Dáil Éireann debate -
Thursday, 4 Jul 1968

Vol. 236 No. 3

Local Loans Fund (Amendment) Bill, 1968: Second Stage.

Minister for Finance (Mr. Haughey)

I move that the Bill be now read a Second Time. The purpose of this Bill is to raise the statutory limit on issues from the Local Loans Fund which now stands at £250 million as fixed by the Local Loans Fund (Amendment) Act, 1964. Issues from the Fund since its establishment in 1935 amounted to £234 million at 31st March last, or £16 million short of the limit of £250 million. The Capital Budget provides for issues from the Fund of over £30 million in the current financial year, so that the limit again needs to be raised to enable further issues in this and future years for the purposes for which the Fund is utilised.

These purposes cover a wide range of activities by local authorities particularly housing, sanitary services, vocational schools, certain hospital building and some harbour works and miscellaneous services. Of these activities, housing is by far the most significant. Issues from the Fund for housing amounted to £181 million, or 77 per cent, of the total of £234 million at 31st March last. Local authority housing, for which £115.7 million was issued, accounted for almost two-thirds of the housing expenditure. The balance was in respect of house purchase loans and supplementary grants given by local authorities to private individuals providing their own homes. Issues in respect of these loans and grants amounted to £51.4 million and £13.7 million, respectively.

The Fund is virtually the sole source of capital for the housing operations of local authorities. In 1966-67 it provided as much as 93 per cent, and last year 97 per cent, of the capital expenditure of these authorities on housing. The increased limit sought in the Bill is an assurance of the Government's intention to maintain this extremely important source of capital for local authorities in tackling their housing problems.

The Fund is also the principal source of capital for sanitary services, covering mainly water and sewerage schemes to meet the growing needs of housing, industry, dairying and tourism. Issues from the Fund amounted to £31 million by 31st March last and accounted for over 13 per cent of the total expenditure from the Fund. Thus, housing and sanitary services together absorbed over 90 per cent of the total issues from the Fund since its establishment.

The increasing emphasis on post-primary education has resulted in expenditure on vocational schools becoming a more important constituent of total expenditure from the Fund. Total issues to 31st March last amounted to £10.3 million and expenditure currently amounts to almost £2 million a year.

The balance of the expenditure from the Fund is attributable to works on local authority hospitals, county homes, dispensaries, etc., and to a variety of miscellaneous services such as harbours, public libraries and bridges.

Mainly because of the increasing scale of housing activity by local authorities, issues from the Fund have grown from about £7 million in 1960-61 to £26.5 million in the last financial year and are estimated to amount to over £30 million this year. A very significant factor in this growth is the increasing demand of Dublin and Cork Corporations for finance for housing and allied operations. These authorities together drew £10 million of the total of £26.5 million issued from the Fund last year.

It is clear that to meet requirements for some years ahead, the existing limit on issues from the Fund of £250 million needs to be materially increased. Accordingly, the Bill proposes to raise the limit to £400 million.

I commend the provisions of the Bill to the House.

Mr. Cosgrave

There are just two points I want to raise on this Bill. First of all, the money issued to local authorities from the Fund in respect of housing covers houses built under the Small Dwellings (Acquisition) Acts procedure. One of the difficulties which arises in the operation of these Acts is a problem which affects Dublin Corporation, Dublin County Council and Dún Laoghaire Borough Council more particularly, I think, than it does other local authorities. It is the system under which the local authority issues a loan on the basis of a valuation which is fixed by the officials of the authority concerned. The invariable experience of applicants for loans is that the actual cost involved in building a house far exceeds the valuation fixed by the responsible authority for loan purposes. The result is that applicants are obliged from their own resources—in many cases this places a considerable strain on them—to make good the difference. In some cases the applicants may be in a position to put up a deposit or provide money from savings but, because of the gap between the actual valuation placed on the house and the amount of the loan, which is determined by the valuation, falling short of the actual cost involved a very serious problem arises for the applicants.

