Written Answers Nos. 380-408
380. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 518 of 21 April 2021, if the proposal with regard to the addition at European Council level of the words by the use of secondary markets to Ireland's 2018 country specific recommendations was made by Ireland; if not, the way that Ireland voted on the amendment; and if he will make a statement on the matter. [31818/21]
Amharc ar fhreagraFurther to Parliamentary Question No. 581 of 21 April 2021, I wish to inform the Deputy that Country Specific Recommendations (CSRs) provide individual tailored guidance to Member States on macro-economic, budgetary and structural policies in accordance with Articles 121 and 148 of the Treaty on the Functioning of the European Union. These recommendations, issued by the European Commission as part of the framework of the European Semester for economic governance, are aimed at strengthening economic growth and job creation, while achieving or maintaining sound public finances and preventing excessive macroeconomic imbalances. Following discussions at the preparatory Council committees and adoption of the Country Specific Recommendations in Council, Member States are encouraged to implement the recommendations over the following 12-18 months, but these are not binding.
As is usual practice, following the publication of the draft Country Specific Recommendations by the Commission in May 2018, Member States have the opportunity to discuss the recommendations and seek factual clarifications. Factual inaccuracies are highlighted and it is not uncommon for the text of the Country Specific Recommendations to be amended, taking account of these discussions. This is done in the preparatory committees of Council. In the ECOFIN filiere, this work is carried out by the Economic Policy Committee (EPC) and the Economic and Finance Committee Alternates (EFC-A), before being approved by the Economic and Finance Committee (EFC) and by Finance Ministers at ECOFIN. A parallel set of discussions takes place in the Employment, Social Policy, Health and Consumer Affairs Council (EPSCO) filière.
The words secondary market loan sales appear in both the draft, as circulated by the Commission, and final versions of Recital 18 of the Country Specific Recommendations proposed for Ireland in 2018, which noted that a stronger consumer protection framework for secondary market loan sales could improve the viability of repossessions and write-offs.
At this stage the 2018 Country Specific Recommendation are historic and the only Country Specific Recommendations that Ireland need to take account of are the 2019-2020 Country Specific Recommendations, which need to be considered as part of the Recovery and Resilience Facility. Ireland has done this as part of its draft Recovery and Resilience Plan, which was submitted to the European Commission on 28 May.
381. Deputy Mairéad Farrell asked the Minister for Finance his views on the reform of the EU Fiscal Rules Stability and Growth Pact as they currently stand; if he will be making a submission to the Commission’s public consultation which is reopening in the second half of 2021; and if he will make a statement on the matter. [20512/21]
Amharc ar fhreagraThe European Union’s fiscal rules, as set out in the Stability and Growth Pact (SGP), are an integral part of the EU’s broader economic governance framework. This framework has evolved significantly over the past two decades, particularly following the economic and financial crisis a decade ago, which saw the rules strengthened through the adoption of the so-called Six- and Two-pack legislative packages. Early last year, the European Commission presented a formal review of the Six- and Two-pack, including the launch of a public consultation on the operation of the fiscal rules. Discussions around this review were paused to allow Member States to address the immediate challenges of the pandemic, with the public consultation suspended.
While compliance with the fiscal rules had improved across all Member States pre-pandemic, the rules have become increasingly complex over time. Thus, I believe it is necessary to discuss potential options that could improve the fiscal governance framework. In particular, I support efforts to improve the transparency, predictability and simplicity of the fiscal rules. While some flexibility is needed in the rules to respond to economic circumstances that are genuinely beyond the control of Member States, as evidenced by the application of the General Escape Clause in response to the pandemic, it is equally important to ensure that the rules are enforced consistently. The current rules’ reliance on unobservable variables such as the output gap, which directly affects the structural balance, also impacts the reliability and communicability of the framework. My Department has previously highlighted this on several occasions.
In relation to the Commission’s public consultation it is important to note the Commission’s intention, as set out in the Communication of March 3rd on the fiscal policy response to the pandemic, to relaunch the public debate on the economic governance framework once economic recovery takes hold. I fully support this position and welcome the planned resumption of the public consultation once economic conditions allow. My officials and I will continue to actively engage in discussions in this area at the European level.
