Written Answers Nos. 215-230
215. Deputy Holly Cairns asked the Minister for Finance the steps he is taking in response to concerns from trustees of a sporting organisation regarding registering with the Central Register of Beneficial Ownership of Trusts; and if he will make a statement on the matter. [21342/23]
View answerAnti-money laundering legislation requires each EU Member State to establish a Central Register of Beneficial Ownership of Trusts (CRBOT). The purpose of the Register is to help prevent money laundering and terrorist financing by improving transparency on who ultimately owns and controls Irish trusts. Trustees have a legal obligation to register details of relevant trusts and their beneficial owners on the CRBOT portal, which is administered by Revenue.
Irish sporting organisations, where not incorporated, will usually have a trust structure to hold assets, such as a bank account. This trust is commonly created by the organisation’s constitution. For sporting clubs and associations, it is the members of the unincorporated body who are the beneficial owners of the trust.
Regulation 3(6) of Statutory Instrument No. 194 of 2021 (www.irishstatutebook.ie/eli/2021/si/194/made/en/print) provides for reduced filing requirements for certain sporting bodies, removing the requirement for all beneficial owners to register on the CRBOT. The legislation stipulates that club trustees, the committee or other governing body and any other individual who has control over the trust, register on the CRBOT.
At the time of putting in place the necessary legislation, the Department of Finance recognised the fact that the trusts provisions of the anti-money laundering Directive would be particularly onerous for Ireland and many of the trusts structures, including sports clubs, that exist here. Therefore the Department worked to ensure, in so far as possible, that the obligations introduced were proportionate to the aims of the Directive. Extensive engagement took place with the Attorney General and the European Commission at the time. The proportionate approach which resulted included the reduced filing requirements for certain sporting bodies outlined above.
The beneficial ownership information to be provided includes personal information such as name, nationality, address, date of birth and PPSN. Any information registered on the CRBOT is only accessible by the club trustees and by designated persons and competent authorities in limited circumstances. Members of the public can access restricted information on the CRBOT when they can demonstrate a legitimate interest that they are engaged in the prevention, detection or investigation of money laundering or terrorist financing offences; and the subject of the access request is connected with persons convicted of an associated offence or holds assets in a high-risk third country. Any request for access by a member of the public is required to be accompanied by information and documents demonstrating a right of access.
Negotiations are currently underway on a package of revised EU anti-money laundering legislation. As part of this process, Irish officials are working to ensure that the equivalent obligations in the new legislation will be proportionate to the aims and will have due regard to Ireland’s situation, where trusts are used for a wide variety of purposes.
Further details about the CRBOT are available on the Revenue website at: www.revenue.ie/en/crbot/index.aspx. Should the Deputy require further clarification in respect of the CRBOT or a specific sporting organisation or Trust, the Trust Register team can be contacted at trustregister@revenue.ie.
216. Deputy Holly Cairns asked the Minister for Finance his views on adjusting the qualifications for single person child carer credit to apply to both parents when they are legally separated; and if he will make a statement on the matter. [21349/23]
View answerThe 2009 Commission on Taxation reviewed the One-Parent Family Tax Credit and acknowledged that it played a role in supporting and incentivising the labour market participation of single and widowed parents. However, in its recommendations, the Commission concluded that the credit should be retained but that it should be allocated to the principal carer of the child only. A feature of the One-Parent Family Tax Credit was that it could be claimed by multiple individuals in respect of the same child, resulting in an unsustainable position.
The One-Parent Family Tax Credit was replaced with the Single Person Child Carer Tax Credit (SPCCC) from 1 January 2014. The current value of the credit is €1,650 per annum. In addition to the credit, a qualifying claimant is entitled to an additional €4,000 on the standard rate income tax band.
However, the credit is more strategically targeted, in that it will in the first instance only be available to the principal carer of the child, who has a qualifying child resident with him or her for the whole or greater part of the tax year and who satisfies the other conditions of the relief. To qualify as a single person for the purposes of the SPCCC, the claimant must not be jointly assessed for income tax as a married person or civil partner, or be living with his or her spouse or civil partner. An individual can only receive one SPCCC irrespective of the number of qualifying children residing with him or her.
