Dáil Éireann díospóireacht -
Thursday, 25 Apr 2013

Vol. 801 No. 1

Leaders' Questions

Deputy Micheál Martin

There is no doubt but that the cost of mortgages represents an extraordinary burden on thousands of families, many of whom see no light at the end of the tunnel. Some 96,000 households are in mortgage arrears for more than three months. The personal insolvency arrangements, in terms of the resolution of the issue of household debt, give complete control to the banks. To add to all of this misery and people's genuine anxiety, the State owned banks, Allied Irish Bank and the Educational Building Society, have decided to increase their variable mortgage interest rates by 0.4%. This is a devastating blow to many mortgage holders. The cost of this increase on a mortgage of €300,000 will be approximately €800 per annum, which is a savage increase for many and will cripple family budgets. This represents a cynical profiteering ethos within these institutions which, in terms of their particular agenda, are making sacrificial lambs of variable interest rate mortgage holders. This is a sneaky rise in advance of an anticipated European Central Bank cut next week.

Many are asking questions such as, "Is anybody going to do anything about it?" and "Is the Government indifferent to the plight of those mortgage holders who will suffer significantly as a result of this hammer blow announcement yesterday by AIB, the EBS and Haven?" The 2011 Central Bank report on variable interest rate mortgage pricing in Ireland states:

It appears that some lenders are charging higher variable rates to compensate for the losses they are making on their tracker loans. The risk with such a strategy is that it may be counterproductive and continue to exert upward pressure on arrears.

There is no doubt but that this increase will add to the number of families in arrears. When one takes into account the property tax and other charges, the situation is looking impossible for many families. This increase will lead to more families in mortgage arrears.

Will the Government intervene in this matter? Will it meet the banks to ask them to reverse this savage increase in variable interest rate mortgages?

The Tánaiste

The Government has already intervened to address the issue of mortgage arrears, which is one of the biggest problems facing many householders. In many cases, those in mortgage arrears bought homes at the height of the property bubble. The Deputy will recall that there was a property bubble during the lifetime of the Government in which he served, the result of which is that many are now stuck with high mortgages which they are finding difficult to pay. To address this problem, the Government has put in place the personal insolvency legislation which reduces to three years the period of time for personal insolvency and a range of non-judicial personal insolvency settlement methods. That system came into operation at the beginning of 2013. Some 8,000 cases of arrears have since been addressed by the putting in place of various settlements. However, there is a lot more to be done. The Government continues to encourage the financial institutions to speed up the process and reach settlements with people in mortgage arrears in order that they can get on with their lives and have certainty about where they are in terms of their mortgage difficulties. There is no doubt but that the announcement by AIB and the EBS that they propose to increase their standard variable interest rate mortgage is bad news for mortgage holders. However, the Deputy will be aware that is a commercial decision made by the two institutions.

Deputy Micheál Martin

The State owns AIB and the EBS and I asked the Tánaiste if the Government would intervene to have this rate increase reversed. The Keane report was published two years ago. However, nothing has happened during those two years in terms of the many sensible recommendations made in it. The mortgage interest subsidy was abolished. The bottom line is that families are facing an average increase of €800 per annum. I put it to the Tánaiste that this is unsustainable. I agree with the Central Bank that this will push many people on variable interest rate mortgages into arrears, thereby increasing the overall number in arrears.

It demands Government intervention. It will damage families and cripple the economy.

Everybody has talked about the domestic economy not getting off the floor during the past two years. Everybody accepts that the domestic economy needs some stimulus, some investment. If €800 is taken out of many families' annual household budget, there is not a chance that the domestic economy will go anywhere in the next 12 months. This is a wider issue. It is extraordinarily difficult for the families concerned but it has repercussions and implications for the broader domestic economy. Two years ago when the banks refused to pass on an ECB cut the Government made great play of hauling in the banks-----

An Ceann Comhairle

A question, please, Deputy.

Deputy Micheál Martin

-----but it seems that was just all optics. The Government is not even saying now that it will talk to them about this savage increase, which represents cynical profiteering and, in my view, is not in the interests of the shareholder ultimately because it will damage the economy. The fundamental question that needs to be asked is whether is it about just getting the banks sorted or the economy sorted. It seems mortgage holders are at the end of the queue and there is complete indifference to their plight given the scale of the increase that will be taken out their weekly, monthly and annual household budgets. There is need to intervene in this case on behalf of the families and the wider economy as well.

