Oireachtas Joint and Select Committees
Thursday, 22 February 2018
Select Committee on Finance, Public Expenditure and Reform, and Taoiseach
Vote 7 - Office of the Minister for Finance (Revised)
Vote 8 - Office of the Comptroller and Auditor General (Revised)
Vote 9 - Office of the Revenue Commissioners (Revised)
Vote 10 - Tax Appeals Commission (Revised)
I am pleased to have the opportunity to discuss with the committee the 2018 Estimates for the Department of Finance and other Votes within the finance group covering the Office of the Comptroller and Auditor General, the Revenue Commissioners and the Tax Appeals Commission.
I will focus on my own Department first. The EU and international division deals with the development and implementation of strategies at European Union and euro area level, and internationally on economic, fiscal and financial policy formulation and the cross-departmental co-ordination of EU policy. It manages the EU budgetary process and EU economic governance. It also builds relationships through Ireland’s diplomatic network and ensures that both I and the Department are fully apprised of EU and international developments.
A dedicated Brexit unit within the EU and international division was established in July 2016 to manage Brexit work across the Department. This includes co-ordination of the Department’s contribution to the overall Government response to Brexit, including input to the EU-level negotiation process and domestic preparations to ensure that our country and economy is Brexit ready, and liaison with the Central Bank of Ireland, the National Treasury Management Agency, NTMA, and other agencies as appropriate.
Several proposals for the deepening of economic and monetary union, EMU, will be discussed at the European meetings in 2018. These relate to delivery of banking union and capital markets union, convergence in a more integrated economic and fiscal union and promotion of structural reform.
The EU and international division also manages our relationship with the International Monetary Fund, IMF, the European Central Bank, ECB, and the European Commission in the context for our former programme of financial support. The division has responsibility for the management of membership of, and policy development relating to, the European Stability Mechanism, ESM. The European Commission is due to bring forward its proposals on the post-2020 multi-annual financial framework in May. This will be a key challenge and priority for the Department.
During 2017 the funds, insurance, markets and pensions division made a positive contribution towards Council agreement on a range of dossiers, including the anti-money laundering directive and European market infrastructure. The revised prospectus regulation and the fifth anti-money laundering directive were concluded in 2017.
In the area of anti-money laundering and countering the financing of terrorism, CFT, we had a favourable assessment in the Financial Action Task Force, FATF, mutual evaluation in 2016-2017. The report, published in September 2017, acknowledges the strength of our CFT systems, but includes a series of recommendations.
The first report of the cost of insurance working group was published in January 2017. Work commenced on the cost of employer and public liability insurance, culminating on the publication of the report in January 2018.
The international financial institutions division manages Ireland’s relationship with a number of international financial institutions. These include the IMF, the World Bank Group, the European Investment Bank, EIB, the European Bank for Reconstruction and Development, the Asian Development Bank and the Council of Europe Development Bank. Our membership of these institutions provides Ireland with a voice at important fora on global economic and international development issues. Most recently Ireland became a member of the Asian Infrastructure Investment Bank. The year 2017 also represented the largest ever annual financing by the European Investment Bank in Ireland. More than €1 billion of new financing was signed last year with new investments around the country.
The banking division is responsible for contributing to the development of a financial services system capable of supporting economic growth and job creation. This involves policy areas such as the provision of credit, SME financing, consumer protection and addressing mortgage arrears. That division focuses on supporting the needs of the SME sector. Along with officials from that division, I have appeared before the committee to discuss matters such as the tracker mortgages. Decisions I have made recently in that and other areas include doubling the level of compensation that the Financial Services and Pensions Ombudsman may award to a consumer who has been adversely affected by the action of a financial services provider. I am now taking steps to appoint two new members to the Central Bank commission with a particular focus on consumer protection. That process is under way.
The shareholding and financial advisory division is responsible for the management of the State’s investments in the banking sector. It responsible for the management of our shareholding in the National Asset Management Agency, NAMA, and represents my interests regarding the oversight of the agency. A key highlight here was the successful IPO of AIB. That unit also works on many issues relating to credit unions
The tax division manages taxation and budgetary policy. It is responsible for analysing, drafting and preparing legislation, including the Finance Bill and the completion of the annual budget process. As I noted in my budget speech, a key part of its work programme in the coming year will be initiating a process to consider options for the amalgamation of USC and PRSI. I aim to have this work complete by the end of June. I recently announced a review of the local property tax, on which the committee has been briefed. The Finance Act 2017 provides for an exploration of other issues, such as the potential application of a tax on vacant residential property. I consider that the objective to be met by such a tax would be to increase the supply of homes.
The economic division is responsible for developing a strategy for the Irish economy across all sectors and the economic analysis of departmental policies.
The funding allocation sought for the finance group of Votes for 2018 totals €407 million, which compares with a 2017 Vote group total of €389 million. This is an increase of €17.9 million or 5%. The primary driver of this increase is the provision of a €15.7 million increase for the Office of the Revenue Commissioners. I will touch on that in a moment.
