Vol. 945 No. 2
40. Deputy Thomas P. Broughan asked the Minister for Finance if his Department has held discussions recently with the NTMA in relation to the national debt repayments which will fall due in 2018 to 2020; his views on the fact that a quarter of Ireland's national debt is due for refinancing in that period; the way this will impact the fiscal position; and if he will make a statement on the matter. [16418/17]
We had a very sobering account of our national debt from the chief executive of the National Treasury Management Agency, NTMA, Mr. Conor O'Kelly, and his head of funding, Mr. Frank O'Connor in the Committee on Budgetary Oversight a few weeks ago. They answered concerns that had been put to me about the refinancing of our debt, particularly in late 2019 and early 2020, when these chimney stacks of debt will have to refinanced. Is the Minister happy with the strategy of the NTMA? Does he think that perhaps they should be lending for longer at the really low rates that we have at the moment? Is it a strategy that the Department of Finance is happy with?
The Department of Finance is in regular contact with officials in the NTMA on a wide range of topics, including the management of the national debt.
Over the period 2018 to 2020, there are five benchmark bonds due to mature. The total balance outstanding on these bonds is currently just over €42 billion. In addition, the majority of the bilateral loans received from the UK, Sweden and Denmark as part of the EU-IMF programme also mature during that period. This brings the total medium-term to long-term debt refinancing requirement over that three year period to approximately €46.5 billion.
The Deputy should be aware that although there are two loans from the European financial stabilisation mechanism, EFSM, totalling €3.9 billion, with contractual maturity dates in 2018, these are due to be refinanced by the European Stability Mechanism, ESM, in light of the maturity extensions granted to EFSM and European Financial Stability Facility, EFSF, loans in 2013. It is not expected that Ireland will have to refinance any EFSM loans before 2027.
The five benchmark bonds maturing over the 2018 to 2020 period carry annual coupons ranging from 4.4% to 5.9%. The expectation is that these bonds can be refinanced at lower coupons based on the current interest rate outlook. The current interest expenditure forecast reflects this expectation. For the period of 2018 to 2020, refinancing requirements have already been significantly reduced in recent years. Following the early repayments to the IMF of December 2014 and the first quarter of 2015 and their replacement with cheaper long-term market-based funding, the liability to the IMF in that three-year period has been reduced by approximately €11.5 billion. The maturity extensions granted to EFSF and EFSM loans in 2013 and bilateral bond switching have also helped to reduce the refinancing requirements over that period by over €7 billion. The NTMA has also built up significant cash balances as part of its pre-funding strategy. These are expected to be of the order of €10 billion at the end of 2017. These transactions leave the Exchequer in a healthy position to fund the 2018 to 2020 refinancing requirement.
Is it really a healthy position? The Minister refers to the ESM and EFSF loans. Are they not really irrelevant at this stage, given that we were allowed to refinance at face value rather than the net present value, NPV? Is the reality not that over 34% of our marketable debt requires refinancing in a very tight period of June 2019 to October 2020?
In addition, I am informed that there is a requirement on the Central Bank to dispose of the floating rate note, FRN, instruments acquired on the nationalisation of Anglo-Irish Bank, which will accelerate from €500 million per annum to €1 billion per annum by 2019. Those repurchases have been made by the NTMA and the stock cancelled at prices up to and above 150% of the nominal value.
The key point is that these contracted repurchases add significantly to the amount of debt requiring refinancing in a highly concentrated timescale and, it is fair to say, the percentage requiring refinancing has been lowered by a tiny amount over the last year, given the NTMA's execution on request by market makers of switches. It seems to be always acting reactively and not proactively. Has the NTMA sheltered behind the belief that lower coupons on maturing debt is the same as having efficient debt management from the start? It has watched ten year yields more than treble, from 0.3% to over 0.9% over the last six month, while 30 year yields have risen from 1.3% to 2%, yet it has done nothing to take advantage of that. Is there the possibility of a perfect storm if Brexit goes badly wrong and we do not have a free trade area, along with other things that might happen to the country in late 2019? It will be an issue for the Deputy's successor after a general election, but nonetheless it will be a great issue for our country.
I am quite sanguine about the NTMA's policy. I have discussed the situation with the NTMA quite frequently. One of the strategies of the NTMA is to smooth the profile of debt repayments so that the peaks are reduced and as a consequences the values are increased, if one thinks about it in graph terms. It is doing that very successfully and has managed that very well over recent years.
Our national debt is still very high. Clearly the size of the debt is a matter of concern but I am assured that the NTMA does not expect any difficulty whatsoever in refinancing the debt that becomes due in the three years the Deputy has inquired about, and it also expects to do it at much lower interest rates, or at a lower coupon, to use the term that they use.