The Tánaiste

As I said, any announcement of an increase in mortgages is bad news for mortgage holders, about that there is no doubt or arguing, but it is important we stick to the factual situation. The Deputy said twice that the average increase is €800 a year but that is not the case. The average standard variable rate mortgage in the AIB is €128,000 which means that the increase will be €24 a month. It is bad news for the householders concerned but that does not amount to €800 a year. The average standard variable rate mortgage in the EBS is €102,000 which will mean an increase of €17 per month. Again is it bad news for the householders concerned but it does not amount to €800 a year. It is important that the Deputy sticks to the factual position.

Deputy Micheál Martin

I am dealing with the facts.

A Deputy

Your arithmetic is every bit as bad as when you were in government.

The Tánaiste

Deputy Martin was also wrong when he stated that the Government did not act on the Keane report. It did act on that report. That is why we introduced the personal insolvency legislation.

Deputy Timmy Dooley

With the banks in control.

Deputy Micheál Martin

Split mortgages.

The Tánaiste

That is why the personal insolvency service has been established. That is why a range of measures has been advanced to help people who are in mortgage distress. Our objective is to aim to get settlement of the mortgage arrears difficulties people have. We have now put in place the architecture under which that can be done. Since the beginning of this year 8,000 have been settled.

Deputy Micheál Martin

They have not been settled.

The Tánaiste

That needs to be speeded up.

Deputy Dara Calleary

The Tánaiste should check the facts himself.

The Tánaiste

We are in constant contact with the banks to encourage them-----

Deputy Dara Calleary

Encourage them?

The Tánaiste

-----and drive them forward to get the settlements made.

Deputy Micheál Martin

Did the Government know this increase was going to be made if it is in constant contact with the banks? It must have.

The Tánaiste

The objective here is that we have to get to a point where people can get their mortgage difficulties settled and get on with their lives.

Deputy Timmy Dooley

And this is going to help them.

Deputy Pádraig Mac Lochlainn

Tens of thousands of home owners woke up this morning to learn of yet another interest rate hike this time from AIB and the EBS. It is a sneaky rise when the ECB is likely to cut interest rates next week. It is even more galling for home owners when they followed the proceedings yesterday where Richie Boucher was awarded a remuneration package of €843,000. Where is the Labour Party in all of this? A few years ago the policy of the Tánaiste's party was that the cap for bankers' pay should be €250,000 in line with the then Minister for Finance's income. A number of his backbenchers made a big stand about that this week and confronted this issue vigorously. It seemed at one point that he was going to make a stand once and for all on these issues but then, interestingly, yesterday the Minister of State, Deputy Brian Hayes, who is seated behind the Tánaiste, confirmed to all of us that this was not the Minister, Deputy Noonan's decision, Fine Gael's decision but was a Government decision. Can the Tánaiste confirm that he signed off on that decision at the Economic Management Council in Cabinet? Was the Labour Party in full agreement with this decision? How can the Tánaiste justify the extraordinary concern for those at the top of the banking system like Richie Boucher who was party to the crisis we face-----

An Ceann Comhairle

I ask the Deputy to avoid using people's names.

Deputy Pádraig Mac Lochlainn

-----when one compares that to the lack of concern for the Croke Park issue?

The Tánaiste

I do not agree at all with the top levels of pay in the banks. I think they are far too much.

Deputy Brian Stanley

Why did the Tánaiste not vote again them then?

The Tánaiste

They have to be brought under control. When the Minister of State, Deputy Brian Hayes, referred yesterday to a Government decision, that Government decision is to support and to seek the implementation of the report that has come from Mercers on pay in the banking system. The Government has commissioned an independent analysis of pay scales and pension packages in the banks. It has recommended that there should be reductions across the board of between 6% and 10%. Our view is, and mine certainly is, that the highest level of reduction needs to come from those who are on the highest levels of pay. It is not about any one individual; it is right across the banking system. We have put in place a cap on pay. We have banned the payment of bonuses. We are hugely conscious as well that we live less than an hour's flight time from the biggest financial centre in Europe and that is why we have worked at European Union Presidency level to put in place a restriction on bank bonuses across the European system, which I believe will help in controlling bankers' pay in this country as well.

