Written Answers Nos. 186-206
186. Deputy Thomas P. Broughan asked the Minister for Finance if the concerns expressed at EU level regarding the employee incentive and investment scheme have now been resolved; and if he will make a statement on the matter. [13633/18]
Amharc ar fhreagraDuring the preparations for Finance Bill 2017 it came to light that the Employment and Investment Incentive (EII) was potentially not compliant with state aid rules (specifically Art. 21(3) of the General Block Exemption Regulations) and that it should be amended as a matter of urgency to bring it within state aid rules. The relevant provisions of the Taxes consolidation Act 1997 were amended by the Finance Act 2017 to correct this error.
The EII scheme previously allowed “connected persons” with up to an existing 30% shareholding to invest in a company and get EII relief. The amendment reduces this to 0%. The effect of the changes are to prevent investors from getting tax relief for investing in their own companies. This restriction does not apply if an individual and their relatives make their investments in the company while it is still at very initial stages before it commences any of its activities. I should also emphasise that the restriction does not apply where an individual is only connected with a company through a prior investment to which EII relief applied.
My Department has been in contact with the European Commission to advise it of the potential failure to comply with the General Block Exemption Regulations and the steps taken to correct this. The Commission is continuing to examine the issue.
The Deputy may also wish to note that, as indicated in my press statement of 3 November 2017, the EII scheme will be reviewed in the current year to ensure that it operates as a competitive, efficient and effective measure in accordance with State Aid rules and my Department's Tax Expenditure Guidelines. Arrangements in this regard are underway.
188. Deputy Róisín Shortall asked the Minister for Finance the status of the strategic review of the Central Bank print works; the options under consideration by the bank in regard to the future of the print works; and if he will make a statement on the matter. [13796/18]
Amharc ar fhreagraAs communicated in the Central Bank’s Strategic Plan (2016 – 2018), the Central Bank announced that it intended to review its strategy for banknote production. The purpose of this review was to determine how the Central Bank meets its Eurosystem obligations for its allocation of annual Euro banknote production.
The review is completed but a decision has not yet been taken on the matter by the Central Bank Commission. However, the matter is scheduled for the Commission meeting at the end of March. The proposal from management involves sourcing the banknotes from within the Eurozone, and ceasing the printing of banknotes at the Central Bank’s Currency Centre. The proposal to source banknotes from within the Eurozone is in line with the approach taken in many other national central banks in the Eurozone (i.e. a number of national central banks within the Eurozone do not print banknotes themselves).
This proposed change will have no impact on the supply of banknotes in Ireland, the majority of which are produced elsewhere. All other currency related operation at the Sandyford Currency Centre would continue as normal.
As part of the proposal, the specialist banknote knowledge necessary to source and design banknotes will be retained within the Central Bank of Ireland. The subject of the proposal is the physical printing of the banknotes.
The Central Bank of Ireland is fully cognisant of its obligations to supply currency in all circumstances to the people of Ireland. The proposal is consistent with those obligations.
If the Commission take the decision to cease printing, a total of 45 staff (of the 170 staff in the Central Bank’s currency centre) will be impacted. The staff and their representatives are fully aware of the proposal.
The Central Bank does not intend to seek compulsory redundancies and is committed to redeployment and retraining opportunities for impacted staff. A voluntary severance package will also be made available to those staff.
If a decision is taken to cease printing, the Central Bank is committed to engagement with staff representative bodies through the normal industrial relations channels on the implications for impacted staff.
189. Deputy Jonathan O'Brien asked the Minister for Finance the person or body to which the National Assets Management Agency sold a site (details supplied); and if he will make a statement on the matter. [13882/18]
Amharc ar fhreagraAs Minister for Finance I have no role in respect of NAMA's commercial operations. Accordingly, I am not aware of specific details in relation to this particular transaction nor am I aware of the identity of the purchaser. Furthermore NAMA is subject to legal constraints which prohibit it from disclosing confidential information relating to its debtors and the assets under their control.