Refinancing costs with the historic coupons on bonds sold when Ireland had already entered into the crisis and then hoping that they will still be lower in two or three years' time is not a strategy. That is the core point that I am raising today. Is it the stated strategy of the NTMA that long-term rates are unlikely to raise above current levels by the crucial period of June 2019 to October 2020? Dr. O'Kelly and his colleague gave us detailed information at the Committee for Budgetary Oversight about the efforts they have made this year and last year and especially since 2015 to refinance the outstanding debt. This is a vast amount of debt overhanging our country. Should we not have a much more proactive policy from the NTMA? Are we just hoping that when quantitative easing ends in December, the concerns about the debt will be inflated away? Is there the possibility that the Minister is leaving his successor in late 2019 and early 2020 with a very serious fiscal problem?
The NTMA tells me that there are a number of variables that impact on interest rates, including yields in other markets at the time, the demand for the relevant maturity at a point in time, the economic and fiscal position of the borrower, credit ratings and the size of issues, among others. The NTMA does not disclose the interest rates at which it could potentially issue debt as to do so could negatively impact the agency in terms of raising funds for the Exchequer at the most competitive rates possible. The five benchmark bonds maturing over the period 2018-20 carry annual coupons ranging from 4.4% to 5.9%, and the current expectation of the NTMA is that these bonds can be refinanced at lower coupons. The NTMA does not share the kind of anxiety expressed by the Deputy. It thinks it is a very strong position to refinance the debt in question at a lower interest rate than what prevails at present.
41. Deputy Michael McGrath asked the Minister for Finance the status of the work of the implementation group concerning the recommendations of the Credit Union Advisory Committee report; and if he will make a statement on the matter. [16414/17]
The Credit Union Advisory Committee, CUAC, in its review of implementation of the recommendations in the commission on credit unions report, recommended that an implementation group be established for a specified period of time to oversee and monitor implementation of those recommendations in a methodical manner and to advise the Minister for Finance on progress.
Publication of the report in July 2016 was just the beginning of the process. From September 2016 onwards CUAC continued working to enable a coherent implementation plan be devised and the Department worked closely with CUAC on this.
In line with CUAC's recommendations, the Department invited one nominee from each of the stakeholder groups. The implementation group consists of a representative from each of the following: the Irish League of Credit Unions, the Credit Union Development Association, the Credit Union Managers' Association, the National Supervisors Forum and the Central Bank. The implementation group also has a CUAC representative and is chaired by the Department. This broad membership will ensure participation and contribution from all credit union perspectives.
The implementation group held its inaugural meeting on Monday 20th February 2017, which was also attended by all CUAC members, and met again on the 22 March 2017. It is intended that each CUAC recommendation will be addressed separately with a view to implementation at the appropriate time. Meetings will continue on a monthly basis with the next meeting scheduled for late April 2017. The term of the implementation group is for one year, which may be extended at the discretion of the Minister. I look forward to receiving regular progress reports on the implementation of these very important recommendations.
I thank the Minister for his reply. The Oireachtas Committee on Finance held some hearings recently into credit union issues and will be compiling a report. I hope that the report can be agreed by all members of the committee. It will make a series of recommendations to the Minister and to the House.
There is a high degree of frustration within the credit union sector. Some credit union managers and boards are quite demoralised at what they see as the lack of focus on the key issues that are holding them back. If one looks at the CUAC recommendations around tiered regulation, for example, which was not implemented following the commission on credit unions' recommendations, then there is serious concern. There is concern about the overall direction, a loan to asset ratio of just 26%, and the fact that longer loans have been replaced by shorter loans of smaller amounts. There are serious business model issues here which need to be addressed. Can the Minister tell us if he thinks that the CUAC implementation body is the appropriate body to deal with those business model issues?
The role of the Minister for Finance in respect of the credit unions is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of the credit unions. The Government has a clear policy to support the strategic growth and development of credit unions in Ireland as set out in the commission on credit union's report and recommendations. The safety of member's savings and the security of the credit union sector as a whole are priorities for the Government, but of course the registrar of credit unions is a role for the Central Bank. They are regulated and supervised by the registrar of credit unions at the Central Bank. The current registrar, Ms Anne Marie McKiernan, under the Credit Union Act 1997 carries out the function of the registrar of the credit unions that are regulated. The primary aim of the regulator is to ensure that funds deposited are safe.
There has been a series of difficulties with credit unions across the country.
However, there is a commitment to implement the recommendations of the commission and that work is under way now. Credit union representatives of all perspectives are included in the implementation group.
