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Leaders’ Questions

Thursday, 19 January 2012

Dáil Éireann Debate
Vol. 752 No. 2

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Deputy Éamon Ó Cuív: Information on Éamon Ó Cuív Zoom on Éamon Ó Cuív Before the election last year, the Labour Party and the Fine Gael Party made promises to distressed mortgage holders. We have had a number of reports but limited action. The Government also stated after the election that it would act decisively, forcefully and effectively with the banks and others in the interest of those who have difficulty paying their mortgages. We are all aware that the European Central Bank reduced its interest rate in November and December. While some banks took longer than others to do so, most of them reduced the interest rate they are charging mortgage holders. Permanent TSB has 115,000 mortgage holders, approximately 40,000 of whom are on variable mortgages or fixed rate mortgages that will come to an end in the near future. It is charging a rate of 5.19% on a variable mortgage, whereas Allied Irish Banks is charging 3.04%, Bank of Ireland is charging 3.55% and even the rate charged by Ulster Bank, which is not a covered institution, is cheaper at 4.9%. I understand Permanent TSB charges the highest interest rate on a variable mortgage not only in Ireland, but in Europe.

Let us consider the effect this has on people. If a person has a mortgage of €200,000, the interest due on a rate of 5.19% is €200 per week. On an interest rate of 4%, the interest due falls to €154 per week. Charging the AIB rate of 3.04% would reduce the weekly interest to €116. Imagine the difference between €116 per week and €200 per week for a hard pressed mortgage holder. Permanent TSB, one of the covered institutions, is 99% State owned. People are trapped with this mortgage provider because they cannot move to other lenders which will not lend to people in negative equity. It is despicable behaviour on the part of Permanent TSB to charge this rate.

I give credit to the Minister for Finance, Deputy Noonan, for using his powers of persuasion with Allied Irish Banks which reduced its interest rate to 3%. What will the Government do to reduce the Permanent TSB mortgage rate? Imagine the relief it would give a large number of people if the rate could be reduced to the level charged by AIB. The most effective relief one can give to mortgage holders is to reduce their repayments permanently by reducing the interest rate.

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore I thank Deputy Ó Cuív for raising this issue. The Government very much shares the concern he expressed about the difficulties mortgage holders are having, both in respect of the interest rates that are being charged by some institutions and also the difficulties they are having in respect of arrears and the pressure on them, and has acted in this area. Last [230]month, in the budget, it introduced an expanded mortgage interest relief scheme for first-time buyers who purchased their home in the boom years between 2004 and 2008, many of whom are in mortgage arrears at present.

The European Central Bank cut its interest rate by 0.5% in the past two months, which immediately reduced the rates charged on tracker mortgages and some banks have announced that reductions will be passed on to other categories of mortgage holders. The Financial Regulator will engage intensively with the banks to ensure certain mortgage customers are not unfairly discriminated against when savings are being passed on.

The Government is taking urgent action on mortgage arrears. We will propose new schemes for the banks and will immediately introduce pilot schemes in local authorities which will allow people to stay in their own homes, if it is feasible to do so. The focus of the Government is to develop and implement schemes to assist those who cannot afford to pay their mortgages while allowing as many people as possible to remain in their homes. We are progressing personal insolvency legislation, which was one of the recommendations contained in the Keane report. Proposals on personal insolvency which will address the difficulties people are experiencing in repaying mortgages are to be circulated to government in the near future.

In addition, to progress the proposals that were made in the Keane report we have established a steering group, effectively a project team, within the Department of Finance. The group is composed of officials from a number of Departments which have responsibility for dealing with mortgage issues, including the Departments of Social Protection and the Environment, Community and Local Government in respect of the housing side of the local authority areas. We are pursuing a number of options which will provide relief for people with mortgage difficulties, including trade-down mortgages, split mortgages, mortgage-to-rent arrangements and a number of other pilot schemes that are being progressed through the Department of the Environment, Community and Local Government.

I assure the Deputy that the difficulties people are having with mortgages, either in respect of the interest rates being charged or the difficulties they are having in repaying them, are being addressed as a priority by the Government. I would be happy to discuss the detail of the different measures we are taking at any time in the House.

