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Dáil Éireann díospóireacht -
Thursday, 29 Sep 2016

Vol. 922 No. 3

Priority Questions

Motor Insurance Regulation

Michael McGrath

Ceist:

1. Deputy Michael McGrath asked the Minister for Finance if he will provide an update on the work of the task force in his Department examining the spiralling cost of motor insurance; when the task force will report; if he is committed to implementing its recommendations; and if he will make a statement on the matter. [27795/16]

I am seeking to put the spotlight on motor insurance premiums again. I thank the Minister for his work on the task force. I am seeking an update on that work in terms of the meetings that have been held, whether progress is being made and the timeline for the completion of its work and the implementation of recommendations. Is the Government committed to bringing forward recommendations, be they legislative or otherwise, to try to deal with the underlying causes of the out-of-control spikes we see in motor insurance premiums?

The cost of insurance working group, which I chair, is undertaking a review of the factors which are influencing the increased cost of motor insurance.

The working group brings together all the relevant Departments and offices involved with the process. Its objective is to identify immediate and longer-term measures which can address increasing costs while bearing in mind the need to maintain a stable insurance sector.

The core areas to be examined by the working group in this first phase are: the motor insurance sector generally, at present and in recent years; the effects of legal costs and litigation processes on insurance costs; the current claims compensation arrangements and the cost of claims; insurance data and information; the impact of accident rates; the impact of unlawful activity on the insurance sector; and other market issues.

As the issue of the cost of insurance is complex and in order to get to the heart of these issues as soon as possible, I have established four sub-groups to review them in detail. Chairs have been appointed to these sub-groups and work has commenced. The sub-groups are meeting weekly and their outputs are feeding into the meetings of the working group.

The working group has held five plenary meetings to date and will continue to meet every two to three weeks to the end of 2016. I am also in constant contact with the chairs and vice-chairs of the sub-groups to monitor progress and we are keeping to the tight deadlines.

The Department of Finance has provided additional human resources to the section dealing with insurance policy and servicing the Government task force and associated sub-groups.

A consultation process has commenced. I have had informal meetings with representatives from a number of key stakeholders including Insurance Ireland, AA Ireland, the Irish Brokers Association, the Injuries Board, the Irish Business and Employers Confederation, IBEC, FBD Insurance and the Central Bank of Ireland.

The working group and the four sub-groups are also meeting with the relevant stakeholders. At its third meeting, the working group met with representatives from the Law Society, AA Ireland, the Irish Brokers Association and the Consumers Association of Ireland. This morning the working group met with representatives of Irish hauliers and the car rental sector. Further consultations will be arranged. In addition, submissions received from all interested parties are being considered as part of the process.

By the end of October, the working group will provide the Minister for Finance with an updated report which will set out the priority actions required. We are already working on emerging recommendations. From November to December, the working group will develop an action plan to enable the relevant Government Departments and offices to commence the implementation of these priority actions. In this regard, I will be consulting regularly with Government colleagues and the Oireachtas.

I thank the Minister of State for his reply. The starting point in this debate is to acknowledge that the situation is out of hand. The latest example is that Aviva insurance is adding a 20% loading to any volunteer in the community first responder scheme around the country. That is costing the scheme, a life saving service, valuable members. The issue must be addressed because this is not acceptable. I welcome that the level of activity by the working group has been accelerated. There are also the four sub-groups. Can I take it that the objective is that the Minister will have an interim report by the end of the month setting out a series of recommendations that can be implemented? Ultimately, that is what all of us wish to achieve. I accept that there is no silver bullet and that a range of measures will be required. I expect the working group will draw from the testimony heard by the finance committee as well. I look forward to the Minister's response but I seek a commitment that we will have recommendations by the end of the month which we can then seek to implement in an effort to deal with the underlying causes of spiralling premiums.

