The Minister is well aware of the conventions which suggest that that answer could have gone on to be completed in a variety of ways. It could have indicated that when the information became available it would be communicated or it could have suggested to the Deputy to put down a question at a later date. The reply gave no such undertaking nor made no such suggestion. Let me give the reason why.
During the term of office of the previous Administration the local authorities constructed between 6,500 and 7,000 new dwelling units each year. Therefore, with a waiting list of over 20,000, there is a three year demand for housing. Allowing for certain distortions in the figures, if we were to get it down to a two year demand it would amount to a very welcome reduction especially when we consider the housing crises of the sixties and early seventies. That is the background against which any changes in the operation of the Housing Finance Agency have to be measured.
I introduce that item at the outset of my contribution to this Second Stage debate because we cannot measure fully the intentions of what is proposed in this Bill until we look at the overall demand for housing. It is correct to say that the nature of the demand for housing is changing, that in some respects it has been reduced.
That refers only to new house starts. It does not refer in any way to the management of the housing stock for which the Minister and the Department have overall responsibility. There is possibly a three year demand for local authority dwellings and 25 per cent of those who are looking for new houses are elderly people who possibly are physically incapacitated or disabled in some way and who cannot enjoy the comforts of the homes they presently occupy. Despite that fact the Government have decided to reduce the capital provision from a figure of £87 million in 1987 to a figure of £50 million in 1988.
I put it to the Minister that the reason I got a non-answer to my second question of 14 October was because the Minister is aware that there will be no new housing starts in any local authority area in 1988. He received this information from the local authorities. It has been available for a long time to those in the Custom House. The Department of Finance sent a diktat to them, outlining the position. Therefore, there will be no new house starts in 1988 and allowing for a construction period of 18 months which is perhaps being optimistic, there will be a massive fall-off in house completions in 1989. Therefore the present three year waiting list will be lengthened to a waiting period of perhaps four or four and a half years and in some local authority areas, five years. Here, I am talking about national averages. The figure will be higher in some areas than in others.
It is against that background the Government are now coldly, systematically and knowingly embarking on a manufactured, engineered housing crisis despite what the Minister said in the reply which was that the information which was requested by me was not available in his Department at that stage. What we are witnessing now is a relaunching of the housing crisis by the Government. This will hit the decks in one to two years' time and it will affect most those people who are not able to buy a house of their own.
At present there are 250,000 unemployed and we are talking about an average of new house completions in the order of 6,500. Those on low incomes cannot raise the money which would enable them to buy a house. That is the base line from which we should start. This rather innocuous Bill does not propose to do very much. It is in Victorian English which emanated from the former centre of colonial administration in this country. I have often wondered whether some of the ethos of that period has embedded itself deeply into the walls of the Customs House and whether at times, perhaps during the times of the occupation of the Ministerial office by certain people, it resurfaces again like dry-rot recurring to infect the minds, attitudes and hearts of those who are there. Mind you, since most of those in the housing section are located in O'Connell Bridge House that analogy may not apply but perhaps it even transfers itself across the river.
When the information is made available to me I will have to tell some of those who are on the waiting list of 20,000 and who are depending on a local authority house that that list is going to become longer as no new house starts are planned for 1988, that they will have to wait for at least one more year before they will be given a house and that their only alternative will be to try to buy houses of their own. According to this circular they will have to prove positive to the satisfaction of the Minister, the finance office and the relevant local authority that not only are they not capable of obtaining a loan from a building society but that they are also unable to obtain a loan from a bank.
Does the Minister not trust the building societies, does he not accept their word? In a letter from a building society saying that Brian O'Brien or Mary Murphy, having regard to their level of incomes, are not eligible to qualify for a loan, not good enough? Is the Irish Permanent Building Society distrusted by the officials in the Customs House and has a letter from one of their branch managers got to be corroborated by a letter from the bank manager of one of the AIB branches? What kind of thinking produced this? What kind of doubting Thomases exist in the Department or in the Department of Finance? Why do two letters have to be obtained from financial institutions before, as Deputy Boland has said, a person can even fill out an application for a loan?
