Ceist:
10 Dr. Upton asked the Minister for Finance if he has satisfied himself with the savings ratio; the measure he has considered to increase the savings ratio; and if he will make a statement on the matter. [23485/00]
Other Questions - Personal Savings Ratio.
Jan O'Sullivan
Ceist:17 Ms O'Sullivan asked the Minister for Finance the consideration that the Government is giving to the introduction of a savings bond or pensions bond to compensate workers for inflation; and if he will make a statement on the matter. [23478/00]
P. J. Sheehan
Ceist:77 Mr. Sheehan asked the Minister for Finance the plans he has to entice young people under the age of 25 years to participate in savings schemes; and if he will allow such people an exemption from DIRT as an attraction to save. [23435/00]
I propose to take Questions Nos. 10, 17 and 77 together. The most data on the Balance of Payments indicate that Ireland continues to run a current account surplus. This indicates that total savings in the economy are sufficient to fund current investment needs. Nevertheless, concern has been expressed about the evolution of the personal savings ratio in the country. This ratio reflects the difference between personal disposable income and personal expenditure as measured in the National Accounts.
The latest available estimates of the personal savings ratio published by Central Statistics Office relate to 1998. For that year it is estimated that the personal savings ratio was 9.6%. The Autumn 2000 Quarterly Economic Commentary published by the ESRI estimates that the personal savings ratio fell to 9% in 1999. For 2000 the ESRI forecast a decline to 6.7%. It should be noted that there is considerable uncertainty about these estimates and forecasts and they are likely to be revised – perhaps significantly – over time.
It should also be noted that any decline in personal savings is offset by increased savings by the Government. It is now estimated that the General Government Surplus will be 3.9% in 2000. Sensible management of the public finances during this period of exceptional economic growth will remain a key priority for the Government.
Rather than focusing on the issue of the savings ratio per se, it might be better to look at matters from the perspective of inflation, the real concern in the economy today. As Minister for Finance I am, of course, aware of the growing demand pressures in the economy. The Government is acutely concerned about the impact that excessive inflation could have on our economic performance. In response to this threat, we took measures in June of this year to address inflationary pressures. These measures focus on fostering competition and monitoring prices. Recent indications are that these measures are working.
I am aware of proposals that have been made by various bodies to counter demand-led inflation and which relate to incentivised savings schemes, as well as to the granting of a pensions bond. I will be considering the various proposals from the perspective of their efficacy in reducing excess demand and in the context of the forthcoming budget.
The Minister has given us a number of statistics but he will also be aware of the statistic in the most recent quarterly national accounts that consumer spending has risen by nearly 10%. If I understood the Minister correctly, he is saying it is that figure that is of concern, rather than the savings ratio. Among the measures the Minister is talking about, is he considering a reduction in the rate of DIRT?
As I indicated in the reply, and perhaps I should say it more strongly now, there is considerable scepticism about the savings ratio in terms of these figures and it should be treated with extreme caution. There is a residue in the national accounts and even the experts are having difficulty in agreeing the figures. I will give the Deputy an example. The ESRI, which is very reputable, forecast in September a rate of 6.7% for this year and forecast a rate of 9% in its June publication. There is a difference between the two figures at the end of the account. I am not casting any doubt on how the figures are compiled but it is a difficult figure to calculate. What was the Deputy's particular question?
I put down the question because the Tánaiste is on record in the relatively recent past as saying that she wants to find means of encouraging people to save, and the Minister is basically saying that he is looking for means of encouraging people not to spend, if I understood his answer correctly. What measures is he considering to do that and specifically is he considering the idea of reducing DIRT? Also, is he considering the idea of a savings bond as proposed by the ICTU?
Both measures have been put forward by different groupings as something that should be considered for the budget. I will consider that and all items. As the Deputy knows, it is not the practice to comment on matters which I may consider for the budget.
Will the Minister agree that as a general rule Irish people do not like to pay tax, particularly on savings? For many people the traditional way of saving was the biscuit tin under the bed but a slightly more sophisticated method is to take out bank drafts. Is the Minister concerned that there might be many uncashed bank drafts lying in financial institutions throughout the country? People who got bank drafts may have died or whatever and to the best of my knowledge there is no method whereby the legal profession can establish the contents of a will from a bank in those circumstances. Money gained through illegal means may have been used to acquire bank drafts. Has the Minister any plans to examine the concept of putting a limit on the life of a bank draft, which is the case in several other countries, because it is possible that there are bank drafts in some financial institutions that are 50 years old?
I have not given any consideration to that. I read some comments that the Deputy made recently on this matter. I will have the matter examined in my Department but as of now, I do not have any particular proposals. I take note of what the Deputy said, and what he said previously about this matter, but it is not something to which I have given much thought because I do not believe it is that much of a problem. People are more likely to forget about dormant bank accounts than about bank drafts. However, I do not have any empirical evidence to back up that suggestion.
Will the Minister agree that if there are uncashed bank drafts there is a moral obligation on banks to try to track down the owners, or their next of kin if the persons are deceased?
I will have to have the matter investigated as to the procedures that are in place for banks in that area.
Has the Minister undertaken any review of the post office savings schemes in recent months, or does he intend doing that to bring them into line with modern savings practices?
I have not given any consider ation to it in recent months but I will look at this aspect also in the run up to the budget.