Written Answers Nos. 20-34
20. Deputy Thomas P. Broughan asked the Minister for Finance the contingency planning that is taking place in the National Treasury Management Agency for Brexit; the future selling of bonds that is expected following a recent auction of €750 million in bonds maturing in 2030; and if he will make a statement on the matter. [33975/16]
Amharc ar fhreagraMy Department has continued to engage closely with the National Treasury Management Agency (NTMA) both in advance of and following the UK referendum on EU membership. My Department is involved in ongoing monitoring of developments as they arise and is part of the cross governmental approach on the consequences of the UK's vote to leave the EU led by the Department of an Taoiseach.
The NTMA and my Department are monitoring, on an ongoing basis, developments in the bond markets in the context of the UK referendum. In the period since the referendum, the NTMA has completed three separate bond auctions most recently just last week, on 3rd November. With the completion of last week's final bond auction of 2016, the NTMA has issued €8.25 billion nominal from its stated target range of €610 billion in the bond markets this year, at a weighted average yield of 0.82 per cent.
These debt issuances have occurred at a time when Irish Sovereign borrowing yields have remained at close to record lows of approximately 0.5% for 10 year Government bonds. These low yields are as a result of domestic factors, principally Ireland's improving debt dynamics and our continued commitment to prudent fiscal management, as well as international factors including the ECB's monetary policy measures. Importantly, the NTMA's debt issuances earlier in the year have allowed it to lock in longer maturities at low interest rates, which is positive for debt servicing costs and will be important when interest rates return to normal.
Ireland's fundamental debt dynamics are improving and debt servicing costs are declining. These improved fundamentals mean that Ireland has now regained its A-rating with all the major credit rating agencies, following Moody's upgrade earlier this year.
The Exchequer's funding position is strong due to the activities of the NTMA in 2016 and the fact that it has limited financing needs in the months ahead. Exchequer cash and other liquid short-term investment balances stood at €9 billion at end-October 2016.
My Department forecasts a 2017 Exchequer Borrowing Requirement (EBR) of €2.2 billon. The current outstanding balance on the 2017 maturing Government bond is €6.3 billion. That bond does not mature until October of next year. The NTMA have advised me that they will announce their funding plan, including a planned bond issuance range for 2017, next month.
21. Deputy Mick Wallace asked the Minister for Finance if he will consider suspending all activities of NAMA in view of the findings of the Comptroller and Auditor General Special Report 94 into NAMA's sale of Project Eagle and the Government-proposed commission of investigation into Project Eagle; and if he will make a statement on the matter. [34050/16]
Amharc ar fhreagraIn no way has the integrity of NAMA or the NAMA Board or the integrity of its decisions been brought into question, so I have no intention of directing NAMA to halt its activities. To do so would irreparably damage NAMA's positive contribution to our recovery and damage our reputation as a credible, open and transparent market. By extension, any such interference would be detrimental to the interests of Irish taxpayers.
Halting NAMA's activities would constitute the State taking direct control of NAMA and bring NAMA onto the State's balance sheet, increasing Government debt by over €3.5 billion at a time when Government policy is to reduce the State's debt. This would constitute a complete u-turn by the Irish sovereign in the eyes of the rating agencies, the sovereign bond market and broader investor community, potentially increasing the cost of government debt, damaging confidence in the recovery of our economy, negatively impacting all of us.
Such action also would raise serious competition concerns limiting the State's flexibility in recovering value from NAMA's remaining assets. Such action would also create significant challenges for NAMA in retaining staff and preserving a viable platform.
It is important to understand that NAMA's remaining deleveraging is required to eliminate the remaining €3.5bn government guaranteed senior debt, a contingent liability for the State. Halting NAMA's deleveraging would stall the funding of the 20,000 anticipated residential units and threaten the commercial development in the Dublin Docklands SDZ. It would also reduce or eliminate the €1.6 - €2.3bn ultimate surplus expected from NAMA if current market dynamics persist.
The Comptroller and Auditor General has raised issues regarding Project Eagle for further discussion. He has not raised any systemic concern about NAMA and its operations. The Comptroller and Auditor General has not called for a halt to NAMA's activities, which he no doubt would have, had he felt such action was warranted.
