James Lawless
Ceist:351. Deputy James Lawless asked the Minister for Finance the way in which tax receipts in 2020 compared to expectations at the outset of 2019; and if he will make a statement on the matter. [1857/21]
Amharc ar fhreagraTax Data
Ceisteanna (351)
Freagraí scríofa
I assume the Deputy is referring to how receipts in 2020 performed compared to expectations at the outset of that year, rather than 2019. In January of 2020, my Department published a high-level update to its economic fiscal and forecasts in the Medium Term Fiscal Strategy. At that stage, tax revenues for 2020 were estimated at €63.5 billion, which would have represented growth of 7 per cent on the record 2019 performance of €59.3 billion.
Reflecting the impact of Covid-19 on our economy and public finances, tax receipts in 2020 ultimately amounted to €57.2 billion, some €6.3 billion under the initial, pre-Covid projections published in January and by €2.1 billion, or 3.6 per cent on 2019.
However, the decline in tax revenues in the year was not as steep as had been feared. Although most revenue streams declined sharply, continuing growth in corporation tax receipts, and a remarkable resilience in income tax receipts, helped to prevent a more severe deterioration. Income tax receipts were down only 1 per cent in 2020, which is a testament to the highly progressive nature of our tax system. Unfortunately the worst affected sectors of the economy were dominated by relatively low wage earners, so most of those who lost their employment as a result of the pandemic were outside the income tax net.
The Government has acted to support those out of work through the Pandemic Unemployment Payment (PUP). Just under €5 billion was spent on PUP payments last year and the Government is committed to continuing to help those who have lost their jobs under the current restrictions.
Tax Data
Ceisteanna (352)
Marc MacSharry
Ceist:352. Deputy Marc MacSharry asked the Minister for Finance the way in which corporation tax receipts held up in 2020. [1863/21]
Amharc ar fhreagraFreagraí scríofa
Corporation tax receipts demonstrated strong growth in 2020 despite Covid-19, increasing by almost €950 million to reach €11.3 billion, the highest level on record. This, and a resilience in income tax receipts, boosted the fiscal position and prevented a more severe deterioration in the public finances.
These receipts are welcome, and a reflection of the success of our industrial policy in attracting high-quality firms to Ireland. There is evidence that, in particular, the pharmaceutical, ICT and financial sectors have contributed to the record level of receipts received in 2020. The continued strength in corporation tax revenues means that we are borrowing less than would otherwise be the case.
However, as the Deputy will be aware, I have stated on many occasions that corporation tax receipts are subject to exceptional volatility and unpredictability. Receipts are vulnerable to the business decisions of a relatively small number of large, multinational firms.
Additionally, forthcoming changes to the international tax regime are likely to negatively impact upon revenues. My Department has projected that the implementation of the OECD BEPS reforms may lead to fall of €500 million per annum in corporation tax receipts from 2022 onwards. Corporation tax receipts are not a sustainable basis upon which to make permanent expenditure commitments.
My Department will be updating its medium-term forecast of corporation tax receipts as part of the Stability Programme Update in April.
Banking Sector
Ceisteanna (353)
Paul McAuliffe
Ceist:353. Deputy Paul McAuliffe asked the Minister for Finance his plans to reintroduce mortgage breaks with the relevant financial institutions due to the high level of social welfare recipients as a result of the new restrictions; and if he will make a statement on the matter. [1787/21]
Amharc ar fhreagraFreagraí scríofa
Last year the Banking and Payments Federation of Ireland (BPFI) announced a coordinated approach by their member banks and other lenders to help their customers who were economically impacted by the onset of the COVID-19 crisis. The measures included flexible loan repayment arrangements where needed, including loan payment breaks initially for a period up to three months and then subsequently extended for up to six months. The implementation of this voluntary moratorium by the banking industry was a flexible response to the emerging COVID-19 crisis and ensured that a large volume of affected customers could benefit quickly during a fast moving and evolving public health crisis.
While many borrowers whose payment break has ended have been able to return to full payments, it is also recognised that many borrowers continue to be impacted by the economic consequences of COVID-19. For those borrowers, lenders are expected to engage with them in an effective way and in line with the requirements of the Code of Conduct on Mortgage Arrears, the Consumer Protection Code and regulations on lending to SMEs to deliver appropriate and sustainable solutions and facilitate as many borrowers as possible to return to repaying their debt.
