Dáil Speech by Fianna Fáil Finance Spokesperson Michael McGrath

Published on: 28 April 2015

This spring statement is a classic example of a Government over-promising and under-delivering. Built up as some kind of mini-budget, it has ended up as just another PR exercise from a Government that is quickly running out of road. At the end of all this, people who have been hearing about the spring statement for months will be left scratching their heads wondering what it was all about. I cannot find a single element in today’s statement that will bring any short-term benefits to families.

As an alternative the Ministers could have said in today’s spring statement that the bank veto would end immediately; that they would not tolerate the excessively high standard variable rates banks are charging; that any family making a reasonable and honest effort to pay their mortgage would not be kicked out of their home by the bank; that the almost 1,000 children living in emergency accommodation in our capital city today would immediately be given reasonable and permanent accommodation; and that in light of the improving economic situation the Government would introduce emergency legislation into the House tonight to restore the €325 cut to respite care grant so that come June when the payments for 2015 are made the full payment to carers would be reinstated.

Instead we got none of that. We got an exercise in self-congratulation, a self-serving statement from both Ministers clapping each other on the back.

We accept and very much welcome that a recovery is under way. It raises fundamental questions for us as a people. What kind of recovery do we want? Do we want a fair and inclusive recovery across the economy? Do we want to bridge the divide between urban and rural? Do we want to bridge the growing divide between those who have and those who certainly have not and have lost most under the Government’s tenure?

I welcome that the Government has made a fundamental shift in its budgetary policy today. It has moved from the situation, when it was introducing austerity, where it had €2 of expenditure cuts for €1 of tax increases. Today it has shifted to what we have been advocating for a prolonged period of time, which is a 50:50 scenario. However, it has done enormous damage to the fabric of society in the manner in which it has introduced fiscal consolidation in the last four budgets.

I know the Minister does not want to hear it and he is shaking his head in denial. He is in complete denial of what is going on out there. He is in denial about the thousands of young children with special needs who are awaiting urgent intervention services. He is in denial about the many elderly people throughout the country who are being denied access to nursing home beds because of cuts to funding.

I referred earlier to the 1,000 children who will be sleeping in emergency accommodation in Dublin tonight.

A full Croke Park on all-Ireland final day accommodates more than 80,000 people. The Minister, Deputy Noonan, can imagine County Limerick in the final if he so wishes.

Multiply that figure by five and it approximates to the more than 400,000 people who are waiting today for hospital outpatient appointments. We must evaluate the statements made thus far today through the prism of these individuals’ experiences of waiting for urgent appointments or who are living with debilitating conditions. I can provide examples from my own area which will be repeated throughout the country. In Cork alone, the number of people waiting to see an orthopaedic hospital consultant has increased by one third in 18 months. The numbers waiting to see an ophthalmologist have increased by 55% in the same period. The number of women waiting to see a gynaecologist has increased by 37%. Where is the recovery for those people? The Government is not giving them any light at the end of the tunnel in terms of the future of this country.

This is why last October, in a departure from the usual politics of opposition, we advocated investing in these critical service shortages given that we had the headway to do so for the first time in the eight years. The Government did not take our advice, however. With each passing month this Government remains in power, the divisions in society grow deeper. Those divisions have been exacerbated by the regressive budgets it has implemented in the past four years, which have proportionately taken much more from those on low and middle incomes than from those on the highest incomes. The Government’s ideology was exposed last October, when for the first time in almost a decade there was scope to give something back. The Government gave it back to those on the highest incomes. The main changes to the income tax changes in the budget were to the higher rate of tax, and benefitted only one out of six income earners.

The Minister, Deputy Howlin, simply does not want to hear the facts. The Government looks set to repeat those mistakes in the next budget. A fairer way of giving back to people through the income tax code would be by progressively dismantling the universal social charge.

The comments by the Minister, Deputy Noonan, about boom and bust cycles ring hollow because his party and the Labour Party subscribed to every ingredient of what he described as boom and bust politics.

I note the following sentence from the statement by the Minister, Deputy Howlin, “It became fashionable for a while to decry this country and its potential.” I could play the Minister a few tracks from a CD dating from five or six years ago which would include familiar voices from his own benches. We need a fair and broad based recovery. Towns and villages across this country are dying but the Government does not seem to care one iota about them. It is creating deeper and deeper divisions.

No sooner was the ink dry on last October’s budget when speculation started about the new departure of a spring statement in which a range of new initiatives and ideas would be unveiled by the Government. I would use all of my remaining time if I outlined the list of carefully orchestrated leaks to the media about the range of benefits that would be unveiled by the Government in the spring statement. We have seen nothing of the sort in this statement. The documents released today contain nothing new.

The stability programme update is released quietly every year and sent off to the European Commission after a token meeting of the Joint Committee on Finance and the Public Service. As it happens, in the final year of this Government’s term it decided to make it a set piece event in the Dáil in order to put the economy centre stage on the political agenda and to create a distraction from the mess it made on so many other issues.

