That a supplementary sum not exceeding £19,400,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1988, for the salaries and expenses of the Office of the Minister for the Environment, including grants to Local Authorities, grants and other expenses in connection with housing, and miscellaneous schemes, subsidies and grants including certain grants-in-aid.
There are a number of items covered in the net £19.4 million being sought in this Supplementary Estimate. The extra funds required stem from greater demands for the payment of private housing grants and malicious injury recoupment claims from local authorities than was anticipated when the 1988 Estimates were prepared in 1987. The gross extra amount sought is £26.514 million but this is offset by increased receipts and savings on the grant to the Housing Finance Agency and some non-voted Exchequer capital.
The original provision for new house grants in 1988 was £17 million. This amount was intended to cover payments of the £2,000 new house grant for first time house purchasers and the £2,250 new house grant which was terminated in the March 1987 budget. The extra £4 million is required to enable additional new house grants maturing for payment this year to be paid within the year and thereby avoid any possible hardship for applicants which might otherwise arise from the carry over of payments into 1989. The additional demand is accounted for mainly by an upsurge in new house grant applications related to the termination of the £2,250 new house grant. The number of applications for the £2,250 grant was 6,595 while the number of grants approved was 5,166 with a value of £11.6 million. This grant will, in fact, account for about £5.7 million of the total expenditure on new house grants this year. A balance of £5.6 million approximately in outstanding approvals of the £2,250 grant will fall due for payment next year.
Three thousand three hundred applications for the £2,000 new house grant for first time purchasers have been received this year to date while anticipated expenditure on this grant will amount to about £15.3 million in 1988. Much of this expenditure relates to grants which were approved in previous years but did not mature for payment until this year.
When the Government terminated the 1985 house improvement grant scheme in the 1987 budget, commitments totalling £260 million approximately had been incurred under the scheme. It is difficult with an open-ended grant scheme of this magnitude to predict accurately the requirements which will arise in the following year. When the 1988 Estimate was decided on, it was expected that the full 1987 allocation of £100 million for the house improvement grant scheme would be paid in 1987. However, the actual outturn at £87 million turned out to be lower than anticipated. As the general economic climate began to improve, more of the grant approvals began to be taken up. As a result, an extra £10 million for house improvement grants is required this year. The extra money will enable grants to be paid in 1988 to about 3,000 applicants who would otherwise have had to wait until 1989 for payment. Expenditure under the 1985 house improvement grant scheme will, by the end of the year, amount to some £160 million.
I want to turn now to the area of malicious injuries. My Department recoup to local authorities expenditure incurred by them on malicious injury awards. In 1987, £19.6 million was recouped to local authorities and this Supplementary Estimate brings this year's provision to £28.75 million, representing an increase of over £9 million on 1987.
Deputies must be wondering why such a large amount is required this year, especially in view of the 1986 amending legislation. In order to explain this position I will outline briefly the background to malicious injuries recoupment. Due to the rising cost of malicious injuries to local authorities, a non-statutory arrangement was introduced in 1974 to put a ceiling on ratepayers' liability. The scheme provided that, if the cost of compensation to a local authority in any financial year exceeded the product of a rate of 20 pence in the £, the excess was recouped to the local authority from the Exchequer. This scheme was given a statutory basis by the Malicious Injuries Act, 1981. The 1981 Act was subsequently amended by the Malicious Injuries (Amendment) Act, 1986, the effect of which was to limit the scope for malicious damage claims to instances caused — (i) by riot; (ii) by malicious act of an unlawful organisation; and (iii) by malicious act of an organisation outside the State engaged in advocating violence for purposes relating to the State or Northern Ireland.
Under the 1986 legislation the entire cost of claims is recouped to local authorities as well as their legal costs. In 1987 a sum of £2.35 million was paid to Donegal County Council for incidents at Ballybofey and Letterkenny. Expenditure on claims under the 1986 Act in 1988 amounts to nearly £400,000 and the number of claims pending against local authorities is relatively small. The then Minister for Justice, Deputy Dukes, when introducing the Second Stage of the Malicious Injuries (Amendment) Bill, 1986, in June 1986 foresaw that "the full extent of the savings to the Exchequer resulting from the enactment of this legislation will not become apparent for a year or two". This prediction was correct.
