Tuesday, 17 December 2013
In his address on Sunday night, the Taoiseach stated that the banks must do more to deal with mortgage distress. It was probably the understatement of the year, particularly given that one in five residential mortgages remain in arrears. The figures are quite dramatic. It is as if the Government is on the sidelines and is helpless in refereeing a match over which it has no control. Under the Land and Conveyancing Law Reform Act 2013 which the Government introduced, repossessions are becoming the norm and are the acceptable option for banks to pursue those in arrears. It seems this is with Government acquiescence. The Government put the banks in the driving seat. As Members will be aware from presentations to the Joint Committee on Finance, Public Expenditure and Reform, AIB, Bank of Ireland and Ulster Bank between them sent out approximately 13,000 letters initiating repossession proceedings.
There has been a dramatic increase in the number of court proceedings issued during quarter three over quarter two of 2013. The increase is about 570% with the number issued during quarter three being well over 1,800 compared to 270 in quarter two of this year. The Fitch report estimates that about 20% of residential mortgages that are in arrears will end up being repossessed - that is 20,000 homes that will be repossessed. The tables in the report detailing court proceedings and so on show that the problem is escalating and accelerating in terms of the numbers.
The Taoiseach said to me in July that repossessions would be the last resort. He said "that has to be the last resort" and that families would be offered solutions that did not involve house repossessions. Is he comfortable with a figure of approximately 20,000 family homes being repossessed? What will the Government do to intervene to provide for those in mortgage distress? He acknowledged that banks are not doing half enough, so what will he do? What has he against the idea of establishing an independent mortgage resolution office that could genuinely arbitrate between the banks and their customers to provide for meaningful and sustainable solutions for those in arrears?
Thank you, Deputy Troy. I do not accept Deputy Martin's premise that repossessions have become accepted as the norm. It is beyond doubt that there will be some repossessions.
Nobody likes to see houses being repossessed but it is not realistic to suggest that there will not be some repossessions. I do not accept the Deputy's assertion that repossessions have become the norm or that repossessions are a fundamental part of Government policy. They are not. We have made that perfectly clear on so many occasions.
As the Deputy is aware, I think much to his consternation, we have rebalanced the rights of borrowers and lenders with the personal insolvency legislation, the most radical shake-up in a century. Despite the comments he has made on numerous occasions about the banks holding the veto here, the first number of the decisions are very clear and speak for themselves. As was announced today, and as has been repeated on many occasions, the first requirement is for borrowers to engage with the banks. It is not a sustainable solution to send out a letter going down the legal route. The fact that many cases, as the Deputy mentioned, are heading down the legal route does not mean automatic or eventual repossession. Nor do I accept, as the Deputy seems to have accepted, the figures put forward by Fitch that 20,000 repossessions will take place. We cannot allow a situation where the economic recovery will bypass those families who have had mortgage problems. As the Deputy will be aware in budget 2012 mortgage interest relief of 30% for first-time buyers was introduced. That was for those who bought there homes between 2004 and 2008 and that eased the cost for 270,000 householders. As the Deputy will also be aware, and this is another thing that is being done, the Department of Finance now produces monthly data and the data for October show a slight decline in the overall number of people falling into arrears. Engagement between consumers and lenders has led to 49,032 permanent mortgage restructures settled and dealt with and the people are able to meet those requirements. That is an increase of 3,855 accounts. The number of mortgages in arrears of greater than 90 days has fallen from 81,156 to 80,854, a small reduction but the number is continuing to fall.
The Central Bank has set clear targets and is monitoring them. Lenders are required to offer distressed borrowers sustainable solutions by the end of next year. The success of the banks in meeting these targets is measured by the Central Bank and by its residential mortgage arrears and repossession statistics and quarter three figures which will be produced in the next short period. The key point is to define and arrive at a solution, therefore, the first requirement is engagement between the borrower and lender. The first requirement is to find a solution. The Deputy seems to accept a figure in the newspapers today produced by Fitch. He seems to assume it is suddenly Government policy that it is the norm that repossessions take place when that is palpably not the case. He should not be putting out all those scares as we come towards the end of this parliamentary session.
Clearly, for banks, about which the Deputy has been talking about having a veto over solutions, bankruptcy is the end of the line for somebody who goes through that process. Banks get nothing out of that and therefore it is in their interests to settle.