The gross allocation sought for the Department of Finance Vote in 2018 is €42 million, of which €10 million is provided for a fuel grant scheme for disabled drivers, a further €950,000 is provided to fund the office of the Financial Services and Pensions Ombudsman. Leaving these aside, my Department’s allocation provides for the administrative and non-administrative costs of the Department. The vast majority of this, some 61%, is provided to cover salaries and allowances, with a further €5.3 million to cover facilities and non-pay costs. The remaining €6.9 million is provided to cover the legal, advisory and committee costs necessary to support my Department.
The allocation for Vote 8, the Office of the Comptroller and Auditor General, is applied towards a single audit and reporting programme. The Comptroller and Auditor General is independent of my Department and is a constitutional officer. The Comptroller and Auditor General is responsible for controlling the release of funds for public services as approved by Dáil Éireann, auditing public accounts, undertaking independent examinations and reporting the results of the work to Dáil Éireann.
The financial audit role covers 290 sets of accounts produced by public bodies. These bodies have financial transactions that total over €200 billion. The allocation for this Vote is €7.927 million, which is an increase of 15%.
On Vote 9, the Office of the Revenue Commissioners has requested a budget allocation of €357 million. Three quarters of Revenue's budget relates to payroll. Revenue plays a vital role in our economy by collecting taxes and duties due to the State. These receipts underpin Government’s capacity to fund vital services and facilities. In 2017, Revenue collected a record €50.7 billion. It continued to support taxpayers in meeting their tax and duty obligations. For example, 2.2 million payments were made through online Revenue services. A key priority for Revenue is PAYE modernisation, on which work is well advanced. The 2018 Estimates provide for an additional €3 million in capital and current funding for IT developments required for the administration and smooth transition to PAYE modernisation.
Non-compliance with tax and duty obligations is an ever-present challenge. In 2017, the Revenue yielded €575 million though its audit and compliance interventions. There were 24 criminal convictions, an increase of six on the previous year. I have allocated an additional €4 million in the 2018 Estimates for an additional 100 compliance staff.
Tackling tax evasion is always high on Revenue’s agenda. In 2017, 2,786 disclosures with a declared value of €84 million. Revenue has initiated a new inquiry to identify and pursue taxpayers engaged in offshore tax evasion and avoidance.
In other areas, Revenue continues to assist the Department of Finance in the formulation and implementation of tax policy. It will support my Department in the review of the Coffey report. In the context of Brexit, Revenue has been participating in the interdepartmental work co-ordinated by the Departments of the Taoiseach and Foreign Affairs and Trade.
On Vote 10, the Tax Appeals Commission, TAC, has a budget of €1.626 million in 2018, a 1% increase on the previous year. The significant increase in the 2018 Estimate is to provide for the TAC with the resources needed to advance its programme of modernisation and reform and to address its caseload in an efficient and effective manner, while also meeting its obligations and accountability as an independent Civil Service body. Specifically, during 2018, as a result of the Revised Estimate, the commission hopes to recruit more staff, including tax-qualified case managers. It will also move office during 2018 to premises which are fit for purpose, largely to allow for multiple hearings and meetings with appellants to take place in parallel. Further expenditure by the TAC is in the area of ICT as it addresses the significant level of appeal cases.
I thank members for their attention and I commend the Estimates to the committee.
I thank the Minister. I only have a few minutes because I have to go to the Dáil. I would like to focus on the comments he made on the issue of mortgage arrears and the potential sale of 14,000 family homes and 4,000 rental accommodation units to a vulture fund by Permanent TSB. When did the bank inform him of its decision in that regard? Did the bank consult him on the decision? Bank representatives have informed the committee that they have entered into confidentiality clauses with potential buyers. Where stands the process? Did they consult the Minister? Does he accept that regulation is required to allow for administrative sanctions by the Central Bank if the buyer breaches the code of conduct on mortgage arrears or the Consumer Protection Code? Does he further accept that regulation in itself is not the issue? The issue is that the loans will be sold to entities that only have a short-term interest and more regulation will not provide additional protection to those borrowers than that which exists. These vulture funds, which are ruthless, have no intention of renewing agreements that have been made or entering into accommodation such as split mortgages, arrears capitalisation or interest only payments and, therefore, it is likely that there will be mass evictions in some cases and repossessions in others.
I have not yet been consulted formally by Permanent TSB representatives regarding their intentions, though as the process moves forward, they are required to formally consult with, and inform, me regarding the magnitude of what is under way and to ask for my views on certain matters. The regulations we have in place have played an important role in dealing with mortgage arrears and in reducing the number of non-performing loans, NPLs, throughout the economy and within banks. However, I have indicated that I will examine the 2015 Act with a fresh eye, conscious of the change that is coming up.
With regard to the role of vulture funds, as the Deputy will be aware, the process is only in its early stages. I am limited at the moment in terms of what I can say because of the commercial sensitivity about some of this but I am aware of the human sensitivity in respect of how people will feel if they believe their homes will be affected by this. The regulations we have in place have played a role in preventing even greater difficulty in the recent past but I will examine them again.
