I move: "That the Bill be now read a Second Time."
Local Loans Fund (Amendment) Bill, 1983: Second Stage.
Order, please. Quiet.
The purpose of the Bill is to raise the ceiling on the amount of loans which may be issued from the Local Loans Fund. The fund was established almost 50 years ago as a channel for the provision of loan capital for local authorities. The resources for the fund came from the Exchequer by way of repayable advances.
On a point of order, we are talking about a very important matter in relation to the Department of the Environment. I have attempted to raise issues on this question here before. It would be only fair to the House if the Minister for the Environment would stay for this debate.
I am very surprised at the Deputy, I must say. The Minister to continue.
I shall commence again, a Cheann Comhairle. The purpose of the Bill is to raise the ceiling on the amount of loans which may be issued from the Local Loans Fund. The fund was established almost 50 years ago as a channel for the provision of loan capital for local authorities. The resources for the fund come from the Exchequer by way of repayable advances. In turn the local authorities draw on the fund to finance direct expenditure on the construction of housing, sanitary services and other projects and to provide loans for house purchase under the Small Dwellings (Acquistion) Acts.
Such spending forms part of the Public Capital Programme and the allocation for each service is decided each year when the PCP is being formulated. Out of a total PCP of £1,890 million in 1983, £375 million or 20 per cent will be paid through the Local Loans Fund.
The vast increase in the PCP in recent years is reflected in the programmes of expenditure financed through the fund. Accordingly it is necessary to adjust the statutory ceiling on issues from the fund from time to time. The ceiling was increased to £1,500 million in 1978 and to £2,500 million in 1980. It is now proposed to fix a new ceiling of £3,500 million.
The fund provides the entire capital for local authority housing and sanitary services. These are the big elements representing 98 per cent of the total this year. The allocations are £208 million for housing and £97 million for sanitary services. Expenditure in these areas has risen dramatically. The figure for local authority housing increased from £85 million in 1978 to £186 million in 1982. The corresponding figures for sanitary services were £29 million and £82 million.
The provision for housing loans in 1983 is £80 million, of which £64 million will come from the fund and the balance mainly from the sale of local authority houses. This allows a reduction on 1982 because loan facilities are now available from the Housing Finance Agency which has an approved budget of £50 million for 1983. Hence there is a substantial increase in the total amount of mortgage finance available.
Other projects which are financed in part from the fund are the construction of fire stations, libraries and swimming pools. Previously the fund also provided capital for vocational educational committees for the building of schools and for health boards for hospital building. This no longer applies. Such projects are now financed by way of direct grants from the Exchequer paid from the Votes for Post-primary Education and Health.
Loans from the fund are repayable on an annuity basis. The normal period of repayment is 25 to 30 years. The rate of interest chargeable at present is 15 per cent — the current Exchequer lending rate — with the exception of SDA capital which is made available to local authorities at 12 per cent.
In practice the Exchequer meets a large proportion of the loan charges on advances from the fund, both capital repayments and interest. For example, it meets the full loan charges on local authority housing and 40 per cent to 60 per cent of the charges in respect of sanitary services. The annual cost is shown in the Vote for the Department of the Environment. The amount provided for 1983 is £128 million for local authority housing and £29 million for sanitary services.
As I mentioned above, the existing ceiling on loan issues from the fund is £2,500 million. Total issues to date amount to £2,300 million. The ceiling would probably be reached by late summer. A revised ceiling of £3,500 million is proposed to meet requirements over the next two to three years. I commend the Bill for the approval of the House.
We welcome the Bill and we will not seek to delay its passage through the House. It has always puzzled me that the administration of the Local Loans Fund should be the responsibility of the Office of Public Works. I have never found a satisfactory answer as to why that continues to be the case, especially when one considers that this fund is the principal source of funding for the major part of the programmes undertaken under the auspices of the Department of the Environment and by local authorities throughout the country. The Minister of State has given details of the extent of that expenditure in 1983.
