Other Questions
63. Deputy Bobby Aylward asked the Minister for Finance the status of the implementation of the recommendations made in the report by his Department's working group on reducing the cost of motor insurance; the number of recommendations that have not been implemented to date; the reason for same; and if he will make a statement on the matter. [13924/18]
Amharc ar fhreagraThe cost of insurance working group’s report on the cost of motor insurance was published in January 2017 and makes 33 recommendations with 71 associated actions to be carried out in agreed timeframes, which are set out in an action plan.
In line with the commitment to publish quarterly update reports on the implementation of the recommendations, the working group has published four update reports to date, most recently on 20 February last. This report shows that of the 46 separate deadlines set during 2017 in the action plan, 39 have been met. Substantial work has also been undertaken in respect of the nine action points categorised as "ongoing".
In respect of the seven actions which were not fully completed in 2017 as scheduled, three relate to legislation issues while another requires further discussion, and subsequent final agreement, between the Department and Insurance Ireland. Another outstanding action is contingent on the establishment of the new office of the legal costs adjudicators, which currently is expected to occur by July 2018. The remaining two actions both relate to recommendation No. 26, which requires the approval of both the Minister for Justice and Equality and the Garda Commissioner for potentially far reaching co-operative mechanisms between Insurance Ireland and An Garda Síochána to be formalised and is still under consideration.
Significant progress has been made in respect of the implementation of all seven of the aforementioned actions, particularly regarding the establishment of a new national claims information database. Overall, a considerable amount of work has been undertaken to address the issue of the cost of motor insurance by implementing the recommendations in the report.
It should be noted that the average cost of motor insurance has been consistently falling since the middle of 2016. The ongoing implementation of the motor report recommendations is contributing to this trend. The most recent CSO data show that the reduction is 18.1% since July 2016.
I do not believe we should understate the importance of the rising cost of motor insurance. I will support any measures that are brought forward to help reduce the cost of motor insurance for young people, taxi drivers, hauliers and all those working in industries affected by this issue. However, the measures brought forward by the Government are not having a quick enough impact. I do not say this lightly. I say it because that is what I hear regularly from our young people, taxi drivers, road hauliers and people in many other sectors of society. They become disillusioned when they learn their premiums are being increased by 15% with no meaningful reason given for such a rise. Older people, in particular, who have never had a claim against them and have never had penalty points on their licences are very aggrieved, and rightly so. I do not know where the Minister of State is getting his figures for the reduction because everybody I speak to says the premiums are going up. Nobody has told me that their premiums are going down on an annual basis.
For over 12 months Fianna Fáil has been calling for action on the rising cost of motor insurance. In 2014, motor insurance increased by 11.6% and in 2015 it increased by almost 30%. In the 12 months since December 2016, private motor insurance increased by 12%. These are staggering figures.
They are not my figures but independent figures from the CSO. They are not from the Department or Insurance Ireland. They are independently assessed by the CSO. The Deputy should not mistake what he calls the lack of speed. We are not underestimating the importance of this issue. To demonstrate its importance, there are four legislative measures from the Department of Finance, three legislative measures need to be changed by the Department of Justice and Equality and there is also legislation to be changed by the Department of Business, Enterprise and Innovation and the Department of Transport, Tourism and Sport. There is much work to be done. If any Member of the House, committee or group is prepared to make time available for these legislative changes, I would be delighted to hear it. We have nine legislative measures that will eventually have the overall impact. It is the cumulative effect of all these changes that will have the impact, not just one or two changes.
All I can speak about is the experience. Small and medium-sized enterprises, SMEs, say the insurance is killing them and its cost is increasing all the time. I do not know where the percentage reductions mentioned by the Minister of State are, because that is not the reality. I can give another example involving a member of my family. He is a young fellow who did the theory test, passed it, had 12 driving lessons and passed his second driving test after failing the first. When he looked for insurance quotations they were for thousands of euro. The insurance actually cost more than a car. When his father and mother tried to put him on their insurance as a named driver, they were quoted €2,000 and €3,000. I even tried to put him on my insurance for my commercial farming vehicle at home with my insurance company. It quoted €900 for eight months. That is extravagant. No young person will ever get on the insurance ladder unless we do something, and this is the place to do something to try to reduce the cost of insurance.