I tabled an amendment in 2015 to regulate these funds and I introduced legislation last year in this regard. I know what the 2015 Act does and does not do. What additional protection will the regulation of these funds give to any of the 14,000 homeowners or the 4,000 renters whose loans will be sold to a vulture fund? We all know that this is not the issue; the issue is selling long-term products to entities that have only a short-term interest. That is a serious issue and there is only one solution, which is not to sell these loans to vulture funds. I do not deny the issue in respect of Permanent TSB's balance sheet, which has to be dealt with, but we cannot throw these families and renters to the wolves. Regulation or not, the protections for them will not change.
The regulations that are in place have played a role in dealing with the great human and economic trauma that we have gone through over the past number of years and that is why there has been progress in respect of mortgage arrears. Anybody who loses a family home to repossession is one too many but we have avoided the worst projections that were made. The number of repossessions that have occurred is low relative to expectations and to the experience in other countries. I reiterate that I will engage in a fresh examination of the regulations. The legal protections people enjoy in respect of their loan will not change depending on who owns the loan.
That will depend on the nature of the additional regulation that we may bring in. If further legislation or regulatory change is needed, I will then have to justify to the Deputy what additional protection will be built in and delivered. I am looking at that actively at the moment because I am conscious of the worry and apprehension people feel about this matter. I want to do the right thing by all but an exceptional challenge that I face on the other side of the balance sheet is that 28% of the loans in third largest bank in the State, which has deposits of €17 billion and more than 2,000 staff, are impaired. It is vital in the upcoming period that a way be found to reduce the number of NPLs that bank and other banks have if we want a safe and secure banking system. Many people now find themselves in a difficult position and I am trying to find a way for that work to happen without adding to the anxiety and worry they are experiencing.
The Deputy is aware of the challenge I find myself facing in that space because he has a deep appreciation of these matters. We all know the value of a strong, independent regulator with strong regulatory powers, given all that we have gone through, indicating clearly that the level of NPLs has to come down.
I wish to raise three issues. The first relates to Brexit. On the question of the relocation of financial services firms to Ireland arising from the UK's decision to leave the EU, has the Minister an estimate of the number of jobs that have been won so far, including jobs that have moved or that have been announced or pledged by firms? Are more announcements in the pipeline? Is he confident of more success in this regard? Generally, many would have expected a greater dividend for the State and not just for Dublin. The regions need to benefit as well from the spread of financial services following Brexit.
I will take that. The story has gotten out that we have not secured our fair share of jobs but I am satisfied that we have.
There was much conversation. The best example I have of this is with Lloyds Bank, which chose not to come to Ireland. Lloyds Bank had 17 jobs. The other insurance companies, XL Catlin, Shaw Insurance Agency, Legal and General, Beazley Insurance, Beazley Re, Royal London, Eversure Insurance and others have committed to coming to Ireland from the insurance side but they are never mentioned. The only company that was mentioned was that Lloyds Bank did not come. I am satisfied that we are doing well with financial services. The conversation I had with the Central Bank of Ireland is that there are dozens, not ten or 20, but dozens of companies that are in a conversation with it. Many of these companies have some form of products and licensing so they are not starting at zero. They add to their licensing as required, depending on the services that they may bring here.
On the first part of the Deputy's question, I am satisfied that we are getting our fair share. On the second part of the question, as the Deputy knows, the first thing I did when I became Minister of State with responsibility for financial services was to visit the regions. I have travelled from Cork to Letterkenny and to just about everywhere in between. The largest announcements I have been to include ones at YapStone in Drogheda, Pramerica in Letterkenny, Northern Trust in Limerick and MetLife in Galway. The one of that scale in Dublin was Fidelity. We are focusing on the regions. Some 30% of the jobs in financial services are now outside of County Dublin and we are establishing really strong hubs around the country. I use Letterkenny as the best example, with interaction between two very large companies, Pramerica and Optimus, and Letterkenny Institute of Technology. Many people would not have believed that the skill sets and abilities were available in a small to medium-sized town. Letterkenny's population is approximately 20,000. The skill sets are there. If there is a deficit, the institute of technology steps in. It is very fluid and fleet of foot to try to ensure that there is not any failing with regard to skill sets or abilities.
Is there an estimate of the number of jobs that have been confirmed? I appreciate that it is not all about the number. The quality of jobs is important and there are many different strands to the financial services sector. Does the Minister of State have an estimate of what has been confirmed at this point?
I do not have the 2017 number. Anything before 2017 would not have been the full year, with Brexit's effect, because there were many conversations that would be required that started and did not finish, and licensing would not be concluded. As I said, we are pleased with where we are. It is important for people, which I am glad the Deputy outlined. It is no longer about the quantum of jobs but the standard and quality of the job. We should move up the value chain. An example of that is Kroll Bond Rating Agency, KBRA, which is the first rating agency to decide to base itself in Ireland. We now have rating agencies coming here too. We now have the largest exchange-traded funds, ETF, sector in Europe. The Deputy knows that aviation is quite strong. We intend to focus on other areas too. The big area I outlined in the 2018 action plan was sustainable and green finance. There is a deficit of expenditure in the area in Europe of approximately €180 billion per annum. That is the number we are short by to decarbonise Europe as we progress into the future.
