Written Answers Nos. 79-91
81. Deputy Pearse Doherty asked the Minister for Finance if he will seek an exemption from the fiscal rules in the context of the economic impact of Brexit; and if he will make a statement on the matter. [16434/17]
Amharc ar fhreagraAs the Deputy is aware, the fiscal rules to which Ireland is subject have direct application through a number of EU regulations. Changes to these regulations would have to follow the normal EU approach starting with a proposal from the Commission before consideration by Member States and the European Parliament.
The issue of facilitating greater flexibility in the application of the fiscal rules has received significant focus at European level and framed discussions on the establishment of the structural and investment clauses, which were codified by the Commission in November 2015. Specifically these provisions allow for temporary deviations from the required structural budgetary adjustment, subject to strict conditions.
The harmonised methodology for calculating the economic cycle used in the implementation of the SGP remains an area with limitations within the fiscal rules. My Department has secured useful changes to this methodology over the years by consistently raising concerns and objections at European level. These changes have partially compensated for the reality that the harmonised methodology is not suitable for small open economies. My Department continues to advocate for improvements in the harmonised methodology and will continue to engage constructively on this and other relevant technical issues.
The fiscal rules are designed to promote budgetary discipline and underpin sustainable economic growth. While Ireland's economy is growing and debt is on a downward trajectory, the debt level is still comparably high and caution must be exercised due to the potential of rollover risk should interest rates increase. We are a small and very open economy in a world that has more risks than usual. Compliance with the fiscal rules underpins the Government's objective of maintaining sound public finances.
In addition, I announced, in Budget 2017, a lower debt target of 45 per cent of GDP that should be achieved in the mid-to-late 2020s. This will help to provide an additional fiscal 'shock absorber' capacity to the public finances to help deal with shocks to the economy, including the impact of Brexit. This will complement the contingency or 'rainy day' fund to be established following the achievement of a balanced budget in 2018 which will help provide a further counter-cyclical buffer.
82. Deputy Bernard J. Durkan asked the Minister for Finance if he will engage with the Central Bank with a view to the introduction of a statutory code of conduct to be operated by lenders and borrowers to give particular recognition to the status of those borrowers that have continued to the best of their ability to make payments in respect of family home mortgages, with a view to minimising the extent of family home repossessions while avoiding moral hazard but reducing the incidents of homelessness arising from the current policies as pursued by some lenders including unregulated third parties; and if he will make a statement on the matter. [16428/17]
Amharc ar fhreagraThe Deputy will be aware that the Code of Conduct on Mortgage Arrears (CCMA) sets out statutory requirements for mortgage lenders and credit servicing firms dealing with borrowers in or facing arrears on the mortgage loan secured by their primary residence. Lenders may only commence legal proceedings for repossession of the borrower's primary residence after it follows a number of steps, including making every reasonable effort under the CCMA to agree an alternative restructure arrangement (ARA) with the borrower.
The CCMA recognises that it is in the interests of borrowers and lenders to address financial difficulties as speedily, effectively and sympathetically as circumstances allow. The Central Bank has the power to administer sanctions for a contravention of the CCMA under Part IIIC of the Central Bank Act 1942.
Last year I wrote to the Governor of the Central Bank to request that an assessment be undertaken of the range of available sustainable restructure solutions offered by banks and non-bank entities. The Central Bank completed its assessment and its report is published on the Department of Finance website. The assessment finds a comprehensive range of available restructuring solutions being offered and delivered by both bank and non-bank entities and notes considerable progress in addressing mortgage arrears since the peak.
The Deputy will also be aware of many other Government initiatives aimed at resolving the mortgage arrears issue, including:
- personal insolvency legislation and the Court review of personal insolvency arrangements (PIAs), which include the primary dwelling, that have been rejected by a majority of creditors;
- overhaul of bankruptcy rules;
- establishment of a mortgage-to-rent scheme;
- making available to indebted borrowers free access to professional advice about mortgage resolution options the Abhaile Scheme.
Finally Mortgage Arrears and Restructures Data released by the Central Bank on 16 March showed that to end-Q4 2016, the number of Principal Dwelling House (PDH) mortgage accounts in arrears has declined for the past fourteen quarters. Almost 121,000 PDH accounts were also classified as restructured, of which 87% were reported to be meeting the terms of their arrangement.
