Written Answers Nos. 37-61
37. Deputy Robert Troy asked the Minister for Finance if the circumstances in a primary medical certificate application by a person (details supplied) will be investigated; and if he will make a statement on the matter. [10887/18]
Amharc ar fhreagraAs stated in my response to the Deputy on 25 January 2018 (PQ 3851/18), I am advised by Revenue that the person concerned, who was a first time applicant, was deemed by them not to have qualified for the Disabled Drivers and Disabled Passengers Scheme and as such was not eligible to access the benefits of the scheme. I am further advised that Revenue informed the family member of the person who submitted the application of this fact.
The Department of Finance has no role in the assessment of applications for a Primary Medical Certificate, nor does it have any role in the assessment of applications under the Disabled Drivers and Disabled Passengers Scheme.
38. Deputy Michael McGrath asked the Minister for Finance the non-performing loan ratio on residential mortgages according to the latest statistics; the non-performing loan ratio on residential mortgages in each eurozone country; and if he will make a statement on the matter. [10889/18]
Amharc ar fhreagraI have been advised by the Central Bank of Ireland that the European Banking Authority (EBA) publishes data on a variety of measures including non-performing loans for 132 banks across 25 countries of the European Union (EU) and the European Economic Area (EEA). Table 1 "2017 EU-wide transparency exercise result" (attached) provides the non-performing loan ratio for households (which includes mortgage lending) across countries at Q2 2017 which are the latest statistics available.
|
Table 1 – Household NPL Ratio |
|
|
Country |
NPL Ratio |
|
Total |
4.2% |
|
Austria |
4.5% |
|
Belgium |
4.0% |
|
Bulgaria |
12.5% |
|
Cyprus |
54.6% |
|
Denmark |
2.2% |
|
Estonia |
1.0% |
|
Finland |
1.4% |
|
France |
3.9% |
|
Germany |
1.9% |
|
Greece |
47.3% |
|
Hungary |
15.6% |
|
Ireland |
14.2% |
|
Italy |
9.9% |
|
Latvia |
7.4% |
|
Luxembourg |
2.7% |
|
Malta |
3.9% |
|
Netherlands |
1.2% |
|
Norway |
0.4% |
|
Poland |
5.0% |
|
Portugal |
8.9% |
|
Romania |
4.9% |
|
Slovenia |
4.7% |
|
Spain |
4.5% |
|
Sweden |
0.7% |
|
United Kingdom |
2.2% |
|
Rest of Sample |
1.4% |
Source: https://www.eba.europa.eu/risk-analysis-and-data/eu-wide-transparency-exercise/2017/results
39. Deputy Michael McGrath asked the Minister for Finance the number and value of completed loan sales here in 2017 from Irish regulated banks; the number and value of ongoing loan sales here currently from Irish regulated banks; and if he will make a statement on the matter. [10890/18]
Amharc ar fhreagraThe information the Deputy requested is not held by my Department and so I referred the question to the Central Bank of Ireland, as the body responsible for regulating the banks.
I have been advised by the Central Bank of Ireland that under Section 33AK of the Central Bank Act 1942, the Central Bank is not in a position to provide any specific information in this regard.
However, some of the information sought is publically available from other sources. For example, Deloitte’s fifth edition of the Deleveraging Europe series examines the European loans market, providing an up-to date overview of the latest transactions at H1 2017 which can be found
https://www2.deloitte.com/uk/en/pages/financial-advisory/articles/deleveraging-europe-market-update.html .
In addition, further information published by KPMG in respect of European debt sales can be found at
https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2016/09/european-debt-sales.pdf and
https://home.kpmg.com/xx/en/home/insights/2016/02/european-debt-sales-2016-dashboard.html .
40. Deputy Michael McGrath asked the Minister for Finance the number of Irish regulated banks that have adopted IFRS 9 before the 2018 deadline; his views on the impact its adoption will have on the loan book of Irish regulated banks; his further views on whether it will likely lead to a greater number of loans being classified as non-performing by Irish regulated banks; and if he will make a statement on the matter. [10948/18]
Amharc ar fhreagraIFRS 9 introduces a new regime for impairment provisioning and imposes an Expected Credit Loss approach to provisioning as opposed to the incurred loss approach that was required by IAS 39.
IFRS 9 does not change in any way the definition of Non-Performing Loans (NPLs) introduced by the European Banking Authority (EBA) and as a result should not impact the quantum of NPLs.
IFRS 9 is applicable for accounting periods starting on or after 1 January 2018 for all listed credit institutions. I am informed that the Irish listed banks - AIB, Bank of Ireland and Permanent TSB - have adopted IFRS 9 on 1 January 2018 for their 2018 accounting year. I further understand that they will provide information on the impacts in their annual accounts for 2017 as they are released.