The Deputy will be aware that the agency has established a dedicated email address for general queries and representations from Oireachtas members, oir@nama.ie. This email is monitored regularly, and queries are responded to promptly, while observing the statutory principle of debtor confidentiality that is set out in the NAMA Act.
It is important to note that NAMA does not own property. Its role is as a secured lender and the property assets securing NAMA’s loan portfolio remain under the ownership and control of debtors and receivers. Where a property is being sold, NAMA’s open marketing guidelines require that a sales agent be appointed and the property openly marketed.
190. Deputy Niamh Smyth asked the Minister for Finance the status of the measures that have been taken to meet and engage with insurance companies regarding excessive premiums being charged to consumers, particularly in counties Cavan and Monaghan. [13886/18]
Amharc ar fhreagraThe Deputy should note 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 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. Its Report on the Cost of Motor Insurance was published in January 2017. The Report makes 33 recommendations with 71 associated actions to be carried out in agreed timeframes, set out within an Action Plan. The Working Group continued its work throughout 2017 and subsequently published the Report on the Cost of Employer and Public Liability Insurance in January 2018.
Stakeholder consultation formed the foundation upon which the Working Group’s two Reports and their recommendations were developed. This consultation process undertaken by the Working Group involved a wide range of stakeholders representing the different voices within this sector, including Insurance Ireland and the major individual motor insurance providers. The impact of excessive premiums being charged to consumers from all over the country was a feature of this engagement process with industry.
In addition, my Department officials regularly raise specific issues affecting consumers during their ongoing engagement with Insurance Ireland, including within a sub-group formed to implement relevant consumer-focused recommendations from the Motor Report.
Furthermore, Minister of State D’Arcy has separately met with representatives from insurance companies and other relevant stakeholders in relation to a number of issues and the problems resulting from high insurance premiums have been discussed during these engagements.
191. Deputy Jonathan O'Brien asked the Minister for Finance when consumers will receive a detailed breakdown of their insurance quotes; and if he will make a statement on the matter. [13657/18]
Amharc ar fhreagraThe Deputy should note that there are two recommendations in the Report on the Cost of Motor Insurance which specifically aim to provide consumers with more information in respect of their insurance premiums.
Recommendation 2 requires insurers to provide additional information on the premium breakdown to consumers, such as setting out the element of the cost related to the mandatory motor insurance element (third party), in addition to the non-mandatory element (comprehensive). The Central Bank of Ireland conducted a public consultation to seek views from interested stakeholders on this recommendation. This consultation process closed on 9 February last and subsequent amendments to provide for these changes will be made to the Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) Regulations (SI No. 74 of 2007). This is on schedule to be completed by the end of Q2 2018, as per the set timeline.
Pursuant to Recommendation 1, a protocol has been agreed between Insurance Ireland and the Department of Finance which aims to explain how a premium is calculated and provides a list of reasons for large increases in premiums. The content of this document is now available on the websites of the major motor insurance providers and will also be provided to policyholders on renewal.
The agreed document is not a bespoke document but consumers will be provided with contact details of their insurance provider in order to enable them to receive more specific information if they do not believe any of the listed reasons apply to their situation. The main reason why a bespoke document cannot be provided is because the complexity of the interaction between the customer-facing systems and the underwriting systems in all modern insurance companies would make it very difficult to delineate specific reasons for an individual premium increase. I am informed that if insurers were to try and link these systems in order to address this issue, it would require very significant IT infrastructural changes at considerable cost. This would be likely to result in higher premiums. In addition, the Cost of Insurance Working Group believes that such an onerous requirement could result in the unintended consequence of discouraging new entrants to the market.
Finally, the Deputy should note that I am seeking to have the previous year’s premium included in renewal documentation. In this regard my Department has engaged with Insurance Ireland on this matter and has made a submission as part of the aforementioned Central Bank consultation process. It will continue to engage on this issue to further improve the level of information provided to policyholders.
