (5) years. Naval Service Ships which are beyond their originally projected thirty (30) year asset life, are drydocked for inspection every year, in order to manage ageing hull risk.
Notwithstanding the capital maintenance programme (for drydocks) detailed above, Naval Service ships are required to undertake planned routine and non-routine maintenance on plant and machinery every day, 365 days a year, regardless of whether the ship is on patrol, undertaking Maritime Defence and Security Operations (MDSO) or alongside the Naval Base off Sailing Order. LÉ Ciara is one of three ships in the current flotilla that are over 30 years old (LÉ Eithne and LÉ Ciara were built in 1984 and LÉ Orla was built in 1985). Accordingly, LÉ Ciara is currently undergoing a planned annual dry-docking.
The White Paper provides for the replacement of the current Naval Service flagship LÉ Eithne with a multi role vessel (MRV) which will be enabled for helicopter operations and will also have a freight carrying capacity. It is the intention to hold a public tender competition in due course to cover the supply of the MRV subject to the availability of funding within the overall Defence capital funding envelope. The cost of the MRV will only be known once the tender competition is concluded.
Future Naval Service capabilities are being planned as part of the White Paper project planning process which will determine the Defence Organisation’s maritime capability requirements.
86. Deputy Carol Nolan asked the Taoiseach and Minister for Defence he reason the widow of a person (details supplied) has not received a widow's and orphan's pension. [46766/19]View answer
My Department has not received any direct communication in relation to a pension in this case.
The Deputy has helpfully given an Army service number and I have been advised that records have been located which indicate that the former officer in question served in the Permanent Defence Force from July 1940 to June 1946.
The former officer in question did not have the minimum of 12 years pensionable service required to be eligible for a pension under the Defence Forces Superannuation Schemes and consequently there would not be an entitlement to a spouse's or children's pension under the Schemes.
The individual also had service in the Reserve of Officers First Line. However, the service in question is not pensionable service.
87. Deputy Catherine Murphy asked the Tánaiste and Minister for Foreign Affairs and Trade further to Parliamentary Question No. 110 of 5 November 2019, the number of instances in the past 20 years to date data (details supplied) was accessed by An Garda Síochána, the Defence Forces, the Airport Police Service and other public authorities; the number of complaints lodged by Irish passport holders regarding the access of the data; and if he will make a statement on the matter. [46852/19]View answer
My Department is fully committed to keeping all personal data submitted by its customers, safe and secure during administrative processes.
It is not possible to provide the number of requests over the past twenty years as section 41 of the Data Protection Act 2018 only came into force in May 2018.
A case management system was instituted in January 2019 to provide more accessible statistics for these type of requests.
There have been 2,198 requests for information under section 41 of the Data Protection Act 2018 since January 2019 to date.
It is not possible to give further information on the details of these requests, as due to the requirement that suitable and specific measures are taken to safeguard the fundamental rights and freedoms of data subjects, my Department is not privy as to why the information is being sought by the public authority. They request information pursuant to Section 41 of the Data Protection Act 2018. It should be noted that in An Garda Siochána, the requests are authorised at Chief Superintendent level.
Prior to January 2019, a manually operated system was in place from May 2018. My Department will be in contact with the Deputy directly on providing statistics from May 2018 until January 2019 as it will take time to manually collate this data.
I can confirm that there have been no complaints lodged by Irish passport holders in view of Section 41 of the Data Protection Act 2018.
88. Deputy Brian Stanley asked the Minister for Finance if research has been carried out with regard to the economic and social impact an increase in carbon tax will have on those living in rural Ireland. [43659/19]View answer
As part of a joint research programme between the Department of Finance, the Revenue Commissioners and the Economic and Social Research Institute (ESRI), the ESRI published research on the impacts of increases in the carbon tax, including distributional impacts. This research paper can be accessed at: https://www.esri.ie/publications/the-economic-and-environmental-impacts-of-increasing-the-irish-carbon-tax.
In June 2019, the ESRI published a special article, Carbon taxation in Ireland: Distributional effects of revenue recycling policies. This special article examined the distributional effects of increases in the carbon tax for urban and rural households as well as the distributional effects of different revenue recycling mechanisms.
This article can be accessed at: https://www.esri.ie/news/a-well-designed-carbon-tax-could-reduce-emissions-and-alleviate-income-inequality.
