Written Answers Nos. 61-80
61. Deputy Richard Boyd Barrett asked the Minister for Finance the plans that he will put in place to ensure that the take-home pay of workers in the private sector is increased at least in line with inflation; and if he will make a statement on the matter. [31323/22]
Amharc ar fhreagraAs the Deputy may be aware, the Programme for Government states that “from Budget 2022 onwards, in the event that incomes are again rising as the economy recovers, credits and bands will be index linked to earnings. This will be done to prevent an increase in the real burden of income tax, to prevent more low income workers being taken into the tax net, and to ensure there is no increase in the number of people having to pay higher income tax and Universal Social Charge rates”.
The Government is very conscious of inflationary pressures and introduced a range of measures in Budget 2022 which included an income tax package amounting to €520 million, which, within available resources, sought to index the income tax standard rate bands and main personal tax credits. The single income tax rate band was increased by 4.2 per cent from €35,300 to €36,800 for the 2022 tax year, with commensurate increases for persons who are married/in civil partnerships. The main tax credits, personal tax credits, employee tax credit and earned income credit, were also increased by just over 3 per cent from €1,650 to €1,700 for the 2022 tax year. This is providing a real benefit to all individuals who pay tax by reducing their tax liability and ensures that some low and part time workers remain outside income tax net.
In addition, the 2% rate band ceiling for USC was also increased in line with the increase in the national minimum wage to ensure that a full-time adult worker who benefits from the increase in the hourly minimum wage rate will remain outside the top rates of USC.
I would point out that this Government has a put in place a package of targeted measures to address the cost of living increases. This brings the aggregate value of measures, including those in Budget 2022, to €2.4 billion.
I would also like to draw the Deputy’s attention to my opening remarks at the ESRI’s Budget Perspectives conference last Friday 10 June where I noted that “Budget 2023 is being prepared against the backdrop of rising borrowing costs; an inflation situation unlike anything we’ve encountered in over three decades; heightened economic and geopolitical uncertainty; and, a worrying exposure of revenue to corporate tax receipts.”
Further, as the Deputy will appreciate, the broad economic and fiscal parameters for the Budget in the autumn will be presented in the Summer Economic Statement. It is within this context and the overall macro-fiscal position that budgetary options, including those relating to income tax, will be considered.
62. Deputy Darren O'Rourke asked the Minister for Finance if he has plans to expand the bike-to-work scheme to ensure that students, pensioners and those on social welfare payments can access the same benefit that this scheme delivers for PAYE workers; if he is working with colleagues in the Departments of Transport and Public Expenditure and Reform on same; and if he will make a statement on the matter. [30742/22]
Amharc ar fhreagraSection 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 up to a maximum of €1,250 (€1,500 in the case of e-bikes), for an employee to use, in whole or in part, to travel to work. Safety equipment includes helmets, lights, bells, mirrors and locks but does not include child seats or trailers.
Under section 118B TCA 1997 an employer and employee may also enter into a salary sacrifice arrangement under which the employee agrees to sacrifice part of his or her salary, in exchange for a bicycle and related safety equipment.
Benefit-in-kind is a charge to tax that applies where an employer provides an employee with a benefit such as a bicycle, car or accommodation. Therefore, the Cycle to Work scheme is only applicable where the bicycle and safety equipment is provided by an employer to either a director or someone in its employment and thus, where an employer-employee relationship does not exist, for example, in the case of students, retired individuals, or those in receipt of social welfare payments, such individuals can’t qualify for the scheme. Likewise, salary sacrifice arrangements may only be entered into between an employer and a director or employee.
As the Deputy will be aware, the cycle to work scheme operates on a self-administration basis. Relief is automatically available provided the employer is satisfied that the conditions of its 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 or the cost of the scheme.
The scheme continues to be kept under review by my officials. The Deputy will appreciate that it would not be appropriate for me to comment at this time, on what changes, if any, are being considered in terms of this relief or any other tax relief. The Deputy may also be aware that the Department of Transport published an examination of the scheme in November 2021 as part of the Spending Review series.
Further guidance regarding the Cycle to Work Scheme and salary sacrifice arrangements can be found on Revenue’s website.
