Dáil Éireann debate -
Tuesday, 9 Nov 1976

Vol. 293 No. 9

Building Societies Bill, 1975: [Seanad] Second Stage.

Minister for Local Government (Mr. Tully)

I move: "That the Bill be now read a Second Time."

The purpose of the measure is to modernise and consolidate the law relating to building societies. It has been examined in a critical but constructive manner by Seanad Éireann. In the course of the discussions in that House, a number of amendments of the text of the Bill as introduced were considered and the great majority were accepted. In consequence, the document which has been circulated to Deputies should, I hope, prove to be a generally acceptable set of legislative proposals, designed to govern the operations of one of the principal investment repositories and the most important source of mortgage finance for the private housing sector.

The existing statute law controlling the operations of building societies in this country dates back just over a century. The principal Acts were enacted in 1874 and 1894. It will be obvious, therefore, that there must be scope for a radical updating and reconsideration of the law. This is the purpose of the Bill which I am glad to present to the Dáil. I hope that the House will give it an objective and positive examination, such as it received in the Seanad.

The operations of building societies have expanded enormously since the State was founded, but particularly in recent years. In 1922 we had 23 societies with total assets of little more than £500,000. By 1941 these assets had trebled and amounted to £1.5 million. Since then there has been a constant acceleration in growth. By 1961 the assets of building societies had increased to £18.7 million. In the short space of the four following years, their assets doubled to £36 million in 1965; by the end of June last they were over £350 million—a phenomenal rate of growth.

This scale of operations is a measure of the confidence which the investing public and house purchasers alike have in the building society movement. In the five years ended 31st December, 1975 the societies advanced £215 million in loans for house purchase, which gives a clear indication of their importance in connection with the financing of private housing. The societies have made an invaluable contribution towards improving housing conditions generally throughout the country.

The inflow of funds to the societies and their rate of loan approvals have been at record levels during the past year. The value of loans approved in 1975 was the highest in any year ever.

This expansion of activities and the importance of the position which the societies now hold as custodians of the savings of so many people make it essential that the legislation under which they operate, and which was designed so long ago to suit much smaller institutions, be reviewed and reconsidered.

This Bill is the outcome of such a review and one of its primary objectives is to reinforce the confidence of the investing public in building societies with the backing of suitable statutory provisions. A person investing with a building society should know that his money is no less secure than if it were placed with a licensed bank.

This Bill, while re-enacting and updating all the relevant provisions of the existing building society legislation, contains a number of new provisions. Some of these are similar to provisions in the Companies Act, 1963, the Central Bank Act, 1971, and the Credit Union Act, 1966, adapted, as appropriate, to deal with the conditions peculiar to building societies. In scope, the Bill is intended to deal comprehensively with all the operations of building societies from their initial establishment to their eventual winding up. Special care has been taken to protect the rights of the members, depositors and mortgagors, and the security of investments, through controls and supervision considered appropriate to one of the most important forms of financial institution in the State. In preparing the Bill I have had regard to the dual function of the societies, first as the repository of an appreciable proportion of national savings and, secondly, as the largest single source of mortgage finance for private housing.

I trust that the Bill will help to increase public confidence in the societies. In this context I want to emphasise that none of its provisions will, in any way, disturb the present confidentiality regarding the business dealings of the societies and their members, and which is so important in attracting investment funds to the societies. I want to give a similar assurance in relation to the orders and regulations to be made in due course, and the directions to be given, under the Bill. Indeed, some of the amendments which I moved during the Committee Stage debate on the Bill in the Seanad were designed to reinforce this element of confidentiality and were accepted in this spirit by Senators.

A basic feature of building society finance is that the societies must borrow short and lend long. Money vested with them is generally on call at three to six months' notice while the money which they lend is usually repayable over 15 to 25 years. This is a problem for which the present Bill—or, indeed, any conceivable legislation— could hardly produce a solution. Another area of difficulty with which it cannot concern itself is the fluctuating mortgage interest rate which borrowers have to pay on their loans. It does not contain provisions relating to trustee status. However, the provisions in the Bill ease the way for the Minister for Finance in conferring trustee status on approved societies.

This is a long and rather complex Bill. It is based, I might say, on a century's experience of previous building society legislation. Because of its importance and complexity I had a particularly detailed explanatory memorandum prepared which sets out the background to the measure, states its objectives and explains its provisions in considerable detail. As Deputies have had an opportunity to study both the Bill and the explanatory memorandum, I do not propose, at this juncture, to go at length into the provisions of the Bill. The measure is essentially a Committee Stage one and when the House moves on to that Stage we can consider each section which Deputies may wish to discuss. However, there are some provisions which call for special comment and I ask the Dáil to bear with me while I refer briefly to these aspects.

Under section 8, ten or more persons may establish a society by agreeing on rules and submitting copies to the Registrar of Building Societies. Heretofore a society could be established by any number of persons, provided the draft rules were signed by three persons and the intended secretary. A further provision in section 18 will require each founder member to invest a specified minimum amount in cash in the society and to retain the investment with the society for at least five years. At no time during that period can the interest rate on his investment be more favourable than that paid by the society to any other shareholder of a similar class. The amount of the investment will be prescribed by regulations. The purpose of these provisions will be readily appreciated. Where funds are solicited from the public it is right that investors should have security. One way to achieve this is to require the founders of a society to have a substantial and continuing personal stake in its funds.

In the case of a society incorporated after 5th December, 1975, which was the date of publication of the Bill, or a society incorporated before that date but which had not then commenced business, section 18 stipulates that it may not raise funds unless the requirements relating to the founders' shares, to which I have just referred, have been complied with. In addition there is a further requirement, under section 20, that such a society must have lodged a deposit with the Central Bank. If a society fails to comply with these requirements within specified periods, the registrar can have its registration cancelled or have the society wound up. Quite a number of societies have been formed and registered but have then been allowed to lie dormant, sometimes for years. There is no purpose in having inactive societies on the records and for this reason the registrar will be empowered to have them struck off.

Section 19 will apply to a society incorporated after the date of publication of the Bill, or a society incorporated before that date but which had not then assets of at least £1 million. Any such society must obtain the written permission of the registrar before soliciting deposits or subscriptions for shares—an expression that is defined in section 2 of the Bill on the lines of a similar provision in section 27 of the Central Bank Act, 1971. The intention is that the registrar will not allow a society to advertise for funds unless he is satisfied on a number of matters relating to the society, including the manner in which it has conducted its business, its liquidity, its ability to meet its obligations to creditors and its compliance with the requirements regarding founders' shares and the deposit at the Central Bank.

Some small societies will be affected by this section, but I do not envisage that the provisions will prevent them from continuing. On the other hand, societies whose activities appear more appropriate to commercial lending companies will have to satisfy the registrar that they are bona fide building societies, as defined in the Bill, and that they carry on their business in accordance with its requirements.

I have mentioned the requirement in section 20 to make a deposit with the Central Bank. All societies will have to lodge an amount varying, according to the size of the society, from a minimum of £20,000 to a maximum of £500,000. Existing societies will be given time in which to comply with the requirement. A similar requirement applies to licensed banks under the Central Bank Act, 1971. It is appropriate that the statutory provision governing financial institutions of the size and importance of building societies should be similar in such regard to those for banks. The deposit will earn interest; it will rank in assessing a society's liquidity, and will provide security for investors.

Section 37 will enable the Minister for Finance to require a society to maintain a ratio between its assets and its liabilities. At present, apart from the limitation on the amount which a society may accept on deposit, there is no statutory requirement in regard to the relationship between the assets and liabilities of a society. It is considered appropriate that that type of control in this vital area which applies to the banks should apply also to the societies. The powers in the section will not be used as a method of monetary control—the ratio will be merely a basic requirement to ensure the stability of the society and the security of the investor.

Different ratios may be prescribed for different classes of societies. Reference is made throughout the Bill to different classes of societies. The intention is to enable requirements to be tailored to fit the specific needs or circumstances of the different types of societies. What may be appropriate for a society with assets of £50 million may not be relevant at all to a society with assets of £100,000.

There are two other areas in which direct control is proposed over certain aspects of the societies' operations. Section 76 will enable regulations to be made, on the recommendation of the registrar, to secure the proper and efficient management of societies and to promote the orderly and proper regulation of their business. These regulations may lay down limits on the management expenses of a society and may also provide for a code of practice. We have all been aware, from time to time, of the criticism of societies on the grounds that their management and advertising expenses have been unduly high, especially with regard to the expenses of comparable societies in Britain. I want to put on record that my own experience has satisfied me that such criticisms cannot reasonably be sustained against the five societies represented on the Irish Building Societies' Association. These member societies control about 98 per cent of the assets of all societies. The past few years have seen an enormous expansion in the activities of the societies—circumstances in which, combined with the effects of inflation, a substantial rise in management expenses might well have been expected. In fact, the accounts of the largest societies show that management expenses were maintained at very reasonable levels.

Criticism has been directed also at the extent of the competitive advertising by the societies. It is only right to remember, however, that advertising is essential to secure a continued inflow of funds in a very competitive market. Indeed, the level of expenditure in 1974 and 1975 of the five principal societies on advertising had fallen when compared with the figure for 1973, a situation which would not indicate extravagance. While I am satisfied that the major societies keep a reasonable balance in these matters, I still feel that there is need to have the reserve power which this section provides.

In due course I would envisage the drawing up, with the advisory committee proposed by the Bill, of a code of practice which would contain provisions relating to matters such as the standards for incidental fees, charges for the redemption of loans, payments to accredited agents of societies and so on.

Direct control is also proposed in section 77 which empowers the Minister for Local Government, with the consent of the Minister for Finance and after consultation with the registrar, to make regulations prescribing the maximum amount of a loan that a society may make and the purpose for which a loan may be made. The regulations may also control the amount that a society may lend to a corporate body.

