Dáil Éireann debate -
Thursday, 22 Feb 1979

Vol. 312 No. 1

Adjournment Debate. - Local Authority Rents.

Mr. Quinn

I should like to thank the Minister of State for returning to deal with this matter which is quite simple. My concern is that the Government are proposing to increase local authority rents from 1 March and have set out in the circular Ref. H3/79 the terms and conditions of the rents of local authority dwellings for each local authority. I am concerned about the way those rents were devised and the discussions, as distinct from the negotiations, that took place between the Minister, the Department and representatives of the National Association of Tenants Organisations. From the information I received, and discussions I had with NATO it appears that the harmonious relationship that was established after a two-year national rent strike in 1973 by the then Minister for Local Government, Deputy Tully, has been put at serious risk because of the manner and the way in which those rents were announced.

According to my information, which is subject to correction, on 30 October last NATO received a telephone call from the Department requesting them to send a submission to the Department with regard to the proposed rent increase. On 15 December a meeting took place here—that was the occasion of the special one-day sitting of the Dáil to consider the EMS—at which a written statement was read out by the Minister. Soon after reading that statement, due to a Cabinet meeting, the Minister had to leave. That statement, effectively, announced what the Department of Finance were instructing the Department of the Environment to collect by way of local authority rents. In effect, there was no negotiation or discussion. Indeed, the document which the Minister read was not circulated to all the people present at the meeting when it was in progress. I do not wish to pry into what occurred at that meeting or interfere with the negotiations but I want to draw attention to the fact that NATO feel that the procedures in relation to the negotiations which existed in the past and resulted in the harmonious ending of the disastrous two-year rent strike have been put at risk. While NATO have queries in relation to the actual rent increases the first issue is one of principle.

Does the Minister for the Environment seriously understand the precedent he is setting in this regard and if so what is the basis for this departure? Are we to take it that NATO have no role to play in relation to negotiating or discussing rent increases in future years when this agreement ends? If that is the case I should like to tell the Minister that he must realise that he is seriously putting at risk the relationship that local authority housing committees have with their tenants. It is a difficult situation for local authorities because they are caught in the position where they get the benefit from all new rents collected and, therefore, have a strong vested interest in collecting those rents and ensuring that there is no difficulty with regard to rent strikes and so on but yet it is the Minister for the Environment who establishes the rents at national level.

A criticism that has been made frequently by Fianna Fáil councillors in Dublin Corporation is that NATO really have no role to play in this and that the tenants should be approaching local councillors to discuss rent increases. In fact, rents are established centrally and the local councils, as such, have no role to play. It is right and proper that a national organisation, like NATO, should have full negotiating status and be so recognised. Their proposals and submissions should be taken seriously. On the basis of the evidence I have it appears that a token gesture of negotiation—discussion—or participation took place belatedly last year in this regard. Those rents would have come in sooner were it not for the strong protest that was raised at one of the meetings about the fact that negotiations did not take place.

That gives cause for serious alarm. As a former member of the Housing Committee of Dublin Corporation, having been elected in 1974, I was aware of the accumulated rent arrears that were there from the time of the rent strike and the difficulties the local authority had in trying to get them back over a period of time. In 1976 we still had major rent arreas directly brought about as a result of this rent strike which, in part, was a strike on behalf of NATO to get official negotiating status and to reduce a lot of socially unjust anomalies that operated then in the differential rents scheme.

I should like the Minister of State to address himself seriously to the status and position that the Fianna Fáil administration afford and give to NATO as an organisation. Clarification on that point is needed. He should clarify for all concerned, particularly for those in NATO, where they stand in relation to a Fianna Fáil Government and if they have a role to play in the process of negotiating rent increases. I should like to remind the Minister that a special delegate conference of NATO will be held on Sunday and that his views will be of interest to the delegates.

At the meeting in the House before Christmas when the Minister announced the amount of the increases dissatisfaction was expressed by the people involved and they were invited to respond to the Minister's proposals and make new submissions. On 29 January they met Department officials—unfortunately, the Minister was not present—and, basically, the same document was read out. The person handling the case for the Department indicated that there could be no negotiation on the figure but said that any comments or ideas NATO might have would be welcome. That is not negotiation and if that is what happened I should like to express the concern of the Labour Party about it. Having solved the problem left to us in 1973 when we took office we are concerned that we are now starting back on the same slippery slope and we will have the same problem on our desk when we return to office.

