Vol. 883 No. 3
103. Deputy Ruth Coppinger asked the Minister for Finance if he or his Department has had any discussion with Allied Irish Banks over the outsourcing of application and development management, ADM, services; and if he will make a statement on the matter. [24507/15]
My information is that the ADM department is being outsourced to India and that skilled IT staff have been told this and will be forced out of the bank. This is a bank that the so-called we own 99.8% of, yet the Government is agreeing not to intervene in any way in AIB's employment practices and job losses.
I thank the Deputy for her question. As she will be aware, under the relationship framework the State does not intervene in the day-to-day operations of the banks in which it holds investments or their management decisions regarding commercial matters. Hence, any discussion around matters such as outsourcing is a matter for the bank, the relevant staff and their union representatives. Notwithstanding this position, my officials take an active interest in how the bank's cost base evolves to ensure that the State's interests as shareholder are protected and the Government's remuneration policy is enforced.
The bank has previously indicated that, as part of its restructuring plan to reduce costs and increase efficiencies, the outsourcing of certain functions would be considered in consultation with unions and affected staff. I have been informed by the bank that there have been no compulsory redundancies as a result of its recent outsourcing activities. Any staff who transfer under outsourcing arrangements transfer under the Transfer of Undertakings (Protection of Employment), TUPE, Regulations.
I have been informed that AIB has not at this stage confirmed any agreement to outsource some of its technology services in ADM teams to a third party provider. Should such a decision be confirmed, affected staff will be informed immediately and AIB will enter into a full process of information and consultation with employee representatives, as required by law and under engagement principles agreed with the Irish Bank Officials Association, IBOA.
I asked a bunch of questions to which the Minister gave the same answer, namely, under the relationship framework, the State does not intervene in the day-to-day operations of the bank or management decisions on commercial matters. We put money in continually, but we are not bothered by jobs being shed. The Government could change this relationship if it wanted to.
Since we paid to bail out the banks, there has been a loss of approximately 4,000 jobs at AIB. It has also outsourced a number of its functions, including cleaning, catering, IT and training. We are meant to own it. The State could intervene to prevent these job losses and the cheapening of labour.
There is a proposal to transfer the ADM section to an Indian company. AIB may keep some of its staff in Ireland, but there is a legitimate concern that it will outsource more functions abroad. It has already happened in the finance sector. The Minister should have an interest in this matter because there have been serious problems with outsourcing IT in other banks, leading to months of delays in addressing consumer complaints.
The Deputy would have received answers to the effect that the State was at arm's length from the banks and that we did not interfere in commercial decisions. The relationship framework sets out clearly that the political side should not interfere in commercial decisions. Consider when Anglo Irish Bank was nationalised or when, in the early days of this Government, I recapitalised PTSB, AIB and Bank of Ireland.
One of the main concerns of Deputies on all sides of the House was that commercial decisions would be commercial and they would not be influenced by political considerations. That was a very strong case advanced by everybody here and it is something that I am convinced was a proper decision, that there should not be political interference in commercial decisions in the banks. As I said in my reply, I have been informed that AIB has not at this stage confirmed any agreement to outsource some of its technology services but should it do so it will follow the agreements it has entered into with the Irish Bank Officials Association.
I thank the Minister.
It will consult immediately with the staff if such a decision is made.
The Minister is making it sound like a holy creed that the State should not intervene in bank decisions. That is the Minister's view.
Commercial decisions.
That would not be the view of most ordinary people outside. For example, "commercial reasons" was the reason given for not informing the Minister's Department about the sale of Siteserv GMC Sierra. That whole debacle was for commercial reasons. The Minister did not find out about that until a month after it had happened. When the taxpayer is pumping money in, I do not see why the State should not be able to interfere. Banks could be run in the interests of ordinary people for a change. That would be a turnaround, knowing that people could get cheap credit and mortgages, and affordable housing could be built.
