This is the section under which the writing-off of certain loans will take place. I think the total amount involved is £5,038. The first advance was made in 1913 and another in 1920. Then there was one to Buncrana Harbour Commissioners which was made in 1929 and 1930. Another advance was also made in 1929. It is obvious that these amounts are quite irrecoverable and, for that reason, we think they should be written off.
Committee on Finance. - Local Loans Fund (Amendment) Bill, 1953 — Committee and Final Stages.
Section 1 put and agreed to.
SECTION 2.
Question proposed: "That Section 2 stand part of the Bill."
Mr. O'Higgins
What is the justification for the first advance?
The Buncrana one? That was in respect of harbour works and improvements which were carried out, I think, between the years 1929, 1930, 1933 and 1934. The harbour commissioners took up the attitude that the works had not been properly executed, and, therefore, refused to meet their liabilities under the loan. A settlement, however, was ultimately arrived at.
Question put and agreed to.
Sections 3 agreed to.
Schedule and Title agreed to.
Bill reported without amendment, and received for final consideration.
Question proposed: "That the Bill do now pass."
On the Final Stage of this Bill, I do not want to be controversial, but I gathered from the Minister's tone that he could give no guarantee to local authorities that the rate of interest on these loans will remain as it is for any considerable length of time, but rather that the interest rates charged will be governed by the price at which money is available to the Government. I think it would be necessary at this stage for the Minister to give an assurance to local authorities that the cost of house-building and of public works generally is not going to be increased within thenext few years. I may have ministerpreted the Minister's remarks when he was replying to Deputy O'Higgins. I should like to know from him whether his remarks mean that he can give no guarantee that the rates of interest will not be increased in the near future.
I could not, with any sense of responsibility, give that sort of guarantee. It is not even reasonable to ask for it, any more than it would be reasonable to ask the members of the Labour Party or of the trade unions to give a guarantee that there would be no advance in wages, or than it would be for me to ask building suppliers to guarantee that there would be no advance in the price of building materials.
The position is that, under the statute, the rate of interest to be charged on advances from the Local Loans Fund will be determined by the cost of Government borrowing. There is no alternative to that. It is quite clear, from what I had to say earlier, that the Government could neither contemplate imposing additional taxation nor making good the losses which the fund might sustain if the statutory conditions were not fulfilled. I think it would, certainly, be very imprudent, taking the long view, that the governing provision of the original Act should be amended to enable the Government to make advances from the Local Loans Fund at a lower cost than the provision of capital for the fund would involve the Government in.
The Minister will appreciate that my only reason for asking the question was that the rate of interest on these loans to local authorities has remained very steady for a long time. Is that not right?
I am glad to say that, under my administration, the rate of interest payable on Government loans fell from 6 per cent. to 3½ per cent. and 3¾ per cent., and that it remained comparatively steady for a long period. Deputies, however, will realise that we are passing out of that cycle, and that even the Government of the United Statesrecently had to undertake a funding operation for the success of which it has been compelled to offer 2½ per cent. for five-year loans. The Government in Canada, similarly, has been compelled to take the same course for a loan which I think it proposes to offer on much more attractive terms. What these countries have not been able to avoid, it is not reasonable, I think, to expect that we should be able to avoid, or that we should expect to do better than they can when it comes to asking the people to lend us money.
Apply the same method to-day by reducing the rate from 6 per cent. to 3¼ per cent.
Mr. O'Higgins
I think it is just as well that local authorities should now appreciate the effect of the decision by the Government some months ago to float a loan at an unprecedented rate of interest. It was inevitable, but not recognised, I think, at the time, that the effect of that loan would have a very serious impact on the money market, and particularly in so far as housing and the financing of housing had to depend on Government borrowings.
We now find that, under the parent statute which will be amended to-day, the Minister is obliged to charge local authorities the prevailing rate of interest in the money market. By the action of the Minister, and as a result of Government policy, the rate of interest has been raised by close on 2 per cent. Accordingly, local authorities, in future, will borrow their money in a very dear market, and the tenants of local authority houses will, as a result of the action of the present Minister and Government, have to pay increased rents by reason of the increase in the rate of interest. Often, the effects of bad actions by a Government are only felt by the people months later. The delayed action of the financial policy of the present Government is now being felt in many spheres by the people. Those, in some counties, have had to face, within the last few days, an increase in the rates. They have had toexperience one delayed effect of the Budget. Here, to-day, we have another delayed effect becoming apparent as part of the financial policy of the Government.