64. Deputy Neale Richmond asked the Minister for Finance the steps that he is taking to increase the diversity of the workforce in the financial services sector; and if he will make a statement on the matter. [31068/22]
Amharc ar fhreagraIncreasing diversity of the workforce in the financial services sector can bring a number of benefits to firms, including increased access to talent. As such, increasing diversity in the financial services workforce is an important priority in the Government’s Ireland for Finance Strategy and Action Plans 2021 and 2022.
A key milestone in the area of diversity, specifically gender balance, was the launch by Minister of State Seán Fleming of Ireland’s first Women in Finance Charter in April 2022. The development of this Charter was a public-private collaboration under the Ireland for Finance Action Plans. The measure was led by industry and their representative bodies, i.e. Financial Services Ireland and Banking Payments Federation Ireland, with involvement from stakeholders including Insurance Ireland and Irish Funds. It was supported by Government including my Department, the Department of Enterprise, Trade and Employment and Balance for Better Business.
The Charter is open to all financial services firms operating in Ireland and I encourage firms to commit to this important development. Signatories of the Charter commit their organisations to achieving greater gender balance by setting targets that are appropriate to their company and formulating action plans to achieve these targets. This should lead to a more inclusive working environment by increasing the number of women in junior, middle and senior management, leadership and board level positions. The ESRI has been commissioned by the industry associations to undertake a comprehensive analysis of the data that firms provide and publish periodic reports. The Charter will be overseen by a Steering Group comprised of public sector officials from my Department and the Department of Enterprise, Trade and Employment, and industry professionals. The Steering Group will also provide guidance and direction for the Charter. More information on Ireland’s Women in Finance Charter is available on the Balance for Better Business website www.betterbalance.ie/partners/
However, diversity goes beyond the number of women in the workplace or in leadership. It also means diversity of age, ethnicity, sexual orientation, education, nationality, disability, beliefs, and more. There is an increased interest by industry on developing talent being driven by trends in fintech and sustainable finance, and by changes in the regulatory environment. I expect that this theme will continue to feature in the strategic update of the Ireland for Finance Strategy that has taken place over the last number of months and which I hope to have Government approval for its publication next month.
66. Deputy Matt Carthy asked the Minister for Finance the status of a review into farm contractors regarding the carbon tax; and the measures that he intends to introduce arising from the review. [31309/22]
Amharc ar fhreagraThe present position is that agricultural contractors are not entitled to avail of relief from increases in the carbon tax on farm diesel under section 664A of the Taxes Consolidation Act 1997. This is because farming, which is defined in section 654 of the Taxes Consolidation Act, requires the occupation of farmland. Agricultural contracting does not involve the occupation of farmland. The measure is specifically targeted at the farming sector to address the particular problems faced by family farms. However, it should be noted that, currently, those who incur expenses in relation to farm diesel in the course of their trade of agricultural contracting may claim an income tax or corporation tax deduction for these expenses, including any carbon tax charged in respect of the diesel.
I indicated to the Deputy, most recently on 25 May last in my reply to question no. 182, that I expected that the review would be completed in advance of Budget 2023 and is likely to be completed by the early part of Q3 this year. This remains the case.As the Deputy will appreciate, decisions regarding taxation measures are made as part of the annual Budget and Finance Bill process at the appropriate time and having regard to the sound management of the public finances and my Department's Tax Expenditure Guidelines. Furthermore, I must also have regard to ensuring that any tax measures are broadly aligned with the need to meet our Climate Action Plan targets.
67. Deputy Éamon Ó Cuív asked the Minister for Finance the increase in the personal tax credit and the employees tax credit since 2008; the rate of wage inflation in the intervening period; the amount that will be collected by the Revenue Commissioners in universal social charge in 2022; the Exchequer surplus recorded in 2008; the expected surplus in 2022; and if he will make a statement on the matter. [30331/22]
Amharc ar fhreagraIn 2008 the value of the single personal and the employee tax credits amounted to €1,830 per annum. In 2022, the personal and employee tax credits amount to €1,700 per annum. This represents a cumulative reduction of around 7 per cent when compared with 2008.
