Vol. 337 No. 9
I move:
That Dáil Éireann calls on the Minister for the Environment to introduce a statutory House Construction Bonded Fund to provide basic protection for all purchasers of new dwellings in respect of their booking deposits, contract deposits and payments made during the course of construction.
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.
Keep going, while you are ahead.
The Minister, in trying to cast around for an available scheme, should take the model which presents itself as originally agreed between his Department, the CIF and Housebuilders' Federation within it, in the National Guarantee Scheme. Contained within the operation of that scheme is the basis for extending its scope and encompassing the protection which we have in mind. The industry should pay for this itself in the manner in which it has always paid for it, by upping the price which the consumer pays. There is a slogan relating to another aspect of the Department which says that the polluter must pay for the pollution.
In the history of market economies it is quite clear that every initial increase in social expenditure on a commodity which enters into the market ultimately finds its way back to the price mechanism at the far end and society pays a higher price for a better product. That is why labour costs in the developed western economy are so much higher than those of Brazil or Argentina. There are very good reasons for this, including the survival, in health and political terms, of those who work in factories in western Europe, as against their counterparts in Brazil or Argentina.
We are not naive in saying that. We are recognising that a very small levy on all would-be house purchases will provide adequate security for the unfortunate small number who will have the experience of seeing their hard-earned savings disappear, by virtue of the unstructured or erratic nature of the market, or the mismanagement of the particular companies. When one accepts, as we do in principle, that it is the logical outcome of saying that the building industry should regulate itself, I am also admitting that the Minister's Department have a substantial role in the industry. The Department are probably the largest single generators of demand within the industry. Because of that fact alone, plus the very good relations maintained on a personal basis between the director of the CIF and whoever happens to be unfortunate enough to be Minister for the Environment is sufficient evidence to demonstrate just how interdependent one is with the other. When I use the phrase "the industry" I include in that the financial role of the Department and, in objective economic terms, the market role of the Department of the Environment. For example, the bonding scheme should be administered by the industry itself, similar to the way in which the guarantee scheme goes. It could possibly form the basis for something that could be talked about tomorrow on Second Stage on planning development, but that we will ultimately be speaking about at some length — the whole question of how one administers, supervises and oversees quality control standards in the building industry itself. I do not believe that is the role of the civil service inspectorate. If they make a mistake one cannot sue them, and asking question in the Dáil simply gets one column inches in the newspapers and sometimes an indirect hit on the relevant incumbent Minister of the day, but invariable no effective action. That kind of game playing does not benefit the victims of any kind of market economy, having regard to the way in which we organise our public service, where no public servant will lose his job because of incompetence in the inspectorate area. The threat of job loss does not exist, as it would in other areas, because it is a reality of the success of civil service trade union negotiation over the years; it is a fact of life. This is one major argument against that type of inspectorate. It is an argument which I would use in preference to the argument of the more dominant Deputy John Kelly of the implicit cost of the inspectorate.
The building council, with the role of the building industry, through the Department, through the private sector, through local authorities, could be the body through which this kind of bonded scheme could operate. In accepting the spirit of the Minister's amendment, I am putting forward to him a proposal to which he might perhaps respond when moving the amendment, that there is the genesis of a guarantee scheme, the extension of which could become available to cover this. The National Guarantee Scheme at present is financed by the house purchaser in any event, so the principle has been established.
To conclude, the need, in objective terms, is undoubtedly there as far as we are concerned 80 per cent of all houses now built in the Republic are built by agencies other than local authorities, in the main for purchase. There is at present no consumer protection for people who place their hard-earned savings with a small individual builder or, for that matter, a large one. Their rights, as against those of creditors, debenture holders, or banks, are very minimal and they have a long wait in the queue. Their real prospects of retrieving any money at the end of the day are virtually nil. It is a clear gap in the consumer protection legislation that should be closed. The response of the Government has been constructive. They now recognise the argument, but dispute the means by which it can be achieved. In recognising that the Labour Party have won the argument, we are prepared, graciously, without rancour or division of any kind, to accept the amendment from the Government and to make some tentative suggestions as to how the scheme could become available within the existing operations of the building industry.