83. Deputy Micheál Martin asked the Minister for Finance if he has discussed at a recent European Council meeting or at any bilateral he attended concerns that Ireland has regarding creeping regulatory arbitrage by other EU countries in trying to win business from the financial services in the City of London; the actions being taken in order to attract jobs from there; and his views on present infrastructure. [15139/17]
Amharc ar fhreagraAt the outset, I would like to state that I have not discussed regulatory arbitrage at any meeting that I have attended and the topic has not been on the agenda of any meeting of EU Finance Ministers. I also understand from the Department of the Taoiseach that regulatory arbitrage has not been discussed at the European Council, nor has it been on the agenda of any of the Taoiseach's bilaterals with fellow EU leaders.
In his role as Minister of State for Financial Services, my colleague Eoghan Murphy monitors developments as they impact on the international financial services (IFS) sector. Arising from this role, a range of IFS-related issues were discussed in a meeting with Commission Vice President Dombrovskis, including ensuring that there is consistency across EU Member States in the application of European and Member State regulatory standards for financial services. Minister of State Murphy raised these issues with the Vice President in the overall context of potential stability risk to the European financial system. I understand that it was also mentioned that there were concerns about an apparent impression about some Member States applying less than full regulations to financial services activities that were considering relocating from London. It has to be clarified that these were concerns rather than "complaints" per se and they echo the sentiments of some other Member States. In fact, the Chairpersons of the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) also voiced similar sentiments recently.
In general terms, the Government will continue, through IDA Ireland, to promote the attractiveness of Ireland as a location of choice for financial service firms that are considering moving out of London or those firms not currently based in Europe that are considering a move into the EU after a UK Brexit. Both Enterprise Ireland and IDA Ireland are in close contact with their clients on the challenges and opportunities that Brexit presents. We will, for example, continue to implement our clear strategy for driving growth in the financial services sector and we will maximise any opportunities that might arise.
Ireland has a successful track record of competing for, and winning, global foreign direct investment. One of the key pillars of that success is the growth of the International Financial Services Sector, in particular over the past 30 years. The continued successful development of the financial services sector in Ireland is a priority for the Government.
In March of 2015, the Government launched the lFS2020 Strategy, a whole-of-Government approach to further driving the growth and development of the IFS sector in Ireland. The IFS2020 Strategy represents a clear and coherent plan for driving further growth in the IFS sector. The Strategy, led by a specifically appointed Minister of State for Financial Services is supported by all relevant public and private sector stakeholders.
In terms of the vision underpinning the Strategy, we want Ireland to be recognised as a global location of choice for specialised international financial services, building on our strengths in talent, technology, innovation and excellent client service while also focusing on capturing on new opportunities in a changing market and embracing the highest forms of governance.
The IFS2020 Strategy combines long-term strategic thinking with the flexible tools to react to any domestic and international developments occurring over the period, including Brexit. The Strategy, through a series of annual Action Plans over its life, provides a clear framework to maximise any opportunities that might arise from Brexit. The annual Action Plans enable a tailored response to deal with these challenges and opportunities as they arise. The IFS2020 Action Plan for 2017 was developed in close consultation with all IFS stakeholders. It was launched at the European Financial Forum in Dublin Castle in January of 2017 by Minister of State Murphy. The 2017 Action Plan places a strong focus on Brexit and it underpins the Action Plan for 2017 while also featuring within the suite of 40 individual measures to be actioned in 2017.
Since the UK EU referendum of last June, Minister of State Murphy has undertaken a significant number of visits overseas to promote Ireland as a destination of choice for financial services investment. Opportunities in the IFS sector in Ireland were also strongly reflected in the key messages from all Government Ministers during the Saint Patrick's Day overseas programme of engagements and these will be followed-up in due course by IDA Ireland and Enterprise Ireland.
An IFS2020 Communications sub-group consisting of relevant Government Departments and State Agencies has been established to develop and promote messaging on Ireland as a location for financial services. This Communications sub-group continues to work both with private and public stakeholders to ensure that there is consistent messaging on Ireland's IFS offering.
In regard to infrastructure capacity, there is a strong pipeline of commercial property solutions coming to the market in Dublin. There is currently about 3.5 million square foot of commercial office stock under construction with about a further 1 million square foot under refurbishment. There is approximately a further 5 million square foot of commercial office space with full planning permission for future developments within the greater Dublin area, along with competitive property solutions coming on stream throughout the regions.
