Private Members' Business. - Credit Union Movement: Motion. – Dáil Éireann (28th Dáil) – Wednesday, 16 Feb 2000

Private Members' Business. - Credit Union Movement: Motion.

The following motion was moved by Deputy Noonan on Tuesday, 15 February 2000:

That Dáil Éireann:

–recognising the uniqueness of the credit union movement;

–acknowledging its work in fostering thrift and providing advice to persons on low incomes in both rural parishes and in urban disadvantaged areas;

–appreciative of the efforts of so many volunteers who give freely of their time to the service of credit unions;

–conscious of the danger to the ethos and fundamental principles of credit unions posed by the application of an inequitable tax regime;

–deplores the refusal of the Minister for Finance to meet representatives of the Irish League of Credit Unions, and calls on the Government to amend the Finance Bill, 2000, so that returns on credit union savings are taxed in accordance with the recommendations made by the Chairman of the working group which examined this issue.

Debate resumed on amendment No. 1:

To delete all words after "That" and substitute the following:

"Dáil Éireann:

–supports the Government's policy of exempting the income of credit unions from corporation tax;

–endorses the tax treatment of credit union savings provided for in the Finance Act, 1998;

–notes that the tax treatment of credit unions has been raised with the European Commission by way of complaint under Treaty competition rules, and acknowledges that the Government will review the situation after the EU have disposed of the matter;

–notes that, as already indicated, the Government will meet without delay with the credit union movement and that a date is being set, and calls on the Minister for Finance to take account of these factors in his ongoing consideration of the Report of the Working Group on the Taxation of Returns on Credit Union Savings which was established by him in this regard.".

–(Minister for Finance.)

Mr. M. Higgins

I wish to share my time with Deputies Moynihan-Cronin and Rabbitte.

In the brief time available to me last night I suggested there was a qualitative difference between those who placed their money with credit unions and those who placed their money, often for speculative benefit, with banks. The history of the two institutions of saving are totally different. To argue that a complaint was lodged by competitors of the credit union for deposits was a total fig leaf. It is unacceptable that a meeting, which has been delayed for two years, will now take place between those who sought it and someone standing in for the Minister for Finance.

The competition regime is entirely the wrong framework for evaluating what is appropriate for credit unions. They have since their inception and will continue to be judged on their social role and the services they provide.

Mrs. B. Moynihan-Cronin

It gives me great pleasure to contribute to this debate and to acknowledge the important role credit unions play in communities throughout the country.

Many of us have a positive experience of credit unions. However, a number of Members in this House do not attach the same importance to the function and role of the credit unions. It was almost galling to hear Independent supporters of the Government tell tales of their relentless efforts to meet the Taoiseach in recent days. The credit unions have looked for this meeting for two years. It is impossible to accept that the efforts of the Independents are heartfelt. If the Independents had an interest in the credit unions they would have secured a meeting some time ago and there would have been no necessity to debate this motion or to put the people in the Gallery to the expense of travelling to Dublin and staying overnight. It appears that nothing less than a hard hitting motion from the Opposition will spur the Independent Deputies into action. Their race to the media at the eleventh hour to assure the electorate that they will ensure the credit unions demand is facilitated is not enough.

Credit unions have been fundamentally important to families in recent decades. A recent exposé by the Director of Consumer Affairs on the excessive interest rates charged by legal moneylenders to low income families highlighted the need to increase access to small amounts of credit for those on lower incomes. The banks are not interested in giving a loan to a family to purchase a new fridge or to pay for a funeral. As a result, low income families in need of credit have two options. They can either establish a record in their local credit union and advance a loan or they can go to a loan shark and pay exorbitant rates of interest. Families in the grip of loan sharks who seek the assistance of the Money Advice and Budgeting Service will normally be given advice on budgeting and will open a credit union account to assist them with their credit needs in the future. This is a vindication of the important role credit unions play.

The snub by the Minister for Finance to the credit unions is an indication that his interests lie with the big banks which make huge profits. His behaviour in refusing a meeting with the credit unions shows he does not wish to acknowledge the important work they do in some of the most excluded and disadvantaged communities.

Credit unions are people based and are found in small villages and in parts of our cities where any bank would fear to tread. I come from the constituency of Kerry South and I know the important role full-time credit union offices have played in towns such as Rathmore. Older people who do not have transport to get to their nearest bank, which could be eight or ten miles away, can access credit and savings facilities in their credit union. I support the motion.

Mr. Rabbitte

It is a novelty that Deputy Noonan has to table a motion requiring any Fianna Fáil Minister to meet an organisation which represents 1.5 million people. That is eccentric behaviour in the extreme. The Minister of State at the Department of Agriculture, Food and Rural Development, Deputy Ned O'Keeffe, and the excellent officials from the Department of Finance should ensure the Minister for Finance is given a check-up. It is unusual, as I am sure you, a Leas-Cheann Comhairle, would agree, that Fianna Fáil would want to spurn such an organisation.

I am amazed that the Finance Bill was published this year without taking on board the reforms recommended by the working group which the Minister set up. It agreed proposals to bring the law into line and to deal with the fact that some credit union members are penalised by the application of the law.

