Dáil Éireann debate -
Tuesday, 3 May 2011

Vol. 731 No. 1

Residential Mortgage Debt: Motion

Deputy Thomas Pringle

I move:

That Dáil Éireann:

recognises that:

the burden of bank recapitalisation severely limits the capacity of the Government to positively lead this country out of recession and back to economic normality;

the burden of negative equity and mortgage arrears severely limits the capacity of the households of Ireland to live happy, secure and productive lives;

the banks, regulators and previous Governments were negligent in allowing the "property bubble" to arise and failed in their fiduciary duties to their customers, especially to mortgagees of principal private residences — the families of Ireland — to whom they had a special duty of care;

the bank guarantee and NAMA have crippled the normal workings of our financial and property markets and have not as yet contributed any positive outcomes;

arising from the unique circumstances that now occur, emergency measures must be used in order to solve the problems caused by earlier, and flawed, extraordinary measures;

real people are living in real houses and making real payments on these "negative equity" homes while their banks are exploiting the financial situation for their private benefit;

the wider economy is in desperate need of fresh credit and renewed banking competition; and

the dangers of allowing families to be trapped in a lifetime of debt and lost economic opportunity far outweighs the current selective interpretation of the "moral hazard" of assisting families in negative equity; and

resolves:

to instruct the Minister for Finance, as the controlling shareholder in the covered banks, to adopt a policy of using whatever emergency measures are deemed necessary to reduce the unsustainable debt burden being placed on mortgagees of principal private residences in the State; and

to ensure that the means used minimise the burden on the taxpayer and ensure that households can contribute fully to our national recovery.

I wish to share time with Deputies Stephen Donnelly, Mattie McGrath, Maureen O'Sullivan, Finian McGrath, Mick Wallace and Clare Daly. I propose to take ten minutes and the others will each take five.

The Technical Group has brought forward this motion because the next big crisis we will face in the context of banking will relate to mortgage debt. In fact, it has already arrived. The motion is an attempt to place it centre stage and try to explore how we might achieve solutions.

As everyone is aware, in September 2008 the previous Government began the process of socialising bank debts which it transformed into sovereign debt, which led to the necessity for the EU-IMF bailout in November last year. Despite claims to the contrary, the Government has continued the policy of its predecessor. It has enhanced the guarantee and further tied the future of the bank bailout with the sovereign debt. It has missed the opportunity in its policies to be truly radical by bringing forward changes that will put the people first. The speculators, the bond markets and the banks which, as the Labour Party is so keen to point out at every opportunity, were completely reckless and placed us all in receivership should not come first.

As the total amount required for the recapitalisation of the banks passes €70 billion and the national debt heads for over 125% of GDP, hundreds of thousands of households are suffering under the burden of ever-increasing mortgage arrears and negative equity. We must as a matter of urgency develop policies which would assist in lifting households out from under this massive burden and enable them to participate in the domestic economy. If such participation was encouraged, consumption could be increased and additional revenue would accrue to the State as a result.

At the end of 2010 over 13,000 mortgages were in arrears for 90 days or more. Some 31,000 mortgages were in arrears for over 180 days. The total value of these mortgages is over €8.6 billion. There is a widely held view that when home owners are in arrears, very few will be successful in re-emerging. We do not know if the banks have made provision in their estimates for defaults on mortgages. As they have not told the truth during this crisis, we do not know what the real figures are.

We are rapidly reaching the point where wholesale repossessions will begin to occur. The banks have signed up to moratoriums on repossessions, but this is only serving to mask the true extent of the problem. As house prices continue to fall, the number of households in negative equity of over €50,000 will exceed 300,000, while over 60,000 households will be in mortgage arrears. In a recent discussion document on the financial crisis the IMF stated efforts by the banks to reduce the burden of household loans had not been adequate. There is clearly a need for the State to intervene.

We have a responsibility to the people, not merely the Irish and European banks which created and fuelled the crisis in which we find ourselves. It is not sufficient to state we must get the banks back working. This will not solve the problems of thousands of families that are drowning under the weight of massive mortgage debt. They were conned into obtaining such debt as a result of the policies pursued by the banks which the Government is intent on saving at the cost of our entire society and sovereignty. The Government is quick to remind anyone who will listen that it did not create the problem, that it was Fianna Fáil which was responsible for doing so. The current Administration is part of the problem. It has taken the baton from Fianna Fáil and is now running its race. The Government must be part of the solution.

The Minister continually points to an export-led recovery that will solve our woes. Information released earlier today shows that export figures are the second highest for 11 years. However, exports are still only approaching the levels they had reached prior to the financial crisis. If we depend on them at this stage, too many families will be destroyed while waiting for recovery to happen.

The banks have alluded to some policies which they may consider. On the publication of its disastrous annual results, AIB stated it would consider some form of debt forgiveness. This is not good enough. The programme for Government refers to some policy issues which may be pursued, including increasing mortgage relief for first-time buyers for a specified period, putting in place moratoria on repossessions and increasing the use of the mortgage interest supplement. This is merely tinkering at the edges.

The Government continually states it has a mandate. It is beyond time this should be used to assist those in real need of help. The Government should stop saving zombie banks and instead concentrate on saving viable households. It should assist real people because they, in turn, will restore the economy by using the money they will save on not paying unsustainable debt by making a contribution to ensure we survive the recession.

The Minister for Finance is, on behalf of the people, the major shareholder in the banks. As the major shareholder, he can present the latter with policies on mortgage debt that can have real meaning. He can also ensure these policies will be implemented. He can call an emergency general meeting and oblige the banks to accept policies that will ease the burden on households. There are proposals relating to debt forgiveness, increasing the terms of loans or engaging in debt for equity swaps. If we initiate a debate on a programme relating to this matter, there are other innovative responses which could provide a solution to the problem of mortgage debt. What we require is a solution which would put the people and their well-being to the fore. That is what the motion seeks to achieve.

One of the most striking aspects of the entire financial crisis has been how the people are not being considered. The Government has paid a great deal of lip service, but there are no policy developments we can highlight which indicate that people are being put first. When someone proposes helping mortgage holders, the first response is, "What about moral hazard?" What about it? It is somewhat rich to refer to moral hazard when discussing the banks. It was they which placed us in the situation in which we find ourselves by offering 100% mortgages, pursuing market share and super profits and providing ever increasing shareholder dividends. There is no moral hazard in assisting householders to participate in community life without the burden of unsustainable debt. Households in debt do not spend. Neither do they invest and the wider domestic economy suffers as a result. This is evident in each month's Exchequer returns, in the decline in VAT returns and the reduction in consumer spending. The loss of economic opportunity is the real moral hazard. The moral hazard is that we will do nothing and leave householders in the hands of the banks.

I commend the motion to the House.

Deputy Stephen Donnelly

In February I spoke to a woman in Arklow who outlined to me the situation in which she found herself. She and her husband were self-employed and had recently lost their business. They are from Dublin, but they bought a house in Arklow because that is where they could afford to purchase one. They are now in negative equity. When I spoke to her, she stated they were about to run out of money and that because they were self-employed, they would not receive any assistance from the State. She indicated that they would default on their mortgage some three weeks later and that they were trying to work out how they might keep their house while also being in a position to afford to buy food for their children. There are many people who find themselves in similar situations.

