Dáil Éireann debate -
Tuesday, 16 May 1950

Vol. 121 No. 1

Local Loans Fund (Amendment) Bill, 1950 — Second and Subsequent Stages.

Minister for Finance (Mr. McGilligan)

I move that the Bill be now read a Second Time. This is merely a matter of increasing the existing statutory limit on the issues that have been already made. As fixed by the Local Loans Fund (Amendment) Act, 1949, the upper limit is £25,000,000 and this Bill extends it by £10,000,000 to £35,000,000. Issues from the fund up to the 31st March this year amounted to approximately £23? millions. About £18,500,000 of that was for housing loans; £3,500,000 was for public health loans; £626,000 represents issues for vocational education loans and then there are other loans all very temporary and exceptional to the Dublin Corporation.

The loans sanctioned are different from loans issued and over the period they came to about £33,500,000. The sanctions are given in respect of loans payable in instalments. The statutory limit of £25,000,000 applies to issues and as we are near the point of saturation as far as issues are concerned the additional margin of £10,000,000 is required.

Mr. Davin

Could the Minister give an estimate of the interest charges falling due to local authorities, under the proposals of the Bill, in a particular period?

Mr. McGilligan

I do not know. I will have to get that for the Deputy afterwards.

Mr. Davin

At the moment what is the rate of interest to be charged?

Mr. McGilligan

That I could not say exactly at the moment. It has been the subject matter of consideration between myself and the Department of Local Government, and it has to bear a relation to the rate at which we get money. The important matter is, of course, that while the amount in relation to advances for houses has been fixed at a new point, the 2½ per cent. rate has been effectively kept, by the provision of extra subsidy making up the difference. As far as I am concerned, it is as if it were working at the old rate, even though I am not getting money in at that rate.

Mr. M. O'Sullivan

Is there any prohibition on the allocations from this particular fund to local authorities? I wish to repeat the point I made on previous occasions that in the case of Dublin and Cork there seems to be, if not an actual prohibition, certainly a lack of facilities in regard to local loans for housing purposes.

Mr. McGilligan

They have not got them so far. They did not usually get them. There have been exceptional advances — very exceptional ones.

Mr. M. O'Sullivan

In relation to the point I made on previous occasions, since we are apparently prohibited from going to the Local Loans Fund, may we at least have the same facilities in regard to recoupment as other authorities have? Under existing circumstances, Dublin and Cork are placed at a disability, which is likely to continue, because of the rate of interest. Other local authorities are recouped, but these two are not. Is there any reason for that discrimination?

Mr. Davin

The rate of interest at which money is being made available through the Local Loans Fund in the past and through the proposals now contained in this Bill may be regarded by some people as reasonable and fair in certain circumstances, but I am certain, from the knowledge I have of the rapid rise in the cost of building under local authorities on the contract system, that the present position is leading to chaos. That is why I am asking the Minister and the Minister for Local Government for certain figures regarding the cost of building houses in certain areas where I regard the cost as entirely prohibitive. In the long run, it falls back, as it is falling back now, on the people living in the slum dwellings, who are expecting, and entitled to expect, to be provided with houses at rents within their capacity to pay.

I contend that, when every possible facility is being given to the Department administratively, and when every encouragement is being given by the Government and by all sides of the House to the local authorities to go ahead and provide the houses urgently required, the position we are confronted with to-day in regard to the rents charged, no matter how much is coming from the Transition Development Fund or what the rate of interest is, obliges Deputies who have some responsibility to the local authority apart from the Government responsibility, to see that the cost of building, the cost of materials and the cost of money for the building of these houses is brought down to the lowest possible level, if houses are to be provided in the future at rents which could be regarded as reasonable and fair. In pre-war days, the average rent charged by local authorities for houses built for people living in condemned houses was, roughly, between one-eighth and one-ninth of the weekly income of the wage-earner who was lucky enough to get one of these houses. But to-day, even with the increased rates of wages to these people, the rents now charged in many towns in my constituency are very excessive. The rents now proposed to be charged — and I can quote the cases — represent one-third to a quarter of the wage-earner's weekly income. That is a serious position for the road worker living in town or village where the weekly rate does not exceed £3 5s. 0d. I do not want to go into details at the moment on this point, but would urge on the Minister for Finance, who has a particular responsibility to the Government for the financial side of the housing policy, to see that the present position is reviewed at the earliest possible date, so as to bring down the rates of interest charged under the terms of this Bill, and charged under previous legislation, to a much lower figure than the interest now charged through the Local Loans Fund to the local authorities for the erection of working-class houses.