Public interest in this area lies principally with the availability of finance for housing loans. The only questions I should like to raise with the Minister are in regard to that area which I recognise is not his direct responsibility. It is clear that the number of persons benefiting from loans under the Local Loans Fund has been diminishing in recent years in direct ratio with the increase in the average cost of houses funded by loans under this scheme. Looking back over the years, one can see that this relationship has always existed. When the Minister of the day delays increasing the loan limits and the income limits, the number of persons seeking loans under the scheme drops fairly dramatically.
I should like to draw the attention of the Minister to this, and I hope he or one of the Ministers in the Department will indicate to the House whether there is any intention in the near future to raise the loan limits and the income limits to qualify for those loans. I should like to put on the record of the House this morning the fact that the number of local authority loans approved has been dropping fairly dramatically. In 1980, 10,381 loans were approved. In 1981; the figure dropped to 8,971, and in 1982 it dropped to 7,595. One can see that there is a relationship with the diminishing value of the loans because of the increase in the price of houses.
In 1980, the average price of a house funded by a loan under this scheme was £20,903. In 1981, it was £23,859 and in 1982, it was £26,300. Last year the average price of a house funded under the scheme was £26,300 and the loan was £14,000 which meant the applicant had to make up the balance by way of his own deposit and possibly a bridging loan of £12,300. In 1981, the gap between the average price and the amount of the loan was only £9,859. The year before it was £6,903. The gap has doubled within a period of two years. It is obvious that the Minister and the Government should agree to increase the loan limits from £14,000 to a more reasonable figure, and to increase the income limits to allow people to qualify who have been disqualified due to the fact that their salaries have increased and the income limits have not been increased correspondingly. I appeal to the Minister to impress upon the Government the necessity for an immediate change in the size of the loan and the loan limits which apply.
I know the Minister will answer me by stating that the Housing Finance Agency has been established and now provides another source of funding for young couples and others who wish to purchase a home with the assistance of a State subsidised housing loan. I accept that that is so, and I welcome the establishment of the Housing Finance Agency. I am pleased that there is a substantial demand for the loans being provided under that agency. I have already stated in this House that I was disappointed that the new Government decided to reduce the amount of capital available under that scheme for the figures proposed in the Estimates published by the outgoing Government — a reduction of £10 million.
We all recognise that the loans available under the Housing Finance Agency can be quite expensive on the applicant when one looks at the total amount which will have to be repaid over the full period of the loan. People who are willing and anxious to obtain loans under the Housing Finance Agency will find in succeeding years that they will become less and less attractive to them. Because of their financial circumstances at the moment they are prepared to enter into an agreement to obtain the loan. Over the period of the loan the cost is much greater to him than it would have been if he had obtained the loan under the Local Loans Fund scheme because of the level of repayments required under that scheme.
It would not be fair of the Minister to make too much of the fact that the Housing Finance Agency have now been established and therefore he may happily reduce the capital available for the Local Loans Fund and refuse to increase the limits. That would be very bad social thinking. I appeal to the Minister to continue to update the level of the loan and the income limits which applied, as has been the practice over the years. There is a direct relationship between the drop in the number of people applying for the loans and delays by various Ministers in increasing the limits. The loan limits can become meaningless when there is high inflation.
I should like the Minister of State to tell us why this scheme is operated under his Department. What special role has he to play in the work of the Department of the Environment? He has separate responsibilities. When I was Minister it puzzled me why the Minister did not have full control over schemes whether water, sewerage, public housing or whatever. The Minister for the Environment is restrained by the Department of Finance. I suggest the Minister should have autonomy in his Department and full control over the financial allocations which have been agreed by the Government. He should have full discretion with regard to releasing these moneys during the year. After all, the Dáil voted these moneys to the Minister for the Environment and not to the Minister of State with responsibility for the Office of Public Works. I am sure Deputy Bermingham is surprised to be bringing in this Bill because he has nothing whatever to do with the programme for housing, water or sewerage schemes operated through the Department of the Environment or the local authorities. We are willing to give our support to the Bill.
