Tuesday, 21 Sep 2021

Written Answers Nos. 31-45

Budget 2022

Questions (31)

Matt Carthy

Question:

31. Deputy Matt Carthy asked the Minister for Finance if he plans to introduce budgetary measures to address the increased costs of building materials considering the current housing shortage. [44745/21]

Written answers

Minister for Finance

The Budget is three weeks away and, as the Deputy will appreciate, it would be inappropriate for me to comment on what may or may not be included in its provisions at this time.

However, the Deputy can take it that, as would apply each year in putting together the Budget elements in conjunction with the Minister for Public Expenditure and Reform, regard will be had to all relevant factors and policy priorities.

Insurance Industry

Questions (32, 49, 74)

Alan Dillon

Question:

32. Deputy Alan Dillon asked the Minister for Finance the engagement he has undertaken with insurance companies to drive down the cost of insurance premia for consumers; and if he will make a statement on the matter. [44856/21]

Brendan Smith

Question:

49. Deputy Brendan Smith asked the Minister for Finance the actions he is taking to reduce insurance costs. [44785/21]

Ruairí Ó Murchú

Question:

74. Deputy Ruairí Ó Murchú asked the Minister for Finance the details of the recent engagements he has had with insurance underwriters in order to bring more into the market; the further progress made in relation to the Action Plan for Insurance Reform Implementation Report; and if he will make a statement on the matter. [44778/21]

Written answers

Minister for Finance

I propose to take Questions Nos. 32, 49 and 74 together.

As committed to in the 2020 Programme for Government, Government is prioritising reform of the insurance sector with particular emphasis on motor, public liability, and employer liability insurance. The whole-of-Government approach being taken through the Action Plan for Insurance Reform therefore sets out 66 actions which aim to improve both the cost and availability of this key financial service, particularly for businesses. As the Deputy may be aware, the Cabinet Committee Insurance Reform Sub-Group earlier this month published the first six-monthly Implementation Report of the Action Plan. This shows that work is progressing well to implement these important reforms, with 34 of the 66 actions now completed. The Sub-Group’s focus now is on implementing the outstanding actions on time.

One of the key achievements in the first half of this year under the Action Plan was the implementation of the Personal Injuries Guidelines , which represents a key achievement of this insurance reform agenda, and was realised several months ahead of schedule. These significantly reduce award levels for many categories of common injuries, particularly those of soft tissue. Of note is that a number of common injuries will now move to the jurisdiction of the District rather than the Circuit Court, thus reducing associated legal fees. The Guidelines also provide guidance in relation to injuries previously not included in the Book of Quantum and will be used by both the Personal Injuries Assessment Board (PIAB) and the judiciary. Therefore, they should help to bring more certainty to claimants and insurers, and as such reinforce the benefits of using the PIAB to settle claims. This in turn should further reduce the costs of claims, particularly legal fees. I have previously set out my view that these costs, rather than the profit component, tend to represent a bigger factor in the cost of insurance premiums. As such, it is important that they are lowered.

As Minister for Finance, my expectation is that insurers will now commence reflecting savings from reduced award levels to customers, in line with past commitments, and both I and Minister of State Fleming are holding them to account on this. In that regard, Minister of State Fleming met with the CEOs of the main insurers operating in Ireland to set out the Government’s expectation in this regard. These engagements were positive, with insurers indicating that they will begin lowering premiums in response to the Guidelines. The Minister of State will meet with CEOs again later this year to review their ongoing response to this and other key reforms.

Another significant achievement of the reform agenda is the establishment of the Office to Promote Competition in the Insurance Market within the Department of Finance. The role of the Office, which is chaired by Minister of State Fleming, is twofold: to assist in reducing insurance costs and to increase the availability of cover, by promoting competition in the Irish insurance market. The Office has held a number of meetings with several key stakeholders, including insurance providers, representative bodies and other civic society groups, to understand gaps in the Irish insurance market. Its aim is to expand the risk appetite of existing insurers and explore opportunities for new market entrants in order to increase the availability of insurance, including specialised cover such as professional indemnity insurance.