Deputy Éamon Ó Cuív: Information on Éamon Ó Cuív Zoom on Éamon Ó Cuív The Tánaiste mentioned many things I would like to debate with him in detail but I will focus on the proposition that the Government, which is 99% owner of Permanent TSB, ensures its interest rates are no longer sub-prime or usury rates and that they are reduced to the level of the other banks, which is 3% to 3.5%. That would be a huge saving for people. If the Government did that, it might be the resolution to its customers' problem and it might not need all of these other rather complicated solutions proposed.

If the Government wants to keep people in their homes, the first thing to do is to ensure the market reacts to what the ECB does. The reason the ECB brought down the interest rate was to make it cheaper to borrow money. What has happened here is that one major lender in the mortgage market has refused to reduce its rate even though it is owned by the Government.

Will the Minister for Finance ensure that Permanent TSB reduces its interest rate from the punitive 5.19% to, for example, the AIB rate of 3%? If he did that, he would ensure huge relief for very many people who find it impossible to pay the €200 per week on €200,000 but who could pay €116 per week. That would resolve their problems. The irony of this is that if the Minister did that, the Government would save money because the interest relief being given is proportionate to the interest being paid. The Government would make a saving by forcing Permanent TSB to reduce the rate.

[231]There are many things I would like to discuss today and the Tánaiste made many interesting debating points but will the Government ensure Permanent TSB brings down the rate as it did with AIB? I compliment the Government on what it did with AIB. It is a job half done but it should finish the job.

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore In the earlier part of my response, I was responding to the allegation Deputy Ó Cuív made that the Government was not dealing with the mortgage issue. I believe he is now satisfied that the Government is dealing comprehensively with the mortgage issue in respect of interest rates and mortgage arrears.

In regard to the specific issue he raised, as he is aware, the Government has spoken to, and is in contact with, the financial institutions. There is a role for the Financial Regulator in dealing with the individual institutions in respect of their interest rates. As I said earlier, the Financial Regulator will engage intensively with the financial institutions to ensure certain mortgage customers are not treated in a discriminatory manner and that there is fairness in respect of the levels of interest applied across the board and that the reductions in the interest rate applied by the European Central Bank are passed on to customers. The way in which different institutions do so varies. Some institutions have already passed on some reductions while others have not. It varies from institution to institution but we are anxious to ensure there are not discriminatory practices between one institution and another or between one customer and another. The job of the Financial Regulator is to deal with the institutions in that respect.

I would be happy, as I am sure the Minister for Finance would be, to return to the House at a suitable point to address that again.

Deputy Mary Lou McDonald: Information on Mary Lou McDonald Zoom on Mary Lou McDonald Today the troika will give its verdict on the first full year of implementing the so-called “bailout”. I for one have no doubt it will place a big gold star on the Government’s copybook in recognition of its policy of cutbacks and the ongoing assault on the livelihoods of low and middle income earners. I have no doubt the troika will say we are getting there, we are ticking the boxes and we are meeting our targets.

Where exactly are we going? What kind of society will we be left with when we get there? The Tánaiste knows as well as I do that the domestic economy is in a heap, growth forecasts are routinely revised downwards, unemployment is higher than when his Government came into office and thousands of young people emigrate. Now the Government is casting its beady eye on valuable State assets. It even sabre rattles in respect of the increments of low paid public and civil servants.

What is the Tánaiste’s assessment of the first full year of the bailout and the austerity as his Government approaches its first anniversary in office? As Tánaiste and leader of the Labour Party, is it his view that we are heading in the right direction?

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore I am very happy to answer those questions. My assessment of the situation is that we inherited the biggest economic mess any incoming Government ever inherited. When we came into office last March, the banking system and the economy were broken and, as my colleague, the Minister for Education and Skills often says, the country had effectively been put into receivership by the previous Government as a result of the arrangements made with the troika.

This Government is taking the country to recovery and we are making progress on that. I do not want to exaggerate the progress we are making because the path we must travel is a very painful one for people, in particular for those who have lost jobs, have difficulty paying their mortgages and have difficulty making ends meet. There is no easy passage here but we are on the way to recovery.