I support this motion. When I was Minister of State at the Department of Enterprise and Employment in 1997 I introduced a Bill to provide a modern framework for the credit union movement to realise its potential on behalf of the type of people Deputy Moynihan-Cronin mentioned. I am saddened that the movement's potential is being constrained by the refusal of the Minister to give expression in the Finance Bill to what everyone knows is necessary.

Some credit union members are treated inequitably as a result of the law as it stands at present. There was broad consensus for the reforms put forward. Corporation profits tax does not arise because credit unions are not corporations in that sense. They are mutual not-for-profit organisations, so the question of corporation profits tax is a red herring.

It appears the Minister, in a fit of pique, is anxious to leave the credit union movement exposed to scrutiny or threatened scrutiny from Brussels because of what Sam Smyth wrote in the Irish Independent on 22 October 1998. Under the large headline, “McCreevy exacts sweet revenge for humiliation”, he stated: “It's not so much a case of getting over his anger, the finance minister is getting even with the credit unions”. I am sure there are many more newspaper cuttings from that time.

I cannot pretend it was a bed of roses when I dealt with the Irish League of Credit Unions over a prolonged period. However, I could not afford to go off in a huff. The nature of this business is that if you cannot take the heat, then you should leave the kitchen. Two years is a long time for the Minister to be in a sulk. He should be examined because two years is a long time for him to have his finger in his mouth and to refuse to come out of the corner and talk to the credit unions.

Deputy Moynihan-Cronin drew attention to the Independents. They come out occasionally and put their finger up to see which way the wind is blowing so they can decide which way to go. They are usually orchestrated by Deputy Healy-Rae who came on radio yesterday, after Deputy Noonan's motion had forced the Taoiseach to do what the Minister would not do and meet the credit unions, and said he would do the devil and all if someone did not meet someone soon. It is extraordinary that the Minister for Finance even refused the importuning of the Taoiseach to meet the representatives of 1.5 million people. The Taoiseach himself now has to do it. I hope we can agree to bring forward an amendment to this year's Finance Bill to give expression to what the credit union movement deserves and requires.

Mr. C. Lenihan

One could characterise the Minister's position as 'once bitten, twice shy'. Unfortunately there has been a contretemps and a failure of communication between the Minister and the representatives of the credit union movement. That is a matter for regret because all of us, particularly those of us in Fianna Fáil, share a great affinity with and confidence in the work done by the credit unions. They are an essential part of our social fabric, performing an enormous task in areas where people would not even think of seeking a loan and would not get it from a regular banking institution. That is the value of the role of the credit unions in our economy or, more accurately, in our society.

Many people have said we do not live in an economy, we live in a society where people have different needs. In that respect the credit unions complement and develop the work which has already been done by commercial banks. Some people predict that there will be only 12 large banks in all Europe within 15 years. Deregulation and greater use of technology mean there will be a significant shake up of the European banking industry. That will mean fewer banks and retail branches. We already saw the decisions First Active had to make because of the intervention of the Bank of Scotland into the mortgage market. We will see more and more of that as the shake up on a European level reaches the local level in this State. I fear we may start to see areas without banks in suburban and rural districts. We all know areas without banks or commercial centres rapidly become disadvantaged, 'no go' areas in terms of investment and financial and commercial choice.

It is important that those on the Government side make it clear that the Government is committed to developing the credit union sector. It is regrettable that the relationship with the Minister broke down because of a miscommunication but it is more important that the relationship with the credit unions is now being dealt with by the Taoiseach. The Taoiseach will meet the representatives of the credit unions and will look at how the area can be developed in the context of the failure of the banking sector to lend to people below a certain income threshold. That is not acceptable in societal terms.

In the years ahead we will depend on the credit unions not only to sustain the customer base it now maintains but to develop an even wider remit. The credit union movement should be given a greater role in lending to small business, another area from which the commercial banks have withdrawn. Perhaps it is not profitable but the Government should examine how the credit union sector could develop in relation to the specific needs of start up or small businesses, micro-enterprises.

Mr. Rabbitte

I am sure if I ask, my constituency colleague will give way.

Mr. C. Lenihan

I will give way but not for too long.

Mr. Rabbitte

Will the Deputy address the motion? Three years ago we dealt with the philosophy of the credit union movement. We want to know if the Minister for Finance will talk to the credit unions and introduce an amendment to the Finance Bill. If Deputy Lenihan and his colleagues call on the Minister to do that, we can talk about motherhood and apple pie at another time. I am all for motherhood and apple pie too.

Mr. C. Lenihan

Deputy Rabbitte likes all the good things in life. He left socialism behind for his love of the good things.

Mr. Rabbitte

The credit union movement is the best possible example of socialism.

Mr. C. Lenihan

The Minister is acutely conscious, as we all are, that the development of the sector is predicated by two factors: European regulations and technology. The credit unions are spending £40 million on computer technology to allow branches from all over the country access to money at the same time. This is a competitive challenge to the banks and they will be worried about it. This increased use of technology will make the credit union movement into, as the Labour Party used to say, a third force in banking. We now have as many as seven forces in banking but the credit unions will be a force when their investment in technology is complete and they offer more products to their customer base. When they can centralise functions they will improve.

A complaint has been made at European level by the Irish Mortgage Brokers Association in relation to EU competition law. The complaint is not justified and I do not think it will succeed. Other, similar complaints made against the credit union movement have failed in the past, as will this one. I agree with the credit unions – DG4 and the Government should impress upon the European Commission that we need a decision quickly so we can clear this up and get down to the business of seeing how the credit unions can fit into the evolving financial sector.

