Vol. 831 No. 3
6. Deputy Joe Higgins asked the Minister for Finance his view on the future treatment of mortgage customers following the announcement by Ulster Bank to move its arrears support unit to Scotland, with the loss of 110 jobs here; and if he will report on any recent meetings with Royal Bank of Scotland, RBS, or Ulster Bank executives. [8274/14]
I want to ask the Minister what may be the future prospects for ordinary mortgage holders with Ulster Bank in the light of the fact that the bank is moving its arrears support unit to Scotland and sacking 110 workers here. Has he had any meeting with representatives of Royal Bank of Scotland or Ulster Bank about these or other issues in recent times?
Ulster Bank Ireland Limited is a regulated entity, licensed pursuant to section 9 of the Central Bank Act 1971. It is also subject to the Central Bank's mortgage arrears resolution targets, MART, process. Ulster Bank's performance in respect of these targets is closely monitored and the Central Bank's MART audits examine the bank's processes of determining and proposing sustainable solutions against its sustainability guidelines. The consumer protection framework also applies to Ulster Bank Ireland Limited and includes the consumer protection code and the code of conduct on mortgage arrears, CCMA. These are statutory codes with which Ulster Bank Ireland Limited must comply. The recent announcement by Ulster Bank does not alter these requirements.
In terms of mortgage arrears, the CCMA sets out requirements for all mortgage lenders dealing with borrowers facing or in mortgage arrears and provides a strong consumer protection framework to ensure borrowers struggling to keep up mortgage repayments are treated in a fair and transparent manner by their lenders and that long-term resolutions are sought by lenders with each of their borrowers. The CCMA also sets out the framework that lenders must use when dealing with borrowers in mortgage arrears or pre-arrears. This framework is known as the mortgage arrears resolution process, MARP, and it sets out the four steps lenders must follow in dealing with borrowers in difficulty, namely: the lender must communicate with the borrower; the lender must gather financial information; the borrower's circumstances must be assessed; and a resolution is proposed.
As part of the normal business of my Department, my officials meet regularly representatives of Ulster Bank. They and I met RBS executives, including the current CEO, last week. The Deputy may be aware that, following the review by the UK Treasury in the autumn of 2013, RBS reaffirmed its commitment to the Irish market. It is reviewing the operations of Ulster Bank in Ireland with a view to creating a sustainable business model. It is expected that the findings of the review will be published by the end of February 2014.
There is concern among those who have mortgages with Ulster Bank and also among the staff of the institution about the sacking of 110 workers here and the fact that the arrears support unit is to be moved to Edinburgh. Ulster Bank was up to its neck when it came to fuelling the profit-fest that was the Irish property bubble. For example, in 2004 a decision was taken to abolish the bank's risk policies and controls committee. At the time it was stated the committee represented unnecessary bureaucracy. There are concerns that the move to Scotland will lead to the arrears support unit being more remote and less sympathetic to mortgage holders here who are experiencing difficulties. Some staff are of the view that the company will feel less constrained in adhering to codes of conduct as a result. The new staff who will be taken on in faraway Edinburgh will be on lower pay and have less favourable conditions. Is the Minister of the view that these individuals will deal in a proper and sympathetic manner with mortgage holders in Ireland who are in distress?
In any restructuring of Ulster Bank's mortgage arrears unit, it must continue to comply with the code of conduct on mortgage arrears, CCMA, which sets out requirements for all mortgage lenders dealing with borrowers who are in mortgage arrears and provides a strong consumer protection framework to ensure that borrowers struggling to keep up with their mortgage repayments must be dealt with in a fair and transparent manner by their lenders. This will not change in any way regardless of whether the unit is in Dublin, Belfast or Edinburgh.
Then why is it moving to Edinburgh?
The same rules apply. We have held meetings with Ulster Bank, which has confirmed this. I have also twice met - once before Christmas and once after - Mr. Mark Carney, the Governor of the Bank of England, who assured me that the policy that is published in respect of Ulster Bank is the one that will continue to be implemented.
As the Minister knows, the Royal Bank of Scotland, RBS, of which Ulster Bank is a part, has a global restructuring group. The likelihood is that the mortgage loans of ordinary householders will be put onto the international marketplace, in the same way as happened in respect of the former Irish Nationwide mortgage holders, to be snapped up by vulture capitalists. Does the Minister not see that the same problems and fears that we discussed earlier in respect of the mortgage holders now in the grasp of IBRC can be repeated in this instance? When the chief executive officer of Ulster Bank was before the finance committee, I found him distinctly unsympathetic towards mortgage holders in arrears in some of his comments. Were the chief executives of Ulster Bank and RBS among those the Minister met? Did they give him any indication of what the future holds for the ordinary mortgage holders currently with them?