The Comptroller and Auditor General report is currently being examined by the Committee of Public Accounts. The Committee is the appropriate forum in which to consider this report.
The Government recognises that it has its own responsibilities in all matters of public concern to do with the functions of an important public body such as NAMA. As the Deputy is aware, the Taoiseach has indicated a willingness to establish a Commission of Investigation into matters of public concern that may require further investigation and the most appropriate nature and terms of reference of such an investigation. The Government's objective is to ensure all matters of public concern will be addressed in a speedy and effective manner.
24. Deputy John Curran asked the Minister for Finance if he will reconsider his decision not to allow second-hand houses to be included in the help-to-buy scheme; if he will reduce the upper property value to €400,000; and if he will make a statement on the matter. [34035/16]
Amharc ar fhreagraThe Help to Buy scheme is being introduced as one of the many actions to develop a fully functioning housing market that responds adequately to the needs of our citizens set out in 'Rebuilding Ireland - The Action Plan for Housing and Homelessness' which was launched last July.
One of the primary policy aims of the Help to Buy scheme is to help increase the supply of housing, by increasing first-time buyers' capacity to meet the requirements of the Central Bank's macro-prudential rules and thus placing more individuals in the position of being able to afford a new home. It is hoped that turning notional demand into real demand will generate the supply response by the market. With the assistance of the scheme, many first-time buyers who want to buy new starter homes would be in a better position to secure deposits and obtain approval for mortgages. In turn, this would mean that developers who may have been struggling to raise funding to build properties will be in a position to point to this increased real demand in their own negotiations with lenders, and therefore be in a position to build more new homes.
Extending the scheme to apply to second hand properties would have no impact on increasing the supply of new homes being built and thus could not contribute to increased supply. As a result, I will not reconsider allowing second hand properties to fall within the scope of the rebate.
In addition, when devising the scheme I was conscious that if a cap on the maximum house price was set at too low a level, then the scheme would be limited in terms of the cohort that it may be able to assist. Setting this cap at too low a level could also lead to individuals falsifying their property prices in order to qualify. Thus, I decided that I would set a higher cap so that first time buyers struggling with high property prices, especially those in Dublin where prices are highest, would not be excluded entirely from the scheme.
I brought forward an amendment to the proposed cap at Committee Stage yesterday. This reduces the valuation at which properties are no longer eligible for the scheme from €600,000 to €500,000. I have no plans to reduce this cap any further. The maximum rebate of income tax paid available under the scheme remains capped at 5 per cent of the price of the house up to €400,000, or a maximum available rebate of €20,000 per property.
25. Deputy Paul Murphy asked the Minister for Finance if he will conduct a review of the projected cost of the exemption from capital gains tax he granted to investments in commercial property where the property is held for seven years or more; and if he will make a statement on the matter. [34041/16]
Amharc ar fhreagraI am advised by Revenue that it is not possible to estimate with any degree of accuracy the impact of the capital gains tax relief granted in respect of land and buildings, including commercial property, introduced in Budget 2012 and extended in Budget 2014.
I am further advised by Revenue that, in view of the fact that the nature of the relief is time-related and requires a minimum ownership period of 7 years, which ownership period could not commence earlier than 7 December 2011, they will not be in a position to offer initial soundly-based costings until the returns for the tax year 2018 have been processed and that more detailed costings would follow on from the processing of tax returns for years 2019 onwards.
26. Deputy Darragh O'Brien asked the Minister for Finance the way in which his Department Brexit-proofed budget 2017; and if he will make a statement on the matter. [31841/16]
Amharc ar fhreagra55. Deputy Jackie Cahill asked the Minister for Finance the reason there was no practical or meaningful package presented in the budget to commence the defence of Irish business interests in view of the fact that as a country, Ireland does business worth €1.2 billion weekly with the UK; and if he will make a statement on the matter. [31809/16]
Amharc ar fhreagraI propose to take Questions Nos. 26 and 55 together.
The UK referendum on EU membership presents an important challenge for the Irish economy. The budget took Brexit into consideration in both its framing and its detail. In terms of framing, my Department incorporated the potential impact of Brexit into the macroeconomic forecasts for next year that underpinned Budget 2017. My Department also published an in-depth analysis of the sectors of the Irish economy and highlighted those with the greatest trade exposure to the UK.