I recognise that the research points to carbon tax increases disproportionately impacting low income and rural households. In order to minimise the impact of the increase on heating costs, I have delayed the increase on home heating fuels until 1st May 2020. I am also increasing the fuel allowance by €2 per week. This increase applies from the first of January 2020 and means an annual increase of €56 to each household. Based on the findings from the aforementioned ESRI research, this will leave the 370,000 households who are in receipt of the fuel allowance better off than before the increase in the carbon tax. This ensures that the most vulnerable in society are protected from the increased carbon tax.
Alongside this I am providing increases to programmes that help to address the causes of fuel poverty. The Warmer Homes scheme provides free energy efficiency upgrades to households deemed to be in or at risk of energy poverty. This reduces the energy required to heat a home adequately, thus reducing a household’s exposure to increases in energy costs. This will be more effective in the long run at reducing heating costs than increases in the fuel allowance. An extra €13m will be provided for this scheme in 2020, bringing its total budget allocation for the year to over €50m.
These measures will help to protect the most vulnerable in society from the impact of the carbon tax increases in the short, medium and long term.
89. Deputy Maureen O'Sullivan asked the Minister for Finance the reason large polluters such as the airline sector were not considered for increased carbon related taxation as a means to make carbon taxes more equitable in view of the increase in carbon taxes and related climate change mitigation expenses being levied on many persons and households in budget 2020; and if he will make a statement on the matter. [42280/19]View answer
The overarching legislative framework for the taxation of aviation fuels used in intra EU and international flights is in EU and international laws. EU Directive 2003/96/EC on the taxation of energy products and electricity, commonly known as the Energy Tax Directive, requires Member States to exempt certain fuels used for commercial aviation purposes from excise duty. The scope of this exemption must include jet fuel (which is the most commonly used heavy oil in air navigation) and must encompass such fuel used for intra-Community and international air transport purposes.
A Member State may waive this exemption where it has entered into a bilateral agreement with another Member State to tax fuel for intra-community flights. With regard to fuel for international transport, the scope for a Member State to take a unilateral approach to taxation is limited by international law and a range of bilateral and multilateral agreements that operate under 1944 Convention on International Civil Aviation (known as the Chicago Convention).
I am informed by Revenue that the breakdown of taxes levied on the different types of aviation fuel as provided for under the Finance Act 1999 and Energy Tax Directive are shown in the following table.
Energy Tax Directive
Finance Act 1999
Light oil (aviation gasoline) used for domestic commercial aviation
No mandatory tax exemption, Member States may opt to exempt or partially exempt
Partial relief from MOT, effective rate of €369.42 per 1,000 litres (section 97B Finance Act 1999)
Light oil (aviation gasoline) used for intra-Community/international commercial aviation
No mandatory tax exemption, Member States may opt to exempt or partially exempt
Partial relief from MOT, effective rate of €369.42 per 1,000 litres (section 97B Finance Act 1999)
Light oil (aviation gasoline) used for private pleasure flying
Full MOT rate of €601.69 per 1,000 litres (section 96 Finance Act 1999)
Heavy oil (jet fuel) used for domestic commercial aviation
No mandatory tax exemption, Member States may opt to exempt or partially exempt
Full exemption (section 100(2)(b) Finance Act 1999)
Heavy oil (jet fuel) used for used for intra-Community/international commercial aviation
Mandatory tax exemption, except where bilateral arrangement entered into with another Member State
Full exemption (section 100(2)(b) Finance Act 1999)
Heavy oil (jet fuel) used for private pleasure flying
Full MOT rate of €494.90 per 1,000 litres (section 100(2)(b) Finance Act 1999)
Since 2012, CO2 emissions from the aviation sector have been included in the EU Emissions Trading System (ETS) and the sector is therefore subject to a carbon pricing mechanism.
90. Deputy Thomas P. Broughan asked the Minister for Finance his views on the key steps which should be recommended to the new Lagarde leadership of the European Central Bank to stimulate the slowing EU economy. [45808/19]View answer
The ECB's mandate is to maintain price stability in the euro area. The Central Bank of Ireland contributes to the formulation of monetary policy at Eurosystem level, and further details of this? are set out in the Bank’s Annual Report.
The Treaty on the Functioning of the European Union prohibits the ECB from seeking or taking instructions from EU institutions or bodies, from any government of an EU Member State, or from any other body. These requirements are set out in Article 130 of the Treaty and ensure that the principle of central bank independence is respected and there is no influence on the members of the ECB’s decision-making bodies. Therefore, it would not be appropriate for me to make recommendations such as the Deputy suggests.
