Seanad Éireann debate -
Wednesday, 16 Dec 1964

Vol. 58 No. 3

Local Loans Fund (Amendment) Bill, 1964 ( Certified Money Bill ): Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time."

Minister for Finance (Dr. Ryan)

The purposes of this Bill are to raise the statutory limit for issues from the Local Loans Fund and to give power to write off the outstanding balances of certain loans which have proved to be irrecoverable.

The existing statutory limit for issues from the Fund is £170 million, having been fixed at that level by the Local Loans Fund (Amendment) Act, 1961. The Bill proposes to increase the limit to £250 million.

The Fund is the principal source of loan finance for the capital programmes of both the urban and rural local authorities. Housing has constituted, and continues to constitute, the major element in these programmes. Loans for slum clearance and other rehousing schemes undertaken by the local authorities from the time of the establishment of the Fund in 1935 up to the 31st March, 1964, amounted to £74 million, representing just half of the issues from the Fund in the period. Loans under the Small Dwellings Acquisition Acts and similar legislation, including the special Gaeltacht housing code, and in respect of supplementary housing grant schemes operated by the local authorities, accounted for £43 million, making a total of £117 million for all housing services. These figures underline the importance of housing in the public capital programme.

Services other than housing—principally those relating to public water supplies, sewerage, hospitals and vocational schools—absorbed £32 million. This brings the grand total for issues from the Fund over the whole period from 1935 to 31st March last to the very large figure of £149 million. The total figure includes an amount of £23 million lent over the past decade to Dublin and Cork Corporations for housing and other purposes.

In addition to issues actually made, account must also be taken of commitments incurred on schemes in progress and planned which have yet to mature. On this basis and bearing in mind that at Budget time requirements for 1964-65 were estimated at £16½ million, the present statutory limit of £170 million needs to be increased.

A temporary falling off in issues is expected as a result of the building strike, but a significant increase is anticipated next year and in the following years according as progress is made with the enlarged programmes for housing, hospitals, vocational schools, sanitary and other services. It is proposed, therefore, to raise the statutory limit for issues from the Fund to £250 million and this is provided for in section 1 of the Bill. The increased limit is expected to suffice for a period of about four years.

I should, perhaps, say that section 1 of the Bill is purely an enabling section, that is, it will enable the issue of loans from the Local Loans Fund to be continued. Actual issues from time to time must, of course, be geared to the available capital resources. An increased level of investment in building and construction is forecast in the Second Programme for Economic Expansion. This increase will impose a heavy strain on national resources. Its achievement will depend primarily on the necessary finance being forthcoming through increased saving by the community in one way or another— by bigger subscriptions to national loans, more small savings and so on.

As I mentioned earlier, the Bill is also intended to give power to write off the outstanding balances of certain loans which it has been found impossible to recover. Section 2 of the Bill makes the necessary provision. The loans were made over 50 years ago under various last century Land Improvement Acts for the improvement or purchase of land or farm buildings. When the Local Loans Fund was established formally by the Local Loans Fund Act, 1935, the balances of these loans then remaining to be repaid became part of the assets of the Fund. It has not been possible to recover the sums now outstanding because of the death, emigration or poor circumstances of the farmers concerned, change of ownership of the land or other reasons. Further recovery action is impracticable and, accordingly, it is proposed to write off the sums involved. The full amount in question is £272, which is quite insignificant in terms of issues from the Fund.

I hope the provisions of the Bill will be acceptable to the House.

Mr. Lindsay

We accept the Bill on this side of the House. Indeed, having regard to the variety of the essential services these loans assist, in our view the Government should go to the full limit of their resources, as I am sure they are now doing, in order to provide these services. One further point on the sum that has been written off as irrecoverable is that it is extremely heartening to see that the sum is so small, having regard to the very large amount that has been expended. Accordingly we welcome the Bill.