If both parents have equal custody (by court order) and the child resides with each parent for an equal part of the tax year, the primary claimant is the parent who is in receipt of Child Benefit from the Department of Social Protection. However, it should be noted that this ‘tie-breaker’ test is only relevant for the purposes of determining a primary claimant for this credit in this particular situation where the child resides with each parent for an equal amount of time.
A primary claimant can relinquish entitlement to the SPCCC to a secondary claimant. The secondary claimant can then claim the credit if he or she qualifies as a single person and the qualifying child resides with him or her for at least 100 days throughout the tax year. Detailed information on the SPCCC can be found on Revenue’s website at link: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-41.pdf which may be of interest to the Deputy.
I am satisfied that the SPCCC in its current form is targeting State resources to where they are most needed. As such, I have no plans to adjust the qualification criteria for the SPCCC from its current form.
217. Deputy Aindrias Moynihan asked the Minister for Finance the measures he is taking to ensure the current reductions in inflation will be passed on to consumers nationally; and if he will make a statement on the matter. [21498/23]
View answerThe main driver of inflationary pressures over the past year has been Russia’s invasion of Ukraine and the energy market pressures that followed. Consumer price (HICP) inflation picked up sharply over the last year and averaged 8.1 per cent for 2022 as a whole, peaking at around 9½ per cent last summer.
Energy prices have now retreated from the highs reached last year. In particular, wholesale gas prices have moderated significantly from the peak of £4 per therm reached last August, with spot prices currently in or around £1 per therm of late. Oil prices have also declined from their 2022 peak and now stand at around $80 per barrel.
The easing in wholesale energy markets suggests that inflation has now passed its peak and is on a downward trajectory. While wholesale prices for natural gas have fallen from their highs of last summer, the full pass-through to households will occur with a significant lag due to the hedging strategies of suppliers. Price setting is a matter for individual suppliers and the timing around any future price changes will largely depend on individual hedging strategies of each supplier.
It should be noted that if retail electricity and gas prices had followed wholesale prices last year there would have been a more significant and rapid increase in retail prices. The opposite effect appears to be at play with higher wholesale prices that were ‘bought forward’ over the last year or so affecting today’s retail prices.
In the meantime, government has responded swiftly and decisively in assisting households through this period of elevated inflation. A total of €12 billion in cost of living supports have been announced to date, including the reduction in excess duties and VAT on electricity and gas, along with the provision of electricity credits to each household. The measures implemented have been carefully targeted in order to ensure that help is given to the most vulnerable households without inadvertently adding to inflationary pressures.
While inflation in Ireland remained elevated at 6.3 per cent in April, this marks a decline of 3 percentage points since October. Looking ahead, inflation is anticipated to continue to moderate over the course of the year and average 4.9 per cent for 2023 as a whole. However, there remains considerable uncertainty around the outlook for inflation.
218. Deputy Aindrias Moynihan asked the Minister for Finance the number of applications made under the help-to-buy scheme through the Revenue Commissioners for 2022 and to date in 2023; the number of applications approved; the number declined in the same time period; and if he will make a statement on the matter. [21499/23]
View answerThe Help to Buy scheme (HTB) assists first-time buyers with the deposit required to purchase or self-build a new house or apartment to live in as their home providing for a refund of Income Tax and Deposit Interest Retention Tax (DIRT) paid by the applicant(s) over the previous four tax years. Eligibility of the applicant, together with the maximum potential relief available is determined at application stage, however, eligibility of the residence and actual relief due is confirmed at claim/verification stage.
It should be noted that applications for HTB may be made on a provisional basis as first-time buyers seek to clarify their entitlements in advance of commencing the purchase of a property.
An application will only progress to the “claim” stage if and when the applicant decides to purchase a property that is eligible for the scheme. First-time buyers can submit their claim once a contract is signed for the purchase of a property. In the case of self-builds, the claim can be submitted after the draw-down of the first tranche of the mortgage.
Applicants may apply and subsequently cancel their application multiple times in order to amend/correct the application, for example, when amending from a single to joint application or including additional/fewer years.