Sections 41 and 42 incorporate two important provisions, adapted from the Companies Act, 1963. These relate to the disclosure of interest by a director of a society in any contract with the society and the disclosure in the annual returns and the annual accounts of the society of loans made to directors, certain members of their families and some corporate bodies with which officers of a society may be directly associated. These are new requirements in the building society code. They are not as restrictive as the provisions in the Companies Act relating to loans to company directors because the making of loans is the ordinary business of a building society and the rules adequately govern them. However, I suggest to the Dáil that the provisions of these sections strike the right kind of balance.

Another point of criticism of the societies has been the giving and receiving of commission in connection with loans. This arose, for instance, in cases in which some societies were paid commission by builders in consideration of an undertaking that loans would be available from the society for the purchase of houses from the builder; this was known as commission for a block loan arrangement. It was an undesirable development in many ways, although I can see that it had legitimate attractions for both the building societies and builders. The system however, favoured the big builder and tended to leave the small builder or the individual seeking a loan at a disadvantage. It goes without saying that the cost of the commission was passed on to the purchaser, thus increasing the cost of the house. The societies agreed in 1973 to end any such arrangement by which commission was paid. This form of commission will be prohibited under section 75 of the Bill.

I have been disquieted by complaints which I have received from persons who claimed that they have been offered loans on payment of quite a substantial fee. I have looked into these complaints but have found no evidence that societies are involved in these offers. I feel strongly that the public should be protected from the activities of persons obtaining easy money by the offer of a service which a house purchaser could get directly by himself without extra cost.

Section 75 also prohibits a director of a society from receiving any commission, other than that authorised by the rules, for introducing mortgage business, or undertaking to introduce such business. There is also a prohibition on the acceptance of commission on the effecting of certain types of insurance.

As I said at the outset, this is a long and rather involved Bill, but one which, I hope, will provide an adequate, modern, legal framework for building societies. On the general subject of controls contained in the Bill, may I say that any Bill of this kind must seem to contain wide powers of control by the central authority. If only the existing body of building societies legislation were to be simply restated in the Bill, this would still seem to comprise a formidable array of controls. The proposals that have been added to the existing provisions have, in the main, been adopted from controls already exercised over banks, credit unions and public companies. I can appreciate that, reading the Bill in isolation, it could strike Deputies as being unduly restrictive and possibly conveying an impression of distrust of the societies. However, the Bill contains few, if any, more restrictive provisions than those seen by the Oireachtas in recent years to be necessary for the control of banks, credit unions and companies. The building societies are major financial institutions with assets in excess of £350 million and the State would be failing in its duty to its citizens who invest with and borrow from the societies if it did not provide an adequate legislative framework for controlling institutions of this magnitude.

Deputies will observe that the Bill proposes to give four different authorities specific areas of control over activities of the societies—the Ministers for Finance and Local Government, the Central Bank and the Registrar of Building Societies.

When the Bill was being discussed in the Seanad, considerable pressure was brought to bear on me to delete all forms of ministerial controls and to place the responsibility of overseeing the societies on the Central Bank and on the registrar, who would then be an independent, almost judicial functionary. This proposition could not be accepted in the Seanad and it cannot be accepted in Dáil Éireann. Responsibility for questions of policy and for subordinate legislation, in the form of statutory rules and regulations, must be vested in a Minister responsible to the Houses of the Oireachtas and able to explain—and defend, if necessary— his policies and regulations in the Dáil and Seanad. The executive functions of day-to-day supervision of societies properly rests with the registrar who, I may say, will be given no less independence in the discharge of these functions than his counterpart in the United Kingdom—who was held up in the Seanad as an example to be copied here. To the limited extent that the societies are part of the second level banking system and custodians of more than £350 million of our people's savings, it is proper that the Central Bank should have directive and sanctioning powers over certain of their financial arrangements.

My attitude in the matter is supported by the report, "Building Societies in Ireland", prepared in February, 1974, for the National Prices Commission by Mr. E.J. Cleary of Swanson University, an acknowledged expert in the history, development and constitution of building societies. At paragraphs 123 and 124 of his report Mr. Cleary makes the point that, while it is necessary to give the registrar power to regulate societies, it is important that there should be safeguards for societies. He says, and I quote:

This can be done by making the Registrar's powers in these matters subject to the consent of an appropriate Minister. The resulting regulations would appear as Ministerial orders made under the Building Societies Act. This could be drawn so that they were subject to annulment by resolution of the Houses of the Oireachtas. Such an approach would enable building societies and others to challenge the regulations through the political process. Societies would, of course, look for legal redress through the Courts if the regulations made were not in their view in conformity with the Act.

124. Apart from the public interest in the good and legal conduct of building society activities there is also a public interest in the manner in which societies adapt themselves to the overall housing programme. This interest is currently overseen by the Department of Local Government. While it has a certain logic to combine these two functions in a single Ministry, it is better practice to separate them. The Ministry's strong interest in the achievement of its own programme can conflict with the proper supervision of the interest of investors and borrowers in building societies. It could be tempting to reward a society compliant in responding to the needs of the Ministry's programme, by not exercising regulatory supervision with the keenness that the interest of members demands.

There we have a succinct and objective explanation of the reasons why the exercise of various functions under the Bill is divided between different appropriate authorities and, in particular, why certain powers in connection with the societies are being given to the Ministers for Finance and Local Government. I would like to make it clear that I am not prepared to agree to any departure from the general framework of the Bill in so far as the distribution of these functions is concerned.

While I must stand firm on these basic principles, I would like to assure Deputies that in any other respects I will be glad to consider carefully any suggestions which they may put forward with the aim of improving the measure. Over a century has elapsed since the present basic statutory structure governing building societies was enacted. I would like to think that the present Bill will stand the test of time as well as did the Acts of 1874 and 1894.

I commend the Bill to the Dáil and I look forward to a constructive debate on its contents.

Mr. Faulkner

The Second Reading of the Building Societies Bill has come at an opportune time, when the building societies are very much in the public mind because of the recent high increase of over 2 per cent in their mortgage interest rates. The new level of mortgage interest rates stands at 13.95 per cent and this interest rate to those holding mortgages from the societies is extremely heavy and beyond the capacity of many to bear. I appeal to the Minister to make a subsidy available to the societies to ease the burden.

I would also suggest to the building societies that they look again at the new rates to see if it was necessary to increase them to their present level. I fully appreciate the problem of the societies in view of the increased bank charges but, nevertheless. I should like to be certain that the level of increase decided on by the societies was absolutely necessary.

Mortgage holders who are presently out of work, or who have not received any increase in their incomes over the past year because of the circumstances of their employment, will find it virtually impossible to meet the monthly repayments. Many of those also who are contemplating taking out loans will be inhibited from doing so because of the increase, and this will have an effect on the building industry itself. Now that the Minister has stated there will be fewer local authority houses built in this year, and that he is relying on the private sector of the building industry to make up the shortfall, the importance of——

Mr. Tully

On a point of order, would the Chair rule on whether we are discussing the Bill?

Mr. Faulkner

That is a very arrogant interruption on the part of the Minister. I am entitled to speak——

Mr. Tully

On the Bill.

Mr. Faulkner

——on any aspect of the building societies. The building societies now assume a role which is even more important in the social field than it ever was before.

On the Bill, the Fianna Fáil Party welcome in principle what might be termed this modernising legislation. Building societies, as they are now are entirely different institutions from those envisaged when the original legislation was passed. Some abuses have also been apparent and reform of the law is therefore necessary, and this Bill proposes many of the right measures to regulate the building society movement. However, we on this side of the House have some serious reservations on some of the controls proposed in this Bill. I will go into detail later on.

We also feel that the approach to the Bill is rather confined. Building societies have changed very rapidly in the past decade. The Bill seems to confine the movement within its present role and it restricts, to a very considerable extent, any further radical changes. I had hoped the Minister would have produced in his Bill some proposals to ensure a greater and more regular flow of funds to the societies, so that we should not have to continue with the stop-go situation to which we have been only too accustomed. The fact that societies were relatively well-off in cash terms in recent times is no assurance as to what the future may bring. We all recall vividly that only a relatively short time ago the inflow of money to the societies was so poor that it was a cause of very considerable concern and, indeed, the cause of cutbacks in the building industry.

The Bill also lacks, in my view, any proposals which would encourage the societies to vary the types of mortgages they offer, or to cater for a wider clientele. My primary concern with this Bill is that it confers too much power on Ministers, which could result in their interference with the day-to-day running of the societies. I fully accept that a considerable degree of control must be exercised in the national interest, and in the interests of borrowers and investors. I am not happy with the involvement by the State in commercial transactions for which it has not got the expertise. It is vital for the future of the whole house building industry that the commercial management of the building societies is sound.

Furthermore, it is possible for two of the Ministers named in the Bill to have objectives opposed to one another, or to the interests of the societies themselves. The sole interest of the Minister for Local Government might be in the building of X,000 houses per annum. The Minister for Finance might be concerned about the success of a national loan. Either could be tempted, for immediate short-term interests, to regulate the societies with powers conferred in this Bill in a manner which would not be in the interests of the societies or in the interests of their members—in which I include borrowers—or in the interests of the construction industry. I fear that the Ministers could bind the societies too tightly with rules and regulations. As a result, the societies could cease to grow, and fail to make the contribution we expect from them in helping to house our people.

A bureaucratic approach to the Bill is a worrying feature. The controls proposed are so great as to put the societies into a strait jacket. Under this Bill the societies will have four masters: the Minister for Local Government, the Minister for Finance, the Minister for Industry and Commerce, in so far as an official of his Department will be the Registrar of Friendly Societies, and the Central Bank. Each of these masters will have his own objectives. However well they may consult with each other, an atmosphere of uncertainty cannot but prevail. This uncertainty and the possibility of political control, and control by those who have not got commercial experience, could hinder the growth of the societies, and could result in many people failing to get loans to purchase their houses.