This is probably a matter for the Minister for Local Government really, but I think the Minister might consider the problem involved because the actual provision of the funds falls within the responsibility of the Minister for Finance. It is certainly a matter which should be the subject of discussion with the appropriate Department and the local authorities to see whether some more satisfactory arrangement can be made.

The other point then is the dissatisfaction caused by the frustrating delays in getting sanction from the Department of Local Government in respect of water supply schemes. Some years ago the present Minister for Agriculture announced a system of regional water supply schemes and a good deal of planning and discussion went into the preparation of these schemes. Then, after some time, the decision was revised and there was a reversion to some form of group schemes. Irrespective, however, of the type of scheme, or its description, it ought to be possible for the Department to notify to each local authority the amount of money which will be available in the particular financial year, thereby allowing them to plan the schemes ahead in the knowledge that the money will be available.

The responsibility for allocating a block grant for the selection of individual schemes within the local authority area should be a matter for the authority itself. The general experience is one of frustration because of the constant transmission of plans backwards and forwards to the Department; almost interminable delays occur, sometimes delays of 18 months and, in one case about which I heard recently, the schemes have been prepared now for a period of almost three years. Failure to get a decision causes not merely frustration but a feeling among local authorities and, to a greater extent, among the people immediately concerned, that some official or Minister is responsible for delaying a particular scheme or schemes planned by local authorities and which those immediately concerned realise is necessary. If a system of block grants were decided upon under which the local authority was notified in advance or had a certain sum allocated to it, then the responsibility for allocating and selecting priorities in a county council or other area would be on the officials and members of the authority concerned.

I think a great deal of useful and constructive work is being done under the method of financing provided here and over the years the amount of money has, of course, grown. The very substantial rise in costs of construction of all kinds obviously means that more money is necessary even to undertake schemes to a comparable extent.

The two matters I have mentioned are giving rise to a great deal of dissatisfaction and, indeed, in some cases, hardship to the people concerned. A simple change in the method of operation would ease the implementing of the actual proposals, to the benefit of the local authorities and the people primarily concerned, the applicants for housing loans, and, indeed, would greatly reduce the amount of correspondence and discussion with the Department concerned in the sense of making it more directly the responsibility of the authorities concerned.

Mr. James Tully

The Labour Party believe that this is a very sensible decision by the Government to increase the amount of borrowing from the Local Loans Fund to £400 million. However, I think the Minister might have in the Bill or, if he finds it is not necessary to do it in the Bill, might consider making, certain regulations which would make the working of the Fund a lot easier for local authorities. We have several complaints from local authorities all over the country, mainly about the delay which occurs from the time an application is made for permission to borrow for the purpose of erecting houses or for water and sewerage schemes until the permission is finally granted. We have even still what I consider to be the ridiculous situation where a local authority who require to build houses for people who are badly in need of houses prepare a scheme, submit it to the Department of Local Government and after seven months or maybe longer get permission to advertise for contracts; the scheme is advertised; the contractors send in their figures; the local authority selects a contractor, submits the name to the Department of Local Government, they delay the matter for a further six months or longer and then send back permission and then the application to the Local Loans Fund is made.

I put down a Question last week to the Minister for Local Government, asking if he would consider the position and try to find out if it would be possible to have the Minister for Finance considering the application for the amount required from the Local Loans Fund at the same time as the Minister for Local Government was considering the tenders submitted. The Minister made what I consider to be a rather stupid reply. He told me that the application to the Local Loans Fund could not be made until the amount of money required for the contract was known. I am afraid that I pointed out that I appeared to be wasting my time, was on the wrong wavelength, that, in fact, what the question mentioned was the tender which contained the figures, which was before the Minister. So, the exact figures were known. The Minister said, eventually, that it could not be done.

If the Minister for Finance, who is a reasonable sort of man, would look at it, he would realise that the system in operation at the present time, not alone causes unnecessary delays, but very often creates a situation where, because of the delay, by the time the houses are finished, the contractor finds that costs have increased and through his prices variation clause is able to ask for an increase in his contract price and must get it. This has occurred far too often.