41. Deputy Michael McGrath asked the Minister for Finance if the European Central Bank or the European Banking Authority has guidance on the sale of non-performing loans to third party vendors; if he has brought the issue of the sale of non-performing loans to unregulated private equity funds to the attention of the ECB or the EBA; and if he will make a statement on the matter. [10949/18]
Amharc ar fhreagraThe European Council Action Plan published in July 2017 invited the European Commission to develop by summer 2018, a European approach to foster the development of secondary markets for NPLs, in particular to remove impediments to the transfer of NPLs by banks to non-banks and to their ownership by non-banks, while safeguarding consumers' rights, as well as to simplify and potentially harmonise the licensing requirements for third-party loan servicers and to take legislative initiative in this respect, as appropriate.
I am expecting a legislative proposal from the European Commission in March 2018 which will include a proposal for licensing requirements for third-party credit servicers across the European Union.
Officials from my department have been active contributors to the discussions on NPLs, including on credit servicers, through its involvement in the European Council’s Financial Services Committee subgroup on NPLs and the more recent European Commission Expert Group on NPLs. The ECB and EBA were involved in both of these groups.
42. Deputy Niall Collins asked the Minister for Finance if assistance will be provided to a person (details supplied); and if he will make a statement on the matter. [11004/18]
Amharc ar fhreagraI am advised by Revenue that the eligibility criteria for the Single Parent Child Carer Credit (SPCCC) are set out in section 462B of the Taxes Consolidation Act 1997 and are available on the Revenue website.
The SPCCC, currently €1,650 per annum, is available to an individual, referred to in the legislation as the “primary claimant” where that individual:-
1. has a qualifying child residing with him or her for more than half the year,
2. is not married, cohabiting or in a civil partnership, and
3. is not jointly assessed with another person for tax purposes or in receipt of the widowed person or surviving civil partner tax credit.
A qualifying child is generally any child who is either born in the tax year or under 18 years of age at the start of the year. Older children may also qualify in certain cases. The child must be in the custody of the individual and maintained by the individual at his or her own expense.
Only one credit is available is respect of any qualifying child, and an individual who is a Primary Claimant in respect of more than one qualifying child can only receive one credit. Where the custody of a child is shared between two individuals, the legislation provides that the Primary Claimant shall be the person in receipt of Child Benefit.
If the Primary Claimant does not wish to claim SPCCC they may surrender their entitlement to SPCCC to a ‘Secondary Claimant’. In order to receive the SPCCC, a Secondary Claimant must meet the criteria set out at 2 and 3 above and have a qualifying child residing with him or her for more than 100 days in the year.
Therefore in the circumstances raised by the Deputy, only one of the parents of the child may qualify for the SPCCC. The credit may be relinquished by the primary claimant, in this case the mother, to the father subject to the criteria above but this is a decision for the primary claimant to make.
I am further advised that this position has been set out in writing by Revenue to the individual concerned.
43. Deputy Robert Troy asked the Minister for Finance the steps he or the Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach have taken to confirm that family homes would not be included in the proposed mortgage portfolio sale by a bank (details supplied); if the committee has powers to request an explanation or confirmation from the bank regarding the matter; and if he will make a statement on the matter. [11115/18]
Amharc ar fhreagraThe Deputy will be aware that PTSB announced on 13th February that it was commencing the process for the sale of a portfolio of NPLs referred to as Project Glas. On the 20th February, the bank gave details of the portfolio of loans which is under consideration. The bank confirmed in these details that 18,000 properties are linked to loans which are within the scope of Project Glas, 14,000 of which are private dwelling homes (PDHs).
In relation to PDHs, the bank highlighted just under €2 billion is accounted for by loans which are typically owned by customers who have not engaged with the Bank, whose mortgages are unsustainable or who have been unable to meet the terms of various treatments put in place. Of this portion of Project Glas, some account holders have not engaged with the Bank for over 7 years and on average the loans are over 3.5 years in arrears. Many of these account holders have made no payments at all for years.
In addition, the bank confirmed that Project Glas also includes some loans which are currently subject to agreed forbearance measures, but which remain categorised as NPLs and this, therefore needs to be addressed.
