Ciarán Lynch (Cork South Central, Labour)
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No. 6 pertains to the 2013 allocations for public expenditure, Finance Vote group. I welcome the Minister for Finance, Deputy Michael Noonan. I advise members that a briefing paper has been prepared as part of today's presentation.

I remind members, witnesses and those in the Public Gallery that all mobile phones must be switched off and if phones are not switched off, I will ask those to whom they belong, whether members or observers in the Public Gallery, to remove themselves from the committee room. Members, including the Minister, are reminded of the long-standing ruling of the Chair to the effect that they should not comment upon, criticise or make charges against a person outside the House or an official by name in such a way as to make him or her identifiable. I call on the Minister for Finance, Deputy Noonan, to make his opening statement.

Michael Noonan (Limerick City, Fine Gael)
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First, I congratulate the Chairman on his election and wish him every success in the exercise of his functions.

Ciarán Lynch (Cork South Central, Labour)
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I thank the Minister.

Michael Noonan (Limerick City, Fine Gael)
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I am pleased to have the opportunity to appear before the joint committee today and look forward to a constructive discussion covering the 2013 technical allocations for my Department's group of Votes. I welcome this earlier interaction on the 2013 expenditure allocations and on the budgetary challenges facing the Finance group of Votes. If I may, I will begin by making some general comments on the economy, our progress under the terms of the EU-IMF programme of support and other strategic objectives set out in our strategy statement earlier this year.

The economy is expanding once again and that is to be welcomed. In April last, my Department projected GDP growth of 0.7% for this year; six months later, the indications are that a growth rate somewhere in this region will be achieved. However, the external outlook, that is, the outlook for growth in many of our trading partners, has deteriorated over the summer. As a small and open economy, this is not good news for us. My Department is currently working on its latest forecast, which will be published in the coming weeks, taking account of this and other recent data.

Turning briefly to the public finances, it is clear that we are moving in the right direction after a number of difficult years. The most recent estimate of the 2011 underlying general Government deficit, that is, the deficit excluding the direct impact of State support to the banking system, is 9% of GDP. This compares to an equivalent 2010 deficit of 10.8% of GDP. Importantly, the 2011 deficit was well within the limit set as part of the EU-IMF programme. All of the quantitative fiscal targets set so far as part of that programme have been achieved, most recently for the end-September Exchequer primary balance.

The end-September Exchequer returns were generally positive showing robust tax revenue growth. Indeed, tax revenues in the first nine months of the year were 1.5% ahead of our expectations with three of our "big four" sources of tax revenue - income tax, corporation tax and VAT - performing better than expected. While there are spending pressures in the health and social protection, I remain confident that we can meet this year's 8.6% of GDP deficit target. What is clear also, however, is that we continue to spend far more than we collect in revenue. Closing this gap further in the years ahead presents a real challenge to policy-makers but we must remain steadfast in our commitment to reduce the deficit to below 3% of GDP by 2015.

As the committee will be aware, the eighth review mission on the EU-IMF programme began yesterday. We are again in the position of having met our commitments under the programme for quarter 3, that is, to the end September 2012, both in terms of policy reforms and quantitative targets. A substantial number of actions - by our count, over 160 - have now been completed since the commencement of the programme.

The purpose of the quarterly review mission is to evaluate performance against the targets set for the fourth quarter of the programme of financial support for Ireland including fiscal developments, the macroeconomic outlook, progress on commitments in the restructuring of the financial sector and structural reform.

Ireland has successfully completed seven reviews of our programme to date and I am sure that the troika will once again find us to be meeting all of our targets, making real progress in restoring order to the economy and public finance, re-structuring the banking system, getting back into the markets and getting people back to work. Ireland's strong programme implementation has been recognised by our European partners, by the IMF and by the markets

Turning to our objectives within the banking and financial services sector, work is continuing across many areas. Significant progress has been made in the Irish banking sector since the start of the EU-IMF programme, at the beginning of 2011, to our current position at October 2012.

Recapitalisation of the PCAR banks - AIB, Bank of Ireland, and PTSB - and IBRC has been completed with a total cost to the State of €64.1 billion. Approximately €15.5 billion was also generated through burden sharing with bond holders. In addition, a significant sale of the State's stake in Bank of Ireland to private investors was successfully concluded. Recapitalisation for PCAR banks was completed on time and below expected costs. In December 2011, the European Banking Authority published a survey on European banks' levels of Core Tier 1 capital using certain stress assumptions. In the results of the survey, the Irish banks ranked amongst the best capitalised banks in Europe.

Restructuring of the Irish banking system underwent considerable transformation. Restructuring realised the new blueprint for the banking system, with two pillar banks, AIB and Bank of Ireland, and mergers between AIB and EBS, and INBS and Anglo Irish Bank. Directors on boards of the banks have been renewed so that only one board member is in situ who was there in 2008. All 2011 de-leveraging targets for the banks have been met. Since the start of the programme, total covered bank de-leveraging of €56.7 billion has been achieved to end of June 2012, which was a fairly significant demand. It comprised €44.6 billion at AIB, Bank of Ireland and PTSB together, and €12.1 billion in IBRC. Significant disposals are targeted for the second half of 2012 as part of the pillar banks' planned run down of non-core balances.

The banks' funding positions have improved significantly. Deposits in AIB, Bank of Ireland and PTSB have stabilised with net inflows achieved since last year while reliance on ECB funding is down on previous levels. The banks have also achieved €6.9 billion of wholesale repo funding which, together with the levels at which their senior bank bonds are trading in the market, suggests that significant progress has been made to restoring investor confidence and with it, market access.

Bank guarantee support in the form of the ELG has reduced from €375 billion in September 2008 to €90 billion at end of June 2012. Given that other EU member states have encountered difficulties with their banking systems Europe is now seeking new ways of breaking the link between sovereigns and their banks.

A key objective for 2013 is to find the best option for a long-term financing solution for the Irish banking system and to replace promissory notes with an instrument that is more favourable to the State's finances. In addition, it is in the interests of the State that the Irish banks continue to build on their viability to ensure the return of a vital and healthy banking system in Ireland.

Much work has been undertaken in the area of mortgage arrears. The Personal Insolvency Bill has passed Committee Stage in the Dáil and will move to Report Stage in November. The director designate of the insolvency service has been appointed and will oversee the creation of the vital infrastructure to underpin the legislation. The enactment of this Bill is a key legislative priority for the Government. The banks have been piloting resolution options through the course of Quarter 3 of this year with Central Bank oversight in advance of broader roll-out and a comprehensive advisory service has been established of the banks' own strategies to deal with those in arrears.

In terms of SME credit, access to credit for viable businesses and individuals remains a key Government priority in supporting economic recovery. The pillar banks have been set ambitious targets for sanctioning of lending into the economy. The target for 2012 is €3.5 billion and the banks are being closely monitored to ensure that they meet these targets. The Department is also working closely with the Department of Jobs, Enterprise and Innovation to facilitate the implementation of a temporary loan guarantee scheme and a micro-finance fund. The Credit Review Office is an important instrument in providing a valuable appeal mechanism for businesses that have had their credit applications rejected by the pillar banks.

The office has overturned some 55% of the cases referred to it, thereby securing over €9.6 million in credit for small businesses in Ireland and safeguarding some 850 jobs. We continue to assess SME demand on a six monthly basis through our regular surveys to inform and guide policy in this important area.

The Government has made significant progress with regard to credit unions. The Commission on Credit Unions finalised an agreed final report on schedule in March. This report sets out recommendations across a broad range of areas and will provide the basis for a viable sector into the future. The Credit Union Bill 2012 was published at the end of September in accordance with the EU-IMF structural benchmark and implements more than 60 of the commission's recommendations. Two further programme targets have also been delivered in the commencement of fitness and probity regulations for credit unions and the commencement of contributions under the deposit guarantee scheme. The credit union restructuring board has been established. Its chair is Mr. Bobby McVeigh, who has many years experience in the credit union movement internationally. The board has already begun to meet and it is focused on progressing the restructuring programme in accordance with the timetable set out in the commission's report.