People will discover today that there is no substance to that spin. It is more about raw politics than economic management.

The employment situation has improved significantly. The number of people out of work is falling and the number of people with jobs is increasing. We warmly welcome that but there is no room for complacency when 350,000 people are still on the live register, as well as 86,000 on activation programmes. While I do not seek to demean activation programmes and their role as a stepping stone to real employment, these numbers reveal the scale of the crisis of unemployment. Approximately 160,000 people are long-term unemployed. We need to take a number of steps to deal with this issue. Among the leaks made in recent weeks was a suggestion on supporting self-employed people by extending a tax credit to them that is equal to the PAYE credit. There was no reference to that suggestion in the Ministers’ statements.

The self-employed expected some indication from the Government that there would be a change in the way they are treated. Successive Governments discriminated against them in the taxation system and in their failure to provide a safety net through the Department of Social Protection. The Government had an opportunity to deal with that issue today. As the employment situation recovers, we also want to see decent terms and conditions for employees. This Government promised a lot in that regard but it delivered very little. It is running out of time to deliver on major reforms of the labour market, and they need to be introduced without further delay.

In regard to the role of local enterprise offices, I recently had occasion to help a local SME which was not involved in exports. It was directed to the local enterprise office to get financial support. We get lip-service from the Government on supporting SMEs as the heart beat of the economy providing 800,000 jobs. The aforementioned company inquired into what practical assistance it could get, such as a grant to purchase equipment or employ staff, but it could get nothing because financial support is provided only to businesses engaged in manufacturing or internationally traded services. If this Government is genuine about supporting the small business community, it would deal with this type of issue very quickly.

The Government has promised tax reform but it has not addressed the major increases that people will face in the future. Mortgage interest relief is due to come to an end in 2017. Mortgage interest relief amounted to more than €400 million for nearly 500,000 families in 2012. It was worth €260 million last year. The ending of that relief in 2017 will be an effective tax increase which will offset the figures outlined today. The Government is determined to pursue universal health insurance. The White Paper it introduced on this subject last year contained a strong hint that tax relief on private health insurance, which has been already dramatically reduced, could be ended. In 2014, that tax relief was worth €350 million. The White Paper sneakily revealed a proposal to subsume the relief into the overall system for financial support for universal health insurance on a revenue neutral basis. That means people who currently pay for health insurance will be paying a hell of a lot more because the tax relief they currently enjoy will be gone. The Minister, Deputy Noonan, failed to address the issue of the local property tax. He commissioned a review from Don Thornhill but he could have nailed the matter today. Dramatic increases in local property tax rates following next year’s revaluation could be avoided if the revaluation does not take place. He could have thereby put people’s minds at ease. He outlined a package of €1.5 billion in taxes and spending in 2016 but he did not mention the other factors which directly affect household budgets.

The Minister’s comments on banks and interest rates are weak and watery. There is nothing in what he said. I expected, and God knows there were plenty of leaks to the media in recent days, that there would be a significant statement from the Minister for Finance today. Previously, he came into the Dáil thumping his chest and saying the banks would have to deal with the issue of the standard variable mortgage rates, but we got nothing of the kind. Tomorrow, the CEO of Bank of Ireland will come before the Joint Committee on Finance, Public Expenditure and Reform. He will tell it that the cost of funds for Bank of Ireland currently is 1.03%, effectively 1%, yet it can continue to get away with charging 4.5% on standard variable mortgages across the country.

Some 300,000 people are paying way over the odds on their standard variable mortgages, yet the Government has arrived very late to this debate. It was dragged kicking and screaming into the debate having shown no interest in the issue. The Minister said it was a commercial matter for the banks and he would not get involved. We heard that many times. However, the penny has finally dropped that people will not put up with the situation. The issue is gaining a head of steam. An interest rate of 4.5% being charged at a time when the cost of funds for the banks is around 1% is unacceptable. As Minister for Finance, the Minister has a duty to speak up for ordinary people on this, as does the Governor of the Central Bank. We need to see progress on this issue because the current situation is not good enough. People will not be bought off with a 0.25% cut as the difference between the rate charged in Ireland by the banks and the rate charged in the eurozone is just over 2% at 2.09%. The Minister is aware of this yet he missed an opportunity today to lay down a firm marker in respect of saying he expects progress on this issue. His words were far too weak.

Where is the promised package of measures to deal with the problem of mortgage arrears? For weeks we have been hearing in the media about measures to dilute the bank veto and new measures to reform mortgage to rent schemes, but the Government cannot seem to get it together because its members cannot reach agreement among themselves on the issue of reducing the discharge period from bankruptcy. All this time, families who are struggling to hold onto their homes are paying the price. The official figures from the Central Bank show that the banks have proposed to take 30,000 family homes from people across the country and they say they have concluded solutions in respect of 16,000 homes. I hope this will not come to pass. I hope negotiations will take place and that these will result in sustainable restructurings being put in place in respect of these mortgages.