Let us be very clear about it. The Government is clear that higher pay levels in the banking system need to come down. We commissioned a study on that, which we have received. We support it and we are awaiting the response of the banks to it. I hope and expect that they will respond positively to that report.

Deputy Pádraig Mac Lochlainn

The personal insolvency legislation is being enacted and rolled out as we speak. A reply to a parliamentary question received by my colleague, Deputy Pearse Doherty, last night confirmed that it is expected that 19,000 people will engage in that service. Many of them are people who believed what they heard in this Chamber, from so-called expert economists and from people with vested interests across the banking sector. That is who created this crisis. Richie Boucher was up to his neck in all of that.

An Ceann Comhairle

Will the Deputy please refrain from referring to individuals?

Deputy Pádraig Mac Lochlainn

Okay. The banker who received €850,000 yesterday was up to his neck in all of that. That is the reality. People are sick to their stomach that every time we have to deal with these issues there is some buyer in the way. When will there be leadership?

I and others sat through 15 or 16 hours of deliberation on Committee Stage and Report Stage amendments to the Personal Insolvency Bill and every time we raised the issue of there being no veto for the banks we were shot down. We understand the banks lobbied heavily to have control over that. What has happened in all of this? Where are the changes people were promised? Where is the hope that the Tánaiste and the Taoiseach, Deputy Enda Kenny, gave in the lead up to the last election campaign? Can the Tánaiste give a definite response today as to whether the Labour Party backed that? Why did the Tánaiste not intervene? Why did he not honour the promise he made last November that there would be no more pay over €500,000?

The Tánaiste

Sinn Féin, as always, is interested in scoring the political point-----

A Deputy

The Tánaiste is not so bad at that himself.

Deputy Brian Stanley

We are just trying to get an answer.

The Tánaiste

-----rather than dealing with the problem. Let us come back to the problem. I have answered the Deputy's question about bankers' pay. We are dealing with that.

Deputy Dessie Ellis

It is only 6% to 10% - €80,000.

The Tánaiste

We have asked each bank to report to the Minister for Finance by the end of April. That issue is in hand and we do not need any encouragement from Sinn Féin on it. We have made clear from the beginning of the lifetime of this Government that our objective was to enable people to continue to live in their own homes. Many households and families who have big mortgages that they cannot afford to pay must resolve that issue with the financial institutions concerned. We have put in place an architecture to enable householders and mortgage holders to do that effectively. It includes the radical change in the personal insolvency process, enacted by this House and brought in by this Government, which reduces the period of time for which people are considered personally insolvent to three years. That is a radical change. Second, we have put in place a non-judicial settlement arrangement so that people who are already in mortgage distress do not have to incur high legal costs, the cost of going to court and all of that. They can settle their mortgage problems reasonably with their financial institutions.

Since the beginning of this year 8,000 people who had been in mortgage distress have concluded such settlements with their financial institutions under the new arrangements. We want to see more of that because we estimate that there are approximately 100,000 households in mortgage distress at one level or another. These households need to be able to conclude an arrangement with their banks so that they can get on with their lives. The arrangements are in place to do that. The Government will keep a close watch on how that progresses. Our position is that we are on the side of those householders who cannot pay because of either job losses or business and financial difficulties and we want them to settle this with their banks so that they can move on with the rest of their lives. Progress is being made. The emphasis is on making sure we resolve the problem for householders in mortgage distress. I am glad that so far this year 8,000 have managed to achieve settlements. We want to see more of this and I encourage the banks and financial institutions to do more of it, to do it more quickly and to enable people to get on with their lives.

Deputy John Halligan

The results of several surveys released in recent weeks strongly indicate that the Irish consumer is still paying a premium for groceries compared with consumers in other EU countries. Supermarket chains across the country have refused to disclose their profit margins. The rumour that Tesco dubs this country "Treasure Island" is well known. Although families are struggling to cope with the downturn, major supermarkets are pushing prices even higher than the boom time rates. A survey by the Consumers' Association of Ireland found that the price of 16 out of 19 popular and essential grocery items had increased by between 12% and 32% since 2011, against the background of a 1.7% inflation rate. Almost all of the products cost more than they did at the height of the boom, costing the average family an extra €870 a year. There are also strong indications of widespread price matching among these chains. They are extracting colossal profits from this country. Is it not time they gave something back?