In light of the findings of the Department of Finance's in-depth sector analysis a number of taxation measures were announced in the Budget, with a view to getting Ireland "Brexit ready". The detail of these sectoral measures are that they reduced Capital Gains Tax to help entrepreneurs bringing this relief more in line with that in operation in the UK. There was an extension and amendment of the Foreign Earnings Deduction to help Irish exporters to diversify their export and import markets as some sectors of the Irish economy are shown to be highly reliant on the UK as an export destination.
The Budget contained an extension of the Special Assignee Relief Programme to assist businesses to relocate key staff to Ireland to provide certainty for foreign direct investment in Ireland. Many sectors in Ireland that are exposed to the UK have a high percentage of small and Irish owned enterprises. The increase to the Earned Income Tax Credit for self-employed tax payers will aid these enterprises and encourage entrepreneurship. The Agri-food sector was identified in the Departments analyses as being particularly exposed to Brexit. The introduction of an income averaging "step-out" in the agriculture sector will help with the volatility Brexit may bring. In addition to this a €150 million loan fund will be provided jointly by the Strategic Banking Corporation of Ireland and EU exceptional adjustment aid to enable farmers to better manage their cash flow and reduce the cost of borrowing.
At a macroeconomic level Budget 2017 sought to build up Ireland's buffers to any fallout from Brexit. Accordingly the Government has decided to set a new domestic target of a debt to GDP ratio of 45 per cent to be reached by the mid-2020s, or thereafter, depending on economic growth. This will improve Ireland's ability to absorb a shock in addition to the rainy day fund announced in the Summer Economic Statement.
27. Deputy Thomas P. Broughan asked the Minister for Finance the likely impact of the revised 2015 GDP figures on Ireland's EU budget contribution in 2017; the likely net position in relation to EU funding at the end of 2017; and if he will make a statement on the matter. [33876/16]
Amharc ar fhreagraMember State contributions to the EU Budget are based upon a formula which includes Traditional Own Resources (customs duties), a VAT-based payment and a residual balancing component paid in accordance with each Member State's share of EU Gross National Income (GNI). On 12th July 2016, the CSO released updated National Income and Expenditure (NIE) Accounts for 2015 which included a very significant upward revision in Ireland's GNI for 2015. As mentioned above, GNI is an important input into the calculation of Ireland's EU Budget contributions, representing c.75% of our total contributions.
Our initial estimate for the impact of the CSO revision on our EU Budget contribution for 2017 was c. €280m when allowing for all factors. However, given the recent revisions to Irish GNI for 2017 announced at the time of Budget 2017, the final figure may be lower. The final impact of the contribution is dependent on a number of variables, including the size of the overall EU budget for 2017, GNI movements in other Member States and other EU budget operational developments.
As published in Budget 2017, we currently forecast that Ireland will make a contribution of €2,400m to the EU budget in 2017. Our final net position for the year will only be known in mid-2018 when the Commission publishes its financial report for 2017.
28. Deputy Richard Boyd Barrett asked the Minister for Finance the number of Irish special purpose vehicles, SPVs, registered with the Revenue Commissioners for tax purposes; the number of SPVs that operate in a tax-neutral fashion; and if he will make a statement on the matter. [34054/16]
Amharc ar fhreagraI am informed by Revenue that they understand that Irish SPVs is a reference to companies that have notified the Revenue Commissioners that they are qualifying companies for the purposes of section 110 of the Taxes Consolidation Act 1997 (section 110 TCA).
As of 31 October 2016, there are approximately 2,480 companies with live tax registrations who had supplied a notification to the Revenue Commissioners that they are a qualifying company for the purposes of section 110 TCA.
As the section 110 TCA regime was designed to provide tax neutrality, it can be assumed that the majority of companies using the regime achieve some measure of tax neutrality as far as corporation tax is concerned.
29. Deputy Thomas Byrne asked the Minister for Finance his plans to extend the statutory time limits for complaints to the Financial Services Ombudsman; and if he will make a statement on the matter. [34051/16]
Amharc ar fhreagraBy way of background, the Financial Services Ombudsman's Bureau was established under the Central Bank and Financial Services Authority of Ireland Act 2004. The legislation provides for an independent, impartial investigation and resolution of disputes between consumers and financial service providers.