I move amendment No. 1:
To delete all words after "That" and substitute the following:
"Dáil Éireann calls on the Minister for the Environment to ensure that a scheme is available which provides basic protection for all purchasers of new dwellings in respect of their booking deposit, contract deposits and payments made during the course of construction."
In proposing that amendment, I want to make it quite clear that I am not opposed to the main sentiments expressed in the Labour Party motion. Every Member would agree that everything should be done to provide the fullest possible protection to house purchasers. We all know that buying a house is normally the biggest single transaction people undertake in their life, and there are enough problems without them having to worry about the possible loss of their money in circumstances over which they generally have no control.
My reservation about the motion is based on my conviction that the establishment of an additional structure to deal with what is undoubtedly a problem is neither necessary nor desirable. We should be thinking about whether structures already in existence to provide security for new house purchasers against financial loss can be extended or modified to cover the issues which are the subject of the motion. I am glad to hear that the proposer of the motion will not press for a statutory solution if it can be shown that there is an alternative.
Due to the importance of house purchase, my Department at all times endeavour to protect and assist purchasers directly and indirectly. The system of new house grants and subsidies provides first time owner occupiers with up to £4,000 in the early years of occupation when mortgage repayments bear heaviest and money is hard to come by. The standards laid down by the Department in regard to methods of construction, materials, insulation, floor area and so on which must be complied with for grant and mortgage subsidy purposes are designed to ensure that purchasers will live in well designed and well built houses. The Department's inspectors at various stages try to ensure that any departure from standards or any defects are brought to the attention of both builders and purchasers so that remedial action can be taken. The inspectors are willing to advise grant subsidy applicants, as are the administrative staff, on any aspect of their applications where help is required. While on the subject of advisory services, I should mention the Department's booklet entitled A Home of Your Own which is highly valued by house purchasers. It is updated from time to time to include new developments, such as new forms of statutory assistance. A new edition is being prepared at present. As a final example of the Department's endeavours to see that house purchasers get good value for money, I refer the House to the system of house price control operated in my Department through the issue of certificates of reasonable value.
As Deputies are aware, every new house offered for sale must be the subject of a CRV. Without it the purchaser will not qualify for £1,000 grant, £3,000 mortgage subsidy and exemption from stamp duty. Lending agencies will not advance a house purchase loan for a new house offered for sale if there is no CRV. Despite criticisms of the system from time to time, CRVs protect purchasers to the extent that they know if they pay the approved price or a lower one they are getting good value for their financial investment.
As can be seen, my Department are already providing a substantial degree of support and protection to new house purchasers — support by way of direct financial assistance and protection by way of measures designed to ensure the house is well built and represents good value. This leads me to the important element of protection provided to purchasers through the structural guarantee scheme operated by the National House Building Guarantee Company, a subsidiary of the Construction Industry Federation, in conjunction with my Department. This scheme was introduced in 1978 to protect purchasers from the legal and financial burdens which a major structural defect would in most cases entail. These are difficult to remedy and are generally beyond the resources of most purchasers, whose means are fully stretched in buying their houses and repaying loans. Without a guarantee certificate they might have to pursue claims through the courts against builders at considerable cost and uncertainty of outcome. Obviously builders would also be involved in major expense in remedying structural defects as well as costly legal expenses. This is why most builders welcome the scheme. To date 1,600 builders have been accepted as members and approximately 34,000 houses have been registered. While the scheme is controlled by the guarantee company, officials of my Department attend meetings of the company and in that capacity monitor the operations of the scheme. The inspections at foundation, roofing and completion stages are carried out by the Department's inspectors. The cost of this inspection service is recouped by my Department from the company.
Even though the scheme has only been in operation for four-and-a-half years it has not remained static. While the protection provided still covers only major structural defects the value of the scheme has been enhanced through the co-operation of the lending agencies, which will not make loans in respect of houses not registered with the guarantee company. The company now employ qualified technical staff to assess the technical capabilities of builders who apply for membership and to provide an advisory service to them. The technical staff of the company and the Department co-operate through joint inspections where desirable and a sharing of information. The scheme is not hide bound and is capable of taking other matters within its ambit from time to time.
