Vol. 960 No. 7
1. Deputy Michael McGrath asked the Minister for Finance the nature of his planned engagement with the banks in respect of the Central Bank tracker mortgage examination; and if he will make a statement on the matter. [44937/17]
2. Deputy Pearse Doherty asked the Minister for Finance the steps he will take to ensure banks and persons responsible for the tracker mortgage scandal face the consequences of their actions, in view of the fact that at least 13,000 mortgage holders have been affected; and if he will make a statement on the matter. [44947/17]
We all know that the Minister, Deputy Paschal Donohoe, has been meeting the banks over the past two days in respect of the tracker scandal. I have two key questions to which I think most people want an answer. Can the Minister give a categoric commitment to all those affected by the scandal that they will get justice, that they will get their money back and that they will get compensation? Can he give a commitment that there will be accountability as to how this happened in the first place and that there will be a thorough investigation that gets to the bottom of how exactly this could occur?
I have given a commitment to Deputy Pearse Doherty that we would take his question also. The Deputy is delayed, apparently. If the Minister is amenable-----
Deputy Doherty is here.
I am always happy to facilitate Deputy Pearse Doherty.
Very good. My apologies.
I propose to take Questions Nos. 1 and 2 together.
I have just concluded my meetings with the CEOs of Bank of Ireland, AIB, Permanent TSB, Ulster Bank and KBC to discuss the tracker mortgage examination. The Government and I are not satisfied with the progress lenders have made to date, and believe that impacted customers should by this time have had their tracker mortgages restored and, where appropriate, have received redress and compensation.
The Central Bank published an update on the tracker examination on 17 October. As part of this update, the bank released details of its engagement with lenders thus far and the enforcement actions the Central Bank has so far taken. As Deputies will be aware, the Central Bank has already concluded an enforcement investigation in respect of tracker mortgage-related failures identified at Springboard Mortgages Limited, and in that instance it imposed a monetary penalty of €4.5 million on Springboard.
Currently, the Central Bank is pursuing investigations into tracker mortgage-related issues arising in both Permanent TSB and Ulster Bank Ireland. Two further enforcement investigations into other lenders are in train, and in its recent appearance before the Oireachtas Joint Committee on Finance, Public, Expenditure and Reform, and Taoiseach, the Central Bank indicated that further enforcement investigations can be anticipated.
The Central Bank has statutory reporting obligations to An Garda Síochána and other agencies where it suspects a criminal offence may have been committed by a supervised entity. The Central Bank takes these obligations very seriously and complies with them on an ongoing basis as appropriate. However, decisions in respect of this are solely a matter for the Central Bank, independent criminal investigation bodies and prosecution authorities. Nevertheless, I would strongly support the Central Bank's pursuit of its tracker mortgage-related investigations and any other necessary actions to the fullest extent and as expeditiously as possible.
However, let me be very clear on this matter. I believe that impacted tracker mortgage borrowers have been treated disgracefully by mortgage lenders, and that many borrowers have incurred considerable losses and in some cases even more significant harm. We should be clear that it was the mortgage lenders that caused this harm to their customers and that the primary responsibility for rectifying the problem rests with them. Therefore, all lenders need to bring the Central Bank examination to a conclusion without any further delay, and to do so to the satisfaction of the Central Bank and more particularly to the satisfaction of their impacted customers. The main point I want to make now is that the time has arrived for banks to finally act in the best interest of their impacted mortgage customers. Of course, they should have done this from the beginning. The meetings have now concluded with the banks. I will have more contact with them over the course of the day and when this has concluded I will update the House during Private Members' business tomorrow evening.
The banks, or at least some of them, have threatened to sue the Central Bank for doing its job, which is seeking to protect customers. We know that 10,000 customers have not got the money back that was wrongly taken from them, not to mention any compensation from their lenders. There may well be many more. It is certainly not the case since this emerged that the banks have dealt with it in an open, honest or transparent manner. Any independent reading of the Central Bank report last week will tell us that the banks had to be dragged kicking and screaming through this process. They tried to minimise the amount of compensation. They did not declare all the customers who were actually affected. I will repeat my two questions. Can the Minister give a categoric commitment to everyone caught up in this that they will get justice? Can he give a straight answer as to whether there will be accountability on how this could happen in the first place?
