I move amendment No. 2:—
In sub-section (1), lines 33-35, to delete all words after the word "sale", line 33, to the end of line 35.
I have already made my case and I should like to hear the Minister on this amendment.
Committee on Finance. - Trade Loans (Guarantee) Bill, 1938—Committee.
(1) In this Act—
the expression "manufacturing undertaking" means an undertaking of which the object or principal object is the manufacture on production in Ireland of goods or articles for sale, or the erection and equipment in Ireland of dwelling-houses, including the acquisition and development of land for that purpose;
There is really no case to answer. When the Deputy discusses the needs of the situation, I am largely disposed to agree with him. If this Bill were a Bill the main purpose of which was to improve house-building in Dublin, I should say that there was a lot in his criticism. But this Bill has nothing to do with housing except in an incidental way. The question as to what is needed to improve the housing situation and to get more houses built is a different question altogether and will be dealt with separately when the Government's proposals in relation to that matter are brought before the House. The Trade Loans Acts were originally introduced to enable persons engaged in manufacturing enterprise to get financial accommodation by way of loan or to get such accommodation more easily or more cheaply by reason of the attachment of a Government guarantee to the loan. That was considered necessary in the circumstances of this country—it was also considered necessary at one period in Great Britain—because of temporary difficulties, the unwillingness of the people to invest their savings in new enterprises which had yet to be proved and the absence of a money market here in the sense that a money market exists in Great Britain. These Acts were operated for a number of years upon that basis. Anybody proposing to engage in manufacturing enterprise who wanted a loan for capital purposes and who found that there were immediate difficulties in getting that loan through ordinary commercial channels applied under the Trade Loans Acts for a trade loan guarantee. That application was referred to an advisory committee and the Minister for Industry and Commerce, in conjunction with the Minister for Finance, then decided whether or not the guarantee should be given. At one period, an application came to the Department for a loan for the development of a housing estate. The application appeared to be a good one. It seemed to offer considerable prospects of new employment and substantial development resulting from the provision of the accommodation. There seemed to be no reason why the State assistance which the Trade Loans (Guarantee) Act made possible to manufacturing enterprise of the ordinary kind should not be given in that particular case, but when we decided to do so the question was raised as to whether the definition of a manufacturing enterprise in the Act covered the building of houses. I remember I argued strongly that it did, and a number of others also argued strongly that it did, but because there was a doubt we felt it was better to have the doubt resolved, particularly as a large sum of money was involved. The definition was amended, and we are carrying the amended definition into this Bill. Another application of this kind may never be made, and certainly I would not encourage applications of that kind unless they arose out of some unusual or exceptional circumstances, and not at all unless they were in connection with development projects of a major kind. The type of application which might be made by an individual who wanted to build a single house, or a small contractor who wanted to build two or three houses, should not be encouraged. Such people would find that the procedure under this Bill was onerous, and the charges which would fall on them would probably be much heavier than they anticipated.
The Deputy is moving to alter the definition by taking out the words which we inserted by special Act some years ago. Perhaps the amendment will have no effect. Perhaps the point of view I argued originally—that the original definition covered the building of houses—is the correct one, and that those words are unnecessary, but on the assumption that they are necessary I see no reason why we should deprive ourselves of the power, even though we have made up our minds already that the use of that power must be restricted; that in the great majority of cases there should be no need for the Government to guarantee a loan for a building enterprise of this kind, and that consequently a Government guarantee should not be given. But I do not think we should deprive ourselves of the power to do so, nor do I think there is any advantage in depriving ourselves of that power. The existence of that power is not going to embarrass anyone, and need not in the least interfere with the ordinary conduct of house-building activity by persons who can finance it from their own resources. Therefore, I propose not to accept the amendment on the ground that there is no reason why we should not have the power, even though it must be recognised now that the circumstances in which that power would be used in relation to the building of houses would be very unusual indeed.
Of course, a Chinn Comhairle, I put down the amendment primarily to provide a basis for discussion on the general matters which we have been discussing, so that we would have the Department's position clarified and explained through the Minister. I think from what the Minister has said that, even if this Bill goes through in its present form with this new clause in it, it will hardly change the policy of administration. The policy of administration will probably remain the same, unless perhaps in a very exceptional case. I should like to point out to the Minister that the development of land for building is the first step, and the builder who is not able to take the first step is hardly there at all. To give money for the development of land is very dangerous to the man who is getting it, because if he gets it handily and gets more than he would get through the ordinary channels of finance he might be tempted to take too much, and thereby create a heavy load of interest which would be dead in the ground for a considerable time without giving him any return. I have heard that the difficulties which have overtaken the major scheme referred to by the Minister—I am sure he is aware of them— were due to that cause. To give money like that is not ultimately going to help employment, but perhaps to cause sudden unemployment. I will withdraw my amendment. I am satisfied that it has served its purpose, and I agree with the Minister that there is no harm in having the power there. There is no harm in clarifying the position. If an applicant comes in, he is in order in making the application, but may not be any nearer to getting it than if he were out of order? That is really the position?
Quite so.
I think the Minister suggested that his colleagues who are in charge of the housing end of it are doing something in this matter. Does he suggest more than the Housing Bill which has been circulated?
What I said was that the question of financing house purchase is being considered. What the outcome of the consideration may be I cannot say, but the matter is under active consideration at the moment.