I have two other issues. One is the matter of a Single Market for financial services across Europe. We recently had a vice president of the European Commission, Commissioner Valdis Dombrovskis, here and I raised this issue with him. As the Minister of State knows, Irish borrowers continue to pay well over the European average in interest rates, including both mortgage holders and commercial borrowers. While we have a Single Market for goods and services, we do not have a Single Market for financial services. If we had a true Single Market, Irish customers could borrow from German banks, French banks and Italian banks and could avail of much lower interest rates. The Commissioner indicated that the European Commission is working on the area. It should be a priority, given that Irish borrowers are paying much more than the eurozone average. Our Government should take a strong interest in this issue. We would all welcome more competition in the Irish banking market but it seems unlikely that that will happen. It is not seen as an attractive market and it is very small. The best way to help consumers at a European level is to bring about a fully functioning Single Market for financial services. Is that a priority for this Government and is it being actively raised, promoted and pushed at a European level?
It is a work in progress. Vice President Valdis Dombrovskis attended a European Financial Forum, EFF, a number of weeks ago. I think he was in here the following day. He outlined that it is something the Commission is progressing. It is a slow burner. Not everybody is in agreement - there is protectionism within the EU 27. We would like it to progress. We do not know where it will land. We have to be careful on the basis that while there are some benefits, there might be other disadvantages. We should ensure that we do what is best for the Irish jurisdiction, including domestic users.
I hear the Minister of State but the overall point is that we now have a single supervisory mechanism, SSM, so the largest banks are regulated on a pan-European basis. There is a common standard of regulation across Europe in respect of the larger banks, at least. There is really no reason, in a proper Single Market, Irish consumers should not be able to buy products from these banks. It is an issue that we should be particularly strong on because of the high rates here. We should be to the fore in pushing for that Single Market system to come into effect for financial services. I take the Minister of State's point about potential downsides. We have had Setanta Insurance and hopefully no more such incidents will occur because of the passporting in and the fact that firms only have to be regulated here for conduct of business purposes. Where institutions are properly regulated at a European level by the SSM, there is no reason they should not be able to sell into Ireland. Currently, they cannot.
The Minister, Deputy Donohoe, will address the matter of the market but I have one point before that. I have a concern that one third of the financial services sector is unregulated. Trillions of euro of products and services are traded worldwide, unregulated. We - regulators and legislatures - are catching up with financial services. Crypto-currencies are the best example of that. It is a space that is not that simple to regulate.
They are currently trading here. That is not the issue that I am referring to, but how banks regulated at a European level by the SSM cannot sell here or how a customer here cannot avail of their products. It is wrong. It is not a single market and it should be. We can sell beef, butter and milk. We can trade goods and services without barriers but we cannot buy financial services. We are paying way over the odds to our own banks. We should be leading the charge on this issue.
I want to speak on the banking union. It is an area which is ultimately the way in which the change Deputy Michael McGrath is referring to will be facilitated. I expect that, at the June or July European Council and the meeting of finance Ministers across that period, we will make greater progress in putting in place the policy framework needed for the realisation of the banking union, which will ultimately lead to banks being more active outside current jurisdictions. I will make two points in that context. A long-term consequence of the banking crisis that we went through is the increased nationalisation of banks. There has been a trend towards banks being refocused in their home market. As the Deputy knows, even in an Irish setting, large banks were required in many cases to divest their presence in international markets, as was the case for Irish banks.
The prospects of that happening for Ireland in terms of new forms of established banks coming in are medium-term prospects. I believe we will see change before then in the area of FinTech, where we will have organisations, which are not retail banks as we know them, playing a more active role in Ireland in providing financial products that are competitive versus our existing banks.
The second point is that the imminence of banking union and the associated regulatory consequences will be apparent soon. The challenges we have with Permanent TSB and the level of non-performing loans are in that context. The bedrock to that now is the existence of a European-wide regulator for banks of a certain scale
All of the dimensions of this will become more and more apparent. My objective is that as we deal with the challenging consequences, which we are in the middle of doing, the benefits will become more apparent than they are at the moment. The first wave of offers will likely be from financial services and FinTech companies.
The final issue I wish to raise relates to Vote 10, relating to the Tax Appeals Commission. Currently, the Tax Appeals Commission is not fit for purpose. The Minister provided details to me in a reply to a parliamentary question. I have it before me on my telephone – I am on aeroplane mode, Chairman. More than €1.6 billion in outstanding tax is caught up in the appeals system. Over 3,600 appeals remain to be resolved. The issue is that the number is growing and the problem is getting worse. In 2017, over 1,700 new appeals came in and 252 were resolved or concluded. The net increase in 2017 alone of 1,500 appeals is staggering. If that trend continues through this year, we will be looking at over 5,000 appeals stuck in the Tax Appeals Commission.