In relation to the reintroduction of mortgage payment breaks, the Central Bank has confirmed that there is no regulatory impediment to lenders offering payment breaks to borrowers, providing they are appropriate for the individual borrower circumstance. The BPFI has also reiterated that standard payment breaks continue to be part of the wide range of tailored solutions which are being made available to customers upon assessment of their situation.
I will continue to work with the Central Bank, as regulator, to ensure that the Central Bank consumer protection and other applicable frameworks will be fully available to all borrowers that will still need support at this time.
Tax Reliefs
Ceisteanna (354)
Michael Moynihan
Ceist:354. Deputy Michael Moynihan asked the Minister for Finance the tax reliefs or concessions available to support persons working from home. [1866/21]
Amharc ar fhreagraFreagraí scríofa
Where e-workers incur certain extra expenditure in the performance of their duties of employment remotely or from home, such as additional heating and electricity costs, there is a Revenue administrative practice in place that allows an employer to make payments up to €3.20 per day to such employees, subject to certain conditions, without deducting PAYE, PRSI, or USC. Revenue have confirmed that PAYE workers using their primary residence as a workplace during Covid-19 restrictions qualify as e-workers for the purposes of this practice.
This administrative practice has been in place for some time and the choice of whether to make the payment of €3.20 is at the discretion of the employer. The value of relief allowed under the Irish system is already considered sufficient to cover any legitimate additional costs incurred by workers. The level of support allowed also compares favourably internationally: at €3.20 per day up to €16 per week or €832 per annum may be paid tax free. By contrast, the weekly rate in the UK is just £6 per week or a maximum of £312 per annum.
Revenue also advises that the provision of equipment, such as computers, printers, scanners and office furniture by the employer to enable the employee work from home will not attract a Benefit-In-Kind charge, where the equipment is provided primarily for business use. The provision of a telephone line, broadband and such facilities for business use will also not give rise to a Benefit-in-Kind charge, where private use of the connection is incidental.
Where an employer does not pay €3.20 per day to an e-worker, employees retain their statutory right to claim a deduction under section 114 of the Taxes Consolidation Act (TCA) 1997 in respect of actual vouched expenses incurred wholly, exclusively and necessarily in the performance of the duties of their employment. PAYE employees are entitled to claim costs such as additional light and heat in respect of the number of days spent working from home, apportioned on the basis of business and private use.
As I announced on Budget day, in addition to these existing measures, Revenue have agreed to allow broadband to qualify for this relief. This apportionment is based on the number of days the person spent working from home in year with 30% of the apportioned value accepted by Revenue as related to work in the home.
PAYE workers can claim e-working expenses by completing an Income Tax return at year end. Revenue advise that the simplest way for taxpayers to claim their e-working expenses and any other tax credit entitlements is by logging into the myAccount facility on the Revenue website.
Revenue have published detailed guidance on e-working arrangements in their Tax and Duty manual TDM 05-02-13 e-Working and Tax which may be viewed at the following link: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-02-13.pdf.
Finally, the national remote working strategy: Making Remote Work, commits the Tax Strategy Group to reviewing the current tax arrangements for remote working in respect of both employees and employers. The Tax Strategy Group will take account of the economic, financial and organisational implications arising from the experience of remote working during the pandemic, and assess the merits of further enhancements for consideration in the context of Budget 2022.
Fiscal Data
Ceisteanna (355)
Jim O'Callaghan
Ceist:355. Deputy Jim O'Callaghan asked the Minister for Finance the status of the public finances; if the forecasts made at the time of the October 2020 budget have been revised; and if he will make a statement on the matter. [1856/21]
Amharc ar fhreagraFreagraí scríofa
The end-year Exchequer returns show an Exchequer deficit of €12.3 billion was recorded in 2020 - a deterioration of almost €13 billion on the surplus of €647 million recorded in 2019. An Exchequer deficit of this level is consistent with a general government deficit of c. €19 billion, or around 5 ½ per cent of GDP.
The year-on-year deterioration in the public finances was primarily driven by large increases in current and capital spending as Government responded to Covid-19.
Overall, revenue proved remarkably resilient, with persistent strength in income tax receipts and further growth in corporation tax compensating to an extent for steep declines in other tax streams, particularly on VAT and excise duties. Tax receipts of €57.2 billion in 2020 were down by €2.1 billion or 3.6 per cent on 2019, a more muted impact than initially anticipated.
Total net voted expenditure to the end of the year was €67.8 billion, an increase of over 25 per cent or €13.7 billion on last year.