The second point I want to discuss is the further devaluation of the Department of the Environment by the Department of Finance. From reading the way this decision was reached it appears that the Department of the Environment were told by Finance what the rent increase would be. The Minister, without discussing the matter with the people directly involved, appears to have accepted this. Obviously one cannot be party to what happens within Government Departments and between Ministers, but we do know what discussions took place between the Minister and the people most directly affected—the representatives of the hundreds of thousands of local authority tenants who represent the low income families in this country. The Minister does not appear to have attempted any kind of consultation or discussion with them. He has simply accepted the direction of the Department of Finance in this regard. If that is the case, the present Minister for the Environment and his Minister of State are devaluing the role and relationship of the Department of the Environment vis-à-vis other Government Departments, and particularly Finance.

That is a fall back from the position held by the Custom House in relation to the previous Minister, having established between 1973-1977 the very clear and unambigious position of the importance of the Department of the Environment. When we come back into office we will have to scramble up the mountain once more to ascertain the importance and the primary position of the role of the Department of the Environment in attempting to provide social justice in the field of housing and other related matters. If that is the case this is a political charge I am laying on the Minister and the Minister of State. If my information is correct, they appear to be allowing themselves to be reduced to the second division so far as Government Departments are concerned. That is not in the interests of the importance of the portfolio they hold, nor is it in the interests of the local authority tenants on whose behalf they have the responsibility to negotiate with the Department of Finance.

I want to deal now with the circular and the proposed rent increase. There are a number of points I want to clarify, anomalies the Department might look at again. At the bottom of item 4 on page 3 of the circular letter we see the date 17 September 1976, the date before which people on social welfare incomes get a reduction of 50 per cent for income assessment in terms of rent. That date should be moved forward a year because effectively it means that a person must be continuously in receipt of social welfare payments for three years before he can benefit.

An Leas-Cheann Comhairle

The Deputy is extending the scope of the question he put down for the adjournment.

Mr. Quinn

I accept the ruling of the Chair.

An Leas-Cheann Comhairle

The question dealt with the decision of the Minister for the Environment to raise the rents of local authority housing and how the decision was made. The Deputy was in order up to now but to go into the pros and cons of the matter would not be in order.

Mr. Quinn

I am in the hands of the Chair. If the NATO people had been allowed to negotiate they would have brought to the attention of the Minister the fact that this date should have been moved forward. They would also have brought to his attention the fact that the £2 allowance for incomes over £39 now—it was £34 under the old scheme—should have been increased. If these people had been allowed to make representations, as happened in the past, these anomalies would not exist.

The average industrial wage last year was £66 and the majority of those people would fall into that over £39 category. I do not understand why that category was not touched.

The other principle that has been introduced in this decision to increase rents, and which the NATO people would like to have negotiated and talked about at length, was the proposal in relation to new houses built after March 1979. The maximum rent to be charged would be the cost of loan charges plus 1.75 per cent. I would like the Minister to clarify what the likely impact of that would be.

This Government have frequently sought a dialogue with the social partners—a horrible phrase which has emerged in official language—and said that there must be restraint, some kind of consensus on incomes and some kind of realistic assessment of what the country can afford to pay itself if we are to get the employment to which we are all committed. To introduce a rent increase in this case, contradicts many of the holier than thou claims made in the three White Papers and is not helpful to creating employment. Consent to seek wage increase will be readily forthcoming if a decision like this is taken without negotiation. This decision is all too similar to the decisions taken on food subsidies and the 2 per cent levy, decisions on which there was no discussion. This is yet another example of this Government effectively transferring back hard-won gains got by the last Government for the low income families. The decision to do that was not even negotiated with the people involved. They did not even have the right to put forward their case. They were called in and told that the Department of Finance had said what the increase would be and they could take it or leave it. The Minister has seriously damaged the role of NATO in this regard and has put at risk all the gains made in the last four or five years.

Minister of State at the Department of the Environment (Mr. J. O'Leary)

I do not question Deputy Quinn's general concern about the implications of recent adjustments in some aspects of the national differential rents scheme, but I feel that his action in raising the matter on the Adjournment was due to misapprehension on his part about the changes being made, the reasons for them and the effects which they will have on different tenants and also on the general body of taxpayers and on local authority funds.

