Ruairí Ó Murchú
Ceist:63. Deputy Ruairí Ó Murchú asked the Minister for Finance if he will provide an update on the work of the Office to Promote Competition in the Insurance Market; and if he will make a statement on the matter. [10256/23]
Ceisteanna Eile - Other Questions
Insurance Industry
I would appreciate it if the Minister could provide an update on the work of the Office to Promote Competition in the Insurance Market. I am talking specifically about the difficulties that exist as regards public liability insurance. There are a large number of community organisations - community centres - that either cannot get insurance or are offered ridiculous premiums. We know what has happened as regards personal injury guidelines. There is more to be done from a legislative point of view on duty of care, etc. We need a timeline on that. I accept that is a matter for the Minister for Justice but we need to see movement. The problem is we do not have enough companies in this space. What is being done?
I thank the Deputy the question. He is right to highlight the Office to Promote Competition in the Insurance Market established as a consequence of the action plan on insurance reform overseen by the Cabinet sub-group on insurance reform. The latest implementation report demonstrates that significant progress has been made, with 90% of the actions contained in the action plan now being delivered or initiated. I will revert to the Deputy on the duty of care point.
The Deputy will be aware that the Office to Promote Competition in the Insurance Market is a programme for Government commitment. Its aims are to help expand the risk appetite of existing insurers and explore opportunities for new market entrants in order to increase the availability of insurance.
As the Minister of State with special responsibility, in my meetings with the CEOs of the main insurers, I am pressing this point around risk appetite and what they might take on in future.
Since its establishment, the Office to Promote Competition in the Insurance Market has held more than 100 meetings with a range of stakeholders, including insurance companies and representative organisations. As part of this, the office is working closely with IDA Ireland to help leverage the ongoing insurance reforms, with the objective of targeting new entrants to the Irish market or persuading incumbents to expand their risk appetite or both. This will, in the first instance, target providers who offer insurance in areas that have been identified as pinch points, as the Deputy correctly highlighted, such as high footfall and activity sectors experiencing difficulty in obtaining public liability insurance. Due to the progress in delivering the Government's reform agenda, the IDA now has a positive message to communicate and there have been encouraging developments, with insurance companies either seeking to establish in Ireland or to expand product lines already available to Irish consumers. This is a space that we will continue to monitor closely.
Upcoming developments, such as the reform of the duty of care, which I might revert to in a supplementary response, will further enhance this by addressing the question of slips, trips and falls, which is particularly prevalent in high-risk public-facing sectors.
Additional information not given on the floor of the House
I wish to assure the House of my intention to work with my Government colleagues to ensure further implementation of the action plan, which, in tandem with the work of the Office to Promote Competition in the Insurance Market, should have a positive impact on the affordability and availability of insurance for all consumers.
I thank the Minister of State. In fairness, we are in a better place than we were, although I could argue that we should have reached here earlier.
We could all point to examples. There is a community centre in my constituency that was being charged €11,000. A claim could be made against three organisations – the community centre, a company and a community organisation - and each of them would see an increased premium. Turning to specific sectors, a significant number of bouncy castle companies are operating in the black but, despite engaging with the best of intentions, were not able to get insurance. This difficulty needs to be rectified.
The reform of duty of care needs to happen. Will the Minister of State say something more about the encouraging conversations that are happening? I am delighted that the IDA has a positive message, but we need to see positive results and more people in the industry.
I tend to agree, but we also need insurers from different countries that are interested in moving into a market such as Ireland's. That is not necessarily a given, as it remains a small market with a number of insurers. It is not simply the case that, because we have a positive message, people are necessarily going to want to change their business model in order to operate in this market. We must reflect that.
In the course of conversations I have had, there are clear signs that the market is responding to the insurance reform agenda, with insurance solutions now more readily, albeit not completely, available in difficult areas such as equestrian activities, inflatable hire, non-standard buildings and childcare. There remains more to do, though.
The Office to Promote Competition in the Insurance Market has met an international insurance company that recently established a base in Dublin seeking to offer an expanded suite of professional indemnity insurance products. In conjunction with the IDA, it is also engaging with another global underwriter that may be seeking to enter the Irish market. The office will continue to build on those networks and partnerships to encourage competition in the market. It is a core part of my work, and I assure the Deputy that I raise it at every opportunity.
We just need to see more, better, faster, quicker. The onus is on the Government to ensure that the conditions are as good as they can be-----
Correct.
-----for more insurers to enter the industry. Be they community organisations, businesses or community centres, a large number of people have been under significant pressure for a considerable amount of time. Because of GoFundMe, the generosity of people and the fact that part of this happened before we entered the cost-of-living crisis, some of them were able to get through the gap.
There is an unfairness to this. We must ensure that the reform of the duty of care and other legislative measures are put in place. We must then ensure that we can get players in the market who can deliver decent products. I might speak with the Minister of State later about facilitating particular groups to block buy and benefit in that way.