We are currently in a period of unprecedented uncertainty and the trajectory of the virus is very worrying. The impact of the current restrictions will have an obvious negative impact on the public finances, although, for now, it is too early to make any meaningful update to the forecasts made at Budget 2021. I will publish a new set of macro-economic and fiscal projections, as part of the Stability Programme Update (SPU) in April.
Brexit Issues
Ceisteanna (356)
Christopher O'Sullivan
Ceist:356. Deputy Christopher O'Sullivan asked the Minister for Finance his assessment of the impact on the Irish economy of the EU – UK Trade agreement announced on 24 December 2020. [1871/21]
Amharc ar fhreagraFreagraí scríofa
My Department has been to the fore in producing number of assessments on the economic impact of Brexit.
Research commenced before the Brexit vote in 2016, and continued following the referendum with analysis on the overall macroeconomic impact, as well as analysis at a sectoral level.
Joint analyses by my Department and the Economic Social Research Institute (ESRI) modelling the macroeconomic impact of Brexit were published in 2016 and 2019. The analyses covered a range of outcomes and possible future relationships between the EU and the UK.
The analyses included a limited Free Trade Agreement (FTA) based on zero tariffs and zero quotas on the goods side with very little covered in respect of services. Overall this is broadly in line with the recently concluded new Trade and Cooperation Agreement.
Under this Free Trade Agreement scenario, the research found that the level of GDP would be around 2 per cent lower over the medium-term (i.e. 5 years) and around 3 per cent lower over the long-term (i.e. 10 years), compared to a situation where the UK remained in the EU.
The conclusion of the Trade and Cooperation agreement is positive for the Irish economy compared to a no-deal scenario, as it will provide for zero-tariffs and zero-quota trade for qualifying EU and UK goods. It does not, however, mitigate against all ‘trade frictions’. Non-tariff barriers remain in the form of customs check, rules of origin requirements, and regulatory requirements. It is also very limited in respect of services.
The most recent trade data, published by the CSO in March, showed that the momentum in export growth seen throughout 2020 has taken a hit in the first month of 2021, with non-pharma exports to the UK recording a significant annual decline. Imports from the UK in all sectors also recorded a very substantial fall.
However, further data will be necessary to fully assess the short-term impact of Brexit, and the Department of Finance will continue to carefully monitor these developments.
In light of the COVID-19 pandemic, additional analysis was also jointly undertaken with the ESRI in 2020. The research found that that the long term impacts of Brexit were broadly in line with analyses undertaken prior to the pandemic.
Looking ahead, the Irish Government remains focused on protecting our economic and financial interests, and will continue to work to minimise the disruption that Brexit will have on the economy and peoples livelihood’s to the greatest extent possible.
Covid-19 Pandemic Supports
Ceisteanna (357)
Éamon Ó Cuív
Ceist:357. Deputy Éamon Ó Cuív asked the Minister for Finance the reason the guidelines issued on 4 December 2020 for the Covid restrictions support scheme were much more restrictive than those issued on 3 November 2020; if applications submitted before 4 December 2020 will be assessed on the guidelines issued on 3 November 2020; and if he will make a statement on the matter. [1015/21]
Amharc ar fhreagraFreagraí scríofa
The Covid Restrictions Support Scheme (CRSS) is a targeted support for businesses significantly impacted by restrictions introduced by the Government under public health regulations to combat the effects of the Covid-19 pandemic. The scheme supplements other Covid-related supports such as the Pandemic Unemployment Payment (PUP) and the Employment Wage Subsidy Scheme (EWSS).
The support is available to companies, self-employed individuals and partnerships who carry on a trade or trading activities, the profits from which are chargeable to tax under Case I of Schedule D, from a business premises located in a region subject to restrictions introduced in line with the Living with Covid-19 Plan. The details of the scheme are set out in Finance Act 2020 and guidelines on the operation of the scheme, including the eligibility criteria, are available on the Revenue website.
To be eligible to make a claim under CRSS, a business must, under the specific terms of the regulations, be required to either prohibit, or significantly restrict, customers from accessing its business premises to purchase goods or services, with the result that, during the period of restrictions, turnover does not exceed an amount based on 25% of the average weekly turnover of the business in 2019 (or in 2020 in the case of a new business).
