Local Loans Fund (Amendment) Bill, 1980 [Certified Money Bill]: Second Stage.

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

Minister of State at the Department of the Environment (Mr. Connolly)

The Bill is an enabling measure to raise the statutory limit on issues from the Local Loans Fund from £1,500 million to £2,500 million. The fund is simply a mechanism for channelling moneys to local authorities. Revising the statutory limit has no policy implications for the programmes financed through the fund; the financial allocation for these programmes are determined annually in the budgetary context.

Exchequer loans are made through the fund to finance essential capital services of the local authorities, including vocational education committees and harbour authorities. The Local Loans Fund Act, 1935, which set up the fund, imposed a limit of £5 million on total issues. The limit has been increased periodically by successive enactments and was last fixed at £1,500 million in 1978.

The local authorities have become increasingly dependent on the fund. In 1979 almost 90 per cent of capital expenditure on services wholly or partially financed from the fund was met from the fund, such as, housing, sanitary services, vocational schools, harbours and itinerand resettlement. Issues from the fund have increased substantially in recent years. The level of annual issues has risen from £171 million last year to an estimated £222 million in 1980. This reflects, in particular, increased provision for local authority housing, including the house purchase loan scheme, the loan and eligibility limits of which were increased by the Government with effect from 1 February 1980, and increases for water and sewerage schemes to service new housing development, to provide infrastructure for new industry and agriculture and to maintain the existing system.

At 31 October 1980 total issues from the fund were £1,445 million, of which £729.5 million was for local authority dwellings, £360.9 million was for house purchase loans and supplementary grants and £247.2 million for sanitary services. The balance of £107.4 million was provided for vocational schools, hospitals, harbour works libraries, itinerant re-settlemrnt, fire stations and so on. At the present rate of issues from the fund the limit will be reached early in 1981. It will be necessary to raise the limit substantially to provide for estimated requirements over the next few years. Accordingly a new limit of £2,500 million is proposed in the Bill which I trust will be acceptable to the House.

Mr. P. Reynolds

This Bill is very necessary. In his speech the Minister clearly states that it will be necessary to raise the limit substantially to provide for estimated requirements over the next few years. Everybody agrees with that. What local authorities want to know and what they should know in January after the budget, or whenever the Minister thinks suitable, is what amount of money will be available to them for the coming year. Over the last few years local authorities have been getting money piecemeal. Schemes have been submitted by every local authority to the Department of the Environment for infrastructure, for the building of roads, for new buildings, to provide the necessary services, water, sewerage and so on in a number of villages in my own county and I am sure also throughout the country. Some of these villages have no water supply or sewerage scheme. The larger towns are seeking extensions to water and sewerage schemes.

This is the most substantial increase given since 1935 when the Local Loans Fund was initiated, an increase from £1,500 million to £2,500 million. The big problem is that there is no guarantee that that £2,500 million will be utilised for the purposes the Minister has mentioned. In his reply perhaps he would convey to the House what will be the situation. We welcome the increase but it is necessary that the money be channelled through to local authorities. The Minister and, indeed, everybody in the country knows that local authorities were never worse off for money, as anybody who applies for a loan from any local authority is aware. The application must be processed and sanction given before work commences. When a house is half built such people make application to the local authority and find they are placed on a waiting list. They could wait a month, two months, three months before being paid the loan. This usually affects young married people who are then depending on bridging loans and who are being haunted by bank managers. They are writing to them, calling to their houses; they are being embarrassed in every possible way, due entirely to the delay in the payment of the loan. That is the situation obtaining in my county. I know it is the situation obtaining in Cavan, Roscommon and Sligo. I am sure the very same situation obtains in other counties. I am sure other Senators will have something to say about their own counties.