Developments in average pay were distorted during the pandemic by large movements in to, and out of, the workforce, in particular by lower paid workers in contact-intensive sectors. As such, the insight from that period is limited by that volatility in the series. However, average wages increased by around 13 per cent in 2019 (i.e. immediately pre-pandemic) compared to 2008.
As the Deputy will be aware, a number of other important structural income tax changes, including the introduction of the Universal Social Charge (USC), were implemented over this period, primarily to raise revenue and also to address some of the structural weaknesses within the Irish income tax system that was a key contributor to Ireland's sovereign debt crisis.
It is important to point out that tax credit changes should not be considered in isolation but viewed in conjunction with the broad suite of income tax changes introduced over the period and within the fiscal parameters that were available.
Tax revenue from the USC amounted to €4.4 billion in 2021. My Department is projecting this to increase to approximately €4.8 billion this year.
There was no Exchequer surplus recorded in 2008 and a surplus is not currently projected for 2022. Instead, the Exchequer recorded a deficit of €4.8 billion in 2008 while, in the Stability Programme Update 2022 published in April, my Department projected an Exchequer deficit of €1.1 billion this year.
68. Deputy James Lawless asked the Minister for Finance the reason that the stability programme update only makes projections for three years ahead; and if he will make a statement on the matter. [30065/22]
Amharc ar fhreagraMy Department published the Stability Programme Update in Mid-April and subsequently submitted it to the European authorities at the end of April. This year, as in all prior years, the format and content of the SPU has been produced in accordance with the guidelines set out by the European authorities. These guidelines stipulate that the macroeconomic and fiscal forecasts should be produced for at least three years ahead. The decision to provide forecasts beyond this time horizon is at the discretion of each member state.
The forecasts produced as part of the Stability Programme Update (SPU) took place against a backdrop of unprecedented uncertainty and geopolitical instability. Given the degree of uncertainty at present, constructing a set of macroeconomic and fiscal projections is particularly challenging and the margins of error around these projections are extremely pronounced. Extending the forecasts beyond the three-year horizon would likely have amplified the uncertainty, as the key assumptions underpinning the forecasts would have become less reliable over time. With this in mind, the SPU does contain a more severe scenario, examining an alternative pathway for the economy in the event of changes to the assumptions underpinning the central scenario.
Faced with many similar challenges, a number of member states throughout Europe have also used a three-year horizon in producing macroeconomic and fiscal forecasts for SPU 2022. As such, Ireland’s forecast horizon is in line with international norms.
70. Deputy Róisín Shortall asked the Minister for Finance the steps that he is taking to ensure that vulnerable customers are assisted in switching banks, following the issuing of closure notices by banks (details supplied); if he has engaged with the remaining banks to ensure that appointments will be made available; if his attention has been drawn to reports that some banks are only providing appointments to those wishing to open a joint account, with those wishing to open a single account only permitted to so online; and if he will make a statement on the matter. [31178/22]
Amharc ar fhreagraI am not aware of the specific issue raised, but both I and the Central Bank have been clear in our engagements with the banks in that we expect them to take a consumer-focused approach in respect of any decision that affects their customers.
I would note that at the banks recent appearance before the Joint Oireachtas Committee on Finance, Public Expenditure and Reform and Taoiseach on 18 May, each of the remaining banks spoke about the different options for account opening, both digital and physical, as well as the supports they have in place for vulnerable customers.
In addition, the Central Bank has written to all retail banks, both those exiting and remaining in the Irish market. Central Bank expects them to have plans in place to manage the impact of the broader changes and consolidation in the retail banking sector in Ireland. It is the responsibility of the individual banks to ensure that they are putting their customer first, ensuring fair treatment of customers and that customers understand what the changes mean for them.
With regard to vulnerable customers, the Central Bank's Consumer Protection Code 2012 (the Code) applies to regulated financial service providers providing regulated activities within the State. Under the provisions of the Code the Central Bank expects that all regulated firms take a consumer-focused approach and to act in their customers’ best interests, particularly in dealings with vulnerable consumers. The Code contains a number of provisions aimed at ensuring that vulnerable people can gain access to mainstream financial services and to ensure that the vulnerable consumer is provided with such reasonable arrangements to facilitate them in their dealings with the regulated entity.