Furthermore, approved applications will automatically expire, if the claim is not finalised on or before 31 December for applications received between 1 January and 30 September, and on 31 March of the following year, for applications received between 1 October and 31 December.
I am advised by Revenue that 46,470 HTB applications were received in 2022 with a further 23,336 applications received this year, as of 30 April 2023. A breakdown of the status of the applications is below.
|
Year/Stage |
Total Number of Applications |
Cancelled* |
Approved |
Pending |
Claims Verified |
|
2022 |
46,470 |
25,071 |
14,828 |
6,571 |
6,577 |
|
2023 (to 30 April 2023 |
23,336 |
6,708 |
8,859 |
7,769 |
1,118 |
*Includes rejected applications which are normally corrected and resubmitted as a new application.
220. Deputy Rose Conway-Walsh asked the Minister for Finance the steps he is taking to ensure mortgage holders, where their mortgage loan is secured against a property affected by defective concrete blocks, are treated fairly and transparently by lenders; and if he will make a statement on the matter. [21563/23]
View answerI understand the difficult situation faced by homeowners whose houses are affected by defective concrete blocks.The Government response to the MICA issue is led by my colleague the Minister for Housing, Local Government and Heritage and a scheme of financial support to help affected homeowners has been put in place. In terms of financial institutions who provide mortgages to help people buy or build their own home, as the Deputy is aware the Central Bank is responsible for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements.
Through its consumer protection role, the Central Bank sets out requirements in its codes of conduct which detail how regulated firms such as banks should deal with and treat their customers. In particular, the Code of Conduct on Mortgage Arrears 2013 (CCMA) places a requirement on regulated entities to have fair and transparent processes in place to deal with borrowers in, or facing, arrears on a mortgage secured on a primary residence and it sets out the process that entities must follow in such cases.
The CCMA sets out a standardized Mortgage Arrears Resolution Process that all regulated entities must follow and which entails communicating with borrower, gathering relevant financial information, assessing the borrower’s circumstances and proposing a resolution. Due regard must be given to the fact that each case is unique and needs to be considered on its own merits. All cases must be handled sympathetically and positively by the regulated entity, with the objective at all times of assisting the borrower to meet his or her mortgage obligations. However, the Central Bank does not have remit over the commercial decisions of the entities it regulates and the nature of the particular support it provides to its customers in any particular case is a matter for that financial institution. Nevertheless, the Central Bank has stated that it encourages borrowers to engage as early as possible with their lenders in relation to any difficulty which may arise in relation to a mortgage and to provide the information required to enable an assessment of the individual circumstances commence. More generally, the Bank has also informed me that the protection of mortgage loan borrowers is a key priority and that it will continue to supervise compliance by regulated entities with the CCMA.
221. Deputy Rose Conway-Walsh asked the Minister for Finance the reason insurance premiums are not falling at a comparable rate to the reduced cost of claims; the steps he is taking to ensure that savings are passed on to customers; and if he will make a statement on the matter. [21564/23]
View answerIt is widely acknowledged that the cost of claims is the main driver of the cost of insurance. The Personal Injuries Guidelines – adopted in April 2021 – therefore represent a landmark achievement of the Government’s insurance reform agenda, as they have significantly lowered award levels for many common injuries. Recent data from the Personal Injuries Assessment Board (PIAB) indicates that the overall average award has fallen by 38 per cent compared to awards made in 2020 under the Book of Quantum.
Separately, the first National Claims Information Database (NCID) Mid-Year Report on motor insurance indicates that use of the Guidelines led to reductions in the cost of claims settled in the first six months of 2022. According to the report, the average cost of claims settled under the Guidelines, either directly or via the Personal Injuries Assessment Board (PIAB), was between 34 per cent and 47 per cent lower than claims settled under the Book of Quantum in 2020.
These reductions clearly indicate that the Guidelines are beginning to have the desired effect. Their consistent implementation by insurers, the PIAB and the courts should therefore lead to a reduction in the cost of claims, which is the main driver of the cost of insurance. In that regard, I welcome recent data from the Central Statistics Office (CSO) showing that the price of motor insurance in March 2023 was 5.9 per cent lower than in March 2022, and 15.9 per cent lower than April 2021 (when the Guidelines were implemented). This is particularly notable at a time when general annual inflation is 7.7 per cent.