The credit unions themselves are also committed to protecting members' savings and they do so. They take umbrage at continuous references to that priority by the registrar as though it was the sole preserve of the registrar. The key issue is business model development and the CUAC report recommended that credit unions prioritise business model development and consider investing significantly in the development of their business models, either individually or collectively. They say they are doing that but are being frustrated by the Central Bank. They say that when they make proposals for new services it takes forever to get a decision or they are rejected. In the confidence and supply agreement which my party entered into with Fine Gael there is a commitment to develop a strategy for the growth and development of the credit union sector. I do not see anything yet that complies with that and I do not believe the implementation of the CUAC report meets that objective. The Minister should at least request the implementation group to focus specifically on business model development for the credit union sector. The overall trends are not positive and I am sure the Minister does not want to be the Minister who presided over the decline of a great national movement.
I share the Deputy's admiration for the credit union movement and for the excellent people, both at professional and volunteer level, who manage credit unions so effectively all over the country. The Central Bank is committed to assisting the credit unions in developing their business model. It has informed me, as Minister for Finance, that it is open to working with the credit union sector to ensure that prudent and appropriate development can be facilitated within the regulatory framework. In its role in supporting the sector the Central Bank wants to ensure that any proposed changes in the business model are appropriately structured and implemented. The Registrar of Credit Unions in the Central Bank recognises the strategic challenges facing the sector, including the need to revitalise the business model and to find ways of doing business that better serve members and deliver on their expectations. The registrar is committed to engaging with credit unions and, as part of that process, the Central Bank established sector stakeholder dialogues in November 2015 to facilitate engagement with credit unions. This is with a view to gaining a better understanding of how credit unions want to develop their business model and to identify any changes that may be required to the regulatory framework to facilitate prudent development.
There is a commitment to develop a business model and it involves the Central Bank connecting directly with certain credit unions. If I can facilitate that in any way, I will do so.
42. Deputy Brendan Smith asked the Minister for Finance his plans to introduce further restrictions to the import of fuel products, both fuel for vehicles and household fuel products, from Northern Ireland; and if he will make a statement on the matter. [16394/17]
As the Minister is aware, the State is estimated to be losing €300 million per annum because of fuel smuggling across the Border. Numerous legitimate retailers and merchants are very seriously impacted and adversely affected. It is not confined to activities along the Border and I understand that illicit products are now also going to the southern part of our country, making it impossible for legitimate businesses to compete.
The free movement of goods is a fundamental freedom of the Internal Market of the European Union and ensures that goods can move freely across intra-union borders. However, the European Union excise regime which governs the production, processing and holding of excisable products imposes certain restrictions on intra-Union movements of these products. These restrictions impact on the importation of mineral oils for vehicle and household use from Northern Ireland. The EU excise regime governing the movement of excisable products, that is mineral oils, tobacco products and alcohol, does not apply to solid fuels such as coal and, as a result, solid fuel is not subject to cross-Border movement controls typical of other harmonised excises such as mineral oil tax and tobacco tax.
I will deal firstly with the importation from Northern Ireland of mineral oils for use as vehicle and household fuels. Persons bringing mineral oil fuel for vehicles into the State from Northern Ireland must pay excise duty, that is mineral oil tax, on that fuel except where the fuel is present in the fuel tank of a vehicle at the time that vehicle is brought into the State or where the fuel is in a single portable vessel with a capacity of not more than 10 litres that is in that vehicle at the time of coming into the State, and where the proper UK excise duty applicable to the use of that fuel in the vehicle involved has been paid in that jurisdiction.
Persons bringing mineral oil into the State for use other than as road vehicle fuel, for example for heating use or for agricultural tractors or stationary motors, must pay the mineral oil tax on that fuel. In the case of gas oil or kerosene, where a person wishes to pay only the reduced rate applicable to those fuels when intended for use other than as road fuel, the oil must be marked with the fuel markers prescribed by the Revenue Commissioners.
All commercial movements of mineral oil into the State from Northern Ireland are subject to a movement control system. Movements of duty-suspended mineral oil are subject to an EU-wide electronic system, known as the excise movement control system. In the case of movements of duty-paid oils, such movements may only take place under an equivalent paper-based control method. Where a person intends to sell or deal in mineral oils the appropriate mineral oil trader's licence, issued by the Revenue Commissioners, must be held. Other control measures include obligations on oil traders to provide detailed information on their fuel transactions to Revenue. This allows Revenue to monitor mineral oil supply chains to identify suspicious or anomalous transactions and patterns of distribution for investigation.
Additional information not given on the floor of the House
I am satisfied that the current restrictions on the importation of oil for vehicle and household use are comprehensive and support Revenue in tackling any issues regarding the illegal importation of mineral oil.