Considerable work has also been done on the legislative area, the negotiation of EU directives, a public sector migration plan for SEPA compliance and rolling out the standard bank account project. We will continue to manage an ambitious agenda of policies to support effective regulatory supervision of the financial sector, continuing development of Ireland as a centre for international financial services and representation of Irish national interests at EU level in regard to financial services dossiers while respecting the goal of effective supervision consistent with EU financial services initiatives.

My Department has provided the committee with technical calculations for the Department, the Office of the Revenue Commissioners, the Office of the Appeals Commissioner and the Office of the Comptroller and Auditor General, which set out our funding requirements on a no policy change basis and the associated savings that would be required in order to comply with the expenditure ceilings under the multi-annual financial framework. As I indicated in my covering letter, this no policy change approach does not reflect the reality on the ground. My Department and Revenue will face significant additional challenges in the coming 12 months and we face associated expenditure pressures which I will discuss in due course. Furthermore, my Department is undergoing extensive restructuring in order to better align resources against the objectives of our statement of strategy. When we come to reviewing my Vote I ask, therefore, that we focus on the total Vote rather than on individual programmes, which will not reflect the structure of the Vote in 2013.

Vote 7 provides for the administrative and non-administrative costs of the Department of Finance. Much discussion has taken place at this committee and elsewhere regarding the capacity of the Department, skills gaps, etc. My Department sought and was granted an increase in funding in 2012 to enable it to address these issues. Recruitment is progressing and we are restructuring to align our resources in line with our revised and more forward looking strategic plan. As part of this restructuring we will continue to pursue economies of scale and improved productivity through the expansion of the shared service function to other Departments, agencies and bodies and through the sharing of consultancy expertise with the National Treasury Management Agency. Consultancy costs will be monitored closely and will be recouped from the relevant financial institutions where possible. However, I am sure the committee will appreciate that we must utilise expertise where necessary in order to secure a robust banking system and promote an environment of stable sustainable economic growth.

A further key deliverable for my Department in 2013 will be the successful hosting of the EU Presidency. Ireland will take over the Presidency of the European Union next January for six months. As the committee will be aware, the Government allocated additional resources for the preparation and operation of the Irish Presidency. The effective and efficient operation of the Presidency will involve increased expenditure for my Department in 2013 as it would not be possible to operate the Presidency without appropriate resources. Significant work has already gone into the preparation of the Presidency at all levels of Government. When considering the financial cost of the Presidency we should be aware that it presents us with many opportunities. Having the Presidency allows us to manage and steer the Union agenda, which is of significance to this country and the future of the European Union. Having an effective and efficient Presidency is important in terms of improving the international perception and profile of Ireland. It will demonstrate our commitment to the EU and ensure that we remain at the heart of the European decision making process. There will also be tangible benefits in terms of the number of visits by officials and the media during the first six months of 2013. It is up to all of us to exploit the potential presented by the Presidency.

Our Presidency will coincide with a significant agenda on financial regulation in 2013, with a large range of EU proposals. The dossiers to be prioritised during our Presidency will be determined in the first instance by the achievements of the Cypriot Presidency and discussions at political and institutional levels. However, we are watching closely the progress being made on banking union and the continuing reform of financial service markets. These two important areas will require our energy and commitment. Other dossiers which are part of an integrated package of financial services regulatory reforms are also likely to be part of the Presidency work programme. However our decision on what particular dossiers to prioritise will be driven in part by the need to seek solutions to the current financial crises, specifically, on an integrated financial framework at EU level and the possible components of that framework. Progress made by Ireland in this area will also be relevant to the stability of the financial sector and hence to the role of that sector in restoring the overall health of the Irish economy.

The goal of the Office of the Revenue Commissioners is to create a more tax and customs compliant society and an administration that assists economic growth and development. Its roadmap to achieve this goal in a challenging and difficult environment is set out in its statement of strategy 2011-14. Revenue has prioritised four strategies, as follows: make it easier and less costly for taxpayers to comply with their tax obligations by delivering quality services to them; increase timely compliance and reduce outstanding tax debt; target and confront those who do not comply; contribute to Ireland's economic recovery by providing high quality policy advice and legislation and extending a tax treaty network that is favourable to inward investment and trade; and, for 2013, contribute to a successful Presidency.

As regards resources, Revenue accepts that it must play its part in meeting Government policy on public service staffing numbers. I am satisfied that to date it has, at the minimum, carried its share of the burden of staffing and other reductions. An effective tax collection system is an essential element of our fiscal consolidation requirements and is critical to the successful achievement of the Government's objectives in the context of the EU-IMF programme of financial support for Ireland. However, while there is undoubtedly a connection between resources and the ability to collect, determining the appropriate level of resources for an organisation like Revenue is a complex task. Revenue will continue to engage with the Department of Public Expenditure and Reform in order to establish the best allocation of resources in the interest of an optimal result for the taxpayer.

The budget of the Office of the Comptroller and Auditor General is applied towards a single programme with the following outputs: auditing the financial statements of public bodies and issuing audit opinions through the certification audit programme; and examining financial management arrangements in public bodies and the value for money of public services through the reporting programme.

The Comptroller and Auditor General assists the Committee of Public Accounts in it scrutiny of the public finances. The number of whole-time equivalents is currently 136, which is 14 below the approved employment control framework number of 150. Measures have been taken to address the resource deficit, including the temporary engagement of qualified accountants.

Ciarán Lynch (Cork South Central, Labour)
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Is it agreed to publish the Minister's opening statement? Agreed. I understand the Minister needs to be in the Seanad later this afternoon and, therefore, we need to conclude at 3.45 p.m.

Michael Noonan (Limerick City, Fine Gael)
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I thank the Chairman.

Ciarán Lynch (Cork South Central, Labour)
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I propose that members make a two minute opening statement, at which point I will cut them off. I will then press them to move on to questions. As the Minister said, today's focus is the review of the Votes as opposed to the broader work of the Department.

Michael McGrath (Cork South Central, Fianna Fail)
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I welcome the Minister and his officials. I will put questions during my initial contribution. I am all for reform and opening up the budget process to have meaningful input by Oireachtas committees such as this into the Estimates process but I spent a few hours going through the documents forwarded to us to get my head around what we are trying to do and I find it difficult to see any meaningful basis for the numbers set out in them. The Minister acknowledged in his opening remarks that the figures do not reflect the reality on the ground because of a number of issues. They are prepared on a no policy change basis, they do not reflect the ongoing restructuring in the Department, and we also have the admission by the various bodies in the other Votes, such as the Comptroller and Auditor General, Revenue Commissioners and the Appeal Commissioners, that if they are required to stay within the comprehensive spending Estimates ceiling, they will not be able to their jobs effectively. There are hard hitting comments in their contributions.

On the Estimates issue generally, the Department's four Votes seem to necessitate a broad cut of approximately 3%. There are no details as to how that will be achieved. The Revenue Commissioners have been clear that further reductions in their budget will impact on their ability to do their job and potentially will result in a revenue loss of more than €400 million. The Comptroller and Auditor General has said if his office is subject to further cuts in line with the Estimates, it will not be able to fulfil its constitutional mandate. I question the basis of these figures. Perhaps the Minister can put them in layman's terms and explains the purpose of this process and how we can meaningfully engage with him and have a proper input into the Estimates as he goes forward to prepare the budget.

The Minister made an extensive opening statement covering a broad range of sectors in the economy. He referred to the fact that the economy is growing again in GDP terms at least. It did so last year and it remains to be seen whether it will achieve the 0.7% growth target this year. Where will growth come from over the next few years? When will the medium-term fiscal statement be published? I understand it is due this month. Is the Minister looking at his Department revising the growth forecasts for 2013 and 2014 because they form the foundation of the budget he will present with the Minister for Public Expenditure and Reform in December?