With regard to younger drivers, I said in the House previously that there is an opportunity for young drivers to use a telematics device which can record the movement of their vehicles. To my disappointment a huge number of young drivers prefer to pay the extra amount rather than be on the system where their every movement is recorded in an appropriate way. I believe that in the future all young drivers should use these devices so we can ensure they start with good driving practices rather than bad ones. There are insurance companies-----
What is the cost of these devices?
The cost of insurance will be halved for a young driver if he or she uses this device. However, very few people are taking it up.
64. Deputy Joan Burton asked the Minister for Finance his definition of non-performing loans, NPLs; if it includes loans that have been restructured and where the borrower has adhered to the conditions of the restructured loan; and if he will make a statement on the matter. [13673/18]
Amharc ar fhreagraWill the Minister for Finance tell the House his definition of NPLs and if this includes loans that have been restructured and where the borrower has adhered to the conditions of the restructuring, including part of the mortgage being warehoused? Is this an NPL in the Minister's view?
As the Deputy will be aware, the definition of what constitutes an NPL is not determined by me but rather by the relevant accounting standards and regulatory bodies, including the Single Supervisory Mechanism, SSM, and the European Banking Authority.
As the question specifically relates to the treatment of restructured loans, I shall repeat the context I provided in respect of this matter earlier. During the height of the financial crisis, a focus of authorities was on stabilising and reducing mortgage arrears. This led to the introduction of targets and a process then followed that included the provision and availability of split mortgage solutions or part capital and interest solutions that met certain criteria. These measures were accepted by the Central Bank of Ireland as being sustainable for the purposes of these targets.
Since the establishment of the SSM, the focus has shifted from reducing mortgage arrears levels to reducing non-performing loans. This has been accompanied by a new strict definition, which is Europe-wide, of what constitutes an NPL by the European Banking Authority. This means that certain restructures are deemed to be non-performing loans 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 separate occasions. We have outlined the background to the restructuring efforts in Ireland and have questioned the logic of now classifying some types of restructured loans, including certain split mortgages, as NPLs 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.
I draw the Minister's attention to the case of a family in my constituency that I have dealt with for some years. The family has been in torment because of the relationship with the Permanent TSB since they restructured their mortgage four years ago. It is a family of five; two adults and three children, one of whom has a severe range of disabilities and requires constant care and attention.
Two years ago, along with the Money Advice & Budgeting Service, MABS, I fought Permanent TSB to ensure that the child's domiciliary care payment was not taken into account as part of the household income being assessed towards ability to service a mortgage. After great difficulty, Permanent TSB relented and allowed the family to split the mortgage and warehouse a section of it. Since then, the family has never actually missed a payment. Both parents are working as well as looking after three children, one of whom has a high level of disability. Now the family has gone back into all the uncertainty and a hellish situation about what is the future of their home because it appears that Permanent TSB may sell their loan over their heads, effectively to a fund. We do not know what approach the fund will take or if the family could potentially end up homeless. This would be an incredible cost to the State but especially to the family in light of their particular circumstances.
This is just one of many cases. As the Minister is aware, the thousands of people in this type of situation are extremely worried about what will be their fate. He cannot stand idly by and wash his hands of the situation.
It is appalling that anybody who is dealing with a family facing such pressures would seek to treat domiciliary care allowance and its payment in the same way as they would other income streams into the home. I am aware that access to that payment is based on severe need. I also know, from ample experience, that the payment is used to help families get by in supporting loved ones that have great need.
On the broad point put to me by Deputy Burton, I have outlined what I and my Department have done in respect of this matter in the immediate past on this current classification. I am absolutely aware of the level of concern these particular loan owners have about the potential sale.