192. Deputy Jonathan O'Brien asked the Minister for Finance if all lenders are on course to meet their commitments made under the tracker mortgage examination in terms of providing redress and compensation by set dates. [13658/18]
Amharc ar fhreagraThe Tracker Examination continues to be a priority for the Central Bank and the Bank will continue to challenge lenders in respect of the conduct of the Examination. The Bank has advised that lenders have committed to certain schedules for payment of redress and compensation to customers and that they are on course to meet these commitments. The Bank has also advised that it will remain vigilant in ensuring that payments to customers are progressed at pace.
The Central Bank issued a report on progress made by lenders in December 2017 and I look forward to receiving a further progress report on the basis of end-March 2018 data.
193. Deputy Richard Boyd Barrett asked the Minister for Finance his plans to undertake a comprehensive review of all corporation tax reliefs and expenditures to establish if such tax reliefs benefit the public and society or are simply providing a mechanism for extensive tax avoidance and private corporate profit; and if he will make a statement on the matter. [13629/18]
Amharc ar fhreagraThe Irish corporation tax regime contains a small number of specifically targeted tax reliefs. The focus of these reliefs is on the creation of additional employment, as is consistent with current government policy, and on innovation, with a view to generating high value-added economic activity in the country.
Some other countries have a high headline rate of corporation tax which is then supplemented by a high number of tax reliefs which reduce the overall rate of tax paid. By contrast, the approach in Ireland is transparent: we have a competitive headline rate of corporation tax which is applied to a broad base.
The effective tax rate of companies in 2015 was provisionally calculated by the Revenue Commissioners as 9.8%, representing a marginal increase on the 2014 rate of 9.7%. In 2012 and 2013, the effective rate was 10.1%. I would note that while these percentages are lower than the 12.5% headline rate, this can be attributed to the availability of the small number of targeted measures, such as the R&D tax credit, available in Ireland which may lower the effective rate of corporation tax paid.
The issue of tax avoidance has been at forefront of the international tax agenda in recent years. The agreement of the OECD BEPS reports in late 2015 represented a landmark achievement in agreeing comprehensive reform of the international tax system. Ireland has taken a number of steps towards implementing the BEPS recommendations and the Coffey Review sets out a roadmap for Ireland to follow in bringing certainty to the implementation of the remaining recommendations, beginning with the launch of a consultation process which is now underway.
In keeping with our commitment to transparency, Ireland was among the first countries to implement Country by Country Reporting. These reports will be exchanged with all relevant countries to ensure tax authorities have a clear picture of the activities of large multinationals and can assess any risk that the correct tax has not been paid in the correct place.
Ireland was also among the first countries to sign the OECD BEPS multilateral instrument (MLI) in June last year. This MLI will provide the mechanism for extensive changes to tax treaties globally. It will ensure that tax treaties are updated to reflect a number of important OECD BEPS recommendations, including agreed standards on treaty shopping and dispute resolution. The first steps towards ratification were made in Finance Bill 2017.
195. Deputy Mary Butler asked the Minister for Finance the reason persons' (details supplied) tax credits were reduced from €36,000 to €27,500; and if he will make a statement on the matter. [14124/18]
Amharc ar fhreagraI am advised by Revenue that in the absence of specific information on the taxpayers concerned it is not possible to comment on the case mentioned. However, if the taxpayers wish to contact their local Revenue office then officials would be happy to assist them.
In general the income tax treatment of persons aged 65 and over is as follows:
- An additional age tax credit is available. For single individuals the credit is €245 per year and for a couple who are married or in a civil partnership the credit is €490.