It is in the interest of the purchasers, builders, the guarantee company and my Department that structural defects are kept to a minimum. Builders who seek registration in the scheme are subject to detailed financial vetting to complete the construction of houses and honour their obligations to their clients. Consequently anyone buying a house from a builder who has been accepted for membership has the satisfaction and comfort of knowing that the construction of his house is in good hands. When a person buys a house which is not registered it will not qualify for the £4,000 grant subsidy. Of course, no form of financial vetting can be 100 per cent foolproof nor can it ensure that builders who are financially sound at the time of application will not go bankrupt at a later stage. Builders can become bankrupt for many reasons. However, every possible precaution is taken by the guarantee company to protect house purchasers against financial loss. I am informed by the company that they are not aware of any cases where the purchaser of a registered house lost a deposit as a result of a builder becoming bankrupt or for any other reason. This indicates that the system of vetting of builders has worked well so far. This is not surprising, as in my experience the majority of builders do a good job in their own interests as well as in the interests of prospective customers.
Naturally there are exceptions, but no more so than in any other walk of life. Membership of the scheme is voluntary. If certain people decide to buy houses from builders who are not members that is their right. There are people who do not need to take house purchase loans, for example, where they are buying a new house out of their own resources or from the sale of an existing house. There are people who are not eligible for the £4,000 subsidy. If they choose to do business with a non-registered builder who may not be able to honour his commitments no one can stop them from doing so. The question arises as to whether the State should step in and protect them, as Deputy Quinn's motion envisages. Would the problem be better dealt with by an extension of the protection afforded by the guarantee scheme? I was glad to hear the Deputy say that this line of approach would find favour with him. It is the approach I favour.
Deputy Quinn will recall that last month he put down a question asking if I was aware that prospective house purchasers who had placed deposits with builders had lost them when the builders went bankrupt and if I would enter into discussions with the Construction Industry Federation with a view to extending the structural guarantee scheme to include full insurance cover and provide full repayment for prospective purchasers so affected. In my reply of 17 June I indicated that I was not aware that any purchasers of houses registered under the structural guarantee scheme had lost their deposits because the builders had gone bankrupt. I indicated that while the extension of the scheme was primarily a matter for the guarantee company I had instructed my officials to act as observers of the company to pursue the question of protection of deposits and report to me in due course.
The motion does not specifically mention the guarantee company but it can be reasonably inferred from its terms and from Deputy Quinn's questions that that is what the proposer had in mind. The Department is actively pursuing the question of extending the cover with the guarantee company but it is too early yet to have it resolved. In any event, the scheme will not, nor can it be expected to, provide a blanket cover for every purchaser. I have already explained the problems of providing against every risk involved in house purchase. I understand that even where cover is provided in similar circumstances in other countries it is generally of a limited degree. It may reasonably be asked then why cover, even if it is limited, is not provided under the guarantee scheme in Ireland. The main reason is that the scheme is in operation for only a short period. Experience in other countries has shown that caution must be exercised in the early years of a guarantee company so that sufficient funds can be accumulated to meet cases of major structural defects that arise. Experience has also shown that claims under the heading are more likely to arise when the period of guarantee is coming to an end rather than in the earlier years of occupation. This is understandable, as occupiers can become worried over every minor defect turning into a major structural defect. It is likely, therefore, that the company will be presented with an increasing number of claims from now on as years go by. Also a major structural defect which might affect an entire scheme, unlikely though this is, could involve major expenditure.
Purchasers who lose money during the course of construction of their houses by way of deposit or other payments can seek redress through legal means, but, depending on the circumstances, the chances of redress might be poor when there are no funds to meet claims, as in bankruptcy cases or where they are low on the list of creditors. However, another side of the story must be borne in mind. Disputes over money arise from time to time between purchasers and builders which have nothing to do with the insolvency of the builders. These disputes relate to matters such as breach of contract and certain standards of construction for which a builder could not be expected to accept liability and which he may defend in the courts. I assume that the protection sought for in the motion is not intended to cover such issues. Basic protection is, however, clearly desirable, as my amendment states.