I will echo some of the comments Deputy Michael McGrath has made. Let us put this into context. We use all these words about redress and examination and all the rest. The banks, some of which are State-owned and in some of which the State is the majority shareholder, are holding on to customers' moneys unlawfully. There are 10,000 that we know of and there may be many more thousands on top of that figure. The quantum of money the banks are holding unlawfully at this point, which they have taken from their customers, is in the region of €300 million.
Finally, the Government seems to have woken up and the Minister has brought the banks in to give them a dressing down. Nine months ago, I was challenging the Minister to do just that. What we need now is clarity. Is there going to be individual accountability? This Dáil spoke with one voice in January of this year, when Sinn Féin used its Private Members' time to propose that the Government put forward any such legislation identified as being necessary as a result of the examination to ensure that individuals and financial institutions can be held accountable for any white-collar crime that may have occurred. Has the Government carried out any examination?
Can the Minister give a guarantee to those who are watching out there, the victims of the tracker mortgage scandal, that they will receive their money back into their accounts before the end of this year and that they will receive adequate compensation?
In respect of the desire of the House to see accountability for how our citizens have been disgracefully treated in this matter, I remind Deputies that I made the point a moment ago that the Central Bank has already imposed a fine on Springboard in respect of this and other matters. It is my strong view that the manner in which banks have handled the probe for the Central Bank, and the recent behaviour of the banks in the management of this issue are unacceptable. It shines a light not only on the culture of our banking system at the time this issue originated, but also on the culture of our banking system now. Neither is acceptable to me.
I am supporting the Central Bank in its work around the probe. I believe that all who are owed money should have it repaid to them and I am supporting the Central Bank in this regard. In regard to accountability and the outcome of this process, which Deputies Michael McGrath and Pearse Doherty have raised with me, enforcement proceedings are already under way by the Central Bank in respect of two banks. This shows the determination of the Central Bank to move this matter to closure. I encourage the Central Bank to use all the powers available to it in regard to this issue, as I believe it will do.
I met the Governor of the Central Bank, Professor Philip Lane, yesterday, to discuss this issue. I am confident that all of the powers that are available to the Central Bank will be used if the latter stages of its probe vindicates their use and if the bank can stand over conclusions that emerge from it, which I believe it will be able to do. In regard to the issues raised by both Deputies today, my message is that the people who are owed money should have it repaid to them. They have been treated disgracefully by our banks in the latter part of this probe and I want to see that changed.
I respect the independence of the Central Bank but fines are not the answer. Springboard Mortgages has come through this process with only a fine of over €4 million. If the outcome in respect of the other banks that are some way through this process is fines, they will be passed on to customers and this will happen again because there will have been no accountability. Springboard Mortgages has concluded the process and there has been no accountability whatsoever in terms of how this happened and who was responsible. If that is a taste of what is to come, we are going nowhere.
What people want to know is when this nightmare will be over. We know that in respect of up to 10,000 customers, the banks are still sitting on their money. They have not repaid them or given them compensation. Did the Minister get a commitment from the banks as to when all of the customers who have been identified, not to mention the many others who we suspect are also involved, will actually get their money back? That is the first step. I do not think it is too much to expect banks to give people back their own money.
The Minister's response if this was day one of this scandal might be appropriate but it was in 2010 that the Central Bank wrote to the banks about the tracker mortgage issue and it was in 2015 that this examination came to light. Two years ago, the Central Bank allowed the banks an additional year to come up with the final figures and yet in October 2017 we still do not have those figures. The Minister said that his message is that people should have the money returned to them. In regard to the banks in which the Government is a majority shareholder, did the Minister instruct them to return the money immediately - it was unlawfully taken and should be put back into customer's accounts immediately - and did he tell them that if they did not do so he would sack the boards of those banks, Permanent TSB and Allied Irish Banks, AIB and that he would not support the re-appointment of the CEO of the Bank of Ireland? Did the Minister tell the banks that he would use his powers to appoint real public interest directors to the boards of banks that were subject to the guarantee in 2008? Did he ever telephone any of the public interest directors and ask them what they had been doing on the boards for the past two years as the banks were dragging their feet?