We cannot, of course, oppose necessary legislative sanction for the financing of necessary work such as housing, but we do deplore the fact that the rate of interest on housing has been increased by the action of the Government. We point to the fact that one local authority in England — there may be others — within the last four weeks was able to borrow money from the public at a rate of interest substantially lower than that which had to be given by the Government of this country. It may be that the "ha'-porth of tar" which the Minister referred to some months ago may become a very expensive bit of painting for the tenants of local authority houses, and for the people generally.
This Bill, I think, enables the Government to continue to provide money to local authorities so that they may be able to finance their future operations. I think that there ought to be no doubt in the mind of any Deputy on the question as to whether or not the Government will continue to make these loans available. Deputy O'Higgins, I think, on the Second Stage mentioned that there was what he called a slowing down of building on the part of local authorities. As a member of a local authority, I cannot see any valid reason for any such slowing down. The local authority of which I am a member has not done so, and does not contemplate doing so until the work of rehousing the people has been brought to completion.
That is the policy of the local authority of which I am a member. I think it should be the policy of all local authorities. It is absurd to suggest that, in some way or other, the Government is seeking to influence local authorities to slow down building operations. In my opinion, if there has been any slowing down on the part of local authorities, it is they and they alone who are responsible.
The delay is in sanctioning the schemes.
Members of local authorities have always complained about delays in sanctioning housing schemes. These delays occurred under every Government — Fianna Fáil and the inter-Party Government. I suppose the Department would justify the delays on the ground that they were making everything safe and right and that questions of title and plans had to be carefully examined. Members of local authorities have always complained about delays but I do not think the position is worse to-day than at any time I, as a local representative, can remember.
The material is available; labour is available and, under this Bill, money will be available to enable housing authorities to complete the work entrusted to them. It is not right that anyone should say that in some way housing is being slowed down through Government action. I am whole-heartedly in favour of any proposition that will bring down the rate of interest, not only on local loans, but on all loans required for development purposes. I realise that no Government would deliberately seek to increase interest rates. The Government has to find money by borrowing and has to pay the current rate of interest. That is the present position. I am not thoroughly satisfied with that position. I wonder is there not some way by which we could reform our financial system. I have pressed for investigations. The fact that a farmer who puts his money into the bank will not receive more than 1 per cent. interest whereas a person borrowing from our banking institutions has to pay 5 or 6 per cent. seems to me to constitute a hardship and to create a difficulty with regard to development work.
Housing is development work which is urgently needed but which cannot be expected to produce big dividends. The reward derivable from investment in housing is in the main the interest which the tenant can pay and, as we know, most of the people who are housed by local authorities are in the lower income groups. It presents a problem to secure a return of the money invested even though the housing operations are subsidised out of general taxation. I would ask theMinister if there is any hope that the general rate of interest will come down so that local loans may be made available at a cheaper rate than at present.
Deputy Cogan has said that he does not know that Government action has slowed down housing or that the increase in the loan charges has slowed down housing. He ought to know. There is a question on to-day's Order Paper, tabled by Deputy Davin, to ask the Minister for Local Government if he will state when the scheme for the erection of houses in Walkin Street, Kilkenny, was first submitted for the sanction of his Department. Up to the change in the cost of money, we went from one housing scheme to another in Kilkenny. When one scheme was nearing completion, the labour went over to develop the next scheme and the tradesmen followed. In connection with the scheme about which Deputy Davin asked the question to-day, it was the Corporation that got cold feet, not the Government, when they realised what the cost of the new loans would be, and they wondered if the people would be able to afford the 30/-, 25/- and 22/6 houses. That has definitely slowed down housing in Kilkenny City.
The position may not be quite so bad in the case of county councils where the rateable valuations are comparatively high and where they can give a bigger subsidy. In the case of local authorities where valuations are rather small, the increase in the cost of money is a very severe blow, and it has caused a great deal of unemployment in the building trade in Kilkenny. If Deputy Cogan wonders how it has been slowed down, I can point out how that has been brought about. I do not do that from a political point of view. We would all be anxious to see the people housed.