Currently, the banks hold all the aces. The Government has given them more and more power. It has diluted the rights of mortgage holders in the code of conduct on mortgage arrears and has allowed thousands of other mortgage holders have their mortgage sold from under their feet. They have been left powerless and are at the mercy of foreign owned vulture funds who can treat them as they like. Those mortgage holders have nowhere to go to vindicate their rights. They cannot go to the Department of Finance, to the Central Bank or to the Ombudsman and have been left hanging in limbo. The Minister has introduced legislation and we are awaiting Committee Stage of that legislation. I do not like how the Minister proposes to amend that legislation, but we will have that debate on Committee Stage. I urge the Minister to accelerate the legislation as it is vital for people who find themselves in this situation.

The bottom line is the bank veto needs to be removed. It is all very fine for the Minister to say the banks only use it in 25% of cases, but the people know it is there and know they will not get any restructuring of their mortgage unless the bank agrees. This is not good enough. The Minister seems to be coming around to the view that he must do something on the bank veto. We told him this was necessary over three years ago. We told him the way the insolvency service was being set up would result in the banks holding all the aces and homes being unnecessarily repossessed. The frustrating fact is that the solutions exist, for example a proper split mortgage with no interest accruing on the warehoused portion of the mortgage.

The banks are open to writing down debt. They should be, because the Government, the previous Government and the people have recapitalised them. They have more than adequate buffers to deal with the issue of mortgage arrears, yet they are singularly failing to do so. The Minister needs to bring forward the long-promised package of measures in respect of mortgage arrears and to deal with the issue of bankruptcy. We support the reduction in the discharge period to one year. If nothing else, that would put manners on the banks and force them to come to the table to negotiate a settlement. The bottom line is that the family homes of well over 100,000 ordinary families around the country are in mortgage arrears. These people should not have to become bankrupt to deal with their mortgage indebtedness. They deserve to get a proper restructuring of their mortgage and this should be done within the confines of the Central Bank code of conduct, the targets programme the Minister unveiled and through the insolvency service if needs be.

Fianna Fáil has outlined a number of other key changes we believe would make a real difference to the economy. We talk a lot here about an enterprise economy and about supporting entrepreneurs, but Ireland is being left behind. Let us be honest about that. When I look at the international trends in corporation tax and how entrepreneurs are treated, Ireland is now in the halfpenny place. The United Kingdom, for example, has relief for entrepreneurs of 10% in respect of capital gains tax and has also introduced a 10% patent box on intellectual property. Much of the investment Ireland is competing for now is highly mobile. We are operating within a hugely competitive marketplace and need to be conscious of that.

The Minister has started what I would regard as a dangerous trend, of diluting our corporation tax offering. Companies making decisions need absolute certainty about the corporation tax environment in which they will compete. It is in that context that Fianna Fáil opposed the measures the Minister brought forward on that issue. We have brought forward our own proposals on a special entrepreneur capital gains tax relief which we believe would make a significant difference. We have unveiled other proposals on DIRT and a range of other issues and we will have an opportunity to tease these out.

The Minister says the biggest risk facing the economy is domestic and political. I am not sure who he is pointing the finger at when he is talking about high taxation and high spending. That, as he knows well, is not the Fianna Fáil policy.

The Minister should have been fairer in his analysis in regard to the passing comment he made to external factors. He never had the good grace to acknowledge the favourable external factors the Government and the country are benefitting from, the historic low interest rates which he knows are extraordinary – that a country like Germany is being paid money to borrow and that Ireland can borrow money at less than 1% over a ten-year term. The Minister knows this will not continue and knows this is being driven by ECB policy. It is being driven by the massive quantitative easing programme by the ECB, the Bank of England and the Fed. The Minister knows that, but it warranted only a passing mention in terms of the risk this country is facing.

As an export-led economy, the Minister knows well that the current foreign exchange rate and weakness of the euro has transformed the export landscape within which companies are operating. However, he did not see fit to acknowledge that or even to mention it as a risk for the economy. Nor did he mention the strength of our trading relationships with the United Kingdom and the United States, which thankfully have insulated us against a pretty anaemic eurozone economy. The drop in oil prices did not do us any harm either. The Minister could at least have acknowledged all of these factors.

There was no mention today of the bank debt deal. I assume that is dead in the water. The Minister spoke about national debt and banks, but did not mention the bank debt. Will he come clean with people and acknowledge that the June 2012 game-changer or seismic shift will not happen or that Government policy has changed? He has been dropping little hints here and there in a cute way, but he should just come out and say it. The bank debt deal seems to be off the table and the Minister should acknowledge that.

What the people want is a fair recovery. We want the Minister to be honest in what it is saying to people. We want a progressive recovery that will benefit all parts of the country and all sections of society. Today was a self-serving exercise for the Government in congratulating itself. People will be deeply disappointed.

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