In regard to the particulars of AIB, Ulster Bank saw its systems go down for a number of months in 2012. I think it took three months to have it resolved for some customers. Outsourcing these departments is not a good idea. The other part is that this seems to be a pattern, somewhat similar to the last question. Bank jobs used to be good jobs with good pensions. If he does not intervene, the Minister is assisting in the decline of decent pay and conditions in the financial services sector.
I call the Minister to conclude.
I could not disagree more with the Deputy than in her policy position that Deputies and Ministers should be enabled to influence commercial decisions of the banks. We had a touch of that in the past and it would lead to absolute chaos. It is not the ordinary people of Ireland who would benefit from that, rather it is the people on the inside track who would benefit again. The policy is no interference with commercial decisions and I will maintain that position. The Deputy is entitled to her alternative view but I think it is very misguided and would lead to corruption of the system if implemented, even on a partial basis, much less a widespread basis. The position is as I have outlined and I do not have anything further to add at this point.
104. Deputy Michael McGrath asked the Minister for Finance his views on the role of the Irish Fiscal Advisory Council in providing commentary and advice to the Government; his plans to address the specific issues raised by the council in its recent assessment of the spring economic statement; and if he will make a statement on the matter. [24577/15]
This question relates to Irish Fiscal Advisory Council and its role. I would like to hear the Minister's view of the recent independent assessment of the Irish Fiscal Advisory Council and to state whether he intends to introduce changes or reforms to the council's work. I wish to raise also the issue of the recent fiscal assessment report from the Irish Fiscal Advisory Council which deals with the spring economic statement. It made some sharp criticisms of the Government's approach to budgetary issues which I would like to thrash out with him.
The Irish Fiscal Advisory Council was established in 2011 as part of a wider agenda of reform of Ireland's budgetary architecture as envisaged in the programme for Government. Subsequently, following approval of the fiscal compact treaty by referendum in 2012, the Irish Fiscal Advisory Council was placed on a statutory basis to fulfil the role of monitoring compliance with the fiscal rules under the Stability and Growth Pact and, following further EU reforms, subsequently given the endorsement role for the macroeconomic forecasts which underpin the budget.
In its recent fiscal assessment report, the council has again asserted its independence and produced some interesting pieces of analysis. While it is the case that I do not always agree with the outcome of the council's analysis, I very much value its expertise and its input as an independent voice in helping the Government to adhere to its own fiscal targets.
With regard to advice contained in the fiscal assessment report, as I have stated in the House previously, this is being considered by my officials. As is normal, a comprehensive response to all of the pertinent issues will be published in the coming weeks. I will, however, give my initial views on a significant issue raised by the council.
As the Deputy will be aware, from 2016 onwards, the public finances in Ireland will be subject to the requirements of the preventive arm of the SGP. The European Commission assesses compliance with the preventive arm on the basis of two complementary pillars. The first is the minimum annual improvement in the structural balance and the second is compliance with the expenditure benchmark. The minimum improvement in the structural balance and the expenditure benchmark are in theory designed to be complementary, although differences between the two metrics can emerge from time to time.
The Fiscal Advisory Council noted that the fiscal projections contained in the stability programme update, SPU, did not show Ireland complying with our requirements under the Stability and Growth Pact - in other words, the improvement in our structural balance is below the required 0.6 percentage points in 2016.
However, SPU estimates show that for Ireland compliance with the expenditure benchmark is consistent with delivering a lower suggested quantum of structural adjustment in 2016. This somewhat counterintuitive outcome was explicitly addressed in the SPU, and emphasises the material problems posed by some of the technical aspects of the rules.
Additional information not given on the floor of the House
It should be noted that compliance with the requirements of the Stability and Growth Pact is ultimately assessed on the basis of analysis undertaken by the European Commission. In this context, the recent assessment of the SPU published by the European Commission as part of the European semester process finds that "on the basis of information in the 2015 Stability Programme Update recalculated according to the common methodology, progress towards the MTO is in line with the requirements of the preventive arm of the [Stability and Growth] Pact." The assessment by the Commission also finds that "the rate of expenditure growth net of discretionary revenue measures, as planned in the SPU, is expected to be in line with the requirements of the expenditure benchmark pillar". In summary, therefore, the projections in the SPU are consistent with the requirements of the Stability and Growth Pact.