The Taoiseach said that he did not know whether it was the cost of money that was slowing down housing schemes or whether it was due to the fact that housing schemes were completed. I can assure the Minister for Finance and the Taoiseach that housing is not nearly completed in Kilkenny. Thereare 300 to 400 people awaiting rehousing, although we have done a great deal of rehousing. At the present time the factor that is holding up housing is the cost of money.
Not only members of Fine Gael, Fianna Fáil or the Labour Party, but members of every Party in Kilkenny at present are wondering whether, if they build the houses, they will be left idle on their hands or whether the rate-payers who are already overburdened should have to carry the additional burden involved in the payment of too high a subsidy from the local rates.
I know that this Bill has to be passed but I would ask the Minister what will be the rate of interest in connection with future loans. The Minister mentioned that the rate of interest on every type of loan has increased. I hope he will not give 5½ per cent. the next time he is issuing a loan. It was 5 per cent. the last time and if it is 5½ per cent the next time, I do not know what position the country will be in.
The reluctance or inability of the Minister for Finance to give any firm guarantee to local authorities that the price of money to them will not be increased in the immediate future will have the effect, whether it is deliberate or otherwise, of curtailing the building of houses. The local authorities of which I have experience plan in advance and at the present time they are more or less confident that the price of money will not be increased in view of the increases in other directions. If this one last blow is delivered at the local authorities there will be a severe setback to the drive to provide houses for thousands of families that still need them.
The increase in the rate of interest to persons borrowing under the Small Dwellings (Acquisition) Act was an additional burden on local authorities because, when prospective builders realised that the price of money would be increased for the purpose of private houses, they decided they could not do it and the result is that the housing of these people is a charge on the local authorities. The local authorities havebeen, and still are, experiencing unusual difficulties in the matter of house-building. The increases in the cost of material, the increase, incidentally, in the cost of labour, and the different other difficulties have meant that at present they are in a dilemma as far as the house-building programme is concerned. The cost is one of the big objections to proceeding with the housing drive.
I do not think any analogy can be drawn between an assurance by trade unions that members will not look for increases and an assurance by the Government to the local authorities that the price of money to them will not be increased. The provision of houses is a national problem. It was recognised by the last Government as a national problem, as I hope it is recognised by the present Government. Therefore there should be some effort on the part of the Government to make sure that the price of money for such an essential thing as house-building will not be increased, at least until the programme announced some years ago of 100,000 houses, approximately, for the whole country is finished.
I am particularly interested in the cost of money for housing. In the City of Cork, for the last seven years, we have been paying each year over £71,000 in interest on money borrowed. The city accountant last week issued a statement to the corporation that the loan charge for the year was up by £41,482, which means that for the whole year we will be expected to pay £112,000 as interest on money borrowed, mainly for building purposes. Am I to understand that the Local Loans Fund charges to the corporation have increased since 1950-1951?
The Borough of Cork does not borrow from the Local Loans Fund.
That is another instance of injustice to the people of Cork. Can we get any guarantee from the Minister that the Cork Corporation will be able to give money borrowed from the Local Loans Fund to people whowant to build houses for themselves at the old rate of interest?
The Borough of Cork is a very wealthy entity and ought to be able to stand on its own feet.
That is not giving me any evidence that the position will be easier.
We cannot possibly have a debate on departmental policy on this Bill.
Am I to understand that the Cork Corporation will have to pay an increased rate of interest on the money which they get from the Local Loans Fund?
They will have to go to the open market the same as the Government and see what they will get the money for.
To give some evidence of what I have in mind, here is one of many instances. A young man, who failed to get a house built by the corporation because he has only two children — we are trying to meet the needs of the people with large families — wrote to the Cork Corporation last May asking for a site on which to build a house for himself. On 6th June, he got a reply from the city manager that his application for a site would be filed, but he regretted to say that there was no money available for a loan. The week before last the man got a letter from the city manager stating that a site was available for him and that if he wished to avail of it he should select it and that he would have to pay a ground rent of £10 a year. This young man is fearful of the rate of interest he will be charged for the money. He as well as others are anxious to know if they will have to pay more than 3½ per cent. for the loan from the Local Loans Fund. Can the Minister say if the present rate of interest will be continued?
I have no responsibility for the financial operations of the Cork Corporation. The Deputy is a member of the corporation and he ought to be aware of it.
You are responsible for the rates which the corporation will have to fall back upon.
A Deputy
Where do you get the money?