The Minister referred to the issue of mortgage arrears but did not refer to the striking intervention by the Central Bank director, Fiona Muldoon, yesterday. Does he agree with her sentiments that the banks are not doing enough and are not fulfilling their responsibilities, having been adequately recapitalised, to face up to the crisis in a comprehensive way and deal with each borrower in distress on a case-by-case basis? Can the Minister give us a sense of the work that is ongoing in the preparation of the budget? He must make a fiscal adjustment of at least €3.5 billion. Is he still looking at that figure in broad terms? Will he wait on the latest economic data, right up to the November Exchequer returns, before he finalises the overall adjustment and its composition? If he could give us a sense of the process, it would be most helpful.

Given the developments in Europe and the European summit meeting later this week, when the Minister sits down to prepare next year's budget, will it be adopted on a no change basis in the context of Ireland's bank debt and the promissory note and the interest bill to service the national bill? Will he prepare the budget on the basis that no deal will come into effect in 2013 in respect of ESM recapitalisation and a restructuring of the promissory note arrangement? Will the Minister give us a sense of how savings will be achieved in the various Votes within the Croke Park agreement framework and the Estimates ceiling? Given the way the process works, as the Minister indicated, there is little point going into each Vote because all we can do is examine the ceiling for the departmental allocation. We do not know yet how that will be allocated across the respective Votes.

Michael Noonan (Limerick City, Fine Gael)
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The Deputy is critical of the base position but we are following the instructions of the committee in providing him with that particular set of figures. We are, therefore, complying with its request in giving members that base data. The concept of no policy change is how much would it cost to deliver the same service in 2013 as in 2012 if nothing changes. That is what a no policy position means and it is the start of the Estimates process. If there are changes, for example, when we bring in a property tax, as we said we will in the budget, the Revenue will need additional resources because it will be in charge of collecting it and a certain amount will have to be added to the Revenue Vote. That is the way it works and it will be the same across the subheads.

As to the relevance of the committee's work, this is an opening up of the process. Members are now aware of the opening position and they can have a view before we make decisions in the Department. If the committee decides the Committee of Public Accounts and the Comptroller and Auditor General need more resources to do more value for money audits, for example, as the Deputy has been advised in the briefing notes and he says, "Give them more money", I will reply, "Where am I going to get it?" He might also propose the alternative way of providing the resources. This is a genuine attempt to involve the committee in policy positions before the budget is structured.

The Deputy also remarked that he had many briefings from various units in the Department. The Comptroller and Auditor General and the Revenue are independent in the exercise of their functions and they will negotiate separately on their Estimates with the Department of Public Expenditure and Reform. Clearly, at this stage of building the budget, they are making the best case possible and taking up negotiating positions to give them the strongest leverage when they come to agree the figures. One has to think of it as a process where people in different parts of the system are trying to get the resources they feel are necessary to achieve their objectives. That is what is going on.

Michael McGrath (Cork South Central, Fianna Fail)
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Is that not dismissive of what they are saying? They are putting forward hard hitting statements and the Minister is suggesting they are doing that as a negotiating tactic. I doubt very much that professionals in the Revenue, the Comptroller and Auditor General's office and the appeals commissioners office would adopt such an approach. They have gone through this in detail.

If what they are saying comes to pass, it would be very serious.

Michael Noonan (Limerick City, Fine Gael)
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I am not casting any doubt on the submissions that are being made. However, there is an ongoing process at the end of which a Department or a section of the Department gets a particular amount which may be higher and lower. So a negotiation is going on. The break-even point with Revenue is if the extra resources enable it to collect more than the cost of the additional resources. That seems to be where the sum is and where the breakpoint is. We are at the early stages of a process which will culminate with the full budget on both the expenditure and tax sides.

The Deputy asked me where I expect the growth in the economy. The economy is growing and a number of sectors are growing very strongly. As I pointed out in last year's budget, as well as complying with the conditions of the bailout programme and the memorandum of understanding, we are also running a kind of parallel programme where we are building on the strong sectors of the economy and repairing the weak sections of the economy. Ideally growth should come throughout the economy. The strong areas at the moment are self-evident. Inward investment is very strong. IDA Ireland had a record year last year and is heading for a record year again this year in terms of the value of inward investment. Despite the bad summer, farming and the agrifood industry is doing very well. One of the new features covered is the demand from places like China for baby food sourced in Ireland. Some big orders are coming through to the main co-operatives and dairy companies. Everybody knows there is great potential in the Irish farming industry, particularly in the dairy industry, when quotas are eliminated under the CAP in 2015 at which point the Irish farming community will no longer be inhibited by caps on volume and will be able to produce.

The financial services sector is also quite strong and there is more activity and growth there. In general terms goods and services on the export side are strong. The domestic economy is what is weak. I would hope we will see growth in that area when confidence rebuilds. We have very high savings ratios of 14% at present. That is historically high and quite high by international comparisons. If that were reduced to 10%, which would still be high, that four-percentage point drop would switch to expenditure, which would add 1% per annum to GDP growth. So there is a potential for growth in the domestic economy, but it was related to confidence. It is also related to what the Deputy also commented on and what one of the regulators of the banks said yesterday about clearing personal debt. The two big drags on the economy are national debt and personal debt. If we could get solutions for both national debt and personal debt, we could take the fetters off the economy and it would drive forward.

The Deputy spoke about mortgage arrears and I would share his disappointment that the plans outlined by the Government were slow to be implemented by the banks. However, they are at it now under the monitoring of the Central Bank. Several interventions have been pilot tested in the past quarter and are ready to go. I hope they go with them quickly because it would help on the personal indebtedness side. The policy is that it must proceed on a case-by-case basis. In parallel with that the Insolvency Bill is working its way through the Houses of the Oireachtas - it is on Committee Stage now. That will also make a major contribution.

The banks were tardy in two ways. First, they did not pay rigorous attention to arrears and was potential to collect more in arrears if they had applied themselves to it - there was a certain amount of drift. Second, they did not make case-by-case arrangements with people who are in great difficulty and whose ability to repay mortgages is impaired. That was what was being said yesterday by both the regulator from the bank and the Secretary General of my Department, and it is a view I share.

Michael McGrath (Cork South Central, Fianna Fail)
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Does the Minister believe it would be preferable for the banks to sit down with borrowers on a case-by-case basis and agree debt write-downs as mentioned by the Secretary General yesterday if necessary outside of the insolvency system without borrowers having to go through a personal insolvency arrangement with the bank?

Michael Noonan (Limerick City, Fine Gael)
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There is a hierarchy. First, it should be dealt with on a case-by-case basis with the local manager. That is the obvious starting position and it is how most should be resolved in my view. Arrangements should be put in place that enable people to pay-----

Michael McGrath (Cork South Central, Fianna Fail)
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The manager has no discretion and has no role in mortgage restructuring. Managers have nothing to do with it.

Michael Noonan (Limerick City, Fine Gael)
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The Deputy asked me what I thought should happen.

Michael McGrath (Cork South Central, Fianna Fail)
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However, what the Minister is saying is not right - it is not happening.

Michael Noonan (Limerick City, Fine Gael)
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I am telling the Deputy what I think should happen. I have already told him that in my view the banks are about-----

Michael McGrath (Cork South Central, Fianna Fail)
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It is all centralised.

Ciarán Lynch (Cork South Central, Labour)
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I might make an interjection at this point. Representatives of AIB and Bank of Ireland will appear before the committee on 31 October and 1 November. I am sure all members will be asking why the banks have not become more proactive particularly in light of the forthcoming insolvency legislation, which will lay out the landscape as to how insolvency measures are being dealt with.

Peter Mathews (Dublin South, Fine Gael)
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We have already asked them those questions.

Ciarán Lynch (Cork South Central, Labour)
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Yes, but they will be back next week. That is the elephant in the room. Given that the legislation is coming down the tracks, why are the banks engaging in an ongoing issue of forbearance, particularly forbearance in circumstances where it is not doing the householder any good? We should put those questions to the representatives of the banks when they appear before the committee. As the Minister needs to leave by 3.45 p.m., I ask Deputy Michael McGrath to conclude his questions at which point I will call Deputy Donnelly. Has the Deputy concluded?

Michael McGrath (Cork South Central, Fianna Fail)
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I have one or two more questions.

