Thursday, 10 Nov 2016

Written Answers Nos. 1-19

Brexit Issues

Ceisteanna (12, 31)

Brendan Smith

Ceist:

12. Deputy Brendan Smith asked the Minister for Finance the measures he proposes to implement to assist the retail sector to retain business on account of the potential loss of trade to Northern Ireland due to the reduction in the value of sterling; if his attention has been drawn to the widespread concerns of the retail sector, particularly in the Border region; if he has had any recent discussions with that sector; and if he will make a statement on the matter. [34048/16]

Brendan Smith

Ceist:

31. Deputy Brendan Smith asked the Minister for Finance the measures he proposes to implement to assist the retail sector due to the potential loss of trade following reduction in the value of sterling and the uncertainty that has arisen for business and commerce, particularly in the Border region; and if he will make a statement on the matter. [34052/16]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 12 and 31 together.

I am aware of the impact of recent exchange rate developments on the retail sector, particularly in the border region.

Since the UK's vote on the 23rd June the euro has appreciated by over 15 per cent against sterling.  This will pose significant challenges for our economy, particularly for Irish exports to the UK and also for areas and sectors sensitive to cross border trade.

From a macroeconomic perspective, the best way to deal with such a shock is to enhance the stability of the economy. That is what this Government is doing through prudent management of the public finances.

At a more micro-economic level Budget 2017 contains several measures designed to ensure that firms in Ireland - especially those in the SME sector - are prepared for a potentially more difficult trading environment. This includes tailoring the wide range of State supports currently available such as:

- Low cost credit and increased credit supply from the Strategic Banking Corporation of Ireland;

- Funding for growth and efficiency from Enterprise Ireland;

- Financing from Microfinance Ireland for micro enterprises affected by the UK referendum.

Specific tax measures included:

- Retention of the reduced 9 per cent VAT rate for the hospitality sector - a measure sought by Retail Ireland in their pre-budget submission.

- Reduced Capital Gains Tax (CGT) to help entrepreneurs.

- Extension of the Foreign Earnings Deduction

- Extension of the Special Assignee Relief Programme

- An increase to the Earned Income Tax Credit for self-employed tax payers

- Introduction of an income averaging "step-out" in the agriculture sector

It is crucial to maintain competitiveness and in particular in those areas which we can influence. It is also important to stress that the recent depreciation of sterling is likely to increase UK consumer prices in the near term as increases in import prices give rise to additional inflationary pressures. This will mitigate some of the negative impact on the retail sector in Ireland from the depreciation in sterling.

Question No. 13 answered orally.

VAT Yield

Ceisteanna (14)

Robert Troy

Ceist:

14. Deputy Robert Troy asked the Minister for Finance if he will provide the VAT return figures on a monthly basis since the start of 2016; and his views on whether end of year targets will be met. [33987/16]

Freagraí scríofa

Minister for Finance

The latest forecast for 2016 VAT receipts are contained in Budget 2017 published last month. This projects that for this year VAT revenues will be €12.6 billion, which represents a 5.7 per cent or €690 million increase on the preceding year. This revised forecast is 1.8 per cent or €230 million below the original Budget 2016 projection. As an ad valorem tax, VAT returns have been affected by, amongst other factors, the current low inflation environment prevailing across the economy. This is reflected in the forecast personal consumption deflator for 2016.  In Budget 2017, it was projected that it would increase by 1.1% in 2016 as against an expected 1.8% increase in Budget 2016 when it was announced in October 2015.  

Turning to the overall VAT performance year to-date, the October Exchequer returns published last week show that cumulative receipts are up 4.7 per cent or about €475 million annually. This is 2.6 per cent or €290 million below the original Budget 2016 profile.

As I am sure the Deputy is aware, the bulk of VAT is paid up to two months in arrears, with the bulk of VAT payments arriving every second month in what are generally referred to as the "VAT-due" months. So, in September, the last "VAT-due" month, the receipts relate to the July August trading period.

Looking at the performance in the "VAT-due" months, €2.1 billion was received in January, €1.5 billion in March, €1.9 billion in May, €1.8 billion in July and €1.9 billion in September.

During the alternate 'off-peak 'months where receipts are lower, €300 million was received in February, €270 million in April, €190 million in June, €290 million in August and €320 million in October.

The Revenue Commissioners have indicated the revised 2016 VAT forecast of €12.6 billion contained in Budget 2017 is reasonable and is consistent with their view of the likely outturn for this year.