I see no point in setting up a further State or semi-State bureaucracy to provide the protection envisaged in the statutory form mentioned in the motion. The best way of dealing with the issue is to have the problem dealt with by an extension of the existing cover provided by the guarantee company, and it is along these lines that discussions are going with the guarantee company at this stage. This extension may add to the costs of the guarantee scheme and necessitate an amendment to the existing rules, which do not provide for anything other than protection against major structural defects. At the same time, some economies in cost may be possible under the existing scheme, and I am pressing the guarantee company to have a solution found for this as soon as possible.
Deputy Quinn rightly pointed to cases which have arisen, as he put it, closing the barn door after the horse has bolted. Some of these may have arisen recently, and I have had discussions with regard to the people involved in the recent cases. Talks are going on already with regard to some security for the deposits that were paid and legitimate fears with regard to their loss may arise. The way forward — I am glad that Deputy Quinn referred to it himself — is through the extension of the guarantee company cover, as the amendment says and as in a way Deputy Quinn's motion says, to ensure that a scheme is available which provides basic protection for all purchasers of new dwellings in respect of their booking deposits, contract documents and payments made during the course of construction. Everybody in this House should be in favour of that, and as Minister I intend to see that it will be done through an extension of the guarantee scheme.
(Cavan-Monaghan): The introduction of this motion calling for protection for house purchasers against loss of their booking deposits, contract deposits and payment on account during the course of the building operation is very opportune. I will go a bit further and say that the introduction of this motion and of an indemnity fund of some sort or other is much overdue. I suppose it takes a calamity of one sort or another to draw our attention to the necessity for protection like this, just as in the last couple of years it took a frightful fire with consequent loss of life in more than one place in this country to put the spotlight on the necessity for updating fire protection and fire prevention provisions and the introduction of new building regulations which have been on the shelf for quite a long time. I am not saying that in any carping or critical manner, but it is a fact that until some disaster or calamity befalls people in one area or another, many danger points are overlooked.
It is true to say what is frequently said from time to time and might be regarded as a cliche, that the purchasing of a house is by far the biggest commercial, monetary or material enterprise that most people will ever undertake in the course of their lives. If that was true in years gone by, it is more true now than ever it was with the price of houses having rocketed to, at the very cheapest, £25,000. I have not looked at figures for this debate, but listening to a programme on the radio yesterday evening on my way from the west. I was reminded that the cheapest house available in and around this city costs £25,000 and the average cost of a house is more than that. Therefore, when you see the amount of money that people of moderate means invest in order to provide themselves with a house, it is wrong that they should have to take any risk.
Most prople who are paid in advance or act as bailees or hold deposits of other people's money, such as solicitors and auctioneers, have for some time past been obliged to provide a bond to indemnify those who may suffer a loss through the failure of the agents concerned to honour their obligations. Indeed, hardly a year goes past but the necessity for such a bond is seen in regard to the legal profession, unfortunately, and in regard to the auctioneers' profession. In recent times one of the leading building contractors of the whole country went into liquidation, and not alone is it feared that some people will suffer a loss, but is has created very considerable confusion regarding the value of the deeds of certain houses for security purposes. The Incorporated Law Society have found it necessary to advise solicitors about closing sales where houses built by either the company or subsidiaries of that company are concerned, because it might well turn out that if they do so on bridging finance the principal lenders, the building societies and others, might not accept the deeds of these houses as security for the amount of money agreed to be advanced, which is £20,000 and upwards.
Furthermore, many people enter into these contracts in the early stages without mature consideration or advice or without independent legal advice and find themselves bound to pay substantial sums of money before the house is completed. If the builders go into liquidation or are declared bankrupt, these purchasers are left at a very considerable loss. The need for an indemnity fund of the type suggested is obvious. There does not seem to be any great difference in this regard between the motion introduced by the Labour Party and the amendment proposed by the Minister. In other words, there is a common case on the necessity for an indemnity, or the need to protect people against losses which occur by reason of bankruptcy or liquidation, situations that arise without there being any criminal or gross negligence on the part of the people concerned. Most building contractors are honourable and responsible people who do a good job and give good value for money. There are the exceptions, but apart from any such exceptions it is easy for firms or individuals to drift into trouble. The only difference between the proposers of the motion and the Minister on the question of an indemnity is whether it should be provided by the State or by way of an agency that would be set up by the building contractors.