Ciarán Lynch (Cork South Central, Labour)
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If the Deputy keeps interjecting across the Chair, we will be very tight on time.

Michael McGrath (Cork South Central, Fianna Fail)
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I just want it be meaningful and interactive. I know the Minister also enjoys the cut and thrust of it.

Michael Noonan (Limerick City, Fine Gael)
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However, the Deputy seems to get upset when he does not like my answer.

Michael McGrath (Cork South Central, Fianna Fail)
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Of course I do when the Minister's answer is wrong. The bank managers do not have discretion to buy a paperclip never mind restructure mortgages. The banks all have central arrears units dealing with that. If the Minister does not know that, where are we going? I asked when the medium-term fiscal statement would be published. On the budget, will he be finalising the figure right up to the first weekend of December?

Michael Noonan (Limerick City, Fine Gael)
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I wish to complete my answer to the Deputy's question on arrears. The second thing I would envisage is if the case-by-case attempts to solve people's problems are not successful, then the voluntary arrangement provisions of the Personal Insolvency Bill would be the next range of intervention. In a very small minority of cases the option of bankruptcy exists because that is also provided for in the Personal Insolvency Bill. So there is a hierarchy of interventions. In an orderly society where the laws apply properly and the banks are active, that is the way I would see it working out. The forecasts will be reviewed, as they always are, at the end of this month. It is too early to say whether they will be altered. We are not going to forecast the forecast.

The Deputy asked about the position on the budget. There is ongoing work on the budget. I am trying to figure out how I will collect approximately €1 billion in extra taxes this year. The Deputy knows the basic arithmetic. The general adjustment is €3.5 billion, of which approximately €1.25 billion is tax. Of the €1.25 billion, approximately €290 million is a carry forward from this year. While this is subject to small variations as we get nearer the day, the net position on the tax side is approximately €950 million to our €960 million - slightly less than €1 billion. On the expenditure side there is €2.25 billion and there is some carryover. There is some of it and capital reductions and I am sure the Minister, Deputy Howlin, will give the exact figure later this afternoon if the Deputy asks the question. On my side of the house I am figuring out the best and fairest way of doing that much on the tax side that is pro-enterprise, pro-growth and pro-jobs. On his side of the House, the Minister, Deputy Howlin, will shortly be participating in bilateral meetings with individual Departments to get the necessary adjustments on expenditure to give him what he requires.

That work is an ongoing process.

In respect of Government intervention, so far we have taken the memorandum to Government and it has agreed the targets, but we have not taken particular single issue memoranda to Government, with the exception of the property tax in which respect of which I have outlined the decisions to members. A property tax will be introduced in this budget. The Revenue Commissioners will be assigned the task of collecting it and the probable date of commencement is 1 July, although that might be reviewed. At the moment, the plan is for it to date from 1 July. The detail of the property tax has not yet been decided.

Michael McGrath (Cork South Central, Fianna Fail)
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Should the bank debt deal in respect of the budget be based on a case of "deal or no deal" in terms of debt servicing?

Michael Noonan (Limerick City, Fine Gael)
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We will see. We are seven weeks away from the budget. The Deputy knows that any possibility of the banks being directly recapitalised by the ESM, as outlined in the statement of 29 June, was contingent on banking supervision being in place from 1 January. At all times, that was envisaged as a post-budget initiative and not a pre-budget one.

In respect of the promissory note, we must wait and see how we do in the negotiations. I have said on a number of occasions that the crucial date for the promissory note is the payment date of the infamous €3 billion at the end of March of each year.

Brian Stanley (Laois-Offaly, Sinn Fein)
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In respect of the property tax, what range is the Minister talking about? I do not expect exact figures today because it will be a feature of the budget, but are we talking about €100 to €200 or €200 to €600?

In respect of GDP, the Minister projected there would be 0.7% increase in the budgeting process this year. In respect of GNP, what is the projected figure in light of current circumstances?

In respect of the impact of support for the banks, to which the Minister referred in his opening statement, how much of a burden is that on the public finances at the moment? The Minister said that excluding that, the deficit is running at 9% of GDP, but what is the impact of support for the banking sector?

In respect of the budget deficit target of 3% of GDP by 2015, I know we come from a different place in respect of this. At one stage, everyone else was saying that the year in question was 2014 while we were saying it was 2016. There has been some speculation recently about whether the target can reached by 2015. Could the Minister comment on whether it is still possible to achieve the budget deficit target of 3% of GDP by 2015?

In respect of the promissory note, I note the Minister's recent comments when he said it would be helpful when entering in the budget process if he could have data or some indication of a deal in terms of framing the budgetary process. Would the Minister like to comment on that? Has there been any update? As a new Deputy who has been hearing about the promissory note for the past 19 months, I am growing a bit weary of it. We seem to be no closer to a deal on it. All we keep getting, and we got it this morning from the troika, is that very complex technical discussions are ongoing but we do not seem to be any clearer in terms of where we are in respect of it.

The Credit Review Office, CRO, has overturned 55% of cases referred to it and, in doing so, has secured more than €9.6 billion in credit. The number of cases overturned seems very large. I welcome the fact the CRO exists and has overturned 55% of cases, but could the Minister comment on that and the issue still facing existing businesses trying to access overdrafts and credit? The Minister is aware that a huge number of applications are being rejected. The figure is seven times that found in Germany. Could the Minister comment on that because it is having a significant effect on sustaining jobs and on companies trying to expand?

Michael Noonan (Limerick City, Fine Gael)
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I do not have anything to add on property tax other than what I have already said to Deputy Michael McGrath. It will be introduced on budget day, the Revenue Commissioners will collect it and the other decisions have yet to be made. The only remark I made about range was when the IMF brought out its Article IV report in September in which it said we should collect €1 billion. It coincided with our party meeting in Westport and I made a public statement on that day that we did not envisage collecting anything like that figure, which I thought was too high an amount. However, the Government must make the decisions on what yield it wants from the property tax and-----

Brian Stanley (Laois-Offaly, Sinn Fein)
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If the figure was €700 per household, one could collect €1 billion.

Ciarán Lynch (Cork South Central, Labour)
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Through the Chair.

Brian Stanley (Laois-Offaly, Sinn Fein)
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A figure of €700 per household-----

Ciarán Lynch (Cork South Central, Labour)
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I need to move matters on so I ask Deputy Stanley to allow the Minister to answer and I will bring the Deputy back in.

Michael Noonan (Limerick City, Fine Gael)
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The Deputy should not make any assumptions. The range of-----

Brian Stanley (Laois-Offaly, Sinn Fein)
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But the Government is going to collect-----

Michael Noonan (Limerick City, Fine Gael)
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The range below €1 billion goes from 1 billion down to one. The Deputy should not assume we will go for either one half or three quarters or anything like that. If it is helpful to the Deputy, I made the remark that the figure of €1 billion is high and we have no intention of the yield on the property tax being €1 billion. That is what I said.

I will supply the Deputy with the GNP figure. There are a few figures here that are not straight off the Estimates so I do not want to have a punt on it. I want to give him the exact figure.

In respect of the date of 2015, the original programme as negotiated by the Fianna Fáil-Green Party Government was that the adjustment would be made by 2014. In the first round of renegotiation, the incoming Government in May 2011 got that extended by one year. We have already got the extension. Portugal got an extra year in the summer and Greece is looking for an extra two years. We got the year that we negotiated and we feel we are well on target to get the deficit below 3% by 2015, so we are not looking for an extension of time on that.

There has been much discussion of the promissory note. It was an arrangement entered into by the Fianna Fáil-Green Party Government. It is a promissory note that I promised to pay. I could write one out for the Deputy. It is a strange arrangement.

Peter Mathews (Dublin South, Fine Gael)
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It is a forced arrangement.

Ciarán Lynch (Cork South Central, Labour)
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If Deputy Mathews wishes to comment, he should speak through the Chair.

Peter Mathews (Dublin South, Fine Gael)
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I am not commenting. I am just stating a fact.