Our general approach in Fianna Fáil to this problem of control is to give wide powers to the Registrar of Building Societies who will become an expert in the affairs of building societies. All controls will be exercised by him. Where statutory controls were required, that is regulations and so on, the Minister concerned would make regulations on the initiative of the registrar. In this way, we could eliminate the unnecessary and bureaucratic consultations envisaged in this Bill for which, in my view, there is no necessity. We propose to put forward amendments which we believe will strengthen the powers of the registrar and reduce those of the Ministers while, at the same time, preserving the right of Deputies or Senators to question the regulations.

If I might digress slightly at this point, I should like to repeat that we are anxious to have a registrar who will play an active and positive role. We would wish him to play a much more important role than is envisaged for him in the Bill. We should like to see him with a professional staff and in a position to have the best advice available before he makes decisions. It would appear to me that the section in the Friendly Societies Bill which permits the Minister for Industry and Commerce to remove the registrar from office, if passed in its present form, would be a retrograde step and would do nothing to enhance the position of the registrar. This is the same registrar who will operate in the context of the Bill we are now discussing.

If the Minister has the sole right to remove the registrar from office without reference to the Oireachtas, the registrar's independence of action will be severely curtailed. We proposed in the Seanad that the registrar should be removed only on foot of a motion passed by a two-third majority of each House of the Oireachtas. and our aim in putting forward that proposal again was to maintain the independence of the registrar in what could be regarded as a politically sensitive area. I would hope the Minister would reconsider some of the points he has made in the final paragraphs of the speech which he has now made and that he would also prevail on his colleague to make the necessary changes in the Friendly Societies Bill in order to ensure that the registrar will be independent.

As the Minister has pointed out, building societies are governed primarily by two Acts passed in 1874 and 1894 and, therefore, there was an obvious need to consolidate, amend and extend the laws governing them. As I said earlier, this Bill has many good features. It tackles some of the problems thrown up such as societies which are not genuine building societies but what might be described as crypto-commercial banks or investment groups hoping to avoid taxation. Societies could be formed too easily and some societies failed. This caused considerable worry and concern to borrowers and depositors, even though it is true that no depositor actually lost money. These problem societies lowered the general respect in which building societies are held, and I feel that the policing measures in this Bill will deal with these cases, and therefore I welcome them.

The Bill itself is a mixture of three Irish Acts and of the British Building Society Act of 1962. It does not incorporate any new thinking and does not reflect enough of the developments which have taken place in recent years. There is no reference to the EEC in the Bill, and I am anxious to know if building society operations will in any way be affected by EEC directives. We are told nothing about this in the Bill nor in the Minister's speech and perhaps he might refer to it in his reply. There is no encouragement to Irish societies to operate in other parts of the Community or no indication whether societies incorporated in other member states are subject to the provisions of the Bill. Could, for example, a large British building society open up here and what controls would be exercised on it?

The Minister has pointed out that there is no section in the Bill which deals with trustee status. Nor is there any mention in the Bill of any method which will help the societies to attract funds in a regular and systematic way. No power is given to societies to carry out their own building developments so as to provide cheaper housing.

As I see it in this Bill, the building societies are viewed essentially by the Minister as carrying out their present middleman role in the money market, a rather staid existence within the present narrow framework, and the Bill is purely regulatory in that context. The development possibilities are ignored.

I do not wish by any means to disparage the present role of the building societies. There have been enormous developments in the past ten years. The growth of the societies has been phenomenal, their contribution to the economy equally so. The expertise and enterprise which generated this growth might wish to develop in other directions. The building societies are now very largely bankers. Originally they were thought of as housing co-operatives are thought of nowadays. They could fulfil other roles in housing than that of borrower and lender, but again the Bill does not envisage this. I am concerned, of course, that the funds of the building societies should be utilised for housing. Building societies have fulfilled a very valuable role over many years in providing money for those who wished to build and to own their own houses. When one remembers that the majority of the houses built over the years were privately built and that a considerable proportion of these houses were financed by building societies, one gets a clearer picture of the contribution the building societies have made.

As the level of wages and salaries rose rapidly with high inflation and the qualifying income limits for SDA loans remained static, more and more people were forced to turn to the societies if they wished to buy or to build their own houses. Therefore in this way the societies have to a considerable extent in recent years taken over a large part of the function which had been carried out by public authorities. Any change which will help to modernise the administration and policies of societies and enable them to do their job better will contribute to economic and social development.

Where problems and dissatisfaction do arise with building societies it is primarily in the matter of interest rates. To attract deposits a building society must pay competitive rates of interest. If the rate of interest is too low income drops and the society is unable to fulfil its function. If interest rates are increased to attract more deposits, a higher rate must be charged to borrowers, creating in many cases serious financial problems. Few borrowers, when taking out a mortgage, understand the vagaries of the financial system. They are concerned only with their ability to repay the loan and the rate of interest in force at the time. If rates rise later on and their outgoings on housing increase there is a feeling of frustration and injustice created which does not help the development of building societies. These rate increases often coincide with increases in other outgoings and the strain and tension created disturb the harmony of family life.

The societies, therefore, might, in their own interests, provide a greater variety of loan options to the public so that the borrower can choose the mortgage that suits his family and financial circumstances. I have in mind index-linked loans which would have a low basic interest rate but whose repayment would vary directly with inflation. Alternatively, societies could offer fixed repayment loans or loans at low rates of interest which would facilitate particularly lower income families while perhaps retaining part of the equity of the property. These are some general suggestions for consideration. Any new schemes would undoubtedly create problems, perhaps increase administrative costs in these societies.

Because of the advantage building societies have in interest rates arising partly from tax concessions, building societies have in recent years attracted an increasing flow of funds which are therefore available for house purchase. This is particularly so in periods of stable interest rates. However, they are at some disadvantage in periods of stability. It is a major administrative task for a society to work out the new repayments to be made by borrowers. Because of the understandable resistance of borrowers to any increase in rates there is a natural reluctance to adjust rates. In these circumstances societies could find themselves at a competitive disadvantage, with a considerably reduced inflow of cash and with a consequent lack of finance for housing.

An unstable cash flow can be a major problem. I noted in a report that was issued some time ago in respect of British building societies that, when deposits slowed down, activity in the building industry also slowed down. When money began to flow again there were not sufficient houses available. At that time the extra inflow of cash simply increased the price of houses. In due course the new price level became attractive for developers, but by the time new houses were completed deposits had slowed down and a building slump developed. Confidence cannot be maintained in such an industry unless every effort is made to ensure an even flow of funds and the steady development of the house building industry. The example I have quoted has become all too prevalent in Ireland. In recent times the societies had a large inflow of cash, but the building industry had already lost confidence. Recent auction results indicate that the spare cash is resulting in inflated house prices. Perhaps some form of stabilisation fund is necessary to ensure the steady development of societies and to help them to overcome any disadvantages they may suffer in periods of instability.

At present building societies have the edge on other popular types of investment in regard to interest rates. I did a survey at the end of last June and at that time the associated banks paid 6.75 per cent on deposits of less than £5,000 with the first £70 of interest free of tax. The non-associated banks paid between 7 per cent and 11¼ per cent, tax payable. The Post Office paid between 7 per cent and 9½ per cent on different types of accounts. At that time the building societies paid 7½ per cent tax free. This gave them the edge and helped their inflow. At that time I said I was sorry to note the Government's decision to remove the 1 per cent interest subsidy from the societies. The excuse given was that the Government did not wish building society borrowers to enjoy better terms than the SDA borrowers. As a direct result of Government action, in increasing SDA loan interest rates, building society borrowers did enjoy better terms. The position has now, because of circumstances, been reversed. The removal of the 1 per cent subsidy caused hardship for building society borrowers, many of whom were unemployed or on short time, and many more had not got the previous year's national wage agreement.

The building societies play an important role in the economy today, one that has been developing over the last ten years. Our net savings with the various financial institutions in 1969 was £124 million. During that year the level of deposits and shares in building societies rose by £8.4 million, or 7 per cent of the total savings. In 1975 savings were almost £600 million and building societies' deposits and shares rose to almost 12 per cent of the total savings. In 1969 deposits with the societies were 16 per cent above the previous year's level and in 1975 the figure was 35 per cent. In recent years the number of investors has increased but I feel it can increase more. Only 3 per cent of the adult population have accounts with building societies. With this growth in the power, strength and enterprise of the building societies and the constructive role they can play in society, I believe that legislation which takes account of these developments should be considered in this House. Building society members should have more power and responsibility and there should be greater communication between the investors and those who administer them. Therefore I am glad this Bill gives special attention to the calling of meetings, particularly annual general meetings, in order that the views of shareholders and depositors can be made known and that they can share in policy making.

I have seen copies of the annual accounts of several societies and I must admit I had difficulty in finding the information I required. Few people could understand the present accounting format of the societies. It may be that the societies are obliged by law to present their accounts in this way. The societies should present their accounts in a more readily understandable form, particularly for the small investor. The small investor is the backbone of the society and provides it with much needed stability. The small investor is not likely to move his money elsewhere for a quick profit and he should, therefore, be given special consideration. I note that the building societies' association are anxious to have representation on any council relating to their function which the Minister decides to set up. I agree with this but I believe that once a society has complied with the regulations and instructions of the registrar it should be automatically admitted to membership of the building societies' association which should be open to all bona fide societies. In the event of the association being granted seats on the council, the smaller societies must have their voices heard.

I come now to the controversial question of advertising. The amount spent by all of the societies on advertising seems very large indeed, particularly when related to the relatively small number of investors. From the Minister's speech I gather he does not regard it as too high. I take it that he has had the matter thoroughly investigated. If that is his opinion, having had the matter thoroughly examined, I accept what he says. However in view of the fact that building societies are non-profit making bodies and mostly charge the same interest rates I wonder whether they could not pool their advertising resources. I do not propose to push this point because it would amount to administrative interference in the financial affairs of the societies, to which I object.