Combat Poverty, when it was in existence, Social Justice Ireland and the Society of St. Vincent De Paul have used the word "profound" when talking about food deprivation and food poverty. Many of these supermarket chains have no compassion whatsoever when they hear of people suffering from food deprivation. They have no compunction about increasing their profits. I was in a house last week with a mother and four children. The mother was ill and the eldest daughter, who is 14, was making dinner. I was saddened and upset to see that the dinner consisted of beans and chips. That is wrong. It was their Sunday dinner. They are struggling to make food last until they receive their social welfare payments on Tuesday or Wednesday. That is unacceptable and it is wrong when one sees the profits the supermarket chains make.

Deputy Finian McGrath

Hear, hear.

Deputy John Halligan

Will the Tánaiste investigate the possibility of holding talks with the major retail chains to introduce a price freeze on household staples until the economy has turned around? The Minister for Communications, Energy and Natural Resources, Deputy Rabbitte, was able to do it in the 1990s with a price freeze on drink. Surely we are capable of meeting those chains and asking them to consider doing this. Following talks with governments, major supermarket chains in several EU countries have introduced price freezes. We should bring those chains in and ask them to do the same here. Otherwise we should introduce price freezes on essential goods such as bread, milk, butter and baby food.

Deputy Finian McGrath

There is a good proposal. The Tánaiste should put that on his parsnips.

The Tánaiste

I am aware that the Consumers' Association of Ireland compared 19 branded products in 2011 and 2013 and found there was a 12.6% increase in the cost of the basket surveyed. For the consumer price index, the Central Statistics Office surveys more than 50,000 prices taken on 632 item headings. That shows that for food and non-alcoholic beverages, prices have fallen by 6.3% since 2008. The most recent CSO figures show an increase of 1.6% for the year ending March 2013. I understand this is explained by an increase in certain commodity prices, some of which were affected by weather and energy costs.

The programme for Government contains a specific commitment to enact legislation to regulate certain restrictive anti-competitive practices in the grocery goods sector. The Government intends to give effect to this commitment by including an enabling provision in the consumer and competition Bill, which will also merge the National Consumer Agency and the Competition Authority, update and reform competition law on foot of a review of the operation and implementation of the Companies Act 2002, and give effect to the recommendations of the advisory group on mergers. Work on the drafting of the consumer and competition Bill is advancing and the Bill is included in the A list of the Government's current legislative programme, so we expect it to be published in this session. In addition, staffing for enforcement in competition is being strengthened by the recruitment of some new personnel.

Deputy John Halligan

I have no doubt we are in the grip of a nutritional recession, triggered by food poverty. I appeal to the Tánaiste to deal with supermarket chains that refuse to reveal the huge profits that everybody knows they make. Everyone else in the country has been asked to help the economy. The people who are suffering from food deprivation have had to take cuts, yet the big supermarket chains increase their profits year after year. Surely it is not unreasonable to ask the Tánaiste to do as governments have done in other countries, while this recession is still destroying the quality of people's lives, and at the very least ask the supermarket chains to freeze the prices of essential food items.

The Tánaiste did not answer all of my questions. Will he consider asking the Tescos, Aldis and Lidls to freeze the prices for two years on the 19 essential food items such as bread, milk, butter and baby food? They will still make astronomical profits in that time. We should be asking them to make their contribution to help out the economy, as everyone else has. If they do not bring in this freeze, we, as legislators, have the ability to bring in a price freeze on essential items and that we should do.

Deputy Finian McGrath

Hear, hear.

The Tánaiste

As I said, the Government is taking the legislative route on this issue. We can have all the discussions we want on this matter. I agree with the Deputy that the supermarkets should not be increasing the prices of essential goods. We gave a commitment in the programme for Government that we would deal with anti-competitive practices in the grocery goods sector. We will deliver on that in the consumer and competition Bill, which will be published this session. There will be an opportunity for Members to participate in the debate on the Bill when it is presented. That action is being taken to protect the consumer against overpricing, profiteering and anti-competitive practices in the grocery goods sector.

Supermarkets and supermarket chains are aware of the Government’s intention in this regard. The message should be clear to them on their pricing policies. I would expect them to act accordingly.