382. Deputy Pearse Doherty asked the Minister for Finance the engagement he has had with both the construction industry and underwriters regarding professional indemnity insurance for construction professions and construction-related professions with particular reference to fire safety concerns and the withdrawal of underwriters from the market; the action he as Chair of the Sub-Group on Insurance Reform or that sub-group itself has taken to address this issue; and if he will make a statement on the matter. [30175/21]
Amharc ar fhreagraThe Government recognises that the Professional Indemnity (PI) insurance market has been hardening in recent years, in Ireland the UK and internationally. Insurers in many countries appear to have tightened their policy terms, increased premiums and overall seem more reluctant to underwrite the same level of risk as before. Events in recent years such as the Grenfell fire (particularly in relation to construction related PI insurance cover), Brexit and the COVID-19 pandemic have had an impact on the market, particularly in Ireland, where a significant level of specialised cover has been provided by UK underwriters.
In light of the concerns felt by many groups, particularly businesses, around the cost and availability of insurance, the Government has prioritised reform of the insurance environment. The Action Plan for Insurance Reform therefore sets out 66 actions which aim to bring down costs for consumers and business; introduce more competition into the market; prevent fraud and reduce the burden that insurance costs can have on business, community and voluntary organisations.
I would note that significant progress has been made to date on the implementation of these key reform including the establishment of the new Office to Promote Competition in the Insurance Market within my Department. In his capacity as the Chair of the Office, Minister of State Fleming has held number of bilateral meetings with major insurers on a wide range of issues The work of the Office includes engaging with sectoral stakeholders to understand gaps in the insurance market, with a view to expanding the risk appetite of existing insurers, and to understand the trends in the market as a whole. It is also involved with bodies such as the IDA in exploring opportunities for new entrants in order to increase the availability of insurance, including specialised cover in areas such as PI insurance. Minister Fleming will continue to update the Sub-Group on Insurance Reform on the Office’s work progress.
In conclusion, while the issues that have contributed to the hardening of the Professional Indemnity insurance market are international in origin, it is my firm belief that implementation of the Action Plan should assist in attracting such insurers into the Irish insurance market when it begins to improve again, including in the construction sector.
385. Deputy Pearse Doherty asked the Minister for Finance the estimated revenue raised by increasing the corporate tax rate from 12.5% to 15%, 16%, 17% and 17.5%, respectively; and if he will make a statement on the matter. [31825/21]
Amharc ar fhreagraOn a straightforward, mathematical basis there is a large theoretical yield from increasing the corporation tax rate for trading income. However, the Economic and Social Research Institute (ESRI) reports that research from both the United States and Europe suggests that foreign direct investment (FDI) and the decisions of multinationals to locate in Ireland are highly sensitive to rates of corporation tax. Therefore, increasing the corporation tax rate would likely lead to lower levels of economic activity, behavioural changes in the locational decisions of multinational companies and employment in the multinational sector. As a result of the difficulty of predicting and quantifying these impacts, particularly in the current economic climate, it is not possible to accurately or robustly estimate the potential yield from the increases proposed by the Deputy. I would note however that ESRI research in 2011 estimated that reducing Ireland’s corporation tax rate from 40% in 1994 to 12.5% in 2003 added almost 4% to the level of economic output in 2005 and around €2 billion in corporation tax revenues.
Furthermore, while corporation tax is statutorily levied on the profits of businesses, the ESRI states that researchers have concluded that a large share of the burden is likely to be borne by workers in the form of lower wages. This can arise from companies deciding to invest less, leading to lower capital and lower labour productivity and wages. As the ESRI found that small and medium enterprises (SMEs) predominantly finance their investments in fixed assets, intangible assets and staff through internal funds, raising the rate of corporation tax would hamper their ability to invest and grow.
386. Deputy Brian Stanley asked the Minister for Finance the extent of the restrictions on credit unions regarding the amount a customer can have on deposit; the purpose of the restrictions; and if this will be permanent. [31839/21]
Amharc ar fhreagraCredit unions in Ireland are regulated and supervised under the Credit Union Act, 1997 (the 1997 Act) and regulations issued by the Central Bank, which set out the framework for the registration, regulation and operation of credit unions including detailed governance requirements and prudential requirements on items such as reserves, liquidity, investments, member savings and lending.