It is important to note that the impact of reforms takes time to transmit to price levels for a variety of reasons. These can include: uncertainty arising from ongoing legal challenges; the inherent complexity of the insurance sector’s operating environment; or even dynamic, external developments which can determine price or supply in a small market such as Ireland.
Moreover, we have yet to see the full impact of the Guidelines on litigated claims. According to the NCID, just 3 per cent of claimants that settled through litigation in H1 2022 settled under the Guidelines. This is significant, as litigated claims make up the vast majority of injury claims costs – in H1 2022, they accounted for 79 per cent of total claims costs, up from 66 per cent in 2020. Nevertheless, I believe these early indicators for claims settled directly and via the PIAB are positive, and that similar trends will continue to be seen as more litigated come to be assessed under the Guidelines.
In summary, reform can take time to implement and in turn see tangible results delivered. The Government has targeted domestic policy action at delivering real and sustainable change benefiting policyholders. In the insurance sector we can see the positive impacts beginning to emerge, particularly regarding motor insurance. Policy-makers now have better tools to measure the results of this work and hold the industry to account. Ensuring this happens is an important part of my job.
222. Deputy Claire Kerrane asked the Minister for Finance if he will provide an update on intentions to extend consanguinity relief, given the deadline for this relief is approaching and he indicated the measure would be extended in Budget 2023; and if he will make a statement on the matter. [21660/23]
View answerStamp duty consanguinity relief, which is available only in respect of farmland, is currently due to expire at the end of 2023. It serves to reduce the stamp duty rate applicable to the acquisition of farmland by qualifying individuals from the current standard rate on non-residential property of 7.5% to 1%. Qualification is primarily determined by the person acquiring the land being closely related to the person disposing of it, but other conditions also apply. It was last extended (by three years) in section 53 of Finance Act 2020.
My Department is currently preparing a report on consanguinity relief which will make recommendations as to its future in terms of whether it should be further extended, and if so for how long and in what form.
As part of this process the views of the main farming bodies, that is the IFA, the ICMSA and Macra na Feirme, have been sought, and I have also written to the Minister for Agriculture Food and the Marine to seek his views and those of his Department.
I expect to receive the aforementioned report for my consideration shortly, and I hope to announce my decision on the future of the relief at Budget time. I also expect that the report will be published at that time, and will include copies of any responses received from the farming bodies and the Minister for Agriculture Food and the Marine.
223. Deputy Holly Cairns asked the Minister for Finance if the small cider producer excise relief scheme will be extended to include other fermented beverages, such as mead; and if he will make a statement on the matter. [21679/23]
View answerThe Finance Act 2022 introduced a 50% excise relief to micro producers of 'cider and perry' as defined in section 73(1) of Finance Act 2003. The scope of the relief applies specifically to cider and perry exceeding 2.8% vol. but not exceeding 8.5% vol. This relief is available on up to 8,000 hectolitres of cider and perry produced by microproducers with an annual production threshold of up to 10,000 hectolitres. On a typical pint of cider or perry, the value of the relief works out at approximately 27c per pint.
While the EU Directive now allows for the extension of the relief to other fermented beverages, the releif scheme has been restricted to cider and perry at commencement this year. This is principally due to the administrative challenges associated with a broader relief as well as a concern around its application for the production of alcopops. The diversity of products in the applicable CN codes and the technical difficulties arising out of monitoring the products, are such that it was considered prudent that the relief be restricted to cider and perry at the outset.
The scope of the relief can be reviewed in the future once it is firmly established. As the relief scheme is only in operation for a number of months, there are no current plans to extend scope.
224. Deputy Jim O'Callaghan asked the Minister for Finance whether students who attend university in the UK can write off the cost of their student accommodation against tax; whether any consideration is being given to providing such relief; and if he will make a statement on the matter. [21696/23]
View answerThere are currently no tax reliefs specifically targeting UK-based student accommodation costs for Irish taxpayers attending university in the UK. I have no plans, at present, in this regard.