Words no longer mean anything in here. The Taoiseach can keep on denying whatever he wants to deny but it does not strike a chord with the reality on the ground. He spoke about the Central Bank targets. Does he know the figure for the threat of legal repossession under those targets? Sixty per cent of the sustainable solutions offered were with the threat of legal repossession. Those are his Central Bank targets. I am not making up that figure. That is official and on the record. The 13,000 letters sent out by AIB, Bank of Ireland and Ulster Bank are not my figures; they were formally presented to an Oireachtas committee.
The Taoiseach can rubbish Fitch if he wishes. We will give him that. I will not rubbish it but the Taoiseach can do so. These other figures are official figures-----
We will take this on just the substance and the facts, Deputy O'Donovan, not smart alec comments about individuals or personalities. I put it to the Taoiseach that the bottom line-----
These are official figures in terms of court proceedings issued during the quarter. In quarter two of 2013 the Taoiseach was looking at a figure of 270. In quarter three of 2013-----
-----he was looking at a figure of 1,830. Those are facts; they are figures that I did not make up but that are on the official record. Whatever record the Taoiseach wants to take officially, it is telling a story that repossessions are dramatically on the increase and that he has sat on the sidelines on this issue. The most he can say in a much hyped televised address to the nation is that the banks must do more to deal with mortgage distress, without explaining any detail in terms of what that means or what he intends to do about it. I ask the Taoiseach one more time if will he agree to the establishment of an independent mortgage resolution office for once and for all to get a genuine engagement going between banks and those who are in arrears because the other options are not being offered to any great degree, be they split mortgages, interest only or extension of loan repayment periods. Those options are not being offered to any great degree.
The answer is "No"; it is not necessary. The Deputy talks about sitting on the sidelines. Did I not hear him say on a radio programme some time ago that, unfortunately, the problem was that his Government did not bring in enough taxation and spent too much money publicly, which got us into this business? When the Deputy talks about denial, did I not see him vote against the exit from the bailout programme just last week? Do I not hear him now talking about a situation where Ireland should have-----
-----49,032 permanent mortgage restructures have been brought into place. That is an increase of almost 4,000 accounts. I am glad to note that Mario Draghi has said the banks need to do more. He echoes clearly what we have been saying from a Government point of view.
He was not a supporter of the personal insolvency legislation, which is now bringing about a change in attitude, with an understanding by banks that if they do not engage they do not have a veto at the end of the day.
The banks are required to shape up. It is not the case that anyone wishes to see people lose their houses, but a certain way of ensuring it will happen is for people not to engage with their lenders in the first place. A variety of measures have been set out by Government action and legislation to help borrowers and they should avail of all these opportunities. Deputy Martin wants go down the road of setting up another independent analytical operation. This would take a very long time and in the meantime many of these distressed mortgages could be restructured permanently to the benefit of both sides.
The Minister for the Environment, Community and Local Government, Deputy Hogan, is rushing through all Stages of the Water Services (No. 2) Bill this week, transferring water services from local authorities to the new company Irish Water. I am sure the Taoiseach is aware of the alarming reports from Dublin City Council and its manager about the implications for our capital city. Dublin City Council will be asset-stripped to the tune of €2 billion following the takeover of its services by Irish Water. The city manager has been clear about what this will mean. It will mean higher water charges for the city's businesses, damage to the council's ability to respond to severe weather events and huge financial and operational risks to the largest local authority in the State. These negative consequences will affect local authorities across the State. Dublin City Council faces pension liabilities of €330 million for water service staff without the assets to fund it. It is normal practice that when a public function is transferred from one authority to another, responsibility for legacy pensions is also transferred. However, in this situation we are witnessing the transfer of major assets built up over many years by the businesses and people of the city with no compensation for the city council. Furthermore, Dublin City Council was obliged to sign agreements to provide water services for the company for the next 12 years. Although the transfer is due to take place on 1 January, it has not been given a final draft of the service level agreement.
I ask the Taoiseach and his Government to withdraw the Bill, step back and review the utterly reckless water services strategy being pursued by the Minister, Deputy Hogan. Will the Taoiseach remove from struggling citizens, whom he addressed over the weekend, the prospect of yet more money being taken from their pockets in the form of domestic water charges and higher water charges for businesses in Dublin city?