The purpose of the Revenue guidelines on CRSS is to assist businesses in understanding the scope of the scheme; to assist them in assessing their eligibility for the scheme; and to provide information on how to make a claim. The guidelines are updated by Revenue on a regular basis to address common queries raised by taxpayers and to provide information on any developments relating to the scheme, such as the impact of any change in the levels of restrictions. The guidelines published on 4 December 2020 did not introduce new conditionality but rather were updated to address common queries and issues raised by taxpayers in relation to the eligibility criteria and to provide further information on how to make a claim under the scheme, including in respect of the “restart week”, which was available to eligible businesses on the easing of Covid restrictions in early December.
Guidelines published by Revenue on the operation of CRSS are based on the terms and conditions of the scheme as set out in legislation. Revenue does not have the flexibility to extend the scheme beyond the terms of the legislation.
The scheme commenced on 13 October 2020 and operates on a self-assessment basis. A person registering their details and details of their business activity for the purposes of making a claim under the scheme should retain evidence supporting their basis for making a claim. Where a person’s registration application or claim is selected for verification by Revenue, Revenue will request such evidence to verify the person’s entitlement to make a claim under the scheme based on the eligibility and qualification criteria as set out in legislation.
EU Budget Contribution
Ceisteanna (358)
Éamon Ó Cuív
Ceist:358. Deputy Éamon Ó Cuív asked the Minister for Finance the estimated net financial contribution outflows less inflows by the Exchequer to the EU for 2020; the estimated net financial contribution that will be made in 2021 taking into account the effect of Brexit; and if he will make a statement on the matter. [1016/21]
Amharc ar fhreagraFreagraí scríofa
As the Deputy will be aware, Ireland has been a net contributor to the EU Budget since 2014, and since then, this position has grown further. In 2020, Ireland contributed €2.6 billion to the EU Budget. Data on actual EU Budget receipts are published annually in my Department’s Budgetary Statistics each Autumn for the previous year – 2020 receipt data will be published in Autumn 2021. Therefore, at this time, it is not yet possible to confirm Ireland’s net contribution in 2020.
Ireland’s contributions to the 2021-2027 MFF are expected to rise over the coming period from approximately €3 billion in 2021, to approximately €4 billion in 2027, an average of €3.5 billion per annum. We estimate that our receipts from the 2021-2027 MFF will be in the region of approximately €2 billion each year. However, these estimates are due to be revised in the coming weeks as part of the Stability Pact Update.
Given that the United Kingdom represented one of the largest net contributors to the EU Budget, Brexit has a significant impact on the contributions of all Member States, including Ireland’s. The above forecasts are based on the agreement on the 2021-2027 MFF, as agreed by EU leaders in July, which does not include any contributions from the United Kingdom.
The Deputy may also be aware that the Department of Finance published a report in September 2020 on Ireland’s financial transactions with the EU, Annual Report on Ireland's Transactions with the EU in 2018, which includes information on Ireland’s EU-related receipts and contributions. The report is intended to be an annual report, and can be found here: www.gov.ie/en/publication/70cad-annual-report-on-irelands-transactions-with-the-eu-in-2018/.
Questions Nos. 359 and 360 answered with Question No. 114.
Question No. 361 answered with Question No. 85.
Covid-19 Pandemic Supports
Ceisteanna (362)
Jennifer Carroll MacNeill
Ceist:362. Deputy Jennifer Carroll MacNeill asked the Minister for Finance his plans to reassess the employment wage subsidy scheme and the level of support provided through the scheme owing to the return to level 5 in the Living with Covid Framework; and if he will make a statement on the matter. [1915/21]
Amharc ar fhreagraFreagraí scríofa
I would like to assure the Deputy that the EWSS is sufficiently flexible to take account of the changes to the economic conditions that have arisen from the additional public health restrictions.
The EWSS is an economy-wide scheme that focuses primarily on business eligibility, delivering a per-head subsidy on a flat rate basis to the employer.
The EWSS “turnover test” has been specifically designed so as to target the subsidy at otherwise viable employers whose businesses continue to be adversely impacted by COVID-19 by requiring a comparison of the firm’s pre-pandemic operations with their current operations. The legislation provides that the employer must be able to demonstrate that they are operating at no more than 70% in either the turnover of the employer’s business or the customer orders received by the employer in Q1 and Q2 2021 compared with the same period in 2019.
There is additional flexibility in the application of the turnover test to allow employers to take account of potentially sudden changes in turnover on a month-to-month “opt-in/opt-out” basis. Under the legislation, an employer is required to carry out a review of their turnover each month and confirm that they are still eligible for the scheme. At the same time, there is no cut-off deadline for access to the scheme, so if there is a reduction in turnover because of an unexpected reduction in business activity or a sudden change in business circumstances the employer may be entitled to make a claim for that future period.