There are two permanent commissioners, one temporary commissioner and approximately 12 staff members. There are over 1,000 appeals for each commissioner. Without significant intervention this problem is not going to be resolved. In fact, it will get far worse. The Irish Tax Institute has raised significant concerns over this issue with the Minister and the Department. The appeals system is an important part of our tax code and system, as the Minister is aware. It is now open to abuse. If a person wishes to kick an issue into the never-never, the best way to do it is to appeal to the Tax Appeals Commission.
The Minister is giving a 1% increase in the budget in Vote 10 for 2018. The Minister described this in his opening statement as a significant increase. It is 1%. That is not terribly significant, to say the least. What, specifically, will be done to beef up the resources of the commission in order that it can get a handle on what is coming in and start to make inroads into the level of cases?
I appreciate that it is a relatively new system. There may well be teething issues and so on. However, given the increase last year of over 1,500 cases, there is clearly a serious problem and it needs to be addressed.
There are three things I will be doing to deal with that matter, because we need to have a well-functioning and fit-for-purpose Tax Appeals Commission. The first relates to the level of resources I will make available. Let us consider the trend and where we are at the moment. In 2015, the allocation for the commission was €0.511 million. In 2016, the figure went to €0.844 million. The provisional out-turn for last year is €1.07 million and for 2018 it will go to €1.6 million. Over the past three years, we will have tripled the resources going into it.
We have more than doubled the staff in the commission. We now have 15 people working in the commission. I have a round of appointments and recruitment under way. We are looking to recruit more case managers to go into the organisation. I aim to conclude the recruitment process soon and put additional people into the organisation this year.
Finally, in response to some of the disquiet Deputy Michael McGrath has touched on, we had a public consultation. It was instigated in respect of the operation of the Tax Appeals Commission to hear the issues that the public and stakeholders have in that regard. My Department has received and considered it. We have now put in place a liaison group with the Tax Appeals Commission. The group had its most recent meeting on 18 January this year. We are engaging significantly with this issue. We are making more resources available to the commission and we will continue with a recruitment process to ensure that we have the right numbers of people and the right kind of people to facilitate closure of the backlog that Deputy McGrath referenced. I am committed to doing all I can to ensure that happens.
I welcome the Minister's comments and commitment to deal with the issue. It is not simply a case of clearing the backlog because the backlog is growing. The Minster referred to the budget being trebled in recent years. The commission received 251 new appeals in January this year, and the number of appeals closed was one. In one month alone this year, there was a net increase of 250 appeals. The problem is growing and getting worse.
A key part of our taxation code is to have a properly functioning appeals system. I can hear from the Minister's comments that this is very much on his radar. It is on the agenda and it is important that it is dealt with. I am keen to reaffirm that view with the Minister and to ask him to redouble the efforts being made. The problem is getting worse despite the efforts made by the Department.
I am aware of the need to have a well-functioning Tax Appeals Commission to do two things. The first is to ensure that issues relating to the taxation status of individuals and companies are dealt with fairly. The second is to facilitate the functioning of the entire system. During the year, I will make as many resources available to that organisation as I can to deal with this. That is why we have another round of recruitment under way. My objective is that we will put together a panel of further case managers. The idea is to keep making them available to make progress on this issue.
I will follow on from Deputy Pearse Doherty with some questions. This morning, media reports indicate that banking analysts are saying that to do anything with legislation or regulation relating to the sale of Permanent TSB loans would make it less attractive for the vultures. That gives us a sense of the type of market we are now into. In commentary this morning, Davy stockbrokers pointed to political opportunism and said that the loans totalling €2 billion were typically owned by people who will not pay and who do not want to pay and so on – the non-payers. The firm is saying that typically those involved are homeowners whose mortgages are in arrears and who refuse to engage. That is what is going on in the media and in the bubble of the bankers.
I wish to draw the attention of the Minister to the fact that Permanent TSB has 14,000 homes. AIB is lining up with some type of sale as well. We know from the exchanges with the other banks at this committee that they too are lining up and that there will be issues for homeowners. Permanent TSB said in its response to our initial informal approach that the bank would not be in a position to discuss the composition of the loan portfolios, criteria, levels of arrears information etc.
Permanent TSB has confirmed that it and prospective bidders have signed non-disclosure agreements as part of the sales process. The point is that all of this information is in the public domain anyway, regardless of whether it is misinformation or is correct. We intend to issue a formal invitation to Permanent TSB to appear before the committee next Tuesday. We will discuss with the bank the make-up of these loans, the cohort of people who are in difficulties, the length of time they have been in difficulties, what they have done resolve these difficulties and so on. This will give a greater understanding to the public, the Government and the Opposition of exactly what is going on within Permanent TSB. Will the Minister encourage the State-owned banks to take up the invitations we are going to issue in the next short while to appear before the committee to deal with the fears people genuinely have in respect of their homes?