The financial sector is also threatened by European and global developments. The development of electronic commerce in the banking system will have enormous consequences for the financial sector. It is imperative that there are institutions which will lend to a customer base that other institutions will not touch. We know that 41% of the customer base of the credit unions are in receipt of social welfare payments of one sort or another. These are the people whom the banks will not consider. The average savings are £1,400, the average deposit is £300 and the average loan is £2,400. Many banks will not even consider lending an amount that small.

The credit unions have a huge role to play and the Opposition parties are playing politics with the issue. The Taoiseach is taking the lead and his presence is good news and a positive signal about how seriously the credit unions' case is taken. It is also a sign that the Government is committed to developing the credit unions.

Mr. Rabbitte

It is a sign that the Minister for Finance will not meet them.

Mr. C. Lenihan

There is an important principle at stake. The Department of Finance is not an ideal setting in which to discuss issues relating to the credit unions, or an ideal vehicle to make proposals for the movement's development. Given that the credit union is part of the social economy, it should be directed, run and legislated for by the Department of the Taoiseach. That is the proper way to do it. The Department of Finance is conservative and is happier regulating large commercial banks and being part of the "real economy".

Mr. Noonan

Is the Deputy expressing no confidence in the Minister for Finance?

Mr. C. Lenihan

I have every confidence in the Minister, but I believe this matter is best dealt with by other Departments.

Mr. Fleming

Amendment No. 1, which we on this side of the House will support, calls on the House to support "the Government's policy on exempting the income of credit unions from corporation tax;" and "notes that, as already indicated, the Government will meet without delay the credit union movement" at a date and time to be set. It goes on to call on "the Minister for Finance to take account of these factors in his ongoing consideration of the Report of the Working Group on the Taxation of Returns on Credit Union Savings which was established by him in this regard.".

There has been substantial progress on what has been a difficult issue over the last two years. The Taoiseach has given a commitment to meet with the representatives of the credit union. In consequence, this side of the House will call on the Minister to take full account of that meeting and of the deliberations at EU level and to proceed accordingly.

As a member of the Oireachtas Joint Committee on Finance and the Public Service I was pleased to meet with the Irish League of Credit Unions on 2 February. I was very impressed with its presentation to the committee. It highlighted the social class breakdown of its members as follows: 35% are in the C2 class, 35% are in the DE class and approximately 10% are in the F class. This gives a clear indication of the make-up of the people who deal with credit unions on a daily basis.

Approximately 40% of those who deal with credit unions are in receipt of some kind of social welfare payment. That is the group about whom I am most concerned. I am not so concerned about the people on the high tax rates who can afford to pay any deposit interest retention tax that is due and income tax on any dividends they may earn. I am concerned with those on social welfare and on low incomes who are not in a taxable position. We will do a good day's work if we focus this debate on the rank and file members of the trade union movement for whom the credit unions were established.

I pay tribute to the role of the credit unions. There is hardly a family in the country that has not had some direct personal experience with them. They have provided assistance when credit was impossible to obtain elsewhere.

The large number of voluntary workers in addition to the full-time officers in the credit union movement is impressive, whether they are operating in branches at Doonan, Mountrath, Rathdowney, Portlaoise, Clonaslee, Mountmellick or wherever. Speaking to those involved in the movement in County Laois it is clear that while senior members and officers may understand the intricacies of this debate, ordinary members do not. That is why I disagree with sloganising; the detail of what needs to be said is more important than highlighting a few catchphrases.

Credit unions are not included in the deposit interest retention tax scheme. As a result they are not obliged to deduct the tax from interest or dividends accruing in respect of the savings of their members. However, this does not mean that income tax is not due on them. Given that the tax code should treat everybody equally, credit union members, like other members of society, are obliged to report interest or dividends on savings as part of their income tax returns. While this applies to those who are liable for income tax, it must be pointed out that a large proportion of the population is not liable because they do not have a sufficiently high income to bring them into the tax net. They have been left behind in this debate.

In the new tax year commencing on 6 April next, there will be three groups of taxpayers – those on the top rate who will pay at a rate of 44%, those who will pay at the standard rate of 22% and those – a large number of people – who will pay no income tax because they do not have sufficient income to bring them into the tax net. This debate has been geared towards those on the top income tax rate at the expense of people who do not have a taxable income.

The motion proposes that an across the board deposit interest retention tax of 20% be applied to all savings and dividends on shares held in credit unions. That is an outrageous attack on people on social welfare and low incomes who are dealing with credit unions and who do not have a taxable income. It is proposed that income tax at a rate of 20% should be deducted from them at source, even though they are not, and would not be, in the tax net. This will take money out of the pockets of those people who should not be in the tax net. The same rate will apply to and will meet all the tax liabilities of those who are on the top rate of tax, which will be 44% in the new tax year. It is not right that people who are not in the tax net should have to subsidise the income tax payments of those who are in the higher income tax bracket.

Mr. Bell

Is the Deputy referring to the budget or the credit union movement?

Mr. Fleming

By introducing a 20% deposit rate—

Mr. Bell

Is the Deputy referring to the credit union movement?