While I will address other issues comprehensively in my formal response to the Council, I would strongly make the point that when formulating budget 2016, the Government is acutely aware of the importance of adhering to the fiscal rules and our fiscal policy will reflect this.
The Minister described the Fiscal Advisory Council’s recent report as “interesting pieces of analysis”. It is much more than that because it made some very sharp criticisms. It should be possible to establish, as a matter of fact, whether it is accurate. It states, for example, that the SPU the Minister presented and the budgetary projections do not take account of explicit Government commitments to reduce taxes beyond next year. In other words, the €1.5 billion the Minister promised in the budget for 2016 in terms of tax cuts and spending increases is factored in but the Minister has gone on the record as having said we will be in a position for expansionary budgets up to 2020, including tax cuts. The Fiscal Advisory Council claims that is not factored into the numbers and the budget projections. Similarly, it makes a very strong criticism that the likely cost of demographic aging, in terms of pressures on certain areas of public services, health and education are not factored in as well as the delivery of existing programmes. That is not an interesting piece of analysis. The Minister should be able to establish, as a matter of fact, whether it is accurate or inaccurate. The House needs the answers to those questions.
I admire the work of the Fiscal Advisory Council and am in general agreement with its overall view of the fiscal policy that should be followed. In the SPU, however, I had to use the data to hand at the time and we made it quite clear in the SPU that as the data changed the compliance rates would change. Subsequent to the publication of the SPU, the Commission came out with a new set of figures. I do not know why but the Fiscal Advisory Council does not seem to have factored that in because the Commission has said we comply fully with the fiscal rules. The assessment by the Commission finds that "the rate of expenditure growth net of discretionary revenue measures, as planned in the SPU, is expected to be in line with the requirements of the expenditure benchmark pillar". Rather than our coming in at 0.4% or 0.3% of an adjustment as against 0.6% the Commission has said we will come in at 0.8% in the next budget on the basis of the new data. It is not the Department of Finance or the Fiscal Advisory Council that decide whether one is complying or not, it is the Commission and it is saying we are well within the boundaries of requirement.
On the Deputy’s other point, we made it quite clear that while we were spelling out the details of what was required for the 2016 budget beyond that we envisage a change of government. Maybe the same parties will compose it, maybe other parties will be in it. We said in the SPU that we were projecting on a no policy change but we did outline the fiscal space. The Deputy may regard that as a criticism but I do not think it would be appropriate for a government in its last year of office to do detailed budgets for the next five years; 2016 is within our remit, 2017, 2018, 2019 and 2020 are not. We identified the fiscal space. We said it was on a no policy change. It will be a matter for the next government to fit the policy into the fiscal space available but we did identify the fiscal space.
From what I hear the Minister saying, he acknowledges that while his political commentary around the spring statement was that there would be scope for an expansionary budget up to 2020, with further tax cuts beyond next year, that is not factored into the numbers.
It is factored into the numbers, but the break-up of the measures within the fiscal space is not factored into them.
I will allow the Minister to contribute again in a moment.
That is not what the Irish Fiscal Advisory Council states.
Deputy McGrath should ask a question.
There is a fundamental disagreement here between the Irish Fiscal Advisory Council's report and the Department of Finance.
I will publish a detailed reply to the report.
That would be very helpful. The Minister should also accept the Fianna Fáil Party's recommendation that, as the general election approaches, the Irish Fiscal Advisory Council be given the power to cost the proposals of all the political parties and Independent Members. To do so would be to do a great service to members of the public who will have to work out all the different noises emanating from the political parties about this or that being costed or not taken into account. Let the gospel be as per the Irish Fiscal Advisory Council when it comes to the election manifestos of different parties and the extent to which they are costed.
I am not sure all the Opposition parties would be pleased if I were to do as the Deputy suggests.