I have not heard any political opportunism in this matter. I would not agree with such an assessment. If others want to use that language to describe the debate that is under way, that is their business. The comments that Members of the Oireachtas are making are rooted in genuine anxiety that their constituents, loan owners and homeowners have. I am responding in that vein to the debate.
My short answer to the Chairman's second question is yes, I believe the banks should be in front of the committee to answer questions its members may have. I understand a number of banks may be producing results soon and, for legal reasons, they might not be able to comment publicly on matters in the period just before they publish their results. I believe the banks should accept the committee's invitation and should explain and provide answers to the various questions the committee has.
That is clear. In respect of the other banks and what is generally happening with the sale of SME loans, some of which involve good businesses attached to bad loans and so on, it is reported that agricultural land is now being examined by the banks relative to the loans they have issued to the farming community. In the context of reviewing the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015, will the Minister consider insisting that the banks at least hold off on their sales until such time as the legislation is actually reviewed? When he is reviewing that legislation, particularly in respect of homeowners, will the Minister consider expanding the mortgage-to-rent scheme? Will he consider reconfiguring Abhaile in order that its remit is extended to mortgage resolution? Will he consider the credit union movement and the funds it has in this respect? Will he insist on the banks working through each and every loan they have so that we know that at the end of the process, should they have to go to a general sale, every single customer has had the opportunity to engage with the bank on the full suite of resolution mechanisms that are currently available? When I asked one of the banks at this committee if it engaged with customers on the basis of debt for equity, for example, it said no, it did not suit it to do so. They have not been engaged with customers.
The Taoiseach said in the Dáil that the regulation currently in place will extend to the vulture funds. In practice, that does not happen. In the tracker mortgage issue, we have seen the type of aggressive culture in which the banks are engaged. I can only say that it is 100 times worse for those who are engaged with vulture funds. I represent customers when they go to these funds. One customer, as is typical of quite a lot of cases, has tried to engage since last year and the fund has not responded to any of his information requests. It has not offered any engagement or resolution. Any offers that have been made in other cases come back with the same answer, that it is not good enough and it wants more money. If they are getting the benefit of property at a knock-down price, surely to God the citizen - the homeowner -also has to be considered.
The Chairman asked me if I can intervene in the timing of any loan book sale. The Single Supervisory Mechanism, which is completely independent of me, has issued a direction that the bank is following. I do not have the power available to me to intervene in the compliance with that regulation or its timing. We are talking about a bank that has non-performing loans. Going back to a comment I made earlier, I am very conscious of the worry that is encompassed in that figure of non-performing loans. However, we need a stable, secure and successful Permanent TSB in Ireland. On the one hand, we have a direction that has been issued from an independent central bank that is regulating this bank and whose regulation the bank is required to meet. There is a level of bad loans that is five times the eurozone average, despite the progress the bank has made. I am trying to ensure that we have the right legal framework in place to make sure this issue is resolved in the fairest way possible.
The Chairman asked if I would consider re-scoping and redesigning the work Abhaile is doing. That body flows from the Department of Justice and Equality. The caution I would have in making any change to its work is that I would need to ensure that it did not cut across or cause difficulty for the work of the Insolvency Service of Ireland, ISI.
On the mortgage-to-rent scheme, for this year alone I have made an additional €5 million available through the Estimates process, bringing it up to €22 million. To date, 308 families or citizens have stayed in their homes due to that scheme and a further 619 applications are currently being progressed. I keep it under review with the Minister for Housing, Planning and Local Government, Deputy Eoghan Murphy, to see if any changes are needed to make the scheme even more successful. The last review of the scheme took place in February 2017, which was not too long ago.
The Chairman asked about the credit union movement. It is open to any organisation to decide if it wants to acquire any of these loans, if it feels doing so would benefit its balance sheet and fit in with its business model. I know the credit union movement has other things that it is looking to do, and to which it believes it can add value, with the savings of its members.
Of all of the banks with which I have engaged - those in which the taxpayer has a stake and those that are a key part of our banking sector - I and my Department have always communicated to them that they need to work through all arrears and debt difficulties with the citizens who have loans, and that they should make use of all of the options that are available.
We have always given that message.
On the funds which are operating in the State and which have acquired loans in the past, the Deputy and other members of the committee have asked me whether I have met or engaged with them. The potential accusation has been that I have engaged with them directly. I have not met them. I have engaged with the banks which are registered here. However, as part of the work I will do which I said I wanted to do in the passage of the Finance Bill, I will look at the regulations in place with a fresh eye.
In the past few weeks and last night on "The Late Debate" a lady came forward whose house had been repossessed, the bank having pursued her relentlessly. The amount of money involved was €60,000. She gave her experience and on radio poured out her life story. Her case is similar to many I have heard and the bank continues to pursue her. I say this in the light of what Mr. Dombrovskis said when he appeared before the committee. He said a country-specific recommendation made by the Commission was that, as part of the solution, the banks should write off the debt in order to correct their books and move on. No one appears to be interested in dealing with the reality of these cases. I again ask the Minister in relation to the regulation whether he thinks his review of the 2015 Act and the pending crisis for homeowners will be concluded and in place before a ptsb sale. Is that his intention or is it something he will do in due course? We have a report which was completed and agreed to this morning on vulture funds and and their refusal to participate by coming here. Even the regulated entities have refused to come to discuss the issue with us. We are laying the report before the Houses of the Oireachtas and asking for a debate on it. We are responding to public concern about the crisis. Will the Minister have the regulation in place before the sale of the ptsb loan book?