Approximately 200,000 households are in negative equity. In addition, in the region of 45,000 households are in arrears for more than 90 days. This does not include all of the restructuring that has happened. Inevitably, these figures will continue to rise. We know that jobs will continue to be lost, that wages are falling and that it is inevitable that taxes and interest rates will rise. The total number of households in mortgage arrears doubled between December 2009 and December 2010 and this number will continue to climb. Last year the banks were involved in 600 repossessions which occurred during a moratorium, under the provisions of which the banks cannot pursue mortgage holders until they have been in arrears for 12 months.

What is the result of this for those who are in negative equity or arrears? Those who are in negative equity and arrears are completely trapped. They are going to lose their homes and under current policy, their debts will make it impossible for them to begin again. Under existing bankruptcy laws, their debts will follow them forever. They will not be able to obtain new mortgages or invest in their futures or those of their children. They are trapped. Those who are in arrears will ultimately be forced to dispose of their houses in fire sales. Those who are in negative equity and can afford to pay their mortgages will be obliged to use all of their income to clear dead debts. These individuals will not be able to participate in the economy or make an investment in their children's education or their futures.

There are several aspects of what happens in Ireland which make matters worse. First, we have got the most stringent bankruptcy laws in Europe, so people's debt follows them forever, unlike in the UK and the US where people can start again. Second, we own the banks and, therefore, any burden sharing we insist be taken by the banks ends up being taken on by the people, which is difficult in the current environment. Third, we have extremely weak tenant protection. There is an entire generation of Irish people who will be renting for the rest of their lives. They will not be able to get out of negative equity. They will not be able to buy a house anywhere. They will have to raise their families under circumstances whereby a landlord can give them five or six weeks' notice to leave. That is a far from ideal situation.

The question is whether we should help people in this situation. One argument being put forward is that these people made free choices and they should accept the consequences of their actions. As Deputy Pringle alluded to, that is a principle we would all understand, but it does not seem to apply to bondholders, where other people bear the cost of their actions. I agree with the principle and we have to ask who is culpable for these arrears and the huge negative equity. The people who took out the loans must bear some of the responsibility, but who else is culpable? We know the banks are culpable. We know they gave out 100%, 110% and 120% mortgages. We have plenty of anecdotal evidence that they encouraged people to borrow more and more. We know the ratio of income to total mortgages taken out increased to a level that was unsustainable. Should they bear some of the burden? Of course they should.

The State also bears some of the burden. We know the Financial Regulator failed in his duty and we know the previous Government was a cheerleader for the property boom. It provided tax breaks, let the regulator fail and so on. Unfortunately, we know the current Government failed to do anything about this when in Opposition. Its constituent parties were very silent on the issue until it became far too late to do anything about it. Therefore, the Government, the State, the banks and the people who took out the loans are all culpable and therefore should all share the burden of the debt. That is a simple principle that we should have applied also to the bondholders, but we decided to do what Europe wanted instead.

The current programme for Government contains some good ideas and I commend the Government on them. The programme mentions increasing the interest rate relief for first-time buyers, extending the moratorium for repossessions, fast-tracking personal bankruptcy reform, and bolstering the power of the money advice and budgeting service, MABS, to include binding arbitration, which would allow for burden sharing. Unfortunately, when pressed on this repeatedly over recent weeks, the Minister for Finance would appear to be dodging the question. He answers by saying, for example, that it is a matter for the Central Bank. I encourage the Government to bring forward a serious timescale for when these measures can be introduced. It would be very useful.

We need debt forgiveness for mortgages in negative equity, again following the principle of accountability. We can use debt for equity deals. They have been used very successfully in the UK and can be used in this country as a reasonable form of burden sharing. We need to extend the interest payment protection to people who are working.

Acting Chairman (Deputy Ciarán Lynch)

The Deputy needs to conclude.

Deputy Stephen Donnelly

We need to——

Acting Chairman (Deputy Ciarán Lynch)

The Deputy's time has expired. I call Deputy Mattie McGrath.

Deputy Stephen Donnelly

——subsidise the interest rates.

Deputy Mattie McGrath

I am delighted to speak on this motion and I compliment Deputy Pringle on doing the legwork in getting it put forward. It is my own fault that my name was not signed to it because I did not get it in on time, but I fully support the motion none the less.

I also compliment the Minister on his appointment and wish him well. The difference in attitude since he changed sides in the House is mind boggling, but that is government and this is the Opposition. None the less, it is not much solace to hard-pressed home owners.

Home owners are carrying a disproportionate burden of debt and are suffering the hardship of negative equity. The extent of the property crash and the related banking crisis were the result of reckless bankers borrowing from other reckless bankers who behaved in a speculative way but who are now demanding their money back at any cost. They were allowed to do all this by the Government of the day and by the Minister and his party, of which I was a part but with which I was very unhappy. People on the Government side of the House might be unhappy at the moment, but they have to do things when in government owing to the situation with the Whips. It is an unsatisfactory situation.

The regulation involved has been described as light touch, but we all know that regulation was non-existent. The saddest part is that the regulators retired with pensions. We were told they had contracts but according to any layman's interpretation, the contracts were not fulfilled. Anyone who is in business knows a contract is a two-way document and that if one person does not fulfil it, the contract becomes null and void and that person suffers the consequences. Many home owners find themselves in this situation because the paperwork and the legal background for these loans were not properly done. Tests on the ability to repay were either overlooked or were just paid lip service. Many loans were given out at 110% and 120%. Where was the regulation and where was anyone to say "stop"?

There are many parties to this and the person who signs on the dotted line is expected to have studied the contract. However, all the advice was flippant and gung ho. The money was like manna from heaven and there would never be an end to it. As we saw last week in the Nyberg report, alternative options to the blanket guarantee were not seriously considered either. When the bank guarantee was brought in, we were all told at very short notice and backbenchers from the Government parties were told it was a doomsday situation and that we had no choice. We have asked many times since why there were not other options, but it was all hush hush. I am very suspicious of the whole thing.

Ordinary people are bearing the brunt of these failures and many people, including young families, are being squeezed to the point of despair. The previous topic for debate was suicide prevention, and unfortunately many people are being driven to suicide. It is creating huge pressure and it is unfair.

I fully support this motion. We should look at various ways to solve these problems. We should be able to extend the time limit on the loans. We should look at the human situation of families trying to live through every day under enormous pressure. All the money is going into paying off the mortgage, even though many do not succeed in doing so. In some cases, it is only paying the interest. These people cannot be expected to play any reasonable part in raising their family with any modicum of self-belief, self-respect or training for the future, not to mind empowering their children to live normal lives. We all know the expensive pressures on parents with children in schools, at parties or whatever.

People are willing and able. They must be given a chance. They must be dealt with fairly. Why should they be expected to pay for the sins of the developers, speculators and bondholders? They are being burned. They are at a new low after just two months, having been promised an awful lot by this Government which has just changed seats and pursued the same policies. That is very disappointing for them and it does not give them much hope. We will have to examine possible ways to allow these people to trade their way out of this. They are willing to do that if given the chance.

Deputy Maureen O’Sullivan

I acknowledge the role of Deputy Thomas Pringle in working on this motion and bringing it before the House.

There are many groups of people hurting in this country. One such group consists of mortgage holders who bought property in our so-called Celtic tiger years. They believed the tall stories about getting on the property ladder and that if they did not do it then, they would never get to own their own home. They believed the tall stories about 100% mortgages and that they would always be able to make the payments because they were told that the good times would last forever. They believed the tall stories about the benefits of tracker mortgages.