Mr. Fleming

The motion calls for the implementation of the recommendations made by the chairman of the working group. One of these is the introduction a 20% tax rate.

Mr. Crawford

Has the Deputy read the recommendations?

Mr. Fleming

The motion proposed by the Fine Gael Party seeks to introduce a 20% tax rate on those social welfare recipients who should not be in the tax net. This is wrong.

Mr. Creed

That is outrageous.

(Interruptions).

Mr. Yates

The Deputy has not read the recommendations.

An Leas-Cheann Comhairle

Allow Deputy Fleming to continue.

Mr. Fleming

The Fine Gael Party is attempting to fool the people of Ireland. I was telephoned by a parent in Dublin city whose children came home from primary school with leaflets from the local credit union advising national school pupils to open savings accounts in their local credit union.

Mr. Yates

Has the Deputy read the review of the working group? It proposes that the first £375 of income from credit union dividends will be exempt.

Mr. Bell

On a point of order, Deputy Fleming is not talking about the subject matter of the debate; he is talking about matters that have nothing to do with the motion.

An Leas-Cheann Comhairle

That is not a point of order. Deputy Fleming to continue.

Mr. Fleming

I acknowledge the points made. It is clear I have hit a raw nerve, because I do not agree with deposit interest retention tax. Not only have I dealt with the report, but I met representatives of the Irish League of Credit Unions in Leinster House this night two weeks ago for an hour and a half. I listened to their arguments and am well informed.

I welcome the move by the Taoiseach to meet the credit unions and totally oppose a 20% DIRT rate on deposits of social welfare recipients and young children who should not have to pay income tax.

Mr. M. Ahern

I am glad of the opportunity to contribute to the debate. Deputy Noonan and Fine Gael have tabled this motion on taxation matters relating to credit unions not because they believe the Minister is doing anything wrong from a tax point of view, but to embarrass the Minister and the Government for not meeting the Irish League of Credit Unions in recent months. It is well known that the Fine Gael Members who attended the meeting of the Joint Committee on Finance and the Public Service on 6 February were advised and warned to be very careful in their utterances and not to commit themselves in relation to tax matters.

The motion has some very laudable propositions, including asking Dáil Éireann to recognise the uniqueness of the credit union movement; acknowledge its work in fostering thrift and providing advice to persons on low incomes in both rural parishes and urban disadvantaged areas and appreciate the efforts of so many volunteers who give freely of their time to the service of credit unions. The Government amendment covers the fourth proposition by stating:

as already indicated, the Government will meet without delay with the credit union movement and that a date is being set, and calls on the Minister for Finance to take account of these factors in his ongoing consideration of the report of the Working Group on the Taxation of Returns on Credit Union Savings which was established by him in this regard.

We are all very aware of and appreciate the very important role the credit union has played and continues to play in society since its foundation in 1958. It is a countrywide union covering the 32 counties, with 430 credit unions in the South and 1.8 million members. Without the voluntary work of up to 16,000 people the movement would not be able to perform its laudable work, and I take this opportunity to congratulate and thank those volunteers who have given freely of their time in serving on the boards of directors and the supervisory committees which oversee the activities of credit unions in respect of risk management. First communions, confirmations, weddings, funerals and many other occasions could not have been properly celebrated by thousands of people down through the years without the credit union movement. Also, without the credit unions many people would not have been able to buy cars, carry out house repairs or continue their children's education. Therefore, the movement has been of tremendous benefit to society.

On 2 February the Joint Committee on Finance and the Public Service had a frank and fruitful meeting with the Irish League of Credit Unions. In attendance were the president, Mr. Lynch, the vice-president, Mr. McMahon, Mr. Tony Smyth and some other representatives. In their presentation they outlined the history and development of the credit union movement and made it quite clear that credit unions exist to give a service to members and not to make profit as such. This is what differentiates credit unions from other financial institutions. The success of credit unions has been seen by other financial institutions as a threat. Some years ago a complaint was made to the European Commission by the banks, which was rejected. A further complaint has been made which is still unresolved.

In 1998 there as an unfortunate mix-up between the Minister for Finance and the credit union movement. I will not say who was to blame, but it resulted in withdrawal of the Minister's tax proposals from the Finance Act, 1998. However, the Minister still held the line on corporation tax and the exemption of credit unions and introduced an amendment which meant credit unions were not liable to report interest on deposits. In addition, the Minister established a working group to report to him with proposals. This resulted in the chairman of the working group making a minority report, and the Minister feels he cannot proceed with the recommendations because of the formal complaint made to the European Commission.

From my inquiries today I understand the Commission will write to the complainant and the Department of Finance as soon as a decision is made on the complaint. To date neither body has received correspondence from Brussels. I know Deputy Noonan for the best part of 18 years and would not accuse him of knowingly misleading the House last night when he stated the EU had ruled on the complaint. He may have been referring to the first complaint and not the one which is stopping the Minister from progressing with the recommendations of the working group.

On 3 February I received a letter from Mr. Lynch, president of the Irish League of Credit Unions, saying that even a written assurance that the Government would implement the proposals of the working group as soon as DGIV makes its findings would suffice. At that stage DGIV had not issued its findings. I believe the Minister will proceed when a decision is forthcoming from the Commission.