I have mentioned the question of the solicitors' and auctioneers' professions in this context. Auctioneers are obliged to give a bond and that is operated through the licensing process provided for in the Auctioneers' Act. A licence will not be granted unless an insurance company bond is produced, or failing that, unless there is a very substantial deposit in the High Court. On the other hand, the solicitors' profession operate their indemnity scheme by way of annual payment by each solicitor at the time of the granting of his licence. Therefore, it can be said that both of these professions provide their own indemnity schemes and operate them without involving the State in any cost. It is possible to operate the indemnity in the case of the solicitors' profession by reason of their having to be licensed and the licensing authority are the Incorporated Law Society. It is convenient for them to collect the subscription at the time of issuing the annual licence. A solicitor will not be able to obtain a licence unless he pays his contribution to the indemnity fund.
The same procedure is adopted by the auctioneers' profession, but they must apply to the courts for their annual licence. Again, a licence will not be granted unless the auctioneer provides evidence of having taken out an indemnity bond. I suppose one could regard road traffic insurance as a similar type of protection in that road-users are obliged to have insurance before getting a licence to use motor vehicles on the roads, though we know that many motorists endeavour to evade that.
Regardless of whether the Minister decides in favour of what I would call the statutory form of indemnity or a form of indemnity operated by the builders themselves, there is necessity for immediate protection. I say this because there is always some risk that purchasers of houses in the course of construction are at some risk but at a time of recession that risk is always greater than it would be at a time of economic growth when there are bound to be more bankruptcies and liquidations. Therefore, there is a certain urgency about the legislation in this area. Indeed, the legislation is long overdue. There have been cases in the past in which if the State had not intervened and organised relief with the help of other insurance companies, many people who suffered injuries and loss in road accidents or who had premises destroyed by fire would have suffered very severe losses in cases in which insurance companies went into liquidation. Regardless of whether a statutory scheme is to be introduced or of whether we are to have a voluntary scheme introduced by the building contractors, there will be delays. The latter would be a voluntary scheme though it might even be a compulsory scheme for which legislation would be necessary. Because of such delays, big losses may be suffered and that is why I suggest that there be an ad hoc scheme introduced and put into effect in the event of an emergency arising. There is precedent for this in the case of insurance companies that collapsed in the past.
It would not be good enough just to get this motion out of the House this evening, have the House go into recess and nothing done about it for a couple of years. In the meantime builders would be getting into trouble, people would suffer financial loss or indeed ruination. The Minister should get his Department thinking about this. One does not have to make any announcements naming any people, as was done recently in regard to another undertaking. Rather simply say that one is having thoughts about rescue operations for anybody who may go bust. But, within the secrecy of the Department, Deputy Connolly, the Minister of State or somebody else should be thinking about this, about having some fire brigade operation ready to come to the rescue of any company in trouble. I want to emphasise that a recessionary period is a dangerous one. Very few people manage their business so badly, build houses so cheaply, or have not a protection clause but it must be remembered that in a recessionary period there is always that inherent danger.
I do not want to stand in the way of a couple of other speakers who want to make a contribution. It was agreed that this would be a short debate and there is no real dispute about it. However, I want to make another appeal to the Minister, and here I do not think I am out of order because the Minister spoke about it. The Minister spoke about all the grants that are available and all that his Department are doing to help housebuilders. I appeal to him now to have delays abolished. Even with regard to the new house grant of £1,000 I receive representations every week about delays in inspections and in having that grant paid. People tell me they have been living in houses for up to 12 months and yet the grant has not been paid.
It must be remembered that a grant of £1,000 means a lot to a person building a house. Even today I was on the telephone endeavouring to sort out finance vis-à-vis the Housing Finance Agency. I understand it has been decided to borrow money in advance of the bonds being purchased to get the scheme going. I put down a Private Notice Question about this today but I was ruled out of order for some reason or another. I am not quarelling with that. But I know of people who have entered into commitments to buy houses who, unless they produce evidence quickly that they are in funds to complete that purchase, will lose their deposit and will not be able to purchase those houses. Also in this connection I understand there is some trouble being experienced with the staffs of some of the law agents — I do not imagine that they are law agents who are operating on a bill of costs basis.
I think the Deputy knows all about that.