For clarity, I should highlight for the deputy that I cannot stop loan sales by the banks, nor can I interfere with the composition of such sales. This applies even for the banks in which the State has a shareholding. These decisions are the responsibility of the Board and management of the banks which must be run on an independent and commercial basis. Their independence is also protected by Relationship Frameworks, which are legally binding documents that I cannot change unilaterally. These frameworks were insisted upon by the European Commission to protect competition in the Irish market. Loan sales do not require my consent, though the banks are required to formally consult with me if the disposals are of a sufficient scale. In the case of the PTSB loan sale, the bank has not yet consulted with me but will do so in due course.
It is worth noting that no loan has been sold yet and it won’t be known how many loans will be sold for a number of months, nor the composition of these loans. In addition, it is not known to whom the loans will be sold. However, I want and expect PTSB to be transparent with their customers when it comes to this sale process as it evolves.
It is important to highlight that there are no changes to the rights or obligations of a customer whose loan is sold by a bank. All terms and conditions attached to their mortgage contract remain in place. In addition, as credit servicing firms servicing loans on behalf of unregulated entities are required to comply with the Code of Conduct on Mortgage Arrears (CCMA), all protections under the CCMA are unchanged. The customer is in the exact same position as they were before their loan was sold. In relation specifically to restructured loans, including splits, any purchaser will be obliged to honour the terms of the restructure agreement, should such loans be included in the final sale.
Notwithstanding the protections currently in place, I have made it clear that I am prepared to engage with Deputies from other parties in an effort to see if we can strengthen and enhance the protections, in a sensible manner, that are already in place for mortgage holders.
In relation to its powers, the Committee on Finance, Public Expenditure and Reform, and Taoiseach is entitled to request an explanation or confirmation from any of the banks on any matter and I would expect such a request to be dealt with to the satisfaction of the Committee. The Deputy may be aware that the Committee invited PTSB to attend a meeting on 27th February to discuss Project Glas. In its response to the Committee, the bank highlighted that it was not appropriate for executives to attend a meeting on the date proposed, as the bank is currently in a closed period ahead of the publication of its annual results on 14th March. However, the bank did state it was agreeable to meeting with the Committee on an alternative date sometime after 14th March. I understand that PTSB is awaiting a response from the Committee with a proposed alternative date.
44. Deputy Robert Troy asked the Minister for Finance the actions being considered by his Department to reduce the cost of motor insurance for drivers; and when he expects to bring forward further proposals which will have an immediate impact on prices. [11141/18]
Amharc ar fhreagraThe Deputy should note at the outset that in my role as Minister for Finance I am responsible for the development of the legal framework governing financial regulation. Neither I nor the Central Bank can interfere in the provision or pricing of insurance products, as these matters are of a commercial nature, and are determined by insurance companies based on the risks they are willing to accept.
However, it is acknowledged that pricing in the motor insurance sector has been subject to a lot of volatility in recent years, from a point where some premiums appeared to be priced at an unsustainably low level to the more recent experience of large increases.
Indeed, the problem of rising motor insurance premiums was the main impetus for the establishment of the Cost of Insurance Working Group in July 2016. Its Report on the Cost of Motor Insurance was published in January 2017. That Report made 33 recommendations with 71 associated actions to be carried out in agreed timeframes, as set out in the Action Plan.
These recommendations were formulated to address the issue of increasing motor insurance costs, whilst taking account of the need to ensure a financially stable insurance sector. This stability aspect is important, as we do not want to find ourselves in a situation again where particular firms drive prices down to a level that is unsustainable and which ultimately results in insolvency.
Work is ongoing on the implementation of the recommendations by the relevant Government Departments and Agencies and there is a commitment within the Report that the Working Group will prepare quarterly updates on its progress.
The fourth such update was published on the Department’s website on 20 February 2018 and shows that of the 46 separate deadlines set during 2017 within the Action Plan, 39 have been met. Substantial work has also been undertaken in respect of the nine action points categorised as “ongoing”.
I believe that the ongoing implementation of the Report on the Cost of Motor Insurance, in parallel with the implementation of the Working Group's Report on the Cost of Employer and Public Liability Insurance – which was published in January 2018 – will make a difference to the pricing of insurance premiums over the next 12 or so months. It is envisaged that the implementation of all the recommendations cumulatively, with the appropriate levels of commitment and cooperation from all relevant stakeholders, will achieve the objective of delivering fairer premiums for consumers. I also believe that the Setanta judgment, by finding that MIBI is not liable to meet third party claims, removes a major uncertainty from industry, which I would expect to be reflected in pricing in the short to medium term.
Finally, it should be noted that the most recent CSO data (for January 2018) indicates that private motor insurance premiums have decreased by 17% since peaking in July 2016. While the CSO statistics indicate a greater degree of stability on an overall basis, these figures represent a broad average and therefore there are many people who may still be seeing increases. However, I am hopeful that this greater stability in pricing will be maintained and that premiums should continue to fall from the very high levels of mid-2016.