Deputy Séan Ryan spoke on this issue last night and also attended the meeting of the joint committee where he raised the issue of the Irish League of Credit Unions putting forward candidates in the next general election. He expressed concern that this might happen on the basis that, as a member of a credit union, he always considered credit unions to be non-political. In response to Deputy Ryan the vice-president said at the joint committee meeting:

I assure Deputy Ryan that he knows as much about the campaign to put forward credit union candidates in certain constituencies as I do. I went home having spent the weekend in Dub lin at a league board meeting. I picked up The Sunday Tribune and.discovered that in the west people were thinking about putting forward candidates.

He went on to say that the matter had not been discussed at the ILCU meeting and that he would not be in favour of the movement being politicised. It was with dismay the following week that I read in the newspapers that the president of the ILCU, who was also present at the joint committee meeting, was going to stand in the Dáil elections under the credit union banner. This is not the way forward for a movement which is of tremendous benefit to all sectors of society. I hope that following the meeting with the Taoiseach and when the Minister for Finance receives a response from Europe it will be possible to bring forward proposals agreeable to the credit union movement allowing it go forward and continue the excellent work it has done since 1958.

An Leas-Cheann Comhairle

I understand Deputy Yates is sharing time with Deputies McGinley, Creed, Crawford, Connaughton, Ring, Enright, Neville and Sargent.

Mr. Yates

Yes, with the agreement of the House. Time is brief but I will get straight to the point. Credit unions are entirely different to any other financial institution because they are non-profit making. They have a different culture and ethos to every other person who lends money and takes in deposits. That factor has not been recognised by Minister McCreevy in his churlish behaviour in refusing to meet them for two years. It is fundamentally unfair that as I deposit money into a bank or building society I pay DIRT at 20%, yet if I invest in a credit union I will pay interest income on my credit union dividend of 44p in the pound. That is manifestly unfair and unjust. Those are the two central factors.

The Minister's dispute has led to a situation where there has been non-reporting for the past two years and we have a non-compliance factor. From anyone's point of view it is in everybody's interest to get this settled. One political point I will make is that there was never as good an opportunity for our four missing Independent friends to have a Government over a barrel where it is so completely out of line. This debate has shown there is not one scintilla of testosterone between them, apart from Deputy Fox. They have acted like wimps because they could have ensured the Finance Bill was rewritten. If the Minister was told, as he was told on the plinth by all backbenchers when it came to the stay at home wives, that this was not acceptable, he would not be so slow about moving – his boss certainly moves with alacrity. The Independent TDs have missed a huge opportunity to force an amendment to the Finance Bill 2000 to ensure equity and justice. If a person is in financial difficulties he or she should not go to a bank. Who do MABS or anybody go to? They go to what is called the poor man's bank, the bank which takes an interest in people, in the community ethos. Those are the people with whom this Government is openly prepared to have a dispute. It is unfair and this issue will not go away.

The working party report should be implemented in full. When it was recommended that there should be exemption for the first £375 of dividend income deposit, rates returned to 6% – they are now 3%, half the value. One would have to have double the money to what they were at the time. The Minister should stop his churlish and childish behaviour, meet them and amend the Finance Bill accordingly.

Mr. McGinley

I wish to declare a personal interest in this debate. When the Gweedore credit union was established in 1972 I served for some years as secretary and am still a member with a small savings account.

Since 1972 the Gweedore credit union has developed and expanded. There are 5,900 members who have total shares of £8 million which works out at an average of approximately £1,200 per member. During those years Comhar Creidmheasa Ghaoth Dobhair has become a focal point of the community. It employs five full-time people, but like all credit unions, much of the work is done by dozens of voluntary workers.

What has happened in Gweedore since 1972 is just a reflection of what has happened throughout Ireland since the first credit union was established in 1958. Today there are 530 credit unions in Ireland and 120 in Northern Ireland. In County Donegal alone there are 14 credit unions with a total membership of almost 54,000. Eight of the credit unions are in Donegal south-west – Ballybofey, Stranorlar, Ballyshannon, Gweedore, Donegal town, Killybegs, Pettigo, Sheephaven and Rosses, with a combined membership of almost 25,000 people and average savings of approximately £1,200 per member.

In many cases credit unions have flourished due to the loyalty, pride and commitment to excellence displayed by many members. Volunteers and staff have built up credit unions into institutions which may sometimes rival other financial institutions. However, an important point is that credit unions have never been and never will be mere financial institutions. They do not facilitate offshore accounts nor would one expect members to have Ansbacher holdings. Unlike some of our major financial institutions, credit unions are not engaged in widespread tax avoidance. Their aim is to serve their members and locality.

Savings in credit unions are called shares thus denoting that the savers are the owners of the credit unions. Savers in other financial institutions are not the owners. Credit union shareholders are the owners.

The point was made by Deputy Yates that their motive is profit. The motive of the credit union is service to its members and the community. The savings in credit unions are loaned to members in time of need. The surplus of income over the operational expenditure of the credit union is distributed to members in the form of a dividend and in many cases as an interest rebate on members' loans. Credit unions are providing essential services for people who are usually living on low or middle incomes. They allow people in the aforementioned income bracket an opportunity to save money and also to receive credit. There are countless families throughout the country who have money to purchase a car, loans to send a son or daughter to college, cash for the occasional holiday or home improvement and the source of these essential loans is the local credit union.