I agree with the Deputy. He is aware that some of that is already happening. One of the questions I am asking is the extent to which more of that can be done and in what circumstances.
I will update the House on the duty of care legislation. The Deputy is right about it being a matter for the Department of Justice, but it is my understanding that the legislation will be enacted before the summer. It is a significant part of the action plan on insurance reform because it sets out the culture of what can be expected of insurance in this jurisdiction. It also sets out what we are trying to do with PIAB. It must be acknowledged that awards in Ireland, particularly for soft tissue and minor injuries, were so large. A cultural change in this regard is important.
The Deputy is right, in that it is the Government's responsibility to create the correct environment. The Government cannot create jobs but it can create the environment to create jobs. However, we are still a small market and it is not the case that we are attractive to every insurance company operating in other jurisdictions. We must recognise that part of the dynamic, too.
Questions Nos. 64 and 65 taken after Question No. 68.
Banking Sector
Niamh Smyth
Ceist:68. Deputy Niamh Smyth asked the Minister for Finance if he will provide an update on the implementation of the recommendations of the retail banking review; and if he will make a statement on the matter. [11380/23]
I congratulate the Minister and Minister of State on their new positions. This is my first opportunity to ask them questions. I wish them the best of luck.
Will the Minister provide an update on the implementation of the recommendations of the retail banking review and make a statement on the matter?
I thank the Deputy for her good wishes. I also thank her for submitting this question.
The Government approved the publication of the retail banking review and the implementation of its recommendations on 29 November. Each recommendation identifies the body or bodies responsible for delivery of that recommendation and, in some cases, contains timelines for delivery of the recommendation, where appropriate. It is for the relevant bodies to consider and implement the recommendations addressed to them.
Implementation of the recommendations requires both the Department of Finance and the Central Bank to deploy resources to deliver them. Many of the recommendations will also require close collaboration between the Department and the Central Bank. The implementation of the recommendations that are directed at the Department are mainly being carried out as part of normal policy and legislative work. However, a key issue identified by the review was access to banking services, particularly the ability to withdraw and deposit cash. A number of recommendations address this issue. A dedicated team has commenced its work on this issue and is currently in its research phase to develop legislation and prepare the heads of a Bill. These heads will include requiring banks to provide reasonable access to cash, which will be defined following consultation with the Central Bank and other stakeholders.
The Central Bank informs me that it is working on the implementation of recommendations addressed to it. The bank is undertaking a major review of the consumer protection code, and the outcome of this significant piece of work is likely to address several of the recommendations. Other recommendations will require implementation by other State agencies, such as the Competition and Consumer Protection Commission, Departments and all relevant stakeholders.
It is crucial that the retail banking sector ensure the interests of consumers are a priority in their organisations and seek to work together, where possible, to deliver the best outcomes for the economy and citizens. The retail banking sector has been contacted regarding its role in carrying out those recommendations that fall to it.
I thank the Minister. I am delighted to hear that a team is in place to examine this matter more closely.
The retail banking review pointed out that, primarily due to technological developments, the main way that consumers and SMEs engaged with and accessed banking services had changed rapidly in recent years. Covid accelerated this trend. While the use of cash and visits to bank branches have been in decline in Ireland and elsewhere for some time, the review team noted that the ECB survey found that a majority of people wanted to have the option to pay in cash – this is the important point – even if some had a preference for digital payments. We cannot ignore the consternation around the country when AIB suggested that it might only have machines in its banks, which would have had a detrimental impact on businesses. Rural Ireland would decline further if banks were allowed to do this, which is why I feel so strongly about ensuring that cash always remain legal tender for people.
I assure the Deputy that work is under way in my Department on these specific recommendations and the heads of a Bill on access to cash are currently being prepared. We will need to decide what level of access to cash it is appropriate to protect. I recognise it is an important issue for communities and small businesses and for ordinary citizens. We also intend to ensure automatic teller machine, ATM, operators are authorised and supervised by the Central Bank and to provide it with the responsibility and powers to protect the resilience of the cash system. The area of ATMs is in need of further regulation. Often we find many of them are out of order for prolonged periods and it can be difficult for people to access cash. Many towns have only one or two machines and they could both be out of order at the same time, for days on end. Such issues affect people on the ground and should be dealt with. It is my intention that this will be a practical Bill. I will consult widely with Members across the House to hear what they have to say and to ensure access to cash is protected for people who choose that option. Not everyone does, but many people still do.
I welcome the Minister's reply. One thing that struck me is that many of the GAA grounds have moved to digitalisation in allowing people into the grounds. There has been huge kickback. Again, I maintain it is particularly from rural parts of the country. It is important we do that. I acknowledge the high cost of providing cash services and the move to a more digitalised banking model have incentivised banks to move away from the direct provision of cash services. I am someone who comes from a rural area and businesses need access to cash. The Minister spoke a little about the regulation of ATMs. That would also be welcome. Many small businesses need ATM services, not only for withdrawals but also for lodgements at weekends. We must ensure our banks are providing that service for the SME sector.