The Central Bank has also written specifically to banks on the issue of vulnerable customers setting out its consumer protection expectations in the changing retail banking landscape. This industry letter sets out that all customers are potentially vulnerable to the risk of making uninformed decisions, or decisions that are not in their best interests, particularly during times of uncertainty and change. The Central Bank sets out the following expectation of regulated entities in respect of vulnerable customers:
- Consider specifically the impact of their decisions on vulnerable customers and provide the assistance necessary to reasonably mitigate those impacts and retain access to basic financial services.
- Have specific and effective processes and communication plans to support vulnerable customers during this time of increased uncertainty.
The Central Bank met with the CEOs of the five main retail banks on 17 May 2022 to discuss the large scale migration of customer bank accounts, and the actions necessary to ensure that this activity happens in line with customer needs and expectations.
Following a constructive meeting, there was agreement that a strong customer focused approach needs to be delivered including the banks having customer focused arrangements to ensure they take into account the specific circumstances a customer may face and strongly supporting them in making the move.
My officials and I will continue to monitor the migration of current accounts from the exiting banks and engage with relevant stakeholders, both public and private, as I have been doing over recent months. With the objective of ensuring that impacted customers face the least amount of disruption in migrating their accounts.
71. Deputy Róisín Shortall asked the Minister for Finance if he intends to introduce more targeted measures to support lower and middle-income families in response to the annual rate of inflation rising to 7.8% in May 2022; and if he will make a statement on the matter. [31179/22]
Amharc ar fhreagraInflation picked up sharply over the course of the last year, and in May stood at 8.3 per cent – the third consecutive month of record high inflation. Almost every advanced country in the world is in the same position, with euro area inflation reaching a record 8.1 per cent in May.
The key driver behind the elevated level of inflation at present is the sharp rise in wholesale energy prices since the onset of the war in Ukraine. Looking ahead increases in wholesale energy prices will continue to feed into higher energy inflation over the coming months. Pass-through price effects are expected in other sectors, such as food (via fertilisers and fuel costs) and consumer goods (via higher energy inputs). Indeed, the recent rise in core inflation suggests that inflationary pressures are becoming increasingly broad-based.
At the time of SPU 2022, the Department forecast average inflation of 6¼ per cent for this year. However, with many of the risks outlined in the SPU having already come to pass, the annual rate will no doubt be higher. Needless to say, the war in Ukraine and in particular the escalation of sanctions against Russia will continue to shape the outlook for inflation over the short term.
The Government is acutely aware of the cost pressures currently facing businesses and households, in particular those on low incomes, and has responded to help alleviate some of this burden. On a cumulative basis, the Government has announced €2.4 billion in cost of living measures since last October. These measures have included changes in tax and social welfare, the provision of an energy credit for households, a temporary reduction in the rate of VAT on the supply of gas and electricity and a reduction in the excise rate for petrol, diesel and marked gas oil. Distributional analyses of the February and April cost of living packages show that low-income households have benefitted the most from the policy changes introduced.
However, it is important to bear in mind that the causes of current price pressures are not within our control. Whilst the Government will continue to help with the cost of living challenge, we must be cognisant that resources are limited and we cannot cushion households and businesses from the entire impact of the current shock. Overall, we will be aiming to design policy in a manner that does not add to inflationary pressures – in other words, budgetary policy itself must not become part of the problem.
72. Deputy Brian Leddin asked the Minister for Finance his plans for reviewing motor tax and vehicle registration tax to discourage the uptake of larger, heavier and inefficient vehicles on roads; and if he will make a statement on the matter. [31333/22]
Amharc ar fhreagraRecent Budgets have seen major changes to Motor Tax and VRT structures with the aim of incentivising the purchase of more efficient and 'greener' vehicles.
Budget 2021 saw the transition to the more accurate Worldwide Harmonized Light Vehicles Test Procedure (WLTP); and restructured the VRT and motor tax regimes with a view to strengthening their environmental rationale in line with Government commitments as set out in the Programme for Government and Climate Action Plan. The VRT rates were changed again in Budget 2022 to increase the fiscal gap between low emission vehicles and the rest, thus incentivising motorists in the market for a new car to make ‘greener choices’. The structure is based on the 'polluter pays' principles, with a reduced rate for battery electric vehicles (BEVs) of 7% of open-market selling price (OMSP), while vehicles falling into the highest emissions band are liable to a rate of 41%. Similarly, in motor tax, WLTP-tested vehicles are charged motor tax according to their emissions profile; the rate for BEVs is €120 and scales up to €2400 for the most pollutant vehicles.