I will now deal with the importation of solid fuel, and specifically coal, into the State from Northern Ireland. All solid fuel supplied in the State is liable to solid fuel carbon tax. This tax was legislated for in 2010 but its commencement was delayed until 2013 to allow for a mechanism to be put in place to address the risk of coal products with lower environmental standards being sourced from outside the State. Regulations to enable local authorities to regulate and control the type of coal supplied in the State were put in place by the then Minister for the Environment, Community and Local Government and are now the responsibility of the Department of Communications, Climate Action and Environment.
As I already explained, EU law does not require compliance with movement controls for solid fuels for excise duty purposes. Therefore, no excise movement controls apply to imports of solid fuel from Northern Ireland, whether by private persons for their own use or by traders or businesses for commercial purposes. Revenue collects solid fuel carbon tax on a self-assessment basis and enforces compliance by way of audit. Excise law does not give Revenue an authority to stop vehicles and physically inspect loads of solid fuel. Similarly, the transport or possession of solid fuel that originated in Northern Ireland are not, in themselves, Revenue offences and Revenue's officers have no authority to challenge such transportation or possession.
I thank the Minister for his answer. Because of time constraints I only referred to household fuel. In the last Dáil I brought forward legislation calling for the establishment of an all-Ireland cross-Border agency to deal with this type of crime and the illicit trade in fuel, tobacco and drugs. Some agreements were reached between the Northern Ireland authorities and our Department of Justice and Equality to deal with the issues on an all-Ireland basis and I welcome these. I understand that a standard truck carrying 20 tonnes of coal from Northern Ireland to the South, without the application of carbon tax and with a differential in VAT, gives an advantage of more than €2,000 to the person conducting the illicit trade. It is very hard for the legitimate merchant and retailer to compete. Hardware Association Ireland has put forward some suggestions to the Revenue Commissioners and to the Department, such as the registration of all solid fuel traders provided for in the Environment (Miscellaneous Provisions) Act 2015, which requires a valid tax clearance certificate for such traders to register. The association also called for a public awareness campaign to let the public who buy these cheaper products know that they are illicit and that carbon tax or the proper rate of VAT has not been paid in our jurisdiction. Hardware Association Ireland also recommends very thorough audits by Revenue on the people involved in this illicit trade.
My initial reply dealt exclusively with controls on the importation of fossil fuels. The collection of solid fuel carbon tax is heavily reliant on the regulatory regime for solid fuel put in place by the Minister for Communications, Climate Action and Environment. This regulatory framework covers the marketing, sale, distribution and burning of solid fuels in the State and sets out particular environmental standards for coal supplied here. These environmental standards are higher than those that apply in Northern Ireland. The regulations provide for the enforcement of the relevant environmental standards by local authorities. Local authorities have powers to inspect premises and vehicles being used for the sale and distribution of solid fuel, to collect samples of coal to check for adherence to environmental standards and to prosecute traders involved in selling illicit coal. It is not the Revenue Commissioners who have the responsibility for the illicit importation of solid fuel. It is a matter for local authorities under licence from the Department of Communications, Climate Action and Environment.
It has the legal powers, the staff and access to the penalties that apply to prosecute traders involved in selling illicit coal.
The Minister is aware that the change he could effect is to change the differential in the VAT rate between Northern Ireland and our State in respect of solid fuels as well as the application of carbon tax which is not applied on products in Northern Ireland. The differential is more than €2,000 on a 20 tonne truck of coal, meaning there is not a level playing field for many of our genuine retailers and merchants who are trying to survive. I frequently get calls advising that someone is delivering product from outside the State and selling it at a rate that would not be viable if they were paying their legitimate dues as they should be.
This issue needs to be tackled. Over the years I have advocated very strongly in this House that we need to tighten control over activity in the shadow economy. It is not fair on the people running legitimate businesses and trying to survive. It is also robbing the public coffers, in this instance alone of almost €300 million annually.
I again thank the Deputy for his submission. The Revenue Commissioners are not the responsible authority for preventing trade in illicit fuels. However, I will bring the Deputy's views to the attention of the Department of Communications, Climate Action and Environment, which has the competence of law and sanctions that would apply to the prevention of the import of solid fuels. I will see what it has to say.
43. Deputy Pearse Doherty asked the Minister for Finance the estimated cost in 2017 and other years of the help-to-buy scheme based on the latest figures; and the reason no cost containment measures were put in place for the scheme. [16432/17]
Today the Governor of the Central Bank appeared before the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and the Taoiseach. When asked, he told us in Sinn Féin and those of us who oppose the help-to-buy scheme that, of course, the help-to-buy scheme was pushing up prices and that a cost-benefit analysis would have been a good idea. We now know, despite the Minister's suggestions that it would not happen and despite assurances he claimed he got from the developers that it would not happen, house prices in the past three months have spiralled out of control, rising by €6,000 per month in Dublin and €4,000 per month across the State. Will the Minister now do the right thing and at a minimum suspend the help-to-buy scheme before more damage is done and house prices go out of the reach of many ordinary families?