Professor Quinlan

We can welcome this Bill because we know the necessity for various incentives for building. I think we can share the Minister's anxiety about the increased cost of building and also the productivity of building. Having increased the amount available, every effort should now be made to ensure that better value and better returns are given for the taxpayer's money than appear to be given at present, because by and large our building industry seems to be lagging behind in modern techniques.

We all know the great emphasis that has been placed on the contribution work study and the appointment of work study officers can make to various building programmes and other operations. It is very well worth while and should be encouraged to the maximum, but we can do better than that. We would be well advised to know what is happening in the United States and elsewhere in regard to the application of operation research to big building programmes, and the spectacular economies that have been achieved. Operation research is a big phrase. Essentially it means co-ordination of materials and men on the job on hand. It ensures by means of mathematical calculation that carpenters arrive on the job just when the team ahead is finished. At present on many sites we see teams arriving without adequate materials and having to go back for or send for materials and wait until they arrive, or wait until someone else has finished the job ahead of them.

We are staggered in many ways by the magnitude of the building problems ahead of us. Speaking for Cork city, looking from the university and seeing the programme that lies ahead of us in the next couple of years, the question is where will a contractor who can handle it efficiently come from, and where will the skilled men come from? We should try to encourage the coming together of small contracting groups in minor consortiums to carry out jobs in the provinces. It is only by bringing groups together that you can get the right size of unit which will enable modern management and study techniques to be employed so that the work will be done efficiently.

I know there is a scarcity of skilled tradesmen but I think that with the improvement in working conditions we should be able to attract many of those who have gone away. We should face big building programmes with consortiums. The Government would be well advised to see that the incentive motive is present so far as possible, so that the teams of workmen will get the job finished ahead of time, and will share to some extent in the savings that have been made possible by their diligence. I welcome the Bill, and I hope it will produce the desired effects in the years ahead.

Mr. Fitzpatrick

I should like to join in welcoming this Bill, principally because it provides money for dealing with the housing problem. The housing problem, as we know, is very far from being dealt with either in the city of Dublin or in the provinces. For that reason we welcome the Bill, which proposes to increase from £170 million to £250 million the issues which may be made from the Local Loans Fund.

The Minister mentioned that the cost of housing has gone up very conriderably during the past few years. While that is a matter to be deplored, we must face up to it. Perhaps the complaint I am about to make is not a matter for the Minister for Finance but for his colleague, the Minister for Local Government. It is about the delays in sanctioning housing schemes, in dealing with plans submitted to the Department. I may be permitted to make the point on this Bill since it provides the wherewithal.

There appears to be a slowing up in the Department of Local Government in the matter of dealing with proposals submitted by local authorities. Sites are not approved of; they are considered unsuitable and there seem to be delays in dealing with plans. Frequently, when tenders are received from builders and sent up for approval, they are considered too high and unacceptable to the Minister. This, again, causes delay and sometimes the scheme is stalled altogether. It is reasonable to assume that as the years go by the cost of building will become more and more. Therefore, it authorities. Sites are not approved of: Local Government to expedite the provision of the necessary houses.

There is just one other point I should like to make—it is a pet point of mine—in relation to the fund from which money is advanced to enable local authorities to lend money to people to build houses under the Small Dwellings Acts. We all know that the ceiling income level under those Acts is £1,040. I have appealed time and time again, and I have heard other public representatives appeal, for an increase in that ceiling to £2,000, certainly to £1,500.

People on the £1,000 income level find great difficulty in raising the necessary money to build their own houses with the assistance of loans from banks and other such institutions. Building societies are slow to advance money on the security of houses in small towns in rural Ireland. I know that local authorities have been given authority to guarantee bank loans. Nevertheless, a more direct way and a better way would be to make the money available under the Small Dwellings Acts.

I would appeal to the Minister to see to it that the regulations are altered so as to permit the granting of housing loans to people with incomes of up to £2,000, having regard to the change in the value of money. I repeat that I do not think the power given to local authorities to guarantee bank loans is sufficient.