Before I deal with the changes which have been criticised, it is necessary, I suggest, to put the general position as regards the renting of local authority houses into its proper perspective. The following are some basic facts which will help to do this.

There are about 100,000 local authority rented dwellings in the country, including some 20,000 still on a fixed rent basis; the remainder are on an income-related or differential rents system. Fixed rents range from 40p to £2 a week, the average being about 80p. The total cost of loan charges, maintenance, management, and so on of the 100,000 houses will be approximately £77 million in 1979. The total amount which will be paid towards this cost by way of rent, and on the basis of the recent adjustments, will be approximately £15.5 million. The balance is met by taxpayers and ratepayers. The average weekly rent over the entire estate is, therefore, £3 a week and the proportion of total expenditure on the houses met by rents will be 20 per cent.

A person with an income of £67 a week—a figure which many tenants of local authorities have—who borrows the maximum SDA loan of £9,000 to house himself would, after paying a deposit of several thousand pounds from his own resources, be repaying £22.29 a week.

A local authority tenant or a person on a waiting list for rehousing who opts to buy a private house under the low-rise mortgage scheme, as hundreds of such persons are doing, would be paying £13.29 a week in the first year and this figure will grow progressively in each subsequent year. The person buying his own house has to meet the full cost of maintaining and decorating the house and carrying out the normal running repairs. In the case of a tenant of a local authority dwelling, practically all the cost of these works is met by the local authority.

Now a word or two about the national defferential rent scheme. The income taken into account in assessing rent under the scheme is the basic income—that is the income on which percentage increases under Clause 3 of the National Wage Agreements are calculated. Basic income does not include overtime, shift allowances or bonus payments. In assessing the rent, income tax on the basic income and social welfare contributions are deducted as are also certain personal allowances—up to £10 a week—for the principal earner and £1.30 a week for each dependent child. The rent is then calculated on a proportion of the assessable income of the principal earner, ranging from one-seventh to one-twelfth in accordance with a graded scale; persons with lower incomes pay the lower fractions. The graded scale is now reviewed each year.

In view of the manner in which the recent changes in the rents scheme were grossly misrepresented by the Evening Herald, I want to state categorically that, as a result of these changes, tenants on relatively low incomes, who genuinely need and deserve the benefit of rent subsidies, will not in any case be asked to pay a higher rent in 1979 than they did in 1978 and that in a big proportion of cases their rent liability will be reduced.

Income from self-employment and from non-social welfare pensions and certain social welfare benefits— unemployment, pay-related and disability benefits—is assessed in full for rent purposes but only 50 per cent of social welfare pensions, assistance, AnCO training allowance and redundancy payments are taken into account as a rule. Income from children's allowances, disabled persons' maintenance allowances, supplementary welfare allowance, scholarships, charitable organisations is completely disregarded for rent purposes. While the incomes of subsidiary earners in the household are taken into account in calculating the rent, only one-seventh of the income over £14 a week is assessed—subject to a maximum contribution of £1.50 a week by any such earner. In no case can the total rent payable on a house be higher than the maximum rent appropriate to the dwelling.

The minimum differential rent payable remains at 10p a week. The maximum rent under the scheme is normally equivalent to the cost of providing and maintaining the dwelling or, in the case of older dwellings, of replacing and maintaining them. The maximum rents of many older dwellings have fallen well behind the cost of maintenance and replacement due to the fact that prior to the introduction of the national differential rent scheme these maximum rents had not kept pace with the rising costs of building, maintenance and management.

This has given rise to the anomalous situation where many tenants with high incomes have been paying unrealistically low maximum rents and consequently do not contribute their fair share of rental income, while, at the same time, other tenants in practically similar accommodation and often with considerably lower incomes are required to pay higher maximum rents. This is unjust and is incompatible with the basic principles of differential renting. Some of the changes recently made in the national scheme are intended to deal with this injustice. However, I want to emphasise that there has been no change in the basic method of assessing rents payable under the scheme.

The changes in the scheme, which are to come into effect from 1 March 1979 were arrived at following discussions with local authority officials and the consideration of detailed proposals, submitted at my Department's request by the National Association of Tenants' Organisations and later discussed by the Minister with representatives of that association. The changes will include an increase in maximum differential rents, ranging from 25p a week for a one-roomed dwelling to £1 a week for a dwelling with five or more rooms.