Limits on credit union savings
The Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 (the 2016 Regulations) set an individual savings limit of €100,000 that applies on a per member basis. Individual credit unions could apply to the Central Bank to retain individual members’ savings in excess of €100,000, which were held at commencement of the 2016 Regulations. In addition, on an ongoing basis, credit unions with total assets in excess of €100 million can apply to the Central Bank for approval to increase individual member savings in excess of €100,000.
The introduction of the savings limit by the Central Bank followed a public consultation, CP88 - Consultation on Regulations for Credit Unions on commencement of the remaining sections of the 2012 Act .
In 2020, the Registry of Credit Unions completed a review of the continued appropriateness of the €100,000 individual member’s savings limit which concluded that the limit remains appropriate.
Savings limits/caps imposed by individual credit unions
Separate to the limits set out by the Central Bank in the 2016 Regulations, individual credit unions may decide to set individual savings limits/caps, which are below the €100,000 limit contained in the 2016 Regulations, in order to take account of their own specific business requirements and strategy.
It is a commercial decision for any individual credit union in terms of any such limits placed on the level of member savings or any decision to return some member savings - where they are of the view that this will best support the ongoing operation of their credit union for their members.
The Central Bank’s "Financial Conditions of Credit Unions" publication - 6th Edition (December 2019) includes some analysis on credit union savings, incorporating information on savings caps and responses from credit unions to a questionnaire that was issued by the Central Bank in 2019 (see Box B on pages 11 and 12 of the publication).
Savings restrictions for individual credit unions
There are currently no savings restrictions put in place by the Central Bank for any individual credit union.
388. Deputy Catherine Connolly asked the Minister for Finance his plans to introduce a vacant residential property tax; and if he will make a statement on the matter. [31865/21]
Amharc ar fhreagraI consider that the primary objective of a vacant residential property tax would be to increase the supply of homes for rent or purchase to meet demand rather than increasing tax revenues. However, before introducing such a tax it is of course important to have a sound understanding of the quantity, locations and characteristics of long term vacant dwellings, and the reasons why they are vacant.
Accordingly, in 2018 I commissioned a study on the potential of a vacant residential property tax to meet the objective of increasing the supply of homes. The resulting report presented a detailed evidence-based assessment of vacancy rates in areas in which the demand for housing is most acute. The report did not recommend the introduction of a residential vacant property tax as it considered it would not be an effective response to deal with the housing challenges. The very low vacancy rates in the areas of greatest demand for housing, particularly in terms of medium term vacancy, indicated that the potential for a vacant property tax to increase housing supply was very limited and could represent a distraction from the need to significantly accelerate the building of new social housing, affordable housing and the facilitation of private sector supply. In their report Indecon stated that while such a tax would be likely to generate significant media and public attention and may be seen as part of an effective response to our housing problems, they did not believe that this would be supported by the evidence in their report.
The report recommended that the matter be kept under review and this remains the position.
390. Deputy Róisín Shortall asked the Minister for Finance the number of employees in his Department and the bodies under the aegis of his Department who have been in receipt of a higher duty acting allowance for over two years. [31876/21]
Amharc ar fhreagraI wish to inform the Deputy that there are currently 5 employees in my Department who have been in receipt of a Higher Duty Allowance for over two years.
One of the bodies under the aegis of my Department, namely the Central Bank, has one employee in receipt of a higher duty acting allowance for over two years.
391. Deputy Neale Richmond asked the Minister for Finance if it is at the discretion of insurance brokers to charge a fee to clients for an insurance quote as opposed to paying the brokers fee themselves; if the option for brokers to continue to pay their own brokers fee and provide quotes to clients free of charge is still in place (details supplied); and if he will make a statement on the matter. [31959/21]
Amharc ar fhreagraAs I understand the Deputy's question, I am advised that in some circumstances brokers may charge consumers for a quote due to the research involved in providing their service. Such a decision would be at the discretion of the individual firm. The Minister for Finance has no role in the individual commercial decisions of brokers in this regard. The Central Bank of Ireland also cannot get involved in the commercial decisions of firms, other than to ensure that firms comply with the appropriate rules and regulations and particularly the requirements of the Central Bank’s Consumer Protection Code.