Mr. Fitzgerald

I, too, welcome the Bill since its purpose is to make money available for housing. In the Dáil, when introducing the Bill, the Minister said that from the time the Local Loans Fund was established in 1935 to March, 1964, issues from it amounted to £149 million. He said that by far the greater amount of that related to housing. He added that a total of £74 million had been allocated to local authority housing and that 114,000 houses had been provided by local authorities during the period.

When we consider that the war intervened and that building came to a standstill, while I do not describe 114,000 dwellings as being spectacular, it was a good effort. It does not appear to me that the same progress, the same drive has been put into the provision of houses by local authorities since building resumed after the war. I agree with Senator Fitzpatrick that there seem to be undue delays. Local authorities find that there are unnecessary and frustrating delays in the sanctioning of sites and plans. Some effort should be made to cut out those unnecessary delays so that houses are provided for those who most need them. There does not appear to be any scarcity of money but if there are delays, if the schemes are not being sanctioned, whispering campaigns are begun to the effect that there is no money. I hope the passage of this Bill will result in more money being provided so that we shall be able to renew our housing drive in a more spectacular way than in the past.

Mr. Desmond

I should like to support the Bill as one which provides more money for more houses for those who need them. The provision of money is, of course, only the beginning. What is really needed is greater incentive from the top. Perhaps, part of what I may say would be more appropriately addressed to the Minister for Local Government, but it is tied up with the measure now before us. There is urgent need to speed up the building of local authority houses. Indeed, the Department of Local Government and the Minister concerned have shown the number of houses built over so many years. That might look very well but if we put the matter in its proper perspective, comparing the position with the number of people who require proper housing, then we would know what the correct picture is. So many thousand houses were built in the past 15 years but we were not given the other side of the balance sheet, that is, the number of people who were badly in need of houses. Every member of a local authority who is a member of this House, and I am sure there are many, knows that is a factual statement. In the big industrial areas especially the matter is most urgent. Various reasons are given. Here is the problem. Can we get the builder to build a house quickly; can we get skilled labour? We know the problem is there. During the last period of building when there was plenty of work available the necessary arrangements were not made to bring workers back to work here. We know they are quite willing, if they have reasonable security, to come back and work in their own country because they like to be with their families.

I do not know whether there is any incentive in that direction other than with local authorities. There, we have direct labour schemes. We know we are short of skilled labour and that slows down the speed of the building of the houses which the people need. At the end of 12 months when there is a check-up it is found that one has not built anything like the number of houses to keep in line with applications for them. Despite the fact that so many houses have been built the number of people on the application side is still increasing. It does not decrease because we have to allow for the young people who get married and who rear families. They go into any kind of accommodation. They become sub-tenants in municipal houses in urban areas. They are supposed to have the permission of the local authority to become sub-tenants but the position is so desperate that they become sub-tenants anyway. Then, when the family comes along, they are disqualified because they did not get permission. All kinds of handicaps are put in their way and the difficulty persists.

The people in charge of local government are naturally aware of all this and it is from there I think direction from the top should come. The local authority, of course, talk and complain about it and they also advise. But, there is a thing called "red tape". There are delays at the top and no quick action or quick decision is taken. There is such a thing as planning, acquiring land and property, and all kinds of legal formalities have to be complied with. That takes a considerable amount of time and there is only one group of people who deal with the problem effectively. They are in the Department of Local Government at top level.

There is the other problem, too, of loans. A number of people are now in such a desperate position that they try to build their own houses, and rightly so, and the local authorities encourage them because it takes another man off the list of applicants. They get a loan from the local authority; they pay a high rate of interest on that loan and then there is what is called the pay back. They will get only about 90 per cent of the loan. It might be said the balance is small and that they can deposit it. But it is not as simple as that, because, whilst the builder will charge, say, £3,000 to build the house, any kind of excuse is made to increase the price on the applicant who is in a desperate situation. We find that the local authority who give the loan have to put a valuation on the house. It is valued at its true value and that may be cut down £500, £600, or £700. I have not known of any case where the local authority's architects valued that house at a lesser figure that that in respect of which there is an agreement with a builder. That creates a situation whereby he will only get a loan to the amount for which the local authority say the house is valued. But he has to pay the builder the figure agreed upon. The builder has to move up all the time with the prices, and if something takes place which will give him an excuse to put on another £100 he will do so. The unfortunate man who started first and said he had only a few hundred pounds finds, before the house is built, that he has to provide much more money.