I met the chief executive of RBS. He was accompanied by the chief executive of Ulster Bank. We discussed the future of Ulster Bank. What they stated was consistent with the information I had received from the Governor of the Bank of England. Ulster Bank will continue to trade North and South and try to be a high street bank providing the kinds of service that are needed, but we should remember-----
Why is its arrears support unit moving to Edinburgh? Is that not sinister?
The Deputy knows that banks all over the world have lost a great deal of money. RBS suffered very severe losses, as did its subsidiary in Ireland, Ulster Bank. They are all restructuring and trying to be more efficient and to cut costs. As part of the restructuring, Ulster Bank moved the unit to Edinburgh. From a legal or practical point of view, though, this will not affect mortgage holders in Ireland, as Ulster Bank is still bound by the same rules as the banks that have their mortgage units in Ireland. Of course we regret the loss of jobs at the unit. No job loss is welcome. We would prefer it had the unit stayed in Ireland and maintained its 110 jobs or so.
7. Deputy Thomas Pringle asked the Minister for Finance his plans to widen income tax bands; the number of persons it will affect; and if he will make a statement on the matter. [8371/14]
This question was prompted by media reports during the past week of indications by the Minister and the Taoiseach that their priority or choice was to increase tax bands in the upcoming budget. What are the Minister's opinions on the matter?
As I indicated in my earlier reply to Deputy Pearse Doherty, the income tax burden is too high and needs to be reduced. However, I have also stated that, although it is my intention to alleviate the burden, I can only do so when the public finances allow it. The general government debt at the end of 2013 is estimated to be just over €200 billion and each year we incur an annual deficit that figure grows.
The Government remains committed to returning the public finances to sustainability, upon which the prosperity of the economy depends. Under the terms of the Stability and Growth Pact, until Ireland has reached its objective of a balanced budget in structural terms, we may not introduce discretionary revenue reductions unless they are matched by other revenue increases or expenditure reductions. This means that the Government must consider carefully any tax change, as any reduction will need to be offset elsewhere. However, it should be noted that extending the standard rate income tax band would benefit all of those whose income exceeds €32,800. The extent of the benefit would depend on the amount by which the band was extended and the incomes of the relevant individuals.
Ireland has a progressive taxation system that ensures that the burden of taxation falls most heavily on those with a higher ability to pay. The latest OECD data indicates that Ireland has the most progressive tax system of the 21 EU countries that are members of that organisation.
As is the normal practice for the Minister for Finance, I have no intention of setting out planned changes to the tax system in advance of the budget, which is almost eight months away. My officials constantly model and examine potential options for changes to the tax system. Such options will be proposed for my consideration as part of the overall budget package for 2015.
In public comment, the Minister has stated that the tax bands are a barrier to job creation. Given the fact that most of the jobs being created in the economy are part-time, which is a different model of working, surely the changes in the bands should benefit those people with part-time jobs? The majority of taxpayers, some 60%, earn under €30,000 and would not benefit from any change to the top band. A consideration of changing the bands seems to be a consideration of continuing the inequity that the Government has fostered in recent budgets. Would it not be more sensible to target the benefit at those who would dispose of that income in the economy? Those on low incomes would benefit most.
It is reasonable to adopt different positions based on one's perspective. I am sure that we will hold many discussions on tax over the next two years or so. Many part-time workers are not in the tax net. Some 850,000 workers do not pay income tax because they are not liable for it. Many of those are part-time rather than low-paid workers. This is one starting position.
The benefit of this reform would be for persons earning incomes in excess of €32,800. However, it is becoming an issue. As the economy grows and people are needed to work in its emerging vacancies, we must attract back some of the young emigrants and those who commute to the UK. If someone can fly out of Dublin on a Monday morning to a job in London, stay for five days and enjoy a much higher salary in a more benign tax system, it will be difficult to bring skilled workers back. This is the connection with job creation. In the UK, one does not go on the higher income tax rate until one is earning somewhere north of £180,000. We are at €32,800.
