The line, which, to the best of my knowledge, Deputy Browne was not corrected for pursuing by the Chair this morning, is extremely dangerous. The Deputy proposed to try to equate what happened last Saturday with young peoples' frustration about being unemployed. Does anybody inside or outside this House think that if the unemployment level was 30,000 rather than 130,000, what happened last Saturday would not have taken place? The Deputy then extended his remarks to say that what was happening here was akin to and parallel with what is happening in the riots in Liverpool, Manchester, London and so on. The Deputy is trying to make what happened fit his own theory. One of the most distressing things I read, which should be a warning to all of us, in relation to the riots which took place in England was about an Asian woman recounting what had happened on the day the riots broke out. She said that she went into her shop and that skinheads had come in and started to wreck it. She said that she picked up the phone and rang her friends. She did not mean the police. She rang people of her own nationality. She was a coloured person, and these people had evidently formed some sort of a vigilante group to protect coloured people from attacks by white people. To pretend that that was not precisely what was behind the riots in England is dangerous.
Deputy Browne's solution to this is that capitalism, or society as we know it, should be dismantled and socialism should take its place as the answer to all our problems. Our financial problems, according to Deputy Browne, are because of a capitalist society and he quoted Marxists as saying that they should not claw the eyes from one another as in a capitalist society. I saw more clawing of eyes being done between Poland and Russia than between the capitalist nations. Capitalism is not a perfect system, nor is socialism or communism. They all have their faults. To get backed in to any "ism" and pretend it has all the answers for all time will not help the young people about whom Deputy Browne is so concerned. Deputy Browne is older than I. But even in my time under this very imperfect system, which Deputy Browne criticises so eloquently and so often, during which, due to the span of years, we were mostly governed by Fianna Fáil, I have seen children without shoes. I do not see that nowadays.
In my city of Cork and, I am sure, in Limerick and in Dublin, people lived in appalling slum conditions. People are still living in bad conditions but nobody lives in the conditions in which people lived in the thirties. Indeed I remember quite clearly that when I discarded my shoes they were given to the children of farming relations out the country. If you will excuse the pun, the boot would be on the other foot nowadays. There is no doubt about that. At the same time those conditions are within my living memory. I am sure every Deputy in this House, if he is honest with himself, will admit that things are better for more people now than they were when they were growing up. That is evolution and progress; it is not fast enough and it is not far enough but it is not meaningless and should not be wiped off in a ten-minute, eloquent address by one Deputy out of 166 in this Parliament as if nothing had happened in 60 years. It has; we should be proud of it, build on it and not try to scrap the whole lot for some "ism" which patently, when practised in other parts of the world, is not answering their problems.
I think Deputy Browne is wrong, very wrong. Nobody should be foolish enough to believe that putting people into work will prevent a repetition of what happened in Dublin last Saturday, because the people who organised and manipulated that crowd will just as easily organise, manipulate and be equally destructive with a crowd of employed people as with a crowd of unemployed people. Indeed if one were to judge by the people on the television screens over the weekend, who knows what percentage of them were employed or unemployed. But it is very dangerous to this country if we allow ourselves be codded into believing that there was not a sinister force behind what happened last Saturday. Apart from the social cost, the cost to society in an ideological, fundamental sense, there was another cost involved about which I shall say a few words later.
First of all I want to say something about my Department which is what I really stood up to say but I think the diversion was worthwhile. I was very concerned, on arriving in my Department at the very serious financial position—unlike what Deputy Wilson said a few moments ago- I saw facing my Department and particularly local authourites who report to and are responsible to my Department. I found it necessary to provide for very substantial additions for a very large number of services for which I am responsible. The provision already fixed for these in the Estimates seriously under-estimated what would be the requirements. Additional sums of £16½ million for housing subsidy, £3 million for sanitary services subsidy, £5.2 million for rates grant and £3 million for malicious injuries claims have now been provided. These additional sums alone amount to almost £28 million. That is a very substantial sum. Regretably I find that these additional amounts are required to meet on-going and very predictable commitments rather than provide for expansion and new services. In other words, they could have been foreseen last December but they were cut out of the Estimates for my Department.