We are seeing an evolution in the significant move towards digital payments. The Covid-19 pandemic accelerated that. However, cash still has an important role to play in our society and economy. Insofar as is practicable, people have a right to use cash. Having said that, I am conscious that not every public body is in a position to accept cash in the provision of every public service. We must examine all of this and that is why I am committing to new legislation, the heads of which will be prepared this year. It will benefit from pre-legislative scrutiny and from the input of Members across this House, who will give feedback about the experiences of their constituents and of businesses in their areas in the frustrations they sometimes have at their inability to access and use cash for goods and services. It is an issue we will talk much more about this year.
With the agreement of the House, I will go back to Deputy Dillon or I can take the questions in order. I thank colleagues for their forbearance on this. I understand Deputy Dillon will take Question No. 64 in place of Deputy Griffin.
Tax Code
Brendan Griffin
Ceist:64. Deputy Brendan Griffin asked the Minister for Finance if he is concerned with the potential impact of the reversal of the 9% VAT rate to 13.5% for enterprises; if his Department has evaluated the number of jobs this measure could cost; and if he will make a statement on the matter. [9270/23]
I thank the Cathaoirleach Gníomhach for his co-operation.
Has the Department of Finance evaluated the potential for job losses that could result from the proposed increase in VAT rate from 9% to 13.5% this September, especially in the services sector which employs a significant number of people?
As the Deputy will be aware, in making any decision on VAT rates or other taxation measures, the Government must balance the costs of the measures in question against their impact and the overall budgetary framework. In the case of the tourism and hospitality sectors, an extension of the 9% VAT rate to the end of 2023 would cost more than €500 million. However, the Government recognises the challenging business environment the tourism and hospitality sectors are operating in and the role that these businesses play in driving employment and economic activity. Their regional presence and focus was an important consideration in the decision we had to make. For this reason, I will be extending the 9% VAT rate for these sectors to the end of August 2023. It will revert to the 13.5% VAT rate on 1 September 2023. The estimated cost of this measure is €300 million. This extension strikes a balance between the cost to public finances and the provision of support for these sectors.
I thank the Minister for his response. The Government's announcement on the final extension of the 9% reduced VAT rate for the tourism and hospitality sectors, which includes hairdressers, for a further six months, as part of the cost-of-living measures to deal with the increases was exceptional news for many businesses, as were the alterations to the temporary business energy support scheme, TBESS. If we look at the current VAT rates in Europe, at 13.5% only two other countries, namely Denmark and the UK, would be higher than Ireland. France, Italy and Spain are at 10% while Portugal is at 6%. I ask the Minister to give consideration in the months ahead to evaluating the potential impact this may have. I acknowledge that there have been numerous extensions since the Covid-19 pandemic and that the Government has played a hugely important role in the tourism and hospitality sectors, including with the wage subsidy scheme, but I ask the Minister to consider this.
I will allow Deputy Conway-Walsh to ask a supplementary question.
This is an important point. We must see the cost-benefit analysis that was done on this matter to see exactly how the Government came to this decision. Everyone is open to examining this but we need to know what the impact will be on hairdressers and other services in the community. I note the Minister mentioned the regional impact. That needs to be set out clearly. The TBESS was welcomed but we must remember it was completely out of the question in rural Ireland. Those who do not have natural gas or liquified petroleum gas, LPG, have also been hammered as they have not been able to benefit from that. When I inquired today from the Department when the grant was coming forward, I was told there is no timeline for it. Uncertainty is killing these businesses. They cannot plan. They do not know what their future is.
I will also allow Deputy Durkan to contribute as he has been sitting patiently all night.
I agree with the previous speakers. Has an evaluation has been done of the possible negative impact and the cost to the various sectors that might be negatively affected? How does that balance against the costs so far outlined by his good self?
I thank all the Deputies for raising this issue. As has been said, the impact is not only on the tourism and hospitality sector. It also covers cinemas, theatres, hairdressers, historic houses, natural heritage facilities, open farms and amusement parks, to name a number of examples. We had to take a range of factors into account at a political level, not least the fact that if the VAT rate went back up on 1 March, it would inevitably have led to certain price increases. That would come at a time when we are trying to get inflation down and it would have moved prices in the opposite direction. It is a jobs-rich sector across all regions and many of the businesses concerned are dealing with high costs at this time. I acknowledge the point Deputy Conway-Walsh made about the TBESS. It was not possible to extend that scheme to cover businesses that use oil and LPG but the Department of Enterprise, Trade and Employment is bringing forward a grant scheme on a comparable basis to address that issue.
I commend the Minister on his efforts on the final extension to the end of August. However, I ask him to engage with the key stakeholders in this sector over the summer months and to provide a cost-benefit analysis of this measure. The economic outlook for this country is positive. We will have the wind behind us in our tax returns when we reach the next budget so I ask that this would be reviewed and for the Minister to come back to the House with some kind of report.