[232]Whatever assessment the troika makes of the Government’s performance — I expect it will be a positive one — as far as the Government is concerned, it is not about gold stars in copy books or anything like that. As far as we are concerned, it is another milestone on the way to recovery.

I refer to some of the things we have managed to achieve to date. For the first time in four years, the economy is growing again. It is very modest growth but it is growing. The figures published yesterday in respect of our trade performance — our exports — show that we have the biggest trade surplus in the history of the State. That is progress which has been made by the Government through the strategy it has pursued in expanding our exports and trade abroad in order that businesses here can grow.

I refer to the performance of the IDA in terms of inward investment. The Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, published a report a couple of weeks ago which showed significant progress on inward investment and the creation of jobs.

I refer to the budget we introduced. Even in difficult times, we have been able to take 330,000 people out of the universal social charge net introduced by the previous Government. Some 1.8 million workers will not pay additional income tax in 2012 as against what they paid in 2011. The basic rates for 1 million people in receipt of social welfare payments have not been reduced in 2012 as against 2011. That is real progress in very difficult times. We will continue that progress.

Deputy McDonald and other colleagues in the House spoke to the troika during its visit here. It would be helpful if on this occasion she put on the green jersey and assisted the Government in dealing with the negotiations we must have with the troika.

Deputy Dara Calleary: Information on Dara Calleary Zoom on Dara Calleary Like the Tánaiste did.

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore I did that——

A Deputy: The country is banjaxed.

Deputy Dara Calleary: Information on Dara Calleary Zoom on Dara Calleary Where is Joan?

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore ——and I am helping the Government to achieve the objective of getting the country’s economy to recover——

Deputy Dara Calleary: Information on Dara Calleary Zoom on Dara Calleary Joan is banjaxed.

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore ——to get us out of the bailout, to say goodbye to the IMF and the ECB and to recover our economic independence.

Deputy Mary Lou McDonald: Information on Mary Lou McDonald Zoom on Mary Lou McDonald I am certain I am not alone in the sheer boredom and tedium I feel when I hear the Tánaiste talk yet again about his inheritance. He is in government now. This is his gig and all of this is happening on his watch.


An Ceann Comhairle: Information on Seán Barrett Zoom on Seán Barrett A bit of order please.

Deputy Mary Lou McDonald: Information on Mary Lou McDonald Zoom on Mary Lou McDonald It is utterly perverse for the Tánaiste to ask people to pull on the green jersey in order to bring about cutbacks in our schools and in the health system, and to take half a million home help hours out of the system. That is not the stuff of the green jersey, it is the stuff of seeking a gold star on a copybook from the Tánaiste’s friends in the [233]troika. He says it is all about recovery and that we are marking milestones, but let us look at the stated objectives of this bailout. They were deficit reduction on the one hand and re-entering money markets on the other. On both counts the bailout is failing. The deficit remains at €8.7 billion and the interest rate on ten-year Government bonds remains at 7.5%.

Deputy Brian Hayes: Information on Brian Hayes Zoom on Brian Hayes Where was it last July?

Deputy Mary Lou McDonald: Information on Mary Lou McDonald Zoom on Mary Lou McDonald Without even rehearsing, yet again, all of the utter misery that the cutbacks agenda, which the Tánaiste so enthusiastically pursues, is bringing to people’s lives — even by those objective measures, the bailout strategy is failing. It defies logic that a person who bemoans their inheritance and urges others to put on the green jersey, does not have the simple wit to realise that when one is in a hole one should stop digging. When a course of action is clearly not working, one should change tack. That is the stuff of wearing the green jersey, good government, protecting our national interest and, above all, protecting our citizens.

Deputy Paudie Coffey: Information on Paudie Coffey Zoom on Paudie Coffey You wanted to cut €20 billion in one shot.

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore All of us, whether in government or opposition, owe it to the people we represent to be straight with them. When Deputy McDonald talks about the reduction in the 7.5% interest rate that now attaches to Irish bonds, she might also tell people that that is, in fact, now about half what it was last year.