Accordingly, the Department is also working closely with IDA Ireland to bring new entrants into the Irish insurance market and to improve its overall competitiveness. Officials from both are developing a customised proposition for potential market entrants and are identifying target providers who offer insurance in areas which have been identified as ‘pinch-points’ in the Irish market.

Finally, I would like to assure the Deputy that work remains ongoing across Government to deliver further elements of the Action Plan, including measures to reform the PIAB, reduce fraud, and make changes to the duty of care in order to strengthen waivers and notices. It is my hope that the implementation of these key actions in particular should have a positive impact on the affordability and availability of insurance for individuals, businesses, community and voluntary groups across Ireland.

Budget 2022

Questions (33)

Pauline Tully

Question:

33. Deputy Pauline Tully asked the Minister for Finance if he will consider in the context of Budget 2022 introducing a refundable tax credit equivalent to 8.5% of annual rent at a cap €1,500 for tenants in private rental accommodation in the context of a rental crisis that is damaging living standards; and if he will make a statement on the matter. [44883/21]

Written answers

Minister for Finance

The previous tax relief in respect of rent paid was abolished in Budget 2011 and it is no longer available to those that commenced renting for the first time from 8 December 2010. This followed a recommendation in the 2009 report by the Commission on Taxation that rent relief should be discontinued. The view of the independent Commission was that, in the same manner in which mortgage interest relief increases the cost of housing, rent relief increases the cost of private rented accommodation. Accordingly, the result of reintroducing this relief would be a transfer of Exchequer funding directly to landlords, which would not have the intended effect of reducing the cost pressure on tenants.

At the time of its abolition, the rental tax relief cost the Exchequer up to €97m per annum, and it is likely that this figure would be even higher today were a similar scheme to be put in place. The refundable element mentioned by the Deputy would potentially add further to the cost.

Finally, as the Deputy will appreciate, I cannot comment more specifically on measures that may or may not be contained in the forthcoming Budget.

Budget 2022

Questions (34)

Pearse Doherty

Question:

34. Deputy Pearse Doherty asked the Minister for Finance the action he will undertake in Budget 2022 to address remote working tax rules which can impose a double tax on cross-Border workers seeking to work remotely post-pandemic; and if he will make a statement on the matter. [44860/21]

Written answers

Minister for Finance

I assume that the Deputy’s question may relate to the taxation of cross-border workers who are Irish resident but commute to work in another jurisdiction and claim relief in accordance with section 825A Taxes Consolidation Act 1997, which is commonly referred to as Trans-Border Workers’ Relief.

The relief effectively removes the foreign employment income from a liability to Irish tax where foreign tax has been paid on that employment income (and such foreign tax is not refundable). In simple terms, the effect of the measure is that Irish tax will only arise where the individual has income other than income from a foreign employment.

The relief applies subject to certain conditions, which includes the requirement that the duties of a qualifying employment are performed wholly outside the State in a country with which Ireland has a Double Taxation Agreement. There is an exception in respect of merely incidental duties which may be performed in the State.

I am advised by Revenue that, in light of the unprecedented circumstances arising due to the Covid-19 pandemic and the resulting public health restrictions to limit movement, for the tax years 2020 and 2021, a concessional treatment for such taxpayers would apply, whereby if employees are required to work from home in the State due to Covid-19, such days working at home in the State will not preclude an individual from being entitled to claim this relief, provided all other conditions of the relief are met. The effect of this concessional treatment allows individuals resident in the State and working for a non-resident employer carry out their employment duties in the State and continue to pay tax in another jurisdiction.

I am aware that there have been calls to place this concessional treatment on a statutory footing so that individuals who are resident in the State, but work outside the State for a non-resident employer, can continue to avail of the relief if they exercise their duties of employment in the State.

During the debates on Finance Bill 2020, I undertook that this matter would be examined as part of the work of the Tax Strategy Group (TSG) for 2021. The resultant paper was discussed by the TSG as part of its deliberations on 8 September last. The examination encompassed very detailed consideration of all relevant matters including the equity of treatment between Irish residents who pay tax in the State, the competitive position of Irish employers and the established principles of international tax. The review identified a number of significant concerns from a policy perspective when having regard to the interest of the wider body of taxpayers encompassing Irish resident employees and employers. The full TSG paper (TSG Paper 21/04) can be located here - www.gov.ie/en/collection/d6bc7-budget-2022-tax-strategy-group-papers/ .