I am looking forward to having the wind behind us. It is important for the Minister to publish the full information that he has, sooner rather than later, for us to be able to discuss this in a meaningful way and to evaluate what is there. Will the Minister please ask the Department of Enterprise, Trade and Employment to get the LPG gas issue sorted out?
I thank the Minister for his earlier reply. The question still remains as to whether the experience between now and September will be included in calculating a decision that might affect future jobs and services and a plethora of areas that may come to light in the meantime. Will the Minister look at this?
The economic assessment recommends that the 9% rate be brought to an end. I have been clear about this in written parliamentary replies that I have provided in recent days. It fell to a political decision to be made as to when that would be executed. We have made the political decision that it will happen at the end of August. It is important that I am straight with the sector. The extension that has been provided is the final extension. The VAT rate will go back up to 13.5% on 1 September. I have no doubt the sector will continue to make a case. Other sectors will also make the case for preferential tax treatment and will do so in the lead up to the budget. I do not want to mislead anybody. I want to be straight up and honest. It is the final extension and the rate will go back to 13.5% on 1 September.
Insurance Levy
Alan Dillon
Ceist:65. Deputy Alan Dillon asked the Minister for Finance the amount raised by the various levies and contributions on insurance premiums for each year since their introduction; if he is reviewing the operation of the levies associated with the insurance compensation fund, ICF; and if he will make a statement on the matter. [11341/23]
The ICF was established in 1984 to facilitate payments to insurance policyholders with regard to risks in the State when a non-life insurance company goes into liquidation. This fund is financed by a levy set at 2%. This is imposed on premiums paid by policyholders to insurers. Is the insurance compensation fund adequately funded? Is it transparent and effective in protecting policyholders in the event of an insurer's insolvency?
I thank Deputy Dillon for the question. It is important to note there are various levies and contributions in existence on insurance premiums. These serve different and quite defined purposes. The 2% insurance compensation fund levy represents the only pure levy charged on insurance premiums. It covers the cost of claims in the State where an insurer goes into liquidation. The ICF was established under the Insurance Act 1964. To recoup the Exchequer funds advanced following the administration of Quinn Insurance, the 2% levy on all non-life insurance premiums was reintroduced in 2012. Revenue collects this, transmitting these funds to the Central Bank of Ireland, which administers the ICF under the Insurance (Amendment) Act 2018. The Revenue Commissioners have informed me that recent annual industry contributions were €93 million in 2021, €101 million in 2020 and €130 million in 2019.
In terms of reviewing the rate, the Central Bank carries out an annual assessment of the ICF's financial position, which is issued to the Minister for Finance. The most recent Central Bank audited figures to the end of 2021 indicated that the balance on the loan was €550 million. While this has decreased in the interim, owing to the outstanding amount, the levy is likely to be applied for the next number of years.
Additionally, the motor insurers insolvency compensation fund, MIICF, is a contribution equivalent to 2% of gross motor premiums, established under the Insurance (Amendment) Act 2018. This ensures compensation levels payable from the ICF for third party motor insurance claims as a result of an insolvency are aligned with that where a motorist collides with an unidentified or uninsured driver. The MIICF is not considered a levy as discretion rests with the insurance companies as to its financing. Under the legislation, the rate will fall to 1% when the fund reaches €150 million and then 0% once the fund reaches €200 million. The fund balance at 31 December 2021 was approximately €110 million.
I thank the Minister of State for her response. The importance of the insurance compensation fund lies in its ability to provide a safety net for customers, particularly in the event of unexpected and unforeseeable circumstances such as an insurer's insolvency. In the past we have seen how the ICF has been activated to provide compensation for policyholders of insurers that became insolvent in Ireland. There was Setanta Insurance, a Maltese insurance company, and Enterprise Insurance, which was from Gibraltar. As the Minister of State referenced, there was also Quinn Insurance. It is important for customers to consider carefully the financial strength and stability of an insurer before purchasing any insurance policy. It is important to stress this.
The outstanding loan referenced is €550 million. The interest being paid on that loan has accrued to approximately €208 million. How long will the 2% levy on insurance companies be passed on to customers? Does the Minister of State expect any reduction in the levy in the near future?
I thank Deputy Dillon. I would like to clarify and come back to him in writing on some of the points he has raised. I hope that is okay. I will go back to some of the figures. Once the MIICF reaches €200 million the levy will be 0%. I would like to clarify this with the Department and come back to Deputy Dillon directly. It is important to set out to the House what is there at present. The Motor Insurance Bureau of Ireland's annual reports of the MIICF state that recent contributions were €38 million in 2021, €38 million in 2020 and €41 million in 2019. As the MIICF nears the thresholds the contribution will be considered in line with the legislation.
Separately, there is a 1% stamp duty charged on life insurance premiums and a 3% per cent stamp duty charged on certain non-life premiums. While occasionally described as levies, these duties are recorded to the Exchequer as tax receipts. I will check Deputy Dillon's questions more specifically and come back to him directly.