The help-to-buy incentive aims both to assist those first-time buyers struggling to save for the deposit required to purchase a house, and incentivise additional building and the provision of extra housing stock. At budget time, my officials estimated that the help-to-buy incentive would cost €40 million per annum but €50 million in 2017 due to the backdating of the relief in respect of properties which became eligible for the scheme since 19 July 2016.
To avail of the incentive involves two stages. Stage 1 is the application stage, wherein prospective applicants can query whether they qualify for the incentive. They can also get clarity on the maximum amount of rebate they could potentially benefit from, based on their tax paid in a four-year period. Stage 2 is the claims stage, wherein applicants who decide to proceed with purchasing or building a qualifying property must provide documentary evidence of the relevant property transaction or their mortgage drawdown.
The estimates for the potential cost of the incentive that have featured in recent media reports are based on the number of applications received by Revenue to stage 1 of the scheme, rather than the number of claims to date. However, many of these applicants may never make a claim to stage 2 for a variety of reasons. These could include individuals who do not go on to obtain mortgage approval, who may decide to purchase a second-hand property, or who are not able to source the new home that they desire.
As of 31 March 2017, Revenue had received 4,698 applications to stage 1 of the help-to-buy incentive. Of these, 1,006 stage 2 claims have been created to date. A total of 534 of these have been approved, at an estimated cost to the Exchequer to date in the order of €8.2 million of the €50 million allocated for the cost of the incentive in 2017.
With regard to the Deputy's query concerning cost containment measures, the help-to-buy incentive is by its nature a demand-led scheme. Therefore, artificially restricting its potential uptake in such a manner would be detrimental to its policy aims and would be unfair to those potential applicants who could lose out as a result. In addition, should the cost of the incentive exceed the original estimate, it could be indicative of an increase in the supply of new homes, which is exactly what I intended to encourage through its introduction.
Over the past 48 hours since the two reports have been published, households have been asking if we are in some kind of time warp. Are we back in 2007 again when the RTE news and headlines splashed across the newspapers indicate that the price of houses in the capital city is increasing by €6,000 a month? Every analyst and economist worth their salt is attributing part of the blame for that increase on the help-to-buy scheme.
The Minister has repeatedly said that the help-to-buy scheme is about helping people to get their deposit. The Minister, Deputy Coveney, repeated that ad nauseam yesterday. The official figures the Minister provided to me indicate that 73% of the applicants approved so far had way in excess of the 10% regulatory deposit required. Only 27% of them actually drew down a loan to value of 90%. There is no guarantee that the 27% needed the help-to-buy incentive to make up the deposit. They may have just decided to go for a 90% loan to value to use money from a mortgage for other purposes as well.
I call the Minister.
I ask the Minister to acknowledge that this is not a targeted incentive. His scheme is about handing out free money - everybody loves free money.
Deputy, go raibh maith agat.
We need to remember he is taking that money from the elderly person who is lying on a trolley this morning, from the child who cannot get speech and language therapy this morning-----
Go raibh maith agat, a Theachta.
----- or from the creaking infrastructure in rural areas. Does the Minister acknowledge that the spiralling house prices we have seen in the first three months of 10% and 9% across the State-----
I call the Minister.
----- is partly as a result of his flawed help-to-buy scheme?
The various indices about increases in house prices are largely applicable to second-hand houses. The help-to-buy scheme does not impact on the price of second-hand houses at all. In any economic model the generation of extra supply should act as a downward pressure, easing the demand for second-hand houses if people can buy new houses instead. Since the scheme is for people principally buying starter homes, then it is an incentive to put a deposit together. Since the house does not exist until the deposit is put together and built - because it is for new builds - it is impossible to argue that there has been an increase in price on a new build. The increases have happened for other reasons and go across the second-hand market. They relate to what everybody knows here - a general lack of supply being driven by demand.
I read the comments of the Governor of the Central Bank to the committee this morning on one of the websites. Without picking an argument with the Deputy, he is not quoting the Governor in full.
I call Deputy Doherty for his second question, combined with Deputy Burton.
I did not suggest I was quoting him in full. He did suggest that, of course, it was pushing up house prices.
However, he said it would wash out over time.
Please Minister, allow Deputy Pearse Doherty to speak.
However, it is pushing up house prices, something the Minister denies.
The Deputy did not quote the relevant piece.