The Minister is not exactly encouraging people to try to house themselves with the aid of a local authority loan. No one likes being refused in respect of an application for a loan or for anything else. We are all human. A person in need of housing needs as much encouragement and support as he or she can get. The purchase of a house is the most important and largest financial transaction that most people will ever embark upon and this category particularly will be doing it for the first time. Many of us who have been over the tracks in advising constituents or dealing with people professionally can handle all the uncertainties and all the doubts quite readily. That is part of our in-course training so to speak, but a young or not so young couple who have never previously been down this road, by contrast with what their brothers and sisters may have experienced in the past two to three years, now realise suddenly that all support systems, the vast majority if not all of the measures, have been eroded, reduced, denied or cancelled. Not only is the support system significantly reduced and denied to them but in its place have been put two new round hoops through which they must jump and if they do not land on the other side with a letter from a building society and a bank they will not be eligible even to have their application entertained.
Suppose a person comes to the Minister with a letter from a building society to the effect that, "This person, Brian O Briain"— for example —"qualifies for a loan but, having regard to his income we can give him a loan of only £10,000 or £12,000", where is he then? He has a letter which says that he qualifies for a loan, but what can one buy with £12,000 in a new house market? Is he then eligible for a balancing loan from the SDA fund through the Housing Finance Agency or the local authority? Suppose the manager of a building society refuses, saying he is too busy and tells the person to come back next week? There is no provision for that in housing circular H10/87. There is no guidance or direction to a young housing officer in a local authority as to what might happen to somebody in the town of Birr who is told by the building society or a bank that he or she might qualify for a kind of loan, a full loan, £12,000 or thereabouts, but not a loan, sufficient to enable him to buy a house or to bring him within reach of closing the gap between the purchase price and the loan by way of either family support or a short term loan from the credit bank by way of an extended deposit.
The Bill before us is designed to give effect to this housing circular. The housing circular is administrative gobbledygook at its worst. All the major building societies are listed as well as the three banks who are eligible to certify that a person does not qualify for a loan. Nowhere is it indicated, justified or argued that one such letter will suffice. Two are needed. This Government who promised us a better way in so many other ways are now telling people who are going to be driven into the private housing market by the systematic reduction in an engineered housing crisis because of the reduction on the local authority side, that instead of being eased off the present waiting list they will have to jump through two hoops. There are enormous numbers of questions to which at least five housing officers in five local authorities to whom I have spoken have not been able to get answers from the Department of the Environment. The circular has gone out in the name of Mr. Dolan. The press release which accompanied it went out in the name of Mr. Macken. Mr. Dolan is an assistant principal officer in the housing administration section. Many of the answers that have been sought for clarification are simply not available because they are being referred to what is in the circular. This Bill, now at Second Stage, is designed to give effect to this circular. These questions need to be answered and the Minister will have ample time in which to answer them.
This Bill is a sleight-of-hand measure in that finances are being laundered to present the figures to the financial institutions in a manner that puts the best side forward. It is extraordinary how conscious this Government are of their own image in making things look as good as possible when they are talking to somebody else and how disastrous they are making matters for applicants for a loan when they are talking to potential recipients. On the one hand the beneficiaries of this con job, the people who are to get a loan, must humiliate themselves publicly with two letters stating that they do not qualify for a loan. On the other hand the Government are trying to launder the figures and create the impression that by some extraordinary feat of fiscal management they have been able to reduce demand for public capital loans by an enormous amount. They have done that by shifting it into the building societies and the banks.
The banks benefit already from two types of securities in relation to a house loan. They benefit from the fact that they hold the title deeds of the property. No lending institution gives more than 90 per cent of a loan, and that is 90 per cent of their valuation of the property not necessarily of the purchase price. Therefore, the bank as security No. 1 have the title deeds of the property as security against the loan they offer and there is a minimum margin of 10 per cent cash cover between what they lend out and what they hope to receive. In some cases if they are uneasy that minimum is even higher in order to cover themselves against a fall-off in the purchase or retail price. On top of that they limit the amount of money they will lend to anybody so as not to overstretch the capacity of an individual to repay, and it varies depending on the size of the income from two to 2.5 or three times the annual income of the person. That annual income is not what the person says he is earning; it is what his P45 and P60 state he earned in the last year. That is the security the banks and building societies already have. In order to assist in the repayment of that mortgage the taxpayer, the PAYE worker who does not own property, through the taxation system gives an indirect subsidy called mortgage interest relief to a maximum of around £3,800. These securities are already in place.