At present, we are trying to build consensus on the causes of the increases in premiums. There are many different voices and a great deal of noise so we are trying to distil the information as to what is causing the increases. If we can get a breakdown of the premium and look at the different component parts that are driving up the cost, we can implement measures for each one. For example, if €50 of a premium is due to fraud or €35 is due to uninsured vehicles, we will identify specific measures to tackle each of those areas in the hope that by having a suite of measures we will be able to bring down the overall cost of premiums. The aim is to have emerging recommendations by the end of October. In November, we will take the time to ensure we can put a solid timeline and series of actions in place, be they legislative or otherwise, to have them implemented. The hope is that by the end of October we will have a definite idea of what the emerging recommendations are to hit each of the elements of the premiums.

I appeared before the finance committee to discuss this a number of weeks ago. The committee is also doing an important piece of work and we are hoping to get feedback from it on where it thinks possible solutions lie. We hope it will be able to report to our working group in advance of me reporting to the Minister for Finance.

I welcome the initiative that has been taken with the working group. The Minister realises the seriousness of the situation. It affects not just individual motorists but is also a major issue for the economy. Transport is a key input cost for the business community and insurance is a central element of that. There are much wider issues in the insurance industry that must be addressed but the focus here, quite correctly, is on motor insurance premiums. The increases of 70% over a three year period are putting people off the road. There is no denying that. It simply must be addressed. The Minister will have the support of Fianna Fáil when it comes to implementing measures that will make a tangible difference in tackling this issue. It must be a serious political priority. I realise that the Minister is giving the matter much of his personal time. I ask him to continue to do that. He can be assured of our support for any measure required in the House that is designed to tackle the premium hikes.

I thank the Deputy. This is my political priority. It is incredibly important for people throughout the country. Despite the gains being made in the economy at present through tax reductions and people getting back to work, people are not feeling it in their pockets because they are experiencing this rise in insurance premiums. It is hitting every aspect of the economy, including tourism, hauliers, health care and small and medium enterprises. There is a wider economic issue here and it speaks to competitiveness as well. Of course, we must manage expectations. It is a complex issue that will involve a complex policy response. We will not be able to solve it overnight but we are working day and night to try to get to the bottom of it. I am anxious that we take a consensus approach. There is no point in me coming to the Dáil with a group of measures we think will work if the other parties do not agree. We will pursue it by consensus and that is why the help from the finance committee is so welcome.

NAMA Assets Sale

Pearse Doherty

Ceist:

2. Deputy Pearse Doherty asked the Minister for Finance if he will direct NAMA to suspend all sales processes under way in respect of an organisation (details supplied) in view of the Comptroller and Auditor General's report on the sale of the organisation and the forthcoming commission of investigation. [27797/16]

Will the Minister say whether he accepts the Comptroller and Auditor General's report on the sale of Project Eagle without condition? The question I tabled relates to that. It asks the Minister to use his authority under the National Asset Management Agency Act to direct the National Asset Management Agency, NAMA, to cease or suspend all sales processes under way in respect of Project Gem, a €3 billion asset portfolio it expects to sell before the end of the year, in light of what the Comptroller and Auditor General said in his report and also in light of the fact that the Government has finally agreed to set up a commission of investigation into areas of NAMA.

It is important to recognise that in no way has the integrity of NAMA or the NAMA board or the integrity of its decisions been brought into question, so I have no intention of directing NAMA to halt sales activities. To do so would irreparably damage NAMA's positive contribution to our recovery and damage our reputation as a credible, open and transparent market. By extension, any such interference would be detrimental to the interests of Irish taxpayers. In particular, it would likely: constitute the State taking direct control of NAMA and bringing NAMA debt onto the State's balance sheet; imply a U-turn for the Irish sovereign in the eyes of the rating agencies, the sovereign bond market and broader investor community, potentially increasing the cost of Government debt and damaging confidence in the recovery of our economy; raise competition concerns which may limit NAMA's ability to recover value for the State from its assets; reduce the surplus currently projected by NAMA to be returned to the Exchequer; and negatively impact NAMA's ability to fund the delivery of residential and commercial units on a commercial basis.

We must also remember that section 9 of the NAMA Act is unambiguous when it states that NAMA is independent in the performance of its functions. Section 12 of the Act bestows the NAMA board with the power to "sell or dispose of the whole or any part of the property or investments of NAMA, either together or in portions, for such consideration and on such terms as the Board thinks fit". Clearly, from the outset the Oireachtas agreed that political interference in NAMA's independent commercial activities was highly undesirable as such interference would render the agency incapable of carrying out its work on behalf of taxpayers and would cast a major shadow over NAMA's ability to achieve its objectives.