In addition, there is the situation where, for instance, in County Meath, we have an application before the Minister for Local Government for a considerable time for a housing scheme for Slane and Oldcastle. It appears that money cannot be found. The Minister has not notified the council that the money is available. We have before him a scheme of 57 rural cottages in Meath for several months. I am told that there is still no decision by the Minister as to whether or not the money is available.

Possibly, as the Minister says here, the amount of money being required by local authorities is causing a strain on the Fund and, therefore, it might be necessary to defer schemes until legislation such as this has gone through the House. If that is so, we would be prepared to accept that as being reasonable and that would be all right but if it is delay just for the sake of delay on the part of Departments who do not give permission to borrow for up to six months after the application is made, or even three months, which is the more general thing, I think it is wrong.

There is another aspect of it which the Minister should look at, that is, the question of the amount of subsidy which is granted. As the Minister knows under the present system, the limit is on £1,600. Nobody can build a house for £1,600 at the present time. According to information given to me by the Minister for Local Government, contract prices have gone up in Dublin to £2,250, in Meath to £1,880, in Westmeath to £1,880. Yet the subsidy would be paid only on £1,600. The Minister might have a look at this aspect and might be able to deal with it in a Bill such as this.

There is the question of regional water schemes. The Minister for Local Government made it clear earlier in the year that he was looking for priority lists on which applications would be considered and talked about £15 million worth of work being planned over the next two or three years. He came back a few months afterwards and said the amount of applications had gone up to £35 million. If my memory serves me correctly, the other day he said the figure had gone up to £87 million and it was impossible to meet the applications for loans to proceed with these schemes and he was waiting for priorities to be decided.

Priorities have been decided by a number of local authorities and have not been decided, apparently, by a substantial number of local authorities. Is there any reason why the Minister could not give permission to those local authorities who have decided their priorities to go ahead with the schemes they have selected?

Mr. Haughey

These are very much Local Government matters.

Mr. James Tully

The Minister for Finance has the final say in this because in each case the money has to be borrowed from the Local Loans Fund, and unless the Minister for Finance deals with the applications which are before him, then they cannot be started. Whether they are Local Government or not, the final say rests with the Minister for Finance.

Another matter I would like to refer to is the question of the rates of interest on the loans. The original applications for loans over the years exhausted, or practically exhausted, the amount of money being made available. Naturally, there must be a pay-back. There must be a certain amount of that money coming back. Perhaps the Minister would say what the actual amount of money at present outstanding is and how much has been repaid? If he has the figures available, I should like him to tell me when he is replying to the debate how much has been repaid over the years and how much is still outstanding.

The rates of interest now are reaching the stage where it is not easy to continue to build, even under the Local Loans Fund. Costs are far too high. Somebody borrows £2,000 to build a house and finds that for that £2,000 he has, with principal and interest, to repay over £10 per £100. It is almost £4 a week. As the Minister will agree, this puts it completely out of the reach of many people who might be tempted to provide themselves with houses if the rate of interest were a little more reasonable. I know in some countries grants have been suspended and instead of grants, a subsidised loan is given. I suggest that this might be considered here.

The rate of interest on the amount of money borrowed has a very big bearing on whether or not a person will build a house for himself or apply to the local authority for housing. The amount of money a person can borrow from a local authority is so limited that when somebody reaches the stage where he feels he might be in a position to pay the interest and to meet the repayments required, he is also reaching the stage where the Local Loans Fund say: "We are very sorry but your income is too high and you cannot borrow from us." This is an aspect the Minister might look at. Perhaps he would say when the present limit was set and how long was it since it was adjusted.

Mr. Haughey

1964. Deputy Cosgrave raised the matter of the limits of SDA loans and the valuations made. The question of valuations for the purpose of SDA advances is a matter for the Minister for Local Government and I will bring the point to his attention. I should point out that the maximum loan which can be made was increased on 24th June last to £2,700 except in Dublin, Cork, Limerick and Waterford where the limit is now £3,000. I think that should help meet the point made by Deputy Cosgrave.