45. Deputy Robert Troy asked the Minister for Finance if he will consult with the head of the Central Bank to confirm the way in which the mortgage accounts of customers who have renegotiated terms and are repaying the mortgage under these terms can be classed as non-performing; the efforts being made to ensure that customers that continue to meet their commitments are protected from the possibility of their account being sold on; and if he will make a statement on the matter. [11167/18]
Amharc ar fhreagraSince the establishment of the Single Supervisory Mechanism (SSM) in November 2014, the focus has shifted from reducing mortgage arrears levels to reducing Non-performing Loans (NPLs). This shift in focus has been accompanied by a new strict definition Europe-wide of what constitutes an NPL by the European Banking Authority (EBA) which means that certain restructures are deemed NPL even if customers are meeting the revised payment schedule.
Officials in my Department met with staff of the SSM at the highest level on two occasions since late 2016. In the course of their discussions they outlined the background and history to the restructuring effort in Ireland and questioned the logic of now classifying some types of restructured loans, including certain split mortgages, as NPL indefinitely. While my Department has been informed that the SSM is looking into the regulatory treatment of split mortgages across a number of European member states I have no evidence at this point that this categorisation is going to change. Banks may be able to reduce their NPLs to levels acceptable to the SSM without the requirement for loan sales and/or the loan sales involving restructured mortgages.
I have been advised by the Central Bank of Ireland that as per the EBA Implementing Technical Standards on supervisory reporting and the ECB Guidance on non-performing loans, non-performing exposures are those that satisfy either or both of the following criteria:
1. material exposures which are more than 90 days past-due;
2. the debtor is assessed as unlikely to pay its credit obligations in full without realisation of collateral, regardless of the existence of any past-due amount or of the number of days past due.
There are instances where an exposure can remain a non-performing exposure, notwithstanding the fact that there are agreed forbearance terms with a lender and the borrower is meeting those terms. This can include instances attributable to the criteria outlined in point 2 above.
Again to reference the EBA Implementing Technical Standards on supervisory reporting;
When forbearance measures are extended to non-performing exposures, the exposures may be considered to have ceased being non-performing only when all the following conditions are met:
1. the extension of forbearance does not lead to the recognition of impairment or default;
2 one year has passed since the forbearance measures were extended;
3. there is not, following the forbearance measures, any past-due amount or concerns regarding the full repayment of the exposure according to the post forbearance conditions. The absence of concerns has to be determined after an analysis of the debtor’s financial situation. Concerns may be considered as no longer existing when the debtor has paid, via its regular payments in accordance with the post-forbearance conditions, a total equal to the amount that was previously past-due (if there were past-due amounts) or that has been written-off (if there were no past-due amounts) under the forbearance measures or the debtor has otherwise demonstrated its ability to comply with the post forbearance conditions.
These specific exit criteria shall apply in addition to the criteria applied by reporting institutions for impaired and defaulted exposures.
The full ECB guidance on NPLs and the EBA Implementing Technical Standards are published here:
https://www.bankingsupervision.europa.eu/press/pr/date/2017/html/sr170320.en.html
https://www.eba.europa.eu/documents/10180/449824/EBA-ITS-2013-03+Final+draft+ITS+on+Forbearance+and+Non-performing+exposures.pdf
As the Deputy will be aware, most loan agreements include a clause that allows the original lender to sell the loan on to another firm. The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (“the 2015 Act”) was introduced to fill the consumer protection gap where loans are sold by the original lender to an unregulated firm. Under the 2015 Act, if the firm who bought loans from the original lender is an unregulated firm, then the loans must be serviced by a ‘credit servicing firm’ which is regulated by the Central Bank. Credit Servicing Firms are typically firms that manage or administer credit agreements such as mortgages or other loans on behalf of unregulated entities.
Credit servicing firms must act in accordance with the requirements of Irish financial services law that applies to ‘regulated financial service providers’. This ensures that consumers, whose loans are sold to another firm, maintain the same regulatory protections that they had prior to the sale, including under the various statutory Codes of Conduct issued by the Central Bank such as the Consumer Protection Code 2012, Code of Conduct on Mortgage Arrears 2013, and the SME Regulations. Contractual terms are not changed by the sale of the loan.