(Cavan-Monaghan): Why does the Minister of State think that?
Because the Deputy belongs to the legal profession.
(Cavan-Monaghan): I do not know what profession the Minister belongs to but——
It is a very distinguished profession.
Deputy Fitzpatrick without interruption.
(Cavan-Monaghan): As a matter of fact I remember one time, as a young solicitor, being approached, not by an old woman but a rather simple sort of a woman——
A gentle lady.
(Cavan-Monaghan):——who had been employed — and I will not say what profession employed her — but she had worked hard and had received practically nothing for years. As a result of my intervention on her behalf she succeeded in getting some hundreds of pounds which at that time was an enormous amount of money. On going out the door she said: “Thank you, sir, goodbye, God bless you, but for the like of you the poor would not be let live.” When I hear of the legal profession being attacked I always think of that incident. I do not know what I was saying when the Minister interrupted me.
I did not mean it in any rude way.
(Cavan-Monaghan): If the Minister would like to know, I did practise as a solicitor for many years but not since 1973. Nor have I any interest in the solicitors' profession, monetary or otherwise. Therefore I am not defending any vested interest.
To revert to the Minister of State at the Department of the Environment, I have dealt with the question of new house grants. For God's sake would the Minister do something about the thousands of people who are being deprived of reconstruction grants?
We are unanimous in supporting a motion here to compensate people for losses incurred through building firms or individuals going bankrupt or into liquidation. At the same time we should pass a resolution seeking indemnification and compensation for the people in their hundreds who have been robbed — and I emphasise that — of the £600 reconstruction grant by the Minister's Department, by messing in that Department from 1980 to date. I make no apology for so saying. I am not saying it is dishonesty but it is large scale messing which has robbed hundreds if not thousands of people of grants of £600, grants to which they are entitled for rendering their houses watertight. They have been robbed of those grants through messing in the Minister's Department, perhaps before his time, perhaps in the time of the second last Government, and the last Government were unable to do anything about it. The Minister does not seem to be doing anything about it. But for God's sake let us not pontificate here about building contractors. Deputy Quinn was right to bring in this motion. I said, in his absence, that not alone was it opportune but was long overdue. We should not be shouting about them while tolerating a state of affairs in which the Department of the Environment write week after week to people telling them there is no file belonging to them, when everybody knows that there is, that their file cannot be traced, that their application was not lodged in time, because those people should be paid.
Like Deputy Fitzpatrick I want to congratulate Deputy Quinn on having introduced this motion. I regret very much there are not a greater number of Members present, either in the Chamber itself or adjoining rooms, to hear what is taking place here. Of course most of the Fine Gael Party are actively canvassing in East Galway. They have not made an appearance here today. I suppose that is their prerogative when in Opposition when they know the chips are down. But I want to congratulate Deputy Quinn on introducing this motion.
And not going to Galway?
I presume if the Deputy is introducing a motion it would be unlikely that he would go to Galway; it would be rather embarrassing were he not present, if I may say so.
I agree fully with the Minister's amendment. It is a reasonable one and goes a long way to meeting Deputy Quinn's proposal, or that of the Labour Party. Deputy Quinn is probably one of the most serious Members of the Labour Party in this House, a man who takes his job seriously, who has made very important contributions to the business of the House over the years. Consequently anything he puts before the House should be seriously and favourably considered.
Over the years we have all learned of the difficulties purchasers experience when firms in the building sector go bankrupt. At a time of deep recession, such as we are experiencing at present, builders and others who provide such services are likely to find themselves in difficulty. Consequently, it is reasonable for purchasers to look for guarantees when entering into an agreement to buy a house. I have no doubt that Members on all sides of the House will be favourably disposed to the suggestions made by Deputy Quinn. The Government, and the Minister are anxious to protect people who find themselves in such a situation when buying a house.
In most cases the purchase of a house is the biggest transaction undertaken by many people in their lifetime. The price of a house has spiralled out of all proportions in recent years mainly due to inflation. The cost of an average type house is now £35,000 and one does not get a mansion or a castle for that sum but a modest type of home. The average type worker, those working in the industrial sector or other businesses, must pay an enormous percentage of their income by way of mortgage repayments. It is crippling in many cases and that is one of the reasons why there are so many difficulties in the housing construction area.