Let the general public decide on that issue. The point is that the Irish Fiscal Advisory Council is essentially arguing that known costs which the State must incur - there is no element of discretion and nothing arbitrary about these, as they are eminently predictable - have not been factored into the projections. I refer to the impact that demographics will have on public services. Similarly, the tax cuts promised beyond 2016 have not been factored into the projections. This is written in black and white in the Irish Fiscal Advisory Council's report. If the Minister believes the council is wrong, he should say so and explain the reasons it is wrong. The council is independent, whereas the Minister is a politician.
I, too, am independent.
The Minister is a practising politician.
I am answerable to the House and constitutionally the Minister for Finance of the country. I do not have to follow the advice of the Irish Fiscal Advisory Council when it misunderstands my position.
The Minister has a duty to explain how the council got it wrong. These are not matters of interpretation but factual issues.
I do not believe the Irish Fiscal Advisory Council got it wrong. I agree with the main thrust of its advice, as I always have. The council operates in very much the same space as the Government and me. There is disagreement about some elements of detail, and much of the detail the council has focused on is due to a misunderstanding of what was in the stability programme update. I do not know the reason the council did not take into account the forecasts of the European Commission and did not acknowledge the Commission's statement that, on current trends, the Government will be entirely within the fiscal rules on budget day. The Commission has stated that we will achieve an adjustment of 0.8%, rather than the 0.6% adjustment required. I will reply in detail, as I am required to under law, and we will deal with all the issues. However, I do not see any great conflict between me and the Irish Fiscal Advisory Council. The Deputy must appreciate that the council has a difficult job. As it is mandated to give a counter-view, it must search around for such a view, even when it agrees with me.
It must give its view, which does not have to be a counter-view.
105. Deputy Thomas Pringle asked the Minister for Finance further to Parliamentary Question No. 299 of 9 June 2015, in the case of a company not under the regulation of the Central Bank of Ireland but that has voluntarily adhered to the Central Bank's code of conduct on mortgage arrears, if its subsidiary company is also subject to the code; if not, how the subsidiary's activity is regulated; the measures in place to monitor the rate of voluntary adherence to the code and the such companies' actual application of the code; and if he will make a statement on the matter. [24592/15]
This question relates to the sale of mortgages arising from the liquidation of the Irish Bank Resolution Company, IBRC, specifically sales to Mars Capital Ireland. In a previous reply, the Minister stated that the parent company of Mars Capital Ireland had agreed to voluntarily comply with the code of conduct on mortgage arrears. What, if anything, does this mean for the company that holds the mortgages?
The code of conduct on mortgage arrears, CCMA, provides a strong consumer protection framework to ensure that borrowers struggling to keep up mortgage repayments are treated in a fair and transparent manner by their lender, and that long-term resolution is sought by lenders with each of their borrowers. The Central Bank uses a number of methods to monitor compliance with consumer protection requirements, such as ongoing interaction with financial service providers and industry, themed inspections, general reviews on a particular topic, monitoring of financial services advertising, market intelligence and mystery shopping. However, where a firm is not regulated, the Central Bank is not in a position to monitor voluntary compliance with the code of conduct on mortgage arrears. As a result, the Government introduced the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015 to protect consumers. When enacted, this Bill will ensure that borrowers retain the protections they had before their loan books were sold, including the protections of the code of conduct on mortgage arrears and the consumer protection code.
The Bill provides for the regulation of the activity of credit servicing and the credit servicing firms engaged in such activity.
This legislation will require all entities dealing with the consumer in this activity to be authorised by the Central Bank and subject to its codes of conduct. Owners of loan books who deal directly with consumers, that is, those who are servicing their own loan books, will be regulated. Otherwise, they can have the loan book serviced by a regulated credit servicing firm. Either way, the entity dealing with the customer will be regulated and this will ensure that borrowers retain the protections they had before their loans were sold. The Bill was passed by the Dáil on 17 June and I look forward to its discussion on Second Stage in the Seanad tomorrow, 24 June.
I thank the Minister. That was an outline of the Consumer Protection (Regulation of Credit Servicing Firms) Bill that is going through the Houses but it does not answer the questions asked on the voluntary agreement to participate in the code of conduct on mortgage arrears. I can take it that the answer is that it does not make any difference really. How will the Bill apply retrospectively for those mortgage holders who are being moved against now? Will they be able to get the protections of the code when the Bill is passed? That is the critical question the Minister needs to answer now.