The Deputy should be aware that provision 4.13 of the Code sets out the minimum information that must be included in a regulated entity’s terms of business such as a general statement of the charges imposed directly by the regulated entity. Provision 4.54 of the Code states that prior to providing a service the entity must provide the consumer with a breakdown of ascertained charges that will be passed on to the consumer. Additionally, under Provision 4.55 of the Code, brokers are required to publicly display their fees and charges in a manner that is easily accessible to consumers.
The Deputy may be interested to know that in September 2019 the Central Bank published changes to the Consumer Protection Code 2012 to ensure transparency of commission arrangements and to minimise the risk of conflicts of interest relating to commissions arising where consumers are receiving financial advice from a retail intermediary. These changes took effect on 31 March 2020. Further detail on the new rules on commission arrangements can be found on the Central Bank’s website - www.centralbank.ie/news-media/press-releases/press-release-intermediary-commissions-25-sept-2019
Finally, if a consumer is not satisfied with how a regulated entity is dealing with them, or they believe that the regulated entity is not following the requirements of the Central Bank’s codes and regulations or other financial services law, they should make a complaint directly to the regulated entity. If they are still not satisfied with the response from the regulated entity, the response to their complaint from the regulated entity is required to include details for the consumer on how to refer their complaint to the Financial Services and Pensions Ombudsman.
392. Deputy Chris Andrews asked the Minister for Finance the revenue raised through the betting tax levy in each of the years 2016, 2017, 2018, 2019 and 2020; and if he will make a statement on the matter. [31965/21]
Amharc ar fhreagraI am advised by Revenue that the receipts from Betting Duty in the years 2016 to 2019 are published on the Revenue website at www.revenue.ie/en/corporate/information-about-revenue/statistics/excise/receipts-volume-and-price/betting-duty-receipts.aspx .
The receipts for 2020 are €86.8 million. This amount is provisional at this time and may be subject to adjustment.
393. Deputy Sean Sherlock asked the Minister for Finance the number of persons that have availed of the bike- to-work-scheme for 2020 and to date in 2021. [31974/21]
Amharc ar fhreagraAs the Deputy will be aware, section 118(5G) of the Taxes Consolidation Act 1997 (TCA 1997) provides for the Cycle to Work scheme. This scheme provides an exemption from benefit-in-kind (BIK) where an employer purchases a bicycle and associated safety equipment for an employee and was introduced in 2009.
The cycle to work scheme operates on a self-administration basis. Relief is automatically available provided the employer is satisfied that the conditions of their particular scheme meet the requirements of the legislation. There is no notification procedure for employers involved. This approach was taken with the deliberate intention of keeping the scheme simple and reducing administration on the part of employers.
Accordingly, there are no records available on the number of people availing of the scheme.
Tax expenditure reports prepared by my Department have estimated the cost in the full years referenced at €4 million but have been clear that this figure was an estimate as separate returns are not required.
An estimated additional tax expenditure of €0.5m in 2020 and €1.5m in 2021 is expected to arise on foot of the changes made to the scheme by Section 9 of the Financial Provision (Covid-19)(No.2) Act 2020. This increased the allowable expenditure from €1,000 to €1,500 in respect of e-bikes and €1,250 in respect of bicycles and allowed the purchase of a new bicycle every 4 years instead of 5.
394. Deputy Michael Creed asked the Minister for Finance the way in which non-compliant properties for property tax can become compliant; the financial penalties involved; and if he will make a statement on the matter. [32064/21]
Amharc ar fhreagraLocal Property Tax (LPT) is a self-assessed tax that requires property owners to meet their statutory obligations to file returns and pay the liabilities due on a timely basis. Revenue provides a wide range of payment options to help property owners meet these obligations, including debit/credit card payments, direct debit payments, annual debit authority payments, deduction at source from salary or certain social welfare payments, and through certain approved payment service providers.
Property owners who fail to comply with their LPT obligations may be subject to a range of collection and enforcement options. These include mandatory deduction from salary or pension, withholding of tax clearance certification, the application of surcharges on income tax, corporation tax and capital gains tax returns, offsetting of other tax refunds against LPT arrears, referral to a Sheriff or solicitor for collection, or the placing of a notice of attachment on his/her bank account. Late or non-payment of LPT also attracts an interest charge of 0.0219% per day (8% per annum). Any unpaid LPT, including interest, attaches as a charge on the property and must be paid before any sale or transfer of ownership can be completed.