I have been clear that there will be no cliff-edge to the EWSS and, as the Deputies will be aware from announcements made on 23 February, it has been decided that the scheme is now to be extended until the end of June 2021. This will be at the enhanced rates of subsidy introduced with effect from late last October.
With the agreement by Government on the revised plan, COVID-19 Resilience and Recovery 2021: The Path Ahead, a cautious and measured approach will be taken as we lay the foundations for the full recovery of social life, public services and the economy. It is therefore appropriate that key business supports should remain in place until the end of June 2021.
As the revised plan is implemented, the EWSS will play an important role in getting people back to work as public health restrictions are eased, thereby reducing the numbers dependent on social welfare payments over time, including the Pandemic Unemployment Payment (PUP).
I am therefore satisfied that the design of the Employment Wage Subsidy Scheme (EWSS) fully takes account of the changing environment around living with the COVID-19 pandemic.
For those businesses who may need additional support, I would draw attention to the comprehensive package of other business and employer supports that have been made available since the July Stimulus Plan and Budget 2021 - including the Covid Restriction Support Scheme (CRSS), the Credit Guarantee Scheme, the SBCI Working Capital Scheme, Sustaining Enterprise Fund, and the Covid-19 Business Loans Scheme.
Question No. 363 answered with Question No. 114.
Covid-19 Pandemic Supports
Ceisteanna (364)
Bernard Durkan
Ceist:364. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he remains satisfied that the Covid-19-related support measures already in place are sufficient to meet all identifiable contingencies; if further steps are required to support the economy and protect the consumer against Covid-19; and if he will make a statement on the matter. [10588/21]
Amharc ar fhreagraFreagraí scríofa
Almost €38 billion in fiscal support has been provided by Government to households, businesses and our health service. This is an extraordinary level of budgetary support, representing almost a fifth of national income.
The Pandemic Unemployment Payment has supported those who have lost their jobs as a result of this pandemic, with a cost of over €6.5 billion to-date.
We have put in place a comprehensive suite of measures to assist businesses. Over €5 billion has been paid to eligible businesses under the main support scheme, the Employment Wage Subsidy Scheme and its predecessor, the Temporary Wage Subsidy Scheme. The Government has also introduced the Covid Restrictions Support Scheme, which provides direct financial support to firms that have had to close due to the public health measures in place. Businesses that are not eligible to avail of this scheme are further supported by the Small Business Assistance Scheme.
These measures are in addition to the wide range of supports provided through Enterprise Ireland, the IDA, and by Local Enterprise Offices.
Going forward, we will continually assess the supports available and ensure that they remain targeted to the sectors most in need. We will also ensure that the existing supports remain in place for as long as they are needed.
Brexit Issues
Ceisteanna (365)
Neale Richmond
Ceist:365. Deputy Neale Richmond asked the Minister for Finance the impact the shift of Euro-denominated share trading away from London post-Brexit has had on the Irish financial services sector; and if he will make a statement on the matter. [1323/21]
Amharc ar fhreagraFreagraí scríofa
It is not possible to give a definitive assessment of the impact of Brexit on Euro denominated share trading based on the data available from just the first quarter of 2021, as the lasting impact of Brexit on Euro denominated share trading is only likely to reveal itself over a longer time period.
However, I am aware of reports of significant outflows of Euro-denominated share trading from London to various EU capitals from the early days of January. I am further aware that the share trading obligation set out in the Markets in Financial Instruments Regulation (MiFIR) may be a factor in such trading flows. But there are potentially many different reasons for changes to share trading flows and volumes over a short period of time.
With respect to the Irish market, my officials are in contact with Euronext Dublin (formerly the Irish Stock Exchange) to monitor share trading data. At this point, I understand that it would be speculative and premature to seek to draw any firm conclusions on these matters. I anticipate that we will be in a better position to identify any enduring trends and understand their drivers later on this year.
Question No. 366 answered with Question No. 114.
Help-To-Buy Scheme
Ceisteanna (367)
David Stanton
Ceist:367. Deputy David Stanton asked the Minister for Finance his views on the impact of the enhanced help-to-buy-scheme introduced as part of the July stimulus package; if he is satisfied that the scheme is achieving the intended objectives; and if he will make a statement on the matter. [1741/21]
Amharc ar fhreagraFreagraí scríofa
Section 477C of the Taxes Consolidation Act of 1997 provides for The Help to Buy scheme (HTB). HTB was initially announced on 19 July 2016 as part of the ‘Rebuilding Ireland: Action Plan for Housing and Homelessness’.
