asked the Minister for the Environment the effect, if any, increasing VAT on building from 5 per cent to 10 per cent has had on (1) construction output; (2) private housing output; (3) public housing output; and (4) levels of employment in the construction industry.
Ceisteanna—Questions. Oral Answers. - Increased VAT on Building.
41.
I would refer the Deputy to my reply to Question No. 12 answered on 25 June last. While it is difficult to be precise about the effect of the increase in the rate of VAT on building services, it is tentatively estimated that if the total effect of the increase is to reduce the level of output and employment in 1985, it will be by a very marginal amount, say 1 per cent, below what would otherwise have been reached this year.
In looking at this matter, account must also be taken of other matters, such as the boost to private housing output as a result of the increase in the new house grant, the effects of the £5,000 grant to certain local authority tenants and tenant purchasers to enable them to build or buy their own houses, the growth in the activities of the Housing Finance Agency, the reduced mortgage interest rate and the effects of the package of employment, taxation and financial incentives announced on 23 October.
What is the boost to private housing to which the Minister referred when his own Department estimated that house completions have fallen by 1,000 units in 1985 and the Construction Industry Federation estimate that the decline will reach a figure of 15,000 units?
I have outlined quite a long list of incentives which will have an effect on private housing output. This morning we debated the Housing Finance Agency and the additional funds required by them ——
Where is the evidence of the boost?
——which have increased from about £50 million to £86 million this year. This took place in a short period of three years. I also mentioned the effect of the grant of £5,000 to local authorities, the reduction of the mortgate interest rate, which is at its lowest for seven years, and the package regarding taxation and financial incentives. These will all undoubtedly have a beneficial effect on the industry. I am aware that there has been a decline in private house building but it should not be overlooked that there was a considerable increase in the number of local authority houses built over the last few years. Although local authority house building is going ahead, due to the recession there had been a fall off in the number of private houses being built. However, the incentives introduced, especially in the last two years, will have a beneficial effect and are seen as such by the Construction Industry Federation and welcomed by them. Indeed road construction is another area which was given a large boost during the last year and has also been welcomed by the construction industry.
Is the Minister aware that loan approval statistics for new houses from the big five building societies show a 32 per cent, 33 per cent and a 21 per cent decline in May, June and July respectively this year? Furthermore, during the three months since the rate was increased, less than 30 per cent of the total new approvals were in respect of new houses compared to an average of 40 per cent during the first four months of the year. Registrations with the national house guarantee scheme, which are an indicator of new work going ahead, are 16 per cent down over the first seven months of 1985 nationally with a 20 per cent decline in the Dublin region. Reliable indicators from manufacturers of building products supplying the rural one off house building sector show an even more dramatic decline in this sector. The statistics and forecasts which the Department are officially issuing support this view yet the Minister offers optimistic comments in the House.
Much of what Deputy Molloy said was argument and while it is not so important in regard to priority questions at the same time I deprecate it.
As I said, I listed the incentives which we introduced. Obviously the recession has affected every country in Europe ——
House building is booming in England.
I do not think the Deputy has been over there lately. Perhaps it is booming in one part of the country but in a line north of the Wash there is no boom. The local authority housing schemes are very depleted in that area.
They are a poor headline with their policy of deliberate unemployment.
The incentives which the Government have provided will have a beneficial effect on the building industry and have been widely welcomed by spokesmen for that industry in the last few weeks.
The VAT increases were not widely welcomed.