Written Answers Nos. 144-163
144. Deputy Holly Cairns asked the Minister for Finance the steps he is taking to fulfil the commitment in the Programme for Government for credit unions to become a key provider of community banking. [46042/22]
Amharc ar fhreagra153. Deputy Pádraig O'Sullivan asked the Minister for Finance when he will bring forward his proposals on reforming the credit union policy framework; and if he will make a statement on the matter. [46193/22]
Amharc ar fhreagra154. Deputy Joe Flaherty asked the Minister for Finance the action that he is taking to support credit unions; and if he will make a statement on the matter. [46326/22]
Amharc ar fhreagraI propose to take Questions Nos. 144, 153 and 154 together.
This Government recognises the importance of credit unions. The Programme for Government contains commitments to:
- Review the policy framework within which credit unions operate;
- Enable and support the credit union movement to grow;
- Support credit unions in the expansion of services, to encourage community development; and
- Enable the credit union movement to grow as a key provider of community banking in the country.
With regard to fulfilling the commitments in the Programme for Government for credit unions, the Review of the Policy Framework has been completed. In July the Government approved the drafting of legislation to implement the proposals. This legislation has received priority status for publication in the Dáil’s autumn session.
The policy proposals contained in the Review address five key objectives:
1. Recognition of the role of credit unions;
2. Supporting investment in collaboration;
3. Supporting Governance;
4. Improving member services; and
5. Transparency of regulatory engagement.
Cumulatively, the desired outcome of these objectives is to strengthen the role of credit unions as a provider of community banking and to further enable credit unions to focus on priorities that will better position the sector to face the challenges and opportunities of the future.
In developing these proposals Minister Fleming has met the Irish League of Credit Unions, the Credit Union Development Association, the Credit Union Managers Association, the National Supervisors Forum, the Registrar of Credit Unions, the Credit Union Advisory Committee, the CEO Forum, collaborative ventures and many individual credit unions.
In total as part of the Review process Minister Fleming has held over 55 stakeholder meetings with the credit union sector and considered well over 100 proposals.
146. Deputy Aindrias Moynihan asked the Minister for Finance with reference to the one-member company pensions if the proposed changes to the PRSA will replicate all aspects of existing one-member arrangements; and if the enhanced PRSA will be included in the Finance Act 2022; and if he will make a statement on the matter. [46243/22]
Amharc ar fhreagraThe Interdepartmental Pensions Reform and Taxation Group (IDPRTG) was established to carry out a number of tasks set out in the Roadmap for Pensions Reform 2018 -2023. The Roadmap set out the need to promote long-term pension saving to address income adequacy in retirement, in particular for low income earners.
The IDPRTG is chaired by the Department of Finance, and includes representatives from the Department of Public Expenditure and Reform; the Department of Social Protection (DSP); the Office of the Revenue Commissioners; and the Pensions Authority. In 2020 the IDPRTG published a report which set out a number of actions to aid in the harmonisation and simplification of supplemental pensions.
Finance Act 2021 introduced a package of measures to give effect to some of the actions set out in the group’s report. These included the removal of a prohibition of transfers from an occupational pension scheme to a Personal Retirement Savings Account for members with more than 15 years’ service; the abolition of the Approved Minimum Retirement Fund; and the extension of an Approved Retirement Fund option to death-in-service benefits.
The Group continues its work to implement the actions set out in the Group's Report. Accordingly, a number of proposals from the 2020 Report are currently being worked on, some of which are technical in nature and others which have wider policy implications necessitating careful consideration through the normal policy channels. One of these actions, designed to aid in the harmonisation and simplification of supplemental pensions, is:
‘The differential treatment of the PRSA for funding purposes should be abolished, employer contributions to PRSAs should not be subject to BIK.’
As indicated in this year’s Tax Strategy Group paper www.gov.ie/en/collection/d5b41-budget-2023-tax-strategy-group-papers/ one of the pension policy issues actively being considered is to abolish the differential treatment of the PRSAs for funding purposes.