The expression "the dogs on the street" has been applied to a variety of situations, and it can also be applied to this situation. The dogs in the street knew that the property bubble would burst, that it was just a matter of time before it did so and that it was inconceivable to spend astronomical amounts on a house of four, five and six times its real value. The dogs on the street knew the foolishness of what was going on, yet our so called experts on banking and finance did not have their finger on the button, but actively encouraged increasing numbers of people to buy into the myth and the lie.

It is frightening to read the statistics on mortgage arrears. According to our own economic indicators carried out by the Oireachtas Library service, since September 2009 the number of mortgages in arrears has increased by approximately 18,000. At the end of 2010, there were more than 40,000 in arrears with a steady increase in the numbers of seriously distressed mortgages. It is obvious that once a mortgage becomes distressed, it becomes very difficult for the borrower to reverse that position. What is also obvious from the statistics is that the sooner the customer or borrower engages with the lender or lending institution, the better the chance that the mortgage will not become delinquent. The first strong action needed, therefore, is for everything possible to be done to ensure the lending institution engages with the borrower in difficulty sooner rather than later.

When I look at the housing section in the programme for Government, it acknowledges that the policy of putting the interests of big developers and bankers ahead of people looking to purchase a home was a direct cause of Ireland's disastrous property boom and bust. It also states that the Government is committed to helping home owners in distress to weather the recession, and it acknowledges that more protection is needed for home owners with distressed mortgages. I look at the details in our Private Members' motion and see common ground. I do not really see where there is space for the Government to vote against this and perhaps that is why there is only one member of the Government is present. They all agree with us.

We are looking for the Minister for Finance to consider emergency measures on this matter. The programme for Government states: "A more radical approach is needed to protect families in fear of losing their home" — more common ground. Part of the plan is for the money advice and budgeting service, MABS, to be converted into a strengthened personal debt management agency to support those families in dealing with their debts and provide protection and space for people to sort out their affairs. The plan is also to make greater use of the mortgage interest supplement to support families who cannot make their mortgage repayments, which it is acknowledged is a much better and cheaper option than seeing families having their homes repossessed and then going on to receive rent supplement. Other measures that can be considered include paying interest only for a significant time, paying interest on part of the capital, payment holidays, deferring all or part, lengthening the term of the mortgage, which would reduce payments, being flexible to ways of changing the type of mortgage, and a deferred interest scheme.

It is also important that the Central Bank's code of conduct on mortgage arrears be respected. Part of that code is that the lender is obliged to consider alternative repayment options while not obliged to offer one. The difficulty is where the lender states he is not willing to offer a repayment arrangement. I note the lender must give the reasons in writing and inform the borrower of other options, but it is not strong enough to prevent repossession. There is much to commend in that code but I hope the borrower can be assisted in practical ways because there is much form filling, meetings and legalities to be gone through. The code states that the aim of the mortgage arrears resolution process is to avoid the repossession of family homes.

No doubt a terrible injustice has been done to ordinary home owners by reckless and unscrupulous bankers and developers who most definitely are not facing the reality of losing their generally palatial homes, both here and abroad, in the same way that ordinary home owners are facing repossession of their homes. The Government must put ordinary citizens who are in difficulty first and not allow the banks exploit the financial situation.

Deputy Finian McGrath

I thank the Ceann Comhairle for the opportunity of speaking to this important motion from the Independent Members. I also commend my colleague, Deputy Pringle, on bringing this before the House and having this urgent, two-day debate on supporting and assisting householders in the State.

Before I go into the details of the motion, I wish to state that it is a national disgrace what has happened to this country. Government, bankers, developers and the greedier sections of society ruined our great little country with their gross incompetence, greed and rampant mé féinism. The founders of the State and those who died for republican and democratic principles must be turning in their graves, especially just after the Easter break. These fat cats let the people down, let the economy down, let householders down and let themselves down. It is important in this debate that we all acknowledge that before we start to try to make an effort to clean up the mess. I say to the Government that when cleaning up the mess, householders and children with a disability should not be penalised by the greed and actions of others. That is a key point in the broader debate. There must be a bottom line and cutting special needs services should not be part of any resolution of this issue.

The Government has clear choices. The Independent Members have put forward choices and options for the citizens. It is a sad state of affairs for the country when only two Government members are in the Chamber listening to the debate. I hope the householders and the mortgage holders of the country are aware that this important issue facing the people is being ignored by the Government parties.

We need a country built on equality and justice. Ireland was once known as the land of saints and scholars but today it is better known as the land of scandals and tribunals. Politics and politicians, banking, the church, business, medicine, the law and the Garda have all suffered from erosion of public confidence in the wake of astonishing scandals. Moreover, Ireland has undergone rapid social, economic and political change over the past ten years which has had a profound impact on our value system. For example, the decline in authority and influence experienced by the church in recent years has forced many to seek other sources of ethical and moral guidance.

Ireland was a fairly prosperous country, yet this created dilemmas of its own. Difficult decisions about the distribution of resources raise awkward questions for society. How is the tension between the rights of the individual and the overall good of society to be resolved and to whom will we all look for guidance? The political classes, the Government, the church, and the medical or legal professions have all had their credibility seriously tainted by damaging scandals. That is where we are at in this country.

The motion states:

[T]he burden of bank recapitalisation severely limits the capacity of the Government to positively lead this country out of recession and back to economic normality;

the burden of negative equity and mortgage arrears severely limits the capacity of the households of Ireland to live happy, secure and productive lives;

the banks, regulators and previous Governments were negligent in allowing the "property bubble" to arise and failed in their fiduciary duties to their customers, especially to mortgagees of principal private residences — the families of Ireland — to whom they had a special duty of care; [. . .]

real people are living in real houses and making real payments on these "negative equity" homes while their banks are exploiting the financial situation for their private benefit;

the wider economy is in desperate need of fresh credit and renewed banking competition[.]

These are the core issues in the Independent Members' motion and we have put forward a number of ideas, some of which the House has heard. I ask the Minister for Finance, as the controlling shareholder in the covered banks, to adopt a policy of using whatever emergency measures are deemed necessary to reduce the unsustainable debt burden being placed on mortgagees of principal private residences in the State. I also ask that he ensure that the means used minimise the burden on the taxpayer and ensure households can contribute fully to our national recovery.

I urge the Government and all the Deputies to look at the Independent Members' motion, to see the reality and pay attention to the detail in order that we can all build up this country again to its proper place among the nations of the world. While it will be tough, I believe we can do it. I urge the Minister to listen to the different points put forward in the debate. I commend the motion to the House.

Deputy Mick Wallace

Going around from house to house during the general election, I was struck by the level of difficulties being experienced by people, whether in social or private housing. Most of those in social housing had no work. Those in private housing had jobs but were experiencing terrible difficulty paying their mortgages. It was difficult to credit, as I had not been around the entire county of Wexford previously. Going from house to house, I was amazed at how many people were in trouble. No doubt the moratorium on repossessions has certainly been a help, but there is an element of kicking the can down the road. Matters are a great deal worse than we realise.

We are fairly used to the fact that the banks do not tell us everything first-off. We were drip-fed the truth over recent years. I have experience in the construction sector of building and selling apartments and I can assure the Minister that close to 50% of the apartments I sold between 2003 and 2008 are in difficulty. Given that 270,000 units were built between 2004 and 2008, it is hard to credit that only 44,000 are in the difficult position of being 90 days behind in their payments. If this is the case, I will be very surprised if the number does not increase dramatically in the coming 12 to 18 months because I am very much aware of people who bought properties from me who are in severe difficulties. This is having a huge impact on the entire economy. It is very difficult to see how the economy will recover if people are afraid to spend money. They are saving the little bit they have to try to deal with their mortgages and to keep a roof over their heads. It is very challenging. Their take-home pay is less than it was because of tax and they have less disposable income. Any opportunity we have of creating more jobs has been diminished by this. It will be difficult for unemployment figures to go in the right direction if people are spending less money, and God knows this is creating a social misery which is devastating for many people.