What happened was that a number of purchasers of mortgage books complied voluntarily with the code of practice. If that is the precise question the Deputy wants answered, that means they willingly subjected themselves to the regulations and protocols being operated by the Central Bank in respect of regulated entities. We are now putting that on a statutory basis. We had very good discussions on Committee and Report Stages in the House and it is going on now to the Seanad. We hope to have it implemented fully before the recess. It applies to all loan books acquired by an entity purchasing a mortgage book. It applies to all mortgages.
If it applies to all mortgages, does it apply to all customers companies have already started to move against by calling in mortgages and making them homeless? Can there be a look back to see if the standards they said they would comply with have been applied?
Yes. The Deputy referred to a company which voluntarily complied with the code of practice. If it voluntarily complied, the Central Bank would ensure compliance. That is on a statutory basis from the time the Bill passes through the Seanad and is signed by the President. If there is a particular issue about a particular mortgage, I ask the Deputy to send it directly to the Central Bank or to send it to me and I will forward it to the Central Bank.
106. Deputy Richard Boyd Barrett asked the Minister for Finance his views that there is a need to investigate possibly large losses in tax revenue to the Exchequer because of abuses of the relevant contracts tax 1 system and instances of bogus self-employment, particularly in the construction industry; and if he will make a statement on the matter. [24599/15]
Deputy Ruth Coppinger, who raised a similar issue today, and a number of other Members, including me, have for years been receiving allegations from construction workers, particularly bricklayers, plasterers and labourers, that there is widespread tax fraud taking place on building sites. Contractors and developers are abusing the so-called RCT 1 system by misclassifying people as "self-employed" when they are not in order to evade tax responsibilities and to underpay those workers. The ruling of the Labour Court in the JJ Rhatigan case, where workers were paid €100,000 to basically get lost, suggests that this is happening, and continues to happen, on other sites which I will mention in a minute.
I thank Deputy Richard Boyd Barrett for his question. Bogus self-employment in the context of the Deputy's question is generally accepted as referring to a practice of employers erroneously describing or treating employees as self-employed contractors. As the Deputy may be aware, a number of questions have been put down by other Deputies in recent times on this issue, especially as it might relate to the construction sector. Similar to the PAYE system, the electronic relevant contracts tax, or eRCT, system is a tax deduction at source system.
Neither system determines whether a person in the construction sector or, indeed, in any other sector is an employee or a self-employed contractor. It is important to be clear, therefore, that the eRCT system does not determine whether a person is employed or self-employed.
As with any contract of engagement in the construction sector, whether a person is engaged as an employee or as a self-employed contractor is determined by the facts and evidence of each case and guidance on that matter is provided in the code of practice for determining employment or self-employment status of Individuals which was prepared jointly by the Irish Congress of Trade Unions, business representative bodies and relevant State agencies.
In regard to bogus self-employment and the RCT1 system, the Finance Act 2007 placed a statutory obligation on principal contractors in the construction, meat processing and forestry sectors to submit to the Revenue Commissioners the details of relevant contracts entered into by those principals and their subcontractors. Up to 1 January 2012, such details were submitted to the Revenue Commissioners on a form known as a form RCT1. Under the eRCT system, which came into effect as and from 1 January 2012, form RCT1 is no longer used but the same obligation on principal contractors remains, albeit the information is now supplied electronically rather than in paper format.
Additional information not given on the floor of the House
There are safeguards built into the eRCT system for those individuals who may have concerns that they are caught up in "bogus self-employment". For example, I am advised by the Revenue Commissioners that when they receive from principal contractors, in real time, the details of relevant contracts in the construction sector, Revenue immediately informs the relevant subcontractor or subcontractors of those details. If a subcontractor is of the view that those details are incorrect, or if the subcontractor is of the view that she or he is not, in fact, a subcontractor but is an employee, then she or he can notify Revenue of those facts. Revenue will then investigate the matter.