In relation to the recently introduced Rent Tax Credit, which is provided for in section 473B of the Taxes Consolidation Act 1997 (TCA), the purpose behind this temporary measure is to assist as part of the overall response to the accommodation shortage in the private rented residential sector in Ireland. More specifically, the aim is to provide some financial assistance to renters in that particular sector who may face high rental costs. Owing to this, the eligibility criteria for the credit specify that the rental property concerned must be a residential property located in the State. As such, neither students attending university in the UK nor their parents are currently entitled to the Rent Tax Credit in respect of rent which they have paid for student accommodation outside the State.
As the Deputy will appreciate, in designing tax reliefs, there is always a balance to be struck between providing support to as many people as possible consistent with the overall policy intention behind the measure and ensuring that there is an appropriate degree of control in the management of limited Exchequer resources.
Further details in relation to the Rent Tax Credit can be found on Revenue’s website at www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-11A.pdf.
It should also be noted that section 473A of the TCA provides for income tax relief in respect of qualifying fees paid by an individual for one or more approved third level education courses, subject to the conditions. Qualifying fees in this context mean tuition fees, but do not include administration fees or examination fees, student centre or union levies, or accommodation costs.
Approved courses may include full-time and part-time undergraduate and postgraduate courses provided by certain approved institutions of higher education in European Union (EU) Member States or in the United Kingdom (UK). Lists of approved higher education institutions and courses are published on the Revenue website each year at www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/education/tuition-fees-paid-for-third-level-education/approved-colleges-and-courses.aspx
In addition to the above, there are also exemptions from tax that apply to payments received by students including, for example, maintenance grant payments made to students in higher education under Student Universal Support Ireland (SUSI). Also, income arising from a scholarship is exempt from income tax, USC and PRSI, where the conditions for relief in section 193 TCA are met. Further details in relation to the scholarship exemption can be found on Revenue’s website at: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-07/07-01-26.pdf.
225. Deputy Emer Higgins asked the Minister for Finance the number of nitrous oxide seizures made by the Revenue Commissioners in 2021, 2022 and to date in 2023; the number of cannisters included in each seizure; and if he will make a statement on the matter. [21728/23]
View answerI am advised by Revenue that nitrous oxide is not prohibited and has a number of legitimate uses, for example in the food industry. However, where Revenue has reasonable grounds for believing that importations of nitrous oxide will not be used for legitimate purposes and are intended for human consumption as a psychoactive substance, then Revenue has the power to detain and seize nitrous oxide in accordance with the Criminal Justice (Psychoactive Substances) Act 2010.
Revenue works closely with other relevant Departments and agencies in the State including An Garda Síochána, the Department of Justice and the Health Products Regulatory Authority in acting against the illegal drugs trade.
The table below outlines the number of seizures of nitrous oxide and number of canisters seized from 2021 to date in 2023:
|
Year |
Number of Seizures |
Number of Canisters |
|
2021 |
75 |
385,891 |
|
2022 |
117 |
6,719 |
|
2023 to date |
1 |
576 |
226. Deputy Seán Canney asked the Minister for Finance the supports he will put in place to support mortgage holders who are in receipt of disability allowance and are on fixed income where the repayments are increasing as a result of increases in the interest rates; and if he will make a statement on the matter. [21744/23]
View answerPolicy matters relating to the disability allowance payment are a matter for the Minister for Social Protection.
In relation to mortgage matters more generally, the formulation and implementation of monetary policy is an independent matter for the European Central Bank (ECB). As the Deputy is aware, the ECB has increased official interest rates over recent months as it attempts to combat inflation. The level of official interest rates influences the overall level of interest rates throughout the economy. However, the setting of retail lending rates by individual lenders is a commercial matter for that lender and I have no function or role in such decision making matters by financial institutions.
I would also point out that the Government has responded swiftly and decisively, multiple times, to help to offset the most severe impacts of inflation, with a particular focus on protecting the most vulnerable. Overall, €12 billion in direct relief has been made available to counter the effects of inflation, with the policy response designed to avoid generating second round effects that could lead to an inflationary spiral.