An increase in the supply of new housing is fundamental to resolving the current housing crisis. One of the main aims of the policy underpinning the design of HTB was to help encourage the building of additional new properties. By restricting the scheme solely to new dwellings and new self-builds, it is anticipated that the resulting increase in demand for affordable new build homes will encourage the construction of an additional supply of such properties. In accordance with a commitment in the Programme for Government, HTB was enhanced in July 2020. It is too soon to draw conclusions as to the impact of the enhancements on supply.
HTB has been the subject of two independent reviews: an impact assessment (2017), and a full Cost Benefit Analysis (2018), both carried out by Indecon Economic Consultants.
The report of the impact assessment was published as part of Budget 2018 documents and is available at the following link:
http://www.budget.gov.ie/Budgets/2018/Documents/HTB_Independent_Impact_Assessment_Sept2017.pdf.
The report of the Cost Benefit Analysis was published on the day of Budget 2019, in the Department of Finance Report on Tax Expenditures, and is available at the following link:
www.budget.gov.ie/Budgets/2019/Documents/Tax%20Expenditures%20Report%20Budget%202019.pdf.
In brief, the 2018 CBA, confirmed the findings of the independent review as follows:
- Prices: While there might have been a very small increase in prices attributable to the introduction of the incentive, the primary driver of house prices remained the continued misalignment between demand and supply.
- Supply: The evidence suggested that following the introduction of the incentive there was a marked increase in supply which can be attributed in part to HTB.
- Affordability: The analysis also found that availability of HTB had reduced the time to save for all claimants and improved the overall affordability of housing for these individuals.
- Benefit/Cost Ratio: The analysis found a benefit-cost ratio of 1.28 indicating a moderate positive effect for the incentive.
Finally, in relation to impacts on house prices, to the extent that data are available at this point, Revenue advise me that for 2020 the average purchase price relating to HTB claims to December 31 2020 was €329,000 which was the same as the figure for 2019.
Banking Sector
Ceisteanna (368)
Pearse Doherty
Ceist:368. Deputy Pearse Doherty asked the Minister for Finance the contact he has had with lenders regarding the reactivation of the European Banking Authority guidelines on legislative and non-legislative moratoria on loan repayments applied in view of the Covid-19 crisis; if he has sought an extension of payment breaks for borrowers under these guidelines without the accrual of interest during the payment break period; and if he will make a statement on the matter. [3383/21]
Amharc ar fhreagraFreagraí scríofa
On the 2nd April 2020 the European Banking Authority (EBA) published guidelines on legislative and non-legislative moratoria on loan repayments. These guidelines provided regulatory flexibility to banks who offered borrowers a temporary payment break due to COVID-19. These guidelines were originally applicable until 30 June 2020 and their application was subsequently extended by the EBA until 30 September 2020.
On the 21 September 2020 the EBA announced that they would phase out the Guidelines on legislative and non-legislative payment moratoria in line with its previous 30 September deadline. However, the EBA announced on the 2 December 2020 that they would reactivate their Guidelines and they applied until 31 March 2021. At that time the EBA also updated the guidelines so that they only apply to loans which have had payments suspended, postponed or reduced by not more than 9 months in total.
Since the onset of the Pandemic, I and my Department, have had ongoing engagement with the retail banking sector to ensure that borrowers impacted by COVID-19 were receiving adequate support.
I met with the CEO’s of the five main retail banks and the BPFI on 18 March 2020 at the onset of the COVID-19 pandemic to discuss the actions that were taking place to assist the customers who were affected by the pandemic. At this time payment breaks were introduced by the industry under a voluntary programme and their introduction in this way allowed for a rapid response and the provision of immediate relief to impacted borrowers.
Following on from this in May and July 2020, I met with representatives of the retail banks again to discuss the supports that business and mortgage customers were receiving during the pandemic.
On 28 September 2020, I along with the Tánaiste and Minister for Public Expenditure and Reform, met with the retail banks and the Banking and Payments Federation who agreed to provide suitable supports, both short term and longer term, to borrowers who are experiencing difficulties on a case-by-case basis following the conclusion of the general payment moratoria in Ireland.