To return to the Deputy's specific question, the Comptroller and Auditor General has raised issues for further discussion, but he has not raised any systemic concern about NAMA and its operations. He has not suggested halting its activities. The opinions expressed by him in his report, on which there is public disagreement, are being examined by the Committee of Public Accounts. With representatives of NAMA, he is appearing before the committee today to discuss the report. The committee is the appropriate forum in which to consider his report and engage in the exercise of seeking public accountability in these matters. The Government recognises that it has its own responsibilities in all matters of public concern to do with the functions of an important public body such as NAMA. As the Deputy will be aware, the Taoiseach has met Opposition party leaders with a view to seeking agreement on issues of public concern that may require further investigation and the most appropriate nature and terms of reference of such an investigation. Subject to the outcome of these discussions, the matter will be the subject of a Dáil debate. The Government's objective is to ensure all matters of public concern will be addressed in a speedy and effective manner.

What is most interesting about what the Minister has said is what he did not say in response to the direct question I put to him, which was whether he unconditionally supported the report produced by the Comptroller and Auditor General on the sale of Project Eagle. He has refused so far to stand up and say he accepts it unconditionally. He says it would bring NAMA debt onto the books. That is complete nonsense. We are looking for him to use his powers of direction under the National Asset Management Agency Act to suspend the sale of Project Gem. He has used these powers on a number of occasions such as in the case of the Anglo Irish Bank promissory note, in respect of which he directed NAMA. We have a report from the Comptroller and Auditor General which I accept. We will find out whether the Minister accepts it. It states there was a possible loss to the taxpayer of €220 million. The Taoiseach is now saying he believes there is a need for a commission of investigation into some of the operations of NAMA, a position which is supported by us in opposition and something for which we have been arguing for a while. There are tapes which we have seen on the "Spotlight" programme on which there is talk about fixer's fees and senior people in NAMA are named as providing information on NAMA debtors and potential bidders. For the Minister to say there is no issue relating to the integrity of decision-making in NAMA is farcical. He must intervene on behalf of the taxpayer to make sure the sale is suspended until we sort out this issue and reach a clear conclusion on the matters at hand.

I have served as Chairman of the Committee of Public Accounts and worked closely with different Comptrollers and Auditors General. I have great respect for the work they do. I also have great respect for NAMA, the chairman of the board and the chief executive who have carried out their functions in accordance with law. No charge of irregularity, wrongdoing or improper behaviour has been laid against NAMA. There is clearly a conflict between the position taken by the chairman of NAMA on behalf of its board and the report of the Comptroller and Auditor General. There are a number of conflicts about the process and timeline in the disposal of Project Eagle, but the principal conflict that would cause a variation in the estimated value involves the different approaches taken to discounts. That discrepancy is being addressed by the Committee of Public Accounts. I will appear before it next Thursday and answer all of its questions.

It is clear that the Minister is unwilling to accept the findings of the report of the Comptroller and Auditor, which in itself is a major issue in terms of the constitutional nature of the office. Even if the Minister does not accept the report and just says there are discrepancies, in the light of these discrepancies and their severity, the fact that the Comptroller and Auditor General believes there was a potential loss of €220 million, the fact that issues concerning a conflict of interest were reported to NAMA and not followed up and the fact that many other issues are raised in the report, there is an obligation on the Minister to act. He is the only person with the authority to say to NAMA "listen folks, pause. There is a serious issue here. The Comptroller and Auditor General is saying you lost the Irish taxpayer €220 million. You cannot proceed with the sale of a €3 billion asset that is owned by the Irish people. We have to clear this up." The Minister needs to use his discretionary powers. On 15 April 2014, within days of NAMA deciding to sell Project Eagle to Cerberus, I asked about the number of bidders and the process involved, but the Minister stonewalled me in the answer he gave to the House. He knew at the time about fixer's fees and that PIMCO had had to pull out. He must now step up to the plate. His actions in the past two years in dealing with this issue do not warrant glory, but he now needs to do the right thing. He needs to suspend the sale of Project Gem in the interests of the taxpayer who could lose more money if the inappropriate form of evaluation used by NAMA in the case of Project Eagle is used in the case of Project Gem.