Budget 2020 introduced a VRT surcharge on nitrogen oxide (NOx) emissions in recognition of the environmental health costs caused by pollutants emitted in particularly high quantities by diesel vehicles. Budget 2021 saw an adjustment to the NOx surcharge structure by increasing rates to incentivise the uptake of cleaner cars.
There are also a broad range of measures in support of Climate Action Plan commitments to increase the electrification of the fleet. This include a €5,000 VRT relief, SEAI purchase grant, low VRT and motor tax rates, and a €50,000 Benefit-in-Kind exemption for Battery Electric Vehicles.
I am satisfied that the current vehicle taxation regime is based on an environmental rationale which incentivises low emission vehicles and consequently provides strong disincentives for the most polluting ones. Officials from my Department keep vehicle taxes under review as part of the Tax Strategy Group process.
73. Deputy Pearse Doherty asked the Minister for Finance the interactions that he has had with the retail banks and an organisation (details supplied) since the beginning of April 2022; if his attention has been drawn to the manner in which banks are operating the switching code and communicating with direct debit originators; and if he will make a statement on the matter. [31249/22]
Amharc ar fhreagraOn my engagement with the entities referenced by the Deputy, the Retail Banking Dialogue in Tullamore on 16 May 2022 provided an opportunity for me to engage with different parties including those referenced to share views on the changing banking landscape. I would add that in my engagements with the banking system since the announcement last year of the exits of KBC and Ulster Bank I have made clear my expectation for them to take a consumer-focused approach in respect of any decision that affects their customers.
In addition my officials have been meeting with each of the withdrawing banks on a monthly basis. They are also meeting with the remaining banks and other financial service providers that offer current accounts to discuss how they can support customers opening new accounts.
The challenges for customers in the process of moving their accounts and how these an be mitigated is a regular feature of these discussions.
Department officials are also engaging regularly with the BPFI, Central Bank of Ireland and the Competition and Consumer Protection Commission to ensure a cohesive approach regarding consumer protection and information provision.
The Central Bank Code of Conduct on the Switching of payment accounts with Payment Service Providers (“The Switching Code”) sets out the process that all Payment Service Providers (including banks) that offer payment accounts in Ireland are required to follow when a consumer wants to switch accounts.
This includes making a switching pack available to customers, timelines for completing the switching process and the actions to be taken by both the existing and new payment service provider when the customer seeks to initiate the switching process.
I understand from the BPFI that banks and other BPFI members have now created a secure email process to facilitate secure communications between the old and new banks. The BPFI is also facilitating regular engagement between the leaving and remaining banks and other relevant parties.
I have also been informed by the Central Bank of Ireland that it has written to the CEOs of the top direct debit originators which it regulates to reinforce their duty to take action to ensure this exercise is completed efficiently.
The Central Bank and I expect all retail banks, both those exiting the market and those remaining, to have plans in place to manage the impact of the broader changes and consolidation in the retail banking sector in Ireland. It is the responsibility of the individual banks to ensure that they are putting their customer first, ensuring fair treatment of customers and that customers understand what the changes mean for them.
My officials and I will continue to monitor the migration of current accounts from the exiting banks and engage with relevant stakeholders, both public and private, as I have been doing over recent months. With the objective of ensuring that impacted customers face the least amount of disruption in migrating their accounts over the coming months.
74. Deputy Richard Boyd Barrett asked the Minister for Finance the assessments that are being carried out to establish whether the research and development tax credit is achieving its objective to stimulate same; if it is the most effective way to achieve this objective; and if he will make a statement on the matter. [31320/22]
Amharc ar fhreagraMy Department’s Tax Expenditure Guidelines set out procedures for best practice in the evaluation of tax expenditures, setting criteria for the review of the evidence base underpinning tax policy and to determine if tax relief schemes remain fit for purpose.