The Government's Housing Strategy aims to boost housing supply by at least 25,000 per annum by 2020. NAMA has become an active funder of the housing market and plans to build more than 20,000 new homes. The Strategy also includes an investment of €200 million to support the development of large sites and measures to speed up the planning process for larger developments.
We have good air connections with the rest of the world especially Europe and, of course, the very large number of flights to and from London and the wider UK. Specifically, Dublin Airport offers direct flights to almost all of the major North American financial centres in addition to flights to Abu Dhabi, Dubai, Istanbul and (from this year) Doha with extensive onward connections to Asia. Shannon airport offers direct flights year round to Boston and New York (JFK and Newark).
International schooling is available in Ireland. This international schooling includes international Baccalaureate education. One of the measures in the 2017 Action Plan is that relevant Departments and agencies will continue to monitor the provision of international schooling in Ireland.
86. Deputy Joan Burton asked the Minister for Finance his views as to whether recent comments by the chair of the eurozone finance Ministers, Jeroen Dijsselbloem, that certain eurozone member states spent their money on liquor and women were a reference to countries such as Ireland that were in a troika bailout programme; if so, if he contested these comments; and if he will make a statement on the matter. [16373/17]
Amharc ar fhreagraIn an interview with Germany's Frankfurter Allgemeine Zeitung on March 20th 2017, Mr Dijsselbloem, President of the Eurogroup, was cited as saying "that wealthier northern European countries had showed solidarity with the south during the euro zone crisis by giving them financial aid. But whoever demands it, also has obligations. I can't spend all my money on liquor and women and then ask you for your support. This principle holds at personal ... and even European levels."
The Dutch Finance Minister did not mention any European Member States specifically; however, his comments to Germany's Frankfurter Allgemeine Zeitung have been negatively interpreted in some quarters.
I understand that a spokesperson for Mr Dijsselbloem said on Wednesday (21 March 2017) that he was not referring to any country or group of countries and that "His message is meant for all eurozone countries. Solidarity comes with obligations." Mr Dijsselbloem has since expressed regret that his remarks have caused offence.
It is my view that the comments attributed to Mr Dijsselbloem, and their subsequent interpretation, are matters for Mr Dijsselbloem to address. I have no further comment to make on the matter.
89. Deputy Michael McGrath asked the Minister for Finance the status of the implementation of the motor insurance compensation framework announced by his Department in July 2016. [16415/17]
Amharc ar fhreagraThe Report of the Review of the Framework for Motor Insurance Compensation in Ireland was published on 22 July 2016. This review was carried out jointly by the Department of Finance and the Department of Transport, Tourism and Sport and was approved by Government on 19 July 2016. The Report sets out an assessment of the current framework and makes recommendations to provide certainty regarding the future regime.
The key recommendations contained in the report are:
- That coverage of the Insurance Compensation Fund will be extended to include third party motor insurance claims in the event of a liquidation of an insurer.
- The level of cover from the Insurance Compensation Fund for third party motor insurance claims will be increased from 65% to 100% in line with that currently provided by the Motor Insurers' Bureau of Ireland.
- The increased coverage of the Insurance Compensation Fund will be funded by a direct contribution to the Insurance Compensation Fund from the motor insurance industry via the Motor Insurers' Bureau of Ireland, to the value of 35% of the third party motor insurance claims.
Work is underway on the implementation of the report's recommendations, including the drafting of amendments to the Insurance Acts. As part of this process my Department has consulted with the relevant stakeholders. In particular there have been discussions with industry about options for alternative funding arrangements which would provide greater predictability about their financial exposure.
It is expected that a legislative proposal will be brought to Government for approval in the coming months.
90. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied regarding the ongoing progress of economic recovery; if he has identified particular issues requiring further attention; if he has satisfied himself that the economy remains well placed to maximise its potential, including job creation in the future; and if he will make a statement on the matter. [16427/17]
Amharc ar fhreagraIn general, recent indicators have been very positive, indicating that the economic recovery is continuing at a robust pace. The preliminary estimate for full-year GDP growth in 2016 is 5.2 per cent based on National Accounts data for the fourth quarter of the year.