Provision 3.11 of the Central Bank’s Consumer Protection Code 2012 (the Code) requires that, where a regulated lender intends to transfer all or part of its ‘regulated activities’ to another regulated entity, it must provide advance notification to both the Central Bank and affected consumers. Specifically, a lender must provide a consumer with at least 2 months’ notice before transferring all or part of its loan book covered by the Code to another person, including where the transferee is an unregulated entity. Where the transferee is an unregulated entity, the Code requires that the regulated lender also notify the consumer of the name of the regulated entity that will be ‘servicing’ the loan for the unregulated entity. In the event that there is a change in the credit servicing firm, the existing credit servicing firm must also notify the Central Bank and the consumer in advance, in accordance with the timelines set out under Provision 3.11 of the Code.
A Government Decision last week agreed to support the FF Private Members Bill in relation to the regulation of loan owners. The Government will work with Deputy McGrath and the House to improve the Bill, with a view to addressing any difficulties that might arise with it as currently drafted. I have also asked the Central Bank to carry out a review of the Code of Conduct on Mortgage Arrears (CCMA) to ensure it remains as effective as possible and for the review to be completed as soon as possible.
46. Deputy Timmy Dooley asked the Minister for Finance the amount of corporation tax that has been received in respect of oil and gas exploration in each year since 1992. [11370/18]
Amharc ar fhreagra47. Deputy Timmy Dooley asked the Minister for Finance the amount of corporation tax that has been received in respect of oil and gas extraction in each year since 1992. [11371/18]
Amharc ar fhreagra48. Deputy Timmy Dooley asked the Minister for Finance the amount of profit resource rent tax that has been received in each year since 2007. [11372/18]
Amharc ar fhreagra49. Deputy Timmy Dooley asked the Minister for Finance the amount of petroleum protection tax that has been received in each year since 2014. [11373/18]
Amharc ar fhreagraI propose to take Questions Nos. 46 to 49, inclusive, together.
I am advised by Revenue that Corporation Tax received from companies involved in oil and gas exploration and extraction cannot be provided due to the low number of companies involved in the sector and Revenue’s confidentiality obligations. However, such companies are likely to be recorded in the trade sector “Mining and Quarrying”. The Deputy may wish to note that tax receipts by sector (including for Mining and Quarrying) are available from 2011 on the Revenue website at:
https://www.revenue.ie/en/corporate/documents/statistics/receipts/net-receipts-by-sector.pdf
For years 2007 to 2010, this breakdown is available on the Revenue website in table TR6 of the statistical reports archive which is available at: https://www.revenue.ie/en/corporate/information-about-revenue/statistics/index.aspx
This sectorial breakdown is not available for earlier years.
I am further advised by Revenue that in respect of receipts of Profit Resource Rent Tax (PRRT) and Petroleum Production Tax (PPT), no tax liability has been identified on Corporation Tax returns filed following the introduction of these taxes. PRRT applies in respect of profits from operating oil and gas fields in respect of licences/licensing option granted on or after 1 January 2007 to 17 June 2014. PPT applies to revenues from oil and gas discoveries made under licensing authorisations granted on or after 18 June 2014. Therefore, PPT replaces PRRT for new authorisations. It is Revenue’s understanding that there have been no discoveries arising from licences granted since 1 January 2007.
50. Deputy Róisín Shortall asked the Minister for Finance the composition of the delegation from his Department on a working group further to a commitment in a Rebuilding Ireland strategy document (details supplied); the number of meetings of this working group that he has attended; and if he will make a statement on the matter. [11384/18]
Amharc ar fhreagraThe Minister for Housing, Planning and Local Government, under Action 5 of the Strategy for the Rental Sector, established a working group with the participation of the Departments of Housing, Planning & Local Government, Justice & Equality; Finance; and Business, Enterprise and Innovation, to examine the scope for amending legislation to provide for greater protection of tenants’ rights during the receivership process.
The appointment of a receiver to a dwelling can cause confusion and distress to tenants and, in circumstances where a receiver is appointed to a rented dwelling, it is essential that the rights of tenants are protected.
The objective is to protect the rights of tenants during the receivership process by ensuring that persons appointed as receivers will be required to fulfil the obligations of a landlord. To inform its work, the working group has sought legal opinion on the feasibility of amending legislation to provide greater protection of tenants’ rights during the receivership process. The working group expects to finalise its report shortly.
The working group has met on three occasions to date: 23 February, 23 March and 11 October 2017. My Department has been represented at assistant principal officer level.
51. Deputy Mick Barry asked the Minister for Finance if he will direct the Revenue Commissioners to respond to the past four letters sent to them by PDFORRA regarding the status of flat rate expenses. [11386/18]
Amharc ar fhreagraI am advised by Revenue that the legislation governing the deductibility of expenses incurred in employment, as set out in section 114 of the Taxes Consolidation Act 1997, provides that, for an expense to qualify as a deduction against income from an office or employment, the expense must be wholly, exclusively and necessarily incurred in the performance of the duties of the office or employment.