My officials are currently conducting an evaluation of the R&D tax credit. This review will comprise qualitative and economic analysis, as well as desk-based research on R&D initiatives in other jurisdictions. Officials are also considering the agreement reached at the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and other developments in international tax frameworks to assess any impact on the R&D tax credit, to ensure that Ireland can continue to support innovative R&D activities going forward.
As part of the assessment process, a public consultation was held on the credit, with a closing date for responses of 30 May 2022. Twenty written responses were received and Department officials are examining these submissions at present.
The evaluation document, as well as the responses to the consultation, will be published in due course as part of this year’s Budget and Finance Bill process.
75. Deputy Pearse Doherty asked the Minister for Finance the work that has been undertaken to date to give full legal effect to the code of conduct on mortgage arrears; if his Department has undertaken work or analysis of banks’ implementation of the code with respect to alternative repayment arrangements; and if he will make a statement on the matter. [31251/22]
Amharc ar fhreagraThe Central Bank Code of Conduct on Mortgage Arrears (CCMA) is the key consumer protection measure for borrowers who are experiencing difficulty in relation to a mortgage which is secured on a primary residence.
This statutory based Code, which is issued by the Central Bank under section 117 of the Central Bank Act 1989, sets out how regulated mortgage creditors must treat borrowers in or facing mortgage arrears. Regulated entities are required to comply with all aspects of the CCMA as a matter of law.
The objective of the CCMA is to ensure that regulated entities have fair and transparent processes in place to deal with their borrowers who or in facing mortgage arrears. Due regard must be given to the fact that each mortgage case is unique and needs to be considered on its own merits. All cases must be handled sympathetically and positively by the regulated entity, with the objective at all times of assisting the borrower to meet his or her mortgage obligations.
In particular the CCMA provides that, in order to determine which options for alternative repayment arrangements are viable for each particular case, the regulated mortgage creditor must explore all the options for alternative repayment arrangements offered by that creditor.
Furthermore, if a borrower is not satisfied with the decision of the regulated entity in relation to this matter, such as if he or she is not happy with the particular alternative repayment arrangement offered by the mortgage creditor to address the particular mortgage repayment difficulty or if the mortgage creditor declines to offer an alternative repayment arrangement, the CCMA provides that an appeals process be in place to allow for the matter to be reconsidered. That appeals procedure must also inform the borrower of his/her right to refer the matter to the Financial Services and Pensions Ombudsman.
The responsibility for overseeing and enforcing the provisions of the CCMA is an independent matter for the Central Bank and the Bank has the powers available to it for that purpose. The Central Bank has advised that it is currently undertaking intensive supervisory engagement with firms on Long Term Mortgage Arrears (LTMA) to ensure that firms are doing all they can to get borrowers who are engaging meaningfully and paying something towards their mortgage on to an appropriate and sustainable arrangement.
They are also engaging with firms to encourage borrowers that are not currently engaged, to reengage with their firm and it has also advised that firms are being challenged to utilise their full suite of alternative repayment arrangements (ARAs), and look at solutions outside of ARAs, such as Personal Insolvency Arrangements (PIAs) or Mortgage to Rent (MTR).
77. Deputy Alan Dillon asked the Minister for Finance if an additional VAT derogation will be applied to petrol and fuel to support workers and businesses during the current cost-of-living and inflationary crisis given the latest figures which indicate that the Exchequer collected a new high of over €300 million in taxes on petrol and diesel in April 2022; and if he will make a statement on the matter. [31360/22]
Amharc ar fhreagraThe VAT rating of goods and services is subject to the requirements of EU VAT law, with which Irish VAT law must comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate, unless they fall within categories of goods and services specified in Annex III of the VAT Directive, in respect of which Member States may apply a lower rate of VAT. Within its rates structure, the EU VAT Directive also allows for historic VAT treatment to be maintained under certain conditions on certain goods and services not provided for in Annex III. Currently Ireland has a standard VAT rate of 23% and two reduced rates of 13.5% and 9%. Ireland also holds a number of derogations, under which it is permitted to retain some historic VAT arrangements, under strict conditions.