At a recent meeting of the Committee of Public Accounts it was revealed that the Supreme Court ordered that €30 million be made available as security costs to the administrator of the Quinn Insurance company in order to proceed with a case against PricewaterhouseCoopers. My understanding is that the case was settled. Neither the Central Bank nor the Department of Finance would reveal the terms of the settlement agreement to the Committee of Public Accounts. I ask that the details of the settlement be available to the public. It was taxpayers' money that was gambled and they are entitled to find out what that final settlement was with PricewaterhouseCoopers, why the case was settled and the amount for which it was settled.
I thank Deputy Burke. As he knows from his own legal experience, the terms of a settlement may include a confidentiality element. I appreciate Deputy Burke's position as a member of the Committee of Public Accounts as I was a former member with him. I would like to reflect on this with the Department of Finance to see whether or how such information could be shared, having regard to the terms of the settlement.
Questions Nos. 66 and 67 taken with Written Answers.
Questions Nos. 69 and 70 taken with Written Answers.
Tracker Mortgages
Thomas Gould
Ceist:71. Deputy Thomas Gould asked the Minister for Finance if he will engage with the Central Bank with respect to the sale of tracker mortgages to vulture funds where those mortgages were overcharged as a result of the tracker mortgage scandal; and if he will make a statement on the matter. [11337/23]
It has become apparent that the retail banks sold to vulture funds thousands of mortgages that were overcharged through the tracker mortgage scandal. Hundreds of these tracker mortgage accounts were sold prior to them receiving remediation through the tracker mortgage examination. The principles of the tracker mortgage examination were very clear. These mortgage holders, having been overcharged by the banks, are now trapped with vulture funds with no option to fix interest rates and no ability to switch. They are in a worse position. Will the Minister outline his views on this revelation? Does he intend to engage with the Central Bank in respect of this?
I thank Deputy Doherty. The Department continues to work closely with the Central Bank on all mortgage related matters. Changes in the interest rate on a tracker mortgage are determined by any movement in the underlying rate being tracked and, in line with the terms and conditions of the mortgage contract, these changes are applied to tracker mortgages customers by their lenders.
This approach applies to all tracker mortgage customers, including those who have remained with the original lender, and to borrowers whose tracker mortgages were purchased by another entity.
Where a loan is sold or transferred to another regulated entity, the protections that were available to borrowers prior to the transaction continue to be in place with the new owner. Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018, if a loan is transferred or sold, the holder of the legal title to the credit must be authorised by the Central Bank and must comply with Irish financial services law that applies to “regulated financial service providers”. This ensures that consumers whose loans are sold or transferred maintain the same regulatory protections, including under the various Central Bank statutory codes of conduct, such as the Consumer Protection Code 2012 and the Code of Conduct on Mortgage Arrears 2013.
In relation to the tracker mortgage examination, the Central Bank's final report of the supervisory phase of the examination was published in July 2019. It outlined that over 40,000 customer accounts were impacted by lender failings and that almost €700 million of redress and compensation was paid to impacted borrowers, and borrowers were returned to the appropriate tracker rate as necessary. The Central Bank has also concluded enforcement actions and imposed fines on lenders for their tracker-related failures.
I have been informed by the Central Bank that it will now monitor developments in the Financial Services and Pensions Ombudsman, FSPO, and the courts in relation to the tracker issue to see if any further action is required by it arising from decisions which may be made in those forums. The FSPO has indicated that, as of 14 October 2022, it had identified 1,077 complaints on hand as being tracker mortgage interest rate-related complaints and, to that date in 2022, it had identified 113 new complaints as being tracker mortgage interest rate-related, closed 172 tracker mortgage interest rate-related complaints and reopened 11 such complaints.
Figures requested from the retail banks and sent to the Oireachtas finance committee showed that Bank of Ireland, AIB, KBC, Permanent TSB and Ulster Bank sold 2,315 tracker mortgage accounts which they had overcharged to vulture funds, and nearly 400 of these were sold before they were identified or remediated, either through the tracker mortgage examination or on foot of an FSPO decision. The Central Bank has subsequently informed me that 6,000 tracker mortgage accounts impacted by the tracker mortgage examination were sold on by retail banks. We know these mortgage holders were ripped off by the banks and then had their loans sold to vultures, and it was a real kick in the teeth for them. We all know today, given the interest rate environment, that if someone’s loan is with a vulture, because they cannot fix and cannot switch in many cases, they are at a disadvantage. However, the principle of the tracker mortgage examination was that there should be restoration and that there should be no further harm. At least 400 people who were still being overcharged had their loans sold to vultures. It should never have happened in the first place and now, because it has happened, they are in a worse position with fewer options. There needs to be a look-back on all of these cases and where they need to be restored, they should be restored to the original lender.