Deputies: Hear, hear.

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore It is down and is going in the right direction. It is not where we want it to be but it is going in the right direction and the Deputy might at least acknowledge progress. Nobody on this side of the House is enthusiastic about cutting any service to the public, but we are in an economic and financial hole. We are short of money and the gap is made up by borrowing. That is the Government’s approach, but Deputy McDonald and her party have offered no realistic solution. Unlike her colleagues north of the Border, she is refusing to face up to the reality of the economic situation here. The policies she would pursue would not just have the cuts that must now be implemented in our services, but would be far deeper. Her approach, for example, in refusing to repay——

Deputy Mary Lou McDonald: Information on Mary Lou McDonald Zoom on Mary Lou McDonald Our policies would have people back at work.

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore That is the policy of us all, but one does not get people back to work simply by making a declaration about it in Leinster House. It has to be worked upon and one must restore international confidence in the country. In order to get people back to work we have to persuade people, outside this country first of all, to invest here to create jobs. We are doing so and the proof of the pudding was the IDA’s performance last year. Second, we have to restore confidence within the country so that we can grow our domestic economy. Dumping down on the country and dumping down on what we are doing to bring about recovery does not do an awful lot to bring that about.

Deputy Dara Calleary: Information on Dara Calleary Zoom on Dara Calleary Tell that to Joan Burton.

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore In respect of the money we must borrow in order to keep the State services going, what would Deputy McDonald do if we were not in a position to borrow that money? How much would she have to cut wages by? Is she going to go down to the Mater Hospital or any other hospital and tell the nurses that she is going to cut 30% of their wages?

[234]Deputy Mary Lou McDonald: Information on Mary Lou McDonald Zoom on Mary Lou McDonald No, but you might.

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore Is she going to tell old age pensioners that she will have to cut maybe up to €100 per week from their pensions? It is time that Deputy McDonald grew up and accepted the economic reality we are facing. If she does not like what the Government is doing — and that is fair enough, it is the privilege of Opposition — then instead of coming in here every Thursday morning and bellyaching about it, she might offer a few positive suggestions.


An Ceann Comhairle: Information on Seán Barrett Zoom on Seán Barrett Could we have some order for Deputy Ross please?

A Deputy: Let Gerry back in on a Thursday.

Deputy Shane Ross: Information on Shane Peter Nathaniel Ross Zoom on Shane Peter Nathaniel Ross I was privileged to be on a delegation of the Technical Group to the troika this week and I have absolutely no doubt that they will give a very good report to the Government today. The question is whether the Government should be looking for, or welcoming, such a good report from the troika. We do not seem to get any payback from this extraordinarily good behaviour on behalf of the Government. The news that broke this morning, that Sarkozy and Merkel are once again seeking to launch an attack on our corporate tax rate — admittedly in a concealed way — is alarming. This time they have presented it in the guise of talking about tax co-ordination, but it is basically the same thing. As the Taoiseach said, a hurrying up of the corporate tax base rate changes, which they are looking for, is in fact a back-door to changing the corporate tax rate.

I would like to ask the Tánaiste about a more alarming and immediate problem. It is a serious matter and I would like a serious answer and not necessarily a political one. There is a serious proposal for a financial transactions tax which is coming down the line on Monday week. Ireland’s reaction to that is important. The Tánaiste will be aware that it poses a real threat, again from Sarkozy and Merkel, to the IFSC which employs 30,000 people. The financial services sector, which accounts for about 20% of the corporate tax gathered in this country, is an absolutely vital part of the economy. If the British stand away from the fiscal treaty which is being negotiated, as they have done, and we go in, which it looks like we are intent on doing, the threat to the IFSC is serious and should not be underestimated. The threat to those jobs is there. Is the financial transaction tax a deal breaker? The Taoiseach has said it would not be welcome, but is it a deal breaker? Will we stand aside from the proposed fiscal treaty if a financial transaction tax is imposed?