I shall be giving figures with regard to local authority housing in a few minutes. In my opinion the number of local authority houses being built this year will turn out to be much fewer than in any other year. In recent years the trend has been for the number of local authority houses to drop. This year I predict that the number will be even fewer, through no fault of the local authorities. They have the machinery, the engineering staff and all the expertise required. All they require is the necessary money and it is out of this fund that that money should be made available. We all know that housebuilding in the private sector is coming gradually to a halt; it is slowing up. I say this with some authority because I happen to be in the builders' providers business and I know how slow it has been over the past 12 months. One has only to look at the drop in the sales of cement over the past year, and they are dropping continuously. No matter which builders' provides one talks to they all have the same story. The sales of damp-proof courses used in the early stage of building are dropping continuously also. I do not know what can be done about the private sector because——

An Cathaoirleach

Could the Senator relate that to the Local Loans Fund?

Mr. P. Reynolds

I could not see how he could not because it is all borrowed money. If one looks at the private sector, at what is being provided by the building societies the banks and so on, it is the same story.

An Cathaoirleach

That does not arise on this Bill.

Mr. P. Reynolds

Let us look at the number of houses built over the past few years, whether by local authorities or any other building agent. The average cost of a local authority house in 1976 was £8,553. In the third quarter of this year, according to the bulletin issued by the Department of the Environment, the average cost of such house had increased to £22,161. That is a very substantial increase. Indeed, it constitutes the highest overall increase. The figures with regard to building societies, insurance companies and the banks are embodied in that bulletin. This House is responsible for the provision of money for the Local Loans Fund and that is the net result. Ultimately that means that there is no way young married people can afford to borrow amounts of £22,000 or £23,000 from the Local Loans Fund. They would be unable to meet such repayments. The net result is that there will be more people in the higher wage brackets coming to local authorities asking them to build houses for them. I hope this increased Local Loans Fund will be sufficient to meet this new and higher demand. In addition, over the past six or eight months reconstruction grants were paid. These loans are still available to people but the grant has been withdrawn. This has meant that there are now a number of young married people living in houses or in flats which are in a very dangerous condition. Indeed, they may well be fire hazards, rat-infested and so on. Local authorities cannot close their eyes to this type of person for whom a house will have to be provided. Indeed, house prices are still escalating. There has been the latest wage agreement which will push up the price of houses yet again. The price of materials escalates daily which means that young people will be unable to afford to buy their own houses.

I should like to refer to one other section of the community, small farmers seeking rural houses. There is not a local authority in the country who have not a substantial list of people who have gone through the processing machinery of local authorities and who have been recommended for houses. From memory I would say there are approximately 60 to 70 waiting in my county to go out to tender but the money is not available. When replying I hope the Minister will be in a position to say when this money will be made available, be it 1 February, 1 March or whenever, or that it will not be made available. These people are entitled to know whether they will get a house next year, the year after or if they will ever get one. The Minister should be truthful about it. Having said that, I have never found the Minister to be anything but truthful.

In addition, money came from the Local Loans Fund for the development of sites. Traditionally in the months of October and November a large number of extra people were employed by every local authority. They were given employment for the Christmas period on the development of these sites and various other matters involving expenditure under the Local Loans Fund. All of that has been withdrawn. The position in every county since September is that the ordinary county council worker is being laid off. At one stage I think there was a drop of some 55 in my own county. Heretofore we had money available with which to employ extra people at this time of the year. They required the employment to yield them an income and additionally they succeeded in getting stamps, which was of great benefit to them.

Mr. McGowan

I welcome the provisions in, and the extra money being provided by, this Bill. Any of us who is or has been a member of a local authority will appreciate the tremendous work the Local Loans Fund afforded local authorities, especially those in rural areas, Without the fund local authorities could not survive. Therefore, the extra provision is to be welcomed.

Despite the fact that I come from the county adjoining that of my colleague, Senator Reynolds, I have seen no difficulties whatsoever being experienced in getting housing loans. I should like to say to Senator Reynolds, with regard to the management in his county, that in any county in which there is good management there is no difficulty experienced in getting money to pay loans on houses, none at all. In County Donegal we do not experience money to pay loans on houses, none at all. In County Donegal we do not experience any difficulty in paying housing loans — and I am proud to be able to say that, We have a very high development programme. As soon as the application conditions are met the loan is paid. There is no difficulty experienced, no problem of a bank not trusting an applicant about the amount of loan that will be paid or whether it will be paid. It is a straightforward, simple transaction to obtain a housing loan. It might call for some explanation or help from an elected representative — he may have a role to play in this — and that is the area into which Senator Reynolds might look.

