Last week, I put down a series of parliamentary questions seeking the rationale for some of the Government?s biggest decisions. What I got back has confirmed what I had hoped not to be true. The Government is making critical decisions without solid analysis.
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D?IL QUESTION
NO ?105 and 106
To ask the Minister for Finance the estimated impact of the pension levy on pension funds here including, but not limited to, future average worker contributions.
- Stephen Donnelly.
- For WRITTEN answer on Tuesday, 28th June, 2011
- Ref No: 17311/11
To ask the Minister for Finance his views that the proposed pension levy will lead to lower investments in pensions thus further exacerbating the pensions time-bomb; and if he will make a statement on the matter.
- Stephen Donnelly.
- For WRITTEN answer on Tuesday, 28th June, 2011.
- Ref No: 17312/11
REPLY
Minister for Finance ( Mr Noonan) : I propose to take questions 105 and 106 together.
I cannot say what impact the pension fund levy will have on individual funds or schemes, as this depends on whether and to what extent pension fund trustees and Life Offices decide to pass on the levy to individual members, given the particular circumstances of the pension funds or pension plans that they are responsible for. In that regard, I take the view that there is scope for the pensions industry to absorb the impact of the levy from fee income and charges and I have written to them in that regard.
There are a number of factors influencing the decisions of individuals in relation to investments in pensions. Affordability would be among such considerations for some and the tax treatment of pension saving would be another. As regards the pension fund levy, I have consistently made the point that the 0.6% stamp duty on pension fund assets is a temporary measure to pay for the Jobs Initiative and will only be in place for the period of the Initiative.
Arguably, the tax relief on pension contributions is a more relevant consideration in terms of long-term saving for supplementary pension provision. I am sure the Deputy is aware, as I am, that the pension fund levy comes at a time when the gradual reduction from marginal to standard rate tax relief on pension contributions forms part of the fiscal consolidation measures in the agreement with the EU Commission, IMF and the ECB over the period 2011 to 2014. When introducing the Jobs Initiative on 10 May last, I gave a commitment to examine this issue.
The Government has initiated a Comprehensive Review of Expenditure in order to provide it with a set of decision options to meet the overall fiscal consolidation objectives and re-align spending with the Programme for Government priorities.
The Review is due to be completed by end September 2011. ?The Government will then examine the findings and, in consultation with the EU, IMF and ECB, will introduce fiscally neutral changes to the detail of the EU /IMF Programme of Financial Support for Ireland while maintaining the overall commitment to fiscal consolidation. ?I have undertaken to examine the scope for any change to the proposed standard rating of tax relief on pension contributions in that context.
D?IL QUESTION
NO ?107
To ask the Minister for Finance the forecast number of jobs to be created in the next one, two and five years resulting from the jobs initiative, broken down by all categories available part-time, full-time, seasonal, by sector and by location..
- Stephen Donnelly.
- For WRITTEN answer on Tuesday, 28th June, 2011.
- Ref No: 17313/11
REPLY
Minister for Finance ( Mr Noonan) : As I said at the time, the measures announced in the Jobs Initiative represent the first steps by this government to increase competitiveness in important sectors in the economy and to improve the functioning of our labour market. As the Deputy will appreciate, given the high level of uncertainty that continues to surround the outlook, it is very difficult to quantify the exact number of jobs that the Initiative will create.
From a sectoral perspective, the measures will help to support employment throughout the economy. In the labour intensive tourism sector, for example, the introduction of a temporary second reduced rate of VAT and reduction of the air travel tax to zero will have a positive impact on both costs and sentiment. In the construction sector there will be an increased focus on capital works which tend to be more labour intensive. More generally, the decision to halve the lower rate of PRSI until the end of 2013 on jobs that pay up to ?356 per week will help to create and maintain jobs in the lower paid sectors of the economy.
The Table below outlines my Department?s latest employment forecasts which were set out in the Irish Stability Programme Update published at end-April. Given that recovery in the labour market tends to lag that in the overall economy, a further decline in net employment is anticipated this year. This is borne out in recently published data, which show that net employment creation continued to decline in the first quarter of the year, but it did so at its slowest pace for three years.
The economy should start to create net jobs once again in 2012, and the pace of employment growth should strengthen in subsequent years as the economic recovery strengthens and broadens out. Over the period 2012 to 2015 as a whole around 100,000 net jobs are expected to be created.