What we need is clear deadlines. We want to know if the money will be back in individuals' accounts before the end of this year. In regard to the motion brought forward by Sinn Féin on 24 January this year, to which the Government's response was that it would bring forward legislation on individual accountability, what has the Government done in regard to individual accountability in the banks, because this scandal will reoccur in a different form in years to come if we do not do that now?
I have made it very clear that the behaviour of the banks in terms of their failure to return moneys properly due to people is unacceptable. The hurt and harm that has been caused to citizens as a result of the manner in which the banks have handled this issue is not acceptable to me as Minister for Finance and as a shareholder in a number of these banks. I have heard much talk of cohorts and consumer affairs. What I am aware of is the hurt that has been caused to citizens in our State in terms of how this matter has been recently dealt with.
The Central Bank has made use of the powers available to it under the legislation brought in by the previous Government in 2013 to deal with this issue. The Central Bank has been using all of the tools available to it to resolve this issue. I am supporting it in its work to bring this issue to a conclusion. Too many people are waiting for their money to be repaid. Too much confusion still exists in regard to where stands this issue. In the engagements I have had with the banks on this matter, I have made clear to them that this is a disgrace. This matter should have been resolved by now. I will use the influence open to me as Minister for Finance to bring clarity to this issue in the coming days. I will update the House at the first opportunity available to me to do so, which I expect will be the Private Members' motion tomorrow evening.
3. Deputy Michael McGrath asked the Minister for Finance the progress made in setting up the escrow account for the money owed by a company (details supplied); the timeframe for the establishment of the account; the timeframe for the first payment to be made to the account; the fines that are likely to be imposed on the State for failing to comply with the Commission’s decision; and if he will make a statement on the matter. [44938/17]
At the end of August last year the European Commission issued its state aid ruling in regard to Apple. Since then, the money, €13 billion, plus interest, has not been collected. While I fundamentally disagree with the European Commission's state aid ruling, I believe it must be respected. When will this money be collected and lodged to the escrow account as promised?
Ireland does not accept the Commission’s analysis in the Apple state aid decision.
Hear, hear.
However, we have always been clear that the Government is fully committed to ensuring that recovery of the alleged Apple state aid takes place without delay and we have committed significant resources to ensuring this is achieved. Irish officials and experts have been engaged in intensive work to ensure that the State complies with all its recovery obligations as soon as possible and they have been in constant contact with the European Commission and Apple on all aspects of this process for over a year.
We have made significant progress on the complex issue of establishing an escrow fund. Given the scale and bespoke nature of such a fund, the precise terms are subject to confidential and commercially sensitive deliberations and I cannot at this point be drawn into a public commitment on timeframes as this could undermine the State's position, save to say that it will take place as soon as possible.
The announcement of the intention to launch infringement proceedings against Ireland is a wholly unnecessary step by the Commission. No fines will accrue to Ireland on foot of infringement proceedings under Article 108(2) of the Treaty on the Functioning of the European Union. Assuming the Commission can successfully convince the European Court of Justice that Ireland has not made sufficient progress on recovery, the result will be a declaration from the court that Ireland has not complied with its treaty obligations. The Government takes this very seriously and we will do everything in our power to defend such action.
Fines may occur on foot of a second court action taken by the Commission for Ireland’s failure to have complied with a judgment of the European Court of Justice under Article 260(2) of the treaty. The level of fines is at the discretion of the court and the purpose behind them is to ensure that member states take their treaty obligations seriously.
The Government has made clear that we respect the rule of law in the European Union and we will continue to take all necessary steps to ensure that the need for such action and the levelling of such fines does not arise.