It is unbelievable that the Minister has consistently refused to meet the Irish League of Credit Unions to discuss the report of the working group established to consider the issue of taxation on credit union savings and dividends. In a belated gesture, obviously in response to this Private Members' motion, the Government has now relented and is at long last willing to meet the league. Is there any other national organisation that has been treated in such a cavalier fashion by the Government and, indeed, the Minister? The 1.7 million members of the Irish credit unions will not easily forget how they have been treated by this Government and particularly by the Minister for Finance who has not yet indicated whether he is willing to meet the league.

I appeal to the Independents, particularly the two from my county, Deputies Blaney and Gildea, to join us in supporting the case of the credit unions.

Mr. Creed

As a representative of Cork North-West any debate on the credit union is obviously close to my heart. The village of Ballydesmond was the home of Nora Herlihy who was one of the leading lights in the late 1950s in establishing the credit union movement. I am pleased to report that the credit union movement in Cork North-West is alive and well. My constituency office is located in what was the former credit union building on Main Street, Macroom. The credit union moved to a new premises two years ago due to an increase in membership and business transactions. Some months ago I attended an opening of a very significant extension to the Charleville credit union office which I believe is among the busiest and biggest credit union branches. Likewise in towns such as Millstreet and Kanturk the credit unions are alive and well and there are numerous sub-offices in places such as Coachford and Donoughmore. It is obvious that, from the late 1950s, the credit union movement has boomed. In the late 1950s there were three credit unions; now there are more than 400. There are more than 1.8 million account holders and more than £2.2 billion on deposit. By any yardstick it is an enormously successful financial institution and it must be said that credit unions are big business, not in a corporate sense but in terms of the community they serve and the number of members.

It is beyond belief that such an organisation cannot secure a meeting with the Minister for Finance. The trade union movement and the employers who do not have as many members as the credit union movement do not have any difficulty getting a meeting with him. I have listened to practically all the contributions in this debate and the terms used across the Chamber to describe the credit union movement have been "the poor man's bank", "tackling moneylenders", "not for profit", "community based", "15,000 voluntary directors", "1,500 employees" and "an organisation of integrity". Compare and contrast that with the terms used by much of the media to describe the activities of other financial institutions, such as "High Court inspectors", "tribunals", "Ansbacher Cayman Ltd.", "evasion", "illegal", "immoral". The credit union movement has made life bearable for many of its members. Many of them have been able to afford weddings, wakes, funerals, first holy communions, confirmations, foreign holidays, new cars, house extensions, and higher education costs while also adding some dignity to their lives.

It is incredible that, in the context of its enormous number of members, the Minister for Finance refuses to meet the ILCU. The subtext of the debate relates to the credit union movement on the one hand and other financial institutions on the other. The proof of the pudding is in the eating. The Finance Bill has been published and other financial institutions are escaping scot free despite their involvement in evasion, illegality and immoral behaviour, yet the ILCU, which basically wants to sit down with the Minister to discuss an agenda that has been proposed by the working group, cannot secure such a meeting. That speaks volumes about where the Minister's heart lies in regard to this debate.

The Government amendment refers to the Taoiseach meeting the credit union movement, which is unacceptable. Effectively, the Minister for Finance is giving two fingers to the Taoiseach and telling him that he will not sit down and discuss this matter. It is an affront to the Taoiseach's authority. Are we to expect a merry go round of talks involving the Taoiseach, the Minister for Finance and their officials with no progress made on the outstanding issues? The Finance Bill, which will pass through the House in the coming weeks, is the vehicle through which the working group's recommendations can be implemented. Unless the Minister irons out in the near future what is acceptable in terms on the ILCU's shopping list, none of the recommendations will be given legal effect in the Finance Bill. That is unacceptable.

Mr. Crawford

The Fine Gael motion is the only reason a meeting has been arranged by the Taoiseach. I am shocked at Fianna Fáil Members who said this is a political motion. I recall that when they were in Opposition, they raised many issues which were much less important than this. Deputy Healy-Rae has not arranged the meeting with the Taoiseach. However, the Government has shown poor leadership in failing to meet the biggest and most important community group in Ireland. The Taoiseach is involved in trying to get people to meet and discuss issues in Northern Ireland. We must put our own house in order first and the Minister for Finance, who is normally a nice fellow, should let bygones be bygones and meet the ILCU. He must deal with financial issues under the Taoiseach's leadership, but he should conduct the meeting.

The big bad wolf that is the EU has once again reared its head. I wonder who organised the big bad wolf's appearance. The EU was blamed for the end of the urban renewal scheme but when I and other Members visited Brussels we discovered that it resulted from a lack of effort on the part of the Government. If the Minister had acted on the working group's proposals, there would not have been a need for EU involvement, good, bad or indifferent.

The ILCU is a unique organisation. Previous speakers have referred to what credit unions have done for small people, including small farmers whom I have represented for many years. Clones Credit Union members donated £100,000 to the local development association to allow it to draw down up to £1.7 million in cross-Border and other funds. No other statutory body would have allowed that to happen in one of the most devastated towns in Ireland. When Ballybay Credit Union built a new office, it also built a health centre. Cootehill and Monaghan Credit Unions supported urban renewal. The credit union movement is unique. It is impossible to understand why the Minister has not met the ILCU.