91. Deputy Carol Nolan asked the Minister for Finance when revenue from the carbon tax will be ring-fenced for the purpose of a just transition in the midlands; the timeframe for same; and if he will make a statement on the matter. [46781/19]View answer
In Budget 2020 I announced that all new revenues arising from the increase in the rate of carbon tax would be ring-fenced for climate action purposes. It is estimated that the €6 increase in the rate of carbon tax will raise approximately €90 million additional revenue in 2020. These funds will be used to protect those most exposed to higher fuel and energy costs, to build a Just Transition and to support new investment in climate action.
€31 million of this additional revenue will be ring fenced for the Just Transition Package and disbursed to the Department of Housing, Property and Local Government, the Department of Culture, Heritage and the Gaeltacht and the Department of Communications, Climate Action and Environment as detailed in the following below:
Just Transition Package
Aggregated Housing Upgrade Scheme
Department of Housing, Planning and Local Government
€ 5 million
Department of Culture, Heritage and the Gaeltacht
Just Transition Fund
€ 6 million
Department of Communications, Climate Action and Environment
Managing the delivery of the just transition package is the responsibility of the Departments listed above.
92. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he expects measures taken to date to adequately deal with issues arising from Brexit; and if he will make a statement on the matter. [46873/19]View answer
Since the result of the UK referendum in 2016, Brexit has been embedded in all of the Government’s economic decision-making, and in the management of our economy. At all times the Government has sought to protect our citizens and support the economy, enterprise and jobs. Budget 2020 builds on the preparations that have been underway across Government since the UK referendum in 2016, including:
- dedicated measures announced in Budgets 2017, 2018 and 2019;
- two comprehensive Contingency Action Plans;
- enhanced physical capacity at our ports and airports;
- training and financial supports to increase our customs capacity; and
- appointment of additional staff in key areas.
In addition, up to €600 million has been made available through the Future Growth Loan Scheme and Brexit Loan Scheme. This is already helping our businesses to mitigate the risks of Brexit.
Budget 2020, including the macroeconomic and fiscal outlook which underpins it, was based on the prudent assumption that the UK would leave the EU without an agreement. The Budget set out a number of temporary, targeted support measures that could be triggered to ensure that that our economy will be protected insofar as possible from the risks of a no deal Brexit. This is prudent budgetary management. Assuming a no-deal Brexit ensures that the Government will have the necessary resources at its disposal to address this challenge, whilst preserving the longer-term sustainability of the public finances and safeguarding the hard won progress of recent years in stabilising the public finances.
The Government’s focus is to protect our economy and to minimise disruption to the greatest extent possible. The best way we can mitigate against the risks posed by Brexit is through prudent budgetary policy, careful management of the public finances and by focusing on competitiveness-oriented policies. The Government will continue to work to strengthen the resilience of the economy, to maximise opportunities and to prepare for the challenges of Brexit.
93. Deputy Bernard J. Durkan asked the Minister for Finance if, in the aftermath of Brexit, he remains satisfied that Ireland is adequately protected in the event of currency fluctuations; and if he will make a statement on the matter. [46874/19]View answer
Budget 2020, including the macroeconomic outlook which underpins it, was based on the prudent assumption that the UK would leave the EU on 31 October without an agreement. The macroeconomic outlook is set out in the Economic and Fiscal Outlook published with Budget 2020. The euro-sterling exchange rate assumptions underlying Budget 2020, based on exchange rate outturns as of mid-September 2020 and unchanged thereafter, are set out in Table 1:
Table 1: Euro-sterling exchange rate assumptions underlying Budget 2020
Euro-sterling exchange rate (€1=)
Source: Budget 2020 Economic and Fiscal Outlook
In the event of a disorderly Brexit, the Government will provide financial support to the economy, in the first instance through higher unemployment-related spending. The Government will also provide timely targeted support to viable firms and enterprises. This will build on existing supports, and will be designed to address transitional issues such as cash-flow problems and market diversification.
As we cannot control the international environment or exchange rate developments, it is crucially important that continued competitiveness improvements are achieved, including by focusing on costs we can control and by boosting our productivity. Ensuring a sustainable path for the public finances is also of fundamental importance.
The Government’s trade strategy - Ireland Connected - sets out a number of measures specifically addressing Brexit-related issues, including diversification of markets for indigenous exporters.