I shall revert to our main objections to the Bill. Some years ago the overall control of the building societies lay with the Minister for Finance. Now it is the responsibility of the Minister for Local Government. Under this Bill the societies will have four masters. I believe that is undesirable; the possibilities of conflict relating to proper management and to financial policies are too great. I should like the registrar to have an independent status, his own staff and the necessary expertise. At present the Minister can dictate to a society to achieve his immediate objectives. For example, over the years, societies made money available for house purchase in the proportion of approximately 50 : 50 between new and secondhand houses. That was a sensible arrangement because few people sell a house without buying or building another. Some people, because of a transfer of job from one area to another, have no option but to sell their house and build or buy another. Others, perhaps, cannot afford to buy a new house.

In my view the traditional division of funds catered fairly for all types of purchasers. In 1974—and this is confirmed in the mortgage accounts of the societies—a considerable change took place, when approximately twice as much money was advanced for the purchase and building of new houses as for secondhand ones. I am led to believe that that change took place because of pressure by the Minister. Those people forced to change house because of a change of job and those who could not afford new houses were victimised by that regulation while many others, who owned houses and who wished to change, could not sell their houses. The result of all this was that the demand for new houses fell. Those people were victims of what I would regard as the Minister's need for housing statistics. As soon as the result of this interference became obvious the Minister was forced to abandon his control and the societies returned to their traditional pattern of lending.

That recent example supports my contention that the activities of the building societies should be controlled only by the registrar who will be guided by legislation passed in this House. While the overall control could be in his hands, rather than in the Minister's, the registrar—while independent of politics—should not be either the creature of the societies or a bureaucrat. He should continually examine the operation and administration of societies to bring about improvements and make more money readily available for house purchase. He should also examine the way in which the societies in other countries are administered, the activities in which they engage and how relevant their activities might be here.

For example, in Germany, societies are builders as well as financiers. In other countries societies are permitted to invest a small percentage of their assets in the construction of houses for letting purposes, the idea being that some investors might not be in a position initially to buy their own homes. They rent a house or flat from a society and, when their circumstances improve, they buy it. Profits accruing to the societies from these activities are ploughed back for the provision of more moneys for mortgages and reducing interest rates. All of this could be examined by the registrar to ascertain whether or not some of the methods used by building societies in other countries could not be utilised here to our advantage. In Ireland, when a society wishes to advance a loan higher than 75 per cent of the cost of a house, it seeks a guarantee from a bank or some other financial institution.

I should be interested to know whether the societies could not improve on that situation. House prices are now so high that societies must lend a higher percentage of the cost than they did heretofore. It is essential that they lend up to 90 per cent or 95 per cent because a householder, particularly a first time purchaser, has many other commitments to meet such as furnishing the house, paying legal fees and so on. If building societies could take on some of the risk themselves, it would reduce the cost of mortgages. Similarly, if societies could amalgamate their legal departments so that there would not be so much red tape involved in the transfer of a house from one mortgagee to another, I believe costs could be reduced also. I have known of cases where up to five different solicitors were involved in a simple sale—the seller's, the ground landlord's, the seller's building society, the buyer's and the buyer's building society.

I believe also that the societies have a role to play in housing standards. Buying a house is the largest financial transaction undertaken by any family, the effects of which will be felt for anything from 30 to 35 years. The life expectancy of a house is at least twice that. Yet the guarantee provided by builders is between six months and two years. A person buying a car which will last from five to seven years gets a year's guarantee or 12,000 miles and he can have that guarantee renewed on the payment of a small fee. As the average householder buys a house only once in a lifetime and will not be making a repeat purchase, he is not in a position to influence the type of guarantee provided.

I believe that building societies, which are involved in the financing of the bulk of private housing, have a role to play in ensuring that high standards are maintained not only in their own interests but also that of their members. There is a serious lack of consistency in construction methods and, in some instances, poor site supervision. Some building contracts modify the common law rights of house purchasers. Inspections by building society architects and those of public authorities very often are relatively limited and relate to specific matters only. Building societies, in view of their co-operative nature and as a service to their customers ought to be more involved in this field. In Britain there is a national house builders' registration council, an independent, non-profit making body which includes all of those involved in house building, including the societies. They promote better standards. They are concerned with construction, design and layout. They lay down standards and will remedy defects in houses if their builder member does not do so. Some parts of their guarantees last for ten years. Here societies have tended—presumably because inflation has guarded the value of their investment—to ignore the question of house quality. I would recommend that they become involved in it here. The guarantees provided here by the construction federation industry are not widely known and are limited to defects occurring within two years.

Perhaps I have wandered slightly from the point, which is that we should have a broader view of the possible activities of the societies. This Bill ensures the continuation of the whole movement in its present role and provides for no new developments.

I should like very briefly to return to the question of deposits and shares. In the ordinary usage of those terms a depositor with an institution is not a member of it and has prior claim on its assets if it collapses. On the other hand, a shareholder is a member of the institution, bearing higher risks, and in good times he gets a better return for his money. However, in building society usage the terms appear to be interchangeable in this Bill. There appears to be no difference in practice although in relation to one particular society, according to the Prices Commission report, 22 per cent of the liabilities were held in the form of shares. However, in another there were different rates of interest for depositors and shareholders. The average member of the public, even the average shareholder and depositor, is unaware of the exact position or of different options open to him. Unless there is some specific reason for maintaining the distinction between deposits and shares, the different names should be abolished and either the word share or the word deposit used.

The Prices Commission report contains very useful data which will be of assistance to the registrar in his policing of societies. I welcome this Bill. I believe it is a necessary piece of legislation but I would like to see it improved in two major respects. As I said earlier, we want to eliminate some of the bureaucracy which will inevitably follow from the implementation of the Bill in its present form, which includes the four masters of the building societies. We also want to broaden the outlook of the Bill so that it can provide for future development of the societies. Although I have been to a degree somewhat critical of the operations of building societies I want again to stress that we are very conscious of the outstanding contribution they have made through the years and we are anxious that the Bill should help their further progress. We favour the Bill in principle apart from the few important points I have mentioned.

Mr. M.E. Dockrell

I would like to say how much this side of the House welcomes the Bill which the Minister introduced into this House today which has gone through what is coyly referred to as "the other House" but which we know as the Seanad. It was welcomed there and was given a very thorough investigation by all sides of that chamber. I listened with interest to Deputy Faulkner's remarks, who, on the whole, has been very fair to the Bill and has welcomed it.

I would like to say a few words on this very fascinating building society movement, which the Bill is endeavouring to help. It was started in England nearly 200 years ago in a very simple way. Men paid in a few pennies a week honestly and regularly and when sufficient money was gathered a draw was held. The names were probably put in a hat and the winner bought his house. The system has not changed fundamentally since then. Nowadays people put money into a society and then the society— it does not hold a draw now—lends money to people who want to buy houses. The enormous movement we know today has been built up from that simple beginning. The building society movement is a non-profit making one. It does not want to make profits. It must not make a loss or it would endanger the whole movement. The Government did not enter into this in the old days. Now they are entering into building societies with an ever-increasing fervour.

I am connected with the building society movement. The people who are interested in running building societies welcome many aspects of this Bill. We have reservations on a few points which the Minister is well aware of. We have not any fundamental objections to the Bill which skilfully endeavours to make the running of building societies, between themselves, their depositors and borrowers, smoother, which makes it more certain that the depositors will get their interest and that the borrowers will get their houses and continue to live in them without fear of being dispossessed.

A fairly complex code of legislation has been built up over the years. We are now getting what we always wanted: a registrar with considerable powers. In the past he had not the legal power to enable him to deal with societies which in his opinion were not conducting their affairs properly. Fortunately those societies have been very few and far between in the whole history of the movement. This movement has been so successful financially and in its management that there have been very few societies who have lost money for either their depositors or their borrowers. The registrar now will have increasing powers if he thinks the ratio of borrowing and lending and so on has been superseded.

States all over the world have welcomed building societies and many newer countries have sent over to ask people from Britain and the Continent to look into the systems which prevail in various countries in order that they could start societies in those countries, because no other financial institutions have been able, in quite the same way or quite as simply and with a minimum of legal fuss, to borrow short and lend long, to the extent that the building societies have been able to do that. I think I am correct in saying that the world-wide £30,000 or £40,000 million of assets and business generally is a huge sum even in global terms. We are only a small country and not being a highly industrialised State our growth in the movement has been smaller than in some of the other countries. Nevertheless our growth in the last few years has been quite phenomenal and in the building society movement there are tens, probably hundreds of thousands of people in Ireland who are, who should be, and who would not be housed were it not for the societies, because even banks have not found it possible to borrow short and lend long. That is what the building societies have done and are doing.

Another thing they have been able to do, and perhaps one of the reasons why they have had this tremendous success, is to be readily available to the people concerned. I will return to another aspect of that in a moment. They are readily available; people can walk into them easily, and when they walk in people can be given and do get eventually a house with a minimum deposit. In the past there have been cases of lots of people who got it with practically no deposit at all. The deposit, in other words, is only a token of the goodwill of the person concerned. What bank would you be able to go into and get a loan just on character, on the fact that you are in some sort of job where you are able to pay it back at so many pounds a week or a month? That is one of the great things the building societies have done and the Minister and his Department have recognised that again and again in this Bill.

I, who have not had acquaintance with the building society movement until late in life am constantly amazed at this service which is given, and expected by the public, namely that they can get a house with a minimum of recommendation. In some continental countries you have to be paying in money for years and years before you can attempt to get a house. In these islands you can go in and you can get it if in the opinion of the society you are a fit and proper person so to do. That has grown and grown to the extent that in Britain the building societies have bigger assets than the joint stock banks. They are colossal and they get bigger and bigger in this country.

Before I develop that I want to mention again ease of access. We sometimes hear people saying that the building societies have too many branches. That is not so. They are in what you might call the high street of every town and many of the large villages of this country and people do not have to go searching for the financial sector of a city or of a town to find a place where they can deposit their money if they are depositors and get a loan if they are borrowing. So that cry that building societies should not have so many branches is a foolish one. Without that number of branches and ease of access the movement would not get the money in.