The notion of debt forgiveness seems unthinkable to many people. However, we know from history that it has been applied before and it worked. Roosevelt used it in the United States in the 1930s after the great depression and it worked to great effect. In this country, in 1932 de Valera introduced a form of it with regard to land tenants who had been repaying money to the British Government for years. At that stage, the payment was £5 million per annum and GDP was approximately £150 million, so it was a huge amount of money. De Valera put a stop to it and did a deal with the British; the British sought £100 million and he gave them £10 million. He took over the debts with the farmers, who were having trouble with the repayments. He halved the repayments and gave them double the time to make payment. At the time, the main argument was that debt forgiveness was good for the economy. It worked, and it was a sensible thing to do. Today, we are at a place where it is definitely something that needs to be considered.

I know there are difficulties with it. I know the dangers with regard to moral hazard, whereby one will behave differently if one knows one will be bailed out if one fails. The banks are in good contact with their customers and are aware of who genuinely cannot pay and who can. If work was put into this, we could deal with those in the most trouble and help them out of their situation which would help the economy in general. If I bought a house in 1995 I would like to see someone who bought one between 2003 and 2008 receive help because I would be better off. From a selfish point of view, I would be better off even though I bought my house in 1995 if those who bought between 2003 and 2008 received help because not only would it help us see a bottom in the market, it would also help the economy in general and we would all be better off. If the benefit exceeds the cost it is something the Government should consider.

Deputy Clare Daly

As other Deputies have stated, there is no doubt this issue is a ticking time-bomb, and the ticking is getting louder and an explosion is not too far away. This time last year, almost 30,000 householders had problems. Now the figure is said to be three times that but, in reality, the figure is probably much more than that. Hundreds of thousands of people are in negative equity. People cannot sell or rent and the houses they are in at present are not adequate to meet their needs. Crucially, they have no way out as they have no ability to meet the repayments being sought from them because their income is falling and mortgages are rising. Adding into the equation the fact that many of these people have been shackled with mortgages of 30 or 40 years duration, it is quite clear that the situation is totally and utterly unsustainable and at some stage something will have to give.

It is important that we link this to the overall economic situation and how we got into this mess. Reckless speculation and profiteering on the property market has had devastating consequences for the entire economy and for everybody as taxpayers and citizens, and those who bought at the height of the boom are victims on the double or treble.

If one peruses the repossession cases in the courts, one will get an idea of the type of disgusting borrowing practices that were sanctioned by the banks and their culpability in this regard. In recent weeks, there was a case where in 2008 a 48 year-old man was given a mortgage for 35 years at repayments of €3,000 a month. This means that for 17 of those years he would have to meet those repayments on a State pension. This cannot be done and it is an impossible situation to be in. The banks have to take responsibility for this. The programme for Government speaks about a radical solution. However, there does not seem to be much there that would deliver on this commitment. Extending tax relief and all of the other measures mentioned by Deputies while welcome would not really get to the nub of the problem.

In essence, we are speaking about a roof over somebody's head, which is a fundamental human right. The starting point must be that this cannot be threatened. What is the point of stating to people, and it has been said to people who are short a couple of hundred euro in their monthly mortgage repayment that there is no answer to it, that they cannot receive any assistance but instead they have sell the house and perhaps go into private rented accommodation where the State would subsidise their rent to the tune of €800 or €900? A family would be uprooted with all of the social consequences that go with this, and the cost to the State would be far greater than the cost of making efforts to keep that family in that home. This situation cannot be countenanced. There is a long tradition of opposing evictions and repossessions in Ireland and I would actively defend people fighting to stay in their family home.

The Government needs to do much more in terms of the banks. We own almost all of the banks. Increasing interest rates on mortgages is unacceptable and can have only negative consequences in driving more people over the edge and into difficulties with repayments. These institutions have received billions of euros of taxpayers money and are now seeking to saddle us with extra debt through mortgage repayments to restore some of their own profitability. As the owners of the banks we have to state "enough is enough" and it should be ruled out.

Ultimately, the only solution to this issue is a retrospective revaluation of all the houses bought during the bubble years and for mortgage payments to be revised downward in line with the new value. Anything else and any other proposal would merely tinker around the edges and would not address the day-to-day difficulties householders have. In this sense, if one is speaking about being radical and addressing the situation, this is the only solution that can be countenanced. It is something that is within our remit given the amount of our money that has been pumped in to the banks in this regard. I urge the Government to consider this as a solution.

Minister for Finance (Deputy Michael Noonan)

I move amendment No. 2:

To delete all words after "Dáil Éireann" and substitute the following:

"—recognises that the recapitalisation and deleveraging of the banking system will facilitate increased lending into the Irish economy and help underpin economic recovery;

endorses recent reforms in the Central Bank to strengthen the regulatory framework and also the Government's plans to introduce legislation to enhance the legislative framework governing financial regulation and supervision in Ireland, consistent with best practice international standards;

notes that the Chairman of NAMA, Mr. Frank Daly, has recently stated that the Agency is exploring ways by which it can provide finance for commercial and residential property deals in line with its objective of reinvigorating the Irish property market and that he envisages that NAMA will work with the two pillar banks to identify solutions which will increase access to residential mortgages for its Irish residential portfolio;

notes that there are significant Government supports available to assist mortgage holders who are in arrears and are experiencing difficulties with repayments in respect of their principal private residence, including:

the Mortgage Interest Supplement Scheme (MIS) which provides an important safety net for mortgage borrowers who get into difficulties and that more than 18,500 families are now benefiting from this support;

advice available through the Money Advice and Budgeting Service (a significant portion of the MABS client base are mortgage holders);

protection to mortgage holders provided by the Central Bank's statutory Code of Conduct on Mortgage Arrears (including a moratorium on legal actions by the lender provided the borrower is co-operating and the mortgage is sustainable) which applies to all regulated lenders; and

lender forbearance (at end of the last quarter of 2010 there were circa 60,000 rescheduled residential mortgage accounts while lenders representing the majority of the market are set to introduce a deferred interest scheme in 2011, which will extend present levels of forbearance);

welcomes the fact that the existing supports are working and the level of repossessions of family homes remains low;

affirms its support for the Programme for Government under which a number of proposals aimed at helping mortgage holders in difficulty will be examined;

commends the Government for its actions to stabilise the financial system and to restore the public finances thereby protecting jobs and home ownership; and

expresses its confidence in the success of the Government's efforts to deal with the impact on Ireland of the worldwide financial crisis."

We are all very much aware of the challenges facing our citizens since the onset of the banking crisis and downturn in the economy. The challenge for Government is to manage constrained resources to ensure that those who are less well off in our society continue to have access to an acceptable level of public services including health and education, as well as opportunities for employment to enable them to support themselves and their families.

For many individuals the main challenge is retaining the family home at a time when unemployment and reductions in salaries are placing increased pressure on homeowners in making their repayments. For many with mortgages these problems are compounded by falling property prices, with the issue of negative equity restrictions it imposes on options for addressing rising debt, whether by trading down or moving to a new location where employment opportunities are better. Increases in mortgage interest rates will exacerbate these difficulties. As several Deputies drew the attention of the House to these difficulties, there is little need for me to rehearse them. They are common to constituents in every part of the country.