Much of what I have to say has already been said by Deputy Molloy. I protest in the strongest possible way at the fact that the Minister for the Environment or his Minister of State have not found it possible to be in the House. This is a debate which concerns them and in just another example of the ridiculous situation which pertains in the House with regard to procedures. The Minister of State at the Department of Finance with responsibility for the Board of Works introduced this Bill. I mean no disrespect to the Minister of State but I cannot see what involvement he has with the Department of the Environment. The expenditure of money from this fund is the most important function of the Department of the Environment. The Minister for the Environment is treating the House very badly when he does not consider it worth his while to stay in the House for this short debate.
I welcome the Bill but I am concerned about the way in which money is being spent from the fund. Why did the Minister find it necessary to reduce the money coming from this fund by £32.4 million? On 12 May I put a question to the Minister for the Environment. I asked him the reason why the estimated expenditure for 1983 for SDA loans was £74.5 million in view of the fact that the 1982 allocation was £106.5 million and if he would ensure that this trend of reducing expenditure on SDA loans and replacing it with Housing Finance Agency loans will not continue. The reply I received was that the reduction in SDA loans reflected an expectation that some borrowers would opt for loans from the Housing Finance Agency in preferance to SDA loans in view of the higher loans available and the most attractive repayment terms in the early years.
As we all know, thousands of young people have been able to build their own homes in rural Ireland with the aid of an SDA loan. If they had not done this the State would have had to pick up a large tab for the construction of more local authority and corporation houses. I view with the greatest concern the decision to phase out SDA loans and replace them with totally unattractive Housing Finance Agency loans. I am opposed to them. A married couple between them must earn less than £7,000 per annum in order to qualify for an SDA loan and that explains the slick answer given by the Minister when he said some borrowers would opt for loans from the Housing Finance Agency. They have no option but to do so because the Minister has refused to increase the income limit which is totally unrealistic. He has also refused to increase the amount of loan available.
This was an attractive loan with a 12 ½ per cent fixed interest rate.
The Housing Finance Agency loan is totally regressive. I accept that repayments in the early years are low but they are tied to inflation. A young person borrowing £22,000 will find, because of interest, that he owes the Department £60,000 in ten years' time. The position could well be that the debt would far outstrip the asset. That is not acceptable. A young married couple should expect to have the burden eased in ten years' time when they have a growing family. When they should be using their money to educate their children they will have a rope around their neck because 18 per cent of their income will be linked to inflation.
A discussion in-depth on the Housing Finance Agency is not in order. It is in order to make reference to it but not have a lengthy discussion.
When can I have an opportunity to talk to the Minister for the Environment in the House about these matters?
The Estimate for the Department of the Environment would present a suitable opportunity.
I object in the strongest possible terms to the way in which this money is being spent and the way the Department of the Environment have found it necessary to remove the SDA loan using such a back door method. It is no wonder that the Government find pickets at every gate because of the way they are treating the House. The Minister or his Minister of State should have been here this morning to discuss aspects of this Bill. It is frustrating to be in the House. Anything important is ruled out, why I never understand.
I welcome the increase in the Local Loans Fund. It enabled many young people to buy their own property. Reference was made by the previous speaker to the elimination of the SDA loan which was extremely beneficial in the past. There is no doubt that. However, it was highly subsidised and we cannot afford that now. I do not agree that the Housing Finance Agency loan has no merit.
I have ruled in the case of Deputy Fahey that an in-depth discussion on the Housing Finance Agency would not be in order and I cannot make an exception in the Deputy's case.
There is a considerable measure of merit in the Housing Finance Agency loan and perhaps with a few minor improvements it could be a good deal better. The Opposition when in Government discontinued what I regarded as an exceptional measure in making funds available for house purchase. I refer to the low-rise mortgage scheme. However, Fianna Fáil realise now that that was a mistake but the Housing Finance Agency have taken up the slack in that regard. This body has been very valuable in terms of helping people to acquire their own homes.
It has put a millstone around their necks, too.