Another aspect of the building societies—and it is not fully understood—is the relationship between the deposit rate and the mortgage rate, the rate which people pay when they borrow money to get a house. There has to be a direct relationship between the two because if money is not attracted in from depositors there will be nothing to lend out. That is a simple and fundamental fact. The societies have to develop, and have developed over the years, immense expertise in that way, that they can readily gauge the price which they can afford to give to depositors in order to have the maximum amount of money to lend to their borrowers. It is very simple but it is not always recognised that without a figure which can attract the depositor there would be nothing in the coffers to lend out, or very little.

I can understand the wish of the Minister—by this I mean the Minister, the Department and the Government —to have power in regard to fixing both mortgage and deposit rates because not only is he anxious to get the money into the societies he is also anxious to see as many houses as possible built. Ministers change and sometimes policies change. I issue a warning to the present Minister and to future Ministers that it is very advisable to encourage the building of houses. My whole life has been connected with house building in this country and I know a little about that side of the building society movement and of building itself.

The Minister is always anxious that the maximum number of houses be built, but building societies are primarily financial institutions. Nobody is more interested than they are in the number of houses built, but their fundamental job is taking in money and lending it to borrowers to buy houses. I will not say that the two points of view are sometimes in conflict but they may not be exactly ad idem, as the lawyers say.

The wisdom of the Minister in this Bill is that he has seen the necessity to reconcile the two points of view. He has taken powers to deal with the situation, if it should arise, that the building societies were following a course which would not help building; but he does not want to take unnecessary powers to deal with such a situation. I want to get it down in black and white here that the building societies must never for one second lose sight of the fact that they must make the lending of money to them attractive or else they will not get it. People take out their money as quickly as the wind blows if they think they are not getting good value, and then young people are left wondering how they will get a roof over their heads. I urge that there be a realisation here of the fundamental purpose of building societies, while bearing in mind that the Government cannot give them a free for all. They do not want that, they have never demanded it and the Minister has recognised that.

The Minister referred to a Bill of the 1870s and of the 1890s—both of those were a long time ago—and said he hoped this Bill would regulate the affairs of the societies for an equally long period. In this rapidly-changing world that would be almost too much to hope for——

Mr. Tully

I will look at it in 50 years' time and if it is not working out I will change it.

Mr. M.E. Dockrell

Certainly the Minister and his Department have considered this matter with the aim of producing as perfect a Bill as possible and people in the future—not to mention the present Dáil—will have nothing to say against it. I thank the Minister for introducing the Bill. All of us welcome it and realise the great effort that he and his Department have made to introduce a Bill that will continue to regulate the affairs of this great movement in the interests of the public and of the country in general.

Mr. T.J. Fitzpatrick

(Dublin Central): I join with the two previous speakers in welcoming the Bill. It contains many sections that we consider desirable and we welcome them but our spokesman has pointed out certain reservations we have with regard to other sections.

I was interested to hear Deputy Dockrell outline the background of building societies as established in England in the 17th century. I got the impression that it was then more of a co-operative society, where the people who invested money were the same people who withdrew it. Building societies have expanded considerably since then and we have a situation here— and I am sure it applies throughout the world—where a considerable number of people invest funds in these societies and do not apply for loans to build houses. On the other hand, there are those people who invest in the societies with a view to getting a loan to build a house at a later stage.

As the Minister stated, building societies have expanded considerably during the years. They have played a major part in the economic and social development of this country. Were it not for the funds made available by them thousands of people would not have the luxury of their own homes. Where an individual has a stake in a society in my opinion—and this is shared by many people—it tends to be a better society. If we encourage people to purchase their own homes it is a contributory factor in the strengthening of our society. For that reason the Bill the Minister has introduced is of vital importance and deserves all the attention this House can give it.

As the Minister pointed out the assets of the building societies since 1961 have increased and they are now in the region of £300 million. This flow of funds into the building societies from people who are investing purely for investment reasons is very welcome. As Deputy Dockrell stated, if the building societies are to have a sufficient flow of funds they must ensure a good return on investments. I would not be misled about the additional flow of funds into any financial institutions over the past two or three years. It is a well-known trend, not alone in this country but in the United Kingdom, that in times of depression people have a tendency to save more. This pattern has been established not only in this recession but in other recessions. People build up reserves of savings to serve in the event of emergency. Some of the additional inflow of capital to the building societies can be attributed to that trend. Not alone must building societies create a climate to encourage investment but a climate must be created so that sufficient people are in a position to get loans from building societies. The building societies cannot do this on their own.

The building societies are fortunate in having this flow of revenue into their associations. The demand for loans is reasonably good in the private sector. The associated banks have quite a build-up of reserves within their organisations. Many bank managers would tell you that if they could get proper clients they would be only too willing to lend money. This situation could develop in relation to the building societies. If the price of houses escalates out of proportion to the ability of the average individual purchaser, a situation could develop where the average individual would not be able to borrow from the building societies. The Minister and everyone in this Houses are perfectly well aware that we are reaching that saturation point. I would direct the Minister's attention to the possibility of that situation arising at some future date, if it has not already arisen.

A man who started to save with the building society four or five years ago will find at this stage that his capital has been eroded. In the normal course of events his capital would have been eroded, but now it would be eroded to a greater extent, in view of the purchasing price of a house now. I have spoken to many people who have saved over a number of years with a view to purchasing a house. They now find that their savings have been completely eroded and, on the other hand, inflation is driving the price of the house completely out of proportion to their increase in wages. In the next two or three years building societies could very well have a substantial flow of money into their funds, but if inflation is not checked and the price of private houses is not checked we will reach a stage where a big proportion of our wage earners, who have made every effort to try and have deposits built up with the societies, will not be able to afford the substantial loan they will need to purchase a house and they will eventually turn to local authority housing. If the present scale of increases in the price of houses continues, that will be the outcome. I have great sympathy for the young married couples who must borrow huge loans when trying to set up house at the present time, when I compare it to those of us who have purchased our houses over the past eight or ten years. As Deputy Dockrell mentioned, building societies have obligations on both sides. They must give a reasonable return, otherwise they will not have funds.

The movement of money within the United Kingdom and this country is very easy and people are getting more and more sophisticated with regard to their return on deposits. Therefore I can see the dilemma of the building societies. But at what stage will the people in this country say, because of these huge loans, that they cannot carry this burden any longer.

There is no doubt that a huge responsibility is placed on a man when he is faced with the possibility of having to pay in the region of 50 per cent of his salary for repayments on his home. This is not an unusual situation. I know one man whose repayments were nearly 60 per cent of his salary. He and his wife persevered and their house is now worth far more than they paid for it at that time, due of course to inflation. This is a very difficult undertaking for married people and the State must take some action. Prices of private houses are escalating by as much as 20 per cent and it is very difficult for young married people to be in a position to approach a building society. I have the highest of praise for the building societies and the work they have done. They have their problems in competing with other financial institutions.

I fully agree with the Minister with regard to the restrictions on the formation of new societies. The major societies have made a great contribution but there are some who probably never intended to make a contribution and had ulterior motives. I am quite in agreement with that section in the Bill which states that certain deposits would have to be placed by each shareholder. The Minister mentioned a figure in the region of £10,000. I see nothing at all wrong with this. I would ask the Minister to review the figure from time to time and increase it in line with inflation. This is a very serious business and we must not allow any individual to set up an organisation. Some innocent people have been caught in the past, and it is only right and proper that the interests of both borrowers and investors should be protected. In my opinion, some provision should be written into the Bill to ensure that people who wish to establish these societies have the proper expertise to develop and run them.

There is also a section in the Bill providing for the lodgment of a certain amount of money with the Central Bank. I can see the merit of this. I know this is common practice with the associated banks. As Deputy Faulkner has mentioned, this section was drawn up in consultation with the Department of Finance and the Department of Local Government. I am not altogether sure whether, at the moment, any moneys have to be lodged with the Central Bank or with any other financial institutions. The figure the Minister mentioned is something in the region of £20,000 to £½ million.

We know that 98 per cent of the business today is dealt with by the Irish Building Societies' Association. There are still some small genuine companies. That is quite obvious. What type of burden will it place on small companies if they have to find £20,000? Will it be accepted by way of debenture, or transfer of deeds which all building societies hold instead of a transfer of cash? The associated banks transfer a certain amount of cash, but they can transfer some gilt edge securities too. Building societies have no such securities. They have the security of the deeds of the thousands and thousands of houses they hold within their companies.

I wonder is the Minister's intention that the transfer of £20,000 from small companies and £½ million from the larger companies should be by the way of cash or some type of securities. The normal rate for any money lent to the Central Bank by the associated banks is 1 per cent over borrowing rates. I should not like to see the building societies being deprived of cash. If at any time in the future there was a diminution of funds into the building societies, I do not know what effect this would have. Would it impede the number of loans they would be able to make? These matters deserve consideration. I am sure the Minister has gone into them with the building societies.

I am a firm believer in the independence and autonomy of business organisations. The organisations we are dealing with operate in a competitive world. Certain restrictions must be placed on them because they deal with public funds and public deposits. We should try to remove their day-to-day running from bureaucracy and State Departments. Deputy Faulkner said we should give more autonomy and more power to the registrar. Under this Bill the Minister for Local Government can lay down his terms of reference. The building societies have to make quick decisions from time to time and, if they are slowed down or impeded in any way by direct interference from a Department, expansion will be hindered. Whether we like it or not, there is this danger when too many Departments are involved, the Department of Finance and the Department of Local Government. If we appoint a registrar with a proper secretariat, and expertise, and give him proper status and complete independence, subject to his terms of reference, we will be doing a good day's job. He will keep the continuity going. He will know what is happening.