We have to appeal to the public for it. We appealed on two occasions in the last two years. We were looking for £250,000 and all we got was £180,000 and the former Minister had to underwrite the balance.
Is that what the Cork people think of their own city?
The municipal debt of the City of Cork represents £27 10s. for every man, woman and child. Every child born there has a municipal debt of £27 10s. apart from the national debt. By asking the people of the City of Cork to pay more than at present in interest they are expected to pay £112,000 for the present year in interest on money borrowed. That is a matter of which we should take very serious notice. It is little wonder that the position of the country is as it is when we are faced with that problem. The Minister tells me that he is not responsible for it and therefore there is no use in wasting the time of the House.
This debate opened by Deputy O'Higgins stating that the local authorities were not borrowing from the Local Loans Fund at the rate at which they had been borrowing and that therefore housing was being held up. Let us see what the figures are. The actual issues from the Local Loans Fund for various purposes are as follows. For the year 1950-51, the amount issued from that fund for housing purposes was £6,461,000. The actual issue for 1951-52 was £8,994,000; and the estimated issue for 1952-53 is £9,100,000.
For housing?
Yes, for housing only. So that, so far as this Government are concerned, the local authorities are in fact availing of the Local Loans Fund to an extent 50 per cent. greater than they were in 1950-51,and we are contributing 50 per cent. more by way of advances from that fund to enable them to tackle the housing problem. Again, for sanitary services, the actual issue from the fund for 1950-51 was £407,000, and the estimated issue for 1952-53, the current financial year, is £600,000 an increase of nearly 50 per cent. For county homes, hospitals, and such-like institutions, the amount actually issued in 1950-51 was £91,000. The estimated issue for this year is £380,000, four times as much.
It will be greater next year.
It may be. The point about it is that that is the fact. Again, if we take vocational education, we have the same sort of story. A sum of £57,000 was advanced in 1950-51 to local authorities for the purpose of building vocational education schools, and in this year the estimated amount to be advanced is £200,000, or almost four times as much. Surely these figures are in direct contradiction to the picture which Deputy O'Higgins has put before the House.
Let me come back now to another aspect of this. Deputy O'Higgins — Deputy Crotty appeared to take the same line — has suggested that there has been a sudden oppressive burden thrust upon the local authorities by reason of the fact that the rate of interest which we have had to pay in order to find the principal for this Local Loans Fund has been increased to 5 per cent. Of course, Deputies know that the difference between 3½ per cent., which was the rate at which the last Government issued its last loan, and the 5 per cent. — that is to say, the additional 1½ per cent. — does not, in fact, fall on the local authorities as far as their housing schemes are concerned. If they are clearing slums the Government takes responsibility for two-thirds of the interest and sinking fund charges.
Mr. O'Higgins
But the one-third is still larger.
One-third in the case of ordinary housing schemes but notin the case of slum clearance schemes. It is perfectly clear that the additional burden which the local authority has to meet is ½ per cent. In the other case it is 1 per cent., but that is not at all oppressive.
Not at all?
Will Deputy Crotty bear with me for a little while? It cannot be alleged, therefore, that in so far as municipal or local authority housing is concerned the recent increase is anything like as significant as some Deputies have been suggesting both here and elsewhere. What is the alternative? It is all very well for Deputy Hickey to talk. He says we ought to have some other system. Deputy Hickey and apparently some of the Deputies on the Fine Gael Benches now feel there ought to be some other system.
Mr. O'Higgins
Not another system, another Government.
What are the other systems available? Does the Deputy suggest we should start printing bank notes?
It is about time a responsible Minister stopped that jargon.
Shall we go borrowing abroad?
Mr. O'Higgins
No. Just resign.
Bring home the money that is invested abroad. Bring home the Hospitals' Trust money.
The Minister, without interruption.
I am trying to be patient but it is quite clear that some Deputies do not want to listen. I ask what is the alternative. They say we must get the money in some other way. What other way do they suggest? Is it suggested that we should print bank notes to inflate the currency in order to provide local authorities with money at a lower rate of interest? Are we to have forced loans from the banks? Are we to go to the directors and say:"It does not matter what ordinary enterprise, or industry or agriculture requires the Government must have its money at something lower than the normal rate of interest." Is that the policy of the Opposition? Do the Deputies want us to institute here a system of forced loans or capital levy? Is that the argument?