In terms of time limits for complaints, the current legislation prohibits the Financial Services Ombudsman from examining any aspect of a complaint where the conduct being complained of occurred more than 6 years from receipt of the complaint in his Office.
As the Deputy may be aware, my Department has been progressing legislation to underpin the amalgamation of the Financial Service Ombudsman and the Pensions Ombudsman for some time now. The legislation will also include updated provisions in relation to the powers and functions of the Ombudsman.
Detailed Heads of Bill went to the Committee on Finance, Public Expenditure and Reform, and Taoiseach in early September 2016. The Heads provide that complaints in relation to long term financial services products and pension products may be made up to:
- six years from date of the conduct complained of, or
- three years from the date the complainant knew/ought to have known about the conduct.
There are also a number of Private Members Bills on the legislation governing the Financial Services Ombudsman and I note that there seems to be broad support for an extension of the time limits in principle.
Pre-legislative scrutiny on my Heads of Bill and a Sinn Féin Private Members Bill on the Ombudsman took place on the 27th October.
We are awaiting the report from the Committee of Finance, Public Expenditure and Reform, and Taoiseach.
The appropriate commencement date for particular provisions in the Heads of Bill such as the extension to the time limit for complaints to the Ombudsman is a complex matter to be considered further in the course of the legislative process. The appropriate commencement date will also need to be considered carefully in the course of the drafting of the Bill in close consultation with the Office of Parliamentary Counsel and Office of the Attorney General.
30. Deputy Thomas P. Broughan asked the Minister for Finance if he will report on his recent announcement on putting Ireland forward as a location for the European Banking Authority, EBA; the next steps to be taken to ensure that Ireland is chosen as host for the EBA; and if he will make a statement on the matter. [33976/16]
Amharc ar fhreagraThe Government has agreed to make a public declaration of interest in Ireland becoming the location for the offices of the European Banking Authority. The European Banking Authority is an important part of the European System of Financial Supervision that arose after the financial crisis. None of the micro- or macro-prudential supervision entities that are part of this system is based in Ireland and there are no senior executives from Ireland heading any of these organisations.
This was the first stage in letting the wider financial community know that Ireland wants to be considered as a host in the relocation process. This decision was taken due to the fact Ireland has a significant financial services sector, efficient transport links to other European capitals and the capacity to absorb the European Banking Authority's re-location to Ireland. Also our interest in hosting the European Banking Authority demonstrates the continued importance Ireland places in well regulated Financial Services and it has sent a signal to the global financial sector of the importance that Ireland places on the financial services sector.
Post the Government decision my officials will now engage with relevant stakeholders, to further progress the goal of relocating the European Banking Authority to Ireland post the completion of the negotiations between the EU and the United Kingdom. These meetings will include the European Banking Authority and European Commission in order to highlight the benefits of relocating the Authority to Ireland, such as the fact that Ireland would be a less disruptive relocation destination for the authority and its staff due to its close proximity to London, both geographically and culturally. These meetings will also aim to determine the needs of the European Banking Authority and its staff.
Finally, I would note that the process for relocating the European Banking Authority will be not be quick as it will be linked to the triggering of Article 50 by the UK and subsequent negotiations between it and the European Union.
32. Deputy Michael McGrath asked the Minister for Finance the status of the State's preparations for the submission of an appeal to the European courts against a European Commission ruling (details supplied); the date by which the appeal must be submitted; and if he will make a statement on the matter. [33878/16]
Amharc ar fhreagraThe Government disagrees profoundly with the Commission's analysis in the Apple State Aid case, and our intention to appeal is very well known.
To this end, I have been authorised by the Government to arrange for annulment proceedings to be brought before the General Court of the European Union in the Apple State case. The Attorney General has been preparing the legal grounds in support of those proceedings and our application will be lodged in the General Court of the European Union this week.
The appeal process may take several years. Apple has also indicated that it will exercise its right of appeal.
As this topic is the subject of open legal proceedings it is not possible to comment further on the State's legal case at this time.