I, too, welcome this Bill and support its passage through the House. However, I cannot agree with what has been said by Deputy Dowling regarding SDA loans. Representing a Dublin constituency and being a member also of a local authority I regret very much that the Government seem to be taking the course of abolishing the SDA loan scheme, a scheme that has served the people well throughout the country but particularly in Dublin. I shall not attempt to refer to the HFA loan scheme since the Chair has ruled on that except to say that the Government appear to favour the HFA loan as against the SDA loan. This is very regrettable. It is obvious that Deputy Dowling does not have a HFA loan. he does not seem to be aware of the many problems associated with that kind of loan.
I do not have a HFA loan but I have recommended such a loan to many people who have availed of it and, who would not otherwise have houses.
I wonder if they will have them in five year's time.
I hope the Deputy explains the problems to the people he advised.
The Bill before the House was introduced by the Minister for Finance. The HFA loan scheme is administered by the Minister for the Environment. Therefore it is not financed by the money being raised here and that is the reason for the Chair's ruling.
The Minister mentioned it.
We must stop mentioning it now.
I did not start the argument but I might say that when you were on this side of the House you got a fair bit of mileage out of that, too. It is regrettable that the Government should take the course of phasing out SDA loans.
Reference has been made to the low-rise mortgage scheme. So far as I can recall this applied only to local authority tenants or to people on local authority housing lists. There were not a great number of applications under that scheme.
I should like to inquire as to the amount of money local authorities are getting for the payment of these loans. We all realise how beneficial is the SDA loan. It would appear that local authorities in general have a backlog of applications for such loans but that the money is not becoming available readily. I appeal to the Minister to ensure that the money in this respect reaches the local authorities so that it can be paid to the large number of people who are waiting for the loans.
I would be very concerned that the SDA loan scheme would be undermined in any way by lack of funding. This type of loan is the most beneficial that young people particularly can avail of.
Perhaps the Minister could publicise the fact that local authorities have large numbers of private sites for sale which I expect are reasonably priced compared with the open market value. If more publicity were given to this situation and more money made available we would be in a position to help many young people waiting for SDA loans.
I thank the Deputies for their contributions but I would emphasise that this is a very limited Bill, that it is merely an enabling measure to raise the statutory limit on issues from the fund which provides the mechanism for channelling funds to local authorities. The Bill provides for an increase of £1 billion to meet the requirements of the next two or three years but I must stress that the new limit has no implications for programmes financed under the fund. The amounts of the funds allocated to each capital programme is a matter for Government decision and is determined by expenditure policy in force at the time. Comments on the precise level of funding for particular services are matters that should be raised appropriately during the debate on the Estimate for the relevant Department.
We were reaching the stage where it became necessary to raise the limit of the amount of money that can be paid out. Similar steps were taken in 1980 and prior to that in 1978. I am not prepared to take a debate on the Department of the Environment. I am bringing in a bill merely to ensure that we have statutory legislation to advance the moneys being provided this year and which will be provided next year and the year after. Of the total expenditure, the allocation of 98 per cent is decided by the Department of the Environment. There are other Departments involved, too. Deputy Molloy asked why the Office of Public Works should administer the fund. Traditionally that has been the procedure and I might add that during his time as Minister for Local Government the Deputy, in introducing Bills to raise the limit, did not attempt to change that procedure.
I am still puzzled as to why I did not attempt to do so but I have been hoping that the Minister might make the change now.
I am prepared to have the Deputy's suggestion examined. The Department of Transport are involved also in that they are financed in some instances under this legislation. Previously some Department of Education projects were financed too under the legislation. That is why perhaps the Office of Public Works have been administering the funds down through the years. Deputy Kitt made the point about delays. There are statutory requirements to be complied with by the local authorities before funds are paid out. When these requirements are complied with I will ensure that the moneys are paid promptly. The reason for this Bill is that we could reach a stage during this summer where the limit would be reached if we did not have the legislation. I have no function in the amounts of money provided by the local authorities or in the manner of limits on SDA loans. That is a matter entirely for the Department of the Environment.