Who said that? Nobody said that in this debate at all.
Nobody has ventured to say that. All they have said is there ought to be some other way of getting this money instead of raising it from the public and I am considering the various alternatives. I want to pin Deputies down to the alternative we will take.
Do not be dragging in red herrings.
Will we go outside the country and borrow £40,000,000 and do, as the inter-Party Government did, leave its successors——
Mr. O'Higgins
With £26,000,000.
——three years later to start paying interest on that borrowed money and start repaying the principal some years later still? Is it suggested that we should raise this money upon such terms that one will not be able in so far as the interest paid on it is concerned to recover any part of it in the form of taxation? Do not forget that if a person here advances money to the Government and the Government pays him 5 per cent. then in the ordinary course of events, when that private individual comes to make his return for income-tax assessment purposes, he will have to return that interest as unearned income and in normal circumstances that money will be taxed at the full standard rate. If the money happens to have been advanced by a company, the company will have to pay roughly 10 per cent. First of all, it will have to pay corporation profits tax on any income derived from that investment and then the ordinary standard rate of income-tax on that income. If we go andborrow abroad, as apparently seems to be the suggestion——
There is no doubt the Minister is rambling a good deal now.
On a point of order. This is a Bill dealing with millions of pounds. May I ask to what section of the Bill, if any, is the Minister's speech relevant? I submit it is completely irrelevant. On the stage of the Bill that we are now discussing, it is an abuse of the Chair and an abuse of the order of the House.
Acting-Chairman
The debate is very wide in scope but then I did allow Deputies a certain scope.
There would seem to be no limit to it considering the line the Minister is taking.
In defence to Deputy Morrissey's well-known concern for the rigid limits of debate, I will get back to the Bill.
For 25 years I have been trying to keep the Minister in order and I have not succeeded.
For once, I will give the Deputy a triumph. I would like to refer to what Deputy Crotty said. The Government is not, of course, responsible for any action the Kilkenny Corporation may think it wise to take.
They are.
We are not the keepers of the Kilkenny Corporation conscience. The members of that corporation are put there to manage the affairs of Kilkenny City. If they feel that conditions are such that additional houses are necessary, surely they ought to be prepared to shoulder their responsibilities in that regard and to discharge them. If it is essential to provide 50 additional houses in that city surely the Kilkenny people should provide these houses. On the other hand, if when they look at the situation in a realistic way they come to the conclusion that the housing needs in the city are not after all such that the corporation would be justified in imposing an additional burden on the ratepayers of that city, then I thinkthe Government is to be congratulated because it is quite clear that it is the Government that brought the members of that corporation up against the realities of the situation, and that body could not, therefore, continue building houses unless such houses were necessary in order to provide the people with proper habitations.
If the houses are necessary, then they ought to be built. If they are not necessary, then they ought not to be built. If they are necessary, then the corporation was wrong in deciding not to build. It is the responsibility of the corporation and the Government can do no more than it has done in relation to this matter. It has provided very generous subventions for local authorities carrying out housing programmes. It has taken upon itself the responsibility for raising the money but in order to raise that money it has to make the loans attractive to the general Irish public and it cannot do any more. There is no use in members suggesting to me it should do any more.
Therefore we have to leave the people without houses.
Therefore the Cork people should take on their shoulders the same sort of responsibility the Government is taking on. The trouble with Deputy Hickey is that he does not want responsibility.
Do not talk nonsense.
He never wants to assume it. He would prefer to have his growl. The Deputy is very like a character in one of the Gilbert and Sullivan operas who went around singing to himself: "Isn't your life extremely flat if you have nothing to grumble at." That is the typical attitude Deputy Hickey takes up.
If you would come down to Cork and look into the question of housing you would not say I was talking nonsense.
When our predecessors were here and Deputy Hickey was sitting on this side of the House he was one of those mice to whom DeputyDillon referred as being among the Dáil's most exemplary members. They never once ventured to criticise anything our predecessors did.
I want to repudiate all the Minister has stated. As far as Cork is concerned the Cork people are prepared to face a levy of 41/- in the £ for building houses but I know well the difficulty in which the Minister finds himself. He has no power whatever to deal with the financing of the whole business.
Question put and agreed to.
Acting-Chairman
This Bill has been certified by the Ceann Comhairle as a Money Bill within the terms of Article 22 of the Constitution.