33. Deputy Michael McGrath asked the Minister for Finance the status of the flood insurance models considered by his Department; the preferred option; the timeframe for its implementation; and if he will make a statement on the matter. [33879/16]
Amharc ar fhreagraMy Department has carried out a review of policy in relation to flooding insurance, which I approved and was submitted for inclusion in the wider report of the Interdepartmental Flood Policy Co-ordination Group chaired by Minister of State Canney. This wider report was agreed by Government and published on the Office of Public Works website this week.
In the review, my Department examined a number of other jurisdictions and concluded that policy surrounding the availability of flood insurance falls, broadly, into three categories:
(i) Insurance Pool with State Indemnification: Such an arrangement would be financed by an agreed percentage of premiums on all policyholders. This option would lead to additional levies being imposed on household insurance policies at a time of increasing insurance costs, and could potentially lead to a considerable financial exposure to the State in the form of a State backstop.
(ii) Compulsory flood insurance: The conclusion was that this model would have a limited impact on the availability of flood insurance unless pricing could be controlled. However, the State and the regulator are expressly prohibited in EU law (Solvency II) from any attempt to limit the industry in terms of pricing. This option also carried the risk of some insurance undertakings leaving the Irish market.
(iii) Private Sector provision of flood insurance which is the current approach with targeted State compensation after flood events: The recommendation of this option is based on clear evidence that this strategy is working as demonstrated by an incremental increase in the provision of flood insurance in areas protected by flood defences. When compared with the other two options, it remains the best approach in terms of its responsiveness and effectiveness. My Department's report recommended that the current approach be enhanced by strengthening the arrangements for data sharing between OPW and Insurance Ireland, as well as obtaining additional levels of data on the availability of flood insurance through detailed surveys. The strengthening of the interaction between Insurance Ireland and the OPW has already commenced as demonstrated by the commitment by Insurance Ireland in July 2016 to assess the risk from the use of demountable flood defences as well as an agreement to hold quarterly meetings.
34. Deputy Paul Murphy asked the Minister for Finance his views on the comments by the chair of the Irish Fiscal Advisory Council (details supplied) on compliance with EU fiscal rules; his views on whether the EU fiscal rules are therefore overly restrictive; and if he will make a statement on the matter. [30839/16]
Amharc ar fhreagraIn his comments on Morning Ireland after the Budget, Professor McHale pointed out that my Department is now forecasting a structural improvement for 2016 of 0.3% of GDP against the required improvement of 0.6% under the balanced budget rule. For 2017, he switched to the other rule, the expenditure benchmark, and pointed out that my Department is forecasting that expenditure will exceed the permitted level of expenditure by about €200 million. He also pointed out that these breaches are not large enough to bring fines.
Taking each of these in turn, I and my Department have frequently highlighed that the harmonised methodolgy used to calculate the structural balance is not suitable for a small open economy. In Budget 2016, the forecast nominal general government deficit was about €2.8 billion. The forecast for 2016 in Budget 2017 is for a deficit of €2.4 billion. Although the forecast structural deficit also changed down from 2.5% of GDP to 1.9%, the improvement was reduced to 0.3 per cent from 0.8 per cent because the forecast outturn for 2015 of minus 3.2% turned into an outturn of 2.2% of GDP. This is one reason why our fiscal planning looks to the expenditure benchmark in the first instance.
The €200 million excess over permitted expenditure under the benchmark in 2017 is due to the projected increase in our EU Budget contribution arising from the large revision in our GDP. As this is a factor beyond our control, the Government has decided not to alter its fiscal plans to cope with a one-off level shift in our EU contribution. It should be noted that the European Commission applies an overall assessment encompassing performance against both rules when assessing compliance. Accordingly, we expect that the European Commission will find that Ireland is broadly compliant with its obligation - indeed, I would point out that Ireland is one of the countries that the European Commission has not written to seeking clarification or changes.
I do not agree that the fiscal rules are overly restrictive. They are designed to promote budgetary discipline and underpin sustainable economic growth. Given our comparably high debt level and the fact that we are a small and very open economy in a world that has more risks than usual, it makes sense to get to a balanced budget in structural terms as planned in 2018. By reducing our debt to much lower levels, we will increase our capacity to withstand shocks by building our capacity to borrow. The fiscal rules underpin and facilitate achieving this objective.