Mr. Cosgrave

Does Dublin include Dún Laoghaire in that context?

Mr. Haughey

It probably does.

Mr. James Tully

I do not think it does. I have been inquiring about it.

Mr. Cosgrave

It is really a question of whether it is Dublin Corporation and Dublin County Council.

Mr. Haughey

According to my information it is the Dublin area. I imagine it would include Dún Laoghaire.

Mr. James Tully

The information I got was the direct opposite.

Mr. Haughey

The other point raised by Deputy Cosgrave was whether or not local authorities could be notified of the amount available to them in any year for regional water schemes so that they could proceed to plan and operate on that basis. Again, the allocations made to different authorities and the breakdown of the allocation to any particular authority are matters for the Minister for Local Government and not for myself as Minister for Finance. I will mention that point to him also.

However, I do not know that it would be possible for the Minister to do anything about this. He has to manage things as best he can. His resources are, of course, limited by me. I do not give him all the money he wants and he has a whole host of competing demands. Most people would agree — I know the Minister takes this view — that housing should be the first priority. That does not mean, of course, that he can neglect the other matters completely, even in the interests of housing. If he does not look after water and sewerage schemes, his housing will be slowed up eventually. He has a very difficult job of management to do in regard to these allocations.

I do know local authorities are given allocations at the start of the year in regard to commitments which they may have, but whether anything more than that can be done I doubt very much. This whole business of local authority financing is very complicated. There is always work in progress at the beginning of the year, new starts made during the year and at the end of the year, there is always an amount due in respect of commitments. I do not know that the Minister could in any year lay down a hard and fast rule as to the exact amount which will be allocated to each authority for water schemes.

Deputy Tully raised the question of applications to the Local Loans Fund. As far as I know at present, apart from a few applications which are under inquiry, all sanctions are virtually up to date.

Mr. James Tully

Meath County Council must be in bad odour so because we are waiting some time.

Mr. Haughey

We will have to look at that. In regard to the figures asked for by Deputy Tully, the latest figures I have are the figures at 31st March, 1966. I think they might help to give a picture of the way the Fund operates. At 31st March, 1966, the total advance which had been made from the Fund was £196 million and a total of £40 million in principal and £71 million in interest has been repaid. There was a small number of loans written off and the total amount outstanding by borrowers was about £166 million in principal and a very small amount of interest in arrears.

Mr. James Tully

A total of £196 million was advanced and £40 million repaid. How does the Minister still get £166 million.

Mr. Haughey

A total of £40 million in principal and £71 million in interest.

Mr. James Tully

Would it not be £156 million?

Mr. Haughey

I am sorry: I was doing a wrong sum there. It is £155 million. That gives a general picture.

Mr. James Tully

Why is it only up to March two years ago?

Mr. Haughey

I am not saying it is not more up to date than that, but that is the only figure I have at the moment.

Mr. James Tully

Would the Minister be able to give me any later figures if I put down a question?

Mr. Haughey

I will send on the Deputy the latest figures I have. I think I have the 1967 figures here, but they are only in draft form. The total issued in 1967 was £218 million; repaid in principal, £44 million and in interest, £79 million; and outstanding £174 million.

Mr. James Tully

So £4 million extra was repaid in the 12 months.

Mr. Haughey

As regards Meath County Council, sanction was issued last week for 12 houses at Slane and 34 at Dunboyne.

Mr. James Tully

There are two other schemes, including 57 rural cottages.

Mr. Haughey

The Deputy should say "Go raibh maith agat" for these anyhow.

Mr. James Tully

Yes, and I have also said it for one in Duleek and one in Laytown for which the Minister has provided money, but that still leaves us nearly 100 houses down and that is what I am worried about.

Question put and agreed to.

Agreed to take the remaining Stages today.