As to investigating what the Deputy describes as possibly large losses in tax revenue to the Exchequer because of abuses of the RCT1 system, the construction sector is an acknowledged area of high risk internationally and Ireland is no different. I am informed by Revenue that monitoring of the construction sector for abuses of the tax and duty systems forms part of its ongoing compliance programmes to which it commits significant resources. If the Deputy has specific information relating to individuals or businesses groups in any sector who are involved in tax evasion, he should send that to Revenue. Revenue has provided a tailored template on its website which facilitates reporting of tax evasion and the relevant links are provided for the Deputy's information: http://www.revenue.ie/en/business/shadow-economy/index.html and https://www.ros.ie/online-enquiry-web/goodCitizen
Will the Minister please get off the script and address what is a very serious issue? Currently, approximately 63,000 people are classified as being self-employed in construction, which accounts for about half of all construction workers. Are we seriously to believe that half of all those working in construction are entrepreneurs? I can tell the Minister they are not. If he wants examples, he should go out to the Gannon Homes site in Swords, a NAMA developer, where he will find people being misclassified as self-employed when they are not self-employed. They are not entrepreneurs; they are simply bricklayers being paid €100 a day. Similarly, this practice is going on at the Robswall site in Malahide just as it went on in Rhatigan's. It needs to be investigated but there seems to be no will on the Minister's part to ensure it is investigated. People who are clearly not self-employed subcontractors are being employed by builders in order for those builders to avoid paying PRSI, holiday pay and tax for those employees. The result of this practice is that Revenue is losing possibly hundreds of millions of euro in tax revenue each year because people are being misclassified. This is tax fraud. It is a criminal offence and the Minister has shown no interest in tackling it.
Thank you, Deputy.
The Minister just passes the buck; this is not Revenue's job and it does not come under the RCT system. These people are being misclassified as self-employed when they are not. It is an abuse of the system and the taxpayer is losing out, not to the mention the exploitation of workers.
First, the Deputy's request for me to get off the script is rather inappropriate because the script is the prepared reply to the question the Deputy put down and if I did not did not reply to the question he put down, he would have another problem and another grievance.
You may get off the stage.
I have also informed the Deputy that the adjudication of whether somebody is an employee and-or self-employed is not a matter for the Revenue Commissioners. It is in accordance with the code of practice for determining employment or self-employment status of individuals and that document was prepared jointly by the Irish Congress of Trade Unions, business representative bodies and the relevant State agencies. That is the document that decides between employees and self-employed people; it is not a matter for the tax authorities. The tax authorities collect the taxes but if, as the Deputy said, he has information that there is widespread abuse of the tax system, he should send the information to the Revenue Commissioners and I can assure him they will follow it up.
No, I want the Minister to take responsibility for tax fraud. The allegations are that this is rampant in the construction industry and on sites involving big public contracts. We saw this happen in Rhatigan's and it had to pay €100,000. Did it have to pay it because everything was squeaky clean? No, it was because it was abusing the system. This is tax fraud. It is a crime. If contractors and subcontractors are misclassifying people as being self-employed when in fact they are employing those people directly, that is the business of Revenue and it is the business of the Government, collectively, to ensure inspections take place. I mentioned two sites. The inspectors need to be sent to those sites now. This practice is going on as we speak at the Gannon Homes site in Swords, a former NAMA site, and at the Robswall site in Malahide. Rhatigan's, which, as we know, was involved in such practice arising from the dispute in Kishoge, also has four or five other sites where it is currently building schools. This practice is rampant and the result is that €167 million was deducted last year in RCT but €139 million was given back. Therefore, only €27 million is being collected in tax from 63,000 employees. It is an absolute joke.
Thank you, Deputy.
As a responsible citizen and as a Deputy of this House, I have no doubt the Revenue will take any allegation the Deputy makes seriously. I will bring the record of the House today to the attention of the Revenue Commissioners and I will request them to follow up the allegations he has made, but I presume that if they contact him personally, he will try and give them more precise information to assist them-----
This is Government policy.
-----with their follow-up.
The Government needs to follow it up.
