Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

However, I have a duty to analyse critically that recovery. The economy is recovering, that recovery is broadening and its pace has almost surprised everyone. I agree the task now is to make sure it is a sustainable recovery. There is a general air of self-congratulation about the Government's pronouncements on the state of the economy. Ireland remains vulnerable to a change in international factors.

4 o’clock

The risks buried in the bowels of the document have not been brought to the fore in the Ministers' statements. We have benefited, in particular, from the weak euro, the historic low interest rates, falling energy prices and the European Central Bank's quantitative easing programme. The reversal of any or all of these factors could and would hit Ireland particularly hard. This should be acknowledged. The economic turmoil in China during the summer was a stark reminder of the unstable nature of the global economy.

On employment levels, Fianna Fáil welcomes the fact that the number of people out of work is falling but fundamental problems remain, particularly in regard to long-term unemployment. When account is taken of the more than 80,000 people on activation schemes, the number working part-time who want to work longer hours and the number unemployed, the overall jobless rate is 18%, which means that the situation is not as rosy as the Government is constantly repeating. Despite improving in recent years, the debt-to-GDP ratio is significantly worse than it was in the 1990s and 2000s. While the deficit is quickly reducing, there is no room for complacency on all of these issues.

It is welcome that the Minister for Finance, Deputy Michael Noonan, has moved to end tax discrimination against the self-employed and is providing a €500 credit in that regard, similar to what was proposed by Fianna Fáil in its submission. However, he should have gone further. He should have introduced a voluntary opt-in PRSI scheme for the self-employed such that if a business gets into difficulty, a self-employed person would have the safety net of jobseeker's benefit or if he or she is unfortunate enough to become ill, he or she would be eligible for illness benefit. The Government should have done this, but it clearly has no intention of doing so.

On corporation tax, the Minister has concurred with the report issued by the OECD on base erosion and profit sharing, BEPS. I broadly support that position, but Ireland should not be complacent in its corporation tax offering. The reality is that many other countries are upping their game considerably in relation to corporation tax. The United Kingdom is cutting its overall rate and has introduced an aggressive patent box scheme and an attractive capital gains tax regime for entrepreneurs. I acknowledge the Minister's move on capital gains tax for entrepreneurs, but a rate of 20% is still not competitive, as compared to the 10% rate in the United Kingdom. Also, the cap of €1 million is too small and should be reviewed. The Minister also announced the knowledge development box last year, which he says is in line with the OECD's BEPS proposals. The question is whether it has been approved by the European Union or whether the Minister has sought approval from it? I note that he is nodding his head. I take it that the measure will be enacted in the Finance Bill and in place for 2016. If so, I welcome it.

Ireland should continue to resist moves to sign up to have the common consolidated corporate tax base. The Minister needs to further reform the proposals in relation to SARP which have not been successful. He also needs to make provision for a greater distinction between passive and active investment in the taxation of enterprises generally. That is an issue which needs to be addressed.

In its submission to the forum on tax and entrepreneurship Fianna Fáil put forward a number of proposals on crowd funding and the enhancement of our research and development offering through a pre-approval mechanism and a special dedicated unit within Revenue. Many countries are now competing in this territory on the grounds of supporting businesses investing in research and development.

The Minister has often made the point that the banks have recovered or are in recovery mode. If the measure of this is the availability of credit to the economy, in particular to small and medium enterprises, SMEs, I do not agree with this. The Government committed in its programme for Government to the establishment of a strategic investment bank, but no such bank has been set up. Instead, the Government set up the Strategic Banking Corporation of Ireland, which is not a bank because it does not have a banking licence and cannot lend to anyone. It is channelling funds through the pillar banks and its performance thus far, to the extent that data are available, is modest, to say the least. Similarly, the other sources of non-bank funding have not delivered the level of credit required in the economy. The temporary partial credit guarantee scheme has not worked and Microfinance Ireland is not making the contribution we felt it had the potential to make. The Minister has not dealt with the issue of legacy debt held by SMEs which is acting as a drag on the domestic economy and needs to be dealt with.