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore There are a couple of elements to the question. First, I do not accept what the Deputy says — that there has not been payback for the country delivering on targets in the agreement we have with the EU, ECB and IMF. Last year, there was a practical and tangible payback when we secured a reduction in the interest rate. The value of that payback in terms of our overall debt is approximately €10 billion, which is very tangible.

Second, we are continuing to have technical discussions with the ECB in respect of a number of matters relating to our overall financial situation.

With regard to the issue of corporation tax, the Government’s position has been absolutely clear from day one: we are not going to change our rate of corporation tax because of the significant importance it has in providing security and certainty to investors and potential investors whom we need to create jobs. I believe that position is more clearly understood now among other European states and in the European institutions than it has been heretofore. Over the course of last year, we have done quite an amount of work in explaining the import[235]ance of that rate of corporation tax, not just for Ireland but in respect of investment in Europe, and the importance to Europe of Ireland’s economic recovery.

When the financial transactions tax was originally proposed as a Tobin tax, it was conceived as a tax that would apply on a global basis. Our view is that that has merit. Applying it to a limited number of countries, however, is difficult. There was a proposal that it might apply only to the eurozone countries, which I think is what Deputy Ross is referring to. That would cause difficulties here in respect of the Financial Services Centre and the financial services industry here. It would put us at a competitive disadvantage, for example, with respect to London.

For that reason, we said the proposal was not acceptable to us. Whether it could be applied to the 27 member states of the EU, which is part of the discussions on the multi-annual financial framework for the European budget under way at the moment, is another question.

In assessing the issue, we must look at how it would leave EU states in respect of states outside the EU, such as Switzerland, and the competitive disadvantage that would apply. The other issue that must be taken into account is financial transactions, which is not just a regional or European issue. This is a global business. Within Europe, we must be careful about progressing the proposal in a way that would leave Europe generally at a competitive disadvantage in respect of its financial services industry. Particularly, the Irish Government is very conscious of not reaching any agreement that would put Ireland at a competitive disadvantage.

Deputy Shane Ross: Information on Shane Peter Nathaniel Ross Zoom on Shane Peter Nathaniel Ross I thank the Tánaiste for his reply, which I take to mean that we will not put ourselves in a situation where the British are not imposing this tax and we are. That is how I understand it and if that is what it means, it is encouraging. Perhaps the Tánaiste does not want to say it in such blunt terms but I presume that is what he means when he makes the distinction between eurozone countries and others.

How long are we going to put up with the extremely unhelpful and hostile attitude from Chancellor Merkel and President Sarkozy? Since the Government came into power, we have been suffering under their electoral designs. The whole House knows that this attack on our corporate tax base and the financial transaction tax is to some extent an electoral gimmick by two powerful nations. Is it not time that we said that we have had enough, that we are not going to be victims of the Franco-German political domestic agenda for any longer? We are an independent country and our interest is putting Ireland first and not dancing to the Merkel and Sarkozy duet.

  11 o’clock

The Tánaiste: Information on Eamon Gilmore Zoom on Eamon Gilmore Let us look at our record on this. When the issue of 12.5% corporation tax was put forcibly on the agenda by other member states when the Government came into office in March of this year, we vigorously and effectively rebutted and refuted the argument. We made it clear that there was an attempt to get us to trade the position in respect of reducing the interest rate for concessions on the corporate tax rate. We said we were not going there and were defending our corporate tax rate and explained patiently why it was important in order to encourage investment into the country. We have won that argument. I am not surprised to see the proposal re-emerging from time to time and we must look at the re-emergence of the proposal in the case of some countries having regard to their electoral cycles but our position will not be dictated by the electoral cycles in other member states. Our position is soundly based, we are determined to defend that position and we believe the 12.5% rate of corporation tax is important in order to attract investment.

More important than the rate is the certainty it gives to potential investors. People looking to invest in Europe and, in particular investing in Ireland and creating jobs here need certainty about our corporation tax rate and the position of the Government in respect of that rate. We [236]have communicated that at European Union level, bilaterally to other European Union states and globally to investors and potential investors. It remains the case that 12.5% is our corporation tax rate and we are not in the business of changing it.

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