As I said in an earlier answer to the Chairman, I cannot influence how a bank responds on its timing because we are dealing with an independent regulator. What I can do is influence what I can directly control. If I believe there are changes which are needed which require legislative or regulatory change, my objective is to implement them as soon as possible. I will do it against the background of saying the current legal framework in place and the institutions which have been in place to manage this very difficult issue for many years within the country have played an important role. I cannot comment on any individual and it would not be appropriate for me to do so. Of course, we are all aware of citizens who have reached resolutions with their banks and agreements which have led to a significant decrease in mortgage arrears on non-performing loans. I have many colleagues, including Deputies Peter Burke and Bernard J. Durkan, who have been raising the matter with me and will look at further change if it is needed and how and when I can do it. Of course, I want to do it as soon as I can, but I do not want to lose sight of the fact that the framework we have had in place has enabled a resolution for many citizens of banking difficulties which, a number of years ago, had looked nearly insurmountable. Of course, when a family who have not been successful in finding a resolution talk about it in public, as the Chairman says, we get an insight into the anguish caused. I have dealt with this issue on countless occasions, both as Minister and within my constituency. However, I acknowledge that what has been in place to date has played an important role in facilitating thousands of agreements.
I respect that and will not continue on this line of questioning because the Minister is going to review the legislation and the regulations. The families affected - indeed all of us - have seen the result of the intervention of the banks on the night of the crisis. Exceptional circumstances dictated an exceptional response. That happened and the banks were saved. As our report shows, there were 125 meetings between the Department and the vulture funds between 2013 and 2016. It appears from that circumstance that the scales are tilted in favour of the institutions and the vulture funds in this case. What people are asking for is a little tilt in their favour and an acknowledgement of the crisis and social catastrophe that will emerge if there is no political response. It is very much a political response that is required.
My second question is about community banking. The committee will go to see the community bank in Germany to see how it operates. We have had them here at the committee and will facilitate a meeting among the stakeholders with an interest in community banking in Ireland. Can the Minister tell the committee when he and the Minister for Rural and Community Development, Deputy Michael Ring, will be finished with the report on community banking?
The Minister, Deputy Michael Ring, and I are working on the community banking report. It will probably be a couple of months before we come back to the committee on it as we still have work to do. I am aware of its interest in the matter. When the work is done and the report complete, we will bring it to the Cabinet and it will then be made available to the committee to debate it.
I turn to investment. The Department invests in various projects and initiatives. Will the Minister look at departmental investment in iCare, the project run by Mr. David Hall to assist people in difficulty with the banks to continue with their mortgages through his independent organisation? It is funded by the banks and of benefit to homeowners in difficulty. It might be an investment the Government should consider.
I cannot guide ISIF, the organisation which manages our investments. It does so independently and I cannot tell it the projects in which it should get involved. I understand we already support iCare Any further support we might give to any organisation must be subject to tendering and procurement rules and so on.
Deputy Martin Kenny referred to the Office of the Comptroller and Auditor General which comes within the Estimate for the Minister's Department. In the context of reform and the funding of the office, has the Department, with the Department of Housing, Planning and Local Government, considered merging both audit operations to achieve greater efficiency, value for money, transparency and accountability? Is it the Minister's intention to at any stage give greater powers to the Committee of Public Accounts and the Comptroller and Auditor General to conduct more forensic examinations of the spending of public money?
It was about the local government audit function and the audits conducted by the Comptroller and Auditor General. Would it not be more efficient to have one department with responsibility for audits under the auspices of the Comptroller and Auditor General? It would help to make local government more accountable and transparent.
Its audits are conducted in secret and there is not much public debate on them. Furthermore, the Committee of Public Accounts is restricted as to its examinations of local government funding. From the point of view of efficiency, value for money and transparency would it not be better to have them all under the one umbrella? Will the Minister increase the powers of the Office of the Comptroller and Auditor General to audit section 38 companies, section 39 companies and other organisations?
Section 38 and section 39 organisations receive funding from the State but they are not run or owned by the State. I have not heard many section 38 or section 39 organisations stating that they want to be State-run organisations.
I am not talking about State-run organisations. I am talking about allowing the Comptroller and Auditor General to pursue the spend of taxpayers' money, which is substantial. Deputy Kelly raised the issue this morning and drew the Minister's attention to the fact that the HSE has procurement issues relating to a considerable amount of money. Has the Minister consulted with the Comptroller and Auditor General to determine what he sees as an office fit for purpose for the future in audit terms?