For ease of administration, where a large number of employees incur broadly identical qualifying expenses which are not reimbursed by their employer, Revenue have over the years provided a facility whereby a flat rate expense allowance may be claimed. I am further advised by Revenue that following detailed, lengthy and comprehensive negotiations with PDFORRA, a flat rate expense was agreed in June 2016 in respect of the specialist cleaning of ceremonial uniforms for all enlisted personnel not in receipt of a uniform replenishment allowance. The flat rate expense was granted with effect from 2015. The discussions involved an examination of the categories of duty carried on by the relevant members, the types of expenses wholly, necessarily and exclusively incurred in such duties and the nature and purpose of any allowances currently paid in respect of those duties.
I understand from Revenue that there has been a significant body of further correspondence from PDFORRA seeking to extend the scope of the flat rate expense notwithstanding the comprehensive nature of the negotiations which led to the agreement of June 2016. While Revenue have advised PDFORRA on a number of occasions that the issues raised in this correspondence were fully explored and addressed during the negotiations which led to their acceptance of the flat rate expense, I understand that the most recent correspondence has been replied to and that PDFORRA has been invited to a meeting in order to further clarify matters.
52. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which growth figures continue to remain in line with projections and in keeping with general economic targets; and if he will make a statement on the matter. [11477/18]
Amharc ar fhreagra53. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which economic projections continue to be affected by Brexit; the degree to which it is likely that diversification in terms of trade can be provided for; and if he will make a statement on the matter. [11478/18]
Amharc ar fhreagra54. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which a review of economic targets is necessary in view of the increased potential impact of Brexit; and if he will make a statement on the matter. [11479/18]
Amharc ar fhreagra56. Deputy Bernard J. Durkan asked the Minister for Finance his views on whether first quarter economic returns continue to be in line with expectations and sound economic principles; and if he will make a statement on the matter. [11481/18]
Amharc ar fhreagraI propose to take Questions Nos. 52 to 54, inclusive, and 56 together.
Recent economic indicators have generally been positive, indicating that the recovery is continuing in a sustainable manner.
Modified domestic demand, which adjusts for distortions in the Irish economy, is up 5.2 per cent in the first three quarters of 2017. Growth is broad based with net exports also contributing positively to growth in the first three quarters.
The strength of underlying domestic demand is being felt in the labour market. Employment growth remains strong with an annual rate of 2.8 per cent recorded in the first three quarters of 2017, representing the creation of almost 60,000 additional jobs.
Data published in the first quarter of this year indicate that:
- Expansion in the manufacturing and services sectors continued in February with the Purchasing Managers’ Index for the sectors recording their fifty seventh and sixty seventh successive month of expansion respectively.
- The Consumer Sentiment Index was 110.4 in January, well above its long run average.
- The seasonally adjusted monthly unemployment rate for February was 6.0 per cent, down from 7.3 per cent in February 2015. As a result, the unemployment rate has fallen by almost two thirds since its peak of 16 per cent in early-2012.
As part of Budget 2018, my Department is forecasting real GDP growth of 3.5 per cent this year. The strong performance of the labour market is set to continue in the short term; my Department is projecting that an additional 48,000 jobs will be created this year. Strong employment growth is expected to further reduce the unemployment rate, to around 5 ½ per cent by the end of this year. The limited data so far available for 2018 has generally been positive and indicate that the momentum in the economy has been maintained.
However, there are a number of risks at present including the UK’s decision to exit the EU. In addition, the sharp appreciation of the euro-sterling rate is posing significant challenges, particularly for the traditional sector, the tourism sector and areas sensitive to cross-border trade.
My Department has incorporated the estimated impact of a “hard” Brexit into the macroeconomic forecasts published as part of Budget 2018. This shock is projected to reduce GDP growth by approximately ¾ of a percentage point on average per annum over the 2019-2021 period. These forecasts were endorsed by the Irish Fiscal Advisory Council (IFAC). The Department will publish updated forecasts as part of the April 2018 Stability Programme Update.
These projections were informed by Department of Finance – ESRI joint research which modelled the medium to long term impact of Brexit on Ireland. In particular, the forecasts were guided by the “WTO scenario”, whereby the UK and EU do not conclude a bilateral trade agreement and instead the UK exercises its rights under the Most Favoured Nation (MFN) clause of the WTO.