Deputy Fitzpatrick referred correctly to the constant and unbearable delay experienced by those purchasing houses in connection with grants from the Department of the Environment. As a Member on the Government side I have no hesitation in supporting Deputy Fitzpatrick in his plea to the Department to ensure that grants that are due are paid without delay. People should be told within a reasonable time that they are not entitled to them or that they will be paid within a specified period. People should not have to go to their local representative with a plea to contact the Department in regard to grants. There are interminable delays and many letters before applications are dealt with. In many cases Deputies find it difficult to get a response from the Department. I do not intend that as a criticism of the Minister, or his Department, but I should like to urge officials in the Department to do everything possible to speed up the payment of grants.
Public servants are being subjected to a great deal of criticism at present and in my belief it is unfair because we have some of the finest brains in the country in charge of that service. I have no doubt that if many of those people were in private industry they would be earning a great deal more money than they are paid in the public service. Nonetheless, because of their dedication and patriotism they have chosen to remain in the public service. It is very hard to acknowledge the service they provide by way of monetary compensation. However, applications for grants should be dealt with without delay. If the money is not available the Minister should announce in the House that he does not have it but that he will be in a position to pay the grants within a specified period. I am not blaming the public servants, but people are entitled to a greater response from them on these matters. We must remember that a grant of £1,000 or £3,000 is an enormous amount of money when one considers the cost of housing and the difficulty young people have in buying their own home. I urge the Minister and the Department to act more decisively in this regard.
Deputy Fitzpatrick made a suggestion that we should prepare an ad hoc scheme. That amused me. What is an ad hoc scheme? Is it a mickey mouse scheme of some type? Is it not difficult enough with all the schemes that have been established and the many bureaucratic systems that exist without frustrating the people more by introducing an ad hoc scheme?
(Cavan-Monaghan): I was making the point that an ad hoc scheme was better than not having a scheme.
On a point of order, I should like to point out to the Chair and the House, that we are concluding this debate tonight and, therefore, in the normal course of events the mover of the motion would have 15 minutes to reply. With the agreement of the House I suggest that Deputy Bermingham have five minutes, the Minister of State five minutes and I, the mover of the motion, the remaining five minutes.
I take it that the House agrees to that procedure.
In conclusion I support the Minister's amendment and compliment Deputy Quinn for introducing this motion. It has given us an opportunity to discuss this important matter. Unfortunately, we have not had sufficient time to deal with it in great depth. I hope Deputies Quinn and Fitzpatrick accept the Minister's amendment.
In the few minutes available to me I should like to refer to the type of person who has not been mentioned in the House, a person who has had a house built for him by a man who has progressed from being a tradesman to a builder in a small way. It is fair to say that most of those builders are hard working and that they do their best for people in rural areas, people who would not have any opportunity of getting a big contractor to build for them. However, I know several people who advanced money to such builders before the work commenced and lost it before long. Those builders could not be included in the house guarantee scheme. I know people who engaged such builders and lost their life savings because they failed to complete their house. That failure may not have been the fault of the builder. It may have been due to a lack of knowledge on the builder's part in submitting the estimate. Decent people advanced money to them, money they borrowed in the form of a bridging loan, but lost everything because such builders failed to complete the building. Such contractors can never be included in the scheme that has been mentioned.
There must be either a statutory scheme or an insurance system for the assistance of people who are getting houses built or for small builders who are forced into such a situation. This is a serious business, as the Minister is well aware, because no one will come in voluntarily, particularly if he is a small builder. Unless there is some sort of scheme of the kind I have suggested those people will continue to get into trouble.
I support what has been said about delays in paying grants. Files have been getting lost. I do not know what has gone wrong in the Department but there is something seriously wrong when files belonging to people who have applied for grants cannot be found. A very brief notice was published by the Department saying that grant applications would no longer be accepted, but 90 per cent of the people concerned did not know anything about that. Reconstruction grants and new house grants have been refused. This is fair enough if the Department have not got the money, but we should have been told that and the country should have been told, but the Department had been saying that they were about to improve the scheme. Many people were conned by that quick advertisement.