During my time in the Department of Social Protection, I invited the Vincentian Partnership for Social Justice to calculate separately the minimum amounts a family needed to live on, including the retention of special social welfare allowances, which many banks initially wanted to reduce or relieve families of in their entirety. I am glad the Minister agrees.
In an earlier reply, the Minister referred to the arrangements for Anglo Irish Bank whereby the €3 billion annual payment was changed overnight. He was not a member of the Cabinet at the time but he was a member of Fine Gael, which took the courageous action to which I refer and which did not meet with a great reception from Brussels. As a result of that action, we actually resolved that problem. It was one of the key things that allowed Ireland to kick-start its economy. I understand all the difficulties outlined by the Minister but there comes a point when one cannot stand aside. He must make a decision in favour of the mortagees who are so indebted and who are facing such great difficulties.
Deputy Michael McGrath has a quick point to add.
In an effort to be constructive, I wish to add to what I said earlier. Will the Minister ask the officials in his Department's shareholder management unit to examine the transcript of the proceedings of last Thursday's meeting of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, and focus, in particular, on the issue I raised earlier about the different classifications by AIB and Permanent TSB of split mortgages as being NPLs and not NPLs? Could the unit and the Department be of assistance to Permanent TSB to resolve this issue? There was a clear conflict of evidence and it must be resolved. The Department of Finance can play a very useful role in this and it would be a help to these mortgage holders.
I have spoken to both banks at length about this issue. I agree with Deputy Michael McGrath's suggestion but I do not believe there is a conflict in the evidence; the evidence is the reality. The reality is that Permanent TSB made a mess of its split mortgages. As a result of the way in which it restructured them, all 6,300 have been deemed non-performing. AIB's 3,800 split mortgages are either deemed to be performing or have the potential to become performing. It is mind-blowing that Permanent TSB does not know how AIB was able to do this. These are two State-owned banks with thousands of split mortgages. One bank has managed its split mortgages into performing loans, under the same rules, while the other has deemed thousands of its mortgages to be non-performing. There needs to be an intervention. Who is left carrying the can? It is the people who did nothing wrong and who have performing mortgages but because these are deemed to be non-performing, they are, in Permanent TSB's case, being sold off as part of Project Glas. There needs to be an intervention. The fact that the management of Permanent TSB does not know how AIB did what Permanent TSB is supposed to do is just mind-blowing. We are paying these people hundreds of thousands of euro and they cannot get to grips with this. They told us that they wrote to the SSM last year and they are still awaiting a response.
Several points have been put to me. First, I am aware of the differing testimonies given by both banks in recent weeks. While there is no need to do so, we will, of course, look at the transcripts. We were aware of what was said during the questions put to the banks by members of the joint committee.
I am aware of how this matter was handled by the different banks. I have outlined what we have done about it and our engagement with the Single Supervisory Mechanism on this matter. I am very much aware of the worry of citizens who restructured their mortgages and tried to honour their terms and now find themselves potentially part of a loan book sale. I do, however, have to respect the work of an independent regulator and the decisions it may make. It is important that our banks can perform independently in responding to needs and guidance issued by the regulator.
In response to Deputy Burton's call for me to be courageous in this matter and to use the Anglo Irish Bank piece as a springboard for that, the difference here is that this is a bank that I want to be a part of the future of Irish banking. It has 1 million customers, €21 billion of mortgage loans and €17 billion of deposits. The Deputy was part of the decisions that were made that night and I need not tell her the direction of Anglo Irish Bank that night and afterwards was fundamentally different from the journey we want Permanent TSB to go on.
I have to say-----
Sorry, the Deputy's time is up.
I want to say briefly-----
Sorry, Deputy Burton, you are going to say that I am picking on you again. I am already five minutes over time on this question and people who go over time exclude at least one question by another Deputy who would like to be heard, probably Question No. 68. We will probably only get to Question No. 67. The time is up.