The best way to mitigate risks such as Brexit is to improve the resilience of the economy. The Government will play its part by continuing to implement competitiveness oriented policies – including those that address emerging bottlenecks – and ensuring that the public finances continue to be managed in a prudent fashion.
In addition, as part of the Government’s trade strategy, Ireland Connected, a number of measures have been set out to specifically address Brexit related issues, including diversification of markets for indigenous exporters. Greater market diversification must be part of the policy response, so that dependence and exposure to the UK market is reduced.
55. Deputy Bernard J. Durkan asked the Minister for Finance if he is satisfied that Ireland's ability to withstand Brexit remains soundly based and that the necessary alternatives in terms of issues affecting economic performance are being pursued; and if he will make a statement on the matter. [11480/18]
Amharc ar fhreagraMy Department has been to the fore in producing and funding a number of Brexit-related studies, both before and since the UK's referendum decision, all of which are available on my Department's website. In addition, my Department’s macroeconomic forecasts have continued to take account of the impact of Brexit.
While all available research has indicated that the potential impact of Brexit on the Irish economy will be significant and negative under all scenarios, with output below what it otherwise would have been in a no Brexit scenario, it is important to note that the economy will continue to grow, albeit at a slower pace than it otherwise would have. It should also be noted that all of these research studies are conducted on a “no policy change basis”, in other words they do not account for efforts that the Government has made, and will continue to make, to prepare the economy for Brexit.
Indeed, the best way and most immediate policy under the Government's control to counter the likely negative economic impacts of Brexit is to prudently manage the public finances in order to ensure that Ireland's economy continues to remain competitive in the face of future economic headwinds. In this context, the Government has taken a number of important steps to prepare our economy for the challenges of Brexit, including in Budgets 2017 and 2018, the Action Plan for Jobs, the Ireland Connected trade and investment strategy, and the preparation of a new 10-year Capital Plan.
As discussions on the future relationship between the UK and the EU progress, my Department will continue to monitor the economic impacts of Brexit, including carrying out relevant analysis and contingency planning for the future challenges ahead.
57. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he continues to identify issues such as housing that remain likely to impact negatively on economic expansion; his plans to address these issues; and if he will make a statement on the matter. [11482/18]
Amharc ar fhreagra59. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which his Department continues to monitor all potential threats to Ireland's economic output; his plans in respect of emerging issues; and if he will make a statement on the matter. [11484/18]
Amharc ar fhreagra64. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied that the economy remains competitive in all aspects; and if he will make a statement on the matter. [11489/18]
Amharc ar fhreagraI propose to take Questions Nos. 57, 59 and 64 together.
Ireland’s economic recovery has been underpinned by a significant improvement in competitiveness. The latest figures from the Central Bank of Ireland show that Ireland's real harmonised competitiveness indicator, a widely used measure of competitiveness in Europe, has improved by approximately 20 per cent between its peak in 2008 and January 2018. Progress can also be seen in our improved international rankings. For example, Ireland ranks 6th in the IMD World Competitiveness Rankings. This compares to a ranking of 24th at the height of the crisis in 2011.
The restoration of Irish competitiveness since 2008 has been hard-won through productivity improvements and wage and price moderation. It is important that this competitiveness is preserved and continues to support growth. This is all the more important given the significant economic risks we face both internationally and domestically.
On the external side, the impact of Brexit is being felt through the strengthening of the euro against sterling. Similarly, gains from the fall in oil prices may unwind in the future. Other international risks include the policy stance in the US, including in relation to taxation. In terms of domestic risks to competitiveness, housing supply pressures are of particular concern. The housing sector can adversely impact on competitiveness through for example, restricting the mobility of labour.
These risks highlight the importance of maintaining competitiveness oriented policies, including sustainable fiscal policies, to help address emerging uncertainties. With regard to housing, a number of initiatives were introduced in Budget 2018, in addition to the measures implemented in ‘Rebuilding Ireland: An Action Plan for Housing and Homelessness’, to tackle the underlying problem of a supply shortage:
- Home Building Finance Ireland (HBFI) will boost the supply of debt funding to residential development. Utilising up to €750 million from the Irish Strategic Investment Fund, HBFI will fund new housing construction across all regions in the country.
- An additional €500 million was allocated to the Department of Housing, Planning and Local Government to build a further 3,000 social housing units by 2021.
- An extra €75 million is also being provided under the Local Infrastructure Housing Activation Fund.
- Budget 2018 included an increase to the rate applicable under the vacant site levy in the second and subsequent years of vacancy. This will provide a strong incentive to landowners to either develop their land or sell them for the purpose of development.