I thank the Minister for his reply. I do not understate that there are many complexities involved. It is not a case of simply exchanging bank account details and money being transferred. However, in delaying this process the Government has given ammunition to those who seek to target Ireland in regard to corporation tax. The common consolidated corporate tax base, CCCTB, proposals have been refloated by the European Commission, along with proposals to tax digital companies based on turnover, and President Juncker has been talking about removing the veto in regard to corporation tax matters.
These are very serious issues. The key issue is that by not meeting the European Commission's deadline for collecting the money from Apple we have provided those who seek to target us with unnecessary ammunition. I do not understand why the Minister will not say when he expects the money to be paid over. The money should be collected by Ireland pending the outcome of the appeal. Fianna Fáil supports the Government's appeal but respects the decision that was made and the money should be collected pending the appeal. Why can the Minister not say when that will be done? Can he update the House on the sum of money involved?
I am not sure on what evidence the Deputy can conclude that I am in any way delaying on this issue. In terms of relevant timeframes, it has previously been the case that when a member state has co-operated in good faith with an understanding or direction from the Commission, the Commission will actively engage with the member state for at least two years before initiating proceedings in that regard. The Government sought an extension from the Commission to deal with this matter but it was not granted. One reason the negotiations are so sensitive is the amount of money involved. When the fund is set up, as it will be, it will be one of the largest of its kind in the world. The fine is the largest of its kind that a government or company has had to deal with. Because of the complexity of the matter and because the Commission has indicated that other jurisdictions might be able to access the money in the future, before the money can be received we must have a very comprehensive agreement in place in respect of the operation of the escrow account. To have the fund set up, the Government had to go through several procurement processes to ensure compliance with European Union law. That has all taken time and that is the reason I regret the action taken by the European Commission on the issue.
Hear hear.
As the Minister noted, the Commission announced its decision at the end of August 2016. There was a deadline of early January 2017 for the collection of the money. I do not recall the Government saying that was wholly unrealistic, which now seems to be the Minister's central point. He accuses the Commission of bad faith and says that countries would normally get two years following a ruling such as this to collect the money but the Commission has instead initiated infringement proceedings. The Minister is giving further ammunition to the Commission by not even laying out a roadmap for the collection of the money. There are tendering procedures involved. Tendering started in July in regard to the NTMA, as I understand it. Can the Minister provide the House with an estimate of when the decision will be respected in terms of the collection of the money and it being put into an escrow account on a temporary basis pending the appeal?
I have indicated a timeline to the European Commission for the potential resolution of the matter. One of the reasons I cannot publicly indicate the likely point at which it will be concluded is we are having discussions and negotiations with a company in this regard and those have to conclude in a manner satisfactory for both parties. I aim to conclude the process as soon as possible, collect the money and, while the money is collected and deposited in an escrow account, continue with the action that Ireland needs to take to defend its name in respect of this issue.
4. Deputy Joan Burton asked the Minister for Finance the projected effect of pre-budget publicity of an increase in non-residential stamp duty on such transactions in advance of 10 October 2017; his views on market reports that the projected 2018 yield from the 4% increase will not be achieved; and if he will make a statement on the matter. [44872/17]
I wish to ask the Minister about the extensive leaking in the days before the budget of his intention to raise significantly the rate of stamp duty from 2% and, potentially, to double it. Such leaks have never been as blatant or widespread as in the run-up to budget 2018 and certain individuals may have been in a position to profit very significantly from them.
In 2011 the rate of stamp duty applying to non-residential property transactions was fixed at a flat rate of 2% as a supply-side measure. Budget 2018 increased the rate on such property transactions to 6% as of 11 October 2017. While the commercial property market has now recovered strongly, the recent sharp increase in investment in construction activity poses a risk that this could, if left unchecked, give rise to overheating in the sector and in the domestic economy generally. This view is shared by commentators including the ESRI. Investment in non-residential construction has expanded rapidly over recent years and is approaching its pre-crisis share of gross national income (Star), GNI*. I am acutely aware that residential construction and the overall housing supply remain well below the level needed to meet demand.