Minister-----
The Minister refuses to acknowledge the facts, which he has put on the record of this House. Some 73% of people who have been approved for the help-to-buy scheme did not need this money at all to garner their deposit. That represents millions of euro being provided, as the Minister says, to help people get a deposit.
The Minister also claims this is about house prices in the second-hand market. I suggest to the Minister that he read the bloody report. He should read the commentary that goes along with the report. He should read the second report that came out yesterday, which very clearly states that house price inflation for new builds is running at double what it is for second-hand ones.
The report has made the distinction, so the Minister's argument falls flat on its face but let me put it to the Minister again. When will the alarm bells start to ring in his private office? When will they ring in the Department of Finance? Is it when house prices go up another €6,000 next month and in subsequent months? At what point will the Minister call a halt to a scheme that is about throwing money at a supply-side problem? This is not a demand-side problem and the scheme is only having one effect, which is to push up house prices and put more money into developers' pockets. These are the same developers who asked the Minister for the scheme.
The Deputy has exceeded his time.
These are the same developers the Minister told he was introducing the scheme before he told any Deputy in the House about it on budget day.
I call Deputy Joan Burton for a short supplementary question.
At the time of the budget, I warned the Minister that this would constitute a direct transfer from Fine Gael to builders and developers. It was designed as such and has had the impact that I forecast at the time of the budget. To be honest, at the time the Minister was aided and abetted by Fianna Fáil. Essentially, the Minister is turbo-charging the housing market on an inadequate scale in the context of many builders and developers still being on strike and sitting on large volumes of land. I can understand that the Minister chose to move on this to induce some kind of feel good factor into the housing market. That is the only sense I could make of the Minister for Housing, Planning, Community and Local Government's strange comments yesterday. It is obvious that one part of his head disagreed with it and the other part, probably in the context of the leadership election, did not want to say anything critical about the serving Minister for Finance.
Ceist, Deputy. Other Deputies have tabled questions.
I can take the Minister to signboards in my constituency where the cost of houses went up by €20,000 almost immediately after the Minister put this scheme, which he was advised against, into effect. The Minister must take responsibility for it.
I call the Minister for a final response.
I am absolutely amazed that the Labour Party and Sinn Féin are objecting to the Government helping young couples to buy their first home. What kind of a society-----
Deal with the facts, Minister. That is the kind of nonsense we heard-----
The Minister, without interruption.
What kind of a society will we have if the representatives in the Labour Party and Sinn Féin deliberately come into the House and try to prevent a Government scheme that is working to help young couples to put a deposit together.
That is a joke. It is unworthy.
It is pushing up houses prices by €18,000 in 12 weeks. The Minister is a disgrace.
Deputies, please.
The Minister would make McCreevy proud.
The Minister, without interruption, or we will move on.
The Deputies are shouting me down now.
Deal with the facts.
We will move on.
The Deputies are just shouting me down. This time last year there were hardly any starter homes being built in any part of this country-----
The Government is creating a housing bubble.
-----except once-off houses in rural parts of Ireland. There are a lot of starter homes being built now and the young couples I am talking about are being assisted by this scheme. It does not apply to second-hand houses or anything other than new builds. It is stimulating new builds.
It is going directly into the builders' pockets.
44. Deputy Catherine Connolly asked the Minister for Finance if NAMA is contributing adequately to the social and economic development of the State in accordance with its statutory duty under the National Asset Management Agency Act 2009; if so, the way it is doing so; the consideration that has been given to include obligations on the purchaser to build homes as a measure to alleviate the housing crisis; and if he will make a statement on the matter. [16446/17]
The next question is in the name of Deputy Catherine Connolly. Permission has been given to Deputy Mick Wallace who has 30 seconds to introduce the question.
What kind of a society will we have when the Government of the day allows NAMA to sell housing to vulture funds for approximately half of their cost to build and there are more than 7,500 people homeless? Is there any chance that NAMA would play a stronger role? In any development that it is involved in, it is supposed to be delivering 10% social housing. Given that this is not enough, does the Minister not think that it should be also engaged in providing affordable housing rather than expensive housing?
I thank Deputy Catherine Connolly for tabling the question and Deputy Mick Wallace for acting as proxy and articulating the issue in the House.
I am satisfied NAMA has made and continues to make a significant contribution to the social and economic development of the State. Its principal contribution to social and economic development has been the major progress that it has made in eliminating Irish taxpayers' contingent liability of €30 billion which arose from the Government-guaranteed senior debt issued in order to acquire bank loan portfolios. As of today, 95% of that senior debt has been redeemed and NAMA has indicated that it expects all of it to be redeemed by the end of 2017. NAMA also expects to redeem its subordinated debt by March 2020 and to produce a surplus, which is currently estimated at €2.3 billion, by the time it completes its work.