I have known cases of that kind. The Department concerned should give a direction on this. Perhaps then we shall be faced with the position where the builder might say: "I shall not build because my profits will not be worth it." We are faced with that and that is where direct labour comes in. Local authorities work on the direct labour system and it has worked efficiently but there is no profit there. The motive is to build the houses and provide them. But the unfortunate owner of the house who had to find £150 or £200, which was called a reasonable deposit before, may now have to find the balance of the money. In some cases he may even have to go to another lending authority which, of course, will again increase the interest rates. They have the unfortunate man at their mercy and it goes on like that. Because of the increased cost, he has to pay back in 25, 30, or 35 years the total cost. In most cases it is double the actual price of the house and in many cases much more.

These are real problems. I am glad to see on today's paper that the Minister for Local Government has issued a warning to builders to consider this position. The increased cost of the building of houses can get out of all proportion and it may have to be examined. Anyway, the Minister has at least made a statement on it. But I should like to see more than that. There should be some definite line of action taken. We should encourage people to build their own houses. People like to own their own houses at some time in their lives and all this is discouraging.

An Cathaoirleach

Might I remind the Senator that this is not a Housing Bill?

Mr. Desmond

It provides money for an object and we should like to know how that money is being used. I heard of a case where a builder in a big way of business admitted that a particular house which cost £3,600 gave a profit of £900. This was a few miles from Dublin, but not very far. That is where I think the Department might come in.

There is another aspect, which is one of supervision. The last instalment on our loan is paid only when the house is completed. How far is a person who gets the loan assisted in seeing that the house is erected according to the specification, as it should be? Is it his job to have his own architect doing it or are the people who give the money by way of loan under obligation to supervise all along the line as the house goes up? We know before they pay the final instalment they supervise and examine the house to see that it is finished and looks all right. I am afraid I have reason to believe that there are many places where, a few short years afterwards, defects are found, but the money is then paid out by everybody except the man whose property has deteriorated. Perhaps it is his responsibility to have an architect there while the house is being built, but it is not easy for an unfortunate worker to face all those costs and then have to deal with that.

I am glad to see that the money is provided and is there but those are aspects which I have met in my experience as a member of a local authority. There is much more that I could say on the matter but I shall leave it at that at present.

Mr. McDonald

The interest rate to county councils on money borrowed from the Local Loans Fund makes quite an imposition on rates in various counties each year. Is there no way in which that interest can be reduced? Sometimes it seems quite a large figure and it is inclined to be disheartening to local authorities who are endeavouring to tackle large problems in the county as quickly as possible. Is there any hope that the interest rate can be reduced?

Dr. Ryan

The first point I want to refer to was made by Senator Quinlan. I quite agree with him that every effort should be made to see that we get better value for our money. How this can be done is the problem. It is not so much a question of agreeing to the suggestion as how to carry it out. He mentioned research. The Minister for Local Government has been organising a body called the Institute for Planning and Constructive Research. We hope to get some results from this Institute when it is working. It may help builders generally to use better methods in their operations and in that way to reduce the costs and perhaps even to do a better job.

I do not know whether it would be desirable or practicable to get the small contractors together. I shall have to leave it to somebody else to decide whether or not it would be a good thing. I think it would be very difficult to get it done.

With regard to delay, the Minister for Local Government is blamed a lot for sanctions. When the Minister gets power to sanction he must obviously have the power to refuse sanction. The power would not have been given to him unless there was some reason why he should examine a proposition and either sanction it or say "No". We have a lot of specific questions in the Dáil on this problem. Deputies are continually asking why such and such a scheme was not sanctioned. I always find that the reply brings out the fact that the scheme was not so long with the Department of Local Government at all, not nearly as long as the Deputy asking the question would appear to think.