With the commercial market now performing strongly, an adjustment in the rate of stamp duty on non-residential property beyond the current rate of 2% is appropriate. The yield from the increased rate is estimated to be approximately €370 million. In addition to providing additional yield, the increase to 6% should support the desired re-balancing of construction activity towards residential investment and help to address potential overheating in the sector.
I am aware of views that we have over-estimated the potential yield from the stamp duty increase. However, those views appear to be based on the additional yield from commercial property developments only, whereas the stamp duty increase I announced applies to the whole of the non-residential property market.
As regards the Deputy's concern about the perceived leaking of this budget decision, I assure her that I played no part in creating an environment in which my decision could be leaked. Speculation was rife on what I was going to do in regard to this measure and several others because they were contained in tax strategy group papers published last summer. A point was reached in the budgetary process at which commentary appeared to be pointing to how few leaks were occurring and all decisions in relation to taxation were treated very sensitively and carefully by me.
An examination of media reports, in particular for the 48 hours before the budget, would suggest differently because those reports very specifically said that the stamp duty was going to increase by a very significant amount and generally suggested an increase from 2% to at least 5%. Such reports were carried by practically all of the major national newspapers and organisations such as BreakingNews.ie. That meant that if commercial property owners had their transactions ready, they could save considerable sums of money by moving and completing the transactions during the 48 hours before the budget. The sources of the leak were clearly within the Department of Finance because the leaks were very specific and their accuracy was confirmed when the Minister read out the budget. This is a bad policy because it has allowed some very large property transactions to escape the tax. If this is to be the standard set by the Minister in charge of the budget, it is extremely disappointing and costly for the taxpayer.
I categorically reject the absolutely unfounded allegations made by Deputy Burton. Because she agrees with the decision I made, she can do nothing beyond making unfounded and inaccurate allegations regarding my conduct and that of my Department. The decision on this matter was treated with the utmost sensitivity by my officials and me. During the time period to which the Deputy refers, many other assertions were made regarding what would happen on budget day, the majority of which proved unfounded.
If the Minister is that concerned, he has a very easy remedy that would put all our minds at rest, namely, backdate the introduction of the measures to 8, 9 or 10 October. The budget was brought in on 11 October. If he wanted to, the Minister could even backdate the introduction of the measures to 1 October. It is a fundamental principle of fairness in taxation that those in the know should not have access to privileged information which would allow them, as in this case, to mitigate significantly the likely amount of stamp duty they would have to pay. In addition, subsequent to the budget, fairly respected commentators suggested that the target would not be reached, partially, I suspect, because of the leaking, and that people in the business of tax arrangements and tax avoidance were able, therefore, to anticipate what the Minister would do. That was foolish from the Department's point of view. There were suggestions that the actual yield from the tax will not be what the Minister indicated in his budget speech. Obviously, we will discover the actual position over the coming year.
I again reject the allegation the Deputy has made. If, in the context of this measure, the best she can do is infer that I or my Department engaged in behaviour for which she has no evidence whatsoever, it points to the poverty of ideas she and the Labour Party are offering regarding our economy and how all of us want to move it forward. This is the right policy measure to put in place. The Government made the correct decision in terms of broadening the tax base. Given the Deputy's background and what I understood to be the policy of the Labour Party, I would have thought that they would support this. If the best the Deputy can do is allege that I was involved in behaviour that would allow some to benefit from decisions I make, she has a very poor grasp of the standards I and my Department try to stand by when we are involved in the development and implementation of policy. The Deputy's comments are unfounded and a slur on the quality of the officials in my Department, who have helped me draft and implement policy options. The Deputy should know - I suspect she does but is not willing to make the point because she is seeking political gain - that at no point would I be involved in seeking to bestow a benefit on anyone as a result of a decision that could be made on budget day. It ill behoves the Deputy to suggest otherwise.
I thank the Minister. Question No. 5-----
May I respond to that briefly?
No. I am sorry-----
I just want to say one sentence-----
The Deputy always does this.