Finally, Revenue has advised me that any property owner with LPT arrears that wishes to discuss the matter should contact the LPT Helpline at 01-7383626 between 9.30am and 1.30pm. Revenue has assured me that it will provide every assistance possible to the person/s to become LPT compliant.
Question No. 395 answered with Question No. 78
396. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which inflationary tendencies have been detected in the economy; if specific action is required in response to same; and if he will make a statement on the matter. [32077/21]
Amharc ar fhreagra413. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which his Department has identified potential inflationary tendencies likely to impact on the economy in the next 12 months; and if he will make a statement on the matter. [32095/21]
Amharc ar fhreagraI propose to take Questions Nos. 396 and 413 together.
Following the outbreak of the Covid-19 pandemic, the fall in aggregate demand exceeded the fall in aggregate supply such that the net impact on prices was deflationary. For 2020 as a whole, the headline Harmonised Index of Consumer Prices (HICP) declined by -0.5 per cent. Core inflation, which excludes the volatile components of energy and unprocessed food, fell by -0.1 per cent in 2020.
While inflation remained relatively subdued in the first quarter of 2021, both core and headline HICP have since picked up, due to a number of temporary and one off factors including the reweighting of the HICP basket, a reversal of the temporary VAT cut and the recovery in oil prices.
In May, headline HICP increased by 1.9 per cent on an annual basis – the highest annual rate since October 2012. Core inflation also increased sharply, up 1.2 per cent on an annual basis. The increase in the headline rate of inflation in May was driven largely by energy inflation, which grew by almost 12 ½ per cent on an annual basis due to base effects from the collapse in oil prices last spring.
The uptick in inflation since the beginning of this year is broadly in line with international price developments. In May, headline HICP in the euro area increased by 2 per cent on an annual basis, while core inflation increased by 0.9 per cent. More generally, in the US and other advanced economies, consumer prices have risen recently partly due to temporary factors including; oil prices, increased global shipping costs and semi-conductor prices. Additionally, consumer price inflation in many economies has been boosted by increasing demand as economies open up, very accommodative monetary policies and extraordinary fiscal supports.
Looking ahead, inflation in Ireland is expected to continue to pick up over the course of this year due to these temporary and one-off factors but also as demand recovers in line with the easing of restrictions and re-opening of the economy. Whether or not this recent increase in inflation proves to be temporary or more sustained is something my Department is closely monitoring.
397. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he expects Ireland’s economic forecast to be affected by international development; and if he will make a statement on the matter. [32079/21]
Amharc ar fhreagra402. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which the economic fundamentals remain stable and in accordance with best practice internationally; and if he will make a statement on the matter. [32084/21]
Amharc ar fhreagra411. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he remains satisfied regarding the future prospects for Ireland’s economy with particular reference to the need for competitiveness in national and international markets; his plans for corrective measures in this regard; and if he will make a statement on the matter. [32093/21]
Amharc ar fhreagraI propose to take Questions Nos. 397, 402 and 411 together.
Approaching the pandemic, Irish economic fundamentals were healthy. Strong economic growth had been recorded for a number of years, the labour market was close to full employment, and surpluses had been recorded on the current account and the government budget balance.
The outbreak of the Covid-19 crisis turned the economy on its head and resulted in a sharp contraction of domestic economic activity last year and into the first quarter this year. My Department projected modified domestic demand growth of 2½ per cent for this year and 7½ per cent for 2022 in the April Stability Programme Update. It is anticipated that as the reopening progresses, the release of pent-up demand financed by the unwinding of historically high household savings will support the recovery.
While the domestic sector suffered a hit last year, the multinational sector has proven resilient, demonstrating the competitiveness of Irish exports in international markets. The outlook for Irish exports in light of strengthening global demand is very positive and Ireland’s modified current account, which strips out the effects of globalisation, is projected to remain in surplus in the medium term. This reflects Ireland’s continuing competitiveness on the international stage, for both indigenous and multinational exports. Looking to the future, our talented and flexible workforce, our track record as a successful place to do business, and our pro-enterprise environment mean that our economy’s long-term fundamentals remain strong.