Table ? Employment forecasts, 2011 to 2015
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |
| Employment | 1,848 | 1,819 | 1,828 | 1,850 | 1,882 | 1,921 |
| Level change | -81 | -29 | +9 | +22 | +32 | +39 |
| Percentage change | -4.2 | -1.6 | +0.5 | +1.2 | +1.8 | +2.0 |
D?IL QUESTION
NO 108 and 109
To ask the Minister for Finance the level and type of insurance, for example, credit default swaps for 100% of the bond value which the current holders of senior unguaranteed bonds in the covered Irish banks have in relation to these bonds..
- Stephen Donnelly.
- For WRITTEN answer on Tuesday, 28th June, 2011.
- Ref No: 17314/11
To ask the Minister for Finance the persons who own the circa ?35bn in unguaranteed senior debt in the six covered Irish financial institutions which are still outstanding.
- Stephen Donnelly.
- For WRITTEN answer on Tuesday, 28th June, 2011.
- Ref No: 17315/11
REPLY
Minister for Finance ( Mr Noonan) : I propose taking Question 108 and Question 109 together.
As I informed this House last week, when a bank issues a bond, whether by private placement or public issue, it would be usual practice for a securities depository company, such as Clearstream and Euroclear, to purchase the bond on behalf of their customers. The bond issuer will likely have little knowledge of the original owners of the bonds; also these initial investors may over time sell the bonds to other investors.
Securities depository companies usually manage, safekeep and administer the securities that it holds on behalf of the purchasers of the bonds and the identity of the purchasers of the bonds is not disclosed in the public domain or to the issuer.
As the identity of the purchasers of the bonds are not in the public domain, I cannot advise the Deputy the level and type of insurance these bondholders have.
D?IL QUESTION
NO 110
To ask the Minister for Finance the conditions attached to each of the multi-billion euro bilateral loan from the UK, Sweden and Denmark, including the interest rates..
- Stephen Donnelly.
- For WRITTEN answer on Tuesday, 28th June, 2011.
- Ref No: 17316/11
REPLY
Minister for Finance ( Mr Noonan) : The bilateral loan element of the EU ?IMF programme of financial support will be provided by three EU Member States ? the United Kingdom providing approximately ?3.8 billion, Sweden ?0.6 billion and Denmark ?0.4 billion. All bilateral loans will be provided subject to the conditions of the Memorandum of Understanding agreed with the EU/ECB/IMF.
At this point, no funds have yet been drawn down under the bilateral loan facilities with UK, Sweden and Denmark.
The UK facility was signed in December 2010. The interest rate on the amounts drawn down will be based on the Sterling Pound mid-market semi-annual swap rate at the time of drawdown plus a margin of 2.29%. At the time that the UK loan facility agreement was signed the overall interest cost was calculated at about 5.9%, similar to the blended rate calculated by the EU Commission at that time. As with all of the loans, the actual rate will depend on the market rates prevailing at the time of disbursement.
In relation to the Danish and Swedish loan facilities, these have not yet been signed but are near completion. The interest rate on each will be based on the 3-month Euribor interest rate, a market reference rate of good standing, plus a margin yet to be agreed.
D?IL QUESTION
NO 111
To ask the Minister for Finance the dates of maturity for the various tranches of bonds, grouped by maturity date, outstanding in each of the six covered Irish financial institutions; the total euro amounts due to be repaid at each maturity date by each covered institution; the interest rate currently being paid on each of these tranches of bonds by each bank; the owners of each of these tranches, for example???200 million of senior unguaranteed bonds, issued by Anglo Irish Bank, maturing on 1 May 2012, with an interest rate of 5%?.
- Stephen Donnelly.
- For WRITTEN answer on Tuesday, 28th June, 2011.
- Ref No: 17317/11
REPLY
Minister for Finance ( Mr Noonan) : The Central Bank of Ireland has advised me that the dates of maturity and the total aggregate amounts for secured, unsecured and subordinated debt due to be repaid by the covered institutions is as follows:
| Year of Maturity | Amounts ?m |
| 2011 | 7,029 |
| 2012 | 13,062 |
| 2013 | 15,706 |
| 2014 | 3,721 |
| 2015 | 10,742 |
| 2016 | 438 |
| 2017 | 2,291 |
| 2018 | 458 |
| 2019 | 1,211 |
| 2020 | 1,197 |
| 2021 + | 5,769 |
| Total | 61,625 |
My Department will contact the Deputy very shortly in response to his request for this information. ? I understand that the six covered institutions have in excess of 200 bonds outstanding which would be encompassed by this request. ?These are denominated in a number of different currencies, in addition to the euro, have various maturity dates extending in some cases beyond the next ten years and have both fixed and floating interest rates. ?Owing to the format in which information on these bonds is available to my Department, it will not be possible to present the information in the precise terms requested by the Deputy. ?However, I can assure the Deputy that the Department will seek to provide as comprehensive a response as possible.