The IDPRTG focused closely on this issue during the course of 2022 and they are examining a number of methods that could be used to achieve equalisation of the funding options for occupational pension schemes and PRSAs.
However, as the Deputy will be aware, it is a long-standing practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions or the Finance Bill.
147. Deputy Michael Moynihan asked the Minister for Finance if he will report on his recent engagement with the credit unions; and if he will make a statement on the matter. [46280/22]
Amharc ar fhreagraSince January 2022, Minister of State Fleming, who has responsibility for credit unions, has held or attended 22 meetings and events with various credit union stakeholders including the Representative Bodies, the Credit Union Advisory Committee and individual credit unions.
He has also spoken at the AGMs of the Irish League of Credit Unions, the Credit Union Development Association and the Credit Union Managers Association and the at National Supervisors Forum Summer Forum.
In March Minister Fleming met with all the credit union representative bodies who broadly supported the proposals emanating from the Programme for Government Review of Policy Framework. The Review is now complete and in July the Government approved the drafting of legislation to implement the proposals. This legislation has received priority status for publication in the Dáil’s autumn session.
Separately, Department Officials from the Credit Union Policy Team have very regular engagement with sector stakeholders, including quarterly stakeholder roundtables, the most recent of which took place this month. They also act as secretariat to the Credit Union Advisory Committee, which meets on a monthly basis.
148. Deputy Paul McAuliffe asked the Minister for Finance his work to date on the introduction of a vacant property tax; and if he will make a statement on the matter. [46258/22]
Amharc ar fhreagraAddressing vacancy and dereliction, and maximising the use of existing housing stock, is a priority objective of the Government. Housing for All outlines a suite of measures aimed at addressing vacancy in a coordinated, robust manner, and specifically includes an action for the Department of Finance to collect data on vacancy with a view to introducing a vacant property tax.
Provisions included in the Finance (Local Property Tax) (Amendment) Act 2021 enabled Revenue to collect certain information on vacant properties in the Local Property Tax return forms submitted by residential property owners in respect of the new LPT valuation period 2022-2025. This information included whether the properties were unoccupied at 1 November 2021, the reason why and whether they (the properties) had been vacant for 12 months or more. Vacancy data on LPT returns has not been verified by Revenue and was collected for informational purposes only. A preliminary analysis of this data was published by Revenue on 6 July 2022, and is available at:
www.revenue.ie/en/corporate/information-about-revenue/statistics/local-property-tax/lpt-stats-2022/index.aspx.
The preliminary analysis published by Revenue includes a breakdown of the various reasons provided for vacancy. It indicates that the most frequent reasons for properties reported as vacant, were “Undergoing Refurbishment” (22.2%), “Other” (21.7%) and “Holiday Home” (20.4%). Other reasons for vacancy were reported as a property being for sale or between lettings, subject to a probate application or other legal proceedings, or where the owner is in long-term care. The analysis also indicated that levels of vacancy among LPT liable properties are low across all counties and lie within a range that is considered to be in line with a normal functioning housing market.
As I have said on many occasions, I 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. The Revenue analysis provides a basis for my Department to assess the merits and impact of introducing a Vacant Property Tax, and how best such a tax might be designed.
This work is well underway and I intend to bring forward proposals on a targeted measure that achieves an appropriate balance between incentivising owners of vacant habitable residential properties to bring their properties back into use, and ensuring any such tax does not arbitrarily or excessively penalise home-owners for normal temporary vacancy. As the Deputy will be aware, it is a long-standing practice that the Minister for Finance does not comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions.
150. Deputy Richard Bruton asked the Minister for Finance the scale of the impact that rising energy prices will have on the balance of international payments in European Union Member States; the implication that this will have on public policy; the strategies that are being debated by the Euro-Group; and if he will make a statement on the matter. [46331/22]
Amharc ar fhreagraThe step-change in energy prices on foot of Russia’s invasion of Ukraine has resulted in a ‘terms-of-trade’ shock, which has seen import bills rise across EU and euro area Member States. In effect, this has resulted in a transfer of domestic incomes from net energy importing countries to net energy exporting countries, leading to a deterioration in the current account balance in a number of Member States.