The answer to both questions is "No". The question of the supply of water to the city, it citizens and its growing population deserves the most serious consideration. For far too long, substantial amounts of water have leaked away through the system that taxpayers pay for and there is clearly a need for a major project in which the pipes service in Dublin city can be renovated, repaired and brought up to standard. There is also a need to deal with the future requirements of the city and its population for the next 50 years, from other locations or by whatever means.
It costs €1.2 billion per year to run the current system, with most of the funding coming from State sources. The creation of Irish Water has many benefits in terms of increased investment resulting in better-quality water services, which are fundamental for industry, human consumption and the health of our people. Not only do enhanced water services benefit individual households, they also attract industries with high water usage. Deputy McDonald is aware of the exceptional amount of high-quality water required by modern industry in a country such as Ireland. With global demand due to rise by 40% in the next 20 years, it is a critical issue.
Dublin City Council will be left with pension liabilities of €330 million. Local authorities operate a public sector defined benefit pay-as-you-go pension scheme. Therefore, as pension liabilities fall due when people retire, payments are made from current expenditure. Liability arises if everyone working for the services retires in the morning. The Minister for Social Protection has pointed out that there is a major pension problem in respect of the entire public service, which makes this figure seem relatively modest. Pension liability already exists in respect of staff working in water services, so the transition to Irish Water does not create a new liability. The service level agreement provides that Irish Water will pay local authorities for existing water service pensioners. The Water Services (No. 2) Bill also provides a mechanism for payment of pension benefits to local authority staff who transfer to Irish Water now or following the service level agreement. When the service level agreement comes to an end, the pension liability for water services staff who do not transfer to Irish Water will rest with the local authority. This is unlikely to arise until 2025 at the earliest. The comment about asset-stripping to the tune of €2 billion without any compensation is an unbalanced presentation. The Bill provides for the transfer of water services assets to Irish Water and all of the liabilities associated with the assets, including loans. A total of €730 million in gross water costs will transition to Irish Water from 2014. Some €244 million will be paid back to local authorities for the provision of water services under the terms of the service level agreement. Irish Water expects to pay commercial rates of approximately €42 million to local authorities on the water infrastructure assets that transfer to it from 1 January 2014. The remaining €444 million of water-related costs, which local authorities would otherwise have to meet from their own resources, will be funded centrally by Irish Water.
The Bill provides that non-domestic charges existing in local authorities in 2013 will continue to apply from 1 January 2014 and will continue to be collected by local authorities on behalf of Irish Water for the first half of 2014. Irish Water will be responsible for collection of commercial water charges from 1 July 2014. In respect of the Dublin City Council deficit in 2014, the city manager issued a note to councillors on Friday stating that the general purpose grant, GPG, allocation he received in the net transfer of water costs to Irish Water represented a satisfactory outcome and exceeded his expectations in regard to the council's funding position in 2014. He said he was satisfied that he would be able to prepare a draft budget for 2014 that would largely maintain service levels.
The Taoiseach is right in saying something must be done in respect of the provision of water services, and not just for the city of Dublin. He is correct that the current system is leaking like a sieve and, as a result, there is huge wastage. The initiative and the stance taken by the Government have nothing to do with that because, if his concern was water preservation, the Government would have invested the €700 million spent on the establishment of Irish Water on remedial works for the infrastructure. It has not done so. This is simply a mechanism to raise more revenue and stick the Government's hand in the pockets of families the length and breadth of the State, despite the Taoiseach's honeyed rhetoric of recent times.
There is clearly a concern in respect of the pension liability. Nobody is suggesting for a minute that all those liabilities would be crystalised in a week or a month but it does warrant some explanation to the local authority as to why it would carry any liability for those pensions if workers work for Irish Water and are no longer contracted to the local authority. It is extremely worrying that the council has not had sight of the service level agreement, and that is a reflection of the very rushed approach the Government has taken in all these matters. Let it not go without comment that All Stages of this legislation are to be taken by the Dáil in two days this week. This is very complex legislation, even for those who propose it, because of the transfer of assets, and it is quite astonishing and unacceptable for the Government to rush legislation like this in this manner.
There is no time for proper scrutiny or consideration but that is the game plan. It has been the game plan of the Taoiseach and the Minister for the Environment, Community and Local Government, Deputy Hogan, from the get go to force these matters through. It was done with the property tax and it is to be done again with water charges. The Taoiseach has argued it is for the betterment of society and in the best interest of the citizen but in reality it is just a smash-and-grab, a cheap pickpocketing of taxpayers and citizens once again.