Banking Sector

Ceisteanna (15)

Joan Burton

Ceist:

15. Deputy Joan Burton asked the Minister for Finance the discussions his Department has had with the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs regarding the investigation of the establishment of a local public bank network here as committed to in the programme for Government; and if he will make a statement on the matter. [33939/16]

Freagraí scríofa

Minister for Finance

As the Deputy will be aware, the Programme for a Partnership Government contains a commitment to investigate the German Sparkassen model for the development of local public banks that operate regionally for which the Department of Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs (DAHRRG) has primary responsibility.

I understand that the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs have been in contact with relevant stakeholders and have now received details of a proposal on local public banking.  On the basis of this proposal the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs intends to work with other Departments and stakeholders to examine the feasibility of this matter.

My Department has communicated that it is available to provide assistance to the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs as it is required, in progressing the commitment in the Programme for a Partnership Government.  Officials from my Department will be available to support that Department's officials as they proceed with their work on this area.

Indeed, my Department has some experience in this work as previously in 2015, the Savings Banks Foundation for International Cooperation (SBFIC), with the support of the Public Banking Forum of Ireland, submitted a proposal to my Department regarding the development of a local public banking system in Ireland. The proposal was considered in detail. However, given the significant SME supports that had been put in place by the Government to support SME financing, including the Strategic Banking Corporation of Ireland's (SBCI), the Supporting SMEs Online Tool, the Credit Guarantee Scheme, the Microenterprise Loan Fund, Local Enterprise Offices and the Credit Review Office, it was not clear at that time how local public banks would avoid replicating these already available supports.

The success of these policies can be seen in increases in new lending from bank and non-bank sources, the number of new credit providers active in the market and the reduction in average interest rates for SMEs. In order for businesses to access these significant levels of credit, they should seek advice from the Enterprises Agencies on how to prepare and present a viable business plan.  My Department will continue to examine actions that increase the availability of credit to SMEs.

Credit Unions

Ceisteanna (16, 23, 42, 46)

Louise O'Reilly

Ceist:

16. Deputy Louise O'Reilly asked the Minister for Finance when the resolution report and affidavit on a credit union (details supplied) will be published; if it will be published in full; the actions he and his Department will take; and if he will make a statement on the matter. [33934/16]

Louise O'Reilly

Ceist:

23. Deputy Louise O'Reilly asked the Minister for Finance the meetings or engagement he or his Department has had with the ILCU in respect of arrangements that can be put in place to provide credit union services for the former members of a credit union (details supplied); and if he will make a statement on the matter. [33935/16]

Clare Daly

Ceist:

42. Deputy Clare Daly asked the Minister for Finance his views on plans to distribute the value of the assets held by a credit union (details supplied) to its members, in view of the fact that the statement issued by the Central Bank on 2 November 2016 made reference only to the return to members of deposits held with the credit union; and if he will make a statement on the matter. [34036/16]

Joan Burton

Ceist:

46. Deputy Joan Burton asked the Minister for Finance the implications for the credit union movement here of the decision by the Central Bank to seek the appointment of provisional liquidators to a credit union (details supplied); the discussions his Department has had with the Irish League of Credit Unions and Credit Union Development Association regarding this development; and if he will make a statement on the matter. [33938/16]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 16, 23, 42 and 46 together.

The decision to apply to the High Court to wind up Rush Credit Union Ltd was made by the Governor of the Central Bank. The legal grounds under which the Governor made this decision are set out in the Central Bank and Credit Institutions (Resolution) Act 2011.

I have been informed by the Central Bank that it made an application on 2 November 2016 to the High Court to have joint provisional liquidators appointed to Rush Credit Union Limited. Jim Luby and Tom Rogers of McStay Luby were appointed as joint provisional liquidators on that date by the President of the High Court, Mr Justice Peter Kelly. The full application will be heard on 21 November, when the Central Bank will seek the winding up of Rush Credit Union Ltd. The Central Bank took this action in order to ensure the protection of members' savings. The credit union will not re-open and all issues relating to the wind down of services will be managed by the Joint Provisional Liquidators.

The Central Bank has further informed me that its objective is to be as transparent as possible by providing information to reassure credit union members regarding the actions taken. For legal reasons, the Central Bank is constrained in terms of the specific details it can provide, pending the decision of the High Court on 21 November 2016.  The Central Bank will publish the Resolution Report and Affidavit (on a redacted basis) on its website following the full hearing for the winding up of Rush Credit Union Ltd in the High Court on 21 November 2016.

Following the appointment of the Joint Provisional Liquidators the Deposit Guarantee Scheme (DGS) has been invoked.  Members of Rush Credit Union Ltd will receive compensation in respect of their eligible deposits up to €100,000 per member. The DGS will make compensation payments as early as possible within the statutory deadline of 20 working days to duly verified depositors.