The latest euro area current account data are for the first quarter of the year, so only capture the initial impact of rising energy prices on foot of the onset of the war in Ukraine. The ECB data show the euro area current account surplus at €217 billion (1.7 per cent of euro area GDP) in the first quarter, down from €301 billion (2.6 per cent of euro area GDP) a year earlier.
The latest ECB macroeconomic projections point to a continued deterioration in the euro area terms of trade and trade balance due to rising energy prices. For the euro area, the ECB forecast a current account deficit 0.3 per cent of GDP in 2022 and 0.5 per cent of GDP in 2023. The balance becomes positive in 2024 with a current account surplus of 0.1 per cent of GDP. In contrast, while Ireland’s surplus is expected to moderate over the coming years, it is still expected to remain in surplus over the medium-term.
Close monitoring and coordination of the broad range of fiscal and financial policies in the euro area is essential. Implementing effective, sustainable policies in a concerted manner to mitigate the impact of the war on the euro area economy and support the recovery requires intense policy dialogue and coordination. As such, the Finance Ministers of the euro area are intervening to support vulnerable households and businesses in facing this unprecedented price shock.
We have two priorities in our collective response. Firstly, policy interventions should focus on income transfers that are exceptional and, where possible, temporary and targeted. We will aim to avoid competitive tax reductions within the euro area. Secondly, we commit to avoiding a wage-price ‘spiral’. Similarly, super levels of profitability should not be enjoyed by some while many are suffering the economic consequences of war. We stand ready to coordinate closely and look forward to the Commission proposals in this regard.
In this context, the Eurogroup is committed to regular discussions on macro-economic developments and policy prospects, including rising inflation and energy prices. Overall, the Eurogroup will aim to maintain sufficient flexibility in order to ensure swift reactions to future and unexpected developments, and will include any unforeseen issues on Eurogroup agendas, as they arise.
152. Deputy Ged Nash asked the Minister for Finance his views on the recent Tax and Welfare Commission Report’s findings that wealth and capital taxes should increase materially as a proportion of tax revenues; his plans, if any, to increase such taxes in order to put the public finances on a sustainable footing as outlined in the Programme for Government; and if he will make a statement on the matter. [46204/22]
Amharc ar fhreagraThe Commission on Taxation and Welfare was an independent group that was established in April 2021 as a result of a commitment in the Programme for Government. It was asked to independently consider how best the taxation and welfare systems can support economic activity, and promote increased employment and prosperity while ensuring that there are sufficient resources available to meet the costs of the public services and supports in the medium and longer term.
‘Foundations for the Future’, the Report of the Commission on Taxation and Welfare, was published on 14 September. It is a wide ranging report that contains over 500 pages and 116 recommendations relating to the future of our taxation and welfare systems. It is available to download at the following link: gov.ie - Report of the Commission on Taxation and Welfare (www.gov.ie).
The report poses serious questions that we as a society must carefully consider. The recommendations will foster real debate around how we reform our tax and welfare systems over the longer term in order to safeguard their sustainability and adapt to a rapidly changing environment. This important work is focused on the longer term and will contribute to debates on the optimal balance of taxation for many years to come.
It is clearly set out in the Commission’s report that the recommendations are not intended to be implemented all at once, but rather provide a direction of travel for this and future Governments around how the sustainability of the taxation and welfare systems may be improved in a fair and equitable manner.
The Commission’s recommendations, including those concerning wealth and capital taxes, are significant and wide ranging, and it is important to allow time for detailed consideration. As is acknowledged in the report, the recommendations come at a challenging time economically.
It is my intention to provide an initial response to some of the Reports recommendations as part of the upcoming budget and over the medium term my Department will consider the recommendations of the Report in detail.
It would not be appropriate for me to speculate on what specific elements of the report I might act on in advance of that process which will be concluding over the coming weeks.
