Dáil Éireann Debate, Wednesday - 18 April 2012
4Deputy Michael McGrath asked the Minister for Finance in the context of recent comments by the IMF on the publication of its latest World economic outlook, if he is satisfied with the proposed personal insolvency arrangements in respect of secured debt, in particular residential mortgages, as set out in the published scheme of the Personal Insolvency Bill; and if he will make a statement on the matter. [19414/12]
Amharc ar fhreagraThe recent IMF World Economic Outlook report, and its chapter on household debt, is a useful contribution to the range of measures being considered to address the global economic situation. However, it should be noted that the examples examined in the report in the chapter dealing with household debt related to particular countries and times, and that some of the debt restructuring examples investigated were more successful than others. Therefore, the particular circumstances of each individual case was a relevant factor in the outcome of the action. While one should seek to learn from previous examples, it is also important to exercise caution in drawing general conclusions from the report and applying them to the current Irish economic position. Indeed, in their public comments on the report, the IMF staff indicated that they were not stating that such a blanket approach should be taken in the case of Ireland and, indeed, indicated that, in cases of constrained fiscal space, which unfortunately is the position Ireland currently faces, a targeted case-by-case debt restructuring approach may be the most appropriate approach. This case-by-case approach is consistent with the recommendations of the Keane report on which the Government approach to address this problem is broadly based. The current funding situation of the Irish fiscal and banking sectors are also relevant factors to be borne in mind.
On the issue of bankruptcy reform, as the Deputy will be aware, the Minister for Justice and Equality, and Defence, has developed a detailed general scheme of a personal insolvency Bill, which was published for public consultation earlier this year. A significant number of submissions were received in response and these, along with the detailed report by the Oireachtas Joint Committee on Justice, Defence and Equality on its hearings on the scheme, will be taken into account by the relevant Departments and the Office of the Attorney General in the finalisation of the Bill. Ireland is maintaining close contact with the IMF and the other troika authorities in the development of its personal insolvency reform proposals and also on the wider approach to tackle mortgage arrears problems and will take full account of their views in the further development and implementation of these proposals.
The main legislative response of Government to the crisis of personal indebtedness and mortgage arrears is the personal insolvency Bill, the heads of which were published in January, and it has since been considered by the Oireachtas Joint Committee on Justice, Defence and Equality. I want to focus on one of the three instruments in that Bill, the instrument dealing with secured debt such as mortgages, that is, the personal solvency arrangements. The Minister co-sponsored this Bill with the Minister for Justice and Equality, Deputy Shatter, and I want to ask him how it will work in practice and what he sees as the benefits of this arrangement for distressed mortgage holders. For those who are in mortgage arrears whose income is not sufficient to meet their obligations, can the provisions of this Bill result in a reduction of the mortgage debt as a result of a personal insolvency arrangement? Can the Minister outline what the benefits of such an arrangement could be for distressed mortgage holders?
The Bill is being drafted. It is never the practice in this House to discuss detailed measures in a Bill which has not yet been published. We will get to that at Committee Stage.
I am sure the Minister agrees with the comments of the Taoiseach and Tánaiste in recent weeks that there is a frustration, which they themselves share, about the lack of progress and the lack of urgency in dealing with the mortgage arrears crisis. The Government has held up this Bill as being the centrepiece of its response. The Government accepted, at Second Stage, a Fianna Fáil Bill in October last which would have set up a non-judicial debt settlement system. They are not proposing to set up their own one and one of the key elements of that is a personal insolvency arrangement which will deal with secured debt. There are thousands of mortgage holders out there who are asking the simple question of what potential benefits can such an arrangement in general terms bring for those who are experiencing genuine mortgage distress.
We want provision in law, as was explained by the Minister, Deputy Shatter, and myself when we launched the heads of the Bill, that is not a full bankruptcy hearing to drive mortgage holders into a bankruptcy position where bankruptcy legislation was never intended to deal with the problems of somebody with an impaired mortgage. We have also decided that it is insufficient from a policy point of view to leave case-by-case arrangements with the lending authorities to the discretion of lending authorities without the force of law underpinning it. The proposal to which Deputy Michael McGrath refers is to give judicial recourse, short of full bankruptcy proceedings but also well in advance of voluntary arrangements, and that is the space we are trying to fill. The legislation in that respect is being drafted in accordance with the head that is published.