In order to cushion the lower income group against the effects of rent increases which would otherwise arise because of the rise in their incomes, the personal allowances in the graded scale were increased by 15 per cent over the 1978 level and the allowance for each dependent child was increased by 24 per cent. Notwithstanding the increases in maximum rents, an actual increase in rent will arise only in the case of tenants whose basic incomes, after deduction of income tax, social welfare contributions, personal, children's and other allowances justify an increase. To avoid hardship, a local authority may agree to accept from a tenant for a specified period a lesser sum for rent than that applicable under the scheme.

The Government consider that the changes in the scheme, which will bring in less than £1 million extra in a full year, are the minimum which could be made in view of the anticipated increase in expenditure on the maintenance and management of local authority dwellings together with the increase in the overall cost of subsidising the loan charges on these dwellings in 1979. In 1978, rental income came to less than £14 million while the provision, maintenance and management cost £65 million. As I mentioned earlier, expenditure is expected to reach £77 million in 1979, of which some £55 million will be contributed by the Exchequer by way of direct subsidy.

The massive increase in the cost to the Exchequer of directly subsidising local authority housing is highlighted by the fact that the corresponding subsidy payment in 1973-74 was £11.4 million. In fact, under the present subsidy arrangements, the direct cost to the State in subsidy of providing a new local authority dwelling for renting at present is of the order of £30 per week while the average rent payable on a modern local authority house is only about £5 per week.

In the case of dwellings let on fixed rents, the increase of 25p a week will apply as from the beginning of March. Tenants of these dwellings can, however, apply to have their rents assessed under the differential rent scheme if they consider that it is in their interest to do so.

Finally, I want to refer briefly to the position of the National Association of Tenants' Organisations and to make it clear that there is no question of the Government withdrawing their recognition of that body or questioning their right to negotiate on behalf of local authority tenants. In fact, it was at the request of my Department that the association submitted in October last the proposals they considered appropriate for the 1979 rent scheme.

These requested a more generous graded scale, higher children's allowances, a weekly allowance for housewives, income tax relief on rent payments, increased concessions in the assessment of rent on social welfare benefits, no increases whatsoever either on fixed rents or the maxima of differential rents and, that following the next yearly assessment of incomes, no increase should exceed £1 per family. It is estimated that these concessions would have resulted in a reduction of £4 million in total rental income in 1979—in other words, that tenants would pay £11.5 million of the £77 million which local authority rented housing will cost this year.

These proposals were considered by the Minister for the Environment, in conjunction with other Ministers concerned, with regard to the equitable distribution of the cost of local authority housing and particularly the implications for the general body of taxpayers. Subsequently, the Minister met representatives of the association on 15 December last and informed them that the implementation of their proposals would result in a huge and unjustifiable decrease in rental income in 1979 and the imposition of an increased burden on public funds. The Minister asked the representatives to study the changes which, the Government felt, should be made in the 1978 scheme and to submit their detailed comments on them as soon as possible. Unfortunately, their reply rejected the Government's proposals out of hand.

The Minister arranged a further meeting between the association and officials of his Department in January at which the reasons why the Government could not accept the association's proposals and the necessity for implementing the Government's own proposals were explained in detail to the association. While the officials had no authority to change the scheme as outlined since the matter had to be one for Government consideration, nevertheless a further opportunity was given to the association to discuss the changes proposed in the scheme so that their comments could be conveyed to the Minister. However, the association did not avail of the opportunity and withdrew from the meeting.

I cannot, therefore, accept the association's contention that there was a lack of opportunity for consultation with my Department. On the contrary, opportunities were given to the association to submit reasonable proposals for changes in the scheme, and to comment on the Government's proposals, but at no time since the Minister's meeting with them in December did they comment, either orally or in writing, on the merits or demerits of the proposals put to them. In fact, at both meetings the attitude of the association was one of outright rejection without any consideration of the reasons why the Government found it necessary to change the scheme.

I am hopeful that when the association have considered fully the detailed reasons which were given to them for the changes in the scheme they will come to accept that the changes are fair and equitable in all the circumstances.

The Dáil adjourned at 5.30 p.m. until 2.30 p.m. on Tuesday, 27 February 1979.