The Deputy is doing what his party has done in Northern Ireland. He is trying to use the issue to damage his opponents politically. The Sinn Féin chairman of the committee in Northern Ireland corrupted the inquiry by coaching a witness to cause damage to the former First Minister. I advise the Deputy very strongly not to do the same in this House. I am going before the Committee of Public Accounts next Thursday and will answer its questions. Representatives of NAMA appeared before it this morning when the Comptroller and Auditor General also gave evidence. Others are being called. The Taoiseach has consulted Opposition leaders and we will see where things go in seeing whether there are other issues to be inquired into after the Committee of Public Accounts has completed its work. We can all deal with the issue in a very fair way, but the Deputy is trying to turn it into a series of political allegations against the Government and me personally. Sinn Féin wrecked an inquiry in Northern Ireland and corrupted its report by the actions taken by the chairman. It should not try to do the same here.

NAMA Operations

Michael McGrath

Ceist:

3. Deputy Michael McGrath asked the Minister for Finance the par value of the remaining loan assets on the books of NAMA; if he will outline NAMA's strategy for the disposal of same and provide an update on planned portfolio sales; his plans to strengthen the existing oversight mechanisms for future loan sale transactions or introduce new mechanisms in view of the Comptroller and Auditor General's report on the sale of Project Eagle; and if he will make a statement on the matter. [27796/16]

This question is on the same topic. It is welcome that the Minister has agreed to appear before the Committee of Public Accounts. This is the right decision. The central purpose of my question is to establish whether the Minister wishes to strengthen oversight mechanisms and put new safeguards in place for future NAMA disposals because we are dealing with an extremely serious issue. The Government has agreed to set up a commission of investigation. By admission, that means that there is an issue of significant public concern. This is a very serious issue. NAMA is still sitting on a lot of assets and we need to be reassured that the process in which it will engage for any remaining sale will be safe, have integrity and fully protect the interests of taxpayers.

As per NAMA's most recent section 55 quarter 1 report which is available on its website, the par value of its outstanding loans was €39.6 billion at the end of March. I am advised by it that its section 55 quarter 2 report will be finalised shortly and disclose the par value of its outstanding loans at the end of June. I am further advised that its disposal strategy is, as previously outlined, designed to take full advantage of strong purchaser interest in loans and property assets securing its loans. NAMA utilises a range of disposal mechanisms, including loan sales, portfolio sales and individual asset sales, to take maximum advantage of purchaser interest and ensure the greatest possible return to the State. Its successful sales strategy which has been predicated on releasing loans and assets for sale in accordance with the level of demand and absorption capacity in each of its main markets - for example, in the period up to 2013, NAMA concentrated sales activity in Great Britain, primarily London, and has since moved to take advantage of the strong recovery in Irish demand - means that it is on track to repay all of its senior debt by 2018.

As regards accountability, I remind the House that NAMA is already subject to a high level of public accountability compared to other commercial bodies, including commercial bodies in the State sector. Its accounts are comprehensively audited by the Comptroller and Auditor General. It is within the power of the Comptroller and Auditor General to scrutinise any aspect of its work, as most recently seen in the report on Project Eagle referenced by the Deputy. The Deputy will note that the Comptroller and Auditor General did not recommend increasing NAMA's accountability in his report. The value for money report was effectively an accelerated module of the Comptroller and Auditor General's normal section 226 review of NAMA required under the National Asset Management Agency Act.

As already provided for in the NAMA Act, in 2015 the Comptroller and Auditor General committed to reviewing a broad sample of NAMA's sales and investment decisions as the focus of its next section 226 report.

The chairman and chief executive are also accountable to the Committee of Public Accounts and other committees, and give evidence to those committees whenever required to do so. Indeed, NAMA is appearing at the Committee of Public Accounts today to discuss the Comptroller and Auditor General's value-for-money report.