Ciarán Lynch (Cork South Central, Labour)
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If the Deputy wishes to speak in this committee, he must speak through the Chair.

Michael Noonan (Limerick City, Fine Gael)
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The Deputy does not know and makes assumptions.

Ciarán Lynch (Cork South Central, Labour)
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I would advise the Minister to do the same and speak through the Chair.

Peter Mathews (Dublin South, Fine Gael)
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It was correct.

Michael Noonan (Limerick City, Fine Gael)
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He was wrong most of the time.

Peter Mathews (Dublin South, Fine Gael)
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I remind the Minister that this time last year-----

Ciarán Lynch (Cork South Central, Labour)
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I will ask Deputy Mathews to leave if he will not be quiet.

Michael Noonan (Limerick City, Fine Gael)
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Time out.

Peter Mathews (Dublin South, Fine Gael)
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If I leave, I will come back.

Ciarán Lynch (Cork South Central, Labour)
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I will not use it on this occasion but I might use it on a future one. I call Deputy Stanley.

Peter Mathews (Dublin South, Fine Gael)
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I am like a piece of cork; I bounce back.

Brian Stanley (Laois-Offaly, Sinn Fein)
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The Minister said that, excluding the cost of the support for the banking sector, the deficit was about 9% of GDP and that the Government is on course to achieve the 3% target. What is the rough cost of the support for the banking sector?

Michael Noonan (Limerick City, Fine Gael)
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The entire recapitalisation is €64 billion.

Brian Stanley (Laois-Offaly, Sinn Fein)
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I know that.

Michael Noonan (Limerick City, Fine Gael)
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We will provide the Deputy with a full briefing note on the breakdown.

Brian Stanley (Laois-Offaly, Sinn Fein)
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How much is it roughly?

Michael Noonan (Limerick City, Fine Gael)
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There is no rough figure for this. I will give it to the Deputy precisely.

It is a question we need to send back and get the actual spread on it. We will get it for the Deputy.

One of the reasons for the high rate of advice reverse by the Credit Review Office is because those who approach it believe they have a pretty good case and should not have been refused in the first instance. Those who go there are those who feel they were wronged so obviously there is a reasonably good success rate. However, the overall number approaching it is surprisingly low, and is not consistent with the theory that thousands of small businesses are not getting the capital they require. It is a mystery. The Credit Review Office has overturned approximately 100 decisions and the two pillar banks approved approximately 50,000 loans for small and medium enterprises and farms to the end of August this year. It is difficult to know. One of the problems with small businesses is that, like many sectors of society, as well as dealing with their core business they did a property play, and small businesses with absolutely nothing to do with property have an impaired property portfolio dragging down a core business which is solvent. We have been discussing with the banks whether they could separate the property portfolio from the core business and allow the core business to proceed and to capitalise it. In many cases such businesses are trading successfully but are being dragged down by the impairment. I am sure committee members know examples of this.

Stephen Donnelly (Wicklow, Independent)
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I thank the Minister for allowing me access to his officials recently to help me put together budget submissions. It was very useful and much appreciated. The budgetary process reform is also very welcome and I encourage the Minister and the Minister for Public Expenditure and Reform, Deputy Howlin, to consider a much more radical improvement. I am sure the Minister is aware that the OECD scores us as the second worst country in the developed world with regard to budgetary processes. Only South Africa is worse than we are. In other countries we would not be looking at this type of information which, while helpful, is very light. Perhaps it was not the Minister's intention, but the tone of his response to Deputy Stanley was that he will not tell us whether a particular figure is €1 billion because we will find out on budget day. In other countries-----

Michael Noonan (Limerick City, Fine Gael)
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No. It is that the Government has not made decisions so I cannot tell the Deputy.

Stephen Donnelly (Wicklow, Independent)
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I understand.

Michael Noonan (Limerick City, Fine Gael)
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That is the point.

Stephen Donnelly (Wicklow, Independent)
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We will find out on budget day when it will be announced, but in the process used by other countries three months prior to the budget the committee would be given the proposed budget so the Dáil could make an input to it. I will leave this with the Minister and suggest if we want to move towards international best practice this is a great first step but we are still 1 million miles away from best practice and we need to break the mindset of the Executive informing the Dáil on budget day what decisions it has made. It is certainly not how the Constitution is written and it is not best practice. Will the Minister examine this?

The information with which the Minister has provided us is very useful. Would it be possible in future to receive multi-year figures? We have figures for 2012 and 2013 but five years' worth of data can be very useful for trends. With regard to the process, there has been a regrettable lack of willingness on the Minister's part to cost proposals. As a specific example I asked whether the Minister's officials would examine making child care tax-deductible. I will paraphrase, but the answer was no because it would be difficult to calculate. I have a Trinity College undergraduate working it out for us. It was a regrettable response from the Minister in terms of openness to non-Government Members providing useful suggestions for the budget.

With regard to mortgages, I welcome the comments made by the Minister on acknowledging the lack of progress. I wonder whether the Government understands how little is being done. I know this might sound like a silly comment because the Minister is dealing with the banks every day, but the only people pointing out that things are moving is the Government. The Central Bank is not doing it, and if one speaks to bankers privately they will say nothing is moving. Today the IMF stated things were moving far too slowly. Permanent TSB recently stated before the committee that its official policy is never to engage in debt surrender. Bank of Ireland stated before the committee that of the several billion euro made available to it for distressed mortgages it has passed on none while AIB stated that of the several billion euro made available to it, €600,000 has been passed on. I hear the banks will throw every legal and accounting resource they can at ensuring the money we made available to them is not surrendered to mortgage holders. The Minister stated this needs to happen. I do not believe the domestic economy will get going until a very large proportion of this unsustainable debt has been cleared. This will not involve restructuring or interest only arrangements, but debt surrender. We will see what will be the effects of the personal insolvency legislation, and it can go in many different ways because the courts will have huge discretion.

The Revenue Commissioners suggest they will not be able to reclaim €265 million due to a lack of resources next year. Will the Minister comment on this? Does the Minister agree with Christine Lagarde's recent comment that the austerity-only approach we are using in Ireland is not working? This was backed up recently by Joseph Stiglitz, the Nobel prize-winning economist, in a speech he gave in Dublin.

Michael Noonan (Limerick City, Fine Gael)
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With regard to multi-year figures, I believe three year figures are available. Five years would be stretching it a bit. We can ensure the three year figures are-----

Stephen Donnelly (Wicklow, Independent)
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At a detailed level figures are available for two years.

Michael Noonan (Limerick City, Fine Gael)
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We will do our best to provide more detail. I have given my view on the lack of progress on mortgage arrears. The Chairman stated the banks will come before the committee shortly and the Deputy will not upset me if he presses them hard on these issues. The Central Bank made clear its position that setting out the portfolio of interventions would be of benefit, suitable and appropriate and the Department of Finance supports this initiative by the Central Bank. The Houses of the Oireachtas are putting in place support through the provisions of the personal insolvency legislation. The time for excuses is over.

As I stated, the Revenue Commissioners will negotiate like everybody else with the Department of Public Expenditure and Reform. The agreement position for the Revenue Commissioners is to show that extra staff would collect at least their own salary and overheads in additional revenue. This is the best point and is where it will fall with regard to whether it would be an extra ten or 20 people. When the Government took decisions on the property tax it took complementary decisions to provide extra resources and staff to the Revenue Commissioners so this discrete piece of work could be carried out without any crossover effects on its existing task of collecting revenue.

The Deputy stated he had a particular difficulty with regard to costing proposals. I do not know what this difficulty was because every day of the week I clear dozens of parliamentary questions from Deputies and a very high percentage of them ask about the cost of this or that and what the yield would be from another 1%. I send out dozens of these. The Deputy should take it on faith that if he does not receive an accurate costing it is because there is a technical difficulty in providing a costing which we can stand over. Deputy Michael McGrath tables many such questions, and Deputy Pearse Doherty holds the record in that regard.

He submits dozens on a weekly basis. He is obviously putting a portfolio together before the budget on what small movements in tax heads would yield and what tax heads would be lost with reliefs. Deputy Kevin Humphreys is a bit of a practitioner as well. I sent him a great deal of obscure data this week.