I will be brief. Allegations have been made in the House in regard to officials of my Department concerning loss of files and people being robbed of their money. They are very serious allegations and I refute them completely. When they go outside the House such allegations are open to all sorts of misconstruction, though they are not true. To the best of my ability I have been attempting, with the help of my officials, to get the grant schemes running efficiently; that is my plan and that is what I should like to see happening.
I want to make it quite clear that there is no shortage of money for the payment of these grants — I have the money to pay them. The volume of applications has been large, and since the new scheme covering the fabric of the house was introduced the Department have been receiving at least 600 applications per week. That alone shows that the scheme has taken off quite well. I suppose in every Department and every organisation everything cannot be perfect and can be improved. I assure the House that since I arrived in the Department I have done my best but I have been taking a lot of kick and a lot of stick. I do not mind that if it is fair comment and if it is put forward in a proper manner, but I cannot allow to go by allegations that files were burned and that people were robbed of their money. I want to say on behalf of the Minister and me that if the applications are in order and the regulations are complied with, I will make sure payments will be made, and if any Deputy across the political divide has any problem which he thinks should be looked into I will be only too glad to have it sorted out.
I did not say files were burned.
I am glad the Minister refuted the allegations of robbery and the burning of files, which could have been damaging to the integrity of the officials about which I have no doubt whatsoever. The Minister was correct in doing what he has done in that respect. We all realise the administrative difficulties that have contronted the system, and the charges made against the officials were unfortunate, to say the least.
I should like to respond to comments made by the Minister for the Environment in relation to the Bill and particularly to the amendment. I make a final appeal to the CIF, to the Department, to the Government and to the House which, I think, is agreed that there should be an extension of the guarantee in regard to the National House Building Agency. We are agreed that to date the agency have been very successful in a number of different ways. Deputy Bermingham emphasised the very exposed position of a sector of the house market vis-à-vis the overall position in the housing market. Therefore, some provision must be found to incorporate the weak section into any new scheme that will emerge. We used the word “statutory” to underline that there should be some State guarantee. At the moment there is not a State guarantee, and I suggest that the Minister and the Department, in discussions they will have, indeed may be having, with the CIF will have particular regard to giving some kind of statutory basis to whatever bonding system will emerge through the National House Building Agency. That will be the first point to consider.
The second point is that some provision should be made in principle to accommodate the small once-off house builder who is in a very vulnerable position — Deputy Bermingham has referred to it and I am sure the Minister comes across it in his constituency. It is not the type of situation one would encounter in Ringsend or Ballsbridge. Housing statistics show that a large volume of house completions, by implication, is done by this type of small builder. The industry desperately needs this type of person who I would not like to see squeezed out. Neither would I like to see them being unable to give the kind of consumer protection we are asking the industry to provide.
(Cavan-Monaghan): That is the only danger I see in the suggestion.
The Labour Party have never been in the business of squeezing people out of the market or jobs from the economy. However, we are trying to reconcile two things that are reconcilable, consumer protection and job security. Therefore, and I ask the press to take a note of this, there has been lack of consumer protection to date and there have been victims of it. The industry is aware that there have been victims, and I make a formal appeal to the CIF — there are some excellent, conscientious members in the CIF, to make a tangible response to those victims who had the misfortune to lose their deposits through no fault of their own. I refer to deposits lost through the collapse or the disappearance of builders. I am not talking about legal disputes or other such matters.
Deputy Fitzpatrick referred to solicitors and auctioneers who accept implicit responsibility. Embodied in the National House Building Agency is a principle of collective responsibility inside the industry. We are now trying to close the door after the horse has bolted and I am suggesting, in fairness to the industry, that we take them at their word, and as a member of the industry I suggest this is a golden opportunity to which they can respond in some tangible form. I leave it as open as that — I am not in any way trying to be specific.
I will conclude in this way. The House will accept the amended Bill put forward by the Labour Party. The Minister has indicated that already he is having discussions with the industry. I now give notice to the Minister and to the House that we will be policing these discussions and looking for progress before the end of this year. That is a reasonable timetable. We will be expecting some kind of performance in six months. Otherwise the kind of motion we will put on the Order Paper in January will be much more substantial, with more stick in it for the Minister.