The House and the public generally will appreciate that the Government could not but face up to the absolute necessity of providing for the essential additional financial aid which will be falling due to local authorities. The alternative would be to leave local authorities short of this amount which would lead in the autumn to a major crisis for the finances of local authorities with the direct consequences for the economy and in particular for employment. Of course the consequences for the public generally arising from the supplementary budget are unpalatable but all must agree that they are necessary in the interests of good Government and reversing the very serious position of our national finances.
I want to say a few words about the waste of the resources of the State and local authorities caused by wanton damage to property which gives rise to malicious injuries payments. Disturbances arising from demonstrations such as that in Dublin on Saturday last can affect the society in which we live and our economic wellbeing in ways which extend beyond the events themselves. One of the more direct and obvious effects is the cost of damage to property which cannot be ignored in any consideration of local finance. Unfortunately it is one which in recent times has become a good deal more serious. The type of damage to property which in recent times has followed demonstrations such as that of last Saturday usually results in massive claims against local authorities under the malicious injuries code.
Where malicious injury claims against the local authorities are successful in the courts the local authorities have to raise the money to pay the decrees. There are arrangements under which the amount of the decrees is shared between the Exchequer and local authorities. The details of the arrangements for sharing the cost may be important in the context of the finances of individual local authorities but what should concern all of us here is that the entire cost comes from public funds.
Leaving aside altogether the events of last Saturday and the claims which may arise from them, local authorities, up to early June, were faced already with claims for damage caused within the previous few months or so which were the result of activities which I can only describe as subversive. These activities have left our community facing claims for damage totalling about £7.5 million. The claims included damage by fire to houses, public buildings, vehicles and other property in a number of areas throughout the country. I cannot say what the final cost of the direct damage, as measured by the courts in these cases, will turn out to be. The amounts claimed, however, give an indication of the type of cost involved for the community. I might say that the £7.5 million does not include anything that happened in the last week the claims for which must be lodged, I think, within seven days. It may perhaps help to put this in perspective if I were to say that £7.5 million would build, say, 325 local authority houses — and anybody here who is a member of a local authority knows how badly they are needed — or provide employment — which was of so much concern to Deputy Browne a minute ago — for 500 men for a year on national road maintenance. This is just one way of measuring the cost to the community and the loss to local services of this type of mindless damage to property.
Local authorities are faced with enough problems in continuing and improving the services for which they have responsibility without having to dissipate their finances and their other resources in dealing with claims in respect of damage to property which need not and should not arise.
As regards local authorities' overall finances, they have not, of course, been able to escape the difficulties which have beset the public sector generally. Although the position varied from place to place there was a marked deterioration in the overall financial position of local authorities generally during 1980. One way in which this deterioration manifested itself was in increased reliance on bank overdraft to keep the capital services going and to pay for the ordinary day-to-day running costs of local authority services.
The additional £30 million, which I will refer to later, being provided in respect of the local authority housing programme, should be of help in this respect in the current year. Apart from wider considerations related to the level of borrowing, undue reliance on overdraft can be costly for local authorities and can thereby effectively reduce the amount available for expenditure on local services.
In the current year local authorities have been able to budget for the spending of £603 million on non-capital services. I realise that in relation to any year a substantial part of the revenue of local authorities effectively must be committed by decisions taken in previous years. This is a feature of the finances of nearly all public bodies. Nevertheless, within their overall current budget of £603 million for 1981 local authorities can no more ignore the need for restraint which current circumstances require than can the rest of the public sector. This is the theme that will be repeated very frequently from these benches by myself and other Ministers in this Government, the necessity for all units and arms of Government to watch carefully their expenditures in all fields. We will be concerned to see that as much as possible of the money voted by this House goes to the people for whom it was intended rather than being creamed off in administration en route. It is up to the local authorities to make the best use they can of the financial resources available to them. This will involve a conscious and sustained effort on their part to direct their expenditures towards those services most urgently needed. At the same time they should be wary of entering into commitments which, though costing little in the current year, may unduly pre-empt local revenues in future years, thus limiting their freedom. The members and management of local authorities alike should be constantly on the alert for ways and means of improving the efficiency of their organisations to ensure the maximum return for their expenditure.