I, as Minister for Finance, also have specific powers to review and assess NAMA's activities under section 227 of the NAMA Act.

Additional information not given on the floor of the House

The last section 227 review supported the implementation of the NAMA board's current disposal strategy.

In addition to the above, the board of NAMA must comply with its obligations under the NAMA Act. Section 18 of the NAMA Act sets out the principal responsibilities of the board, which are to ensure that NAMA discharges its functions efficiently and effectively, to set strategic objectives and targets for NAMA, to ensure that the appropriate systems and procedures are in place to achieve the strategic targets and objectives and to take all reasonable steps available to it to achieve those targets and objectives. The board has established four statutory committees, under section 32 of the Act, to assist in the discharge of its responsibilities and obligations: audit committee, credit committee, finance and operating committee and risk management committee.

NAMA's annual reports, quarterly reports and annual statements are all laid before the Houses of the Oireachtas. The level of disclosure in NAMA's reports is comprehensive and professional. Any recommendations resulting from the Committee of Public Account's review of the Comptroller and Auditor General's value-for-money report will be considered in due course. However, in light of the high level of accountability to which NAMA is currently held it is not currently appropriate to contemplate any additional oversight measures not already provided for in the NAMA Act.

I thank the Minister for his reply. The key issue is that there is a major cloud hanging over the Project Eagle sale, which totals £1.3 billion. The Government has conceded the need for a commission of investigation, which only happens where an issue of significant public concern has to be investigated. The Comptroller and Auditor General has told the Committee of Public Accounts today that Project Eagle was not a satisfactory sales process.

The Minister has told the House that NAMA has up to €40 billion par value of loans that remain to be sold. How can he reassure the House and, more importantly, the Irish people that any further disposals by NAMA will meet the requirement for the public interest to be at the forefront, that taxpayers' interests are fully protected, that any further sales processes will achieve that objective and that the integrity of those processes is protected? That is what I need to know. How can the Minister reassure us, given that a major cloud hangs over Project Eagle and how it was handled? Massive sales still have to go through the system.

There are strong accountability requirements under the NAMA Act, and they have been implemented since the Act became law. The activities of NAMA are reviewed as I described, that is, in accordance with the Act.

The Committee of Public Accounts is reviewing the value-for-money report produced by the Comptroller and Auditor General into Project Eagle. In the normal process of the committee's work, its inquiries will be followed by a report and that report will have recommendations. If the committee decides that accountability has to be increased, I am sure that will be reflected in its recommendations.

I envisage a similar process will be followed if there is a commission of inquiry. One investigates first, then one draws conclusions and makes recommendations. If the recommendations require additional accountability, of course I will be amenable to accepting them.

When one compares NAMA to any other commercial State agency, it has a higher level of accountability. Every Deputy knows that the Comptroller and Auditor General has staff embedded in NAMA who work in it for perhaps ten months of the year. They have access to all paperwork and transactions.

I accept that it is in the national interest that there be a smooth work out of the remainder of NAMA's assets. I understand the issues around senior debt, contingent liability and all of that. However, we have to be reassured about the integrity of the sales process. Accountability instruments are already built into the system, but they, in the form of the report of the Controller and Auditor General, have identified serious issues which have led to the establishment of a commission of investigation.

I welcome what the Minister appears to be saying, that is, if the Committee of Public Accounts recommends additional oversight mechanisms for the strengthening of accountability provisions then he would be prepared to implement them. I ask him to clarify that is what he is saying, namely, that if the Committee of Public Accounts report seeks additional changes, whether by way of legislation or strengthening the accountability and oversight mechanisms regarding NAMA, that he is prepared to implement that.

If the committee makes recommendations on strengthening accountability and if, in the opinion of the Government, they are fit-for-purpose of course we will implement them. I do not want to give a commitment, sight unseen, on possible recommendations, the content of which I do not know. In principle, I agree with the Deputy.