155. Deputy Seán Haughey asked the Minister for Finance the way that he will ensure that the benefits of the insurance reform agenda are passed on to customers; and if he will make a statement on the matter. [46304/22]
Amharc ar fhreagraAs the Deputy will appreciate, neither I, nor the Central Bank of Ireland, can direct the pricing or provision of insurance products, as this is a commercial matter which individual companies assess on a case-by-case basis. This position is reinforced by the EU Single Market framework for insurance (the Solvency II Directive).
Nevertheless, this Government understands that insurance costs are a significant issue for customers, and has therefore prioritised reform of this sector through the whole-of-Government Action Plan for Insurance Reform. Delivery of the reform package is overseen by the Cabinet Committee Sub-Group on Insurance Reform, which is chaired by An Tánaiste, and contains a number of Ministers as standing members. Work is underway to complete the delivery of the remaining actions, with some 80 per cent of delivered at the time of the last implementation report in March.
It is the Government’s expectation that all savings from this reform agenda are passed onto customers, including any reduction in claims costs resulting from the new Personal Injuries Guidelines. The Guidelines represent a milestone in the insurance reform agenda, and have significantly lowered award levels for many common injuries, with recent data from the Personal Injuries Assessment Board indicating that the overall average award has fallen by 42 per cent compared to awards made in 2020 under the Book of Quantum.
The Guidelines are therefore expected to lead to a reduction in the overall cost of claims, including legal fees. It is necessary for the insurance industry to pass on any benefits from this initiative, and the many other reform already introduced, to its hard-pressed customers, especially in the context of current inflationary pressures.
Both Minister Donohoe and I have been clear on these points and remain committed to holding the insurance sector to account, in so far as it is permissible, on commitments made. In this regard, I will be meeting with the CEOs of the eight main insurers in the Irish market again in the coming weeks in order to further assess their response to the Action Plan reforms, and to stress the importance of reflecting lower claims costs through reduced premiums. I will also continue to press insurers on the need to expand their risk appetite, especially into ‘pinch-point’ sectors that are experiencing issues with availability and affordability of cover.
In addition, the National Claims Information Database (NCID), managed by the Central Bank of Ireland, contains official data on premiums and claims costs, and provides further evidence on the Irish insurance market.
Over time, this allows policymakers and stakeholders to assess the cumulative impact of this multi-action reform package. Following the implementation of the Personal Injuries Guidelines , the Central Bank has amended the NCID data specification and will collect further claim settlement data. The fourth NCID Private Motor Report, which will provide data up to the end of 2021, should show some initial insight into the impact of the Guidelines, and I look forward to the publication of this report in the coming weeks.
156. Deputy Marc Ó Cathasaigh asked the Minister for Finance his views on undertaking a regular benchmarking exercise in respect of all working-age income supports, as recommended in the Report of the Commission on Taxation and Welfare; and if he will make a statement on the matter. [46297/22]
Amharc ar fhreagraIn its recently published report, the Commission on Taxation and Welfare makes a number of serious and wide-ranging recommendations regarding the future of the tax and welfare systems in Ireland. The report runs to more than 500 pages and contains 116 recommendations.
The report poses serious questions that we as a society must carefully consider. The recommendations will foster real debate around how we reform our tax and welfare systems over the longer term in order to safeguard their sustainability and adapt to a rapidly changing environment.
The Commission’s recommendations are significant and wide ranging, and it is important to allow time for detailed consideration. It is my intention to provide an initial response to some of the recommendations as part of the upcoming budget.
With regards to any measures affecting the social welfare system, this will be a matter for consultation with the Minister for Social Protection and her Department, who have responsibility for social welfare policy.
It would not be appropriate for me to speculate on what specific elements of the report we might act on and when in advance of such consultation.
157. Deputy Ruairí Ó Murchú asked the Minister for Finance the measures that are under consideration to alleviate the huge increases in the cost of energy for small and medium businesses; and if he will make a statement on the matter. [45715/22]
Amharc ar fhreagra224. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which efforts continue to control inflation; and if he will make a statement on the matter. [46537/22]
Amharc ar fhreagraI propose to take Questions Nos. 157 and 224 together.