The cumulative effect of the annual expenditure on the capital programmes of local authorities gives rise to continuing increases in the demands of their current budgets. This arises both from the growth in net loan charges to service the capital debt and from the extra maintenance and management costs of new houses, water supply schemes and so on. There is also the added burden arising from the increased pressure on the other services which are so often taken for granted when new houses are built and occupied. Services like street lighting and cleaning, domestic refuse collection and so on all cost money. While I would repeat that local authorities need to be constantly vigilant on this question of achieving the maximum economy in the provision of these services, I am not at all unmindful of the burdens these and the increasing cost of other services place on them.
I am fully sympathetic to the idea of allowing local authorities as much freedom as possible in managing their own affairs and in deciding on their priorities. Various people involved in local government either as members of councils or as officers of local authorities have from time to time made suggestions as to ways in which the local authorities might be assisted to have a more meaningful role in our society. So far as finance is concerned there seems to be a wide measure of agreement that local authorities should themselves have the necessary freedom of action to raise their direct charges for services where they feel it is appropriate that they should do so and that they should have the necessary power to charge directly for certain services where they do not at present have that power. It has also been suggested that additional sources of revenue other than rates should be available to them.
I think everybody associated with our system of local government realises that there is no magic formula which will lead to the discovery of major and hitherto untapped sources of local finance. But what is important is that local authorities should within reason have the necessary freedom to raise additional finance for purposes which they consider of importance locally. I am fully in sympathy with that view. I feel that there should be no unnecessary obstacles placed in the way of local authorities who are genuinely concerned with improving their own localities. If they are prepared to take on themselves the responsibility of raising the necessary funds, even if that means new or increased direct charges, I do not think they should be prevented from doing so. A local authority should be in the best position to judge what local services or amenities are most needed in their own area and to gauge the extent to which the community will be prepared to pay the cost. I hope to be able to help in bringing about that situation in so far as it may be within my control.
In my approach to this question of new or improved sources of revenue I will look closely, over the months ahead, at the many specific suggestions which have already been made. I will also look at the scope for improvement there may be within the system of local finance as it at present operates. I hope to bring forward my own specific proposals in this area very shortly.
One of my early priorities as Minister will be to look seriously at local government structures. Many of us in this House are or have been members of local authorities. Our background in local government enables us to appreciate the excellent work being done by elected members of local authorities throughout the country. They give generously of their time and talents in that tradition of voluntary service which is so much a feature of our local government system. We can appreciate too the work and dedication of the people employed in the local service. We owe it to these men and women, elected members and officials alike, who operate the local government system, and, in particular, to the communities served by that system, to ensure that the structures continue to meet efficiently the increasing demands made on them.
The need for a thorough examination is most acute in the major urban areas. Here the local government system has come under considerable pressure arising from a vastly increased population and an ever-growing demand for services. It is evident, especially in Dublin, that there are serious problems; problems of inner city decline; problems in the provi-infrastructure to support social and economic progress, problems in the provision and management of housing and, perhaps, particular problems arising from a certain lack of a distinctive community identity in large new housing developments where the existing local government organisation may appear rather remote.
I feel it is necessary to give serious consideration to the apparent lack of a local focus in some newly developed areas. This is bad for local democracy and leads to apathy and even to disaffection. In an ideal situation there should be a local community spirit in each local area. There should be a clear appreciation of the existence and identity of the local authority which should be close enough to the people to be real to them.
I will be seeking ways and means of fostering local government and local authorities so that they will be more a reality in the lives of ordinary people. I am having various suggestions on these lines examined and I hope to develop more specific proposals in due course.
In approaching this review of local government structures, in addition to the proposals published in the Government's programme I will take into account the various suggestions for reform which have been made from time to time together with the views put forward by local authorities themselves as well as by interested organisations and individuals.
It would be my intention to approach this review in a pragmatic manner. We must remember that some of our local authority structures were established about a century ago. I will be looking for the things that need changing so as to establish a system tailored for the eighties rather than the nineties. My aim will be to ensure that any changes proposed will bring about real improvements in the standard of the local government services and at the same time preserve and improve the local and democratic aspects of the system.