- In addition to the age tax credit, individuals over the age of 65 are exempt from any tax where their income is below a threshold of €18,000 for a single individual or €36,000 for a jointly assessed couple. If the couple have children that are under 18, over 18 and in full-time education or incapacitated, the exemption limits are increased by €575 per child for the first two children and €830 per child for any additional children. However, this exemption threshold is reduced by the amount of any income that is not subject to PAYE. This reduction includes any pension payments made by the Department of Employment Affairs and Social Protection. This is to ensure that the taxpayer pays the correct amount of tax based on their total income consisting of both PAYE and non-PAYE income.
- Where a taxpayer’s income exceeds the relevant threshold, tax is calculated in the normal manner on the full amount of income. However, if the taxpayer’s income is above the thresholds by a small amount, a further relief, known as “marginal relief” is available. Marginal relief operates by reducing the individual or couple’s tax liability for a year of assessment to 40% of the amount by which their income exceeds the threshold. Where the application of marginal relief gives a more favourable tax outcome than the standard tax calculation, Revenue will apply this option.
Further information on the age tax credit and related exemptions can be found on the Revenue website at:
https://www.revenue.ie/en/life-events-and-personal-circumstances/older-persons/tax-credits-for-older-persons.aspx .
196. Deputy Brendan Smith asked the Minister for Finance the timeframe to implement measures to address the escalating costs of business insurance; and if he will make a statement on the matter. [14181/18]
Amharc ar fhreagra197. Deputy Brendan Smith asked the Minister for Finance when the cost of insurance working group will finalise a report; his plans to implement measures from the work of the group to deal with the escalating costs of business insurance; and if he will make a statement on the matter. [14182/18]
Amharc ar fhreagraI propose to take Questions Nos. 196 and 197 together.
The second phase of the Cost of Insurance Working Group project culminated in the publication on January 25th of the Report on the Cost of Employer and Public Liability Insurance, following its approval by Government. This new Report makes 15 recommendations with 29 associated actions to be carried out, detailed in an Action Plan contained in the Report with agreed timelines for implementation.
All 29 actions are scheduled to be implemented before the end of 2019, with 26 due for completion this year. The following numbers of actions are due in each respective quarter:
- Q1 2018: 8 actions
- Q2 2018: 7 actions
- Q3 2018: 4 actions
- Q4 2018: 7 actions
- Q1 2019: action
- Q2 2019: 1 action
- Q3 2019: N/A
- Q4 2019: 1 action
The recommendations, covering three main themes, include actions to:
- Increase Transparency: enhance levels of transparency and improve data sharing and collection processes,
- Review the level of damages in personal injury cases: request that the Law Reform Commission undertake a detailed analysis of the possibility of developing constitutionally sound legislation to delimit or cap the amounts of damages which a court may award in respect of some or all categories of personal injuries, and
- Improve the personal injuries litigation framework: through a number of measures, including:
1. ensuring potential defendants are notified in sufficient time that an incident has occurred in relation to which a claim is going to be made against their policy;
2. tackling fraudulent and exaggerated claims; and
3. ensuring suitable training and information supports are available to the Judiciary to assist in the fair and consistent assessment and awarding of damages in personal injury cases.
The Working Group will focus during 2018 on carrying out the recommendations of the Report on the Cost of Employer and Public Liability Insurance in parallel with the continuing implementation of the 2017 Report on the Cost of Motor Insurance. I am hopeful that the cumulative effect of the completion of the two reports’ recommendations will be increased stability in the pricing of insurance for businesses and improved availability of liability insurance for all types of bodies.
198. Deputy Michael McGrath asked the Minister for Finance when he was first informed of a bank's (details supplied) planned sale of a loan portfolio; and if he will make a statement on the matter. [14115/18]
Amharc ar fhreagraI was first informed by Department officials of PTSB’s intention to offer this particular portfolio of loans for sale on Friday 19th January. My officials were first briefed on the timing of the sale, and potential composition of the portfolio, earlier that week.
As this information was commercially sensitive, and as I am obliged to comply with stock exchange disclosure and market abuse rules, I was not in a position to discuss it publicly at the time.