Let us take the other side of the coin. I have the highest respect for the officials of the Departments of Local Government and Finance. I am sure they are experts in their own field. We must remember that today within the civil service, especially since the evolvement of the EEC, many of our top civil servants often have to transfer to Brussels or to the Commission. Perhaps an official within the Department who has been dealing for the past six months with the building societies is transferred to Europe. This would to some degree impede the work of the registrar. For that reason I believe the registrar should be given more independence, and the absence of interference from the Department of Finance and the Department of Local Government would, I believe, lead to far greater efficiency within the building societies.

The Minister for Local Government is divesting himself of a very onerous duty from 1st January next, namely, planning appeals, which will be the responsibility of an independent body. That is how it should be. I am not sure that the Minister will help the building societies by involving himself here. To all financial institutions confidentiality is of vital importance. I am not suggesting for a moment that it is the intention of the Minister of Local Government or the Minister for Finance to delve into the various financial aspects of the building societies. If it was, I believe it would be disastrous. However, if investors took that view, it would weaken the structures which have been built up over the years. The intrusion of too many Departments cannot be a help to the building societies.

The Minister has drawn attention to the provisions in the Bill relating to the ratio of assets to liabilities, and says this could be varied from company to company. It is right to maintain a certain ratio and to retain a certain amount of the funds for cash flow. All these regulations are welcome. I am sure the details can be worked out at a later stage between the Department and the building societies. But I would certainly much prefer to see the Central Bank working out the ratio of assets to liabilities and advising building societies how their surplus assets should be invested. The Central Bank has expertise in this field. There has been a relationship down through the years between the associated banks and the Central Bank which, I believe, could be extended to the building societies. This would create a better structure and generate more confidence in the public generally.

Reference has been made here to advertising and the opening of various offices throughout the country. Building societies must compete for finance and it is important that a certain amount of advertising be done and that a certain number of branches be opened. However, whether building societies should compete with one another is a question I have often asked myself. Many of our banks have amalgamated, and I believe that as time goes on we shall see a great reduction in the number of outlets for the various associated banks. I can see the point in a building society moving into a town and opening an outlet, but I cannot see any sense in another building society moving into the same town and opening another outlet two doors up at a cost of £10,000 or £20,000. I believe the time will come when there will be a rethink on that whole aspect of the building societies because the question of staffing, capital expenditure, and overheads are aspects that are worth considering. One sees groups vying with one another in advertising on television, radio and so on, and while advertising is necessary, it should not be done to such an extent as to diminish unduly the profits of the societies.

There are many excellent sections in the Bill, and many of the details can be dealt with at Committee Stage. These are sections which are necessary for the safeguarding of investment. These provisions we welcome, but others we have mentioned are unnecessary and will impede the expansion and strengthening of the building societies. Generally, the provisions are satisfactory. You will always find weaknesses in any expanding organisation. These have been criticised in the past, and this Bill provides a remedy for them.

Deputy Faulkner referred to the soaring of interest rates, at the moment standing at 13.5 per cent. People trying to finance loans for houses costing £9,000 or £10,000 have my sympathy. I know what a great effort many of them who have taken on housing loans have to make. An increase of 2 per cent can be a substantial amount for a person who was on a very tight budget before this increase was ever introduced. Many of these people are in the most vulnerable section of our society as regards health and hospital services. There is no way that payments can be reduced.

I join Deputy Faulkner in asking the Minister to consider giving some subsidy to offset the differential between the additional charges and the old charge. These high charges will not last forever. I believe that the interest rates will be reduced, probably in the not-too-distant future. In the interim, there are people who may not be able to carry these increases. I welcome the Bill with the exception of those sections about which we have expressed our reservations.

Mr. F. O'Brien

I should like to pay tribute to the Minister for introducing this Bill which I welcome. It has already been debated in the Seanad when certain desirable changes were made to it. When the Bill has been passed it will meet the needs of the people and of the building societies.

We owe a great deal to the building societies. They have given a tremendous service and have helped many people to purchase houses. All legislation should be updated from time to time and the updating of this legislation does not reflect on the building societies. The building societies are happy with this Bill. Deputy Fitzpatrick baffled me for a short time. I did not know whether he was in favour of investing in building societies. He seemed to find it difficult to understand that large amounts of money were being invested in the building societies. Money is being invested in the building societies because people have confidence in them and in the development of this country. The records show that the Government have helped the construction industry.

The last speaker said that the building societies should have autonomy. He then talked about advertising and the duplicating of offices. If the building societies want to compete by advertising and by opening up new offices that is their business. I am a great believer in competition. Indeed, competition is the spice of life. The banks thought it was a good idea to amalgamate and to structure their advertising accordingly. Deputy Faulkner said that the rate of investment is very low. If that is so the building societies must try to attract more investors. They will have to adopt a hard line and be more commercial. Obviously they want to make a profit but they also have a social obligation.

One way in which the building societies could sell the idea of investing with them is by having savings deducted at source in various industries. I should also like to see building societies involving themselves with young people. They should devote funds and energy in trying to attract younger investors. The Government should consider giving incentives for saving in this manner. At present there are too many people on local authority housing lists. If we tackled the situation by encouraging people to invest in building societies we would not have long waiting lists for local authority housing. A sensible approach would be to attract young people to invest in building societies so that they would be able to get loans when they decide to purchase a home.

The building societies' rate of interest is high. When a loan is granted the interest rate is high because it is the going rate. The building societies can do nothing about that. They have to compete for money. I wonder if they could not devise some system under which, for the first five years of repayment of a loan—when a person's salary is lower and while inflation continues to rise—they might lend at a lower rate to be escalated as the salary is augmented. In that way people would be paying only what they could afford.

Deputies were saying here this evening there will come a time when people will not be able to borrow because of the high cost of housing and inflation rising. I inquired about a constituent of mine who was looking for a loan. She has no money invested. I was told: "No, there is no way, our books are closed, come back in three or four months' time." Remember we are talking of a time when building societies this year will lend possibly £90 million. That constitutes progress. Therefore, we should not be in doubt as to how building societies will proceed with their activities. The fact that that kind of money will be loaned this year reflects well on our society. It reflects a growing confidence in our society and in the house building and ancillary industries.

This Bill affords building societies a greater degree of autonomy. There has been talk about the registrar being slotted in and being the sole arbiter. There may be an argument to be made for that but, in terms of the vast sums of money invested by the public, one must have stringent controls. There is no point in our being concerned after the horse has bolted. We must ensure that when we introduce legislation it protects the investor. The building societies would also regard this as a desirable thing.

In cases where new building societies are being set up the registrar should act quickly to ensure that there is no sharp practice operating at an early stage. Also when there is to be a change in a company or in a building society, such as a change of directors, of personnel or, indeed, of attitude the registrar must be careful at all times to ensure that there is nothing in such change that will affect investors' money. People have confidence in building societies, which is what we want. This Bill aims at giving a greater degree of confidence to the public to invest their money in their future.

What concerns me somewhat is the question of commission paid by builders, which is being stopped. There is also what I might call the middleman, the insurance company agent who will tell you he will obtain a loan provided you take out some sort of policy with him. I dislike that type of sharp practice. Insurance companies should operate in their own right. Building societies do insist that a mortgagee has an insurance policy but that policy should not be initiated by an insurance company solely as a means of attracting lending business. Perhaps the Minister would examine that aspect because I do know of people who have gone to building societies who in turn have said: "Sorry, we are closed for business; you can go to an insurance company or one of their agents". In turn he will say that you can borrow the money but, of course, there is the stipulation that you buy his policy. That is the kind of practice this Bill seeks to eliminate. We are concerned about the investor, about the young married couple trying to purchase a house. There should be no middlemen or exploitation.

The type of investment that has taken place in building societies since the foundation of this State up to date, and particularly during the last five years, has been tremendous. Given the confidence of the House, this Bill will encourage building societies to examine the whole aspect of attracting investors. They have a little edge in the sense that they can pay a little more in interest rates. I would ask them to exploit that edge as far as possible. People feel that rates of interest should be subsidised. I think that is a wrong approach. By and large, subsidies are not a good idea. They may appeal but, in the long run, one is channelling money out of the Exchequer which could be more productively used because even people who can well afford to pay reap the benefit of subsidies. There may be certain areas in which they are essential but, as a rule, they are wrong because too many people who can afford to pay also reap the reward.

Then there is inflation and the state of the £ sterling. Many things account for the current high interest charges over which we have very little control. We can only hope that in coming years—and I say years, not months— inflation and the £ sterling will be controlled with a resultant fall in interest rates. That is the way the problem should be tackled rather than expending moneys from the Exchequer in order to prop things up.

This Bill has been welcomed by all of us. The building societies discharge a tremendous social function in our society and rarely get the kudos for it. They are doing it very well and this Bill will help them in that activity.

Mr. Ray Burke

This Bill reminds me of a man setting out on a journey who, half way loses sight of the woods for the trees. The Minister has introduced the Building Societies Bill, 1975. I suggest that it constitutes the trees. The woods are the problems of young couples attempting to buy homes, anxious to do so at a low interest rate over a certain number of years with, more important still, a fixed interest rate so that when they sign their contract they know that will be the rate they will pay over the years ahead and not a variable one as we have under present building society regulations.

The provision of finance for house loans and mortgages should be the prime consideration. The Minister should not have lost this opportunity to discuss the overall provision for private housing. He should have considered the role of the banks and their provision of finance for loans for private houses. He should have discussed the role of insurance companies or if they are doing enough in relation to providing money for private housing. He should have discussed the SDA loan situation in regard to the infinitesimal level of loans and grants.

An Leas-Cheann Comhairle

That is not applicable to this Bill.

Mr. Ray Burke

The Minister has just introduced a Building Societies Bill which is looking at a small section of an overall problem. The Minister stated:

The building societies are major financial institutions with assets in excess of £350 million and the State would be failing in its duty to its citizens who invest with and borrow from the societies if it did not provide an adequate legislative framework for controlling institutions of this magnitude.