Over the coming weeks between now and Budget 2022, I propose to give this matter further detailed consideration having regard to the comprehensive review carried out under the auspices of the TSG and the fundamental points which the TSG paper raises.

It should also be noted that Ireland has an extensive network of Double Taxation Agreements which have the effect of eliminating double taxation on the same income source. Relief is generally afforded by way of exemption or granting relief for foreign tax paid in the country of residence of the individual.

In the event that an individual does not qualify for Trans-Border Workers’ Relief he/she may be entitled to relief from double taxation under the terms of the relevant Double Taxation Agreement, thus a double taxation charge would not arise in such circumstances.

Question No. 35 answered orally.

Insurance Industry

Questions (36)

Cathal Crowe

Question:

36. Deputy Cathal Crowe asked the Minister for Finance if he will take measures to ensure that the insurance sector does not apply the principle of risk equalisation whereby homes that have never been flooded are being denied insurance that incorporates flood protection cover. [44673/21]

Written answers

Minister for Finance

The provision of flood cover is a commercial matter for insurance companies, based on an assessment of the risks they are willing to accept. At a general level, it is my understanding that firms examine the claims history of the individual risk, the risk of flooding in the area and consider any flood protection measures when deciding what underwriting action to take.

Saying that, I have asked my officials to monitor the development you have mentioned, and engage with Insurance Ireland on the matter. However, it is important to remind the Deputy that neither I nor the Central Bank of Ireland can interfere in the provision or pricing of insurance products. This position is reinforced by the EU framework for insurance (Solvency II Directive).

Current government policy in relation to increasing flood insurance coverage is focused on the development of a sustainable, planned and risk-based approach to managing flooding problems. Almost €1 billion in flood relief measures is being invested over the lifetime of the National Development Plan 2018-2027. The Department of Finance will continue to engage with the OPW, Insurance Ireland and other stakeholders regarding the levels of flood cover being provided.

Finally, the Deputy should be assured that Minister of State Fleming and I will continue to proactively engage on all aspects of insurance reform including flood insurance issues.

Questions Nos. 37 and 38 answered orally.

Budget 2022

Questions (39)

Gerald Nash

Question:

39. Deputy Ged Nash asked the Minister for Finance his views on the pre-budget letter of the Governor of the Central Bank and the pre-budget submission by IFAC; and if he will make a statement on the matter. [44841/21]

Written answers

Minister for Finance

I welcome the advice from both the Irish Fiscal Advisory Council and from the Governor of the Central Bank of Ireland.

Both documents outline the economic context against which budgetary policy is being formulated. My Department is currently updating its forecasts - these will underpin Budget 2022 - and our assessment is that the economy is recovering strongly as the various public health restrictions are gradually relaxed. This broad assessement of the economic backdrop is largely consistent with the views of the Council and Bank.

That said, I am conscious that conditions in the labour market are lagging somewhat - as is normally the case in most advanced economies - and that is why Government is keeping many of the fiscal supports in place for the next few months.

In terms of the implications for budgetary policy, a number of key issues are outlined both by the Council and Bank. Firstly is the need to address structural fiscal challenges, while second is the issue of high public debt.

In relation to the former, the Summer Economic Statement set out a medium-term budgetary strategy that seeks to address this. Government is putting budgetary policy within a medium-term framework, a development that has been welcomed by the Fiscal Council. This is being operationalised by way of an expenditure rule, through which public expenditure will be tied to the estimated trend growth rate of the economy. Such an approach enhances fiscal sustainability while allowing investment in key government priorities, particularly capital investment.

I note, in particular, the Fiscal Council’s view that the expenditure plans are at the limit of what is prudent. I agree with this assessment, and that is why the Government introduced expenditure ceilings that will apply irrespective of revenue performance.

The second key point is that of public debt, and I share the assessment that this needs to be stabilised and then put on a downward path. But it is also important to stress that both the Council and Bank are supportive of the view that allowing public debt to rise was the appropriate response to the pandemic.