D?IL QUESTION
NO 112
To ask the Minister for Finance his views on whether it is appropriate for his officials to withhold information sought through committees and Parliamentary Questions which are not commercially sensitive on the basis that they do not pertain to his existing policy..
- Stephen Donnelly.
- For WRITTEN answer on Tuesday, 28th June, 2011.
- Ref No: 17318/11
REPLY
Minister for Finance ( Mr Noonan) : I understand that the Deputy is referring to Parliamentary Question 13817 answered on 1 June 2011.
At the outset let me say that the reply given to the Deputy?s question on 1 June was given by me and not my Officials.
As far as my Officials attendance at Parliamentary Committees is concerned, let me assure the Deputy that it is not official policy to withhold information.
I will repeat what I said in my reply to the Deputy on 1 June last: there will be no increase in the corporate tax rate and in the circumstances it is not plausible to speculate on any possible increase under any circumstances, CCCTB or otherwise.
D?IL QUESTION
NO 113
To ask the Minister for Finance his views on whether there needs to be more transparency in the public and private partnership negotiations, in particular, publication of the forecast profit that the private partner will earn from each venture or project, for example measured by total net or gross profit, internal rate of return, net present value or return on invested capital.
- Stephen Donnelly.
- For WRITTEN answer on Tuesday, 28th June, 2011.
- Ref No: 17319/11
REPLY
Minister for Finance ( Mr Noonan) : The overriding concern for state procuring authorities in all contract negotiations is to ensure value for money and these procurements are conducted strictly under EU procurement directives and regulations. The state does not enter into PPPs unless it can be clearly demonstrated that they provide value for money and there are a number of specific tests throughout the procurement and tender negotiation processes to ensure that best value is derived for the state. Details of the timing and content of these value for money tests are set out in the various PPP guidance issued by the Department of Finance which are available on www.ppp.gov.ie.
A key factor for the state is not to lose advantage in its attempt to try to negotiate the best deal for the State ? both in terms of costs and innovation. The current PPP disclosure framework reflects international norms.
The Deputy?s proposal is well intentioned but in practical terms it raises a number of issues, for example, with respect to commercial sensitivities and may serve to lessen international interest in domestic PPP projects when in reality we would like to see as much interest as possible.
I would emphasise that in PPPs, any forecast profit is fully at risk depending on the performance of the private partner over the full life of the contract, which is normally 25 years after construction. This performance conditionality ? which is particular to PPPs ? puts the payments to private partner at risk, if the contracted standards are not met. In PPPs, there is significant risk transfer from the State to the private sector.
Moreover, if certain performance standards are not met, the contract can be terminated by the State. The forecast profit is just that ? a forecast ? and does not take account of which risks, borne by the private sector, will materialise. It is also important to recognise that the value can only be assessed over the full contract period, which can be up to 30 years.
D?IL QUESTION
NO 114
To ask the Minister for Finance when he will sign the commencement order for section 3 of the Finance Act 2011 to commence the relief scheme for retrofitting insulation..
- Stephen Donnelly.
- For WRITTEN answer on Tuesday, 28th June, 2011.
- Ref No: 17320/11
REPLY
Minister for Finance ( Mr Noonan) : I assume that the Deputy is referring to Section 13 of Finance Act 2011, which provided for income tax relief at the standard rate for expenditure incurred by individuals on a range of works carried out to improve the energy efficiency of residential premises situated in the State.
The underpinning legislation for the scheme was subject to Commencement Order. However, that legislation, on review, was found to have flaws and would have required amendment before it could be implemented.
As part of the announcement in the recent Jobs Initiative, the Government undertook to provide further funding for the grants available under the Better Energy Homes scheme operated by the Sustainable Energy Authority of Ireland (SEAI). Because of these circumstances, I decided to review the requirement for a co-existing tax incentive for similar works and following this review, I have decided not to proceed with the introduction of the tax relief scheme.
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