Consumer price (HICP) inflation has picked up sharply over the course of this year and stood at 9 per cent in August. Almost every advanced economy in the world is in the same position, with inflation rates of 8.3 and 9.1 per cent recorded in the US and euro area respectively in August.
The key driver of the elevated level of inflation at present is the sharp rise in wholesale energy, food and other commodity prices since the onset of the war in Ukraine. However, as highlighted in the correspondence, pass-through price effects from higher energy prices are increasingly being felt in other sectors. Indeed, non-energy or ‘core’ inflation has picked up sharply in recent months and stood at 6.2 per cent in August, suggesting inflationary pressures are increasingly broad based.
The Government recognises the impact rising prices have had on households and businesses across the country and has taken significant action. Some €2.4 billion in cost of living measures has been announced since last October. Looking ahead, the Government will continue to address these challenges head on. Budget 2023 will be a ‘Cost of Living Budget’ and will build on the fiscal supports the Government has already provided to cushion the impact of rising prices.
The Government supported households and firms through the pandemic and will continue to do so in the face of unprecedented energy price spikes caused by Putin’s war. However, we must be cognisant that resources are limited and the Government has to balance the appropriate response to the increased cost of living in Ireland with the very high level of global economic uncertainty and macroeconomic risk.
Furthermore, in calibrating how we respond to the current challenges, it is important that we strike the right balance and ensure that policy doesn’t inadvertently add further inflationary pressures into the system.
159. Deputy Bríd Smith asked the Minister for Finance if he will examine changes to the tax rules affecting section 31E of the stamp duty legislation which are impacting schemes to help elderly persons remain in their homes when they experience financial difficulties (details supplied); his plans, if any, to exempt such products from the current rules; and if he will make a statement on the matter. [46237/22]
Amharc ar fhreagraIn 2021, I introduced a higher 10% rate of stamp duty on multiple purchases of residential properties. The rate was introduced by Financial Resolution on 19 May 2021 and is provided for by section 31E of the Stamp Duties Consolidation Act 1999. It applies where a person buys 10 or more residential properties, excluding apartments, in any 12-month period. The background to the introduction of the measure was the purchase by institutional investors of all, or a significant proportion of, residential housing estates, thus denying first-time and other buyers an opportunity to purchase a home. The 10% rate is intended to provide a significant disincentive to this practice.
To ensure that the higher rate of duty does not have an adverse impact on the delivery of social and affordable housing in the State, section 31E contains a specific exemption from the 10% rate of duty for residential units that are leased to a local authority for onward leasing to a household that qualifies for social housing support. The relief is intended to apply in respect of residential units acquired under the ‘mortgage-to-rent’ scheme. I have also introduced two specific repayment schemes in relation to section 31E, which are provided for by sections 83E and section 83F of the Stamp Duties Consolidation Act 1999.
Section 83E, which was introduced by the Finance (Covid-19 and Miscellaneous Provisions) Act 2021, provides for a partial repayment of stamp duty paid at the higher 10% rate where, within 2 years of acquisition, a property is leased to a local authority or an approved housing body for the purpose of social housing. Section 83F, which was introduced by the Finance (Covid-19 and Miscellaneous Provisions) Act 2022, provides for a partial repayment where, within 6 months of acquisition, a property is designated as a “cost rental dwelling”. In the case of both schemes, the amount to be repaid is the difference between the amount of stamp duty paid at the higher 10% rate and the amount of duty that would have been payable had the standard rate applied.
It has subsequently come to my attention that Section 31E may impact on a number of other forms of acquisition that it was not intended to apply to, and I will consider introducing similar measures to remove that impact where a convincing case for doing so is presented to me.
I am sure the Deputy will appreciate that I cannot give any indication of any plans I may have in this regard, be they for Budget 2023 before it is announced, or Finance Bill 2022 in advance of its publication.