In relation to the accrual of interest on loans during payment breaks, lenders will continue to incur costs (both in respect of funding and enhanced operational requirements) and that other borrowers will continue to be liable for their interest charges. Payment break measures do not come without cost to the banking sector and these costs will also have to be managed in a way that protects their business and will be as fair as possible to the various stakeholders. From the outset, I have made it clear to banks that it will not be acceptable for them to make excess profits on payment breaks and that it will be a matter for them to demonstrate that such a situation will not arise.
I understand that circa ninety percent of borrowers have now returned to full repayment either under existing or extended terms. In respect of borrowers who are still experiencing repayment difficulty at the end of a COVID-19 payment break, mortgage lenders are expected to work with borrowers in a pro-active and sympathetic manner and with the objective of assisting borrowers to meet their mortgage commitments.
EU Agreements
Ceisteanna (369)
Pearse Doherty
Ceist:369. Deputy Pearse Doherty asked the Minister for Finance if the Government will support the General Escape Clause in the EU fiscal rules remaining in force beyond 2021 and the fundamental reform of the Stability and Growth Pact in the time in which it remains in force; and if he will make a statement on the matter. [3384/21]
Amharc ar fhreagraFreagraí scríofa
As the Deputy will be aware, earlier this month the European Commission published a Communication on the fiscal policy response to the pandemic. This Communication provides valuable guidance to Member States on the conduct of fiscal policy in the period ahead, including in relation to the application of the General Escape Clause of the Stability and Growth Pact.
In this Communication, the Commission announced that its decision on the continued application of the clause will involve an overall assessment of the state of the EU economy, based on quantitative criteria, in particular the level of economic activity compared to pre-crisis levels. On this basis, the Communication states that current preliminary indications suggest the clause will persist into 2022 before its de-activation in 2023. However, a formal assessment on the continued activation of the clause will only be made by the Commission once its 2021 Spring Forecast is published in early May.
I am in broad agreement with the approach that has been outlined by the Commission, including the framework for deciding if the General Escape Clause will continue into next year. For as long as the current health and economic crisis remains acute, it is vital for governments to support and protect jobs and businesses. Although policy will need to remain agile and adapt to the prevailing situation, premature withdrawal of fiscal support should be avoided.
It is in this context, that my fellow Eurogroup finance ministers and I recently committed to a supportive policy stance in the euro area in 2021 and 2022. The support put in place at the European level, notably the Next Generation EU initiative and the Recovery and Resilience Facility, will be very important in this regard. The Eurogroup agreed that once the recovery is firmly under way, governments should implement sustainable medium-term fiscal strategies to tackle the increased levels of public debt.
On the broader question of reform of the EU fiscal rules, it is important to recall that there have been several overhauls of the Stability and Growth Pact since its inception, including most recently following the Global Financial Crisis, through the adoption of the Six-pack and Two-pack legislative packages. Early last year, the Commission opened a formal review of the Six- and Two-pack, including the launch of a public consultation on the operation of the fiscal rules in February 2020. Discussions around this review were paused because of the pandemic, with the public consultation suspended. I welcome the confirmation by the Commission in their Communication that they intend to relaunch the public debate on the fiscal framework when the recovery takes hold. My officials and I will actively engage in these discussions. In particular, I support efforts to enhance the transparency, predictability and simplicity of the rules. However, it must be recognised that there are difficult trade-offs involved. This means that finding agreement will be challenging.
Financial Services Regulation
Ceisteanna (370)
Pearse Doherty
Ceist:370. Deputy Pearse Doherty asked the Minister for Finance if he will consider legislation to strengthen the consumer protection code; his views on the lack of enforcement action taken by the Central Bank for breaches of the code; and if he will make a statement on the matter. [1850/21]
Amharc ar fhreagraFreagraí scríofa
The Central Bank’s Consumer Protection Code 2012 (the Code) is a statutory Code issued pursuant to Section 117 of the Central Bank Act 1989. The Central Bank has the power to administer sanctions for a contravention of the Code under Part IIIC of the Central Bank Act 1942. The provisions of the Code are binding on regulated entities and must, at all times, be complied with by regulated entities.
The Code is a key component of the strong consumer protection framework in place for consumers of regulated financial service providers and sits alongside other statutory rules such as the Code of Conduct on Mortgage Arrears, SME Regulations and many conduct rules contained in various EU Directives. The Code sets out the requirements that regulated entities must comply with when dealing with consumers in order to ensure a similar level of protection for consumers, regardless of the type of financial services provider. The Code sets out important protections in a range of areas, including in relation to pre-contractual and post-sale information, assessing suitability, claims processing, error and complaints resolution, arrears handling and advertising.