In addition, recent budgets have introduced specific initiatives, such as loan supports for agri-businesses, aimed at supporting those businesses most affected by Brexit. The Brexit Loan Scheme assists firms to adapt and innovate in response to Brexit, to restructure their cost bases and give them the opportunity to diversify into other markets thereby reducing their exposure to the UK. The Future Growth Loan Scheme provides a longer-term facility of up to €300m to support strategic capital investment for a post-Brexit environment by business at competitive rates.
94. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he remains satisfied regarding the stability of eurozone countries; if this is likely to be affected by currency trading changes; and if he will make a statement on the matter. [46875/19]View answer
As Minister for Finance, I attend the Economic and Financial Affairs Council of the European Union (ECOFIN) which is responsible for EU policy in a number of areas including economic policy. I also attend meetings of the Eurogroup, where the Ministers of the Euro Area Member States discuss matters concerning their shared responsibilities related to the euro.
At both the ECOFIN and Eurogroup meetings, Ministers work alongside the European Commission and the European Central Bank (ECB) to take stock of the latest economic situation, including the risks to the European economy’s growth prospects.
I regularly monitor the latest economic developments. My Department continually analyses and prepares briefing on short and medium-term macroeconomic trends in European and international economy. This includes informing me of the latest forecasts of the global economy and of our key trading partners from the international institutions.
The Commission published its Autumn Economic Forecast on Thursday 7th November. The forecast indicated that the European and the Euro Area economies have weakened over the past year, reflecting a considerable slowdown in external demand and contraction in the manufacturing sector. While the Euro Area is now in its seventh consecutive year of growth, with growth expected to continue in all Member States, this is at a considerably slower rate than earlier in the decade. European labour markets have remained strong and the unemployment rate has fallen to below its pre-crisis level, fuelling robust wage growth, allowing domestic demand to expand at a relatively steady pace. The labour market is expected to maintain this performance albeit at a slower pace reflecting the broader economy.
The European economy is expected to enter a protracted period of subdued growth and low inflation. The Commission is forecasting Euro Area GDP to expand by 1.1 per cent in 2019 and by 1.2 per cent in 2020 and 2021. The GDP forecast for the EU28 is for growth of 1.4 per cent in 2019 and 2020. This represents a significant slowdown from the growth rates seen in 2015-2017. The performance of individual Member States is diverging with some areas (e.g. Central and Eastern Europe, Malta, and Ireland) expanding faster than others (e.g. Italy, Germany).
The Commission also identified a number of risks to future growth in its forecast, including; a less supportive external environment, persisting tension in the international trade environment, a slowdown in Euro Area manufacturing, and uncertainty related to Brexit.
Member states promote stability and growth in their respective economies during the European Semester Cycle. The purpose of the cycle, commencing in November, is to provide a framework for coordination of economic policies and guidelines, delivered in the context of the Stability and Growth Pact (SGP) and Macroeconomic Imbalance Procedure. In Spring/Summer the Commission makes country specific recommendations based on EU member state plans for macroeconomic, budgetary, and structural reforms. The recommendations are designed to put in place, and maintain, the necessary conditions for stability, growth, and jobs in all EU partners.
The Commission Forecasts note that monetary policy conditions are expected to remain supportive and that the Euro Area fiscal stance is set to remain broadly neutral.
In trade terms, almost half of all the trade in goods undertaken by Euro Area countries is with other Euro Area countries, and thus is not subject to currency risk. The nominal values of other key trading partner currencies (as the Euro) are determined by market forces. The Commission forecasts are based on a standard technical assumption of unchanged interest and exchange rates from a given cut-off date. However, the variability of the international environment, including exchange rate developments, underlines the importance of continued competitiveness improvements including by focussing on costs we can control and by boosting our productivity. Ensuring a sustainable path for the public finances is also of fundamental importance.
The adoption of tailored country-specific structural and fiscal reforms will help to boost future growth, increase resilience, and improve future living standards within the Euro Area.
95. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the economy will continue to remain competitive notwithstanding Brexit or other international developments, including trade deals or lack of such; and if he will make a statement on the matter. [46876/19]View answer
Strong economic growth is a sign of our economy’s competitiveness, with GDP up 6½ percent in year-on-year terms in the first half of this year. Although in the Irish context, GDP can be distorted by globalisation factors, other indicators such as modified domestic demand confirm continued growth in our economy. The strength of the economy is most clearly evident in the labour market. Total employment increased by 63,100 (+2.8 per cent) in the first half of 2019 while the unemployment rate for October fell below 5 per cent for the first time since 2007.