The extra provision of funds is more than welcome to any member of a local authority in a rural area because we see its full benefit on the ground. In rural areas the local authorities are largely dependent on the Local Loans Fund. Unfortunately the building societies do not have the same interest in rural areas. They are inclined to spend their money where the very high value of property is maintained, where the increased value of property is likely to continue. Therefore, the Local Loans Fund has a major role to play in helping the rural community. I would have strongly opposed a move not too long ago by the Government to subsidise the building societies, in so far as any such subsidy would help a very small section of the community only, those people in high-growth city areas, housing built on high development and of high value. Certainly that subsidy would contribute very little, if anything, to the rural dweller, or those in search of houses in rural areas. I am glad that that subsidy was discontinued and I hope it will never be resumed. The proper way to channel money is through the provisions of the Bill before this House. I compliment the Minister. I know he comes from a rural constituency and understands the plight of those living in rural areas. I think that has enabled him to see the need, and I can see that as having played a major contribution.

I do not want to answer all the points raised by Senator Reynolds. I was surprised to learn that Senator Reynolds would advocate the building of small farmers' houses. All of us realise that the reason we are not building sufficient houses is that our capacity to build them must be related to our capacity to pay for them. Small farmers' houses carried a rent ceiling of about 50p or 55p per week in some counties. This was scandalous, bearing in mind the cost of the site, site development, footpaths, lighting, water and sewerage and so on, with the house costing £20,000. It would cost £60 to £80 per week to pay the interest alone. Yet we were renting such houses at 25p or 50p a week. Very often when the tenant was selected for a house it might have been justifiable to rent it to him at 50p a week. But all too often — and I could name a hundred cases — we had tenants of SF houses paying 50p a week who had four members of their family earning £250 or £300——

An Cathaoirleach

With respect, the Chair feels that the Senator is going too deeply into housing policy.

Mr. McGowan

I completely respect your advice, a Chathaoirleach. I will adhere to what I consider to be important. If I do deviate it will be on account of the extreme interest I have in the provisions in this Bill. I sincerely hope the Minister will not proceed along the lines suggested by Senator Reynolds. No money should be provided from this Local Loans Fund for the building of houses the rent of which is ridiculous. It all adds up to those on waiting lists, who are in desperate need of housing, being neglected and houses not being provided because there is a limit to the amount of money that the State can provide.

I should like to voice my opinion as a rural Member of this House and as a member of a local authority in rural Ireland. The provisions of this Bill are very welcome in a vitally important area. I hope the Minister will keep the extra provisions under constant and careful surveillance, that he will continue to improve and extend the provisions under this heading. At the same time, I hope he will keep a careful watch on how the local authorities spend this money. I sincerely hope that none of it is spent in providing houses to be rented at 25p or 30p a week, but rather that a realistic rent be charged. I sincerely hope that none of it is spent on providing houses at 25p and 50p a week and that we are realistic about the rents being charged. Only by so doing will we provide sufficient houses for those who are in very bad need of housing.

Mrs. Robinson

It is clear from the opening statement by the Minister of State that this Bill is an urgent one in that the present ceiling of £1,500 million on the Local Loans Fund has almost been reached. This Bill seeks to add a further £1,000 million to that fund for an unspecified time. The Minister does not specify how long the period to be covered by this Bill will be. Certainly, as a member of a local authority, I share with other Senators in a similar position an acute awareness of the financial crisis in local authorities and, therefore, we would do nothing to delay this Bill. Indeed in the Labour Group we would wonder whether the proposed increase is substantial enough to meet the very serious crisis in areas of local authority jurisdiction.