Mr. Connaughton

What has the Government got against credit unions? Why does it and the Minister for Finance go out of their way to lock horns with one of the most financially beneficial organisations ever founded? It is a hallmark of the Government to try to be as difficult as it can when dealing with credit unions. I and 1.9 million account holders wonder why. There is a degree of begrudgery involved. Is it because the credit union movement is so successful, highly organised, true to its core principles and objectives and deals with ordinary people with ordinary problems? It seems that the Government is more interested in the world of big business and banking, shareholdings, and ever increasing share prices while ignoring the small people at the bottom of the pile.

The Minister referred to equity in dealing with taxation and investment issues during his contribution. Does he really believe there is a similarity between the mother of a young family on a low income trying to kit out her children for their first holy communion and a large shareholder or executive in the banking world who can easily earn £500,000 per annum? The Government continually misunderstands the philosophy of the credit union movement. Its core principle is that all its members must save before they can seek a loan. It encourages thrift and introduces many families to the concept of budgeting for the first time.

The movement, like the co-operative movement, works on the premise that individuals on their own have little power but when they combine with clear objectives few obstacles cannot be overcome. For young and old in urban and rural Ireland the credit union has become an indispensable part of people's lives. I am proud to be a member of my local credit union as are the other members of my family. I see at first hand small extensions to dwellings and the young people who use the credit union to financially aid them while studying at third level institutions and I know many farmers who bought a few extra cows, built slatted houses or purchased a tractor through the credit union.

The credit union has one other great strength. It has one of the best supervisory and managerial control systems. This Government will only make its peace with the credit unions once it accepts that they are unique in many ways. Government members have not got that into their heads yet.

Mr. Ring

This issue is not about taxation, it is about Charlie's pride. I am talking about Charlie, the Minister for Finance and not Charlie Pride, the singer. He had to do a U-turn on the budget and we want him to do another in regard to the credit unions. Every speaker has outlined what credit unions have done for small people. The Government has proved one thing since it took up office. It is there for the big man and the big banks and we saw what the big man did for Governments over the years. A constituent who was in difficulty called into my office two weeks ago. His family had debts and he had to pay a little loan that he owed. I wrote to the three banks and building societies in the town and they refused to help because he did not have the means to pay it back. I rang the manager of the credit union and explained the problem to him. I asked him not to put the same pressure on my constituent that the banks had and explained that he just needed a few pound to alleviate his problems. He delivered the money to him and now the man is paying back that money out of his social welfare benefit. The Minister should realise that this is not about pride, it is about fair play. However, the Government has not shown fair play in respect of the people on hospital waiting lists or farmers, but it has shown fair play in respect of the banks. Enough is enough.

I ask the Minister to deal with the problems highlighted by credit unions. If the members of the credit unions wanted to make a donation to the Progressive Democrats or to Fianna Fáil, they would be met in any hotel in Dublin or in Mayo, the cheque would be taken off them and they would be thanked very much.

We live in a democracy and there is no reason the Minister should not meet representatives of the credit union movement. It boils down to Charlie's pride. Charlie's pride is coming to Castlebar and I want him to come for the credit unions.

Mr. Enright

This important motion concerns the refusal of the Minister for Finance to meet representatives of the credit union movement, and amending the Finance Bill. The Minister's refusal to meet the credit unions is an outrage. If the Taoiseach is not happy with the job the Minister for Finance is doing, the honourable thing would be to move him but not leave him in the job where he and the Department of Finance will be humiliated. The Taoiseach will meet the credit unions but on a previous occasion, the Fianna Fáil backbenchers were able to have the Finance Bill changed. In this instance, the Minister for Finance should have met the credit unions. The Taoiseach should not have to do that. Even at this late stage I appeal to the Minister to do so because what is happening is wrong.

The credit union movement over the years through its own enterprise and initiative is working on behalf of the communities in which its branches are located. In the vast majority of cases its members are doing this work on a voluntary basis. The major banks and building societies are closing down their branches in the villages and smaller towns. They take this action in low income areas. The credit union movement is serving those people and the Government should actively support credit unions rather than come down on them with a hammer.

The recommendations of the working party, which were simple and straightforward, were supported by the Registrar of Friendly Societies, the chairman of the working group and officials of the Department of Enterprise, Trade and Employment. The working party recommended that the first £375 of credit union dividends paid to members be exempt from tax – that is fair and reasonable; that between £375 and up to £750 should be subject to 20% tax and, if the dividend is above that figure, it should all be subject to 20%. That is fair and reasonable. The Government is failing to recognise the hard work and initiative of the people in credit unions who have done such a service for this country. These people will still be around when, in years to come, our major financial institutions, some of which may have been taken over by foreign banks, will be gone. The credit union movement should be supported rather it being threatened with a heavy hammer.

Mr. Neville

The credit union movement has played a key and unique role in Irish society, both rural and urban. Those who have been involved in community development have witnessed at first hand the contribution it has made. It has helped countless families and is available to assist people at times of major crisis and it has encouraged people to save. It is a disgrace that the Government has refused to recognise this and has snubbed the movement by refusing to meet the Irish League of Credit Unions for over two years. Why is the league singled out for this treatment? Does the Minister for Finance not recognise the work of the credit union movement in fostering thrift and providing advice to persons on low income in both rural parishes and in urban disadvantaged areas?

