This motion in my name and the names of other Members of the Labour Party, including your good self, sir, is an attempt by the Labour Party to obtain something which is now absolutely essential but which existing house purchasers and prospective house purchasers do not have. I refer to security for their deposits, the moneys they save and any interim payments they make during the course of the construction of their homes under the existing regulation of the building industry.
The objective is very clear. This is an attempt by the Labour Party to get the Oireachtas to introduce consumer orientated legislation designed to protect people trying to buy their own homes. This legislation is long overdue and, sad to relate—and this has been the case in many other instances of reform legislation—it has been prompted by direct representations made to me by people who have actually lost their deposits owing to certain building companies going into liquidation because they could not financially continue to operate. Depositors had no legal redress of any kind and could not recover their hard earned savings. In a sense this is without parallel relative to other commercial operations. Having regard to the importance of the Bill to the economy generally and the consensus of all parties regarding the desirability of home ownership, this is a situation we should clearly eliminate and, in its elimination, establish proper protection.
I do not think that we will divide on this service, there is a general commitment to achieve the objective highlighted by the Labour Party. There will, of course be some discussion as to the most effective way in which this objective can be achieved. In achieving this objective perhaps industry in general—I am addressing my remarks to industry — would have regard to the small number in terms of volume of those who have lost their deposits and who, in consequence unless the industry responds, have lost for all time any prospect of buying a house. I have in my correspondence particulars received in regard to one particular woman who saved £7,000 to buy a flat. That deposit was lost and with it years of foregoing expenditure and consumption and she has now no realistic prospect of being able to save that kind of money again.
The average industrial wage at the moment is £7,500 per annum or £140 per week. The median income ranges from £7,500 to about £10,000 per year and, having regard to the punitive levels of taxation on those who do not have the benefit of a mortgage to offset against their personal income tax allowance, increasing inflation around 20 per cent per annum the saving of a sum in the region of £3,000 to £5,000 is an extremely difficult task. It may perhaps be within the bounds of one wage earner's capability to do it once but it would certainly not be possible for him to do it twice.
The objective is clearly stated. There must be consumer protection for people purchasing new dwellings in regard to their booking deposits, contract deposits and payments made during the course of construction. The need has been represented to me but regrettably the statistics are not easy to establish. I have asked people if they can corroborate their own assessment of the statistics of other people's experiences, but it is not the kind of thing that people highlight and the correspondence I have received would certainly indicate that you cannot base any statistical argument on it. Having admitted that, however, it in no way invalidates the principle of the argument that there is need for such protection and there is a vehicle through which that protection can be provided. I shall return to that later.
The House should look at the complex in which we are debating this Bill. House completions for the year gone out for other houses in the four quarters of 1981 were respectively 6,000 odd, 4,000 odd, 5,000 odd and 6,000 odd, making a total of around 24,000 houses. It is quite clear from the present policy of the Government and indeed the previous Government that something in the region of 80 per cent of all new housing will be provided by the non-local authority sector. I use the phrase "non-local authority", which is a kind of negative phraseology because the other sector, and it is referred to here as the other sector, will consist of estate house building contractors, one-off individual houses and houses people build themselves. I would guesstimate that something in the region of 40 per cent of all house completions will fall into the category of houses completed by building contractors for the purpose of sale.
A significant development has taken place in housing statistics. Again, it is not easy to establish these, but in contrast to the housing sector prior to the slump of 1973-74 it is my clear impression that the role of the large house builder was a dominant role and therefore the would-be house purchaser was dealing with a company of substance and the disappearance of a deposit or the collapse of a company was not something the purchaser would readily encounter relative to the market situation today.
The joint housing conference held in October of last year, sponsored by the Institute of Architects and the Minister's Department, confirmed this impression. One of the speakers from the private sector indicated that the major private housing construction companies had scaled down the extent of their exposure — I think that was the precise phrase he used — and preferred to develop sites and off-load them to a number of small builders, and this for a variety of reasons, not least of which was to be flexible because of the very uncertain market place. That very uncertain market place put at risk, in our view, the security of the deposit the first time house purchaser in particular has when he enters into the housing market. There is no indication to show that this Government's policy or, indeed, that of any subsequent Government, unless there is a radical shift in politics, will move dramatically from the 20 per cent 80 per cent split. Therefore, for the foreseeable future, for the next 10 years at least, we will be relying on the private commercial house builder to produce something in the region of 50 per cent of new dwellings. The legal position is that if that house builder is not properly bonded — I shall come back to this later in the context of the world of housing co-operatives — or insured, or the company are not so bonded, then the deposit paid by the would-be purchaser is totally exposed and totally at risk.