Mr. Hickey

Is the Minister aware that a reduction of 1 per cent. on £1,000 houses is equal to 2/6 a week in the rent? Therefore, the statement made by Deputy Davin is a very serious one. I feel that both this Government and the last Government have never faced the problem sufficiently at all. The houses which we built in 1938 and 1937 for £480 are now costing up to £1,400, £1,480 and £1,500. A 1 per cent. reduction in the interest is equal to 2/6 on a £1,000 house. Deputies can imagine what 2/6 reduction in rent would be to a workman at present. I suggest that the time has arrived when the Government will have to tackle the question of giving money free of interest to build houses for workers, who are producing the wealth of the nation.

Mr. McGilligan

I am prepared to make an offer to the Deputy. I will give money free of interest for the building of these houses if all other subventions to house building are removed.

Mr. Davin

What are they?

Mr. McGilligan

All the grants.

Mr. Davin

You mean the grant from the Transition Development Fund?

Mr. McGilligan

I will make a bargain here and now. I will give money interest-free for the building of these local authority houses if Deputies will agree that all other subventions in respect of that can be withdrawn. I am giving that at the moment, and more.

Mr. Davin

It is going to subsidise high building costs and not to reduce rents.

Mr. McGilligan

I will talk to the Deputies and my own colleague in Local Government in regard to that, and the Deputy may address himself to those employed in house building, as I think they are getting a bit of their share, too.

Mr. Davin

And the builders' providers.

Mr. McGilligan

The interest rate as regards houses is 2½ per cent., effectively 2½ per cent. It never has been lower. The interest that is being charged is 3¼, but there is an extra subvention given that makes up for the difference. In regard to the 2½ per cent., no loans have been given at lower rates than that in living memory. We are proposing to continue that, for the time being.

With regard to Cork and Dublin, the situation right from the start of this has been that Cork and Dublin have not been paid out of this at all. That is nothing new but an old time matter. I think that is the proper way in which Cork and Dublin should be. I suppose the reason is that the two local authorities of that type — Dublin, certainly, and I do not think Cork would demean themselves by putting themselves much behind them — would have been able to borrow at least as cheaply as the Government. Each municipality has had one unhappy experience, but that was more on account of circumstances, in that they might have made their appeal at the wrong time. Generally speaking, these two authorities have been able freely to borrow moneys as they required them, on the same terms as the State does. Under those circumstances, it is no handicap on those authorities that they should not be fed out of this Fund.

The same situation holds good in countries near us, with the same sort of institutions as ourselves, and under this particular type of fund. That is the situation in England in regard to the larger municipalities. They borrow on their own and are well able to do it. I do not think there is any impediment preventing any corporation from borrowing out of the fund. In fact, last year, when the Dublin Corporation did find some difficulty, we came to their aid in another way and with as much benefit to the corporation as if they were being fed from this fund itself. As far as Deputy O'Sullivan is concerned, there is no legal prohibition, as far as the law is concerned, on money being advanced to Dublin Corporation, or Cork, in just the same way as to anyone else, but there is an effective prohibition in the sense that we do not allow it to happen. That is a situation that I do not want to maintain indefinitely.

Mr. Hickey

We never got money at a lesser rate than 4 per cent. in Cork.

Mr. McGilligan

On the loan?

Mr. Hickey

Yes.

Mr. McGilligan

I am afraid that is their lookout.

Mr. Lemass

It is very easy to do it. If the Deputy will read some of the Minister's pre-election speeches he will find the method.