The strength of our economy reflects the important steps we have taken to improve our competitiveness. The 2019 IMD World Competitiveness Yearbook recently ranked Ireland as the 2nd most competitive country in the EU and the 7th most competitive country in the world. In addition, since 2008, the Central Bank’s real harmonised competitiveness indicator has improved by approximately 22 per cent.
Importantly, the robust economic growth in recent years has not yet given rise to significant inflationary pressures. In the first ten months of 2019, average annual inflation was just 0.9 per cent. On wage developments, average weekly earnings increased by 3.5 per cent year-on-year in the second quarter of 2019. The rise in household incomes is a welcome development, however it needs to be monitored closely, as a significant acceleration in wages could undermine Ireland’s competitiveness relative to other European countries.
Despite recent positive developments, the risks over the coming years are numerous and primarily external in nature. As well as continued uncertainty with respect to Brexit, there is also evidence of a continued slowdown in global growth, as has been recently reported by the IMF and the European Commission.
The Budget 2020 central scenario projections assumed a disorderly Brexit scenario. Under this scenario, GDP growth of just 0.7 per cent would be in prospect next year, reflecting both the impact of a no-deal Brexit and weakness in the global outlook. However, given recent events in the UK and the ‘flextension’ granted by the EU, a disorderly Brexit in 2020 is less likely, though still possible. Of course, any form of Brexit will have a negative impact on the Irish economy.
The best way we can mitigate against these risks is through prudent budgetary policy, careful management of the public finances and by focusing on competitiveness-oriented policies.
96. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he anticipates economic growth here to keep pace with other economies throughout Europe and outside in the next five years; and if he will make a statement on the matter. [46877/19]View answer
Budget 2020, which was based on the assumption of a no-deal Brexit, projected GDP growth of 5.5 per cent this year and just 0.7 per cent next year, reflecting the Brexit impact and a weakening in the global environment. Growth in modified domestic demand – a better barometer of economic conditions in Ireland – is estimated at 3.2 per cent this year and 1.4 per cent next year.
Indeed as a barometer of how well our economy is performing, there is no story more positive than the one emanating from our labour market. The strong growth in employment over the last number of years has continued into this year, with total employment increasing by 45,000 (+2.0 per cent) in the year to Q2 2019. As a result, there are now 2.3 million people at work in Ireland.
In an EU context, Ireland remains one of the fastest growing Member States. The strong growth and performance seen in our economy is also clearly illustrated by a comparison with the performance of our main trading partners – the Euro Area, the UK and the US.
For the Euro Area the European Commission is forecasting growth of 1.1 per cent this year, and 1.2 per cent next year. The GDP forecast for the EU28 is for growth of 1.4 per cent in 2019 and 2020. This represents a significant slowdown from the growth rates seen in 2015-2017.
The European economy is expected to enter a protracted period of subdued growth and low inflation. GDP should continue to grow in all Member States, albeit at a more moderate pace, in 2020 and 2021. The performance of individual Member States is diverging with some areas (e.g. Central and Eastern Europe, Malta, and Ireland) expanding faster than others (e.g. Italy, Germany).
For the UK, modest GDP growth of 1.3 per cent is expected this year and 1.4 per cent next year, based on a technical assumption of status quo in terms of trading relations between the EU27 and the UK.
Growth in the US economy is forecast to slow as tailwinds from the fiscal stimulus implemented last year fade. Growth is expected to fall from 2.3 per cent in 2019 to 1.8 per cent in 2020.
In common with Ireland, there has been a recovery in employment growth in all our main export markets – though at a more modest pace – with a corresponding reduction in unemployment.
97. Deputy Bernard J. Durkan asked the Minister for Finance the position of Ireland in respect of debt, current or otherwise, in the context of the eurozone and the rest of Europe; and if he will make a statement on the matter. [46878/19]View answer
As set out in the Budget 2020, Economic and Fiscal Outlook document, an important milestone is expected to be achieved this year, namely that the debt-to-GDP ratio is projected at below the 60 per cent threshold set out in the Stability and Growth Pact, for the first time in the post crisis era.
Ireland’s position in terms of gross general government consolidated debt is below the average level of gross general government consolidated debt for both the Euro Area and the European Union when measured as a percentage of GDP.
However, modified gross national income (GNI*) is a more accurate measure of repayment capacity in Ireland, as it excludes many of the factors that artificially inflate the level of GDP in Ireland. On this basis, Ireland’s gross general government consolidated debt as a percentage of GNI* is above the average level of the gross general government consolidated debt as a percentage of GDP for both the EU 28 and the Euro Area.