As the global economy has experienced the shock of the Covid-19 crisis in a reasonably symmetric way, Ireland’s economic fundamentals remain healthy and relatively strong in an international context. Unavoidable consequences of the pandemic and the associated necessary policy supports put in place, such as the increases in unemployment and public debt, have been shared international experiences. These imbalances are expected to moderate as the economic recovery takes hold.
The strength and resilience of the Irish economy lies in its openness to international trade and investment. Nonetheless as a small open economy, Ireland is more exposed to external risks, including the international path of the virus, the extent of permanent damage to the global economy, and potential changes to the international tax environment. External risks continue to be monitored closely by my Department.
399. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which Eurozone countries are likely to be affected by indications to increase interest rates; and if he will make a statement on the matter. [32081/21]
Amharc ar fhreagraThere has been an extraordinary level of monetary support over the course of the pandemic. This support has included low interest rates, extensive asset purchases, and various refinancing operations, all of which have led to favourable financing conditions. This in turn has supported bank lending to firms and households, and has made it easier for people and companies to borrow funds. It has also lowered the burden of debt for eurozone countries, facilitating the substantial fiscal support governments have provided to cushion the impact of the pandemic.
As the economy recovers and economic conditions begin to normalise, the exceptional monetary policy supports in place will need to be gradually withdrawn. However, a sudden and premature tightening of monetary policy could have adverse effects, threatening financial stability, increasing debt service costs and leading to a weaker-than-anticipated recovery. This possibility was one of the key downside risks set out in the Stability Programme Update published by my Department in April.
However, the ECB’s position is that the highly accommodative monetary policy continues to be necessary to support the burgeoning economic recovery. The ECB has also made it clear that advanced notice and clear communication of the path ahead will precede any tightening of monetary policy. This will help to avoid negative reactions from the market when monetary policy begins to normalise.
400. Deputy Bernard J. Durkan asked the Minister for Finance if the EU and Eurozone countries in particular remain committed to ensuring that taxation remains within the responsibility of national governments; and if he will make a statement on the matter. [32082/21]
Amharc ar fhreagraAs Minister for Finance for Ireland, I represent Ireland’s views at EU meetings where taxation is discussed. These meetings take place in a format where all EU Member States participate, known as ECOFIN, where the rotating Presidency of the Council of the European Union chairs the meetings. The Presidency is currently held by Portugal; from 1 July 2021 Slovenia will take over.
Tax files are subject to unanimity in voting which means every Member States agreement is required for proposals to be adopted. Ireland believes that the current unanimity based voting procedure is the most appropriate voting system in the area of taxation. Indeed, over the lifetime of the previous Commission, over twenty taxation initiatives were agreed by Member States using the unanimity voting process. This includes important Directives on VAT, administrative co-operation, Anti-Tax-Avoidance and also the EU list of non-cooperative tax jurisdictions. We do not see the need for, or merits of, any proposals to move away from the requirement for unanimity.
I cannot speak for other EU Member States in relation to their views on tax sovereignty.
401. Deputy Bernard J. Durkan asked the Minister for Finance if he remains satisfied that the budget for 2021 continues to be adequate to meet contingencies; and if he will make a statement on the matter. [32083/21]
Amharc ar fhreagraBudget 2021 contained two contingency funds totalling €5.4 billion. At the time the Budget was drafted, these funds were designed to be flexible in light of the considerable uncertainty around the evolution of both the Covid-19 pandemic and Brexit, allowing Government to react swiftly and decisively to a constantly evolving environment without impacting on the baseline budgetary arithmetic.
Subsequent to the publication of the Budget, the trajectory of the virus necessitated the introduction of increased public health restrictions, with the majority of these funds needed to meet costs arising from the Government’s primary pandemic-related income support schemes: the Pandemic Unemployment Payment, Employee Wage Subsidy Scheme.
Moreover, around €700m has been earmarked for other Covid-related expenditure meaning that the €5.4 billion provided for in the two contingency funds will have been fully accounted for by the middle of this year.
As announced in the Economic Recovery Plan, Government is committed to continuing to provide all necessary supports to households and businesses, the cost of which will be funded through additional borrowing.
403. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains confident that adequate provision has been made or is in course thereof to offset any negative impact from Brexit; and if he will make a statement on the matter. [32085/21]
Amharc ar fhreagraThe Trade and Cooperation Agreement (TCA) between the EU and UK remains a positive conclusion to the transition period. However, the new agreement still represents a break from previously existing arrangements, and thus a permanent shock to the Irish economy. Therefore, Brexit will still have a negative economic impact on the Irish economy and living standards compared to the previous relationship.
Effective implementation of the TCA is a priority. Ireland, as part of the EU, will play our full part in realising the full potential of TCA for citizens and businesses. The EU continues to engage intensively with the UK to find solutions to the difficulties following Brexit, including implementation of the Ireland Northern Ireland Protocol, which safeguards the Good Friday Agreement, avoids a hard border and protects the Single Market, and Ireland’s place in it.
I remain satisfied that the Government’s response to Brexit has been well-managed. We have invested significantly in new infrastructure, systems and staff, and provided a range of supports to assist businesses. We have also continued to engage intensively with stakeholders.
The Government has put in place extensive financial supports for sectors over recent years to assist businesses prepare for and mitigate the impacts of Brexit, including various financial, advisory, and upskilling supports. The Government has also invested heavily in our port infrastructure, as well as working closely with businesses to navigate the new customs arrangements. A range of Government support is available to Irish exporters, including training and grants, to help businesses deal with these changes. It is vital that business prepare for the further changes which will arise over the coming months due to the UK’s new import controls.The successful negotiation of the Protocol on Ireland / Northern Ireland, as part of the Withdrawal Agreement, delivered key economic objectives for Ireland. The Protocol secures Ireland’s place within the Single Market, avoids a hard border on the island, protects the all-island economy, and provides Northern Ireland with unique access to both the British internal market and the EU single market.In the months since the end of the transition period on 31 December 2020, a level of trade friction has been evident. Given the phased basis of the new import controls which are being applied by the UK, it will take time for these to feed through to overall exporting activity, and to assess any associated economic impact. The 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’ livelihoods to the greatest extent possible.
406. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied that lenders continue to engage with borrowers who have fallen into arrears for reasons outside of their control; if amicable resolutions continue to be found; and if he will make a statement on the matter. [32088/21]
Amharc ar fhreagraThe Government and the Central Bank expects that lenders will continue to engage effectively and sympathetically with distressed borrowers to deliver appropriate and sustainable solutions and to treat borrowers at all times, including in response to COVID-19, in line with Central Bank’s robust consumer protection framework, specifically the Code of Conduct on Mortgage Arrears, the Consumer Protection Code and the Regulations for Lending to SMEs.
The Central Bank has advised that it is satisfied that lenders are engaging with distressed borrowers in a proactive way in order to resolve those borrowers’ financial difficulties. Where mortgage borrowers are in financial distress, lenders must follow the Central Bank of Ireland’s Code of Conduct on Mortgage Arrears (CCMA) which aims to help borrowers address their financial payment difficulties with their lender quickly and effectively and get borrowers back on track with their mortgage obligations. The CCMA indicates that all such arrears or pre-arrears cases must be handled sympathetically and positively by the lender, with the objective at all times of assisting the borrower to meet his/her mortgage obligations.
In relation to business customers and SME’s that are in financial distress, lenders must follow the Central Bank of Ireland’s Small and Medium Enterprise Regulations. These Regulations place an obligation on lenders to assess each business’ financial circumstances with the objective being to assist that business to resolve its financial difficulties quickly and effectively, and to get the business back on track with its repayment obligations.
Given the significant impact that Covid-19 has had on some businesses, the Central Bank has made clear to lenders (through its supervisory engagement) that it is critical for them to ensure there is efficient and targeted restructuring of SME liabilities in the near term, in order to ensure that viable businesses are supported and are placed on a sustainable footing. The Central Bank has advised that it has engaged with lenders to ensure they have strategies and plans for supporting viable SME borrowers that are experiencing short-term financial difficulty.
The Central Bank has also emphasised the importance of borrowers engaging proactively with their lender noting that if a borrower is struggling to repay their debts due to COVID-19 or any other reason, the borrower should talk to their lender as soon as possible to find a sustainable solution and to retain access to protections some of which only apply if the borrower engages with their lender.