Mr. McGilligan

I cannot lend at a lower rate than I am paying for money. As a matter of fact, with regard to the Local Loans Fund, it is three-quarters of a point less than what it cost. That differential may be increased in the near future and I do not, therefore, want to be tied to the present situation indefinitely.

Mr. Davin

I hope you will not.

Mr. M. O'Sullivan

May I put it to the Minister that we should be realists in a matter of this kind? It is all very well to point to our personal pride in Dublin and Cork so far as borrowing is concerned, but the actual position is that we can never get down to a figure which is effective for all authorities. Because of lack of this particular subvention it does appear to me that housing will continue to be on a higher basis in both Dublin and Cork since we are not allowed the same facilities. I suggest that the argument is all in favour of Dublin and Cork paying for it in the same way.

Mr. C. Lehane

Will the Minister bear in mind that it is in Dublin and Cork the incidence is greatest?

Mr. Lemass

He knows how to raise money at 1 per cent.

Mr. Davin

A 15-year loan period is provided for. Would the Minister say if, under the proposals contained in the present Bill, out of the final amount repaid 60 per cent. of the total represents interest on money?

Mr. McGilligan

Repaid by whom?

Mr. Davin

By the local authorities at the end of the loan period.

Mr. McGilligan

It could not be so. It varied according to the houses. Take a house at an average price of £1,400. The total assistance given in respect of the building of such a house is £765, excluding Dublin and Cork. In Dublin and Cork the assistance given in respect of such a house would be £667. The figures vary in relation to the cost of the house. In the county boroughs, except Dublin and Cork, the total assistance given for a £1,000 house is £712. In Dublin and Cork it is £667. I do not know how anybody can expect anything more. As I said when speaking on the Budget, the whole system of financing local authority housing is under consideration at the moment.

Mr. Davin

It is a good job.

Mr. McGilligan

Would the Deputy withhold his comment until he sees what the new system is? He may not be so pleased. In any event, the position is very confused because there are grants that come in three different ways so far as certain houses are concerned. There is the Transition Development Fund grant. In respect of certain houses there is this extra money that goes in reduction of the difference between 2½ per cent. and 3¼ per cent. But that does not finish the matter. After that there is a subvention. There is a heavy subvention via the rates. I have a suspicion that if the rentals were examined, as Deputy Davin suggests, it might well be found that there are certain people who have been asked to pay too much in relation to their incomes, while others are not being asked to pay enough. That is why I think the differential system ought to be extended.

Mr. Davin

In the case of a £1,400 house with a 15-year loan period, what proportion of the total repayment at the end of that period represents interest?

Mr. McGilligan

I cannot tell you that now.

Mr. Davin

Would the Minister look into the matter?

Mr. Hickey

Arising out of the statement that some people might be asked to pay too much, is it fair to ask any tenant to pay more than the economic rent of the house?

Mr. McGilligan

Nobody is doing that at the moment.

Mr. Hickey

I submit there are tenants in Cork paying more than the economic rent under the differential system.

Mr. McGilligan

The Deputy does not mean more than they ought to be asked to pay. Is it economic from their angle or from the point of view of a rent sufficient to meet the charges on the house?

Mr. Hickey

I call that the economic rent.

Mr. McGilligan

Then I do not know them.

Mr. Hickey

I suggest that men were put into houses and charged an economic rent. The differential system was then introduced and the rent was calculated on the basis of income and was increased beyond the economic rent. Another man might be brought down below the economic rent to, say, 3/6 when he is either sick or unemployed. I submit that all these charges are met from the one source irrespective of whether it is subvention or interest. We want houses to be built at 1 per cent. to cover administration charges. The sooner we face that problem the sooner we will have reasonable rents attached to the houses of the working-class people.

Question put and agreed to.

Agreed to take remaining stages to-day.

Bill put through Committee, reported without amendment, received for final consideration and passed.

Acting-Chairman (Mr. M. O'Reilly)

This is a Money Bill within the meaning of Article 22 of the Constitution. The Seanad will be notified accordingly.