This is fair comment. We would be failing in our duty in controlling institutions that have seen a rise since 1921 when they had assets of £500,000, to £0.8 million in 1931, £1.5 million in 1941, £10.4 million in 1951, £18.7 million in 1961, £181 million in 1973 and today over £300 million if we did not review the controls under which they operate. Are the institutions operating in the best interest of the borrowing public, the potential house buyer? I doubt it. The best interest of a potential house buyer is a building society or an organisation which can provide to that person a loan over X number of years at £X interest rate which would remain constant throughout the period of the loan.

The main problem I come across in my constituency is the variation in building society interest rates. A man buys a house today and pays a 9 per cent interest rate. He works out his family budget on that. Six months later the interest rate has gone up to 10 per cent, 11 per cent, 12 per cent or 13 per cent. How can a man working on the basis of a certain income organise an annual family budget if the principal item in which he is involved, that of putting a roof over his family's head, keeps costing him more? He cannot calculate accurately from one month to the next the amount he will have to pay to his building society. All the Bills under the sun, like this Building Societies Bill, will fail in what should be their goal if the Minister or some other Minister does not tackle the problem of fixed interest rates over a fixed number of years.

There should be a modernisation of any institution which has £350 million of the people's money invested in it. I am sorry the Minister did not take this opportunity to look at the problem of finance for people anxious to buy their own homes. He has merely looked at an institution with £350 million of the people's money invested in it. He has not looked at the effect on the people who borrow money from the building societies. The building societies get their money on one basis, to which the Minister referred, short term money given out on a long term basis. Building societies are there to provide money for people anxious to build their own homes. A young couple wishing to buy a home start out at a disadvantage because of the economic situation we are facing today which by anybody's reckoning, including the Minister for Finance, is in an appalling state; it must be, when we have a Minister for Finance suggesting that children's allowance and free travel for school children be cut out.

An Leas-Cheann Comhairle

The Deputy cannot go into that matter. He must keep to the Bill.

Mr. Ray Burke

The Minister has conveniently forgotten about the main problem facing young people in the country who are anxious to buy their own homes. They must know out of a fixed salary, when there are wage freezes and so on, how much they can spend every week. Those people are unable to bend to the major financial houses in London or Dublin without breaking. They are unable to meet the high interest rates charged at the moment. I come across more young people in my constituency every day who got married a few years ago and now have one or two children. They bought their houses under building society mortgages but the interest rates have risen so much that now, because the jobs they were in have closed up or because they can no longer get overtime or there is a wage freeze, they cannot pay the excessive mortgage interest rates. They are giving up their owner-occupied houses and going on the local authority waiting list. I can give the Minister at least a dozen cases in my constituency where this problem arises.

Mr. Tully

Will the Deputy give them?

Mr. Ray Burke

I will without mentioning names because, as the Minister knows, it is not permitted to mention names in the House. I can give the Minister cases in the Donaghmede area and in Swords. I had with me this morning a man from Portmarnock——

Mr. Tully

The county council will give him the loan he is entitled to.

Mr. Ray Burke

I am sorry the Minister finds this a disagreeable subject. I appreciate his embarrassment as colleagues of his had promised him instant solutions for these problems.

Mr. Tully

I hate people bluffing like Deputy Ray Burke. Would the Deputy give me the names and addresses of the people in confidence?

Mr. Ray Burke

I will give the names to the Minister.

Mr. Tully

And the addresses in confidence.

Mr. Ray Burke

Yes, I will. This morning I had a case in Portmarnock, an SDA building society situation where he can no longer pay the mortgage repayment because of financial strains, because of where he was working and the downturn in the economy. He finds himself in an appalling situation. He is moving out from his own home which he had been buying and is now thrown on the county council housing list hoping to get a county council house. This is not good for the economy, for society or the family. I congratulate the Minister on the Bill as it is. There are defects, and major defects, but my difficulty is that it is merely the tip of the iceberg. It is the tip of the major problem of the funding and financing of mortgages and home loans generally for prospective house buyers. The main aim should be the provision of loans from whatever source for a fixed number of years and at the fixed interest rate. There is nothing in this Bill that will achieve that aim.

One thing not in this Bill that should be there and should be written into any building society legislation is that all money invested with building societies should be used, other than that taken up for staff and management expenses, for private loans for housing and housing only. In the past charges were made, rightly or wrongly, of investment by the building societies in hotels, office blocks and in other sectors of the economy.

Mr. Tully

That stopped in May, 1973.

Mr. Ray Burke

It should be written into this Bill as a section that all money invested in building societies should be reinvested in house purchase loans only. There should be no investment in office blocks, in hotels or pubs, or in flat development.

I refer to a point that caused the Association of Combined Residents' Associations to call a major mortgage strike in 1972-73. This association represents 40 or 50 residents' associations around this city and the country. They have a seven-point demand. I would like to go over the seven points and then consider how many of them are covered by the legislation we have before us. The people in the ACRA are mainly mortgage holders with building societies and their point of view and their attitude to the operations of building societies are relevant because they themselves are repaying loans over varying numbers of years and at varying interest rates.

Point one of the seven-point demand was that all building societies making money available to home purchasers should amalgamate into one society with a fixed rationalisation of offices and expenses; failing that the Government should act in the public interest and take over the building societies and use funds invested in the post office or the vast profits of the banks to provide low-cost loans to home seekers. Here we were calling for rationalisation.

Mr. Tully

Nationalisation.

Mr. Ray Burke

Rationalisation.

Mr. Tully

Wrong letter; it should be nationalisation.

Mr. Ray Burke

Rationalisation— a fixed rationalisation of office and other expenses. It is outrageous to see their expansion. Admittedly, it has slowed up because of the downturn in the economy but there was a time up to two years ago where we had this proliferation of offices almost reaching the stage of the news-agent at every street corner. We had one and two branches of the nationally known building societies at every street corner. They were, in my view, using up money invested with them which was intended to be reinvested in house purchase loans only. They were using it up in offices for their own aggrandisement. They were opening up like Allied Irish Banks, the Bank of Ireland and other banks. They were meeting a situation in which domestic banking facilities were being provided at every street corner. That was never what was intended and I am glad to see that there is something in this Bill about that behaviour. I hope the Minister will be very strict in regard to the idea of opening offices at will and ad nauseam. Every village and town in this country has two or three building societies competing with one another at branch and street corner level.

The second item in the seven-point demand was that it should be made illegal for societies to provide loans other than for bona fide house purchases. I have made the point already that the role of the building societies should be restricted firmly and by legal controls written into this Bill. It should be written in that no society will be in a position to give loans other than for the provision of homes for the people of this country. They should not be in a position to provide money for the purchase of pubs, office blocks, hotels and so forth at the whim of the directors of the building societies. They should be restricted solely to loans for private house purchase.

Item three of the demand said that accounts, particularly regarding the advertising expenditure of societies, should be made subject to examination each year by the Registrar of Friendly Societies or an auditor especially charged with this function. The Minister has written in a registrar here. I question the powers that the Minister is giving to the registrar in this Bill. I am afraid that the registrar will not be given strong enough powers. He should be completely independent of Government, of the Minister for Finance, the Minister for Local Government and the Minister for the Public Service. He should be a man who would have strong individual power over the building societies. However, the main emphasis of point three was on advertising expenditure. The situation is ludicrous when you are talking about certain limited funds available for house loans being used up in advertisements in slot after slot on television and in the newspapers, very expensive slots I understand, asking the public to please invest their money with society X or stating that society Y will give so much nett return which really equals very much more in gross terms. It is ludicrous to see and hear all this advertising. We are told about society X, the first building on O'Connell Street and about the society that has been in existence since the last century. This is all wasteful advertising because the societies are competing with each other and the only people getting anything out of it are the newspapers and RTE. The unfortunate prospective house buyers are getting nothing out of it because they have to pay for this very expensive advertising in the interest rates charged to them. I object strongly to this. There is a section in the Bill dealing with advertising but it is not firm enough and I shall deal with this aspect on Committee Stage.

In the seven-point demand, item four speaks about a legal requirement on the societies to publish payments to directors as a separate item in their annual accounts. This is obvious and I do not intend to deal with the matter in detail. The next item refers to an upper limit to be fixed for directors' fees and a limit by law on the number of directors. Again, this is an obvious matter and the Minister referred to it in his speech. Item six refers to an ethical code and the Minister also mentioned it.

Item seven states that the figure negotiated originally by borrowers for home loans be reverted to. This is the nub of building society legislation and of any discussion of the operations of such societies. This nettle must be grasped. When a person buys a house on a mortgage of 20 or 25 years he should know on the first day what he will be paying on the last day. He should know the interest rate he will be charged. A person who gets an SDA loan knows what he will pay and there is a fixed interest rate for insurance loans. That is what the people want and until the Minister tackles the problem he will have failed in his attempt to reorganise the entire building society movement. I accept he has gone a long way but the core of the problem for house buyers and the unfortunate, over-burdened ratepayers is that they have not got a fixed mortgage interest rate from the building societies.

I understand there are problems in that the building societies take money in on a short-term basis and loan it out on a long-term basis. However, it is not beyond the inventiveness of some Minister to devise a system for building societies where they would have a fixed mortgage interest rate.

If the Minister cannot do it under the building society legislation, I suggest that he might introduce a section allowing for the establishment of a national home loan board to provide this kind of finance, to provide it by an extension of the SDA loan system we have at the moment. That is falling apart because the Minister will not increase the loans——

An Leas-Cheann Comhairle

The Deputy is moving from the Bill.

Mr. Ray Burke

I accept the ruling of the Chair but I submit that what I have said is relevant because the whole problem of building societies comes back to the question of a fixed interest rate over a fixed number of years.

An Leas-Cheann Comhairle

That does not allow us to deal with SDA loans.

Mr. Ray Burke

If the Minister is not prepared to do it, we will do it.

Mr. Tully

Like Fianna Fáil did it before.

Mr. Moore

Wait until the next time.

Mr. Tully

We will have to wait until the cows come home.

Mr. Ray Burke

We will have to introduce some scheme for house purchasers to provide for fixed interest rates over a fixed number of years. I was very disappointed that the Minister did not introduce the long-promised trustee status——

Mr. Tully

It does not have to go into the Bill.