It should certainly not be the case that any individual borrower is disadvantaged because of where their tracker mortgage ended up, so the principle of remediation being applied across the board is one I absolutely subscribe to. I will examine the issue the Deputy has raised. The original lenders were in scope and they should have followed through with those customers. As the Deputy knows, even customers whose loans had been extinguished were also brought back into the scope of the examination, so the fact the loan was sold to another loan owner does not absolve the original lender of the responsibility to deal with that issue. I will take up the issue. If the Deputy has any information, he should please share it. I will ask my officials to engage with the Central Bank on that matter.
I welcome that. Let me be clear that I discussed this with the Central Bank in my recent meeting with it. These individuals, because they have now been identified as being in scope as part of the tracker mortgage examination, have eventually been remediated. However, the point is that, at a point in time, before they were identified and before they had the money restored to them following the overcharging that was taking place and the compensation, they were sold on to a vulture. At that time, some could have argued that there was no difference but there is clearly a difference today. They have been put at a disadvantage because they were overcharged by the same bank. If they were not, and if they were identified as in scope at the time, they would not have been sold on. The tracker mortgage examination is clear that lenders are not allowed to sell on a mortgage to a third party until they have dealt with the issues surrounding that. Some of these were in a better position and they would not be in arrears if they were not being overcharged in the first place. That is why it is important there is a proper look-back in this regard.
There is a principle here. These banks did wrong, and that is why they have been levied with the highest fines ever issued on financial institutions in the history of the State. They did doubly wrong in that while they were overcharging these customers, they sold the loans on to a vulture fund. They have to do the right thing now. They have to offer to take those loans back onto their books, deal with them appropriately and charge the necessary tracker interest rates.
As I say, it should not be the case that those borrowers would be disadvantaged in regard to the application of the tracker redress or remediation scheme because of where their loan ended up. I will examine that issue. Of course, it is also the case that their tracker mortgage contract has to be fully honoured by the new loan owner. The Deputy said they were compensated, they got redress and their loan is now with the new loan owner. That loan owner has to fully honour and abide by the tracker.
They cannot fix. That is the problem.
They do not have the option to fix, and I understand the point the Deputy is making. I will examine the issue offline.
I appreciate that.
Questions Nos. 72 and 73 taken with Written Answers.
Tax Code
Pearse Doherty
Ceist:74. Deputy Pearse Doherty asked the Minister for Finance if he will publish the economic analysis undertaken by his Department regarding the retention of the 9% rate of VAT with respect to the hospitality and tourism sectors; if he will outline its findings; and if he will make a statement on the matter. [11320/23]
This comes back to the question that was addressed earlier by Deputies Rose Conway-Walsh and Alan Dillon in regard to the 9% VAT rate. I raised this issue with the Minister on 24 January last. During that discussion, I asked if the Department had undertaken an economic impact assessment regarding the consequences should the rate reduction be extended or the prior rate be reinstated. The Minister told me that analysis was being carried out. Will he commit to publishing that analysis?
In January of this year, officials from my Department compiled a ministerial briefing on a number of measures, including the temporary 9% VAT rate. This briefing included an economic assessment of the measure. The material outlined the macroeconomic backdrop to any extension of the 9% rate, noting that the economy has rebounded strongly from the pandemic and that economic activity is now above pre-pandemic levels. The briefing also contained an analysis of employment trends, reporting that employment in the sectors covered by the 9% rate was near pre-pandemic levels last year. While job vacancies in the 9% sectors were lower than the economy overall, they are still higher than the long-term average. Economy-wide employment could be classified as what economists term “full employment”. In addition, the briefing noted that the reduced rate is both regressive and very costly, and that this cost represents a transfer from taxpayers to the sectors which it covers.
The Government accepted the Department’s economic assessment, which found there was no longer an economic case for the temporary 9% rate and, therefore, decided upon a reversion to the 13.5% VAT rate. Specifically, the Government decided that the 9% VAT rate for the tourism and hospitality sectors will only apply until 31 August. This decision was made in recognition of the employment provided in the sectors to which the 9% rate applies, as well as to give businesses a transition period to adapt to the changing economic and policy environment. Finally, the Government was cognisant of avoiding adding to upward pressure on prices while inflation remains so elevated.
This extension, therefore, strikes a balance between the estimated €300 million cost to the public finances and the provision of support for these sectors through the busy summer period, after which the reduced rate will cease. I have already put on record, both tonight and in written parliamentary question replies, a summary of the economic assessment. I will discuss with my officials the issue of publishing it. I have no objection to the publication of the assessment and I have already provided a high-level summary of it.
I have received the parliamentary question responses in regard to the assessment. That is very important because there has been a wide public debate in this regard. It is a good debate and it needs to be an informed debate, including in regard to the Department's analysis on whether to extend or continue with the rate.
Whether 9% is the appropriate rate for the sector is another question that should be teased out and the cost implications of that need to be taken on board. Consequently, the publication of the assessment is important. I have done this on many occasions, but I make clear that as a director and founder of a company that is not for profit, that company will benefit from the reduced rate of VAT as it operates music festivals. I wanted to put that on record.