65. Deputy Joan Burton asked the Minister for Finance his views on proposals by banks to offload mortgages in arrears; the number of such mortgages in respect of small and medium enterprise, SME, and other business loans in which the security for the loan is a personal home; and if he will make a statement on the matter. [13670/18]
Amharc ar fhreagraI have no problem with either or both Deputies speaking because this is such a life-and-death issue for so many families.
This question follows on from the previous one. We face a horrendous situation. Right around the country, particularly I would think outside Dublin, there are people who have conflated personal guarantees on their family residential homes with loans they took out for commercial purposes. The Minister does not have to make the sort of big decision that had to be made on Anglo Irish Bank but he has to see what he can do to ensure the future of these families because if they lose their homes they will lose their businesses as well. If the Minister is worried about the future of small businesses and rural Ireland, as the Minister of State beside him, Deputy D'Arcy, well knows, this is a catastrophe waiting to happen.
I am well aware of the concerns on this matter. In responding to questions I try to show that we also have to get to a place where the level of non-performing loans that Irish banks have is reduced. There have been several years of economic growth in our economy. People have returned to work, in no small part due to the decisions made by the Government of which the Deputy was a member. There is the potential for the country to move to full employment. For one of the largest banks to still have non-performing loans in excess of 20% on its balance sheet has very serious consequences for that bank. That is why it is trying to deal with the matter. Through the different courses of action I have outlined, and in what I seek to do by assessing the effectiveness of the code of conduct on mortgage arrears, in trying to work constructively with Members of the Dáil on legislation they bring forward, I am trying to maintain the framework that has resulted in a big reduction in non-performing loans and a significant reduction in mortgage arrears in recent years, while avoiding the huge social consequences that many forecast several years ago and which did not happen.
I put it to the Minister that he has arrived at a crunch time. I do not think there is very much disagreement on those loan holders who have failed to engage in any way with the banks. What I and others have constantly spoken about is those people who in good faith made an arrangement and are sticking to it at great sacrifice to themselves. In almost every other country where bank collapses happen, for instance in the United States, they would be able to strike a deal. While it was not possible to do deals five years ago, it is now possible to do them because of the strength of the Irish economy and it is up to the Minister for Finance to be creative about a structure that allows families or businesses which have offered personal guarantees on business lending of their family homes survive.
Customers and citizens have been making agreements with many banks to help get through the grave difficulty in which they were and still are. The Deputy refers to structures. I can mention the personal insolvency legislation and organisations such as Abhaile, all of which have contributed to a massive reduction in mortgage arrears over recent years, for 16 or 17 consecutive quarters. That has happened because the structures have been in place to help people get agreement in a way that differentiates between the majority of citizens who want to pay and a few who have decided not to pay at different points. I have told the House several times this afternoon that, conscious of the fact that there are further significant developments on the horizon, such as the potential loan book sale by Permanent TSB, I aim to see how we can assess, and change if needed, matters such as how we regulate private equity funds. I also aim to ask the Central Bank to review the code of conduct on mortgage arrears because I want to ensure that we have the right structures in place to manage further difficulty and stress that could develop in the period ahead.
The Minister is not offering any creative solutions to this problem. There are people who have businesses and who are in employment breaking their backs to meet the conditions. We are talking about people who have made great personal sacrifices. I can certainly offer several creative solutions. Practically any accountant in town would. I was personally involved in setting up Abhaile and the other schemes as a way to help people survive and come out of the crisis with their family homes intact. I am not sure that the Minister really recognises that the risk now is that families who have entered agreements could find themselves swept into the arms of non-registered entities which will give them no security to be able to hold onto their family homes. That is the dilemma to which the Minister must offer creative solutions.
It is not acceptable that AIB refused last week to provide any information whatsoever on Project Redwood. It would not confirm its existence but if I look up that "alleged" portfolio sale, as AIB called it, online I see a running commentary including the fact that it is down to the last phase with Lone Star, Cerberus and Goldman Sachs, which is expected to be completed by June. While I disagreed with much of what the Permanent TSB officials said last week, at least they engaged and provided information. There has been no information from AIB on Project Redwood. That is not acceptable.
