Michael Noonan (Limerick City, Fine Gael)

-----but if they purchase in 2013, mortgage relief will end, arising from the decision of the previous Government.

Mortgage Arrears

Turning to those in mortgage difficulty, the Government is acutely aware of the increasing financial stress that some households are facing arising from difficulty in meeting their mortgage commitments. It was for this reason that the Government took the significant decision to establish a group to consider further necessary actions and to report within a very short time frame. The Government is now progressing with the implementation of the group's recommendations as well as assessing other approaches as suggested by Deputies, Senators and by interest groups who made submissions. I expect to make a formal announcement on the next steps shortly.

Legacy Property Tax Reliefs

As part of this Government's determination to develop a fairer tax code, legacy property reliefs must be reduced. My Department has undertaken an economic impact assessment of the measures proposed by the previous Government. It is quite clear that these proposals were unworkable and would have done significant and lasting damage to an already distressed property market, creating real difficulties for many ordinary people. This report is being finalised and will be published with the Finance Bill.

The report also highlights the vulnerability of small investors to insolvency if they lose these reliefs, a finding backed up by recent research from the Central Bank that shows high levels of negative equity and arrears in the buy-to-let mortgage sector. Therefore, I have decided not to proceed with the proposals put forward by the previous Government in last year's budget. The report concludes that reliefs to small scale investors should not be restricted but that there is scope for larger investors to contribute more. The Government also believes that large scale investors in property that attracts tax reliefs can and should make more of a contribution. Therefore, in the interests of fairness, a property relief surcharge of 5% will be imposed on investors with an annual gross income more than €100,000. This will apply on the amount of income sheltered by property reliefs in a given year. Reliefs in section 23 type investments will not be terminated or otherwise restricted for investors with an annual gross income under €100,000 as these are at the greatest risk of insolvency.

Investors in accelerated capital allowance schemes will no longer be able to use any capital allowance beyond the tax life of the particular scheme where that tax life ends after 1 January 2015. Where the tax life of a scheme has ended before 1 January 2015, no carry forward of allowances into 2015 will be allowed. The delayed implementation of this measure gives individuals time to adjust. Full details will be in the Finance Bill.

Role of NAMA

As NAMA has completed its loan acquisition phase and is now concentrating fully on the active management of the assets under its care, the NAMA board, with my agreement, asked Michael Geoghegan, a former CEO of HSBC, to review NAMA and report his findings to me. His report was generally positive but arising from it, I am establishing an advisory group to advise me on NAMA's strategy and its capacity to deliver on that strategy through property disposal and the ongoing management of assets. In making appointments to the NAMA board, the advisory group will help me identify candidates with entrepreneurial and property skills. Recommendations will also be provided by the group on strategies for NAMA to attract international capital to Ireland and to provide advice in respect of lessons to be learned from asset management agencies in other countries. I will issue a direction order to NAMA under section 14 of the National Asset Management Agency Act 2009 setting out the work of the advisory group and requiring NAMA to facilitate its operation.

Banking Sector

A strong and vibrant banking sector is vital to our recovery and to any growing economy. Credit is the lifeblood of the economy and without adequate credit availability, businesses will find it difficult to maintain the jobs they have, let alone create new jobs. Also, without sufficient credit, it will not be possible for the property market to stabilise.

Since taking office, the Government has completed a large scale restructuring of the banking sector, in which the two largest institutions will function as universal pillar banks. The more problematic institutions have been ring-fenced into a single entity. These restructured and recapitalised banks must now serve the different sectors of the economy. We have set the two pillar banks ambitious SME lending targets of €3 billion each this year, €3.5 billion each next year and €4 billion each in 2013. By making this credit available we are supporting increased activity in a key sector for job creation. The banks must also make mortgage credit available to allow people to avail of the mortgage interest relief incentives announced.

Public Finances

The medium-term fiscal statement set out the Government's policies on budgetary reform and the path to sustainable public finances, both of which are essential for the creation of jobs. In the light of the revenue and expenditure figures for November and the other information that has come to hand, my Department now estimates that the general Government deficit for this year will be 10.1% of GDP. This is lower than the 10.6% required by the EU-IMF programme. The general Government deficit target for 2012 is 8.6% of GDP. No matter what happens in the wider eurozone, Ireland needs to restore sustainability to its public finances. If the eurozone crisis recedes, we will be among the best placed to grow quickly, as evidenced by the European Commission's growth forecasts. If the eurozone crisis persists, it is equally important for the State to reduce its dependence on borrowing.

To continue to improve the sustainability of the public finances, we need €3.8 billion of additional fiscal consolidation in 2012. The Minister for Public Expenditure and Reform, Deputy Brendan Howlin, set out the €750 million capital expenditure consolidation on 10 November and yesterday set out how the €1.45 billion current expenditure consolidation would be implemented. In regard to the €1.6 billion revenue consolidation required in 2012, the full year effect of measures already introduced is €600 million, which means that I am announcing additional new tax measures today worth €1 billion approximately.

Taxation

The programme for Government states there will be no increase in income tax.

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