Since 2012, the Code has been strengthened a number of times, via addenda, to provide additional protections for consumers. These amendments include new requirements around variable rate mortgages, mortgage switching measures, and intermediary inducements.
A review of the Code is currently underway by the Central Bank. A public consultation on the Central Bank’s proposals for amendments will take place in 2021 giving all stakeholders an opportunity to make submissions. This review will also include transferring the Code into regulations in line with the regulation making powers given to the Central Bank in the Central Bank (Supervision and Enforcement) Act 2013.
The Central Bank has advised me that it continues to give focus to the Consumer Protection Codes in both its supervisory and enforcement work.
It is important to note that the Central Bank’s work to protect consumers is delivered across the entirety of the Bank, and is not just confined to the Code. The breadth of its mandate enables it to harness its collective wide-ranging policy, economic, financial stability and regulatory expertise in working to protect consumers. The stability of the system, and the resilience of firms within it, are as essential in protecting consumers and investors as our statutory codes of conduct, policy development, assertive supervision, authorisation gatekeeping and robust enforcement powers.
On the issue of enforcement, the Central Bank has a strong track record of taking enforcement action, with a significant focus on consumer protection in this regard.
The Central Bank has concluded 142 cases under the ASP framework with fines imposed of over €165.9m. Of the 142 outcomes, 22 were imposed against individuals. The Central Bank has also taken action to revoke 28 firms’ authorisations on an involuntary basis. A further 13 firms were refused authorisation to undertake regulated activities.
While the Central Bank’s enforcement work spans the entirety of its mandate and is wider than the Code alone, the Central Bank has a strong enforcement record in respect of outcomes which are integral to the Code. In this regard, the three largest monetary sanctions imposed to date by the Central Bank – Permanent TSB plc sanctioned €21million in 2019, KBC Bank Ireland plc sanctioned €18.3million in 2020 and in March 2021 Ulster Bank sanctioned €37.7million - evidence the Central Bank’s commitment to taking robust enforcement action with real deterrence value where serious and significant breaches of the Code are committed.
In addition, in the first quarter of 2021 the Central Bank delivered the following significant enforcement outcomes:
- reprimanded and fined Keystone Insurance Limited for Code breaches relating to overcharging and a failure to communicate fees clearly to customers;
- reprimanded and fined J&E Davy for regulatory breaches arising from conflict of interest and identification management and compliance with staff dealing rules under MiFID.
The Fitness and Probity regime was introduced in 2011. In the Central Bank’s role as gatekeeper, 107 applications for pre-approval to the Central Bank were withdrawn following involvement of the Central Bank’s Enforcement Division. A further 4 individuals have been refused pre-approval due to fitness and probity concerns. Where the Central Bank identifies individuals in a controlled function who do not comply with the fitness and probity standards the Central Bank will investigate fully and if the evidence supports it, prohibit the individual either indefinitely or for a period of time.
The Central Bank has issued 9 prohibition notices since 2011. The protection of consumers is one of the key considerations when deciding to prohibit an individual.
The Central Bank has a broad range of tools, which it carefully deploys in appropriate circumstances, including the imposition of sanctions but up to and including the revocation of authorisations and the refusal and prohibition of individuals. The Central Bank has taken a number of actions in these areas in furtherance of its consumer protection mandate.
Ultimately for all cases, whether they are specifically based on a breach of the Code, or another sector of legislation, it is important to note that while a case may not have been settled under the Code, protecting consumers is at the centre of all of the Central Bank’s enforcement outcomes.
Regarding legislation to strengthen consumer protection, the Programme for Government includes a Senior Executive Accountability Regime (SEAR), which will be the centrepiece of the forthcoming Central Bank (Amendment) Bill. The key focus of this legislation is to drive positive behaviour and encourage a culture of high standards that delivers better and fairer outcomes for consumers.
Officials in my Department are currently engaging with the Attorney General's Office to ensure that the provisions of the Bill are constitutionally sound, and that the correct balance between additional powers for the Central Bank and the protection of individuals' constitutional rights is struck. This engagement is an iterative and ongoing process, substantial progress has been made on clarifying the legal and constitutional issues to be considered.
It is my intention that draft heads of Bill will be presented to Government for approval in the near future.
Question No. 371 answered with Question No. 106.