Nevertheless, at almost a quarter of a trillion euros, Ireland's public debt is amongst the highest (on a per capita basis) in the developed world. That is why, by 2023, we will eliminate the need to borrow for day-to-day spending while continuing to invest in the productive capacity of the economy. This approach - gradually eliminating borrowing for current spending while continuing to invest in our future - is the best way of supporting economic improvements while ensuring fiscal sustainability.

Official Engagements

Questions (40)

John McGuinness

Question:

40. Deputy John McGuinness asked the Minister for Finance if he has recently met with a union (details supplied). [44876/21]

Written answers

Minister for Finance

Minister for State Fleming and I have had regular contact with the Financial Services Union (FSU) in the last year, particularly in relation to the withdrawal of Ulster Bank and KBC Bank Ireland (KBC) from the Irish market. I met with the FSU after the Ulster Bank announcement by NatWest and I have committed to further engagement with the FSU in relation to this issue.

Whilst the management of staff matters is entirely a matter for the Banks and any counterparty who acquires any of their business, I would expect all stakeholders to be very sensitive in relation to the needs and rights of staff. This includes full compliance with any statutory requirements, and honouring all agreements in place between the bank and staff representative bodies. In addition, I would expect these entities to engage with staff representative bodies as appropriate.

Ulster Bank

I note that on 11 June Ulster Bank reached a new Colleague Agreement with the FSU and that this agreement is subject to a ballot of FSU members.

On 23 July, Ulster Bank reached a non-binding agreement with PTSB for the proposed sale of €7.6bn performing loans, Ulster Bank’s Lombard Asset Finance business, and 25 of 88 Ulster Bank branch locations. If this potential transaction is delivered, it is expected that between 400 and 500 Ulster Bank employees will transfer to PTSB.

Ulster Bank has also committed not to close any branches in 2021 and said that it does not anticipate closing any branches in the first half of 2022. Branches will also continue to play an important role in its business in the second half of 2022.

KBC

On 16 April, when KBC announced the proposed transactions that may result in it is withdrawing from the Irish market, it stated that it had entered into a Memorandum of Understanding with Bank of Ireland, expressing the parties’ intention to explore a route that could potentially lead to a transaction whereby Bank of Ireland commits to acquire substantially all of KBC Bank Ireland’s performing loan assets and liabilities.

I note that Bank of Ireland has commented that it will be working closely with all colleagues at these branches and will be setting out a range of options, including relocating to a different branch, moving to a new role in the bank, or voluntary redundancy for those who choose it. KBC also made an internal announcement in mid-August regarding job security for employees until 31 December 2021.

These potential agreements are subject to further due diligence, negotiation, and the completion of a final binding agreement and obtaining of regulatory approvals. While these are commercial negotiations, the Government is supportive of trying to bring about an outcome that is good for the banking sector, as well as for the staff and customers of Ulster Bank and KBC and for the Irish economy generally.

Questions Nos. 41 and 42 answered orally.

Credit Unions

Questions (43)

Michael Moynihan

Question:

43. Deputy Michael Moynihan asked the Minister for Finance if credit unions will be facilitated to provide mortgages for private housing purchases. [44859/21]

Written answers

Minister for Finance

Credit Unions can and do provide mortgages.

Following a review of the lending framework, the Central Bank introduced new lending regulations on 1 January 2020. This provided credit unions with a combined capacity to provide up to approximately €1.1 billion in additional mortgage and SME loans, with further additional lending capacity available to credit unions who can comply with certain conditions or on approval by the Central Bank.

Credit unions currently have a mortgage book of approximately €247 million, which has grown 25% year-on-year.

Budget 2022

Questions (44)

Pearse Doherty

Question:

44. Deputy Pearse Doherty asked the Minister for Finance the status of changes announced to the research and development tax credit for small and micro-companies under section 25 of the Finance Act 2019; the reason engagement with the Commission began only in March 2020; when the changes are expected to commence; if he will consider amending the research and development tax credit in the context of Budget 2022 by allowing small and micro companies to receive payable credits in one instalment not earlier than the relevant tax pay and file date for the company’s accounting period in which the qualifying expenditure was made rather than three instalments over a 33 month period; and if he will make a statement on the matter. [44862/21]

Written answers

Minister for Finance

The Deputy will be aware that in Budget 2020, I provided for the introduction of a number of targeted enhancements to the R&D tax credit for micro and small companies and noted that these were being introduced subject to a commencement order, pending State aid approval from the European Commission.

