I thank the House for the manner in which they have received this Bill. I appreciate that people are, of course, all too anxious that the State would maintain the supply of money for essential purposes. They may be assured of this Government's determination to provide money for the very necessary expenditures financed from the Local Loans Fund.
I can sympathise with those who have asked for increases in the income limits for housing purposes. That is something at which we shall continue to take an on-going sympathetic look, but it must be realized that, if the limits rise, the State will be required to pay more money from this fund and, as the fund is very heavily subsidised by the Exchequer, which naturally means the general body of taxpayers, it is only right that we should ensure that money advanced for housing purposes should go to the most necessitous in the community. A system which would make money available from this fund—a system I believe which would be quite wrong and one which nobody here would favour—which has to be subsidised so heavily by the general body of tax-payers could not be countenanced.
An indication of the size of the subsidy can be seen from the figures. The rate of interest charged by the State on advances from the fund is 10 per cent and 10 per cent is well below the rate of interest the State has to pay on money it borrows. That rate may vary from 12½ per cent to 16 per cent depending upon the length of the period for which the money is lent. It will be seen from this that there is a very massive subsidy given to those who borrow from this fund when the State is re-lending the money it borrows so dearly. Local authorities invariably re-lend the money for housing purposes at 1/2 per cent higher than the rate at which they borrow it. That means the borrowing rate is 10½ per cent, which is extraordinarily generous having regard to current interest rates here and generally throughout the world.
In respect of interest rates, it is very important that we should appreciate that the prime lending rate here is the lowest in Europe. The cost of money is determined not by any domestic situation operating in a local environment but rather by the situation in the open market and it is in our interest to borrow in that open market. The rate of interest is determined by world trends in the markets in which we ordinarily deal. The prime lending rate here is 11¾ per cent against a rate of 13 per cent and 14 per cent in Britain, 12 per cent in Denmark, 14½ per cent in France, 12 per cent in Germany, 18½ per cent in Italy and 12 per cent in the Netherlands. In the USA the prime lending rate is beginning to fall, but it rose at an exceptionally rapid rate over the last few years, during which time the lending rate from the Local Loans Fund was kept comparatively stable.
In 1972, when the prime lending rate here was 7½ per cent, the interest rate charged on advances from the fund was 1 per cent higher, namely 8½ per cent. In December, 1973, when the prime lending rate was 12½ per cent, the rate at which money was available to the Local Loans Fund was 9 per cent. Today it is 11¾ per cent; the rate of interest charged on money from the fund is only 10 per cent. Subsidies are extremely costly and, as I have emphasised, they can only be paid for by the community at large. We have, therefore, to reserve the funds for those people who require maximum help. That has been the policy of this Government. It will continue to be our policy.
Having said that, I reiterate that we will of course continue to consider sympathetically the need to increase the income limit but, as things stand, we have to bear in mind that increasing the income limit may increase the demand upon funds which are both very scarce and very dear.
Deputy Colley suggested that the principal reason for the increased allocations from the fund was inflation. That is not so. Certainly inflation is having some effect because it requires a greater amount of money to produce the same quantity of houses and sanitary services, vocational schools and so on; but the principal reason for our having to come back to Dáil Éireann shortly over two years since the last occasion has been the massive increase in the number of houses now being financed from the Local Loans Fund and the very significant increases in the amount of money made available for the necessary infrastructure. One of the reasons why housing sites have been so dear and why the cost of sites has escalated far beyond rises in living costs and construction costs has been due to the gross neglect for many years of the necessary infrastructure. We have changed that policy. We have accepted the absolute necessity of providing very substantial improvements in water supplies and sanitary services. The reflection of that can be found in the increases given for sanitary services. In 1972-1973 the allocation was £7.71 million. For the current year it is £14.6 million. That is a most significant increase. Had it not been granted many of our housing problems would remain unsolved and housing development would be delayed in the way in which the construction of houses used be delayed because of lack of essential facilities.
When we were in Opposition we severely criticised the Government for their failure to provide the funds necessary for local authority housing, housing essential for the least advantaged people in our community. That Government deliberately reduced the volume of local authority housing, leaving the main burden of providing new dwellings on the private sector. We appreciate the importance of the private sector in housing and we have shown our appreciation by the very substantial assistance we have given to the private sector. We have, however, accepted as an obligation the need to provide additional money for local authority housing. The result is that, in a two-year period, the allocation for local authority housing has risen from £25 million in 1972-73 to just £40 million in the current year. This, of course, has produced a substantial number of local authority houses.
On the house purchase loans front for a variety of reasons, not all associated with the temporary difficulties of societies, the allocation for house purchase loans under the local authority SDA schemes has risen from £8 million in 1972-73 to almost £34 million in the current year. These figures are much greater than any increased costs in the construction industry and are clear evidence of the Government's determination to use the funds at their disposal to assist the community in the provision of necessary housing.
In the period I talk about, the number of new dwellings being built has risen from 15,000 to 25,000 houses per annum. This, in itself, has meant that, while in 1972 the Government of the day expected that it would be four years before it would be necessary to return to the Dáil for an increase in the Local Loans Fund, we have used up the money which was then expected to last a four-year period in two years, and that is why we are back now looking for this substantial increase.
We consider it to be warranted and, if the Bill were not to pass, there would be difficulties early in 1975 in providing the necessary houses for the ongoing programme of massive capital investment for very necessary social and economic purposes. Not only are we providing houses because of the social and humanitarian obligation of doing so but because they are a very necessary part of the industrial development which is critically important for the maintenance of employment and also, of course, for the increase in the number of jobs which we must have if unemployment is not to grow.
Deputy Colley asked me about the capital budget. Subject to verification —and I am sure he will accept that it is not always possible to produce the instant answer—the figures, I understand, are as follows: for the 1974-75 12-months' period, the allocation is £98.55 million which includes an increase of £12 million for the small dwellings.