On top of that, this Government want to subsidise further and reduce the risk to building societies to 50 per cent of any loss they might experience by way of bad debt. I do not have any fundamental objection to that approach. In many respects it has a degree of efficiency which I welcome. We should, however, recognise that the building societies and the banks are doing nobody any favours in relation to this measure. In so far as risk exists at all, it is being taken out of the system by virtue of the guarantee. They will then take the cream of the applicants who have been driven off the local authority housing list because of the engineered housing crisis over which Fianna Fáil are presiding. They will further reduce the risk so that at worst they will have a minimum amount of default, 50 per cent of which will be covered by us, the taxpayers and, at best, they will have no default at all. We, the taxpayers — the banks do not rush to join us in that category — will then have to carry in the total portfolio of house loans under the local authority umbrella, the majority of bad risks, the majority of vulnerable people whose income, either because of its stability or because of its quantum size, is such that they will always be a risk in relation to defaulting on a mortgage. Why are we doing that? What has happened in the housing market which has forced us to do it?
I predict that in a year or two the Minister of State, if he is still an officeholder in that Department, will come into this House and say that the State cannot manage housing loans. He will be supported by the Progressive Democrats, with all the fervour of the born-again New Right Adam Smith economists. Some genius will say that local authority house mortgagees have a higher percentage of default and failure than people who borrow from building societies; therefore, the State is inefficient and the private sector is efficient. Some lunatic will make that argument within the next 18 months, on the basis of figures produced here in reply to questions which will be fully answered. There will be a further attack on local authority loans on the grounds that they are inefficient and basically do not work or that the housing officials in local authorities do not know how to run their affairs. It will follow from that that somebody in O'Connell Bridge House will say the reason is that local authorities are not smart enough to run the system and that they should run it themselves. That is the path we are following.
The timescale in the housing market is of necessity slower and of a longer duration than in most other areas because of the time it takes to put together a response to a housing demand by the acquisition of land and the delivery of the finished object, the house. I am not using words wildly. Within the licence of parliamentary debate I am saying to the Minister of State and the Department of the Environment, who have an exemplary record in the area of housing, that they are now writing the first chapter of an engineered housing crisis, the harvest of which we will see in a year to two in varying degrees in different parts of the country. Why? It is designed to launder the figures. There is no other reason. It is in order to shift columns of money and accountability from one channel to another. If ever people were entitled to say that the gnomes of Zurich, to use Harold Wilson's famous phrase, and those people responsible for high finance were manipulating people's lives in order to present a good set of fiscal figures, this is the occasion on which it could be said. This is not merely an amending Bill. The Housing Finance Agency was opposed by Fianna Fáil in the first instance. This is something fundamental which will have a very damaging effect on the morale and ability of local authority officials to run their affairs in the housing area.
The way we have succeeded in housing our people has undoubtedly been one of the success stories of our society in recent times, especially in regard to the quality of houses we have provided. Some would say we have overdone it, that we have been profligate with local authority housing, that perhaps it is almost too good and that people do not deserve such good houses. The last Minister to use that kind of argument was Deputy Robert Molloy, now born again in the Progressive Democrats. He brought in the ingenious idea of low-cost housing. The Minister of State is no doubt familiar with the efficiency of low-cost housing. It is so efficient that we now have to knock it down. The repairs to it are more expensive than the original erection cost. The Leas-Cheann Comhairle is familiar with low-cost housing in his own constituency in South Finglas. It is so efficient that the end gable houses in parts of the Tolka valley have one door and no fireplace. The were cheap because the Minister's party regard the people who live in them as being cheap as well. This Bill is cheap and this approach is cheap because the Government are looking for a con trick to satisfy people in the Department of Finance.
That is not in accord with what were once the housing traditions of the Fianna Fáil Party. I am saddened that during the term of office of a Fianna Fáil Minister in O'Connell Bridge House they have retreated before the onslaught of the Department of Finance. Everybody knows the banks are flush with cash. This is designed to entice the banks into a secure market where there is adequate cover in terms of the title deeds to the property in question, in terms of the ratio of income to the gross lending and the percentage of the acquisition cost. If there was not adequate cover as far as the banks or the Department of the Environment were concerned why not have let them step in and bridge that gap? That has not been the case and instead the Department are underwriting to the tune of 50 per cent of any losses they might suffer. They are distorting the portfolio of loan applications in such a way that we will get the argument in a couple of years time, if not sooner, that local authorities are incapable of managing a loan portfolio because of the higher percentage of defaulters on local authority loans than on loans taken out with building societies.