One of the most important and sensitive areas of the economy in terms of investment, growth expectations and jobs which all Governments must constantly monitor is of course the building industry. As Minister for the Environment I have responsibility at Government level for overseeing the state of the industry. This vital sector of the economy was noticeably depressed in 1980, with output falling by over 6 per cent. This was caused by the economic recession and in particular by a severe drop in private sector investment in the industry. Consequently, the level of direct employment in the industry declined by 5,000 between April and December last year. Overall, I expect output to increase by 5 per cent this year and employment to increase by about 2,000 by the end of the year. The main growth areas in 1981 will be telecommunications and industrial and educational buildings. The Government have increased by £30 million the provision for local authority housing to counteract the sharp decline in activity in this sector; I will refer to this aspect in greater detail later on in my speech.
In tackling the overall problems of the industry, I am anxious to plan on the basis of orderly growth in output and employment. In developing plans, I intend to have close consultation with representatives of the Construction Industry Federation, the Building Materials Federation, the Irish Congress of Trade Unions and the Building Industry Council. In all our interests, working in co-operation it should be possible for us to devise ways and means of smoothening out the peaks and valleys in the industry and ensuring that the levels of apprenticeship intake are satisfactory. Our housing programme must be adequate to meet the requirements of our growing population and priority must be given to the provision of infrastructural services such as roads, telecommunications and sanitary services. To this end, our overall building programme is being closely monitored.
I would now like to speak on housing, which is a vital sector of the building industry. The management of a national housing programme by a Government requires skill, vision, compassion and, perhaps, a little luck. I say skill because housing is a complex area with many competing and interacting demands for available resources. Decisions have to be taken which affect the supply of financial resources for the various types of housing need. The job of good government is to ensure that those whose degree of need is greatest are given priority. Government also needs to have an ability to identify quickly the problem areas in housing whether they arise in the area of direct building or in improvement of the housing stock and to provide or create the climate for the provision of the necessary incentives, financial and otherwise, to ensure that the housing needs so identified can be dealt with quickly and effectively. It is obvious to me in the short time since I became Minister for the Environment that there is room for improvement in the management of the national housing programme and I am confident that measures already taken and to be taken in the months ahead by the Government will secure that improvement.
In the short-term it will be important to inject sufficient capital into the housing programme to ensure that the anticipated completion of 25,500 or so houses this year is improved on immediately. The assessment of national housing requirements will indicate the nature and extent of need in the years ahead and the Government will ensure that the required comprehensive range of aids and incentives will be available to ensure that housing targets are met.
A very important factor in determining the success of a housing strategy is the Government commitment to financing the national housing programme in a comprehensive and common sense fashion. Since assuming office the Government have seen the problems affecting housing and already have taken significant steps to combat the rot and the mis-use of resources which were beginning to set in. I want to outline now the major problem areas and the steps which have been taken already by the Government to attempt to rectify the situation.
In the housing area the most immediate problem is the rescue of the local authority housing programme. I use the word rescue deliberately because the programme was on the verge of a complete collapse arising from the lack of adequate central funds. It is no exaggeration to say that in the absence of additional capital being provided by the Government work on many local authority housing sites would come to a complete half within weeks. In fact, many local authorities would not have re-employed their direct labour force after the builders' holiday fortnight.
The 1981 public capital programme provided £108.5 million for local authority house building. A further £2.5 million was allocated at the end of May bringing the total provision for the year to £111 million. This provision was grossly inadequate compared with the expenditure of £114 million last year. The situation in 1981 was aggravated by the fact that since 1978 there were a series of cuts in real terms in the capital provided annually for local authority housing, the previous administration are most guilty in that sphere. While the wholesale price index for building and construction rose by 39.2 per cent between 1978 and 1980, capital provided in that period rose by only 25.7 per cent; the disparity was even greater in practice as the index does not take account of certain special increases which were substantial during the period. In this connection it is interesting to note that during 1980 building prices generally increased by 20 per cent but average tender prices for the bigger local authority schemes increased over that year by over 30 per cent.
While these cuts in real terms were taking place it appears miraculous that the programme was being maintained at about the same level. But, of course, there was no miracle involved; the plain fact of the matter is that by the end of 1980 debit balances on local authority accounts totalling about £28 million had been built up. What this meant was that more than a quarter of the public capital programme provision for 1981 had to be used to pay off debts already incurred in 1980. The consequence was that less than three-quarters of the £108.5 million provided in the Estimates was available for actual building purposes; the other quarter had to be used to pay off overdrafts that had been previously built up. It was not possible to meet the demands of local authorities for what they considered was necessary to meet their commitments on existing schemes and, of course, the normal practice of making separate allocations for new works programmes had to be abandones. By the middle of this year over 80 per cent of the total capital available had been drawn from the Local Loans Fund and a number of authorities had fully drawn their total allocations for the year. Many local authority managers were faced with the bleak prospect of putting contractors off sites; the alternative was the accumulation of even more crippling debit balances but this was not a viable choice in view of the critical state of local authority and Government finances.
