Peter Mathews (Dublin South, Independent) | Oireachtas source

That is something that makes me feel awkward and puts me on the back foot when I have to discuss it with my wife. New Ireland Assurance is not known for wall-of-death risks. The company has an array of risk-complexioned funds and I am sufficiently adult and professional to know that investments go up and down but that is a pretty rotten performance. That is a hold position, as it were, until I reach 65, which is not too far away. Lots can happen in the meantime.

I only have a small exposure to what people experience who are in funds with companies that are insolvent as I am in one of those too. The fund is technically insolvent. It is in ICC Bank, a semi-State company. The pension fund would be valued on an actuarial basis at 60% or 65% of where it should be. As one approaches 65 years of age one holds one breath and hopes an event will not trigger a winding up of the fund because one could be staring at the hole in the doughnut if one is like me and put in 20 years in the company and would be hopeful of having a respectable pension. That is especially the case given that the company worked well and profitably from 1933 to 2001 when it was taken over by Bank of Scotland (Ireland) which effectively trashed it by abandoning all prudential balance sheet banking principles and destabilised it.

I expect the Minister would agree with me about the wider picture and how the wheels of the machinery of economy and finance work across Ireland, Europe and the world. The majority of pension funds are invested outside this country, but as the moneys get managed and go out there are nice hefty slices of fees and management expenses.

The Minister's former colleague Kathleen Barrington did excellent work at one stage on pensions industry analysis and reviews and discovered the whopping cumulative expenses that come out of a fund during the lifetime of its management. These are the overall framework figures that the public needs to know. The public does not need to read weighty articles in newspapers or other weighty papers to find out. People find out about the horrors of other people's family tragedies from stark headlines and photographs in the newspaper but, while this is going on, they do not see the corrosion and rot associated with their own old-age provisioning, which could explode on them in a final envelope opening on their retirement day, the day the fund is declared insolvent or the day of a double insolvency. This is not good enough. It is part of the old culture in Ireland that needs to be power-blasted like an old building so the people can understand where they are.

"Financial services industry" is one of those framework phrases that would have one believe we are all in favour of financial services. Let us examine what financial services have done in the past 20 years. They have actually robbed people of their money and savings; that is the net result. I gave my own example of the mismanagement of a fund. This happens all around the place and it is just not good enough.

The opaque way of reporting and the long intervals between reporting by the firms and staff entrusted with the management of funds are not good enough. There should be clear and transparent glass. Even in respect of life assurance cover, where there is a very small mixture of savings associated with the policy, one gets a statement at the end of the year that actually defies comprehension. It is just shocking. The statement does not simply list one’s monthly premium and the value of one’s life cover for the next 12 months, with the caveat that it could be a little more or less in certain circumstances. That is easy to do and the institutions know it.

The actuaries, the whizzes, are vaunted as the fantastic raw material to go into modern e-emporiums such as Paddy Power, which we are told will create 500 jobs over two years. What about the 5,000 families that will be battered and become the customers of the Minister's Department? There is not even a tax of 2% on the institutions in question. Paddy Power opened headquarters in Clonskeagh beside UCD. It hoovers in graduates, with red carpets and temptations, to high-paid jobs because they are “quant” geniuses or have a PhD in mathematics. It is believed they are not really bookies or turf accountants, but they are. One should consider the invidious and alluring advertisements on television stipulating that one can get one’s first bet, worth €10 or €100, for free. Is that the sort of society we want? I am not trying to be holier-than-thou but I believe it is rotten, stinky. It is a temptation. An app on a telephone is a hell of a temptation for younger people in college who may be under a little pressure. In a weak moment, they might believe they could make a bet that could solve their problems, thus getting hooked. It was weird that, only a week or two ago, the chief of the organisation to which I have referred was invited to fill the vacancy on the NTMA board. That is strange. We need a wider debate on the interconnectivity of all these wheels. The big danger in the financial services industry, which is manned and managed by the whizzes, is OPM, or other people's money. They have mismanaged it.

I recommended a book by Joseph Stiglitz to all the members of the Cabinet, particularly the Taoiseach. It is readable and backed up by researched evidence and the authority of years of study and wise observation. Mr. Stiglitz uses the phrase “of the 1%, for the 1%, by the 1%”, arguing that wealth is becoming increasingly concentrated in fewer hands, not only in the United States but also here. That is a fact. Again, it is not right.

While headline tax rates do not appear to have been touched over the past two and a half years, the real effective rates of taxation have been touched as a result of policy. I will give an example. Having used up some of their income while struggling to pay back mortgages, households may dedicate between 40% and 50% of their remaining income to meeting the expenses associated solely with living and surviving. These include the costs of lighting, heating, health insurance, other forms of insurance, travel and transport. I travelled on the bus recently between Donnybrook Church and Stillorgan Park Hotel, a short journey with seven stops. This cost €2.35 one way, meaning that a daily return ticket would cost €4.70. One should calculate the cost over the course of a year.

The costs of the products and services I have described have increased in the past year by not less than 15%. If 50% of household income is spent on services which have increased in cost by 15%, tax will have increased from 7.5% to 8%. I do not refer to headline income tax but the tax on everybody, including the poor and middle-income earners. That is the truth of the matter. One should add to one's calculations some miscellaneous arrivals, such as the property tax, the non-allowability of health insurance premiums valued over €1,000, and the rise in the latter expense once the increases start.

We have a fabulously regressive taxation system. When I hear that the 1% pay 10% of all income tax, my answer, which I do not want to be facetious, is, "So what?". Income tax is not the big revenue earner for the State any more. VAT, another regressive tax, is. I hope the Minister hears resonances in my humble offering of the need for fairness.

By their own reporting standards, foreign direct investors and multinational corporations reported €70 billion in profits in the last year for which figures are available. We have receipts to show that they paid approximately €4 billion in tax. This is an effective rate of roughly 6.5%. People will argue there is a difference between assessable profits and reported profits. There is, but so what? The companies state their profits and the taxes they pay, thereby indicating the rate that applies. Despite this, the companies in question enjoy the benefits of the structure, framework, customs, culture and stability of the stage on which they make their profits in this country, which is disease-free and does not have dengue fever, as exists in Asia, or smallpox, cholera or other such diseases that the top executives and board members of the FDI companies certainly do not want for themselves or their children. That is a very strong reason the companies are here; it is not just about a headline corporate tax rate of 12.5%. To say so is dishonest and I do not buy it.

Consider what occurs every time a bank admits it has a problem. With regard to the NAMA transfers of loans of €77 billion, as the sum was to be, the figure for losses was supposed to be €23 billion. It was approximately €100 billion, so the original figure was out by a factor of five.

I have a rule of thumb - when a bank admits it has a problem, multiply it by five and one is somewhere in the right area then. Last week Bank of Ireland admitted that its provisioning might be a little bit off and would have to be increased by €1.5 billion. One must multiply that by five, giving a figure of €7.5 billion, which is probably just about right, if it is to do the work it needs to do to clean up the loan books and recover what is justly recoverable. How dare the banking industry, for six years, hose money at the economy in such a way as to cause an asset bubble and then, when the bubble burst, have the temerity, audacity and arrogance to insist on collecting all of the money back from people whose incomes have shrunk or disappeared. Some of those people have emigrated, while old age pensioners are topping up repayments on loans that are still performing. Some of the loans on the balance sheets of the banks are not problematic simply because the pensioned parents of borrowers are topping them up and paying them. That is what people do in Ireland. I know this because they tell me.

These are some thoughts for the day and I hope the Minister will take them on board. I urge her to ask the Taoiseach to read the book I mentioned earlier. He needs to look out a different window on Ireland.

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