Before I address what the Government is doing or planning to do to assist those facing these challenges, I would, first, like to address the wider issues of economic policy raised in this Private Members' motion, including the impact of bank recapitalisation, meeting credit needs in the economy and the impact of NAMA.

As I have stated previously in the House, a key objective of the Government is to strengthen overall fiscal sustainability by separating bank risk from the sovereign. Clearly, this can be achieved only by returning the banking system to health. Shortly after we presented our radical plans to resize and reorganise the banks the ECB issued a number of very important announcements related to the continued availability of euro system funding for our banks. First and most important, it confirmed that, against the background of our decision to recapitalise the banks in line with the Central Bank's rigorous assessment of their capital needs, the ECB would continue to provide liquidity for banks in Ireland and, according to the Central Bank's statement on the night of the announcements I made on bank restructuring, "supports the Irish banks plans to deleverage and downsize their balance sheets". Second, it confirmed that all marketable debt instruments issued or guaranteed by the Government would be deemed as fulfilling the credit standards required for collateral in eurozone credit operations, irrespective of rating. In the absence of such a statement, the risk was that the banks' access to ECB funding would have been restricted had there been downgrades of the sovereign. These commitments are very important in underpinning the capacity of the banking system to meet sustainable credit need because it is impossible for a bank to prioritise new lending when it is experiencing capital or funding problems. The fact that the ECB will continue to fund Irish banks puts them in a position where they can give credit. Economies cannot function without access to credit. Certainly, they cannot grow without access to the credit required to permit such growth.

We know that the Irish banks have lent excessively and imprudently during much of the last decade. As discussed in the recent Nyberg report, credit allocation became heavily skewed towards real estate and development lending and genuine borrowers, for example, in manufacturing and agriculture have seen their percentage share of overall lending reduce annually over time since the end of the 1990s. My Department has recently published some statistics which show how real estate lending became disproportionately large. Other more productive sectors such as agriculture and manufacturing were starved of credit in the rush to lend to real estate developers and even to farmers, shopkeepers and solicitors who wanted to become real estate developers. It is essential to reverse this trend. I am sure many of my colleagues share my experience of being told by small business owners that they cannot get credit from the banks, only to find after examining their balance sheets that, even though they may be operating in a sector of the economy, their difficulties arise because they invested their profits in four apartments and two houses. The mortgages on these properties rather than difficulties in their core businesses are pulling them.

The difficulties that brought us to the position in which we find ourselves arose not only from development——

(Interruptions).

Deputy Michael Noonan

Sorry, does the Deputy want me to answer the question asked? The difficulties arose not only from over-investment in development but from the fact that people who ran profitable businesses in other sectors of the economy used their profits to invest in developments which are now dragging them down. The stain spreads right across the economy and it is essential to reverse this trend.

Putting more than €10 billion of lending finance per annum back into the economy is clearly a positive development, but it has the potential to impact negatively on the economy if we repeat the mistakes of the past. Working with the Central Bank, the banking policy division of my Department will develop safe monitoring tools to prevent the excessive concentration of lending in risky sectors and ensure lending is made in those sectors that, above all, support sustainable employment. We will proactively encourage lending in the sectors in which we need to see additional growth such as agriculture, manufacturing and the green economy, as well as to allow people to once more buy their own homes.

The Credit Review Office which was established by my predecessor has a very important role to play in overseeing the lending behaviour of the banks and supporting the implementation of best practice standards to meet the needs of small businesses. The office commenced operations on 1 April 2010 to ensure Allied Irish Banks and Bank of Ireland achieved their objectives of making €3 billion in new lending finance available each year to SMEs in the period from 2010 to 2012. While this process has improved somewhat the previous wholly unsatisfactory situation, problems remain. The most recent quarterly report from the Credit Review Office states "the perception of bank borrowing being difficult to access" has led to some businesses engaging in the "risky strategy" of investing working capital in fixed asset projects. This puts such businesses in a more perilous position of being unable to trade through difficult trading periods and dampens their investment in improvements or expansion. However, there are some important positive signs. The credit reviewer, Mr. John Trethowen, states the potential of borrowers to appeal to the Credit Review Office against their treatment and credit decision has "in itself had a positive influence on the behaviour of these two banks". It is a step in the right direction, but clearly more needs to be done. We will build on the work of the office to ensure effective access to enlarged credit lending finance from the pillar banks.

NAMA was established as a vehicle to reduce risk in our systemic banks by taking the riskiest loan portfolios off their books and also forcing the upfront recognition of loan losses, while providing these institutions with assets in a form that could be used to access liquidity. In the context of further deleveraging measures in the banking sector being central to the State's agreement with the ECB, the IMF and the European Union, the deleveraging achieved by NAMA must be seen as a necessary development. NAMA has realised a significant amount of the deleveraging required if the banks are to be restructured to a size more appropriate to an economy the size of Ireland's.

With regard to the agency's influence in the property market, when I recently met the board of NAMA, I explained that I expected it to review all options in regenerating activity in the property market as soon as possible. Following that meeting, the chairman of NAMA recently stated the agency was exploring ways by which it could provide finance for commercial and residential property deals in line with its objective of reinvigorating the property market. He has also stated he envisages NAMA working with the two pillar banks to identify solutions which will increase access to residential mortgages for its Irish residential portfolio. In that context, I understand the agency is preparing detailed plans and that it proposes to enter into discussions with the two pillar banks shortly. In the context of its commercial remit and consistent with section 2 of the National Asset Management Agency Act 2009, it is at all times open to considering proposals aimed at contributing to broader social and economic objectives. It assures me that it will play a key social and economic role by regenerating activity in the property market through its asset sales strategy and the provision of liquidity for the banks in the form of NAMA securities which can be used as collateral for funding.

It is a deeply rooted cultural characteristic of Irish people that they value the ownership of their home. Unfortunately, the financial crisis has created conditions in which many home owners, through no fault of their own, find themselves in arrears with their mortgage repayments and at risk of losing their homes. Through its agencies, the State is assisting mortgage holders in arrears in a measured and proportionate manner. This is undoubtedly the correct policy.

The mortgage interest supplement scheme, managed by the Department of Social Protection, provides assistance where the mortgage relates to a person's principal private residence. It currently supports approximately 18,500 mortgage holders. The money advice and budgeting service, MABS, provides a national, free, confidential and independent service operating from 53 offices nationwide. MABS devotes a substantial amount of its resources to dealing with client mortgage difficulties.

The expert group on mortgage arrears and personal debt, which was chaired by Mr. Hugh Cooney and included Mr. Matthew Elderfield, head of financial regulation at the Central Bank, as well as other external experts and senior officials from Departments, published an interim report in June 2010 and a final report in November 2010. Since the publication of the reports, the Central Bank has revised the code of conduct for mortgage arrears, with effect from 1 January 2011, to reflect many of the recommendations of the expert group, including key recommendations relating to the introduction by all regulated lenders of a standardised mortgage arrears resolution process, MARP.

The provisions set out in the revised code of conduct for mortgage arrears are a very important means of helping all residential mortgage holders. This code sets out how mortgage lenders must treat borrowers in or facing mortgage arrears, with due regard to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits. The code sets out the framework that lenders must use when dealing with borrowers in mortgage arrears or in pre-arrears. For the purposes of the code, a pre-arrears case arises where the borrower contacts the lender stating that he or she is in danger of getting into financial difficulties and-or is concerned about getting into mortgage arrears. Lenders are required to comply with the revised code as a matter of law but have been given a period of six months grace, ending on 30 June 2011, to put in place some of the provisions of the code.