The Minister should recognise that there are some 1.9 million credit union members, and I must declare that I am a member of Cushana credit union which has its headquarters in Askeaton, County Limerick. I have seen at first hand the excellent voluntary work done by the directors of the credit union. The League of Credit Unions is looking for a fair and equitable taxation system for its members. The Minister should introduce an amendment to the Finance Bill which would tax credit unions in accordance with the recommendations made by the chairman of the working group on taxation of credit union returns.

The current approach is unfair and inequitable. Credit unions are non-profit organisations. Last evening, the Minister for Finance trotted out the excuse for inaction that an objection was submitted to the European Commission. It is clear from the debate last evening that that is not the case. Deputy Michael Noonan, introducing the motion, pointed out that he had been in contact with Brussels yesterday and he learned that that was not the case. It is being used by the Minister as an excuse for inaction and for—

Mr. M. Ahern

On a point of order—

Mr. Neville

—not meeting with the league at this late stage to discuss all aspects of the case.

An Ceann Comhairle

What is the point of order?

Mr. M. Ahern

I would like to ask a question.

An Ceann Comhairle

That is not allowed. There are only a few minutes remaining.

Mr. Neville

The Taoiseach, at the behest of the Independents, is now prepared to meet them. Without the Fine Gael motion, this would not happen.

Mr. M. Ahern

The Deputy is misleading the House.

Mr. Belton

The Minister for Finance is not misleading the House. He will not come into the House.

Mr. Sargent

The history of credit unions in Ireland is synonymous with the history of community development and for this reason, it is important to the Green Party. Like almost every other Deputy in the debate, I am a longstanding member of my local credit union in Balbriggan. I compliment Balbriggan credit union and the other credit unions I visited as a guest in Skerries, Donabate, Swords and Malahide for being there to help people with whom the financial institutions often refuse to do business. I have attended a number of events organised by the MABS, and I support its work, but the credit unions were doing this work for years before MABS came on the scene. Credit unions have saved many people from the clutches of moneylenders, even paying off moneylenders to break the cycle of debt eating away at a family.

With this in mind, it infuriates me to hear of the pressure being exerted by the 14 members of the Irish Mortgage and Savers Association on Brussels and on the Government to drop the unique deserved recognition of credit unions. Credit unions hold a distinct community development remit and reinvest their surplus in their own communities. How many members of the Irish Mortgage and Savers Association have such a community remit? Looking at the DIRT inquiry, it is clear that community remit is not an issue for the profit-driven financial institutions.

Last December, The Sunday Business Post referred to this distinct aspect of credit union activity in referring to Tullamore credit union funding local charities. It must also be noted that Balbriggan credit union has chosen to be the first credit union in Ireland to have direct debit and other facilities and associated computer training. It also gives tens of thousands of pounds to local schools, sports organisations and charities. Tallow credit union has funded a business centre and paid for street sides in its town. Oldcastle credit union has funded a local sports centre. Clones credit union has funded local good causes. Kilrush credit union has built a local hospital and leisure centre, and Blessington credit union has built a business park.

The Minister for Finance should examine his conscience on this issue and ask himself if he is blinded by the prejudice of the financial institutions against credit unions. His current intransigence is indefensible and arrogant, and I join the other Opposition Members in asking him to meet the credit unions on this issue.

Minister of State at the Department of Finance (Mr. Cullen)

I am glad to be able to respond to this motion on behalf of the Government and to put this issue into proper context. This is what the Government's amending motion does and I look forward to the House agreeing to support it.

As the House will know, the Taoiseach will meet the credit unions next week and will have the opportunity to outline their current thinking on this matter. I thank all those who have spoken on this issue for their general endeavours to give this matter a full airing in this House.

All who have made contributions to this debate are in agreement on the valuable and important role that the credit union movement has played and continues to play in the life of so many communities throughout this country. Deputies have also drawn attention to the free time given by the many volunteers to their local credit unions. These are sentiments that I fully share.

On the subject of EU complaints, some confusion appears to have crept into the discussion of this matter in the House. It is the case that the EU Commission dealt with a complaint in 1998 but a further, more detailed and wider complaint was made to the Commission last year by a financial sector representative body. That complaint is still live. I am not aware that the Commission has come to a decision on it.

Deputy Noonan last night dismissed the EU angle as a bogus concern and Deputy McDowell said it was nonsense. I am surprised at both Deputies who are well aware from debates in the House that the EU is keeping a close watch on everything happening in this country. I have no reason to treat the EU dimension as bogus or nonsensical and I would be alarmed by such an approach. The Commission has been granted a formal role by the Treaty in these matters. It has also made clear that it regards such issues as coming within the Commission's guidelines on the application of State aid rules to measures relating to direct business taxation. Paragraph 25 of the communication from the Commission of 11 November 1998 – Sec (1998) 1800 final – on tax competition and State aid rules reads as follows:

Obviously, profit tax cannot be levied if no profit is earned. It may thus be justified by the nature of the tax system that non-profit making undertakings, such as foundations or associations, are specifically exempt from the taxes on profits if they cannot actually earn any profits.

Furthermore, it may also be justified by the nature of the tax system that co-operatives which distribute all their profits to their members are not taxed at the level of the co-operative when tax is levied at the level of their members.

It is not a social affairs directorate matter, as Deputy Michael Higgins suggested last night.