The HSE is different from a section 38 or section 39 organisation. The role of the Comptroller and Auditor General is to audit and oversee State bodies and bodies associated with the State. The Comptroller and Auditor General has not told me that he or his office is looking for any additional powers or a change in remit. The HSE is subject to the scrutiny of the Comptroller and Auditor General and I sat in many meetings with the Chairman where the HSE was required to answer questions about its use of money.
The Minister has no plans for reform, or to extend the powers of the Comptroller and Auditor General. People believe the Comptroller and Auditor General has the ability to carry out a forensic examination of accounts and always does so but he does not. He does not always have the ability to do it.
I did not say I did not have a plan for the reform and support of the Comptroller and Auditor General. The Chairman asked if I would support the merger of the Office of the Comptroller and Auditor General with the local authority audit organisation and I said I would be reluctant to do that because the Comptroller and Auditor General has a constitutional status, while the local government audit service feels it can best continue with its work in an independent way. The Comptroller and Auditor General has not said he wants additional power but that is not to say we do not have work under way to look at how the office can do its work better and how its work can be reformed. We are currently implementing a strategy up to 2020 which is looking to increase the number of special reports it does each year from four to ten. We are asking the office to undertake an annual good practice event every year and the office has said it wants to do that. We are looking at how the implementation of examination report recommendations can be followed up in a more public way. At the moment, I am required to respond to any report the office publishes with a commitment to what my Department will do in respect of the issues identified.
There is not much change there. There is now a focus on budgets and if we were to concentrate on the hole in public finances and the waste of public money uncovered by the Comptroller and Auditor General year in, year out, it might prevent a considerable amount of waste and inefficiency. This would give the Minister more to allocate to Departments and projects.
We are about to go into the second year of a comprehensive spending review and there is a difference between waste, which we have to identify and reduce, and a better use of taxpayers' money. There can be better ways of spending money and that is what the Department of Public Expenditure and Reform does. I have Vote teams which work with every Government Department, which cannot go ahead with particular projects without my Department's consent. One of the reasons I can have challenging relationships with other Departments is that my consent is required in certain cases. To date, the Comptroller and Auditor General has not approached me to ask for additional powers, nor have I received an approach from the Local Government Audit Service but if either of these things were to change I would, of course, engage with them. I think the work done by the Comptroller and Auditor General is of exceptional value.
In passing the legislation on Irish Water recently, a commitment was given that Irish Water would be audited in the future by the Comptroller and Auditor General. Is progress being made on legislation for that purpose or is it just a matter of including Irish Water in the list of entities examined and audited by the Comptroller and Auditor General?
I do not have an answer to that. The Minister for Housing, Planning and Local Government, Deputy Eoghan Murphy, is dealing with the matter. I will get back to the Chairman in response to this question.
My final question relates to insurance. We committed to quarterly meetings with the previous Minister of State, Deputy Eoghan Murphy, and the new Minister of State, Deputy D'Arcy and we have had some exchanges on the issue. I read headlines recently commending the fact that insurance premiums had come down but that is not really true across the sector. I still get complaints from taxi drivers and the Irish Road Haulage Association and one publican I met this week, who has a taxi licence, told me his insurance had gone from €5,000 to €17,250. I am querying this with the regulator but there is unease in the market, not just in cases of road insurance but with public liability and employers' liability insurance. Is the Minister satisfied with the progress that has been made or will the industry have to come up with more reform and more cuts?
The cost of insurance working group, a cross-departmental group, has a meeting every month and we raise all these issues. On average, motor insurance premia are down by 16% year on year. There has been an increase of 57% from the low point, but that was when there was a price war and the outcome of price wars never tends to be good. We are not going to see decreases of 57%. The employer liability and public liability reports were done, they went to Cabinet and they have been published. A lot of work has been done, some of it following the recommendations of the motor insurance report of 12 months earlier. The Personal Injuries Commission has been established and Mr. Justice Kearns has produced its first report. He is working on a second part, which will be very telling as it will cross-reference payments in the Irish system with those in our nearest neighbour, and maybe some other jurisdictions. It will compare what people get from similar claims in the UK to what they get in Ireland.
One line sticks out from the employer liability and public liability reports, which asserts that one cannot have low premia and high awards. We have high awards and that is what we are trying to deal with. We are trying to improve the insurance sector as a whole for everybody.
I understand that in some areas, if there is only a single pub or shop, the insurance premiums can sometimes double or triple if a claim is made and that it can have such an impact that the shop or pub will close. There are a number of aspects to this. The general data protection regulation is to start in May. A recommendation on employers' land public liability insurance will be that, if somebody has a claim, that he or she must present it within 28 days, the period for which somebody can hold information. If there is a video camera recording an event or potential accident, somebody has to present the claim to the individual within the period, otherwise the data have to be deleted. A number of good things are happening. If the Deputy wants, I will be quite happy to come with my insurance team to present the information.
It would be because much good work is being done and it is not being spoken about. This is a work in progress and it will take time as there are constitutional issues. We asked the Law Reform Commission to consider whether the Oireachtas was capable of capping awards. We hope to have its paper back to us as soon as possible.