VAT Exemptions

Michael Harty

Ceist:

4. Deputy Michael Harty asked the Minister for Finance if he will consider in budget 2017 addressing the issue of applying a zero rate of VAT on medical vehicles and equipment purchased by organisations with charitable status, such as the Red Cross, for use by community and voluntary groups. [27877/16]

I thank the Minister for taking this question. The charity sector provides essential services to Irish society and is widely respected and supported by public donations and Government grant aid. The imposition of VAT on equipment and services purchased places a considerable burden upon charities and their resources, and diminishes their ability to function to their maximum capacity. Would the Government consider relieving the burden by reducing their VAT liability to as close to zero as possible by introducing a VAT compensation scheme?

VAT is a tax on consumption and is applied to supplies being made by a person and not to supplies received by him or her. In this context, it is not possible under EU VAT law, with which Irish VAT law must comply, to introduce VAT exemptions based on services received or on the basis of the recipient of a service, nor is it possible to allow for zero rating of such supplies.

Non-profit groups engaged in non-commercial activity are exempt from VAT under the EU VAT directive. This means that they do not register for VAT and cannot recover VAT incurred on goods and services that they purchase. This non-entitlement to VAT deductibility is a general feature of VAT exemptions. There is no provision in European or Irish VAT law to allow a zero rating or exemption for supplies of this nature. However, there is a specific VAT refund order that provides for VAT incurred on the purchase or importation of new medical instruments and appliances, excluding means of transport, which is purchased through voluntary donations, and may be refunded to hospitals or donors, as appropriate, subject to conditions. In addition, there are a number of other VAT refund orders that provide for refunds of VAT in certain circumstances, such as where the VAT is incurred on aids or appliances for persons with a specified degree of disablement.

A working group was established last year, comprising representatives from my Department, the Revenue Commissioners and the Irish charities taxation reform group, to examine options available to reduce the VAT burden on charities. The report from the group is available on the budget 2016 website. On the basis of that report, I decided at the time not to introduce a VAT refund scheme for charities as the charities sector already benefits from a range of ministerial refund orders and special tax treatment across a number of tax heads. Requests for new ministerial refund orders have been consistently refused since the 1980s primarily to maintain the integrity of the VAT system.

Additional information not given on the floor of the House

However, A Programme for a Partnership Government recognises the difficulties faced by community groups and charities in relation to VAT rates on certain products such as defibrillators and commits to raising the issue at EU level. The European Commission's action plan on VAT was adopted on 7 April 2016 and contains a proposal to look at VAT rate policy across the EU in 2017. The action plan's proposal on rates may offer member states more flexibility in the future in determining VAT rates applicable to goods and services. This forum will provide an opportunity to discuss VAT rates applicable to goods and services. However, the Deputy will be aware that any proposed changes to the current EU VAT directive would require unanimous agreement from all member states.

I thank the Minister. I understand the EU VAT directive precludes charities from claiming a direct refund but, as the Minister is aware, the Irish charities tax reform group has been part of a working group which has examined how to reduce the tax burden on the charity sector. This group has identified that a VAT compensation scheme operated outside of the VAT system would be workable.

The Danish system of VAT conversation would be the model most suited to Ireland. Denmark sets aside a fixed pool of funding from which charities can reclaim VAT. The claim is in proportion to the funds raised by public donation, and if a charity has raised 50% of its funds by donation it can apply to reclaim 50% of its VAT. Charities' claims are pooled and the individual charities receive a pro rata proportion of their claim. The size of the refund would depend on the size of the pool which the Government would set aside. The pool set aside by the Government is fixed so there is certainty in the cost to the Exchequer. Charities gain by reclaiming a proportion of VAT paid and society gains by having increased services.

I thank the Deputy for that information. The European Commission's action plan on VAT was adopted on 7 April 2016. It contains a proposal to consider VAT rate policy across the EU in 2017. The action plans proposals on rates may offer member states more flexibility in the future in determining VAT rates applicable to goods and services. We will avail of it if it comes through. I am sure it will consider comparisons like those the Deputy referenced and the VAT situation in Denmark.