Mr. Ray Burke

In his statement the Minister said with regard to the Bill:

It does not contain provisions relating to trustee status. However, the provisions in the Bill ease the way for the Minister for Finance in conferring trustee status on approved societies.

The Minister should have taken the opportunity to write trustee status into the Bill. It would provide the building societies with enormous sums of money, with the potential investment that is there but which they cannot take advantage of because they have not got trustee status. The Minister has said it is not necessary to write it into the Bill, that it can be done under another system and that the Minister for Finance can take advantage of some other scheme. We have not had very much legislation with regard to building societies— there was reference in the Minister's speech to a Bill in 1834 and in 1874—and it is my opinion that the Minister should have used this opportunity to have a specific section granting trustee status to the building societies. That would have been the end of the debate and discussion on this matter.

The Minister very carefully limited the conferring of trustee status. He spoke of the Minister for Finance conferring trustee status on approved societies. It should have been written in as a section here so that there would not be any misunderstanding, and nobody would be under any illusion but that the building societies could take advantage of the moneys available in pension funds throughout the country. In my view it should be written in as a section of this Bill.

What have we got here? We have a Bill that is merely codifying the present legislation with some extensions, the main one being the extension of the powers of the registrar. I do not think he should be under the controls written into this Bill where he is merely a civil servant —no disrespect to civil servants— under the thumb of the Minister. He will take his instructions from the Minister, do what he is told and that will be that. He should be completely independent of the Minister for Local Government, the Minister for Finance or the Central Bank. He should be responsible to the investors in building societies for protecting their interest. I do not see him being given that independence in this Bill. I will come back to that in greater length on Committee Stage.

There is one big disappointment in this Bill. The Minister did not tackle the major problem facing mortgage holders, potential and prospective mortgage holders in building societies, that is, providing a mortgage for a certain number of years at a fixed interest rate. Until some Minister tackles this main problem house purchasers will be facing increasing mortgage rates as well as increases in the cost of living and local authority rates. These difficulties will eventually cripple them. In my view the increase in mortgage rates and local authority rates this year can best be described as the straw that broke the camel's back.

As I said the Minister when introducing this Bill lost sight of the wood for the trees. He tried to codify existing legislation for building societies— that was the trees—but he lost sight of the wood—that was to introduce provisions to ensure that mortgages would be given for a fixed number of years at a fixed interest rate.

Mr. Moore

In his brief the Minister states:

This is a long and rather complex Bill. It is based, I might say, on a century's experience of previous building society legislation. Because of its importance and complexity I had a particularly detailed explanatory memorandum prepared which sets out the background to the measure...

No one could dispute those remarks.

As a model of drafting this Bill is very good. All the i's have been dotted and all the t's crossed. It will ensure as far as a Bill can that building societies will be solvent and no building society will go bankrupt if they keep to this legislation. I wonder has the Bill any soul? Does it offer any hope to young people who want a loan from a building society to buy a house?

In his brief the Minister went back to the start of building societies. I realise the idealism of the men and women who founded them well over 100 years ago, almost as far back as the industrial revolution. At that time those people saw the social problems that existed and tried to organise societies to solve them.

The Minister gave us a very detailed explanatory memorandum which made very interesting reading. It showed that we were consolidating legislation already in existence. In my opinion this Bill should be more than that. It should have been an instrument to give building societies greater scope than they have at the moment. It should have done one big thing, that is, introduce a fixed rate of interest. I realise this is not easy. Building societies borrow for short periods but lend on the long term. There must be a financial genius somewhere, perhaps, in the Department of Finance or the Department of Local Government, who could have looked at this Bill and said that building societies could lend money at a fixed interest rate. The reason for the existence of a building society should be to lend money to buy houses.

This Bill does nothing to give young people hope that if they borrow from building societies they will ever be like their neighbour who was fortunate enough to obtain a loan from the local authority under the SDA Acts which give loans at fixed rates. I think the insurance companies work the same way. Despite some very excellent provisions in this Bill, it loses out on the very important and compelling aspect that it does not offer borrowers a chance to borrow at a fixed interest rate.

I am not a financial genius but I always thought there could be a tie up with the Central Bank, who have control over the societies, and the local authorities and building societies should be more concerned about lending money than lending structures. They should help couples buy houses for £8,000 or £9,000. I am not concerned with the people who want to buy the £25,000 houses. The Fianna Fáil Party proposed a new home loans fund. A couple could go to these people and borrow at a fixed rate. Alternatively, the building societies could be encouraged to expand their services. When a young boy or girl starts his or her first job, a bond could be issued to them saying: "If you save with us now we guarantee you a housing loan which will enable you to make a good start in married life." All legislation must have a social aspect.

Perhaps the Minister would consider for the Committee Stage some provision whereby the local authorities, the building societies, the banks and the Government would be complementary to one another with the backing of appropriate legislation. What people want are loans they can afford. Very often there is cause for social unrest where the man in No. 1 has an SDA loan from a local authority whilst his next door neighbour did not qualify for such a loan because he could not afford the deposit demanded by the local authority and was compelled to go to a building society. ACRA on occasion call for a mortgage strike. I do not agree with that but they call the strike because many of their members are finding it difficult to meet their commitments. This is true in both the case of SDA loans and loans from building societies, though the rate of interest in the former is much lower.

We should, as I suggest, concentrate on introducing a lending agency. Great effort has been put into the preparation of this Bill and the very helpful explanatory memorandum. But this Bill will not achieve what should be the real aim, and that aim will not be achieved until we put some soul into our legislation. Ours is a private enterprise economy and it is almost impossible to control increases in interest rates. Our institutions must keep parity because, if they do not, there will be a flow of money out of the country and less money still for housing and everything else. There is a prime need for a subsidy of some sort to help borrowers. One must pay tribute to building societies for filling a void. Very often they are criticised for too much advertising or for building palatial offices. They must advertise like any other commercial firm. If they did not do so they would not get the money.

The Minister might encourage the amalgamation of building societies. A few years ago we had a great many commercial banks. Now we have two or three large groups. Amalgamation might help building societies. Not so many years back I remember one society being absorbed into another. This is an age of rationalisation and amalgamation. I do not see anything in the Bill to encourage building societies to amalgamate.

Mr. Tully

The Deputy should read the Bill again. It is in it.

Mr. Moore

I am very glad. That is a forward step. On Committee Stage I shall acknowledge the Minister's foresight. Building societies will be empowered under this Bill to acquire premises or to build premises. It might be very good business to build an office block, use one floor for the society's purposes and let the remainder; but this money would be invested in an office block and not in housing loans. We must think of the young couples and the families who want housing loans and cannot get them because the societies say they have no money. A few weeks ago a society said it would not accept any more applications. Why are applications being refused? The banks boast regularly of the amount of money they have for lending. It is the people's money and it cannot be confiscated but it should not be beyond the bounds of possibility for the banks to lend some of this money to building societies to enable them to continue giving housing loans.

Mr. Tully

It would be easy putting a fixed rate of interest on that money.

Mr. Moore

What does the Minister mean?

Mr. Tully

If they borrow from the banks at interest rates up to 20 per cent and had a fixed income over a number of years.

Mr. Moore

We are judging the housing loans too much on a commercial basis.

Mr. Tully

That is the only way we can get money, on a commercial basis.

Mr. Moore

We must consider preparing a different system and realise that people looking for houses come first. We should use our money to build a better society and not simply permit a number of people to make a lot of profit. Governments in the free world can act in a tough fashion towards financial institutions when they want to and as long as we have thousands of people looking for houses and young couples living in squalid surroundings or paying exorbitant rents which they cannot afford we must try to devise a system whereby they can obtain house loans at rates of interest they can afford. I do not wish to over-simplify this matter because I know it is a difficult problem but one of the shortcomings of the Bill is that it will not mean more loans being made available. It is possible that as a result of this legislation more money will be attracted into the societies and that it will be safeguarded but it will not ease the loan situation.

It should be possible to ensure that at some stage in the life of a borrower from a society the interest rate on the money he borrowed would be made static. In my view that would attract more business into the societies. More thought should be given to the bringing about of a fixed interest rate on housing loans. I am glad the Bill provides control over the amount which may be issued for a specific thing. I believe that those who founded these societies did not think in terms of profit but I realise that societies today must think on profit lines. I am not one of those people who thinks the word "profit" is a dirty word and a reasonable profit by the societies would not be begrudged by anybody.

Mr. Tully

Will I get Second Stage this evening? Five minutes would do me if the Deputy is finished. It would give me an opportunity of getting amendments for Committee Stage. I do not wish to rush the Deputy and if it is not convenient for him to finish now that is all right.

Mr. Moore

It is a very long Bill and I wish to finish my brief. The Minister had better wait until tomorrow for Second Stage.

Mr. Tully

I made the request to the Deputy so that we can get the amendments in reasonably quickly.

Mr. Moore

It is a long Bill and we must devote a lot of time to it.

Mr. Tully

It is a Committee Stage Bill.

Mr. Moore

I agree but I have a lot more to say on this Stage. In the Bill there is no shortage of control over the conduct of societies and that is necessary. I am sure the Minister went to some pains to ensure he had good guidelines and that those involved in the building societies were consulted. As a piece of cold legislation it is probably a good Bill but I am disappointed in the purpose it is supposed to achieve. Deputy Burke has made the House aware of the demands of ACRA and one cannot ignore the requests of an organisation which has hundreds of branches and performs an important role for urban society. This organisation represents thousands of families who have bought their houses by availing of loans. They want all building societies who make money available for home purchase to amalgamate into one society. I would hardly go that far with them because we cannot coerce any of them to amalgamate and I do not think it would be a good thing if that happened. However, there is some need for rationalisation so that societies can play a more important part than they have to date. I accept that the societies have played an important part in helping people to buy houses, and I hope they will continue to do this.

Debate adjourned.