161. Deputy Ged Nash asked the Minister for Finance if he, or any of his Departmental officials, were provided with any prior written or verbal notice regarding the decision of a bank (details supplied) on 21 July 2022 to terminate cash services at a number of its branches; if he or his officials were in possession of a document before the bank’s announcement of the decision to terminate cash services at a number of its branches on 22 July 2022; and if he will make a statement on the matter. [46206/22]
Amharc ar fhreagraI wish to highlight, as Minister for Finance, I am precluded from intervening in commercial and operational decisions in any particular bank, even one in which the State has a shareholding. Decisions in this regard, including AIB's original announcement on 19 July 2022 to re-purpose 70 of its branches across the country, are the sole responsibility of the board and management of the banks, which must be run on an independent and commercial basis. The bank's independence is protected by a Relationship Framework which is a legally binding document that cannot be changed unilaterally. This framework, which is publicly available, was insisted upon by the European Commission to protect competition in the Irish market.
Papers made available to the Department of Finance via a secure web-link in advance of the June AIB Board Meeting included a proposal on a reconfiguration of some AIB branches but with no firm announcement date. Department officials do not attend board meetings for any of the banks in which the state has a shareholding.
A Department of Finance official met with AIB officials on 15 July 2022 where he was advised that an announcement of branch reconfiguration would be made on 19 July 2022. It was noted that this was a commercial decision for the board and management of the bank, that no branches were being closed and that an enhanced arrangement was in place with An Post to provide cash services via the post office network.
The Department’s executive board was briefed on the next business day, 18 July 2022, and I was informed the day after that.
On 22 July 2022, recognising the customer and public unease that this decision caused, the bank decided not to proceed with the proposed changes to its bank services. AIB continues to retain its 170-strong branch network in its entirety and will also continue to offer banking services through its relationship with at An Post at its 920 post offices nationwide.
162. Deputy Joe Flaherty asked the Minister for Finance the details of the SME Credit Demand Survey that was published by his Department in September 2022; and if he will make a statement on the matter. [46325/22]
Amharc ar fhreagraSMEs play a key role in the Irish economy, comprising 99.7% of the total enterprise population, 66.4% of employment, 43.6% of total turnover and 36.9% of gross value added (“GVA”) in the Business Economy . This is why my Department conducts the SME Credit Demand Survey and has been doing so biannually since 2011. The SME Credit Demand survey is an independent and statistically significant report that provides insights into the availability of, demand for credit and related issues amongst SMEs. In addition, the report is an important resource used for research by my Department in conjunction with the Central Bank, ESRI and others.
As the Deputy is aware, the latest SME Credit Demand Survey was published on the 5 September 2022 and the full report is available on www.gov.ie.
The results show that demand for bank credit has fallen steadily since the series commenced, with requests in the period falling from 39% of those surveyed in September 2012 to 16% in the most recent result (6 months to March 2022). The recent growth in non-bank finance activity as a source of credit for SMEs is an important contributing factor which is why a new question was introduced in the recent survey specifically in relation to demand for non-bank finance in its own right.
The 5% of SMEs who stated they applied for non-bank finance in the 6 months to March 2022 is notable and reflects a growing market share for this source of finance.
Of those SMEs who did not apply for bank finance the main stated reason was a lack of credit requirements due to sufficient internal funds, a reason cited by 76% of businesses not seeking credit (up from 72% in March 2021). Of those companies that have requested bank credit, expansion needs (42%) was the main reason for finance requests up from 32% in March 2021. Notably, expected future demand remains stable with 12% of SMEs expecting to apply for finance in the following six months, down from 13% during the corresponding period in 2021.
Despite ongoing uncertainty, SMEs have remained resilient with all sectors reporting an improvement in turnover performance compared to March 2021. With 45% of all businesses reported increased turnover in the six months up to March 2022 and 18% reporting a decrease. This is a significant improvement from the low levels recorded in March 2021.
Notably the biggest improvement seen was in the Hotel and Restaurant Sector with 66% reporting improved turnover. In addition, 61% of SMEs reported an increase in profit during 2022, compared to 53% in 2021. These positive financial results indicate SMEs are bouncing back to pre-pandemic profit levels. However, this resilience is being tested further with rising energy costs.
Government remains committed to supporting the business community through these challenging times and it will continue to monitor access to credit and related issues through inter alia my Department’s SME Credit Demand Survey.