Individual claims for compensation against the local authority must be made within 14 days of the incident. Experience has shown that a considerable time elapses before a claim is either settled or determined by the courts. Equally, many claims are lodged as a matter of course and never pursued by the claimants. The initiative in pursuing a claim rests with the claimant and proceedings may be commenced at any time within three years of the incident. This is the main reason expenditure on malicious injury recoupment is still so high even after the enactment of the 1986 legislation.
It has always been difficult to estimate in advance each year the expenditure requirement for malicious injuries and this year is no exception. The biggest difficulty is in trying to anticipate in advance the level of claim payments and to take account, if possible, of any large individual claims that may be finalised in the coming year. An example of this in 1988 is the settlement of one claim for the burning of a church premises which will cost in excess of £3 million when all costs are included. If the local authority fail to pay claims as soon as they are determined or registered in the court, interest can accrue to the claimant until payment is made.
This Supplementary Estimate will meet all recoupment demands arising to the end of the year and I feel reasonably confident at this stage that the requirement for 1989 will diminish considerably.
The Supplementary Estimate includes a provision of £14,000 to meet the general expenses of the National Roads Authority in 1988. These expenses comprise travelling and subsistence allowances and the annual allowances for the chairman and certain members of the Authority.
The launching of the new Authority in July this year marked a departure in road development in Ireland. For the first time we have a single Authority with functions in relation to the improvement and maintenance of national roads and access roads to our principal ports and airports.
When I launched the Authority last July, I indicated that they would operate initially on a non-statutory basis and that legislation would be required in due course to establish the Authority on a statutory footing.
As I mentioned when opening the debate, the extra expenditure detailed in the Supplementary Estimate is somewhat offset by,inter alia, additional receipts from the EC in 1988. These receipts comprise recoupment by the European Communities under the FEOGA Western Package of a portion of State expenditure on a national programme to stimulate agricultural development in the west of Ireland. In March 1988 the European Council concluded a review of the western package with a decision to increase, from 1 January 1988, the amount of EC aid available, the region qualifying for EC aid and the proportion of expenditure recoupable under the FEOGA Western Package. This enable Ireland to apply for a higher amount of EC recoupment than previously anticipated, with the result that £1.837 million more than estimated was paid into my Department's Vote.
The net Supplementary Estimate is further reduced by savings of £5.277 million on the £11 million grant provision for the Housing Finance Agency. This grant assists the agency in matching the cost of funds raised by conventional borrowing with the return from income-related repayments by borrowers. The savings have been made possible by the reduction in interest rates and favourable exchange rate trends brought about by Government policy, and the increasing capacity of the agency to fund loans from capital repayments by borrowers.
Before concluding, I would like to refer to the motion which I will be moving later in relation to the 1986 Excess Vote. The need for this Excess Vote arises from the ESB's failure to pay the full £24 million determined by the Government as their contribution in lieu of rates for 1986.
The ESB are statutorily obliged under section 7 of the Electricity (Supply) (Amendment) Act, 1982, to pay to the Minister for the Environment a sum in lieu of rates as determined by the Government each year. That sum could not exceed the amount which, in the Government's opinion, the ESB would pay in respect of the ESB generating and distribution network but for the fact that such property was technically exempt under the ESB Acts. The ESB contested the size of the annual amounts demanded. The situation came to a head in 1986 when, despite considerable efforts at both departmental and ministerial level, the ESB paid only £8 million of the £24 million deemed due for that year and decided to initiate legal action for the refund with interest of what the board regarded as overpayments in respect of the years 1983 to 1985.
Inevitably this gave rise to an excess on the 1986 Environment Vote.
This issue was addressed and solved within one week of the Government taking office in 1987. My colleague, the then Minister for Energy, had discussions with the ESB and indicated that legislation in the pipeline could include a provision to remove any doubt about the requirement of the ESB to pay the amounts demanded. The ESB immediately paid over the £16 million outstanding. Deputies will recall that the Electricity (Supply) (Amendment) Act, 1988, confirmed the validity of the payments made since 1982 and provided for the imposition of full rates liability on the ESB. This actual rates liability will arise in 1989 when rates will be levied by individual local authorities on ESB valuations, determined by the Commissioner for Valuation under the provisions of the Valuation Act, 1988. This Act provides for the global valuation of public utilities and for the apportionment of the global valuation between the rating authorities. Thus the payment by the ESB of a single sum to my Department will not arise from 1989 onwards.
I look forward to hearing the views of Deputies on the Supplementary Estimate, on the matters I have raised, and on the 1986 Excess Vote. I will take note of any points raised and, in so far as it is possible, reply to them at the end of the debate.