Rush Credit Union Ltd has been monitored by the Central Bank over a number of years and during that time the Central Bank investigated aspects of its business. The Central Bank is of the view that there are a number of reasons for the failure of Rush Credit Union Ltd which have manifested over an extended period of time. These include issues relating to governance, internal controls, lending practices and valuation of its premises. Despite assurances given by Rush Credit Union Ltd to the Central Bank, and the credit union having been provided with an opportunity to address the issues concerned, in the opinion of the Central Bank, they have not been adequately addressed. In applying for winding up, the Central Bank has also considered Rush Credit Union Ltd's recent financial performance and its constrained capacity to ameliorate its distressed financial position.  In the absence of taking the proposed action, the nature of the financial, governance and internal controls issues, could lead to a disorderly collapse of Rush Credit Union Ltd.

The registration and regulation of credit unions is the responsibility of the Registrar of Credit Unions within the Central Bank, who is the independent regulator for credit unions. The Central Bank is keen that credit union services are available to the people of Rush and Lusk. I share this view.  The Central Bank informs me that it is conscious that there is a demand for the services of a credit union in the local area and will examine what arrangements can be put in place to provide specific credit union services in the community in the future.  In some cases, members may currently be able to avail of services in another credit union in the area as the common bond may extend into their locality or through their place of work.

While the Central Bank is willing and prepared to take the necessary action to protect the savings of credit union members, it remains fully supportive of the credit union sector in Ireland and is committed to the continued development of a strong and sustainable sector that meets members' changing needs and protects their savings.

The Government recognises the important role of credit unions as a volunteer co-operative movement in this country. The Government's priorities remain the protection of members' savings, the financial stability of credit unions and the sector overall and it is determined to continue to support a strengthened and growing credit union movement.

Mortgage Book Sales

Ceisteanna (17)

Pearse Doherty

Ceist:

17. Deputy Pearse Doherty asked the Minister for Finance the plans of State backed banks to sell mortgage loan books to third parties; and if he will instruct these banks to only sell to regulated and reputable parties. [34030/16]

Freagraí scríofa

Minister for Finance

As the Deputy is aware, significant progress has been made across the Irish banking sector in reducing the level of non-performing loans (NPLs) since the financial crisis. This has been primarily achieved by customers engaging directly with their banks and agreeing a sustainable payment plan which allows the customer an achievable path out of arrears, as well as protecting the value of the loan for the bank. In many cases these agreements have included elements of debt restructuring and writedowns. This is the most equitable means of dealing with problem loans for both borrowers and lenders, and I would urge all those in arrears to engage constructively with their bank in order to reach an appropriate repayment arrangement. In the vast majority of cases this achieves the best outcome for all involved.

Despite the significant progress made, the levels of NPLs in the Irish banking sector remain elevated by European standards. Banks are under pressure to reduce these exposures, both from their regulator and the market.  Notwithstanding whether or not the State is a shareholder, it is the management and board of each institution that are tasked with developing and implementing a strategy to address this challenge.

In recent years banks have introduced multiple engagement channels to facilitate those customers who are reluctant to engage directly with them. Having exhausted these initiatives, if meaningful engagement is not forthcoming from particular customers the bank may be left with no option but to look at alternative solutions which could, as a last resort, include the sale of the loan.

As the Deputy will know, I as Minister for Finance have no role in the day-to-day management of the Irish banks. Notwithstanding that the State is a significant shareholder in a AIB, Bank of Ireland and Permanent TSB, these banks are run on an independent and commercial basis. Strategic decisions for these institutions, such as a decision to sell any asset or portfolio of assets, are the sole remit of the management and board of each bank.  The terms of my relationship as Minister for Finance with the banks in which the State is a shareholder fall under the Relationship Framework Agreements in place with each institution. These relationship framework agreements are available on the Department's website. 

The Central Bank in its role as regulator, oversees the conduct of all providers and servicers of mortgage products in the state. Legislation ensures that all mortgage holders are entitled to their full contractual and conduct rights, regardless of the owner of the loan. The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 was enacted in July 2015 and is designed to protect relevant borrowers whose loans are sold on to unregulated entities. The Act introduced a regulatory regime for a new type of entity called a 'credit servicing firm'. These are firms that manage or administer credit agreements such as mortgages or other loans on behalf of unregulated entities. Under the Act, purchasers of loan books must either be regulated by the Central Bank themselves or else the loans must be serviced by a credit servicing firm who is regulated by the Central Bank.

Under the  Consumer Protection Act 2015 relevant borrowers, whose loans are sold to third parties, maintain the same regulatory protections they had prior to the sale, including under the various statutory codes, such as the Consumer Protection Code, Code of Conduct on Mortgage Arrears, issued by the Central Bank.