VAT refunds are quite significant. In 2014, there was a refund of €642,000 on donated medical equipment, in excess of €2.9 million for disability equipment, €18,000 for water rescue craft and equipment, in excess of €100,000 for exports by philanthropic organisations and the disabled drivers' fund received a refund in excess of €5 million. The refund system is working and delivers quite a lot of money to the areas to which the Deputy referred.

However, the best course to pursue now is to await the result of the EU review because we are very constrained by EU law on what we can do in VAT. If the EU provides us with the flexibility to move in the direction suggested by the Deputy, then we will not be reluctant to move.

Do I take it from the Minister's reply that the compensation scheme will not be considered in regard to the budget for 2017? Charities, such as the Irish Red Cross, are providing essential services that the Government is not providing and they fund-raise, sell lines and collect money from schools and GAA clubs. In my county, County Clare, the Red Cross bought an ambulance for public service for €86,000. It raised €76,000 of that fund itself and ended up paying €16,000 in VAT. It does not seem right that it is acting as a tax collector for the Government. There should be some compensation in recognition of its public fund-raising and yet a high proportion of that fund-raising is being returned to the Government. Perhaps the Minister will seriously consider a VAT compensation scheme, which may not return all the VAT but which would return a proportion of it and it would allow charities to provide their services to the maximum extent.

As I have said, there was a review and report in advance of the budget for 2016 and the charities participated in the review. It is my understanding that they were agreeable to not making the change that was contemplated at the time because they had significant refunds and nobody wanted to change. The European Union has put in place an action plan on VAT and it is to report before too long. It contains a proposal to look at VAT rates across the EU for 2017. Since we are so constrained by EU directives, I do not contemplate making major changes this year in VAT for 2017 but I look forward to the EU report to see if it gives the flexibility to allow me to do the things of which the Deputy is talking.

Child Care Costs

Eamon Ryan

Ceist:

5. Deputy Eamon Ryan asked the Minister for Finance the measures he will introduce to support families with child care other than subsidisation of paid child care. [27878/16]

I do not believe the Government should discriminate between different approaches to parenting and child care. We need to ensure that full-time paid child care facilities are both accessible and of good quality but I argue that we also need to support those parents who decide to provide full-time care themselves or to use relatives, grandparents or a paid child minder. Parents are the best people to call what is the best form of child care to use for their children and I question why we are using our tax system, and it now looks like new support systems, to favour one choice or form of child care over the other.

As the Deputy will be aware, the Minister for Children and Youth Affairs has primary responsibility for Government policy in relation to child care and at the outset, I would refer to the interdepartmental working group on future investment in child care in Ireland, which published its report in July 2015.

Having considered the option of a tax credit that would be available to those who incur child care costs, the group recommended against introducing such a measure. The group had concerns that a tax credit would not be equitable, would have high possible deadweight, could end up being fully absorbed in the cost of child care and might not have a meaningful impact on a parent's decision on whether to join or return to the labour market.

The interdepartmental working group also made some initial estimates of the potential costs of such a tax credit based on available data. Tentative costings, based on estimates of average child care costs per pre-primary and primary school child care place, were applied to Department of Social Protection figures on the numbers of such children in receipt of child benefit. If a tax credit were provided in respect of even half of these children at the standard rate of 20%, it would involve a potential cost to the Exchequer of between €290 million and €590 million per annum. The variation depends on the rate of take-up which is difficult to estimate. It was assumed for the purposes of that costing that all paid child care would be covered by the relief, that is, not just centre-based care.

It is clear that any initiative that provides tax credits for paid child care would fail an equity test as it could be seen to unfairly discriminate against those individuals who choose to stay at home to care for their children. In addition, tax relief is only of benefit to those in the tax net and it is estimated that in 2016, 36% of income earners were exempt from income tax altogether.

As regards other tax measures, the Deputy may be aware that in budget 2016, I increased the value of the home carer tax credit and increased the amount of income the home carer can earn while still qualifying for a full or partial credit. The increase in the income threshold is a measure which is of specific benefit to lower income families and retention of the credit could facilitate the home carer in meeting child care costs associated with working any additional hours.

Additional information not given on the floor of the House

There is a commitment in the programme for Government to further increase the home carer credit and I am considering relevant options as part of the tax package for the budget.