Fianna Fáil welcomes the increase in the minimum wage, which increase is presented in the budget tables as if it will be paid by the State which, of course, it will not; rather, it will be paid by employers. The Minister has addressed the PRSI anomaly created by the Government when it removed the PRSI exemption limit of €100, which created the cliff for employees moving above a certain level of income by having to pay PRSI on 100% of their income. It remains to be seen if the detail of what has been proposed deals with that issue. However, the relief is being tapered, which we welcome.

Another issue in relation to banks and mortgages is one to which I have returned time and again, namely, standard variable interest rates. The Minister promised last May when he met the banks that if sufficient progress was not made on this issue, he would act to address it in the budget. In that regard, he threatened to introduce a penal bank levy or to introduce legislation which would empower the Central Bank to deal with the banks' continued charging of rip-off interest rates to variable interest rate customers in Ireland. While the Minister is clearly satisfied with the progress achieved, as he sees it, I fundamentally disagree with him. The following are figures which I gave during questions to him recently. The actual standard variable interest rates being charged to existing customers are as follows: Bank of Ireland, 4.5%; permanent tsb, 4.3% for customers with less than 10% equity; Ulster Bank, 4.3%; KBC, 4.3% for customers who move their current account to that bank; AIB, 3.65%; EBS, 3.7%; ACC, 4.4%; and Danske Bank, 4.95%.

The Minister has spoken about fixed interest rates and the new managed variable rate products, but for many mortgage holders, the new fixed rate products are not suitable. People do not want to be locked into two or five-year arrangements because doing so comes with a penalty. A person who wishes to switch a mortgage to another lender must pay a financial penalty. If a person comes into money by way of an inheritance and so forth and wishes to pay down a mortgage, he or she will incur an actual financial penalty. This issue has not been dealt with. The Minister has been advising mortgage holders to sign up to fixed interest rates. To be frank, it is not his job to act as a personal financial adviser. It is his job to deal with the regulatory system and the supervision of the banks and to ensure there is fair play for the 300,000 mortgage holders who are still paying, in many cases, double the rate charged elsewhere in Europe. This is not acceptable. What it actually means in many cases for mortgage holders is several thousand euro in additional interest every year. In terms of tax cuts and giving a little back in welfare payments, in many cases, they are against the backdrop of people paying up to €2,000 extra in rent this year than they were paying three or four years ago or an additional €1,500 to €2,000 in interest on their loans in Ireland than they would be paying if they were living elsewhere. These are the fundamental structural issues in the economy that need to be dealt with if people are to share in the fruits of the recovery, as I am sure the Minister would wish them to do. He continually calls on people to switch their mortgage provider. However, doing so is not as easy as switching one's electricity provider. It is very difficult to switch one's mortgage from one lender to another. It remains our view that legislation should be enacted to give the Central Bank the power to act in this area.

The impending ending of mortgage interest relief will affect over 300,000 families. Mortgage interest relief will expire in 2017, a fact of which many are not aware. There is also always the risk that tracker mortgage rates will increase at some point in time; it is inevitable that they will. Equally, the issue of mortgage arrears has not been addressed. The figures for the uptake of the insolvency service are very flow. The Minister has spoken many times about all of the mortgage restructuring arrangements that have been put in place. However, 27% of the restructures involve the recapitalisation of arrears. In 14% of cases, the mortgage term has been extended, while in 10% of cases, the repayments have been temporarily reduced. It remains to be seen whether these are solutions that will be durable in the medium to long term. There are still 38,000 mortgage accounts that are in arrears for two years or more. These mortgages are in very real difficulty. During the past 18 months repossession proceedings have been issued in respect of almost 17,000 family homes. We know from information provided by the banks for the Oireachtas finance committee that more than 30,000 letters threatening legal action or in respect of actual legal proceedings have been issued to families because of the level of their mortgage arrears.

We have the added problem, which compounds that situation, that because of the Supreme Court judgment last May, which the Minister has not yet addressed, banks do not even have to comply with the code of conduct on mortgage arrears before proceeding with a repossession action before the courts.

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