It is worth noting that the weighted average interest rate on new Irish mortgage agreements at end-February 2023 was 2.92 per cent and is now among the lowest in the euro area. Also it should be noted that the structure of the Irish mortgage market is changing and that there is an increase in the take up of fixed rate mortgages - in February 2023 for example 93% of new mortgages were at a fixed interest rate - and this protects borrowers from interest rate changes for the period that the interest rate is fixed. As regulator, last November the Central Bank wrote to all regulated firms to set its expectations on how firms should support their customers in the face of current cost of living challenges. With respect to mortgages, the Bank indicated that it is especially focused at this time on ensuring that firms:• have the resources and arrangements in place to assess applications from existing and new or switching borrowers in a manner that is timely and based on prudent lending standards applied consistently across all applicants;• have fit-for-purpose arrangements in place to anticipate and deal with customers in or facing arrears; and• proactively assess the risks and consumer impact that commercial decisions, including rising interest rates, may pose to borrowers and have an action plan in place to mitigate such risks. Last month the Central Bank published an update on its ongoing work to ensure regulated firms meet the expectations on protecting consumers in a changing economic landscape, relating to mortgages secured on a borrower’s primary residence.
The Central Bank has indicated that firms have responded with additional supports for borrowers and increased operational capacity. This has included proactive contact with vulnerable borrowers including those at greatest risk of default, and continued provision of supports, including alternative repayment arrangements, to borrowers at risk of arrears.
The Central Bank will continue to engage with firms on areas where consumers can be better supported at this difficult time.There are also a number of important consumer protections for variable rate mortgage holders. Firstly the Consumer Protection Code requires lenders to explain to borrowers how their non tracker variable interest rates have been set and to clearly identify the factors which may result in changes to variable interest rates.
Secondly, it also increases the level of information lenders are required to provide their customers including where there is a possibility for the borrower to move to a lower ‘loan to value’ interest rate band and signpost the borrower to the Competition and Consumer Protection Commission's mortgage switching tool.However, it is the case that some borrowers will experience repayment difficulty on a mortgage secured on a primary residence and the Code of Conduct on Mortgage Arrears (CCMA) was introduced to ensure that regulated entities have fair and transparent processes in place for dealing with such cases.
The CCMA sets out the process that entities must follow when a borrower is in or facing difficulties with their mortgage payments and it states that all arrears cases must be handled sympathetically and positively by the regulated entity, with the objective at all times of assisting the borrower to meet his or her mortgage obligations.
There is an obligation on regulated entities to explore all of the options for alternative repayment arrangements (ARAs) offered by that entity, in order to determine which ARA, if any, is appropriate and sustainable for the borrower’s individual circumstances.
227. Deputy Cian O'Callaghan asked the Minister for Finance further to Parliamentary Question No. 422 of 18 April 2023, the action he will take to protect the interests of people in Ireland when adopting decisions from the European Central Bank in relation to mortgage interest rates; how Ireland compares to other European countries in terms of mortgage and savings rates; and if he will make a statement on the matter. [21772/23]
View answerThe formulation and implementation of monetary policy is an independent matter for the European Central Bank (ECB). As the Deputy is aware, and as set out in Parliamentary Question No. 422 of 18 April 2023, the ECB has increased official interest rates over recent months as it attempts to combat inflation.
The level of official interest rates influences the overall level of interest rates throughout the economy. However, the setting of retail lending and deposit rates by individual financial institutions is a commercial matter for the particular entity and I have no function or role in such decision making matters by financial institutions. Nevertheless, it is worth noting that the weighted average interest rate on new Irish mortgage agreements at end-February 2023 was 2.92 per cent and is now among the lowest in the euro area; the comparable average interest rate for new mortgages in the euro zone was 3.33%.
Also it should be noted that the structure of the Irish mortgage market is changing and that there is an increase in the take up of fixed rate mortgages - in February 2023 for example 93% of new mortgages were at a fixed interest rate - and this protects borrowers from interest rate changes for the period that the interest rate is fixed.
In relation to savings rates, the Central Bank has advised that the interest rates on household overnight deposits stood at 0.03 per cent in February 2023. Interest rates on new household deposits with an agreed maturity rose to 1.02 per cent in February in Ireland. The equivalent rate in the euro area was 1.92 per cent.
228. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the economy continues to be based on sound economic principles; and if he will make a statement on the matter. [21777/23]
View answer231. Deputy Bernard J. Durkan asked the Minister for Finance his intentions to continue to ensure best practice economic performance in the future, keeping in mind the need to protect the stability of the economy and having regard to experiences in the past; and if he will make a statement on the matter. [21781/23]
View answerI propose to take Questions Nos. 228 and 231 together.
Over the course of the last year, Ireland has faced numerous headwinds. First, Russia’s invasion of Ukraine induced a crisis in global energy markets which sparked decades-high levels of consumer price (HICP) inflation. Secondly, inflation became an increasingly broad-based phenomenon, with spill overs from energy prices to many other sectors. Finally, the ECB has embarked on a front-loaded process of monetary policy normalisation, with 7 successive interest rate hikes culminating in a total increase of 3.75 percentage points in the main policy rate since last July.
Despite these numerous economic headwinds, Ireland’s economic fundamentals remain strong and the economy continues to be based on sound economic principles. The underlying strength of the Irish economy is most evident in the labour market. A record 2.6 million people were in employment in the fourth quarter of last year, while the unemployment rate stood at just 3.9 per cent in April.
Helped by a buoyant labour market and strong household balance sheets, personal consumption growth was robust in the final quarter of last year despite inflationary headwinds. My Department expects the robust performance of the Irish economy to continue into the future, but is nevertheless acutely aware of the risks to the outlook.
Incoming data suggests that inflation has now passed its peak and is on a downward trajectory. In the recent Stability Programme Update, average annual inflation was forecast at 4.9 per cent and 2.5 per cent for this year and next year, respectively. The anticipated easing of inflationary pressures is expected to pass through to an improved outlook for the domestic economy, with MDD growth of 2.1 per cent projected for this year, a significant upward revision from the Budget 2023 forecast last autumn.
Despite this improved economic outlook, I am acutely aware that the outlook for the Irish economy remains highly uncertain. My Department continues to closely monitor macroeconomic developments both domestically and abroad.
229. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the Government's economic policy continues to be able to withstand economic shocks; and if he will make a statement on the matter. [21778/23]
View answer230. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which his Department continues to monitor any and all potential economic threats to the economy here and retain the ability to respond in the event of unforeseen difficulties; and if he will make a statement on the matter. [21780/23]
View answerI propose to take Questions Nos. 229 and 230 together.
Over the last number of years, the Irish economy has faced numerous economic shocks in quick succession. Brexit, the Covid-19 pandemic, and most recently, the inflationary cycle brought about mainly as a result of Russia’s invasion of Ukraine, have each posed significant challenges to the Irish economy.
Throughout each of these shocks, the Irish economy has proven to be remarkably resilient. Ireland’s economic fundamentals remain strong and this has been most clearly evident in the labour market. A record 2.6 million people were in employment in the fourth quarter of last year, while the unemployment rate stood at just 3.9 per cent in April. Despite inflationary pressures on households’ real incomes, personal consumption remained robust in the fourth quarter, aided by a strong labour market and a buffer of ‘excess savings’ built up during the pandemic years.
While recent evidence suggests that we are now past the peak of this inflationary cycle, the inflationary and economic outlook remains highly volatile. The recently published Stability Programme Update outlines a number of short and medium-run risks to the outlook.
In terms of the near-term inflationary outlook, it is possible that further disruption to energy supplies or harsh weather conditions coming into the winter ahead could exacerbate imbalances between supply and demand and cause energy prices to spike again. Furthermore, there is a real risk of a wage-price spiral emerging as the economy is clearly operating at, or possibly beyond, full employment and prices remain elevated. My Department also continues to monitor the possibility of an emergent sector or firm-specific shock in the multinational sector which could be damaging to the economy. I am also cognisant of the profound medium-term challenges that the Irish economy will inevitably face, such as an aging population and the dual transition of digitisation and decarbonisation.
Given our strong economic fundamentals, I am confident that we will be prepared for and able to respond to these, and other, economic threats.