The revised code includes more detailed requirements for lenders when dealing with borrowers in arrears and financial difficulties. The most significant changes require that the code will now apply to borrowers who notify their lender that they are facing financial difficulties and may be at risk of mortgage arrears, that is, pre-arrears cases; lenders must establish a mortgage arrears resolution process, MARP, and use this framework when dealing with arrears and pre-arrears customers; lenders must ensure communications with borrowers are presented in a clear and consumer-friendly manner and must make available to borrowers aninformation booklet that provides details on the MARP; lenders cannot initiate more than three unsolicited communications with a borrower by whatever means in a calendar month other than correspondence required by the code or other regulatory requirements; a lender must not require a borrower to change from an existing tracker mortgage to another mortgage type as part of an alternative arrangement offered to the borrower in arrears or pre-arrears; lenders are required to set up an arrears support unit to assess arrears and pre-arrears cases; borrowers can appeal the decision of the arrears support unit and the lender's treatment of the borrower's case under the MARP to an internal appeals board that lenders are required to establish; and the complaints process under the Central Bank's consumer protection code is replaced with an appeals process under the revised code of conduct on mortgage arrears.

One very important tool set out in the code is as follows. When a lender is determining the 12 month period, it must wait before applying to the courts to commence legal action and it must exclude any time period during which a borrower is complying with the terms of an alternative repayment arrangement, making an appeal to the internal appeals board or making a complaint to the Financial Services Ombudsman under the revised code. Effectively, if a borrower agrees an alternative repayment arrangement for the mortgage with the lender and continues to meet their revised repayments, the lender cannot start legal action against them to seek repossession.

The Central Bank has also written to lenders to issue directions which will mean that lenders cannot impose arrears charges or penalty interest on borrowers who are co-operating with the MARP. One of the main recommendations of the expert group was for a deferred interest scheme. This is intended to allow borrowers to pay at least 66% of the mortgage interest but less than 100% and defer payment of the balance for up to five years based on a full appraisal of an individual borrowers circumstances. Mortgage lenders have been requested to commit to the scheme. Lenders representing the majority of the market have indicated their willingness to implement the expert group's proposals for a deferred interest scheme or a variation of it. These are AIB, EBS, Bank of Ireland, Irish Life and Permanent, Irish Nationwide Building Society, Springboard and Start. While the deferred interest scheme is voluntary for all lenders, those who have signed up in support of the scheme will be monitored by the Central Bank to ensure compliance.

To implement the recommendations of the expert group regarding the mortgage interest supplement scheme, changes to primary and secondary legislation are required. I am informed that the Department of Social Protection is formalising an implementation plan that will set out a framework for the future of the mortgage interest supplement scheme.

The recommendation of the expert group to amend the local authority needs assessment process has been implemented by the Department of Environment, Heritage and Local Government. Local authorities have been provided with clear guidelines on the treatment of applicants for social housing support whose mortgages have been deemed unsustainable. Discussions are ongoing between the Department of Environment, Heritage and Local Government and the Irish Banking Federation to enable borrowers whose properties are to be repossessed to remain in their homes for a period of time, pending the sourcing of appropriate accommodation by the housing authority.

It is my understanding that the Minister for Justice and Equality intends to give early attention to the final report of the Law Reform Commission on personal debt management and debt enforcement, which was published in December 2010. That report contains recommendations on comprehensive reform of the system of personal insolvency law in Ireland.

While all efforts must be made to assist those struggling with mortgages, the Government must be conscious of the overall impact on the taxpayer. It should be noted that the mortgage arrears and personal debt group did not recommend a formal debt forgiveness scheme. It set out a list of policy considerations in regard to loan modification techniques, which included the potential impact on borrowers and the taxpayer. While I share the concerns of Deputies, I must emphasise that any assistance to mortgage holders must be very carefully targeted to ensure there are no additional unnecessary costs imposed on the taxpayer. It should also be noted that not all those in negative equity are struggling to meet mortgage repayments. Many considerations must be taken on board and I thank Deputies for their contributions.

Deputy Michael McNamara

I wish to speak against the Private Members' motion because it contains an inherent contradiction. On the one hand, the Technical Group would have this House instruct the Minister for Finance, as the controlling shareholder in the covered banks, to adopt a policy of using whatever emergency measures are deemed necessary to reduce the unsustainable debt burden placed on mortgage holders and, on the other hand, to ensure the means used minimise the burden on the taxpayer and ensure householders can contribute fully to our national recovery. This side of the House agrees it is essential to the recovery of the State that householders can contribute fully to it but we must not provide that they do so in a way that further burdens taxpayers with debt.

Most of us in this House agree wholeheartedly on some of the concerns raised by the Technical Group. Deputy Finian McGrath criticised the lack of members of the Government parties in the Chamber. Unfortunately, he did not hang around long enough to hear any of us speak or the other side of the argument. Notwithstanding this, I commend him on indicating his concern on the need for equality and social justice which is shared by Members on this side of the House. I fail to see, however, how it would contribute to equality and social justice if taxpayers were burdened with further debt, which is effectively what is being proposed by the Technical Group.

The Technical Group proposes in a rather non-technical manner — I have yet to hear a single proposal from it, other than a reiteration of the concerns shared by everybody in the House — that we can somehow magically write off the debt as if it would have no consequences, but it would have consequences because, as those of us on this side are sorely aware, the banks, in particular the pillar banks, require capitalisation to ensure they can again play the role banks play in modern economies. They can lend money in the economy to allow businesses to acquire the credit they need to survive on a day-to-day basis and people to buy houses from property developers such as Deputy Mick Wallace who has told us 50% of those who acquired properties from him are now in negative equity. He proposes a system of Houdini economics in which we could all fly clear of the decisions made. Everyone who took out a mortgage did so in the belief he or she could repay it.

Those of us on this side of the House are fully cognisant of the fact that economic circumstances in the State have changed dramatically. It is for that reason the Minister for Finance has outlined in considerable detail the Government's proposals and the requirements of lending institutions to ensure account will be taken of the changed circumstances. However, Deputy Mick Wallace pointed to Eamon de Valera who represented County Clare long before I did and spoke about him refusing to pay back the land annuities as if somehow this was a magic solution without consequences. It was not without consequences. First, de Valera's actions led to a land war, as well as an economic war, between the State and its major trading partner which arguably crippled our biggest market for 20 years. Second, de Valera took these actions in a very different world from the one in which we live. It was a world in which the State could exist in splendid isolation from its trading partners. That is not the case today. We have to exist in a modern world in which international finance and international agreements made by the State must be fulfilled, including the bank guarantee which my colleagues in the Labour Party opposed and which the Government Deputy Finian McGrath supported brought forward. Each of us is suffering the consequences and every taxpayer is shouldering the burden of that guarantee. I propose that taxpayers should not be further burdened and that the weakest and most vulnerable should not be saddled with further taxes.