I should emphasise at this stage that no loan has been sold yet and we won’t know how many loans will be sold for a number of months. 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.
As I indicated previously, if the transaction proceeds I expect to be formally consulted on the disposal in due course as provided for in the Relationship Framework between the Minister and the bank.
199. Deputy Michael McGrath asked the Minister for Finance if he or his officials have had contact with the Single Supervisory Mechanism on the classification of certain restructured mortgages as non-performing loans on the books of banks; and if he will make a statement on the matter. [14116/18]
Amharc ar fhreagraIn answering the Deputy’s question, it is useful if I start by giving some historic context. During the height of the financial crisis a key focus of the authorities was on stabilising and ultimately reducing mortgage arrears through the implementation of sustainable mortgage solutions that were agreed with borrowers.
This led to the Central Bank of Ireland (CBI) introducing public mortgage arrears resolution targets (MART) for the banks in H1 2013. As the MART process was rolled out a split mortgage solution or a part capital and interest solution that met certain criteria were both accepted by the CBI as being sustainable for the purposes of these targets.
Since 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.
Aside from direct interaction with the SSM, Department officials have also been actively involved in the discussions on NPLs through its involvement in the European Council’s Financial Services Committee subgroup on NPLs, and the more recent European Commission Expert Group on NPLs. While this has ensured that Ireland’s views are voiced and considered on the matter, ultimately the final arbiter on the resolution of NPLs for the Irish banks is the SSM.
200. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he continues to have discussions with his counterparts at EU level with a view to preventing an economic crash in the future; and if he will make a statement on the matter. [14231/18]
Amharc ar fhreagraAs Minister for Finance, I attend the Economic and Financial Affairs Council of the European Union (ECOFIN) which is responsible for EU policy in areas including economic policy. I also attend meetings of the Eurogroup, where the ministers of the euro area member states discuss matters concerning their shared responsibilities related to the euro. The Eurogroup’s main task is to ensure close coordination of economic policies among the euro area member states and to promote conditions for stronger economic growth.
At both the ECOFIN and Eurogroup meetings, Ministers of the Member States work alongside the European Commission and the European Central Bank (ECB) to take stock of the latest economic situation in the EU and euro area, including on the risks to the European economy’s growth prospects.
The European Semester was initiated in response to the crisis in 2010. It provides a framework for coordination of economic policies across the European Union in which guidance is provided to Member States before they take policy decisions at national level. The guidance is provided in the context of the Stability and Growth Pact (SGP) and the Macroeconomic Imbalance Procedure (MIP). As part of the Semester process, the Commission makes country-specific recommendations to provide tailored policy guidance to each EU country on how to boost jobs and growth, while maintaining sound public finances. Following the economic crisis, budgetary surveillance was enhanced with the 'Six-Pack' and 'Two-Pack' regulations which seek to complement the European Semester through enhanced monitoring and surveillance of the fiscal policies of EU Member States.
The European economy is performing well with growth exceeding expectations in 2017. The latest estimates from Eurostat, the statistical office of the European Union, show that in 2017 the EU and euro area economies grew by 2.4 per cent and 2.3 per cent respectively. The upturn is increasingly broad-based across EU countries. The recovery has been supported by a number of factors including sound macroeconomic policies, strong business and consumer confidence and a gradual improvement in world trade.
The European Commission’s Autumn Economic Forecast 2017 highlights risks to the European economy as being broadly balanced. Downside risks relate to the process of the UK leaving the EU, global geopolitical instability and potentially tighter global financial conditions. While bank fragilities in the euro area have eased, low profitability and legacy issues (i.e. non-performing loans) remain a concern. Other economic challenges relate to potential changes to the international taxation and trading environments. On the upside, uncertainties have diminished, economic sentiment has improved and with the rebound outside Europe potentially leading to a stronger, more durable expansion in Europe.