They need to provide information to us. We are talking about farm loans, small business loans, retailers, manufacturers and buy-to-let properties. Zero engagement from AIB is not enough.
I was baffled. It was a simple question as to whether they would confirm that Project Redwood indeed existed. They said they would not even comment on that, despite the fact that we have the named three entities in the second phase of the sale. Earlier today, the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach asked publicly for them to reflect on the contribution they made in respect of Project Redwood. We have now asked them to do that again and to appear before the committee. As Minister for Finance, would Deputy Donohoe support the call of the committee for AIB to come back before it to discuss the loan sale that is under way at present? While the Irish people and the committee cannot go into the detail of how much the loans were and so on, we need to see what is being sold under Project Redwood. Are there split mortgages, farmland or homes that are attached to businesses such as those Deputy Burton raised? These are crucial issues and the finance committee needs to do its work. I ask the Minister, as the majority shareholder in that bank, if he supports the committee's view that AIB should come before us and discuss these matters, which members across the political divide were trying to question the bank on just last week.
I believe banks should give as much information as they possibly can to the committee and answer any questions that are put to them. I know that when banks are managing these sales, constraints are generated. I was affected by this myself in respect of what I was able to say about the Permanent TSB disclosure. However, within the constraints that are imposed due to stock market rules, it is still possible to give a fair amount of information regarding what is happening. While there are legal constraints that apply to banks that are involved in these transactions, I do believe they should give as much information as they can to the committee.
They gave none.
When I am in front of the committee, while we do differ on matters, sometimes vigorously, I do give as much information as I can and I believe other witnesses before the committee should do the same.
66. Deputy Pearse Doherty asked the Minister for Finance if he clarified to all State-owned or part-owned banks that his view is that they should not sell loan books to vulture funds; and if he will make a statement on the matter. [13653/18]
Amharc ar fhreagraThis is connected to the previous question. I thank the Minister for his response. I recognise what he said in respect of his own contributions before committees. AIB would not even confirm the sale. It is being reported across the globe, in The Wall Street Journal, in papers here and in England. The bank treated the finance committee appallingly, in my view. We have asked them to reflect on it and to come back. I welcome the Minister's comments.
Last week, the Minister confirmed to me that he had a meeting with Permanent TSB in which the loan sale, Project Glas, was discussed. Can he confirm to the House the views he expressed to Permanent TSB in respect of that loan sale?
I have outlined to Permanent TSB the views that I have shared with the House this afternoon, namely, that I understand that they are subject to a requirement from the regulator to reduce their non-performing loans. They took me through the circumstances that their bank faces, much of which I was aware of. I described to them the process that is open to me and the point at which I would be consulted in respect of this, of which they are aware. I emphasised to them the huge concern in respect of this matter and the need for those concerns to be recognised in how they act.
People refer to the Minister's predecessor using the term "vulture lover", which is probably due to a comment he made to the finance committee about the role vultures play in society. He believed there was a role for vultures in the financial system as well. I do not share that view although he is and was entitled to it. There is a real question in respect of where the current Minister stands, however. He is the majority shareholder in that bank. Is he going to give any indication to Permanent TSB that he, as Minister for Finance, does not want these 18,000 loans sold on to the vultures and that he wants them to work down these loans and to look at other avenues?
For example, I raise again the 6,000 split mortgages. They made a bags of them. They made a mess and got the wrong advice. Under the exact same rules and criteria, one State-owned bank was able to sort it out. We took them through it bit by bit. However, the CEO of the other bank was telling us that unless it sold them on or they returned to their original contract, they would be deemed non-performing. We know that is not true. I do not run a bank. I am not paid the amount that CEO is paid, yet I and every other member of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, knows that it is not true. It is mind-boggling stuff. We cannot sit back when a State-owned bank, as a result of its own incompetence in structuring these loans, says there is no option but to sell them off. Will the Minister tell the bank to restructure them using the model that AIB used so that we can bring these 6,000 loans, which comprise about 5% of their non-performing loans, back to a situation where they are performing?