Deputy Michael McCarthy

I am pleased to have the opportunity to speak in support of my party's amendment to the motion. Unless someone has been living under a stone in the past few years, we are all well aware of the extent of the financial crisis gripping the country. We are also well aware of the economic abyss in which we find ourselves and, unfortunately, the banking crisis that was not the creation of the Government. In many respects, the country is in receivership. We are dealing with the results of arch conservative, right-wing politics which brought the country to a halt and literally put us into receivership. To take a particular angle to the debate without being cognisant of the historical context is akin to throwing a dart in the dark. It is aimless. In that context, I will confine my remarks to the manner in which home owners are struggling and also the bank bonuses in terms of the culture in the banks which has not been brought to an end in recent times. We must be cognisant of where we are going and ensure the mistakes are not repeated.

One in ten home owners is struggling to pay his or her mortgage and trying to stave off repossession. A total of 400,000 people are out of work. The previous speaker was correct when he stated that when people took out mortgages, they did so in good faith and they believed they would be able to repay them. Unfortunately, given the economic and unemployment crisis, that is no longer the case. As the Taoiseach put it so well today, we are confronted by a challenging economic crisis, but it is not an impossible one. With the right decisions we can hope to turn the corner in the near future.

Amid the structural changes taking place we must not forget about the thousands of ordinary people who are bearing the brunt of the profound economic crisis brought about by our predecessors in government, Fianna Fáil and its friends in the Green Party. A recent national survey carried out by the Irish League of Credit Unions revealed many worrying trends about people's financial circumstances, including that 20% of Irish home owners had just €70 left in any one month after they had paid their mortgage and utility bills. Four out of five people said they were worried that they would not be able to cope if unforeseen expenses arose. In that context, it is urgent that we introduce legislation to provide measures to assist struggling home owners. The Minister eloquently brought forward a number of strong points in defence of what could be done in that context, but it is imperative that we drive to take action at this junction to help those facing eviction by the banks, those before the courts because they are facing bankruptcy and those struggling to make ends meet.

Analysts have indicated that the European Central Bank will raise interest rates twice within the next 12 months, with the first of these possible increases most likely to take place either next month or the month after. That is extremely worrying because we are dealing with people trying to exist on much reduced incomes. In addition, we have seen the appalling situation in recent weeks where some banks have introduced increased banking charges, which is making it almost impossible for some people to survive.

Recently I called on the Government to press ahead with legislation promised in the programme for Government to provide relief for struggling home owners. It is important for us to offer a quid pro quo to those who are struggling. We have seen the manner in which the banks have been recapitalised and the manner in which the previous Government bent to their every whim and need. When that is balanced with what the struggling home owner has to face, there is a huge cry for parity of esteem.

The ugly culture of paying banking bonuses sickens people to their core. The Committee of European Banking Supervisors published guidelines in January which advised governments across Europe on various new EU rules for bankers' pay. One of these guidelines is that investment banks should be forced to limit bonuses to a set multiple of bankers' salaries agreed with financial watchdogs. It is important that we press ahead with such measures.

There are many analysts and experts in what is a complex area. Every time we turn on the television the parliamentarian or the politician is sidelined in favour of an expert. It is experts who got the country into trouble, based largely on right-wing economic policies administered by Fianna Fáil and its friends in the Progressive Democrats and the Green Party. In my previous incarnation as a Senator there was one esteemed Independent Senator with expertise in banking who championed Mr. Seán FitzPatrick and Mr. Michael Fingleton and berated Allied Irish Banks and Bank of Ireland for not following the practices and business model of Anglo Irish Bank. Imagine how badly off we would be if they had listened to his advice.

Deputy Michael Noonan

Who is it? Name him.

Deputy Éamon Ó Cuív

Ba mhaith liom moladh a thabhairt don Ghrúpa Teicniúil as ucht an rúin seo a ardú anocht. Níl aon amhras orm ach go bhfuil sé thar a bheith tábhachtach go dtiocfaimis muid i gcabhair ar dhaoine atá ag fulaingt de bharr an lag trá eacnamaíochta, iad siúd go mór mhór atá i mbaol a gcuid tithe a chailleadh. I commend the Technical Group on this motion which gives us an opportunity to debate this issue. Obviously there are aspects of the motion I would not agree with and I will address these later in my contribution.

I have always had a firm political belief that as many people as possible should be facilitated to own their own homes and that there is a huge value to be put on the stability of families through home ownership. Last Christmas, I was pleased to introduce a scheme facilitating an extra discount for people buying local authority houses. Anyone who walks around local authority estates can see the houses that have been bought because the owners care for them and do extra work to maintain them. The stability of society as a whole is hugely aided by a high rate of family home ownership. I also subscribe to the idea that the State should assist those who have fallen on hard times to hold on to their homes and that doing so is not only good social policy but also good financial policy. I would make exceptions where people bought trophy homes and also where, for social or medical reasons, people cannot sustain a mortgage.

The question is what one can do in practice to assist those who are most in need. How can one do so in a cost effective manner to ensure a long-term sustainable arrangement for people? The previous Government looked at this issue and commissioned a report by the expert group on mortgage arrears and personal debt. I believe these recommendations should be implemented in full.

I am surprised there was very little in the Minister's speech about a key issue, namely, a radical restructuring of the mortgage interest supplement scheme, as well as an arrangement for those who could not pay the interest on their loan to pay only 66% of the interest over a five year period. The latter point was mentioned in the Minister's speech and I understand the banks are facilitating that. The problem with that, however, is that one is only putting off the evil day which will chase one forever.

Whether in business or in private life, I have always believed that if an indebted person starts deferring their debt or takes out more loans, they are just digging a deeper hole. If the State believes a person has a future, the only way to help is by providing cash. It is not rocket science. The mortgage interest supplement provides cash.

There were also recommendations in the report on how some of the extra money to be spent on the mortgage interest supplement could be recouped from banks. In particular, there was a recommendation that if mortgage interest supplement was being paid, the banks could not charge any higher rate of interest than the basic rate of the loan. If they got the mortgage interest supplement directly, the banks would have no greater risk and, therefore would not charge a higher interest rate. The way forward is to change the terms of the mortgage interest supplement. During my term as Minister, work was ongoing in the Department of Social Protection in this regard and we had intended to introduce measures this spring. A schedule has been laid out by my officials to ensure this happens.

I agree with Government speakers that there are those who think one can have a general write-off of a huge amount of bank debt on the part of mortgage holders and that there will be no cost to be paid by anyone. This is obviously untrue. Any general write-off of debt would require further recapitalisation of the banks by the taxpayer. An indiscriminate write-off of debts by the taxpayer therefore would not only be very expensive but would also be inherently unfair. One might be writing off banks' liabilities for people who could well afford to pay. They made the choice and can afford to pay the piper. Equally, however, I am totally opposed to those who say that people took out mortgages of their own volition, that it is their responsibility to pay them and that the taxpayer should in no way help those who are down on their luck one way or another. It is uncharitable to take that attitude, as well as being unfair and inequitable. In addition, it is a simplistic way of approaching such issues.

The big question is who should be helped and how. Anyone who bought a family home at what was the going market rate at the time, even if they purchased it at the top of the market, and who cannot now repay their mortgage because of loss of income or employment should be assisted if they are facing serious difficulties. The way to do this is to assess individually those in difficulty. There is no other way of doing it. People in difficulty should avail of the money advice and budgeting service, MABS, which will undertake the assessment along with community welfare officers. In that way, one could decide who would be helped and the maximum number of households, per million euro spent, could be assisted. Every household could then be helped according to its individual needs in an open and transparent way.

There will be those who will argue that we cannot afford to extend this scheme. I would not agree with this as the direct cost of housing families who lose their homes because of repossession, not to mind the indirect costs to society and the families involved, is much greater than helping people through a temporary period of difficulty. It is also worth noting that the mortgage interest supplement currently costs approximately €70 million per annum compared with almost €1 billion for the rental interest supplement. I think it was €994 million at the last count. What we invest in saving people's mortgages tends to be quite temporary because people get re-employed. It also tends to be much less expensive than permanent social housing.