That is a magic gap in consumer legislation, and it would be fair to say that if the activities of the building industry came within the ambit of the EEC this gross neglect of consumer protection would have ended many years ago. The gap exists and we in the Labour Party are moving to close it, regrettably after the stable has been vacated by a number of unfortunate builders who collapsed, taking with them the deposits of first-time purchasers. I would make a formal appeal to the building industry, particularly the CIF, to accommodate these people in some way, perhaps in a manner similar to that adopted by the travel trade in relation to some of those who were disappointed due to the collapse of one or two travel operators. Perhaps this is not the most fruitful time to talk to the building industry, but they present themselves as being socially responsible and this is a unique opportunity for them to give substantial and tangible evidence of their commitment to the consumer side of the industry.
I refer now to the increase in house costs. The increase in new house prices is, according to the Department's statistics, in excess of the increase in inflation, building costs or income increases. The Quarterly Bulletin of Housing Statistics for the quarter ending 31 March 1982 is based on the index of 100 for the year 1973 and states that consumer prices have risen from that base to 370, house building costs to 454, average earnings of adult workers to 428, while new private house prices have increased from the base of 100 to 496. There has been an absolute increase in new house prices and consequently in the cost of a deposit.
The actual increase in house prices is quite dramatic, but I will resist any temptation to play party politics. These prices are an extraordinary indication of the disastrous effects of inflation. In 1977 the average gross price of new houses for which loans were approved by building societies, insurance companies, local authorities and associated banks was £14,770 but at the beginning of 1982 that figure had risen to £33,960. That is an extraordinary jump. Taking into account all the other factors such as the increase in incomes, I would suggest that it is becoming more difficult to purchase a house and more difficult to accumulate the funds for a deposit. In 1980 the average cost was £27,000, in 1981 it was £31,000 and at the end of that year it was £33,000. The increase is quite substantial.
The deposit varies from 10 per cent to 25 per cent of the purchase price, depending on the way the property is marketed. Even at its lowest amount the deposit would represent about £3,500, though most people would agree that it is far more substantial, and purchasers are also expected to make phased payments to the builder before the loan is payable.
The outlay of money by a would-be purchaser is fairly substantial and, irrespective of the unfortunate cases of people losing their deposit, there is a clear argument for some form of consumer protection. I do not think that anybody within the building industry would in conscience reject that argument. I might add that as an architect I regard myself as part of the building industry. If there is consensus in the House as to the desirability of achieving this objective, we should consider the most effective way of doing so.
The Minister has put down an amendment which effectively agrees in substance with the objective but disagrees with the method of achieving it. He has backed away from a statutory house construction bonded fund and the amendment calls upon the Minister for the Environment to ensure that a scheme is available to provide what we are seeking. We are looking for something of substance which will stand up to the test of claims by consumers who have been the victims of an unfortunate collapse within the industry. The nature of the industry is such that it is subject to very rapid changes in demand. At times the Government throw out money in the hope of creating jobs in the industry but they whip it back again. The building industry does not lend itself to being used as an accelerator for the economy but frequently it is used in such a way, with much damage to the social fabric, labour relations and training programmes within the industry.
The argument stands for some established legally contained and secure house construction bonded fund in order to secure purchasers. Why I say that is that, having regard to the changes in the structure of private house building and the industry as I understand it, in all possibility we will see more small house builders building a small number of houses a year for sale, as against an increase in the large house construction company with a large volume of house construction of 200 to 400 houses a year, with a large land bank and all the carrying costs implicit in that. The trend in the industry appears to be towards the small builder and towards large companies spreading their eggs amongst a large number of baskets, and, by implication, smaller construction companies, which frequently comprises a building tradesman who turns into a house builder. To make his books stand up he probably must count his own wages as profit in order to make the operation look viable to the bank manager or anybody else. That kind of operator in the market economy which we operate will find it extremely difficult to get adequate insurance bonding from our insurance community. Indeed, our insurance community as far as bonding is concerned leaves a great deal to be desired.
My experience with Dublin Corporation's housing authority was of small, unknown builders during the recession of 1973 to 1976 trying to compete and competing fairly effectively against a number of larger household names who had come in out of the cold to take up the slack by way of local authority house building. These small builders who, on the surface, were more competitive with the lowest tenders found it impossible to get bonding even for comparatively small contracts. The same will tend to apply now if the onus is put on the builder to bond himself or herself. We will accept the Government's amendment in the interests of goodwill towards the Minister in question and in the interests of arriving at a solution because this, as far as we are concerned, is not a party-partisan affair. We are genuinely trying to achieve an agreed scheme which will not become a political football and will not be abolished, reduced, or simply ignored when there is a change of Government. I would not like it to suffer the fate of the Housing Finance Agency. Let us get a consensus on this in the first instance because there are lessons for all of us from that type of experience. I am tempted to say more, but I am in a good mood at the moment.