Insurance Costs

Ceisteanna (18, 22)

Robert Troy

Ceist:

18. Deputy Robert Troy asked the Minister for Finance the measures he will introduce to address the spiralling cost of insurance; the timeframe for implementing same; and if he will make a statement on the matter. [33986/16]

Clare Daly

Ceist:

22. Deputy Clare Daly asked the Minister for Finance the status of the work of the Working Group on the Cost of Insurance; and the timeframe for action to be taken on the spiralling cost of insurance. [34037/16]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 18 and 22 together.

The Cost of Insurance Working Group, which I am chairing, is examining the factors contributing to the increasing cost of insurance. The Working Group brings together all the relevant Departments and Offices involved with the process.  Its objective is to identify immediate and longer term measures which can address increasing costs, while bearing in mind the need to maintain a stable insurance sector.  The initial focus of the Working Group is on rising motor insurance premiums.

The core areas to be examined by the Working Group in this first phase are:

- The motor insurance sector generally, at present and in recent years

- The effects of legal costs and litigation processes on insurance costs

- The current claims compensation arrangements and the cost of claims

- Insurance data and information

- The impact of accident rates

- The impact of unlawful activity on the insurance sector

The Cost of Insurance Working Group has met nine times to date and will continue to meet until the end of the year.

The work is being progressed through four subgroups.  The subgroups have been meeting on a weekly basis since their establishment on 1st September 2016.

The consultation process is ongoing by both the Working Group and the subgroups.  These stakeholders include: Insurance Ireland, individual insurance companies, the Irish Brokers Association, AA Ireland, the Consumers Association of Ireland, the Law Society, the Bar Council, Irish Road Haulage Association, the Car Rental Council, the National Transport Authority and Tiomanai Tacsai na hEireann.

At the end of October 2016, the Working Group provided the Minister for Finance with an initial set of emerging recommendations.  The Minister has considered these recommendations and I have discussed them with him.  Since then, the Working Group has been working to finalise the Report and developing an action plan to enable the relevant Government Departments and Offices to commence the implementation of agreed priority actions. The report and action plan will detail any legislative or regulatory changes that may be required and will include a detailed timeline for implementation.

From the emerging recommendations presented to the Minister for Finance and the consultations carried out since, it is likely that the report will address nine key areas, with in the region of 40 recommendations in total.

Tax Reliefs Data

Ceisteanna (19)

Richard Boyd Barrett

Ceist:

19. Deputy Richard Boyd Barrett asked the Minister for Finance the number of persons that have benefited from the special assignee relief programme for each of the years 2012 to 2015; the amount which was claimed for each year; the amount of tax foregone for each year; and if he will make a statement on the matter. [34053/16]

Freagraí scríofa

Minister for Finance

SARP is designed to help Ireland compete with other countries for foreign direct investment and as a result lead to additional job creation, which will be particularly important in the context of Brexit. The individuals at which the programme is aimed often have an input into the decision as to where the company will locate new projects. Such individuals could persuade companies to make their investments in competitor countries in the absence of this incentive. This relief complements our competitive corporate tax offering.

I am advised by Revenue that detailed reports regarding the Special Assignee Relief Programme (SARP) are published online by Revenue Commissioners in the statistical reports section of their website.  These reports provide information on the conditions, eligibility and the calculation of the relief. Furthermore, there are statistics covering both the uptake of the relief and the cost to the Exchequer from 2012 to 2014, the latest year for which figures are available.  As the self assessment tax returns for 2015 are only due to be submitted to Revenue about now, statistics for 2015 are not yet available but will be published in due course.

Take up of the scheme has increased year on year. The first year of the programme was 2012 and in that year 12 employees availed of SARP relief at a cost of €112,000. Employers reported that 6 jobs were created, and 6 retained as a result of the relief.

In 2013, 121 employees claimed SARP at a cost of €1.9 million, with employers reporting that 49 jobs were created and 215 jobs retained as a result of the relief.

The most recent report on SARP, in respect of the 2014 tax year, showed that 302 employees availed of it in that year.  Employers reported that 126 jobs were created and 708 retained as a result of the relief. The cost to the Exchequer of the scheme in 2014 was almost €6 million. 

If these jobs had not been created or retained then the Exchequer would have lost the associated income tax, USC and PRSI, as well as any additional economic activity, as a result of spending in the economy. I would also add that the impact of SARP should not be measured in terms of job creation alone as the measure acts to secure and embed investment, which delivers sustainable growth and strengthens Ireland's innovative capabilities. Accordingly, I propose to extend it to 2020 in the current Finance Bill.