The Minister made the point in his commentary that the Department believes it is regressive and I believe the Minister agrees. That being the case, will he give the reasons for the continuation of the 9% rate in the first instance? The Taoiseach was flying kites for a long time about hotels being excluded and all that. The Minister and I know, and Revenue would tell anyone, that it cannot be done on a practical level. However, is that completely off the cards?
It is important to give certainty to the sector. It is appropriate we have a transition to the restoration of the rate on 1 September. There was considerable debate and speculation and it would have been challenging for many businesses that are dealing with increased energy and other costs and grappling with remaining competitive and keeping their doors open. I was very conscious of that. I was conscious also that putting it up would have resulted in some prices going up. VAT is a consumer tax. It is the last item that goes on the bill or invoice, so it is a tax on consumers. We are trying to get inflation down and it is a sector that is jobs-rich throughout the country. Taking all that into account I felt, and the Government felt on my recommendation, that a six-month transition to the restoration of the 13.5% rate was the appropriate action. I have no doubt the debate will continue but as I said earlier it is important I, as Minister, provide clarity and certainty to the sector that the rate will return to 13.5% on 1 September.
To clarify, will that occur regardless of the rate of inflation at that point in time? When the Minister selects 1 September for a tax rate to go up it is an appropriate time because the Dáil is in recess. The Dáil is in recess for a number of weeks before and after that date as well and that sometimes creates a little bit of pressure. Is the Minister saying the decision is permanent regardless of the inflationary environment? The last time it was restored it was also said that was permanent. I assume the Department did not support the extension, and that is fine. There must be political considerations and I agree a Minister should weigh up the advice and then make decisions, so I am not questioning that. However, the sector has put forward a strong argument that if we look at our competitors in Europe, outside Britain, our 13.5% rate probably makes us an outlier. What is the Minister's opinion on that debate? Some would argue it is not about an extension and that the right rate for the sector is 9%. I am not convinced at present, but I would like to hear the Department's view and the Minister's own on whether there is any merit to that argument, given countries other than Britain have rates well below 13.5%.
I thank the Deputy for acknowledging there is a role for political judgment in all these decisions. As he well knows, given the way the public finances were managed, in the base it was provided that the underlying rate here is 13.5%. Accordingly, there is a cost to the Exchequer in the form of providing additional resources by way of revenue foregone were we to continue with the 9% rate over a longer period. That is why I have acknowledged there is a cost of €300 million associated with the extension to the end of August. We will have a Finance Bill in the coming weeks, so the mechanics of it will be the subject of a discussion through the normal legislative process. However, it is my intention and the Government decision that the rate will return to 13.5% on 1 September.
Economic Data
Bernard Durkan
Ceist:75. Deputy Bernard J. Durkan asked the Minister for Finance if he will indicate this country’s total debt as a percentage of GDP, GNP and GNI; and if he will make a statement on the matter. [11302/23]
This question relates to the extent of our national debt and how it impacts on our GNP, GDP, GNI or whatever, how that presents us and how accurate the measurements are.
At the time of budget 2023, my Department forecast the total level of public debt at the end of 2022 to be €226 billion. This is a level equal to 45% of GDP, 60% of GNP or 86% of GNI*. Gross national income, or GNI* as we call it, is considered the most reliable measure of economic activity in Ireland as it removes globalisation activity and thereby provides a better measure of the domestic economy. The estimate of €226 billion is approximately €23 billion higher than levels at the end of 2019. This reflects the significant fiscal supports needed throughout the Covid-19 pandemic.
At over €44,000 for every person in the country, Ireland has one the highest per capita debt burdens in the world. The Annual Report on Public Debt in Ireland 2022, which was published last month, provides an analysis of current debt developments in Ireland and explores the sustainability of Ireland’s debt in the context of the current macroeconomic environment. An important consideration, when assessing the sustainability of public debt, is the underlying structure of the debt and the State’s ability to make interest payments. This report shows the structure of Irish public debt insulates the public finances in the short term, given that the majority of debt is locked in at fixed rates and with relatively long maturities. Despite this, the recent rapid increase in inflation across advanced economies, as well as the associated shift in policy interest rates, highlights once again how quickly economic conditions can change. From a public finances perspective, the shift in the interest rate environment will have tangible implications into the future, and the refinancing of existing debt over the medium term will lead to increased debt servicing costs.
Additionally, Ireland’s narrow tax base, and in particular the overreliance on corporation tax receipts as a source of revenue, is a significant vulnerability. A shock to corporation tax receipts, or the income taxes that are associated with the multinational sector activity that generates these corporate revenue streams, could result in a very large deficit. Furthermore, the public finances remain exposed to an intensification of the inflationary impact of the war in Ukraine, as well as any fallout from the ICT sector shock. Looking further ahead, long-term structural changes such as the fiscal impact of shifting demographics and climate change also pose significant challenges for the public finances.