-----to the Minister. There was a time when a previous leader of Fine Gael, Garret FitzGerald, had to seek the resignation of a Fine Gael Minister of State because there was an inadvertent leak of information-----
We know about that.
-----which may have resulted in advantage to some of the players involved. If Fine Gael standards have really-----
I think the Deputy is realising just how spurious is the ground on which she is raising this matter. She is now talking about inadvertent leaking in contrast to the serious allegations-----
That was inadvertent in those days.
-----she levelled at me a moment ago.
5. Deputy Michael McGrath asked the Minister for Finance his plans to establish Home Building Finance Ireland, HBFI; the expected timeframe for it to be operational; the number of homes he expects it to fund; the terms and conditions that will apply to the loans; and if he will make a statement on the matter. [44939/17]
I am raising a question about the budget day announcement concerning HBFI. I think everyone in the House accepts that finance is an essential ingredient in delivering the homes we want to build for our people throughout the country. Specifically, when does the Minister anticipate the fund to be up and running and providing finance for home construction? Will the terms and conditions be on a commercial basis and attractive enough that the loans will actually be drawn down and used?
As announced in my budget day speech on 10 October 2017, it is my intention to establish HBFI to provide funding on market terms to viable residential development projects whose owners are experiencing difficulty obtaining debt funding or credit. HBFI will be a stand-alone entity that will provide funding directly into the market. It will be designed to leverage off the extensive expertise already available to the State to deliver this initiative and, as such, existing NAMA staff skills and expertise will be utilised to deliver the funding involved. Any lending provided in due course will be made available by HBFI and will not impact on NAMA's existing objectives or its board's strategic wind-down plans.
In answer to the Deputy's final question, I hope to bring the establishing legislation to the Houses of the Oireachtas for approval either later this year or in early 2018, with a view to HBFI commencing operations by the second quarter of next year. It is not expected that it will have an indefinite lifespan but it is too early to speculate as to how long it might operate as this will depend on the availability of funding in the market to meet demand for homes in the coming years.
What consideration has been given to the terms and conditions that will be attached to the credit that this new agency will be able to provide? One of the reasons the Activate Capital fund has not been hugely successful is that the initial cost of funding was very high. I think it was as high as 14% but has come down significantly since then. The fund has had some success but not, I think, at a level others might have expected. Will the Minister clarify what will be the terms and conditions associated with the funding that this new body will provide? Will he confirm that the legislation is under preparation and that he will bring it before the House on schedule?
The legislation is under preparation and I am confident that I will be in a position to publish it towards the end of this year and bring it before the House in the early part of next year.
Regarding the terms and conditions relating to the credit and how it would be made available to companies, it must and will be made available on commercial and market-equivalent terms. In other words, the way in which this funding will be provided must be consistent with the commercial terms upon which funding is provided elsewhere in the market. I have studied the operation of the Activate Capital fund, the success of which to date has shown that there is a need for credit in a way that our banks are not able to facilitate at present. As I bring the legislation before the House, I am confident we will be able to create an entity that will be able to do this. At this point, I am not in a position to be able to comment on what the rate of interest will be because much of that will depend on the quality of the individual applications made to HBFI once it is set up.
Will the Minister clarify whether this new fund will only finance private home construction? What role, if any, will it have in the construction of social or affordable housing? For example, will approved housing bodies be able to avail of funding from this new organisation for the construction of voluntary housing association houses or social houses that they will be delivering as part of schemes? Will the Minister confirm that?
It is my intention at this point that HBFI would primarily be focused on the private sector. The rationale behind this thinking is that in dealing with approved housing bodies and local authorities, my experience is that the issue they face is not the rate of interest on the credit they need. In many cases the funding they need is provided directly by the Exchequer. For this reason, my current thinking is that HBFI will be primarily focused on the private sector. However, in the course of the Bill's passage through the House, if Members have suggestions as to how this might be amended or if it needs wider breadth to deal with the long-term objective of increasing housing supply, I will be open to dealing with Deputy Michael McGrath and others on that point.