I think the Minister is trying to be helpful but, in all honesty, these banks, notwithstanding the fact that they are majority State owned, are acting in a really gung-ho way towards families. That includes families who have businesses and a variety of circumstances and commitments as well to employment. Essentially, the Minister is adopting a hands-off approach and is indicating that there is little or nothing he can do. I actually do not agree with that.
I think the Minister is in the position of being Minister for Finance so that he has a capacity to work out solutions that are helpful to people who have actually tried their best and are paying it off. The social consequences of cutting these people adrift, whether they are businesspeople or people in a family situation who may lose their family home, and the social cost are catastrophic right around Ireland, particularly as regards business loans in rural Ireland and in farming, allied to Brexit. That is what we are trying to explain to the Minister.
There is absolutely no reason that all banks cannot treat the customers in the same way, with particular reference to a code of conduct. Currently, the only code that is acceptable is the one the banks manufacture themselves. They become judge and jury. They put out the code of conduct. They tell the client, "Sorry, you do not comply; your loan is unsustainable." It was unsustainable from day one but there is no reference to that at all. That is the sad part of it. I strongly urge that we look carefully at the code of conduct. It will be of assistance. There is the question of splitting mortgages and all that can go with it as well. There is no reason it cannot be done. I ask the Minister that serious consideration be given to it.
The code of conduct is currently being reviewed by the Central Bank. Under the powers available to me under the Central Bank Act, I asked that it conduct a review regarding the operation and effectiveness of the code of conduct as it currently stands. I am aware of potential change that could happen in the future and I want to make sure we are striking the right balance between our citizens, the taxpayer and the banks.
I do not need Deputy Burton to explain to me the consequences of this and the worry that people feel. I have articulated this since the moment I was required to comment on the issue. I know the responsibilities that I have. In terms of responsibilities, I want to return to a point I made earlier when answering a question from Deputy Pearse Doherty. I remind the Deputies, although they will be aware of it, that we are talking about a bank that has a million customers. It currently holds €21 billion of mortgage loans and €17 billion worth of deposits, and employs 2,500 people. After a number of years in which we have seen significant growth that has improved the balance sheets of banks and has helped our citizens cope with the great difficulty that they were under, having gone through all of that, this is a bank that still has non-performing loans which are five times the European average. If not dealt with, that will have consequences for the bank for which in turn the Deputies will hold me accountable.
They are misclassified.
I am accountable for both and, as the Deputy knows, different banks have handled this matter in different ways. The framework that we have had in place has served most people well as they have tried to deal with difficulties with personal debt at a time of economic difficulty. In the time open to me, I am looking to find a way in which we can make sure we have the right framework in place for change that might ensue. That is not me not taking my responsibilities seriously. It is me taking my responsibilities seriously but they are manifold and I must try to strike the balance that I just described to the House.
If I have Deputies' co-operation, we will get Deputy Pearse Doherty's next question and Deputy Wallace's. There are 12 minutes left.
At what point will the Minister be consulted with regard to the sale of Project Redwood? It is later on in Project Glas. Are we expecting that in the next months?
I do not have the information for the Deputy on that. I do not know but I will find out for him and write back to him. I will check that and give the Deputy the answer to it.
I thank the Minister.
There are just over 11 minutes, and we can get Deputy Wallace's question in if everyone co-operates. Deputy Doherty has 30 seconds to introduce No. 66.
I have done that one. I will do it again, if the Acting Chairman wants.
Sorry, we move to Deputy Wallace, No. 67, and if he co-operates, we might get to Deputy Michael McGrath's question.