In the matter of the programme itself, by mid-year it was obvious that there was no prospect of achieving the 6,000 completions announced earlier in the year. The prospects now are that completions will not be much above 5,000 and possibly lower. Completions up to 30 April were already down 183 on the same period in 1980 while units in progress were down by a massive 728 on the corresponding date last year. When I became Minister I found that schemes involving 2,200 houses and over 200 sites for private housing were being held up in the Department or were not being started by local authorities because of lack of funds. These and other schemes planned to start later in the year would not have got under way unless extra capital which we provided was provided and the net result of this would be that the number of houses in progress at the end of the year would have fallen to 4,500. This could mean that completions would be as low as 3,000 in 1982.
This then was the daunting prospect that faced me when I took up office. Obviously remedial action was necessary and that action could not be delayed. I immediately put a case to the Government for a substantial extra capital provision to save the programme and I am glad to say that, despite the grave financial crisis, they decided to allocate a further £30 million necessary to keep the schemes going to the end of the year. The Government have authorised a further £16½ million in housing subsidy bringing the total provision for this item in 1981 to over £79 million. This subsidy meets the cost of borrowings by local authorities to provide houses for renting. The need for the extra allocation arises primarily from a regrettable decision in the context of the 1981 budget to under-provide for this item in 1981. The scale of the shortfall was such that it would have placed local authorities in intolerable financial difficulties later this year.
This was in spite of the fact that it was an assessable sum that could be estimated — if that is the right word — to the last penny on 1 January how much was to be paid out during 1981. Yet, it was deliberately omitted from the Book of Estimates, even though it was known that local authorities would have to get their money, so as to try to present a better picture of the finances at the beginning of this year. No wonder the Government changed. In formulating housing policy, it is important to take a critical look at developments which have a significant bearing on our overall housing scheme. Between 1971 and 1979, the total population increased by 13.1 per cent which was the fastest rate of population growth in Europe apart from Turkey and Iceland. But perhaps, even more startling is the fact that the total number of households in Ireland increased by 21.1 per cent during this period.
A very large proportion of the increase in the numbers of households in Ireland can be attributed to a change in the rate of formation of households by the younger age groups rather that to changes in the size and structure of the population. Information to be published by my Department later today shows that 22 per cent of new house borrowers from all agencies in 1980 were single persons not about to marry compared to 19 per cent in 1979, 19 per cent in 1978 and 20 per cent in 1977. A high incidence of single persons not about to marry but who can afford to purchase secondhand houses is also apparent from the statistics.
This development has serious implications for the Exchequer. Clearly, some single persons could readily postpone the purchase of a house because they are adequately housed at present. In the normal course the housing needs of families must take priority. The Government have reviewed the position and have decided that there should be no change in the position relating to the special loans and mortgage subsidies available to categories such as tenants and tenant-purchasers of local authority houses who surrender their premises to the authority and one-parent families. In future, however, in other cases, eligibility for the mortgage subsidy and ordinary local authority house purchase loans will be restricted to married persons and persons about to marry. Single purchasers may obtain approval to the payment of a loan and mortgage subsidy but these payments will not be made until evidence of marriage is available.
I have talked up to now about the role of the Government in the provision of finance for new housing. At this stage it would be remiss of me to let this occasion pass without an acknowledgement of the tremendous achievements in the provision of mortgage finance by the building societies over the years. The societies play a vital role in the Government's housing programme by providing 74 per cent of mortgage finance for private houses. In 1980 they provided 16,900 house loans valued at £269 million consisting of £126 million in respect of 7,800 new houses and £143 million in respect of 9,100 other houses. It is estimated that societies will provide about £300 million in mortgage finance in the current year.
As Deputies are aware the level at which societies pitch their investment rate is of the utmost importance in attracting new funds to enable them to continue to supply such high levels of mortgage finance. In setting their investment rate, societies are conscious of other competitive rates and, for instance, have normally maintained a differential over the minimum deposit rate offered by the associated banks.