I would love to see the Department's research on the bands posing a barrier to job creation. I know a number of people who travel to England every week to work. When one factors in the cost of flights and accommodation, I am damn sure that most of them would be happy to get a job at home on €32,000 or €33,000 per year. The fact is that people cannot get those jobs because they do not exist. Will the Minister publish the Department's research that shows tax bands are a barrier to job creation?
We publish a great deal of data every year and put much of them up on our website. There is also the tax reform group, the papers of which are published.
8. Deputy Thomas P. Broughan asked the Minister for Finance the measures he will take to ensure that loans held by customers of the former Irish Nationwide will be subject to the same contractual terms and conditions of customer mortgages and other borrowings upon the sale of the Irish Nationwide loan book to a third party or the loans reverting to the National Asset Management Agency as would have been in place prior to the loans having been sold. [8241/14]
There was a lengthy discussion on this matter, but when I asked the Minister on 28 February 2013 about whether individual mortgage holders would be allowed to bid for their own mortgages, he told me that the contractual terms and conditions of customer mortgages and other borrowings would not change as a result of the appointment of the special liquidator.
As the Minister knows, there is considerable distress among mortgage holders, one of whom contacted me last night via e-mail.
The e-mail reads:
I am very worried and concerned of who might purchased the loan book and as to the possibilities of losing protection from the Central Bank as offered to all mortgage holders in IRELAND. I am concerned that whoever might purchase them will have carte Blanche to increase interest rates on us already struggling to meet our monthly repayments and stay in our homes. I also find it quite disingenuous that the Minister for Finance and IBRC can offer huge Financial discounts to multimillionaires to purchase the commercial loan book but the tax paying working class must just shut up and carry on with there contractual agreement with the IBRC until it's sold to some vulture fund.
Perhaps the Minister would repeat what he said.
It is important to highlight that the contractual terms and conditions of all customer mortgages and other borrowings have not changed as a result of the appointment of the special liquidators; nor will those terms and conditions change as a result of the ultimate sale of these obligations to a third party. Purchasers of mortgage loans will be required to honour the legal terms of the loan agreements. None the less, I am fully aware of the concerns raised by the IBRC mortgage holders regarding continued protection under the CCMA for those mortgage holders following the sale of the loan book by the special liquidators.
The special liquidators have, following due consideration, decided that the sale of the residential mortgage book in portfolios was the best method available to maximise market interest and return within the timelines set out in the ministerial instructions. It was not possible for me to interfere in the sales process developed by the special liquidators to compel them to sell the residential mortgage portfolio to regulated entities as to do so would have had a negative impact on the return achievable by the special liquidators. Such action would have left me open to challenge by other creditors of the bank.
I am keenly aware that the potential loss of protection under the CCMA is a source of great concern to the mortgage holders of the bank. The continued applicability of CCMA depends on the regulatory status of the ultimate acquirer of the IBRC portfolio, which will not be known with certainty until that process is completed next month. However, I have instructed my officials to examine the issue fully, in consultation with the Central Bank, with a view to bringing forward a solution if required. While work is ongoing in that respect, I am pleased to note that some unregulated firms have already indicated that they intend to voluntarily adopt the CCMA in order to manage acquired loans, as they believe that following the CCMA is in the ultimate best interests of both the businesses and their customers. I fully expect that this would also be the case in the event that the IBRC portfolio was acquired by such organisations.
It is important to note that in the event that NAMA acquires the IBRC residential mortgage book it will be mindful of its legal obligations and is likely to apply best practice in relation to the CCMA. Furthermore, it has confirmed that no borrower will be in any worse a position.
We have witnessed a number of serious scandals in this country over recent decades. I recall having a conversation with the Minister when we were in opposition about the endowment mortgage scandal and the fact that nothing was at that time being done about it. Why will the Minister not move quickly on this issue? He was prepared to move in the middle of the night a year ago on an important matter. Why not pass the sale of loan books to unregulated third parties Bill, which is on the C list, this evening rather than waiting until 2015 to do so, which will be too late? This Government may not even be in office then. Alternatively, he could simply accept the spirit of Deputy Michael McGrath's Bill and put it on the Statute Book as quickly as possible.