My Department has published, for the third year, the Annual Report on Public Debt in Ireland 2019 which highlights that public indebtedness remains very high in Ireland, reaching an estimated 100.2 per cent of GNI* this year. This is a vulnerability that must be addressed and is why reducing public indebtedness remains a key priority for Government.
98. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which economic initiatives are likely to arise in the event of unforeseen impacts from Brexit; and if he will make a statement on the matter. [46879/19]View answer
Since the result of the UK referendum in 2016, Brexit has been embedded in all of the Government’s economic decision-making, and in the management of our economy. At all times the Government has sought to protect our citizens and support the economy, enterprise and jobs. Dedicated measures were announced in Budgets 2017, 2018 and 2019 including up to €600 million that has been made available through the Future Growth Loan Scheme and Brexit Loan Scheme. This is already helping our businesses to mitigate the risks of Brexit.
Budget 2020 builds on these preparations. Budget 2020, including the macroeconomic and fiscal outlook which underpins it, was based on the sensible assumption that the UK would leave the EU on 31 October without an agreement. Budget 2020 involves a ‘twin-track’ approach, namely:
- Funding services and making progress on particular policy areas, and;
- Supporting sectors and regions most exposed to Brexit-related disruption.
In the event of a disorderly exit from the EU by the United Kingdom, certain sectors of our economy would be impacted more severely than others. In particular, indigenous enterprise and agriculture are likely to be the hardest hit, given our close trading relationship with the UK and the expected increase in tariffs.
To mitigate against this, in addition to allowing the public finances to absorb the shock, the Budget set out a number of temporary, targeted support measures of over €1.2 billion that could be triggered to ensure that that our economy will be protected in as far as is possible from the risks of a no deal Brexit. This is on top of existing grants and loans which are already available for business and agriculture, and is in addition to ongoing Government expenditure on Brexit preparedness.
Assuming a no-deal Brexit ensures that the Government will have the necessary resources at its disposal to address this challenge, whilst preserving the longer-term sustainability of the public finances and safeguarding the hard won progress of recent years in stabilising the public finances.
The Government’s focus is to protect our economic and financial interests, and to minimise the disruption to the Irish economy to the greatest extent possible. The best way we can mitigate against the risks posed by Brexit is through sensible budgetary policy, careful management of the public finances and by focusing on competitiveness-oriented policies. The Government will continue to work to strengthen the resilience of the economy, to maximise opportunities and to prepare for the challenges of Brexit.
99. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which his Department continues to identify and monitor weaknesses in the economy likely to be exploited by other events outside his control in the aftermath of Brexit; and if he will make a statement on the matter. [46881/19]View answer
My Department continuously identifies and monitors possible risks to, and weaknesses in, the Irish economy, most of which are currently external in nature.
In the Budget 2020 Economic and Fiscal Outlook, four key external risks were identified. Firstly, there is a possibility that the slowdown in global growth will become more prolonged, despite the initial expectation of the slowdown being temporary. Secondly, continued and increasing geopolitical uncertainty has the potential to disrupt growth in key regions and generate headwinds for output and employment in Ireland.
Thirdly, an increase in protectionism, including increased tariffs on EU-US trade, could have a detrimental impact on living standards. Given Ireland’s position as a small open economy with a high degree of integration in global value chains, any further disruption to trade or a slowdown in global growth would have a disproportionate impact on the Irish economy.
The fourth external risk identified is the potential for the outcome of Brexit to be more severe than initially estimated, notwithstanding the assumption of a no-deal Brexit in the baseline forecasts. On the other hand, there is the increasing possibility of the UK leaving the EU with a withdrawal agreement which represents an upside risk.
A useful tool used by my Department to monitor global developments is the economic policy uncertainty index. The global index and the Ireland-specific index are currently at all-time highs, reflecting the challenges currently faced by the global and Irish economies.
As these external challenges are largely beyond our control, the best way we can mitigate against them is through prudent budgetary policy, careful management of the public finances and by focusing on competitiveness-oriented policies. That is what this Government has done and will continue to do.
100. Deputy Bernard J. Durkan asked the Minister for Finance if a land-locked site (details supplied) will be examined by NAMA with a view to enabling the necessary details and procedures to be progressed in order to facilitate housing development; and if he will make a statement on the matter. [46882/19]View answer
The Deputy will be aware that I, as Minister for Finance, have no role in respect of NAMA’s operations and decisions, or in properties securing its loans.