There are those who come up with great ideas, such as making 30 year mortgages into 60 year or 100 year mortgages. It is total nonsense and irrational because the people we are talking about cannot pay the interest on their mortgages and, therefore, even if they get a total holiday on the capital, it will not solve the problem. In fact, one of the proposals we had was that where the mortgage interest supplement was being paid, there would be no capital repayments to the banks.

During my time as Minister, I had prepared a schedule of implementation of the various steps concerning the mortgage interest supplement. Some of them did not require any legislative change while others required primary or secondary legislation. All of it was to have been done in the spring of 2011. It was intended to set up a central mortgage interest supplement processing unit in the Department so that everyone would be treated equally. The second decision, which did not require any legislation, was that the mortgage interest supplement would not cease until alternative arrangements had been made. If the person got a job, that was fine, but if he or she did not, the supplement would not cease until alternative long-term arrangements had been made. The third decision, which could also have been done without legislation, was to abolish the rule stating that a person could not get mortgage interest supplement if their house was up for sale. That was total nonsense, so that step was to be taken.

The fourth step was to address a provision that caught many couples who were dependent on two incomes. When one income disappeared, they may have had to live on the lesser of two incomes. There is a rule with the mortgage interest supplement that even if a person is working more than 30 hours per week, he or she can get mortgage interest supplement. That was to have been abolished by enacting legislation because there should be no relationship between the hours worked and receipt of the supplement. It should be based totally on a person's means and outgoings. The mortgage interest supplement should be calculated solely on that basis.

It was also intended that only interest would be paid to the bank if one was in receipt of mortgage interest supplement. In addition, because the supplement would be paid directly into the bank, the bank would not be allowed to charge any extra interest. Furthermore, the bank would not be allowed to charge any capital. Therefore, it could not put pressure on home owners to start clearing capital now that they were getting the mortgage interest supplement on the basis that they would not be getting the supplement if they did not need help. The bank would be told that the mortgage interest supplement, which would be its lifeline, would not be paid. There were several ways to pay for it. The first, which was to transfer people into social housing if the house is repossessed, is way more expensive. However, the other issue was that we had said MIS would not be paid for the first six months of difficulty or unemployment and following forbearance by the banks, the supplement would kick in if the householders problems were not resolved.

A general write-off of large mortgages with no connection to the ability of the mortgage holders to pay or their income would be a wasteful and irrational way to go. Some people say assistance should not be given, but that has never been our way. We have always given assistance to those who have lost jobs. By amending the MIS scheme and putting the resources that would otherwise have to be put into social housing into the scheme and getting rid of the crinkles in the scheme in the way I have outlined, we would have the means to directly help only those who need our help.

Those who do not need to be helped by, for example, doubling mortgage interest relief, will not be helped if they are 15 years into a mortgage and lose their jobs and they could have difficulties while many people would be helped who are happy at the moment because their incomes have increased and they have no problems paying for their house, including those who might have taken out relatively small borrowings because they had cash when purchasing. We must target the resources because they are finite. There is nothing we can give either by way of bank write-offs or direct support to people that will not have to be paid for by the taxpayer and, therefore, our finite resources must be targeted at those who need them and it must be made clear that the policy that the State has followed for many years in recognising the value of the family home will be protected and those who have difficulties will be assisted.

I have focused on the mortgage issue but, according to the MABS statistics, a huge number of people in severe financial difficulty do not have major difficulties with mortgages. As Minister, every time I asked MABS officials the average personal debt, I expected them to say €200,000 or €300,000 but they often said it was between €30,000 and €50,000, which was at a low level. Many people with debt problems do not have mortgages. They are in local authority houses or in other rented accommodation or circumstances. They do not own houses but they have problems with credit cards or credit union and finance company loans. Having received various offers in the post, they took on large debts but the message I have for them is that help is available. Nobody should go to bed at night worried about this. They should get help and where this issue is approached in a systematic way by MABS, the problems can be handled and resolved because nobody under our system should go to jail over a debt. The courts cannot, and do not, order people to pay that which they do not have. That has been my experience in dealing with people over the years. If a systematic approach is taken and people approach MABS, they can be helped to alleviate the terrible fear they are experiencing.

Deputy Pearse Doherty

There has been considerable media and political interest in the issue of distressed mortgages in recent weeks. However, this problem is not new. The number of families struggling to repay mortgages bought at the height of the boom has been steadily growing for the past two years. Wage cuts, tax increases and increasing unemployment have forced more and more people into mortgage arrears.

As of December 2010, almost 45,000 households were in mortgage arrears for more than three months, of which 70% had been in arrears for more than six months. When households in receipt of MIS are taken into account, the total number of people in mortgage distress reaches a staggering 80,000. This represents a 50% increase in families unable to pay their mortgage since the end of 2009. In turn, the number of repossessed homes in mortgage arrears almost doubled from 397 in 2009 to 585 in 2010. These figures hide the reality of the tens of thousands of families who are not in mortgage arrears but who are paying an increasing proportion of their income to service boom time mortgages. Over the coming 12 months, we can all agree that more of them will cross over into serious mortgage distress.

In addition to the enormous human cost to individuals, families and communities, there is a massive economic cost in the increasing vulnerability of our banking system and the undermining of consumer spending. According to the documents released last week by the Minister for Finance and recent Exchequer returns, it is clear that consumer spending is at an all-time low and the Government has had to revise the yield downwards under some tax headings. This is not only a housing policy issue, as it directly impacts on job creation and the financial stability of the State. Considering the scale of the problem, it is incredible that the outgoing Government was unable to come up with a set of proposals aimed at addressing it. It was a little surreal to listen to the contribution of the previous speaker, who was a Minister only eight weeks ago. Usually, on this side of the House, we say what we would do when we get into government but after 17 years in government, former Ministers are outlining what they wanted to do or what they intended to do. It is a strange turnabout and perhaps that is the new strategy of these former Government members.

While the expert group on mortgage arrears and personal debt acknowledged the scale of the problem, it failed to provide sustainable and affordable long-term solutions. The Fine Gael-Labour Party programme for Government promises little more than longer moratoria, which simply pushes the problem further down the road, and bankruptcy legislation, the date and detail of which is not yet known. That the Government parties main proposal is to increase mortgage interest relief from 5% and 10% for first-time buyers shows they do not understand the full extent of the problem. The Government has signalled its intent to increase the financial hardship of tens of thousands of families across the State. The updated memorandum of understanding with the EU and the IMF copperfastens that position. The plan outlined in the programme for Government and the memorandum of understanding is to reduce tax credits, increase tax bands and introduce stealth taxes such as water charges and property charges at the same time as cutting the wages of low and middle earners and reducing social welfare benefits. All this will push even more families into mortgage arrears and distress.

In the coming period, Sinn Féin will launch detailed proposals on tackling mortgage distress and the guiding principles underpinning them will be threefold. First, we will provide a mechanism for people to retain their family home where that option is in their long-term personal and financial interest. This needs to be achieved with a minimum cost to the taxpayer and both the lender and the borrower will share the cost of the total loss of the value of the asset. Second, where remaining in the family home is not a viable option, we propose to enable mortgage holders to trade down to a home and mortgage more suitable to their changed financial circumstances.

Debate adjourned.