NAMA has also made a major contribution in driving the development of commercial and residential accommodation in the Dublin Docklands SDZ. This will attract foreign direct investment into Ireland and will create a substantial number of jobs.
NAMA has made a significant contribution to social and economic development in other respects also. I refer the Deputy to NAMA's website, www. nama.ie/social-initiatives/, which contains extensive information on how NAMA seeks to manage its portfolio in a manner that complements the objectives of Government Departments, local authorities, State agencies and public bodies. NAMA's work in this respect includes the provision of homes for social housing and properties for schools and other public uses. NAMA also works closely with IDA Ireland to identify suitable properties for companies investing in Ireland. All this has been managed in the context of NAMA's overriding commercial mandate, as set out in section 10 of the NAMA Act.
NAMA has made a substantial contribution in the social housing sector by working with its debtors and receivers, the Housing Agency, local authorities and approved housing bodies. It established the NAMA asset residential property service, NARPS, as an innovative model to expedite social housing delivery. NARPS has significantly reduced the upfront capital costs for local authorities in delivering to date more than 2,370 residential units for social housing.
Additional information not given on the floor of the House
NAMA also played a key role in the resolution of unfinished housing estates within the State. In 2010 NAMA had exposure to 332 unfinished housing estates. That has now reduced to 11 unfinished estates at this stage and they are expected to be resolved by end-2017.
I would also point out that NAMA is seeking to facilitate the delivery of 20,000 homes over the period from 2016 to 2020, subject to commercial viability. Since 2014, NAMA funding has facilitated the delivery of 4,700 units by its debtors and receivers.
As regards the Deputy's question as to the obligations on purchasers to build homes, I am advised that NAMA contributes to the delivery of housing in three ways. First, as mentioned above, it seeks to facilitate and fund the delivery of 20,000 homes by 2020 through funding residential projects controlled by its debtors and receivers. Second, its debtors and receivers sell sites to the market which enables other developers to contribute to housing delivery. Sites for 40,000 units have been sold since 2010. As the Deputy will appreciate, it is not possible to impose legal obligations on asset purchasers to undertake activity without significant loss in the site values. Third, NAMA enters into licence arrangements with non-NAMA developers which require them to carry out development on sites securing NAMA loans in return for a fee.
Taken together, I hope the Deputy will agree that NAMA has made, and continues to make, a significant contribution to the social and economic development of the State and that it does so successfully within the context of NAMA's overriding commercial mandate, as set out in section 10 of the NAMA Act.
As the Deputy is aware, NAMA does not own property. NAMA owns loans. As a lender, NAMA cannot force a borrower to take action which would reduce his or her repayment capacity such as providing a property for social or private housing where that is not economically optimal. To do so would compromise a borrower's capacity to repay his or her debts to NAMA and would constitute a direct breach of the borrower's property rights, as protected under Article 43 of the Constitution. I am advised that a direction running counter to these obligations is not one lawfully open to me in all the current circumstances.
Section 2(b)(viii) of the NAMA Act provides that NAMA should "contribute to the social and economic development of the State". At the housing committee, Frank Daly of NAMA stated that "the biggest social dividend we can deliver indirectly is to pay this back as quickly as we can". He was speaking of the debt, much as the Minister was now. If NAMA returned what it called a profit of €2 billion or €2.5 billion over the 11-year period, it would be looking at a return of something in the region of 7%. The vulture funds would not dream of buying from NAMA unless they were guaranteed a minimum of 20%. In most cases, they are getting a lot more.
My point is that NAMA is talking about delivering houses for €330,000 each. If 10% of them were social houses, it means that 90% cost more than €300,000 each. Of those in Ireland that need housing today, 90% of them cannot possibly afford a price north of €300,000 which is what NAMA is seeking. Would the Minister consider getting NAMA involved in providing affordable and not just social housing? At the moment, Dublin City Council states that it can provide a three-bedroom house for €205,000.
We are running out of time.
With the NAMA price, a huge profit is built in.
The issue in the question is whether NAMA is delivering on its social mandate under the NAMA Act. I have already stated that it has delivered 2,370 residential units through NARPS. When it began in 2010, there were 332 unfinished housing estates. There is now 11 because it finished out all those estates. It has, therefore, contributed significantly to housing supply. It is also now committed to facilitating the delivery of 20,000 homes between 2016 and 2020 and it has delivered 4,700 of those already. It has also supplied a quantity of sites for primary and secondary schools. It has provided facilities for sports clubs throughout the country and has worked closely with IDA Ireland to supply premises or sites for companies coming in from abroad that are creating jobs. My point is that NAMA is very strong in fulfilling the social mandate that it was given by this House under the relevant section of the Act.