67. Deputy Mick Wallace asked the Minister for Finance his plans to introduce a tax on land, specifically vacant land, which could be used for residential purposes; and if he will make a statement on the matter. [13939/18]
Amharc ar fhreagraI was afraid Deputy Pearse Doherty was going to go again. This question relates to the introduction of a tax on vacant land. The vacant site register is not catching those who are landbanking due to the many holes in the vacant site levy. Will the Minister consider introducing a proper tax on land? Ever since the Kenny report, as far back as 1974, successive Governments have refused to do what is necessary and it has led to untold damage to the manner in which we supply housing in the country.
Following a commitment given in budget 2015, a public consultation was conducted by my Department in that year on the issue of unused zoned and serviced land with a view to examining what taxation measures might be taken to penalise landowners who do not develop such land. Separately, the Urban Regeneration and Housing Act 2015 introduced new powers for local authorities to incentivise the development of zoned and serviced land, as well as providing for other measures which are intended to facilitate housing development. The Act allows for the possibility of applying the vacant site levy to both brownfield and greenfield development sites as long as they are located in designated areas in local authority development plans for the application of the levy. I understand that the Department of Housing, Planning and Local Government proposes to encourage local authorities to apply the levy on as wide a basis as possible in order to bring housing supply on stream earlier than would otherwise be the case.
On considering the outcome of the public consultation and the enactment of the Urban Regeneration and Housing Act 2015, it was determined that no new tax separate to the vacant site levy would be introduced to encourage the development of residentially zoned and serviced land. I understand that planning authorities will be issuing notices to owners of vacant sites by 1 June 2018 in respect of vacant sites on the register in 1 January of this year, indicating that the levy will apply to those sites on 1 January and will subsequently be applied on an annual basis thereafter, as long as the site remains on the vacant site register. As the Deputy knows and I announced in budget 2018, it is proposed to increase the rate of levy from 3% to 7% of the market valuation of relevant sites with effect from January 2020.
The vacant site levy is a farce. The Minister increasing it from 3% to 7% will still not catch the people who are avoiding it. A 0% rate of levy applies if the outstanding amount of the site loan is greater than the market value. When the outstanding amount of the loan is between 75% and 100% of the market value, a reduced rate of 0.75% applies. Where the outstanding amount of the site loan is between 50% and 75%, a 1.5% rate of levy shall apply. No one is buying development land with cash. One would be off one's head to buy it so they are all avoiding it. Anyone who has a loan on development land is not getting caught for the tax. It is borne out by the registers, which are catching the wrong people. Look at the Dublin City Council register and guess who has the most sites on it. It is Dublin City Council because it is a public body. The HSE has two and the Office of Public Works, OPW, has two. The National Asset Management Agency, NAMA, has a site on it. The landbanker is not being caught by this Bill. It does not work. It is not a proper land tax. Does the Minister have an interest in this? It is the biggest problem that we have in housing.
I was going to bring to the Minister's attention those well-known fantastic sites such as O'Devaney Gardens and the bottom of Dominick Street. Dublin City Council has been sitting on those lands and other lands in the city which have been derelict for a long time. Full-scale profiteering in land values is now a serious hindrance to house-building. There are too many people sitting on sites because they are just waiting as the values climb and climb. That is not helping ordinary families who desperately need to see more houses and more apartments built, including by the city council.
As the Deputy knows, I am well aware of O'Devaney Gardens. I hope that there will soon be an announcement on how that project will progress. I know the Deputy will welcome that as much as I will because it is a really important development. With regard to what Deputy Wallace said about the operation of the levy, we now have 235 sites from 12 local authorities - I know Dublin will be one - registered for the application of this levy. As I have described, the levy will go up from 3% to 7% if the land is not developed. The feedback I am getting - I acknowledge it is only feedback and we will have to wait to see until the financial liability is actually paid - is that this is having an impact on decisions that people are making with regard to holding land and what they decide to do with it.