Might I ask the indulgence of the Ceann Comhairle, and inquire whether the matter has got its final consideration, and whether the result is embodied in the Housing (Amendment) Bill which has been circulated to us?
I can say definitely that consideration has not been completed, and has produced no results as yet—certainly no results in the form of a Bill.
Finally, I should like to inform the Minister—he probably is aware of it; he seems to betray quite a knowledge of it—that if you want to look for employment in the building line you should not mind the builder who is not able to keep pace with building; let him get out, but help those who want to purchase, and then the building trade in Dublin city and county, at any rate, will look after itself.
What about those who cannot purchase?
Amendment, by leave, withdrawn.
Question proposed: "That Section 1 stand part of the Bill."
The Minister rather disparages the use of money for the purpose of getting a manufacturing concern going in the building of houses. I should like to get information from him as to whether he has got cold on that matter in respect of say, firms who are building houses for renting purposes? I submit to him that firms who are building houses for renting purposes in the City of Dublin, at any rate, are doing a very great service at the present time. As Deputy Hickey suggests, it is not everybody who can purchase a house. There is a very large number of people who want to get a chance of renting houses. At the present time, in spite of what Deputy Belton says, it is not so easy to get money for, as it were, putting into houses for which you can simply draw rents. I take it the Minister is satisfied that those moneys would be available for persons putting up houses for renting at the present time?
We have never had an application of that kind, but such an application might be more suitable than the other type of application which has been mentioned, namely money borrowed for the purposes of building houses for sale. In regard to the operation of the Trade Loans (Guarantee) Act, under which a loan is secured to be paid back in fixed instalments over a period of years, any operation which suits that method of finance can be considered. It is only operations which suit that method that can be considered. That would apply, I think, to a loan secured for the purpose of building houses to be rented. I do not know what difficulties would arise in connection with the security which the State would require for its guarantee, but there would be no objection in principle to a loan for that purpose on a scale which would justify the bringing into operation of the Act at all. The giving of a loan is, in itself, a fairly expensive process, and unless, therefore, the loan is for a fairly substantial amount, the charge which must be added to the interest payable makes it an uneconomic proposition. Therefore, only loans for a substantial amount could be obtained, or would be in the interest of the person applying. Persons may apply for a loan because of some immediate need, and may be prepared to take a chance on the charge involved, so you have to decide whether it is in their own interests, because the charge would be considerable. Take an application in regard to the development of a large estate, where a substantial amount of money is put into roads, drains and sewers, before house building can proceed. Where capital is sought for that type of development, then we can consider guaranteeing a loan under this Bill. The same may apply, although to a less extent, to loans granted for the building of houses for renting. There is no objection in principle, but there may be practical objections.
What interest is charged?
The interest is initiated by the borrower. We do not give the loan. We merely guarantee the loan, principal and interest, at 2½ per cent. The actual interest paid by the borrower may be more than 2½ per cent., but our guarantee only covers 2½ per cent. That meets the points raised by Deputy Belton. The loan may be actually made by a bank or other financial institution, and they will see that the loan is one worth making, because they stand to lose a proportion of the interest if the borrower fails.
What is the usual term?
It varies. In individual cases it is usually ten or 12 years.
Is that the maximum limit?
There is no maximum limit. We have given loans to harbour authorities up to 50 years. The limit varies in individual cases, but is generally about ten or 12 years.
Am I to understand that if a borrower put up a scheme to build 100 or 200 houses to rent, that proposition would be considered?
I see no objection in principle to considering it. I do not know that there would be any practical objection. We never had such an application, so that it has not been considered in detail. There is no objection in principle.
As you are advised, it would be within the terms of the Bill?
Yes, it would be considered.
There might be some sportsmen to take the plunge.
The Minister stated that harbour authorities got up to 50 years. I do not suggest that that could be done in the case of buildings, but 12 years seem unduly short.
There is no maximum. We could consider the circumstances of each case. We had only one loan for building in all those years, out of some hundreds of loans guaranteed. That is the only experience we have had there. I think that that loan, as a matter of fact, was repaid long before the building scheme was completed. That may have been due to the fact that the borrower got a more convenient method of financing the undertaking, or that he found the trade loans procedure not suitable. In any event, we got our guarantee discharged, and that finished the matter for us. That was done within a year after the guarantee was given. There is nothing in the Bill which necessarily limits the loan to ten or 12 years.
Is the loan for development or for buildings?
For the acquisition of land and the construction of buildings.
Theoretically, there could be a loan up to 50 years.
In practice we have done that for particular works such as harbours.
Sections 1 and 2 agreed to.
Question proposed: "That Section 3 stand part of the Bill."
Can the Minister say if anything has been done under this section, dealing with a reduction in retail prices?
I have never had an application under that section.
Sections 3, 4, 5, 6, 7 and 8 agreed to.
Question proposed: "That Section 9 stand part of the Bill."
This is the only section in respect of which we are making any change. The original Act provided that the amount required would be charged on the Central Fund, which meant that no information was given to the Dáil, except in the annual report. In consequence of the change in the Bill, any money required to make good a guarantee will have to be voted by the Dáil, which means that the Dáil will have an opportunity of discussing each individual case.
Section 9, remaining sections, and the Title agreed to.
Report Stage ordered for Wednesday, March 1.