In summary, competitiveness has improved but we must not be complacent. My Department will continue to monitor all relevant developments closely as we seek to ensure that the economy is best placed to weather economic shocks to the greatest extent possible. Competitiveness is an important factor in this.
58. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he remains in contact with his EU counterparts to ensure the remaining 27 members states of the European Union are ad idem in respect of the need to maintain a co-ordinated approach in the context of the post-Brexit situation; and if he will make a statement on the matter. [11483/18]
Amharc ar fhreagraSince the UK referendum outcome, I have met with my EU counterparts at the monthly Ecofin and Eurogroup meetings, with the next meeting scheduled for 12-13 March. I also meet and speak by phone with my European counterparts on an ongoing basis outside of Ecofin and Eurogroup meetings, as appropriate.
In relation to Brexit, the Government’s priorities are clear: minimising any impact on trade and the economy, protecting the Northern Ireland Peace Process, maintaining the Common Travel Area, and influencing the future of the European Union. A critical part of the Government’s strategy and preparations for the negotiations has been to ensure that our priorities and unique concerns are heard and understood across Europe. The very strong acknowledgement of our unique circumstances by the EU 27, both in the European Council Negotiating Guidelines and the European Commission Draft Withdrawal Agreement is reflective of this engagement. We continue to work closely with the Commission Task Force and our EU 27 partners. As we prepare for the European Council later this month, and for the negotiation period ahead, the Government will continue to engage politically to ensure that Ireland’s interests are kept to the forefront of the negotiations as much as possible.
60. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which the financial services sector here may become enhanced by developments arising from Brexit; and if he will make a statement on the matter. [11485/18]
Amharc ar fhreagraWe already have a successful track record of competing for, and winning, global foreign direct investment. Ireland offers a very good solution for companies who potentially may have a difficulty selling goods and services to the EU single market after Brexit. In particular, International financial services (IFS) is an area that is identified as an area of opportunity for Ireland post Brexit.
Ireland will be the only English-speaking Common Law jurisdiction in the EU after the UK leave the EU. This means that international financial services companies can establish here quickly in order to service their international and European customers with a minimum disruption to their business, proven by the firms that have already moved some or all of the operations to Ireland. We are, therefore, a solution to firms who wish to passport their financial services to the EU market post-Brexit.
Government and the State Agencies have been working closely with industry to implement the international financial services strategy (IFS2020). The vision of IFS2020 is for Ireland to be recognised as the global location of choice for specialist international financial services.
We have made great progress in becoming a strong hub for international financial services business over the years – Ireland is currently home to some of the world’s largest IFS companies across all the sectors. We are a global lead in aviation leasing and financing and also among the top destinations for funds (asset management) and FinTech, building on our strengths in technology and financial services.
A number of firms have already indicated that Ireland is their preferred choice for their European headquarters, including many household names. In respect of relocations post Brexit not every firm will want to make the relocation decision public for commercial and other reasons.
We have a very strong offering and we've done extensive work to promote that offering.
61. Deputy Bernard J. Durkan asked the Minister for Finance the way in which his Department will respond to the housing situation in the short term in view of the necessities to so do from both an economic and social position; and if he will make a statement on the matter. [11486/18]
Amharc ar fhreagraThe Government’s primary response to current issues in the housing market is contained in ‘Rebuilding Ireland: An Action Plan for Housing and Homelessness’. The Department of Finance is the lead Department on 8 of the 168 actions in the plan. In the latest status report on the Action Plan, published on January 25th, 7 of the 8 actions associated with my Department were complete. The one remaining action – concerning private sector investment in social housing through long term leases – is on schedule.
Increasing supply is key to addressing the current difficulties in the housing market. In addition to the measures contained in the Action Plan, Budget 2018 contained a number of initiatives aimed at increasing the supply of new homes. Home Building Finance Ireland (HBFI) will boost the supply of debt funding to residential development. Utilising up to €750 million from the Irish Strategic Investment Fund, HBFI will fund new housing construction across all regions in the country. An additional €500 million was allocated to the Department of Housing, Planning and Local Government to build a further 3,000 social housing units by 2021. An extra €75 million is also being provided under the Local Infrastructure Housing Activation Fund. Budget 2018 included an increase to the rate applicable under the vacant site levy in the second and subsequent years of vacancy. This will provide a strong incentive to landowners to either develop their land or sell them for the purpose of development. In Budget 2018, I also increased the rate of stamp duty applicable on the sale of non-residential property from 2% to 6%. This measure will help incentivise a re-balancing of activity away from non-residential commercial construction in favour of residential activity. It will also ensure that the construction sector is able to meet the demand for residential property, while avoiding overheating in the sector as a whole.