Only recently, the managing director of Hines, a fairly serious player in development in Ireland today, said that there is no question, when house prices go up 14%, that people sitting on that land are rubbing their hands, wondering why they would sell or build now because they will make another 14% next year. He says that there should be a land tax, plain and simple. If one has undeveloped land that is zoned as residential and it is not built then one pays 50%. Like that, one solves the housing crisis. This is the managing director of Hines. We are not dealing with landbanking and I know it is a difficult place to go but until we do so, some Government, some day, will do it. It will do more for how we supply housing in Ireland than anyone has ever done in this State. It would be fantastic. Does this Government have the appetite for it?
The Deputy put a question to me about what we are willing to do. I have said, in the context of the Project Ireland 2040 plan, that we will put in place a State organisation to develop our own landbank. Where I agree with the Deputy, although I differ on the form of taxation policy to deal with the matter, is that the supply and pricing of land are fundamental to the operation of the housing market. I want the State to be in a position where it can acquire land and use that land for the delivery of more homes. We differ as to what impact that tax and new taxes will have on the pricing of land and release of homes. I believe, on the basis of figures that I have just shared with the Deputy, that the vacant site levy will have an effect.
68. Deputy Michael McGrath asked the Minister for Finance if he is satisfied that the additional numbers to be hired in the Tax Appeals Commission will be sufficient to meet the growing number of appeals it has to deal with; when he expects the number of outstanding appeals to begin reducing; and if he will make a statement on the matter. [13645/18]
Amharc ar fhreagraThe question is to establish what progress is being made in dealing with the substantial backlog of cases that has built up before the Tax Appeals Commission.
The Tax Appeals Commission, TAC, was established in March 2016 as part of the reform of the Finance (Tax Appeals) Act 2015. The vision for the new commission was that it would provide enhanced arrangements for an independent, efficient, well-defined, clear and transparent system for appeals relating to decisions of the Revenue Commissioners.
The commission has a recruitment campaign under way in conjunction with the Public Appointments Service to engage experienced, tax-qualified staff. I understand it is expected that appointments of case managers will be made shortly at assistant principal level. However, I am also advised by the commission that the number of appeals it receives now is of the order of 200 per month, which compares with an average of 75 appeals per month in 2016, the year of the commission's establishment. It has indicated that the view of agents and their representative bodies is that the number of appeals is likely to grow further during 2018. I am advised that with more than 3,600 appeals in its system, the commission is unable to provide the timely and efficient service that it wants to provide.
We have provided additional resources to the commission. Staffing levels have more than doubled over the first two years of operation. Where additional resources have been sought to date, no obstacle has been placed in the way of the commission in moving to secure the requested resources. Indeed, its budget has almost quadrupled between 2014 and 2018. The commission's Accounting Officer submitted a request to my Department last month for additional staff and resources to meet the increased caseload. This would involve an effective doubling of the commission’s budget in 2018 from €1.626 million to an estimated €3.226 million and it would require extra resources for ICT and new office space. I am considering this submission carefully at the moment and I will make a decision on it very soon.
Something dramatic has to be done to deal with this issue. Some of the facts the Minister mentioned in his reply highlight my concerns that this problem is actually growing. There is now about €1.6 billion of disputed tax caught up in the tax appeal system. There are more than 3,600 cases and the number is growing month on month because if the commission is receiving about 200 appeals per month, it is not concluding a fraction of that number of cases every month. The problem is getting worse. Having an efficient tax appeals commission is a vital part of the administration of taxation in our country as I am sure the Minister will agree. I do not know if extra resources and larger budgets are the answer, but an answer is needed. This problem is getting worse and it has to be addressed urgently.
The number of appeals coming to the commission is now far greater than it was when it was set up. I cannot think of any other organisation that has seen its resources quadruple in four years and about which I will say in the House that I am seriously considering a request for more resources, which I am. It is in everybody's interests to ensure that appeals submitted to the commission are treated quickly and fairly.
That concludes questions to the Minister of Finance. Ten questions were dealt with in the time allocated. We would have completed 13 if Deputies had stuck to their allotted time. I apologise to Deputies Durkan, Pearse Doherty and Michael McGrath, whose three questions could have been addressed if Deputies had stuck to their time limits.