Under the EU VAT Directive and Irish VAT legislation the supply of motor fuel, specifically petrol and diesel, is liable to VAT at the standard rate, currently 23%. There is no discretion under the Directive for Ireland to remove these supplies from the standard rate.
78. Deputy Brian Stanley asked the Minister for Finance the outstanding amount owed in relation to the bank guarantee; the cost of servicing this debt each year; and the date the final payment will be made. [30900/22]
Amharc ar fhreagraIn answering the Deputy's question, I am assuming he is asking about the debt that the State has accumulated from recapitalising the banking system which flowed from the then Government's decision to guarantee bank liabilities.
The most recent analysis carried out by the Office of the Comptroller and Auditor General (C&AG) indicated that the estimated net cost to the State from banking stabilisation measures as at end-2018 was approximately €41.7 billion. This estimate is after taking account of the estimated value of the State’s investments in banks and NAMA’s retained earnings. The C&AG are currently undertaking work to refresh these figures as at end-2021 and updated figures will be available in due course.
The Exchequer continues to incur the cost of servicing the debt associated with the banking stabilisation measures. While the amounts invested in recapitalising banks, proceeds from disposals, income accruing from the investments, and estimated residual values can be readily identified, estimation procedures are required to identify the costs incurred by the State in funding the investment. The estimate of the net cost of banking stabilisation has remained relatively consistent since the initial estimate was produced in respect of the end of 2014. In total, the debt-related cost to the State associated with the investments was c.€22 billion over the period 2009 to 2018. In the long-term, the cost of servicing the debt associated with the investments is projected to be around €420 million annually for each percentage point that the State pays on its debt, per the most recent C&AG projections. For example, at an average cost of debt of 2.5%, the cost of servicing the debt would be around €1.1 billion annually. This estimate does not take account of the additional interest costs that will arise in the future from funding the annual debt servicing cost.
79. Deputy Brian Stanley asked the Minister for Finance the projected total national debt by the end of 2022; and the percentage of this figure that related to the bank bailout. [30901/22]
Amharc ar fhreagraGross National Debt (GND) at end-2021 was €237.2bn. This is just over €30bn higher than it was at end-2019 i.e. pre-pandemic. However, the Exchequer has at its disposal significant cash and other assets. Therefore, the net National Debt – that is the debt after the deduction of these assets – is lower. It stood at €208bn at end-2021. This is c. €20bn higher than it was at end-2019, pre pandemic.
The Stability Programme Update (SPU), published by my Department in April 2022, includes forecasts for General Government Debt (GGD). GGD is a measure of the total gross consolidated debt of Government. It includes National Debt measured on a gross basis, along with debt of the wider general government sector. GGD is forecast to decrease to €233.8 billion by end-2022 (from €235.9 billion at end-2021), the equivalent of 96.5 per cent of GNI*. The baseline forecasts within the SPU are based on the assumption that the war in Ukraine slows the pace of economic expansion in Ireland, rather than reverses it.
Turning to the second element of the Deputy’s Question related to the Bank Bailout, in general terms, the proceeds of borrowing, as well as revenues such as tax revenue are lodged to the Exchequer account. No specific tranches of borrowing were undertaken solely for the purpose of recapitalising the banking sector. Therefore, it would be extremely difficult to accurately quantify the part of the national debt that relates to the borrowing undertaken to recapitalise the banks or provide a useful percentage figure that related to the banking stabilisation measures. It is generally the case that public debt is not repaid as such, but rather is refinanced, or rolled over into new debt, when it comes to mature.
The Office of the Comptroller and Auditor General (C&AG) has previously – in its Reports on the Accounts of the Public Service – provided estimates of the net cost of the banking stabilisation measures as at end-2014, end-2016 and end-2018.
The most recent report, containing estimates as at end-2018, stated that the net cost to the State from banking stabilisation measures up to the end of 2018 was around €41.7 billion. This estimate is after taking account of the estimated value at the end of 2018 of the State’s investments in banks (€8.4 billion), and NAMA’s retained earnings (€4.2 billion).
The 2021 edition of the C&AG’s Report on the Accounts of the Public Service, due for publication later this year, will include updated estimates of the net cost of banking stabilisation measures and associated debt service costs, as at end-2021.