Given the still high levels of unemployment and public and private debt across the EU, there are clearly no grounds for complacency. An appropriate balance of fiscal, monetary and structural reform policies are needed to ensure sustainable growth is maintained in Europe.
201. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which adequate working capital remains available to small and medium-sized enterprises with particular reference to the need to ensure the protection of jobs in the indigenous sector; and if he will make a statement on the matter. [14232/18]
Amharc ar fhreagra208. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied that the main banks are making adequate resources available to facilitate the house building programme; and if he will make a statement on the matter. [14239/18]
Amharc ar fhreagraI propose to take Questions Nos. 201 and 208 together.
Supporting the availability of finance for SMEs is a cornerstone element of Government policy in our efforts to strengthen the economy and create jobs. Government is focused on ensuring that all viable SMEs have access to an appropriate supply of credit from a diverse range of bank and non-bank sources. In this regard the Government has developed a number of initiatives to ensure that the supply of credit in the market is sufficient to meet the existing and future funding needs of SMEs.
In terms of monitoring the working capital and other requirements for SMEs, my Department biannually surveys the demand for credit by SMEs. I would draw the Deputy's attention to the Department of Finance SME Credit Demand Survey just published, covering the period April to September 2017, which can be found at www.finance.gov.ie.
The results of this survey show that, when pending applications are excluded, 88% of credit applications to banks were approved or partially approved. Working capital/cash flow requirements are provided as the main reason for applying for bank finance with 38% stating this is why they requested bank finance. When asked about sources of finance for working capital, internal funds/retained earnings were the main finance source of working capital with 81% of working capital coming from this source (up 8%) since Sept. ‘16.
Also, the latest publication of the Central Bank’s Trends in Business Credits and Deposits which can be accessed at
https://www.centralbank.ie/statistics/data-and-analysis/credit-and-banking-statistics/business-credit-and-deposits recorded an increase in new lending to the construction sector.
Further, AIB has stated that construction, "is of strategic importance for the economy and the bank. AIB is strongly supportive of the industry and we are ready and willing to increase our support as the industry grows. We are the main bank to many of the largest developers but also we have a strong focus on mid-sized developers. We created a new dedicated team in 2017 to serve mid-sized development groups following feedback from the industry that they struggled to get the attention of mainstream banks. Overall we have more than doubled the Bank’s Development Lending Team over the last twelve months".
The Government remains committed to the SME sector and larger businesses which it sees as a key engine of ongoing economic growth. I can assure the Deputy that my Department, working with other relevant Departments, Bodies and Agencies, will continue to advance policies to ensure the availability of both bank and non-bank credit so as to ensure that viable Irish business have sufficient access to finance.
202. Deputy Bernard J. Durkan asked the Minister for Finance when the benefits of the review of the motor insurance sector will accrue in terms of reduced premiums; and if he will make a statement on the matter. [14233/18]
Amharc ar fhreagraAs you are aware, the Cost of Insurance Working Group published its Report on the Cost of Motor Insurance on 10 January 2017. The Report makes 33 recommendations with 71 associated actions to be carried out in agreed timeframes, set out in an Action Plan within the Report.
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 20 February last 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 continued implementation of the recommendations from the Report on the Cost of Motor Insurance, in parallel with the implementation of the recommendations from the recently published Report on the Cost of Employer and Public Liability Insurance, will make a difference to the pricing of insurance premiums over the next 12-18 months. It is envisaged that the implementation of all the recommendations from the two Reports cumulatively, with the appropriate levels of commitment and cooperation from all relevant stakeholders, will achieve the objective of delivering fairer premiums for consumers and businesses alike.
In this regard, it should be noted that the most recent CSO data (for February 2018) indicates that private motor insurance premiums have decreased by 18.1% 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 with the result that premiums should continue to fall from the very high levels of mid-2016.
203. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he expects the economy to grow in the context of this and subsequent years, notwithstanding the potential threat of Brexit or other external factors; and if he will make a statement on the matter. [14234/18]
Amharc ar fhreagra209. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he expects his economic projections to remain on target throughout the course of 2018; if particular issues have emerged or are likely to emerge in this regard; and if he will make a statement on the matter. [14240/18]
Amharc ar fhreagraI propose to take Questions Nos. 203 and 209 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 4.0 per cent in 2017. Growth is broad based with net exports also contributing positively to growth last year.
The strength of domestic demand is being felt in the labour market. Employment growth remains strong with an annual rate of 2.9 per cent recorded in 2017, representing the creation of over 61,000 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 105.2 in February, well above its long run average.
- The seasonally adjusted monthly unemployment rate for February was 6.1 per cent, down from 7.2 per cent in February 2017. 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 forecast real GDP growth of 3.5 per cent this year. The labour market should benefit from this, with employment growth of 2.3 per cent (48,000 jobs) expected this year. Strong employment growth is set to further reduce the unemployment rate, to around 5 ½ per cent by the end of this year.
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 over the last two years 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 Favored 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.
204. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he continues to make provision for issues arising from Brexit in such a way as to maximise opportunities for the economy; and if he will make a statement on the matter. [14235/18]
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, to assess and prepare for the impact of a UK exit from the European Union. All of these Brexit-related studies are available on my Department's website. In addition, regular updates of my Department’s Macro-Economic forecasts take account of the impact of Brexit.
While the results in the 'Modelling the Medium to Long Term Potential Macroeconomic Impact of Brexit on Ireland' study published by my Department and the ESRI, show that the potential impact of Brexit on the Irish economy will be significant 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 these results are based on a “no policy change basis”. However, with the future trade path between the UK and EU still unknown, it is crucially important that we prepare our economy for the challenges ahead.
Indeed, as we cannot control the international environment, 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 maximise opportunities for the economy and 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 to make provision for issues arising from Brexit, and contingency plan for the future challenges ahead.
205. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he and his Department continue to monitor the policy of lending institutions that are set to repossess family homes, even in instances in which the borrower has over the past number of years continued to make repayments to the extent of up to one third of income; if a protocol can be devised to facilitate such borrowers (details supplied); if the lenders will now be expected to accept some responsibility in the issue by way of extending the terms of the mortgages or splitting such mortgages in a way to make it possible for the borrower to meet the demand; and if he will make a statement on the matter. [14236/18]
Amharc ar fhreagraAs the Deputy will be aware, within the remit of the Central Bank of Ireland's responsibilities for safeguarding stability and protecting consumers; its approach to mortgage arrears resolution is focused on ensuring the fair treatment of borrowers through a strong consumer protection framework and ensuring that lenders have appropriate arrears resolution strategies and operations.
The Code of Conduct on Mortgage Arrears (CCMA ) forms part of the Central Bank’s Consumer Protection Framework. It is a statutory Code first introduced by the Central Bank in February 2009, replacing the existing voluntary Code of Practice on Mortgage Arrears issued by the Irish Banking Federation. The CCMA has been revised three times since 2009, with the current CCMA becoming effective from 1 July 2013. The CCMA provides a strong consumer protection framework to ensure that borrowers in financial difficulty are treated in a timely, transparent and fair manner by regulated entities.
Firstly can I highlight to the Deputy that the CCMA includes timelines for regulated entities before they can commence legal proceedings for repossession of a primary residence.
It also includes requirements that repayment arrangements be sustainable and based on a full assessment of the individual circumstances of the borrower and that repossession be used only as a last resort. Borrowers who engage, therefore, benefit from the protections afforded under the Mortgage Arrears Resolution Process (MARP), enhancing their chances of remaining in their homes. The MARP process is a four-step process that regulated entities must follow and must consider the most suitable arrangement from the suite of options they offer. Each regulated entity must consider the borrower’s situation in the context of the range of solutions it offers, which may differ from lender to lender. The CCMA does not prescribe the solution which must be offered and this remains a commercial decision for the lender (outside of a Court process such as insolvency). The Central Bank has published guidance for supervisors on what constitutes sustainable mortgage arrears solutions.