In the interest of having good legislation and out of respect for the people elected to this place and those elected to Dublin City Council, will the Government pull back on this legislation and at least pause for proper consideration? I ask the Minister, Deputy Hogan, to meet the delegation of Dublin city councillors to hear first-hand their concerns. I understand he was a no-show at a meeting last evening but it would be appropriate for him to meet the directly elected representatives of this city. The citizens elect these people and it would be only proper for the Minister to make himself available to them.
As I understand it, the Minister, Deputy Hogan, was not invited to the meeting but was rather requested to send an official. As the Deputy knows, the Bill was in the Seanad last evening with the Minister, Deputy Hogan, and the Minister of State at the Department, Deputy O'Dowd. The Minister was not asked to attend the meeting but was asked to send an official, which he did.
I have given the figures in respect of the statement issued and I have dealt with the question of the pension liabilities. I have also dealt with the assertion of a loss of €2 billion in assets, as well as the collection of the commercial water charges. The intention all over the country is to provide a modern system of treating water and being able to provide that treated water to citizens. We should be able to provide clean water in the required volumes for business, industry and other uses. Whereas local authorities worked over many years, it is fair to say that standards were applied differently in many areas. I have first-hand knowledge of this. Irish Water, as a major investment and new entity, will have a system right across the country of the very best level of provision and treatment. It is a major undertaking. This is not a question of wanting to rush legislation through.
I have dealt with the figures raised by the Deputy, the transfer of assets, pension liabilities and the collection of commercial rates. It is time to move on with a system fit for 2014 and beyond, and that is what Irish Water will be able to do.
All the Governments over the past 50 years have seen the likes of pipes extending throughout the Dublin regional network, where we lose very substantial amounts of treated water every day.
There was trouble recently in the treatment works and the extent of water that could be treated coming out of that. This was causing trouble for Dublin business and daily commercial life. We must get this right.
The standards must apply across the board and in a country that has as much rain as we do, there must be a reliable supply of treated water that is cost-effective and does not have the taxpayer paying very substantial amounts of money for treated water that could then flow away through inferior pipes to the earth. That is one of the real tasks that will be carried out in Irish Water's major projects. The standard must be raised so the network is fit for purpose for 2014 and beyond. We are talking about an entity that will last for very many years and which will supply a scarce and precious commodity that is becoming very expensive to treat.
Today's Irish Independent contains a report that a dossier has been presented to the Garda Commissioner on the conduct of a previous employee of NAMA. It indicates the dossier includes an allegation that the official fed information from NAMA to named individuals who should not have received it. The Irish Daily Mail also references very serious allegations of price manipulation and off-market deals. My understanding is that several news outlets have significantly more information, which they are examining, involving potentially improper behaviour by NAMA. I hope, as I am sure we all do, that these allegations are baseless but if they are not, it is possible the State will be exposed to very significant costs if an aggrieved party sought and was awarded damages for potential wrong behaviour. Regardless of whether the allegations are true - I hope they are not - they compromise NAMA's ability while they are left untested, and the agency cannot do the best job it can in returning as much money to the State as possible. For example, a potential bidder for NAMA assets may decide it will not bid as it may feel other bidders have access to confidential information which they do not.
These are not new allegations, as the Taoiseach knows. The allegations around the official surfaced in 2011 and the Garda began investigations at NAMA's request in 2011. In 2012 NAMA conducted its own report. Since 2011 and the initial allegations, what steps has the Government taken to ensure no leaking of confidential information from NAMA can take place? Is the Taoiseach satisfied that all steps have been taken and that NAMA is now watertight?
The Government is taking this matter very seriously and the point raised is one of concern and substance. I note the statement yesterday from NAMA. It states:
The Senator's comments in the Seanad this afternoon suggest that he has evidence of impropriety involving staff members of NAMA. He has not shared any such evidence with NAMA. Nor has NAMA received such evidence from any other party. If the Senator or any other party has evidence of any impropriety, they are legally obliged, under section 19 of the Criminal Justice Act 2011, to bring it to the immediate attention of the Garda Síochána.That means the Act, since going through the House and becoming law, makes it a criminal offence not to follow a legal requirement if somebody has information about impropriety to bring it to the attention of the Garda directly. The Minister for Finance, the Minister for Justice and Equality and the Government is not involved in carrying out any criminal investigations, although these are serious matters. I repeat that anybody with information about improprieties, illegal actions etc. should bring them to light under the relevant section of the Act.