There may be a general impression in a county that a scheme has gone up to the Minister for sanction and that he is a long time sitting on it. I think those schemes do not reach the Minister for long after the time they are considered to have gone and that is one point that must be subtracted from the length of time the Minister is supposed to have the matter. Often I hear the Minister giving the reply that he had to ask for further particulars, that the scheme was not submitted as comprehensively as it might be before it could be considered by his experts and himself. Again, the Minister has often to refer back a scheme on one point, and maybe not a very big point, but it is referred back and there is a fair delay on the other side. It might be well and it might be possible—I do not know—if the Minister's Department could help him to give the sanction quicker in all these cases but the position is not as bad as it might appear to be.

The next point raised was that not enough houses are being built. That is perfectly true. We all agree that there is an acute want of houses especially in the bigger cities and in provincial towns and even in rural parts. When we come to the cause of the delay in these matters or the cause why houses are not being built for the people who require them, we cannot, I think, blame the local authorities. The local authorities are doing their best to get sites, to get a plan prepared and to try to satisfy the needs of the people as far as they can. I do not think we can blame the Minister because the Minister has not, as a policy, tried to delay the schemes or to put them off by refusing sanction. He is willing always to deal with a case. If he cannot sanction it, he points out the reason why and invites the local authority to put it in such a way that he can sanction it. The cause of the delay appears to be the inability of the local authority to get tenders.

In my experience, in counties I am familiar with, when the local authorities are trying to get houses built they cannot get a tender. In some cases they do, naturally. That, in turn, is due to the fact that we have not enough skilled men in the business. The statistics show that the number of people employed at present in the building industry is as high as ever it was but we need more and how we will get them I do not know. The only hope, I suppose, we can look forward to is that younger people will go to the technical schools and into those trades and in that way increase the numbers. I think there is no doubt whatever that the tradesmen who are there at the moment need not be a bit afraid of having others admitted amongst them because as far as we can foresee, building will be going on and more building coming on than at the moment so there will be work for everybody.

The case was made also that a man getting his own house built may get a bill from a contractor for £3,500 but the local authority valuer will say the house is worth only £3,000 and, therefore, the person who is getting the house built has to put down not only the deposit of £300 but has to cover the other £500 as well and he is not in a position to do that. I am sure that is a fairly typical case. I am sure that occurs, but what is the remedy? After all, the local authority cannot, I think, be asked to give whatever the applicant says the house is worth, having regard to the facts of the case. The local authority must have its own valuer and must work on that value and make the advance on that value.

It would be entirely wrong and altogether outside all sound business management to give a loan higher than the value of the house would warrant. Whether or not we can do anything on the other side, that is, to see that builders do not charge too much for their building, is a matter that should, perhaps, be considered but it is not a matter I could take any part in, I am afraid, because I am not responsible in that particular direction. That raises also the point that what I would call the top limit allowed under the Small Dwellings (Acquisition) Acts is too low: I have heard that stated both in this House and in the Dáil from time to time. A case may be made for that. I have not examined that case. It is for the Minister for Local Government to examine it. I know he has examined it. He knows the arguments against it and for it.

So far he has not come down in favour of the argument for an increase. I suppose these things take time. Circumstances will change and the Minister will change his mind. As things stand, he has not changed his mind.

The last point raised was that the interest generally is a very high burden on local authorities. The rule which has operated here is that the State provides money for the local authorities. They are allowed a very small margin in relation to the interest they pay themselves. Up to the last loan the interest which the State was paying worked out at £5 17s. They made the burden 6 per cent, which is only 3/-of a margin to look after the servicing of these loans. They cannot go very far on that. The interest rate, which the State is paying, with the last National Loan, is £6 3s. It is inevitable that the interest must be revised upwards, not downwards, and that is being considered at the moment.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without recommendation, received for final consideration and ordered to be returned to the Dáil.