I would also point out that the social impact assessment of the budget 2016 tax and welfare measures published by the Department of Social Protection showed that households with children were the biggest beneficiaries.

It should also be noted that budgets 2015 and 2016 introduced reductions in income tax and USC for all income earners that had a relevant liability.  These reductions were specifically focused to target low and middle income earners and the programme for Government commits to continue reductions in personal taxation in order to make Ireland's personal tax system more competitive and to encourage work and employment.

The Minister gave the same response to the Committee on Budgetary Oversight. I am not calling for a tax credit. I am asking a fundamental question and I want to hear the Minister's view. It is not good enough to just say that it is the view of the Minister for Children and Youth Affairs. Is the Minister, as a Fine Gael Minister, happy that he is about to introduce a budget that, historically, will say the Government does not want parents staying at home looking after children, that it does not want them using a grandparent to care for children, that it does not believe in unpaid care work and that whatever a person does, he or she must get into the paid workplace because the Government wants to push the economy, whatever it takes, and it does not care if this means discrimination against a choice of different types of parenting. I would like to hear the Minister's view on that rather than getting the same answer a second time, which was not an answer to my question.

This is not a small change because the sort of subsidy which we have talked about paying, a couple of thousand euro a year, is a huge difference. In my constituency, and in many parts of the State, parents will be faced with a choice in that they will not have the option of staying at home because everyone else who is working will be paying higher mortgages and will pump up the whole economy. One has to be part of a dual-income system because that is what the Government says people have to do by the measures that it has introduced. I would like to hear the Minister's view on it rather than another repeated answer to something I did not ask.

First, I am not responsible for policy on child care, there is a Minister who is. To establish the Government policy on child care, along the lines of the Deputy's supplementary question, he should put down a question for the Minister for Children and Youth Affairs and not to me. I have referenced for the Deputy a reply to the notion that different parents should be treated differently under the tax code. I referenced the working party report which said it would be discriminatory to do so. I am responsible for taxes, among other things, and I have given the Deputy the reason applying tax relief to child care would be inequitable. It would discriminate against people who are not in the tax net and who are not in the labour force. I am fulfilling my obligations to the House in being amenable in respect of the policies I control. If Deputy Ryan wants a general discussion on child care, I suggest he raises it with the Minister, Deputy Zappone.

This is a central issue in the budget and there is a raging debate, from what I read in the newspapers, within the Minister for Finance's party about possible discrimination between those on different incomes. I support the Minister, Deputy Zappone, in trying as much as possible to target support for those on low incomes. However, a second massive discrimination is about to be introduced which is a historic statement that Fine Gael is saying it does not want anyone to do unpaid care work, it wants people in the economy and to stop caring for children and it will make that happen by introducing budgetary measures - the Minister's budget - which give direct financial assistance to those who tick a particular option. I do not have a problem with that but if the Government is doing that, then it should give the same assistance to those who choose other options because parents are best placed to choose what is the best form of child care for their different circumstances. Every child is different and every family is different. Why is it that economic considerations seem to be driving the State and the Government to say that only one approach is right? The reality is that it is the Minister's budget which is delivering that strategic change of direction in this State. That is wrong and I would like to hear the Minister's view on child care, as the Minister introducing the measure.

Deputy Ryan is ascribing views to me which I do not hold. On no occasion in the preparation for this budget have I indicated that I am introducing any particular measures on child care. I have never spoken about it and I do not know from where the Deputy's assumptions are coming.

The front page of everything.

If one was to rely on the newspapers, I would not be here at all.

According to last Sunday's newspaper, I should be dead long ago. The Deputy should not assume that what is on the front of a newspaper is a policy position. The Deputy was in government. He knows that quite well. I am sure he was misquoted on several occasions as well. The point is, if the Deputy wants a debate on child care, he should put it down to the Minister for Children and Youth Affairs. My job in the budget is setting the expenditure ceiling, managing the tax affairs, keeping within the fiscal rules and so on. I have indicated on no occasion that there are going to be measures along the lines the Deputy suggests for child care or otherwise. He will have to wait for budget day to see if there are any specifics.

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