I commend Deputies Mathews and Donnelly on their suggestions with regard to the publication of the advice from PricewaterhouseCoopers. The last comment made by the Minister may offer a tiny glimmer of hope to mortgage holders. However, people believe the Minister is simply standing idly by and allowing them to be thrown to the vultures. That is the net impact of what is being done to Irish Nationwide mortgage holders. Will the Minister reconsider this matter and have the relevant legislation put on the Statute Book? I am aware that voluntary compliance was a feature of the Apollo deal and others. However, one cannot trust vultures to behave in any kind of voluntary or community-oriented manner. This is a matter for Deputy Noonan as Minister.
Hyping up the situation and using extreme emotional language is not helping the mortgage holders.
That is how they feel.
Yes, because they are being well hyped up by people-----
No; they are contacting us.
------whose interests are not their interests.
We are acting for them.
It is unfair to the mortgage holders to be raising unreal fears.
I am talking about young homeowners.
The Minister has the floor.
It is unfair to the mortgage holders to be raising unreal fears. We should not do it. People have different objectives. I am prepared to back the mortgage holders and work towards a solution. I said it was complicated and that my officials are in talks with the Central Bank and the Attorney General's office on the best possible solution. The liquidator must get the best return possible for the creditors of IBRC. That is the legal position. If I were to intervene in the middle of the sale and attach additional conditions to the loan books, that would potentially diminish the value of the loan books. It would also leave us open to being sued in the courts. We should first wait to see who purchases the loan books. If NAMA purchases them - and it is more likely to purchase performing mortgages rather than non-performing ones - there will be no problem with that set of mortgages. If an unregulated institution purchases them we will review the situation, including through the liquidator, reinforced by me, asking that that party do what other private sector mortgage purchasers have done in the past and apply the full code voluntarily. We will be looking for that commitment. If that does not happen, other work, such as Deputy McGrath's proposed solution, will come into play.
I want to convey to the Minister, as other Members tried to do earlier, the distress people are feeling due to the uncertainty surrounding their family homes. The Minister has a core responsibility in this area. It is all right for him to say that if NAMA purchases the loan books it will voluntarily comply with the CCMA, but what people want at this stage is some decisive action. I again urge the Minister to look at what legislative measures can be introduced to ease people's concerns. I accept that everybody affected by the gangsterism of the Celtic tiger era of the past ten or 15 years is struggling with huge inflated mortgages, negative equity and so on. However, the Minister has a moral obligation to address the situation of this particular group about whom we are speaking now in a manner that is in their interests. I am speaking in this regard about young couples and families.
I accept what the Deputy says. We are working on solutions and monitoring the situation every step of the way. There is a process of sale going on which will be completed in the middle of March. We must wait to see who purchases the loan books, following which, if necessary, we can act. We are not standing idly by. We are working in parallel but for legal reasons I am not going to intervene. If I have to intervene I will do so after and not before the sale.
Deputy Derek Keating is unable to attend to deal with Question No. 9.
10. Deputy Pearse Doherty asked the Minister for Finance if he will fast-track the sale of loan books to unregulated third parties Bill to safeguard the rights of those whose mortgages have been sold or will be sold to unregulated entities. [8345/14]
This question also deals with the issue of mortgages and the real concern people have in this regard. There has been some good news, which should be acknowledged at this point. In regard to the two tranches of loan books sold heretofore in 2012 and 2013, one of the institutions is obliged to comply with the CCMA and the other has voluntarily agreed to do so. I understand the party interested in acquiring the loan books in March is willing to voluntarily comply with the CCMA. I am concerned about the so-called voluntary requirement to comply with the CCMA. If a party can voluntarily enter into the CCMA, can it voluntarily withdraw from it, or is there a legally binding agreement between the Central Bank and the party that voluntarily enters into the CCMA? Perhaps the Minister would respond to that question first before I move on.
The Bill to which the Deputy refers is listed in the legislative programme, published last month, under the category "Bills in respect of which heads have yet to be approved by Government". The purpose of the Bill is to provide for the application of the protections provided to mortgage holders under the Central Bank's CCMA to loan books which have been sold by regulated financial institutions to unregulated financial institutions. The matter is legally complex as it could affect contracts already entered into, and so needs careful consideration. For that reason, my officials are currently examining the issue with their colleagues in the Central Bank and the Attorney General's office. In the meantime, I understand that a number of the purchasers of mortgage loan books are abiding by the code on a voluntary basis. As the Deputy is aware, the code confers certain protections on distressed borrowers when dealing with lenders and sets out a clear framework for dealing with cases in arrears.