Importantly, domestic demand made a strong positive contribution to growth in 2016 with consumption increasing by 3.0 per cent in 2016. This is crucial as domestic sectors are both jobs-rich and tax-rich. What's more, the exporting sector appears to be holding up reasonably well despite the weakness in sterling.
The economic recovery is perhaps most clearly evident in the labour market where we have now had seventeen successive quarters of employment growth. Employment in the fourth quarter of 2016 increased by 3.3 per cent year-on-year, equivalent to 65,100 new jobs. The number of people in employment has exceeded the 2 million mark since Q2 2016 and is now at its highest level since Q4 2008. Encouragingly, the seasonally adjusted unemployment rate fell to 6.6 per cent in February, down from a peak of over 15 per cent in 2012.
However, there are several sources of uncertainty which could negatively impact on the economic outlook. In particular, the UK's decision to leave the EU has added to concerns about the international outlook while the change in policy direction by the new US administration has also added to concerns about the international economy. Weaker than expected trading partner growth would negatively impact on Irish growth through reduced exports.
This uncertainty highlights the importance of prudent management of the public finances and of competitiveness-oriented policies that would help the Irish economy to weather any global economic downturn that may emerge.
In summary, I am confident that significant economic progress can be made in the years ahead. However, this is critically contingent upon implementing appropriate polices and that is what the Government intends to do.
91. Deputy Pearse Doherty asked the Minister for Finance if he will commission an independent value-for-money review of NAMA's sales processes to date and, pending its report, direct that all NAMA sales be suspended; and if he will make a statement on the matter. [16433/17]
Amharc ar fhreagraI do not propose to commission the review suggested by the Deputy. NAMA is already subject to a substantial level of scrutiny from the Oireachtas and to audit by the Comptroller and Auditor General, including the C&AG's Section 226 review which I understand is currently underway.
Nor do I propose to take any action with regard to NAMA's future sales activity. As I pointed out during the debate on the PAC report into Project Eagle last week, there is a clear legal separation between the Minister for Finance and NAMA's commercial operations. I do not have the power to intervene in those operations. Section 9 of the NAMA Act provides that NAMA is independent in the performance of its functions. The NAMA legislation was deliberately crafted by the Oireachtas to ensure that NAMA could carry out its work without undue political interference and I, and indeed my predecessor, have always respected the intentions of the Oireachtas in that respect.
Clearly, from the outset, the Oireachtas took the view that political interference in NAMA's independent commercial activities was highly undesirable as such interference would compromise its ability to obtain the best achievable return for the State. NAMA was established to carry out a commercial mandate and it recruited the expertise that it needed to conduct its business in a professional manner.
The decision of the Oireachtas in 2009 to allow NAMA to carry out its functions in an independent manner has been vindicated by its strong performance since inception. It has made major progress in eliminating Irish taxpayers' contingent liability of €30 billion which arose from the senior debt issued in order to acquire bank loan portfolios. As of today, 95% of that senior debt has been redeemed and NAMA has indicated that it expects that all of it to be redeemed by the end of 2017. NAMA also expects to redeem its subordinated debt by March 2020 and to produce a surplus currently estimated at €2.3 billion by the time it completes its work.
NAMA has also made a major contribution in driving the development of commercial and residential accommodation in the Dublin Docklands SDZ. This will attract foreign direct investment into Ireland and will create a substantial number of jobs.
NAMA has made a significant contribution to social and economic development in other respects also and in particular in the area of social housing where it has worked closely with its debtors and receivers, with the Housing Agency, with local authorities and with Approved Housing Bodies to maximise the delivery of social housing. It also established NARPs as an innovative model to expedite social housing delivery. NARPS has significantly reduced the up-front capital costs for local authorities in the delivery to date of over 2,370 residential units for social housing.
NAMA also played a key role in the resolution of unfinished housing estates within the State. In 2010 NAMA had exposure to 332 unfinished housing estates. That has now reduced to 11 unfinished estates at this stage and they are expected to be resolved by end-2017.
I would also point out that NAMA is seeking to facilitate and fund the delivery of 20,000 homes over the period from 2016 to 2020, subject to commercial viability. Since 2014, NAMA funding has facilitated the delivery of 4,700 units by its debtors and receivers.
I have stated consistently that I support the work of NAMA and I have full confidence that the Board and management of NAMA are achieving their commercial mandate in accordance with the NAMA Act.