407. Deputy Bernard J. Durkan asked the Minister for Finance when Irish home borrowers can borrow at similar interest rates to that available throughout Europe; and if he will make a statement on the matter. [32089/21]
Amharc ar fhreagra408. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied that the single market rules apply in relation to interest rates charged throughout the European Union and their applicability to all countries including Ireland; and if he will make a statement on the matter. [32090/21]
Amharc ar fhreagraI propose to take Questions Nos. 407 and 408 together.
There have been certain developments to promote the closer integration of banking and credit markets in the EU. For example, credit institutions authorised in one EU Member State can, with minimal additional requirements, provide banking services in other EU states. In addition, there have been developments, such as the Mortgage Credit Directive and the Consumer Credit Directive, which seek to promote a more harmonised market for the provision of credit to consumers across the EU. However, this does not mean there will be a single price for any particular type of credit across the EU. There are many factors, such as differences in national legal and housing systems, cultural preferences, language, the proximity of lenders to borrowers, which will continue to inhibit the full integration of the market for mortgage and other consumer credit in the EU. More directly, differences in the nature of mortgage and other credit markets, credit and market conditions, mortgage default rates and the funding of mortgage and other credit will also impact on the levels of interest lending rates between and within different EU countries.
I am aware that the general level of lending interest rates in Ireland are higher than is the case in many other European countries, though it should also be noted that recent trends indicate that certain mortgage rates have been falling in Ireland. For example, the interest rates on new mortgages (excluding renegotiations) have fallen from 4.05% in December 2014 to 2.8% at end-April 2021.
However, as I have indicated on a number of occasions, Irish mortgage and other loans can have different characteristics from those offered in other countries. For example, many Irish banks include incentives such as cash back offers, which reduce the effective Irish mortgage interest rate. Also Irish mortgages are also generally not subject to upfront fees which are typically charged by banks in some other EU jurisdictions.
Nevertheless, there are a number of important factors which will likely influence the interest rates charged on Irish mortgages. These include operational costs, certain structural factors as referenced above (such as incentives offered), as well as the fact that pricing will reflect:
- credit risk and capital requirements which in Ireland are elevated due to historical loss experience;
- the level of non-performing loans which is higher in Ireland relative to other European banks;
- different cost-to-income ratios among banks;
- there are lower levels of competition in the Irish banking market compared to other jurisdictions (however, it is noted that a new entrant has recently entered the residential mortgage market and that it is offering fixed rate mortgages at competitive interest rates).
Specifically in relation to mortgages, the Central Bank has a range of measures to protect consumers. The consumer protection framework requires lenders to be transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle; through protections at the initial marketing/advertising stage, in assessing the affordability and suitability of the mortgage and at a time when borrowers may find themselves in financial difficulties. In particular, the Central Bank introduced of a number of increased protections for variable rate mortgage holders which came into effect in February 2017. The enhanced measures, which are provided for in an Addendum to the Consumer Protection Code 2012, require lenders to explain to borrowers how their variable interest rates have been set, including in the event of an increase. The measures also improve the level of information required to be provided to borrowers on variable rates about other mortgage products their lender provides which could provide savings for the borrower and signpost the borrower to the CCPC’s mortgage switching tool.
The Central Bank also introduced additional changes to the Consumer Protection Code in January 2019 to help consumers make savings on their mortgage repayments, provide additional protections to consumers who are eligible to switch, and facilitate mortgage switching through enhancing the transparency of the mortgage framework. Consumers can reduce average pricing in the mortgage market by availing of switching options to ensure that recent and potential future price reductions through increased competition pass through to the greatest number of customers possible. Indeed the Central Bank advises that a recent study by it estimated that three in every five ‘eligible’ mortgages for principal dwelling homes stand to save over €1,000 within the first year if they switch and €10,000 over the remain term.
Ultimately, however, the price lenders charge for their loans is a commercial matter for individual lenders. As Minister for Finance I cannot determine the lending policies of individual banks including the interest rates they charge for loans including mortgages. Nevertheless, I will continue to work with the Central Bank and also engage with lenders to encourage, within a framework which seeks to maintain overall financial stability, greater price and other competition in the mortgage market, both for new and existing borrowers.