However, as previously outllined in a response on 3rd October 2019, in this instance, I am advised by NAMA that it has never had involvement with the referenced site.
101. Deputy Bernard J. Durkan asked the Minister for Finance the discussions he has had with the Central Bank and-or the European Central Bank with a view to bringing mortgage interest rates here in line with the European norm; and if he will make a statement on the matter. [46883/19]View answer
The European Central Bank (ECB) sets monetary policy and official interest rates for the Eurozone as a whole and also plays a key role in the prudential supervision of European banks and the maintenance of the stability of the overall banking system in the context of the Single Supervisory Mechanism. It is a matter for each credit institution to set its own lending and deposit rates having regard to cost and competitive considerations and also to make its own lending decisions. Neither I nor the Central Bank have a role in prescribing the interest rates that commercial lenders may charge on their loans, including mortgages, or for deposits.
Part of the reason for the differential between Irish mortgage rates and those in other countries is the relatively large historical loss experience in the Irish market during the financial crisis and the related legacy issues of non-performing loans, many of which remain on banks' book. Banks are required to make adequate provisions for such loans.
Banks are also required to hold an adequate level of capital against mortgage lending. These capital requirements are calculated with reference to historical loss and default rates with the result that Irish banks are required to hold relatively more capital for new mortgage lending than many of their European peers, in some cases substantially more capital.
In addition to their capital requirements, banks are also required to build up additional capital to meet regulatory capital buffers such as the countercyclical capital buffer which is intended to ensure banks can withstand future adverse economic shocks.
The impact of these capital requirements is reflected in the interest rates charged for mortgages in Ireland.
Furthermore, the Irish banking system continues to hold a large amount of lower yielding tracker mortgages on their balance sheets and there is currently a high level of concentration in the market for new mortgage credit.
The Central Bank has introduced a number of changes to the Consumer Protection Code that are designed to help consumers make savings on their mortgage repayments; for example, provision 6.5 (g) of the Code now requires lenders at least annually to, inter alia, notify their variable interest (other than tracker) mortgage customers whether they can move to a cheaper interest rate as a result of a change in their loan to value interest rate band and, if the customer is permitted to move, to invite the borrower to contact the lender to discuss the matter. If the consumer is not permitted to move to a lower loan to value band with a lower interest rate, the consumer is nevertheless to be notified that he/she may be able to avail of a lower loan to value interest rate band from another lender based on an up to-date valuation of the property. It should also be noted that the Central Bank macro prudential loan to value and loan to income residential mortgage lending restrictions do not apply to switcher mortgages. More generally, the Code also requires lenders at least annually to provide to variable rate (excluding tracker) mortgage holders:-
- a summary of other mortgage products offered by that lender which could provide savings for the consumer at that point in time,
- a statement that consumers should keep their mortgage arrangements under review as there may be other options that could provide savings for the borrower and
- a link to the relevant section of the Competition and Consumer Protection website relating to mortgage switching or changing mortgage type.
102. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he has monitored the activities of investment funds and other lending institutions in their pursuit of borrowers; if due process and best practice is observed and dealt with as necessary; and if he will make a statement on the matter. [46884/19]View answer
Deputy, in advance of my reply, I am assuming that your use of the words “investment funds” is a reference to those firms in the non-bank sector i.e. retail credit and credit servicing firms.
It is within the remit of the Central Bank of Ireland’s (the Central Bank) responsibilities to safeguard stability and protect consumers, and its approach to mortgage arrears resolution is focused on ensuring the fair treatment of borrowers through a strong consumer protection framework and ensuring that regulated entities have appropriate arrears resolution strategies and operations in place.
The Code of Conduct on Mortgage Arrears (CCMA) is a statutory code that must be complied with by relevant regulated entities as a matter of law. The CCMA provides a strong consumer protection framework, aimed specifically at the process to be followed by relevant firms, to ensure borrowers in arrears or pre-arrears in respect of a mortgage loan secured on a primary residence are treated in a timely, transparent and fair manner.