I thank the Minister for his detailed reply. I ask by way of a supplementary the extent to which Ireland is fairly treated in the international arena by the measurements to which the Minister referred, namely, GDP, GNP and GNI. Do these measurements serve the best purpose from the point of view of the projection of Ireland's image abroad in the financial services sector?
I thank the Deputy. As part of the European fiscal architecture, the Stability and Growth Pact is expressed in terms of GDP. That is not our preferred measure for Ireland for the reasons we have put on record on many occasions. That is why we now publish the GNI* measure regularly and why we express the national debt as a percentage of GNI*. This gives us a figure of 86%. I should put on record that debt servicing costs are a key ingredient in overall debt sustainability. Debt servicing costs last year were less than €4 billion. The average maturity of our debt is about ten to 11 years and the National Treasury Management Agency, NTMA, has done an excellent job in recent years in removing those refinancing chimneys. While interest rates are now increasing for governments, including us, we are satisfied we are in a good funding position overall.
I again thank the Minister. By way of a final supplementary, is the Minister satisfied Ireland's interests are best served, notwithstanding the comments made by some well-known commentators to the effect that questions are being raised about the manner in which we measure our economic performance that suggest there is a doubt? I do not believe there is. We have accurately reflected what needs to be reflected at this particular time. This is especially so in view of the fact we are an open economy in a highly competitive arena and every measure must be used to serve the country to the best possible ends.
This must continue because we have a debt and it will remain with us for some time.
We have been very open and transparent about the limitations of GDP as a measure, as we see it, in respect of contract manufacturing, intellectual property, IP, flows and the role of aircraft leasing. That said, it is the official measure of economic activity in Europe and, indeed, across the developed world. We will, therefore, continue to provide this information, but we will also provide what we regard as a more meaningful measure of economic activity in Ireland by means of GNI* and we are happy, at any time, to explain and engage regarding the logic behind this measure. It is an Irish construct because of the nature of our economy, but it is one we will continue to publish because we believe it is a better, more accurate and fairer representation of the Irish economy.
I thank the Minister.
Questions Nos. 76 to 81, inclusive, taken with Written Answers.
Energy Policy
Colm Burke
Ceist:82. Deputy Colm Burke asked the Minister for Finance his views on the number of temporary business energy support scheme applications to date; the work being done to improve the scheme; and if he will make a statement on the matter. [9261/23]
Paul Kehoe
Ceist:84. Deputy Paul Kehoe asked the Minister for Finance his plans to improve the level of uptake of TBESS; and if he will make a statement on the matter. [11347/23]
Niamh Smyth
Ceist:87. Deputy Niamh Smyth asked the Minister for Finance his assessment of the operation of the temporary business energy support scheme to date; and if he will make a statement on the matter. [11379/23]
Regarding temporary business energy support scheme applications to date, I ask the Minister to outline the number submitted; the work being done to improve the scheme; and if he will make a statement on the matter.
I propose to take Questions Nos. 82, 84 and 87 together.
The TBESS was introduced to support qualifying businesses with increases in their electricity or natural gas costs over the winter months. TBESS is provided for in sections 100 to 102, inclusive, of the Finance Act 2022. The scheme is administered by the Revenue and initially provided support to qualifying businesses in respect of energy costs relating to the period from 1 September 2022 to 28 February 2023. The scheme operates by reference to bills for the metered supply of electricity and natural gas through electricity accounts or gas connections identified by a business’s own meter point reference number, MPRN, or gas point reference number, GPRN. It provides for a cash payment to qualifying businesses impacted by the unprecedented increase in energy costs resulting from the military aggression by Russia in Ukraine. The scheme is subject to state aid approval under the European Commission’s temporary crisis framework for state aid measures to support the economy following the aggression against Ukraine by Russia.
I have announced several significant enhancements to the scheme so that additional businesses can benefit from this vital support. The scheme was originally due to expire on 28 February 2023. While the Government confirmed its decision to extend the scheme to 31 May 2023, pending the introduction of necessary legislation to make this change, and to facilitate the continuation of the scheme in the meantime, I have exercised the power contained in section 100 of the Finance Act 2022 to extend the scheme to 30 April 2023. I will allow time for the Deputy to put any specific question, if he wishes to.
I ask Deputy Burke to take only ten to 15 seconds.
Has there been a percentage increase in the number of applications received?
We are seeing increases in the number of registrations and claims. The Revenue publishes statistical reports concerning TBESS weekly. These reports are available on the website. As of 1 March 2023, some 25,423 businesses had registered for the scheme and 23,833 claims had been approved, to the value of €51.65 million. Of course, the changes we announced two weeks ago will, I am certain, result in a significant increase in the number of businesses that will be eligible and in the amounts that can be successfully claimed under the scheme. I look forward to these changes coming into effect in the weeks ahead.
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Written Answers are published on the Oireachtas website.