I also understand that Deputy Michael McGrath has put forward a Private Members' Bill with a similar intent. I look forward to discussing that Bill when it comes before the House.
I need an answer to my question. For example, the Apollo Group which bought 2,000 mortgages from Bank of Scotland last year has indicated it wants on a voluntary basis to enter into the code of conduct on mortgage arrears, CCMA, with the Central Bank and the Department of Finance. What does that mean? Is that a cast-iron guarantee for those 2,000 mortgage holders who reside in the State that they are now locked into it, as they would be if Bank of Scotland still held these mortgages, or can it voluntarily opt out of it? Is an agreement being put in place between the Central Bank and the unregulated institution? That was my original question. If the sale process does not proceed in March because the bid targets have not been met, the loan book will revert to NAMA. It is not likely that NAMA will hold on to these loans to their conclusion; it will be wound down before many of these loans are extinguished. In that case will the Government facilitate individuals in purchasing their loans at a lower discount than that offered to the markets or at least the same discount offered to the markets?
The commitment given previously by the unregulated purchasers of mortgage books was a formal one, but I could not say whether it has the force of contract law without checking the legal position. However, I would not expect anybody to resile from it; if a formal commitment is given, it stands. The commitment is given publicly to the mortgage holders in the first place, but it is also given to the Central Bank and we expect it to stand. I will ask the officials dealing with the Central Bank and the Office of the Attorney General to have a look at that point.
I thank the Minister.
The Minister had more time left and I asked a second question.
I am not going to write the script for the Minister or the Deputy.
You cut off the Minister. The second question still stands. If the loans revert to NAMA, will the Government facilitate the people whose loans they are in purchasing them from NAMA at a reduction, similar to that offered to the markets in the process taking place in March or at a lower rate? I assume there will be an administration burden on NAMA. It is important for the Minister to have clarity on whether there is a legal contract because these loans may be sold on again. He has indicated that legislation will be introduced in 2015. The Taoiseach has said the reason for not introducing it this year is that 61 bids have been received. He has indicated that that was one of the bids and that it did not come out of the hat in time, which is somewhat strange. Given the level of interest in the issue which I presume is reflected across the Opposition benches, the Sinn Féin Party will facilitate the speedy passage of such legislation. If it means sitting additional days, let us do so in order to have a clear-cut system to ensure mortgage holders will be protected when these loans are sold on to unregulated institutions.
It is important to think the matter through. NAMA is required to get the best return possible for the taxpayer on anything it sells. The only way for it to establish this is to have a competitive process. That is exactly what the liquidator is doing. It cannot sell a single mortgage unilaterally to the mortgage holder because it needs to establish value in the market. If it were to sell mortgages individually, rather than in loan books, it could result in a mortgage holder's neighbour who had a row over planning permission buying the mortgage. Alternatively, someone with whom the mortgage holder is in dispute or another family member, in circumstances where the family is not pulling together, could come in and buy the mortgage. Therefore, it is not a solution. If the rule requires a competitive bidding procedure to establish value, there is no guarantee that the person who has the mortgage will end up being owner in that situation. Of course, if NAMA acquires a large tranche of the mortgages which originated in Irish Nationwide Building Society, over time it will also sell them. However, we will have time to look at what conditions it might attach to them for the benefit of mortgage holders. We can have that discussion subsequently. We are now in phase 2 and the liquidator has advised that he will complete the sale sometime in March. We will see where we stand at that point and then address outstanding issues.
I do not regard voluntary compliance with the code as a solution because it is simply unenforceable, which is the fundamental weakness. Who will police voluntary compliance if an issue arises? The answer is that nobody will. We will have two standards of a code, one that is statute-based, enforced and policed by the Central Bank and another that is entirely voluntary. That is not a solution. I know the Minister has a concern about being sued if he issues a direction order now when the sales process is under way. However, we could pass legislation - it does not even need to be Government legislation - to deal with the issue. The Government is far less likely to be sued if legislation that originates from the Opposition benches is passed by it. It would have to be implemented and enforced. I do not believe it could be sued in that scenario.
The publication of the Deputy's Bill was quite helpful to us and me, personally. It sharpens the consciousness of anybody thinking of buying that there are concerns in the House and that there is a legislative route that this Parliament might follow. We can discuss it, but I see it as something we will deal with as the situation develops. It should develop very rapidly and conclude in March, if the liquidator sticks to the deadline he has suggested to me.