There are specific offences under the NAMA Act 2009 regarding the inappropriate disclosure of confidential information. I understand an investigation by An Garda Síochána into a complaint made by NAMA some time ago against a former employee is at a very advanced stage. I cannot comment on that. More recently, in August this year, An Garda Síochána received a separate complaint from a firm of solicitors acting on behalf of a client relating to the alleged disclosure of information by NAMA.
The Garda, which is the appropriate authority, has been awaiting receipt of further documentation from the solicitors concerned. The Garda will fully investigate any allegations of criminal activity. I understand that NAMA was informed by a journalist over the weekend that certain allegations had been made by a former employee about the activities of current and former NAMA staff. NAMA cannot and will not issue any public comment about ongoing Garda investigations or the background to them so as not to prejudice the outcome of any investigations that take place. NAMA has not been contacted by the Garda to date in connection with the allegations. Other than what appeared in the public press yesterday, NAMA has no specific knowledge of these allegations and therefore will not make any public comment other than the press statement it issued yesterday indicating that if somebody has an issue, he or she should bring it to the attention of the relevant authorities forthwith.
It seems to me – many Deputies in the House would agree – that an organisation as powerful as NAMA, dealing with such sensitive information, should never have been set up under the veil of secrecy that prevails. I accept that it was not set up by the Government. The Garda will investigate the allegations and if it deems it appropriate a file will be prepared for the Director of Public Prosecutions. Is the Taoiseach confident that sufficient systems and processes are in place such that NAMA is watertight? It must be above reproach. I hope the allegations are unfounded and untrue, but the suggestion is that NAMA is leaking confidential information. The Taoiseach referred to a second case, about which lawyers have been contacted, in which it is alleged that confidential information was leaked. There may be more to come. NAMA must be above reproach. It must be able to operate in such a way that it can return as much money to the State as possible. Is the Taoiseach comfortable that the systems and procedures in NAMA are as good as they can possibly be? If he is not, does he think it might be wise to urgently set up an independent external review of those systems and procedures? The Garda cannot do it; it is not set up to do that. NAMA cannot do it. No body can investigate itself in that way. Does the Taoiseach think there is a compelling argument for setting up a quick and urgent investigation to look at those systems and procedures such that anybody who is dealing with NAMA, or anyone who is looking at buying assets from NAMA, can be absolutely assured that people they are bidding against could not possibly have access to confidential information which would make it more difficult for them to bid fairly?
The Government takes the matter very seriously. Two cases arise; one formal investigation by the Garda is nearing completion and I expect it will come to a conclusion. The second arises from a recent contact. NAMA has not been formally contacted by the Garda arising from those allegations.
Deputy Donnelly made a point about people perhaps not following through on an initial interest in a property or loan because of the concern that somebody might have other information. He is aware that NAMA requires that all loans, properties and other assets be secured on a competitive, fully open basis by suitably qualified sales agents, and in all events NAMA insists on independent valuations of assets to deal with that particular issue. It also requires that sales agents prepare a final report and recommendation. In the reports it is a requirement that there be a summary of the marketing campaign undertaken; a list of all parties who expressed an interest in the loan or real estate or were contacted during the marketing campaign; a recommendation to accept the terms of the purchaser's offer as the best price reasonably obtainable, and confirmation that the agent has reviewed the purchaser's confirmation relating to connected party sales; a statement disclosing any commercial relationship between the agent, the debtor, the purchaser or the purchaser's ultimate beneficial owners in the past five years; and how any actual or perceived conflict of interest was managed during the sales process. Deputy Donnelly will understand why that applies. It applies to all interested parties, so that they are given equal opportunity to bid for and to purchase loans or properties sold by NAMA or by NAMA debtors and receivers. I, no more than any other citizen in the country, am bound by legislation in terms of making contact with NAMA. I accept Deputy Donnelly's point. As to whether I am happy or confident that all the systems are in order, I am not in touch with NAMA because of the provisions that exist, but the Minister for Finance is in touch with NAMA in respect of official matters and, following the conclusion of the two Garda investigations - if the Garda follows through on the second one - it is clearly an issue of which the Minister would be cognisant, taking into account the constraints upon him as a citizen or public representative in terms of the law.