Officials in my Department began engagement with the Commission on this matter in March 2020. This is a standard time-line for such a process as the legislation must first be enacted (Finance Act 2019 was signed into law on 22 December 2019) and then further work is required to prepare for, and schedule, discussions with Commission officials.

The Deputy will be aware that this period also coincided with the onset of the Covid-19 pandemic, which required the immediate attention of officials both in Ireland and in the Commission to develop and implement measures to support businesses and employees affected by the public health restrictions.

It has been determined that, as the proposed micro and small company measures are targeted measures, in order to secure State aid approval it may be necessary to introduce some changes to the measures for micro and small companies in order to secure State aid approval. However, as the measures in their current form are enhancements to the existing general R&D credit, this could present a significant administrative challenge to both taxpayers and Revenue if different criteria were to apply to two elements of a claim for the same R&D costs. Adding complexity and administrative burden would be counter productive to the aim of assisting small and micro companies. My officials are currently working to develop options to progress this position in order to deliver the best outcome for small innovative companies, including options for other methods of support taking into account the significant changes to the wider economy since the measure was announced. The Deputy's suggestions will be taken into account in this process.

Over the last 18 months, the immediate priority of this Government has been to support businesses during the Covid pandemic. Revenue advise that the companies using the extensive Covid-19 supports were primarily SME companies, and the supports were primarily aimed at delivering immediate cash supports to enable affected businesses to maintain a level of trade and retain their staff in employment.

The need to attract early stage funding into new and innovative businesses has also motivated work undertaken by my officials over the last year to review the Employment and Investment Incentive Scheme (EIIS), with a view to identifying options to continue to make the EIIS more efficient and effective. I will be considering options in this regard in the context of Budget 2022.

Insurance Industry

Questions (45)

James Lawless

Question:

45. Deputy James Lawless asked the Minister for Finance the progress being made by his Department in its areas of responsibility under the Action Plan for Insurance Reform; and if he will make a statement on the matter. [44790/21]

Written answers

Minister for Finance

The Cabinet Committee Sub-Group on Insurance Reform oversees implementation of the Action Plan for Insurance Reform. This Plan sets out 66 actions across several departmental policy areas, including that of the Department of Finance, to improve the insurance environment for consumers, businesses and community groups. This cross-Governmental reform agenda has been adopted in recognition of the need for a comprehensive and structured approach in order to deliver real reform in this important area.

Implementation of the Action Plan is well underway. As the Deputy may be aware, in July the Cabinet Committee Insurance Reform Sub-Group published the first six-monthly Implementation Report of the Action Plan. This shows that work is progressing well to implement these important reforms, with 34 of the 66 actions now completed. There have been a number of achievements made by my Department, including:

- The creation a new Office to Promote Competition in the Insurance Market, chaired by Minister of State Fleming;

- The expansion of the National Claims Information Database (NCID) to gather data on employer and public liability insurance – the first report of which was published in July;

- The publication of the Final Report and Recommendations of the Central Bank’s Review of Differential Pricing in the Motor and Home Insurance Markets, which is now subject to a public consultation until 22 October;

- The enactment the majority of provisions under the Consumer Insurance Contracts Act 2019; and

- The publication of the Oireachtas Post-Enactment Scrutiny Report in relation to this Act.

Work is continuing across Government to ensure the implementation of the Action Plan, with 97% of actions due to be implemented by the end of the year. For my Department, this includes an examination of the Central Bank’s recommendations in relation to differential pricing, as well as the development of a databank for new entrants to the insurance market. In addition, to the Action Plan both Minister of State Fleming and I intend to bring draft legislation to Government for approval in the coming weeks. This will address a number of important insurance issues that have arisen recently.

Finally, I would like to assure the Deputy that work remains ongoing across all of Government to deliver further key elements of the Action Plan, including measures to reform the PIAB, reduce fraud, and make changes to the duty of care in order to strengthen waivers and notices. It is my hope that the implementation of these key actions in particular should further help to lower public liability insurance costs for businesses.