Kevin Humphreys (Dublin South East, Labour)
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I thank the Minister.

Michael Noonan (Limerick City, Fine Gael)
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Sometimes, I wonder what people are up to when they ask such questions.

Kevin Humphreys (Dublin South East, Labour)
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The Minister will find out in a minute.

Michael Noonan (Limerick City, Fine Gael)
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Mention was made of the austerity-only approach of Christine Lagarde. There are two sides to economics, namely, supply and demand. Recent work done by the IMF, the report of which members have seen, gave rise to a great deal of comment. The IMF was referring to a wider range of countries than just Ireland. The simple analysis of the IMF paper is that, if one removes €1 in expenditure cuts or taxation, on average it hits GDP by 50 cent. The multiplier under Keynesian theory is one half. The IMF stated that it might have been wrong and that the multiplier could have been one, in other words, €1 for €1. Examining the small print, though, the IMF stated that the multiplier depended on circumstances and could be anywhere from 0.9 to 1.7. It is quite a large range. One could examine the small print even further. In Ireland, the multiplier seemed to be approximately 0 and there was no effect, since we were such an open economy and a certain flow of inward investment compensated for the removal of demand.

It is a complex issue. My opinion is that trying to stimulate demand in Ireland on its own is not a solution that would give strong results. I would favour a more demand-driven approach in Europe at this point in the cycle. It stands to reason that if all of the peripheral countries are doing budgetary corrections and the AAA rated countries like Germany, which accounts for one third of the European economy, are strong but also hold back and continue to contain expenditure, there is nothing to compensate for the demand that has been removed across Europe.

Our problem is not particularly that demand at home is down. Rather, our emerging problem is that demand in customer countries is decreasing. Our model of success is export-led growth. We need our customer countries to continue purchasing our goods and services.

What Mr. Mario Draghi at the European Central Bank is doing is effectively a demand management initiative. It is not quite printing money, but intervening in the bond market is a method of releasing demand. If that initiative is brought on board, it will be helpful. The quantitative easing model used by the Federal Reserve in the US and by the Bank of England is not legally permissible for the ECB, but Mr. Draghi is quite creative and I hope that the intervention of the new French Government stressing the importance of a jobs and growth strategy will also move in that direction.

I am not that far from the Deputy's analysis but it would not be fruitful to consider the matter from the small constraints of an Irish economy. To be effective, it must be Europe-wide and operate in parallel with fiscal correction in the stronger countries, not in substitution. Sweden is the only country that has already picked up the baton. Its finance Minister introduced an expansionary budget in September. During my conversations with him, he stated that someone needed to take the lead. He hopes that other AAA rated countries will follow.

Stephen Donnelly (Wicklow, Independent)
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I thank the Minister. We will continue to push the banks, but we have no executive authority. All that we can do is point out what they are doing. The Minister might not share the Tánaiste's position, but a general policy position of walking hand in hand----

Ciarán Lynch (Cork South Central, Labour)
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A question, please.

Stephen Donnelly (Wicklow, Independent)
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Regarding the Revenue Commissioners, I take the Minister's point about a negotiating position, but what is his opinion? Does he agree that if Revenue does not get the resources outlined in the note, the State will lose €265 million?

Michael Noonan (Limerick City, Fine Gael)
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That is a precise figure and I did not see the basis for the calculation. As a general principle, if Revenue does not have sufficient resources to do the job it is asked to do, there will be a loss of revenue. I cannot second guess the precision of its estimate.

Ciarán Lynch (Cork South Central, Labour)
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I am conscious of the fact that the Minister needs to leave within the next 20 or 25 minutes. We are moving into Government time for questions. They should be asked immediately. I call Deputy Mathews and Humphreys. They should ask questions, not make statements. The sequence is Fianna Fáil, Sinn Féin, the Technical Group, Fine Gael, Labour and then back to the Opposition.

Peter Mathews (Dublin South, Fine Gael)
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I thank the Minister for all of his work. He knows that I am behind him.

Ciarán Lynch (Cork South Central, Labour)
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Deputy, please.

Peter Mathews (Dublin South, Fine Gael)
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Everyone else got a preamble.

Ciarán Lynch (Cork South Central, Labour)
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I allowed the Opposition preambles, but I will move Deputy Mathews straight to questions.

Peter Mathews (Dublin South, Fine Gael)
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This is the first anniversary of my mention of the paper by Messrs. Cecchetti, Mohanty and Zampolli, which was produced to the central bankers of the OECD countries in Wyoming in August 2011. It was a seminal paper, but only now are the leaders of Europe waking up to it. The paper asserts that the three elements of debt in an economy - sovereign debt, household debt and non-financial corporate debt - should be examined to determine how increasing debt affects growth. By hard experience in Europe, we know that households, businesses, young people, etc., are losing their homes and jobs, going out of business and so on. It is patently clear that-----

Ciarán Lynch (Cork South Central, Labour)
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A question, please.

Peter Mathews (Dublin South, Fine Gael)
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Will the Taoiseach ask the German Chancellor, Angela Merkel whether she understands that instead of imposing the prohibitive and delaying tactic of setting up a European cental monetary banking situation, dealing with the legacy debt in banking systems, particularly Ireland's, is an imperative? She is doing everything to delay what needs to be done. Deutsche Bank, Germany's largest bank, has recently been examined and is seen to be over-leveraged, undercapitalised and carrying assets the collectibility of which is uncertain. I am sorry for sounding under pressure, but this should be a conversation-----

Ciarán Lynch (Cork South Central, Labour)
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We will be concluding this section in 20 minutes. That is why the Deputy is under pressure.

Peter Mathews (Dublin South, Fine Gael)
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Today and tomorrow, the main imperative is to address Chancellor Merkel and the leaders of those countries that will remain the economically strongest until their household debt and non-financial debt drifts into sovereign debt, as could happen with Deutsche Bank. The acclaimed professor of finance at MIT, Professor Simon Johnson, has examined this situation and believes it is at tipping point. At €2.2 trillion, Deutsche Bank accounts for 80% of Germany's GDP, its balance sheet. Some 12 months ago, I made the point that Ireland-----

Ciarán Lynch (Cork South Central, Labour)
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The Deputy has made his point. He needs to ask a question to get an answer.

Peter Mathews (Dublin South, Fine Gael)
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Our economy does not have a hope. I will use an analogy so that people might understand. If I as a human being am an economy with an arm, a leg and another arm, namely, household debt, national debt and corporate debt, and if people are telling me that the national debt is sustainable while ignoring the smashed condition of the household debt and the non-financial corporate debt, this body as an economy does not have the capacity to generate the incomes to repay and repair all of those elements. That is a fact. Please, will you get this message across?

Ciarán Lynch (Cork South Central, Labour)
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Deputy Mathews should speak through the Chair at all times. The Minister should respond briefly.

Michael Noonan (Limerick City, Fine Gael)
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I do not believe that we needed a paper from Jackson Hole to illustrate what every man in every pub and what every woman going to the First Friday knows.

If one is in debt one does not have money to spend and is, as an economic unit, weaker.

Peter Mathews (Dublin South, Fine Gael)
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We have €64 billion of odious debt.

Michael Noonan (Limerick City, Fine Gael)
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The same principle applies, be it personal, corporate, sovereign or other debt.

Peter Mathews (Dublin South, Fine Gael)
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Will the Minister take on my debts?

Michael Noonan (Limerick City, Fine Gael)
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No.

Ciarán Lynch (Cork South Central, Labour)
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I suggest that Deputy Mathews pursue this matter at the next Fine Gael parliamentary meeting. Is the Minister finished?

Michael Noonan (Limerick City, Fine Gael)
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We all know the Deputy's place is stuffed with money and he has no debts.

Ciarán Lynch (Cork South Central, Labour)
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Deputy Humphreys.