Banks, retail credit firms and credit servicing firms are all required to comply with the CCMA. The overriding objective of the CCMA is to ensure the fair and transparent treatment of consumers in mortgage arrears or pre-arrears, and that due regard is had to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits. The CCMA recognises that it is in the interests of borrowers and regulated firms to address financial difficulties as speedily, effectively and sympathetically as circumstances allow. It sets out the Mortgage Arrears Resolution Process (MARP), a four-step process that regulated entities must follow:
Step 1: Communicate with borrower;
Step 2: Gather financial information;
Step 3: Assess the borrower’s circumstances; and
Step 4: Propose a resolution
The arrears handling provisions in Chapter 8 of the Consumer Protection Code (the Code) apply when the loan is not a mortgage loan to which the CCMA applies. Amongst other protections, the Code requires that where an account is in arrears, a regulated entity must seek to agree an approach that will assist the personal consumer in resolving the arrears.
Most loan agreements include a clause that allows the original lender to sell the loan on to another firm. When a loan is sold, the relevant Irish and EU consumer protections continue to apply. Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018, which came into effect on 21 January 2019, if a loan is transferred, the holder of the legal title to the credit must now be authorised by the Central Bank as a credit servicing firm. Such credit servicing firms must act in accordance with Irish financial services law that applies to ‘regulated financial service providers’. This ensures that consumers, whose loans are sold to another firm, maintain the same regulatory protections that they had prior to the sale, including under the various statutory Codes of Conduct issued by the Central Bank, such as the Code and the CCMA.
The Central Bank carries out its supervision of regulated entities, including banks, retail credit and credit servicing firms in a number of ways, which includes both desk based and on-site reviews of various activities. In early 2018, I requested the Central Bank to review the CCMA to ensure it remains as effective as possible in the context of the sale of loans by regulated lenders. In November 2018, the Central Bank published a report on this matter.
The review concluded that the CCMA is effective and working as intended in the context of the sale of loans, for borrowers who engage with the process. There was no evidence that retail credit and credit servicing firms do not engage with borrowers in arrears. When a loan is sold by a bank, any existing Alternative Repayment Arrangements (ARAs) in place with a borrower under the CCMA continue to be honoured until the agreed term of the ARA ends. There was no evidence that borrowers, whose circumstances have not changed, were being moved off existing ARAs by retail credit and credit servicing firms during the term of the ARA. There was no material difference in the level of repossessions by retail credit and credit servicing firms compared to banks.
As a follow-up action to the Report on the CCMA, the Central Bank wrote to banks, retail credit and credit servicing firms in August 2019 to set out its expectations of all firms in respect of loan sales. These expectations include that:
- Sufficient due diligence and information sharing takes place at the outset to ensure that complete customer files transfer as part of a loan sale.
- Where a cooperating borrower is complying with the terms of an ARA and their loan is sold, the new regulated entity cannot unilaterally change the ARA.
- The new regulated entity should continue to honour an ARA until review, expiry or by agreement, as appropriate. This includes honouring timelines and terms and conditions for reviews of the ARA.
- Where the borrower’s circumstances have changed, any change to the ARA must be appropriate, sustainable and proportionate to that borrower’s circumstances.
103. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which his Department continues to monitor specific inflationary tendencies within the economy, including inflated rental prices; his plans to address such issues; and if he will make a statement on the matter. [46885/19]View answer
Irish inflation has been subdued for a number of years. For example, on a Harmonised Index of Consumer Prices (HICP) basis, annual inflation has been below 1 per cent since 2013. This trend is unlikely to change this year with HICP inflation of 0.9 per cent on average for the first ten months of 2019. This phenomenon is not restricted to Ireland. In recent years, low inflation has been a feature across all advanced economies.
Irish inflation has been consistently below euro area inflation since 2008. The divergence between inflation in the euro area and Ireland can in part be attributed to the impact of euro-sterling appreciation on consumer prices in Ireland. In turn this reflects the importance of the UK as a source of imports of consumer products.
While overall inflation has been subdued, services inflation has been robust, averaging 2.4 per cent on average for the first nine months of the year. A key component which explains part of the increase in services inflation is the strong growth in rent prices. Rent inflation averaged 6.4 per cent last year, a slight moderation from the 6.7 per cent increase in 2017. This decline in rent inflation has continued into 2019 with rent inflation of 5.5 per cent on average for the nine months of 2019. The high level of rent prices partially reflects the shortage of housing at present, a key concern of Government.
The Government’s strategy for tackling housing issues is set out in Rebuilding Ireland – An Action Plan for Housing and Homelessness. The primary objective of the plan is to increase overall housing supply to a more sustainable level of around 25,000 homes per year by 2020. The Government has committed to spending over €6 billion out to 2021 to implement the plan.