Building societies reduced their investment rate from 9 per cent to 8.25 per cent with effect from 1 January 1981 when the minimum bank deposit rate stood at 7.5 per cent. In the event there was a sharp fall in the net inflow of funds to societies from January to April. On 12 May 1981 the associated banks increased their investment and lending rates.
To restore the inflow of money to a level necessary to meet the demand for mortgages, building societies increased their investment rates by 1 per cent from 1 June 1981 until further notice, without increasing their existing mortgage interest rate of 13.15 per cent on the basis of payment of a Government interest subsidy of 1 per cent from that date. The societies decision in the matter arose from a commitment given by the former Minister for the Environment at a meeting on 20 May 1981 with representatives of the Irish Building Societies Association.
Because of the present difficult financial situation which the present Government has been left, we have no alternative but to take measures in order to commence rectifying the situation. It has accordingly been necessary to terminate the subsidy on the building society investment interest rates with effect from 1 September 1981. My Department will be in touch with the societies in this matter without delay. Deputies and indeed the general public will realise that scarce resources must be devoted to areas where there is most need, for example, those who must depend on the local authority for a house. It is for this reason that we have decided to allocate £30 million extra for local authority housing.
I should say that the subsidy was originally introduced about ten years ago and discontinued in 1976. It was reintroduced last year, I think, and operated then for four months. It is operating for only three months this year.
The Government are conscious of the fact that the present overall system of house purchase loans has certain short-comings. This applies particularly to the needs of low to moderate income purchasers and the extent to which finance is provided from public funds. We must not lose sight of the need to tackle the problem of high deposits in some cases, the need to top up loans and the question of trying to establish a better relationship between amounts of loan repayments and total incomes during the repayment periods. For these reasons my Department are having discussions with interested parties with a view to formulating proposals for legislation which would provide for the setting up of a housing finance agency. I hope to have these proposals before the Dáil before the end of the year.
Earlier I indicated it was not enough for the Government to arrange merely for the building of new houses. We must ensure that the existing stock of houses does not deteriorate. For that reason we pointed out in our programme that we will introduce shortly some home improvement schemes. Details will be announced by the Minister of State shortly.
With regard to roads, I am keenly aware of the difficulties being faced by industrialists and others dependent on transport facilities through chronic traffic congestion in cities and towns. A road network that is adequate for the needs of the community also makes a positive contribution towards our costs and helps our export competitiveness. An investment in roads is an essential part of any Government's programme. I am satisfied that we will continue investment in roads at a high level.
Despite the present economic difficulties and the financial problems inherited by the Government, we are determined to do all we can to sustain investment in sanitary services. The lack of adequate piped water and sewerage facilities has for far too long inhibited economic physical development at national and local level. Planning permissions for worthwhile developments are delayed or refused because of insufficient sanitary services. The ability of the IDA to attract industrial investment, particularly water-using and effluent generating industries, is dependent on the existence of adequate water supplies and sewage disposal facilities. The drive to modernise farming must be matched by the continuing progress of the rural piped water supply programmes since water is essential for farm hygiene, livestock production and quality milk production. On my recommendation, the Government have agreed to an additional £3 million to finance the shortfall in the provision made to finance the payment of State subsidies due to local authorities.
The sanitary services programme has an important impact on employment both directly and indirectly. About 85 per cent of the materials and equipment required for the programme is manufactured in Ireland so that the import content is relatively low. The programme plays an important part in maintaining off-site employment in firms producing pipes and treatment plant for the programme. Other direct employment programmes, including the IDA advance factory programme and the housing programme, follow on from the servicing of land for development purposes.
With regard to planning, I am conscious of the necessity of ensuring that development is not inhibited by planning laws while, at the same time, ensuring that the population and the environment are protected. It is accepted by all that snags have arisen from time to time. It will be a priority on my part to see that any wrinkles in the planning laws are ironed out so that development can go ahead but not at the expense of the Environment.
My final comment is with regard to unfinished estates that are causing so much trouble to local authority members and, more especially, to residents of the estates. The Minister of State and I will tackle this as a matter of priority to ensure that people who buy houses in such estates get what they have paid for, namely, a finished estate.