At the end of the MARP, regulated entities are required to provide a three-month notice period to allow co-operating borrowers time to consider their options, such as voluntary surrender or an arrangement under the Personal Insolvency Act, before legal action can commence. Regarding potential court proceedings for repossession, under the CCMA, a regulated entity may only commence legal proceedings for repossession of a primary residence where it has made every reasonable effort to agree an alternative repayment arrangement (ARA) with the borrower and other clear requirements are met. This framework requires lenders to exhaust the options available from the suite of ARAs offered before taking action which may result in the borrower losing their home (whether by voluntary sale or repossession).
During the legal process, borrowers have opportunities to re-engage with lenders to find a solution. In some circumstances, however, loss of ownership may be unavoidable.
As I mentioned at the outset, a key element of the Central Bank’s role is ensuring that the consumer protection regulatory framework is fit for purpose so that consumers best interests are protected. To this end, I have also asked the Central Bank to carry out a review of the CCMA to ensure it remains as effective as possible and for the review to be completed as soon as possible.
Finally, in June 2016, I requested the Governor of the Central Bank to provide me with a report detailing the mortgage restructuring activity within banks and non-banks, the range of solutions offered by non-banks, assessing the range of solutions that may affect borrowers’ capacity to remain in their primary residences, and whether these are addressing the requirements of over-indebted borrowers. In that Report, the Central Bank stated ‘While repossession proceedings should only be initiated following the MARP, the ability to undertake secured lending is ultimately dependent on the institution’s right to realise the security if needed and to price accordingly. This is a cornerstone of secured lending and, by extension, an effectively functioning mortgage market’.
The Central Bank further stated that ‘Overall, there is strong evidence that banks and non-banks are looking to exhaust available options before moving into the legal process’.
206. Deputy Bernard J. Durkan asked the Minister for Finance his plans to introduce statutory rules appertaining to the code of conduct applicable to primary and secondary lenders or their agents with a view to ensuring the protection of families who continue to pay their mortgage to the best of their ability, or those who can demonstrate an ability to so do, and the need to ensure that the current housing crisis is not exacerbated by the activities of venture capitalists with negative consequences of a social and economic nature; and if he will make a statement on the matter. [14237/18]
Amharc ar fhreagraAs the Deputy will be aware, within the remit of the Central Bank’s responsibilities for safeguarding stability and protecting consumers, its approach to mortgage arrears resolution is focused on ensuring the fair treatment of borrowers through a strong consumer protection framework and ensuring that lenders have appropriate arrears resolution strategies and operations in place.
The Code of Conduct on Mortgage Arrears (CCMA) forms part of the Central Bank’s Consumer Protection Framework. It is a statutory Code, issued under Section 117 of the Central Bank Act, 1989.
The CCMA is a lengthy document which has evolved to reflect the changing times and situations which have arisen in the area of consumer protection. For example, an Addendum to the CCMA was published to take account of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 which stated that with effect from 8 July 2015, credit servicing firms, as defined in the 2015 Act, must apply for authorisation to the Central Bank and that the CCMA 2013 would apply to these firms. The great benefit of the CCMA not being a piece of primary legislation is that it can be amended relatively quickly to respond to changing events, pursuant to Section 117 of the Central Bank Act, 1989, while still remaining statutory.
The CCMA is aimed specifically at the process to be followed by relevant firms, to ensure borrowers in arrears or pre-arrears in respect of a mortgage loan secured on a primary residence are treated in a timely, transparent and fair manner. A key element of the Central Bank’s role is ensuring that the consumer protection regulatory framework is fit for purpose so that consumers best interests are protected. To this end, I have also asked the Central Bank to carry out a review of the CCMA to ensure it remains as effective as possible and for the review to be completed as soon as possible.