I do not think many people in the country would agree with the Minister. Speaking of a social dividend, when Dublin GAA failed to get the Spawell complex from NAMA, the CEO, John Costello, stated, "When the legislation went through the Dáil at committee stage the community development provision was added but I can't find any example of this being taken into account."
We understand the Davy Group is negotiating with and, by all accounts, treating Dublin GAA in a fair manner. If the notion of NAMA providing a social dividend was to have any meaning, the agency would have worked the Spawell facility towards Dublin GAA in the first instance. I do not understand NAMA's approach of selling the asset to someone who would subsequently sell it on to Dublin GAA. While I do not disagree with Westport House being taken out of the NAMA portfolio, I disagree with the political process surrounding the decision. It makes sense to remove assets that should remain in the hands of the State or a sports body. NAMA did not do that, however, and I do not understand the reason the Government stood idly by in this case.
While I do not wish to comment on individual cases, I have already cited examples of cases where NAMA is fulfilling its social mandate in an extensive manner. I also referred the Deputy to NAMA's website, www.nama.ie/social-initiatives, where he will find details of the various social initiatives the agency has taken under the Act.
45. Deputy Joan Burton asked the Minister for Finance if he has satisfied himself that the Central Bank's order to lending banks to return affected customers to an appropriate tracker rate of interest is being addressed; if his attention has been drawn to the fact that banks are free to come up with their own offers of compensation and that many banks are not offering customers effective redress; and if he will make a statement on the matter. [16371/17]
This is a simple question on the tracker mortgage process and redress being effected to bank customers. The requirements provide that banks must place customers on an appropriate tracker rate of interest. However, the banks are free to come up with offers of compensation and are not required to ensure customers obtain redress. This is a serious wrong on an issue that has affected many thousands of families and resulted in some families losing their homes. Now that redress must be paid, there is no structure by which the banks must pay the appropriate rate.
The Central Bank (Supervision and Enforcement) Act 2013 has given powers to the Central Bank to direct the payment of redress to customers, where appropriate. However, this provision does not have a retrospective effect and the Central Bank does not have the statutory power to compel lenders to implement redress and compensation programmes in respect of failures that occurred prior to the introduction of the 2013 Act. However, where customer detriment is identified in the tracker examination, the Central Bank has clearly articulated its expectations of lenders to provide appropriate redress and compensation to impacted customers in line with its prescribed principles for redress, as set out in its report dated 23 March 2017.
The principles for redress are designed to ensure that harm is stopped as soon as possible and that impacted customers receive appropriate redress and compensation in a timely manner. In addition, they provide for an independent appeals process to ensure customers have an option to challenge any aspect of the redress and compensation package, including the tracker rate margin they receive from their lender. While the Central Bank expects lenders' reviews to deliver fair outcomes for customers, the bank believes the appeals process is a very important part of the overall framework to ensure there is an independent and transparent process in place for impacted customers. The appeals process, however, is additional and without prejudice to the options available to the borrower to bring a complaint to the Financial Services Ombudsman or initiate court proceedings.
In all, arising from the examination, approximately 9,900 impacted customer accounts have been identified as at the end of February 2017. Lenders have commenced contacting impacted customers and rectified the interest rates applied to such impacted customers' accounts, thus stopping further detriment. The Central Bank has also indicated that, as at the date of its most recent report, interest rates have been rectified on more than 90% of the accounts which require rectification.
I understand this issue was the subject of questions to the Governor of the Central Bank at a committee meeting this morning, at which he provided the most up-to-date information available to the bank.
As the time for questions has almost expired, Deputy Burton may make one supplementary contribution.
We have, on one side, a powerful institution, namely, a bank, and, on the other, an individual mortgage holder, usually a family. The Minister has confirmed that unless the mortgage holders are well advised and informed, the interest rate on their mortgages may not be returned to an appropriate rate which gives them the redress to which they are, as the Minister stated, legally entitled. The scheme established by the Central Bank and the Minister's comments leave a significant number of people on the hazard as to whether they receive fair redress from the banks in question. While practices differ from bank to bank, it is essentially up to the individual bank to decide what is fair compensation. Unless the affected customers have read up sufficiently or have expert advice available to them, they will be left in a position of having to take what the bank has to offer.
The Central Bank is insisting that redress is paid by the offending banks to persons affected by this issue, even if the redress obligation arises prior to the 2013 Act. In addition, affected customers do not have to accept the compensation offered and may go through an appeals process without prejudice to their other options of taking a second route of appeal, making a complaint to the Financial Services Ombudsman or taking their case to court. The Central Bank is conscious of this issue and is insisting that full and appropriate address is paid by the banks to all affected customers.