Kevin Humphreys (Dublin South East, Labour)
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I welcome this type of initiative. I agree with Deputy Donnelly on the need for further detail, particularly on the budget prior to its announcement on 5 December. However, I will leave that for another day as the purpose of today's meeting is the Estimates for the Department of Finance.

The Minister stated that consultancy costs must be closely monitored and kept to a minimum. There has been a reduction of approximately 13 staff in the Department of Finance, some of whom are on career break and others of whom are on incentivised career breaks, at a cost to the Department of approximately €140,000 over the past three years. Has the Department undertaken a cost-benefit analysis of the career break scheme in terms of whether we are getting value for money from it? Is consultancy being used to compensate for staff on leave under the scheme?

On the ten staff on secondment to the Department from AIB, Deloitte, PricewaterhouseCoopers, KPMG and McCann FitzGerald, is the cost of pay and pensions for these staff included in this Estimate? Has a cost-benefit analysis been undertaken of the recruitment of these people into the Department? I welcome that these staff are required to adhere to the Official Secrets and Ethics in Public Office Acts. However, I remain concerned about people from the private sector giving advice to the Minister given the advice previously given by them to other sectors of the economy.

Michael Noonan (Limerick City, Fine Gael)
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Arrangements such as career breaks and so on come within the remit of the Minister for Public Expenditure and Reform. That Minister makes the rules in this regard, which apply across the service. Civil servants in the Department of Finance are as entitled as other civil servants to avail of any such scheme. I suggest the Deputy take up that matter with the Minister for Public Expenditure and Reform, Deputy Howlin.

Kevin Humphreys (Dublin South East, Labour)
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My question is whether the Department uses consultancy services as a result of staff availing of the career break scheme.

Michael Noonan (Limerick City, Fine Gael)
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No. I have already provided the costings in that regard by way of response to a parliamentary question tabled by the Deputy. Consultancy costs vary. Where the required expertise is not available in-house, a consultant is engaged. The Department is dealing with enormous amounts of money and huge issues. Departments are by and large composed of generalists rather than people with refined and specific expertise. Where expert advice is required, consultants are engaged. If we are engaging consultants on a banking issue, we usually try to transfer the costs of doing so to the bank. The cost of some consultancy does fall to the taxpayer. For example, in regard to legal advice, the general principle is that it is better to buy it in when needed rather than have a whole range of legal expertise in-house, which would be only used occasionally. Even though the unit cost appears high when it is bought in, the cost of having a legal department in every Department would be higher. That is the approach taken in that regard.

On secondment, there are currently ten people in the Department on secondment from the private sector, seven of whom are pro bono in that the companies from which they come pay their salaries and other costs such as pensions and so on. The situation with regard to the remaining three varies, depending on whether they are on permanent or temporary secondment.

Joe Higgins (Dublin West, Socialist Party)
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I will be succinct. The Minister said that inward investment, which is at record heights, compensates for the removal of demand from the domestic economy. I put it to him that that is manifestly not the case. Inward investment by multinational corporations is highly specialised and highly capital-intensive. While the jobs created are of course welcome, such investment is highly capital-intensive. The billions of euro which the Minister takes out of the pockets of ordinary people could be used for the creation of massive numbers of jobs because the domestic economy is labour-intensive. Perhaps the Minister would further explain this. I put it to the Minister that this is borne out by the 14,000 fewer people in work in quarter 3 than in quarter 2, the hammering of consumer spending in the first six months of this year and the fact that emigration is, unfortunately, at an all time high. The Government's austerity agenda is a disaster.

Perhaps the Minister would be more precise on the issue of the external outlook, which he said is not good news. In my view, that is putting it mildly. Is it not the case that the EU is effectively moving decisively into recession and that this is what is predicted even in Germany? Against this background and that of austerity across the board, what is the prognosis for the 27 million unemployed people in the European Union, including the hundreds of thousands here who are unemployed? The Minister will be aware from articles in the Financial Times and The Wall Street Journal that €2 trillion to €3 trillion in profits remain uninvested by big corporations throughout Europe and investment in the eurozone is at a 60-year low, which is a disastrous situation.

In regard to the national debt, can the Minister give us the percentage GDP projected for 2011, 2012 and 2013? Can he also tell us how much of that is due to the bank bail-out and the total interest payments in each of those years? The Minister said that during the Irish Presidency two important issues - namely, financial regulation and continuing reform of financial services market - will require our energy and commitment. What commitment, given that Ireland is resolutely opposed to the proposed mild reform of a financial transaction tax on speculation on the billions swashing around in the financial markets? The dictatorship of the financial markets and speculators must be delighted that the Ireland is taking over the Presidency.

I will not ask the Minister to repeat what he said on the property tax. However, I can tell him that he will face massive opposition across the board to it. What timescale is envisaged in that regard? Legislation in respect of the household charge was rushed through in a week last year. Given that the legislation in respect of the property tax is far more grave, will it be January or February before it is enacted? In other words, will plenty of time be provided for consideration of it? Also, how will stand the existing legislation in respect of the household charge following enactment of the legislation in respect of the property tax? Will that legislation be revoked at the end of this year, or is it the intention that it will apply for the first six months of next year or until the property tax comes into force, so that the household charge will apply for the first six months and the property tax will apply in the second six months?

Michael Noonan (Limerick City, Fine Gael)
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Deputy Higgins is a bit of an enigma to me always. I was schooled in a politics which suggested that people on the left, particularly socialists, would be in favour of taxes on assets such as property.

Joe Higgins (Dublin West, Socialist Party)
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On the rich and super-rich.

Michael Noonan (Limerick City, Fine Gael)
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I believe property tax was always part of the portfolio coming from the socialist background.

Joe Higgins (Dublin West, Socialist Party)
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Not on the family home.

Michael Noonan (Limerick City, Fine Gael)
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I do not understand Deputy Higgins's particular brand of ideology. The announcement and detail of the property tax will be provided on budget day. On the financial transaction tax-----

Joe Higgins (Dublin West, Socialist Party)
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Perhaps the Minister would give the detail in respect of the household charge.

Michael Noonan (Limerick City, Fine Gael)
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All the details will be provided on budget day, including on the household charge. As I explained twice already-----

Joe Higgins (Dublin West, Socialist Party)
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I heard the Minister. He does not need to waste time.

Michael Noonan (Limerick City, Fine Gael)
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-----the Government has not yet made decisions on these matters.

Joe Higgins (Dublin West, Socialist Party)
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Will the household charge apply next year?

Michael Noonan (Limerick City, Fine Gael)
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As I said, decisions on these matters have not yet been made.

After they are taken they will be announced on budget day.

Joe Higgins (Dublin West, Socialist Party)
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It is extraordinary that people will not know-----

Michael Noonan (Limerick City, Fine Gael)
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What is extraordinary about it?

Joe Higgins (Dublin West, Socialist Party)
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-----until three weeks before the end of the year whether the Government will be seeking a household tax on 1 January 2013.

Michael Noonan (Limerick City, Fine Gael)
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Does the Deputy want an answer on the financial transaction tax? What is being proposed in Europe, so far, is a form of stamp duty starting at 0.1% on certain transactions. We have a stamp duty on share transactions already so we are one of the few countries in Europe with a significant financial transaction tax. Our stamp duty is at 1%. In the United Kingdom there is a stamp duty of 0.5% on the same type of transaction. What is being discussed in Europe at the moment is the introduction in certain other countries of stamp duty on share transactions and possibly other transactions of 0.1% at a minimum.

We are not joining that piece of enhanced co-operation because there are 33,000 people employed in financial services in Ireland. The United Kingdom has indicated that there are no circumstances in which it will be bound by a financial transaction tax emanating from Europe. In those circumstances there would be a transfer of jobs, particularly out of Dublin into London, if we were tied into a financial transaction tax that would extend the base along the lines being suggested by some people in Europe. There is a strong number of dossiers on financial services coming through under the patronage of Commissioner Barnier. When Ireland has the European Presidency, carrying that portfolio of work forward will be part of the co-operation between the chair and the Commission.