The housing circular 10/87 was issued on 28 October. I understand that there are approximately 32 major local housing authorities and it would not take a lot to rewrite that circular and issue it to them. There are many very good graduates in English and economics in the Custom House who could do that. In the interests of the efficiency of the economy the Department should draft a set of criteria for applicants for local authority loans. Officials in local authorities on reading those guidelines on eligibility could assess whether a person was eligible for a local authority loan. It would not be necessary then for an applicant to go down the street and knock up the agent of the Irish Permanent Building Society or approach a bank manager in whose branch they may not have an account. The official in the local authority, having regard to the guidelines produced by the Department — I presume officials in the Department are capable of producing a set of guidelines and figures — could apply them in principle with decency and humanity to a housing applicant who has given up the ghost about getting a house from a local authority because of the cancellation of new starts in 1988. If that person was told by an official of a local authority that he or she did not qualify they would have to take the only other course of action open to them, to hold out for a long time for a house.
Is there some ideological objection to such an approach? Is it that the Minister does not trust local authority officials to apply the guidelines? If that is the case the Minister's colleague in the Department of Health has shown gay abandon in trusting the officials of health boards to apply a similar process in relation to medical cards. Why is it that we do not apply the same logic to applicants for medical card. Why is it that we do not get such applicants, before they fill up their forms, to go down the main street of Birr, Portlaoise or some other town to get a certificate from a bank manager or a building society to state that they are or they are not eligible for a loan? A medical card holder arguably could cost the State more over a period of time than might a local authority tenant or a local authority home loan. The fiscal risk to the bureau in Merrion Street is not any different. In terms of high finance the risk to the State is no greater.
Is it the position that officials of the Department of the Environment and the Department of Health do not talk to each other? Once upon a time the Department of Health was located in the same building as the Department of the Environment, the Custom House. How is it possible that some officials going in and out of the same hall door daily can trust local authority members and officials of health boards to apply criteria in relation to medical cards when across the corridor, or on another floor, other officials do not trust such people? Why is it that those officials do not consider local authority members or officials capable of applying those criteria and that they must prove positive that a person is ineligible for a loan? Why is it that they insist on getting a certificate from a building society? In fact they do not trust building societies because they are also seeking a written certificate from a bank. This is a patent nonsense and the Minister knows it.
If "Hall's Pictorial Weekly" were to run this it would be humorous and TAM ratings might improve but the Department are making jokes of the lives of some people. They are turning their hardship and horror into a type of perverse humour or, alternatively, the officials who drafted the circular I referred to have been so terrorised by the Department of Finance that they will agree to anything. What has happened in the Department of the Environment that suddenly has put them in the position that they know something about the banks or the building societies that we do not? Is there a crisis or are those institutions not run properly?
In each local authority a person could produce a tax certificate as proof when applying for a loan but now applicants must produce two further pieces of paper. There will have to be somebody to confirm that the additional pieces of paper have been submitted. When the auditors from the Department of the Environment carry out their annual checks they will have to ensure that not only were the loans properly given out but that the applicants were properly qualified. They will have to check that all pieces of paper were submitted. This will result in more demands on local authority staff. We must remember that local authorities will be part of the 15,000 redundancies, which for the time being are voluntary, being sought by the Government.
At a time when the Government are reducing the number of personnel in local authorities the Department are giving them extra unnecessary work. There is no justification for that. It is clear that there is some other reason involved in the Department making it as difficult as possible for people to get loans. If obstacles are put in the way of a race we are doing one of two things, trying to slow the person down or trying to see how high that person can jump. I know that the Minister of State, Deputy Connolly, does not want to see how high the homeless can jump and I would not for one moment impute that motive to him but the circular will discourage, slow down, prevent and dishearten people who might otherwise apply for a loan from a local authority. When we strip away the verbiage, when we strip away the con job of moving the figures from one column to the other, and the laundering of the public capital borrowing programme we will find that that is the motivation behind the circular.
There is no doubt that the circular was not drafted by a person who attended an organisation and management course. It was not cleared by the consultants on efficiency within the public service and it certainly was not drawn up by a systems analyst. Such officials did exist in the Department of the Environment and it was normal in the past to consult with such professionals on these matters. Local authorities should have been consulted to ensure that difficult jobs were not made more difficult.
There was no reference to this matter in the Minister's speech. It seems that not only have the Department of the Environment reneged on the local authority waiting list which consists of 20,000 people, reneged on the 10,000 people on the transfer waiting list and on the 4,000 people of the 20,000 who are elderly and need special housing. I wonder why the Department have decided to introduce a measure which will make it more difficult for people to get local authority loans at a time when they have reduced the supply of local authority houses to one category of people. They are forcing people to traipse up and down a town to get a letter from a bank or a building society — in some cases both letters. I wonder why it is necessary to do that.