We can get a schedule on the national debt, as I came here to discuss the Estimate. We can also get the rest of the information requested by the Deputy. On the external outlook, the Deputy would have seen various estimates, and it looks as if after the presidential election in the United States there may be a way to recovery. There are certain signs that the US economy is recovering but that has not yet been proven. There are certain difficulties in various other economies, including China. The prospect internationally is not particularly optimistic at present but these kinds of positions can sometimes change very quickly.

Arthur Spring (Kerry North-West Limerick, Labour)
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I have two questions, with the first relating to the promissory note and the second relating to mortgage arrears. Fianna Fáil, and Deputy Michael McGrath in particular, may have paid the Minister a compliment in acknowledging that the budget does not include repayments on the promissory note for last year and perhaps this year. Will the Minister indicate if in a worst case scenario we will be looking at a €3.5 billion adjustment, the promissory note payment for last year - which was deferred - would have to be paid this year? If the interest had to be paid again in March would we be looking at a worst case scenario of over €9 billion in adjustments?

I have been advocating on behalf of what I call "Generation Jinxed", or people like myself in negative equity. I am aware of Department plans to ultimately sell its shareholding in Bank of Ireland and AIB. When the Government is in a position to sort out the cost of funds, which is the key problem within the banks currently, I would like to hear how it will be done. Will those shareholdings be sold with the cash flow earnings of those heavily indebted mortgages, which also have long timeframes? Ultimately, the level of debt over a long duration will give huge profits to the people who buy the banks in their currently impaired state. They will be a lucrative asset when the position starts to come right.

I propose that there should be a moratorium on any profit making for the banks that should be stitched into any contract before the sale. That would alleviate some weight from the generation of people in negative equity. Is that being considered by the Department before the sale?

Michael McNamara (Clare, Labour)
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The Minister's presentation noted in particular the possible benefits of the EU Presidency, and he indicated there would be tangible benefits from the number of visits by officials and media during the first six months of 2013. It is up to all of us to exploit that as much as we can. Will all these people come through Terminal 2 at Dublin Airport? I returned from a Council of Europe meeting a couple of weeks ago to a significant queue; the arrivals area was packed with people. I was delighted to meet a Minister of State in the queue, and it is a new departure for this Government that Ministers and Ministers of State do not go through the VIP area but rather queue with ordinary citizens. One of the officials told me that the queue was a regular occurrence, which disturbed me.

When I got to the Garda kiosk I asked if there was a go-slow but there was not. I was asked if I knew the number of aeroplanes which arrive in the evening and although I did not, I presumed the authorities could plan for such events. Is there a real danger that the officials coming to Ireland will see a worrying picture of the country on their arrival? Notwithstanding the significant amount of money spent on Terminal 2, the service provided is completely dysfunctional.

Michael Noonan (Limerick City, Fine Gael)
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I have been through Terminal 2 on a number of occasions and I love to see a big crowd there.

Michael McNamara (Clare, Labour)
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The Minister should be there on a Friday evening.

Ciarán Lynch (Cork South Central, Labour)
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The Deputy has had enough trips abroad. It is a new experience for him.

Michael Noonan (Limerick City, Fine Gael)
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With regard to the promissory note, if there is a resolution before the budget and there are some deficit gains, it will not lessen the adjustment required. We would have a lower deficit figure next year.

Arthur Spring (Kerry North-West Limerick, Labour)
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What is the worst case scenario if we must make repayments? Is it over €9 billion?

Michael Noonan (Limerick City, Fine Gael)
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No, it is somewhere around the €3.5 billion to which we are committed.

Arthur Spring (Kerry North-West Limerick, Labour)
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If repayments must be made, where will the funds come from?

Michael Noonan (Limerick City, Fine Gael)
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That is in the arithmetic.

Arthur Spring (Kerry North-West Limerick, Labour)
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It is not agreed.

Michael Noonan (Limerick City, Fine Gael)
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There is no suggestion that a failure to make a deal will increase the adjustment. The only variation on the adjustment would be around the €3.5 billion figure, depending on the opening position.

Arthur Spring (Kerry North-West Limerick, Labour)
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What about the €3 billion payment that would occur, as per the agreement by the last Government?

Michael Noonan (Limerick City, Fine Gael)
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That is already in the arithmetic.

Arthur Spring (Kerry North-West Limerick, Labour)
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That will be borrowed.

Michael Noonan (Limerick City, Fine Gael)
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Yes.

Arthur Spring (Kerry North-West Limerick, Labour)
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What about the €3 billion for last year? That would be borrowed as well.

Michael Noonan (Limerick City, Fine Gael)
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Yes, it would eventually be borrowed.

Arthur Spring (Kerry North-West Limerick, Labour)
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That is if we can get our hands on it. If we cannot get our hands on it, in a worst case scenario it might have to go into the budget.

Michael Noonan (Limerick City, Fine Gael)
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No. That will not happen in any scenario. The connection between the promissory note and the budget is positive, if we can get a deal. The degree of positivity would depend on the deal.

Arthur Spring (Kerry North-West Limerick, Labour)
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Okay. What about the mortgages?

Michael Noonan (Limerick City, Fine Gael)
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That is as I have previously outlined. A combination of the direct action the banks have committed to undertaking and the Personal Insolvency Bill will work through for the indebted people and put them in a position to repay their mortgages at a reduced rate.

Arthur Spring (Kerry North-West Limerick, Labour)
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That will work for the minority rather than the majority.

Michael Noonan (Limerick City, Fine Gael)
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There is a full range of interventions that should apply to everybody. The process must be taken on a case-by-case basis. Nobody can enunciate a general policy, as if there was a general policy of debt forgiveness, a person would be foolish to pay a debt. That will not happen and there will not be a general policy of debt forgiveness.

Ciarán Lynch (Cork South Central, Labour)
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What about Deputy McNamara's aviation difficulties?

Michael McNamara (Clare, Labour)
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It is a question of Dublin Airport managing this facility, which cost €2 billion.

Michael Noonan (Limerick City, Fine Gael)
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If there is a problem, people can come in through Shannon as there is plenty of room there.

Ciarán Lynch (Cork South Central, Labour)
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I wish to bring two points to the attention of the Minister. The process of this afternoon's meeting is a bit of a breakthrough. Last week, the European Commission made an announcement that it is examining VAT rates across the European Union, particularly items exempt from VAT, those on a reduced VAT level and those on a higher VAT margin.

The thinking behind the examination is to have a fundamental reform of VAT rates across the European Union. The Commission will also examine how reduced rates distort competition, how goods and services can benefit from a universal VAT arrangement and how VAT rates may contradict some of the EU's current policies. The announcement is now being followed by a public consultation process. I assume that the Department of Finance shall observe and make a formal submission. If it does then I request that it presents a copy to the committee.

Michael Noonan (Limerick City, Fine Gael)
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Yes, a series of VAT directives have emanated from Europe and our VAT must comply with them. A change would lead to ongoing and lengthy negotiations because an awful lot of people in various countries would object. I do not think that a dramatic change is imminent.

Ciarán Lynch (Cork South Central, Labour)
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Ireland has some strange rates. There is a 13.5% rate on services supplied by jockeys but I do not know what they are.

Michael Noonan (Limerick City, Fine Gael)
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Riding horses?

Ciarán Lynch (Cork South Central, Labour)
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It is 13.5% at present.

With regard to the process, I take on board the example given by Deputy Donnelly. This is an evolving process and I assume when we enter the process next year that it will be more thought out and robust. There is a concern, particularly as we approach Christmas, about jobs in the retail sector because they depend on the Christmas rush. There is a marked measurement of sentiment that consumption drops before budget week and increases again afterwards. In other words, people have the same amount of money at the end of November as they had at the beginning of December but they spend it far quicker after the budget. Perhaps if we get the clarity sought by Deputy Donnelly and other Members, from both sides of the House, then it may assist the process next year. Consumer confidence and consumer consumption could be assisted by the budgetary process.

I thank the Minister for attending this afternoon. I know that he must go to the Seanad and I propose that we suspend the meeting until 4 p.m when the Minister of State, Deputy Brian Hayes, will be in attendance to discuss his portfolio.