In particular I should like to begin with the housing crisis. It is impossible to consider this Bill without referring at least briefly to the way in which it is proposed to dispose of the moneys from the Local Loans Fund. As I understand it, approximately two-thirds of this fund are allocated for local authority housing, for house purchase loans and for supplementary grants. On Monday, 15 December, a special meeting of the Dublin City Council was requisitioned by the Labour Group because of the extent of the housing crisis in Dublin. This is the most seriour challenge facing local representatives in the Dublin area: the fact that the housing list reflects a very severe social problem, the fact that the population in the greater Dublin area has increased very dramatically over the past half decade, while the amount of money, particularly in the private sector, for house building and the amount of house building have declined.

This is a very severe crisis for the local authority because we are dependent on the allocation of money from Central Government and, in particular, dependent on allocations from funds such as the Local Loans Fund. If the Minister of State had been present at the Dublin City Council meeting the other right, it would have been clear to him that, right across the board, local councillors are extremely worried about the situation. Again and again the point was made that it is impossible to get a local authority house allocation now, unless the family has special priority. It is no longer possible under the points system to have a reasonable prospect of an allocation of housing. That has put an allocation of housing. That has put an enormous strain on the local authority. One of the reasons for this strain is the high interest rate and the fact that the private construction industry has moved into the more luxury market, so that those families and those individuals who would like to obtain a mortgage and get their own house find themselves unable to do so and are forced to go on the local authority housing list.

Another very important factor is the cost of local authority housing. This is deeply relevant to the question of the size of the Local Loans Fund. The average price of a local authority house in 1976 was £8,553. In the last quarter of 1980, the average price of a local authority housing is £22,161 and, in centre city areas, the price is higher because of the high cost of sites as well as other inflationary aspects in the construction industry. That has seriously aggravated the housing crisis and yet this Government refuse to consider a Bill to control the cost of building land, to control the cost of sites. That is a blatant failure to meet an important part of the housing crisis. For so long as the price of housing can be exploited in an unfettered way on the private market, and for so long as people can make profits out of the development of sites for housing, then the cost, both to the private builder and, more importantly, for the purposes of this debate, for local authorities trying to house families in their area, will escalate, not in small amounts, but double and treble over the years.

For that reason I should like the Minister to be a little more precise about the period for which he thinks this Bill will run. How long is it estimated that, under the present terms, the £1,000 million extra, which is being sought in this Bill, will last? If there is to be any meeting of the real social needs, then the view of the Labour Group is that this is an underestimate at present costings. The reasons are very clear. We have no control over building land. All Government policy is directed away from the availability in the private sector of cheap housing for people. The Foras Forbartha report establishes this. The construction industry has moved into the luxury market. A much higher percentage of houses are now five bedroomed luxury houses, and freestanding houses. Those who already have homes are converting a £40,000 home into a £60,000 or £70,000 home because of the advantages of high mortgage relief, the general taxation advantages and the increase in their assets.

An Cathaoirleach

The Chair has allowed the Senator to make her point but I do not want her to go into too much detail on the matter of housing on this Bill.

Mrs. Robinson

I appreciate that. The Minister's speech introducing the Bill was very brief. The Bill itself is brief in its terms but it is an extremely important measure and it is impossible to assess it unless one looks at how the present Local Loans Fund is being administered. It is proposed to increase this fund by about 60 per cent.

An Cathaoirleach

The Chair does not want this to become a debate on housing policy. There will be opportunities for that later on.

Mrs. Robinson

I appreciate that this is not the proper occasion to have a full scale debate on housing policy. As a member of a local authority, I have to view the Local loans Fund as being a very important facility for improving the extent of local authority housing, SDA loans and other grants for housing. In that context, it is important to be critical of the present administration of the fund.

I want to make a few more remarks on this and also to direct a few questions to the Minister of State which arise from the present administration of the Local Loans Fund and any attempt to increase that fund by a further £1,000 million. This is the opportunity to do so, and I do not intend to do so at any great length. It is proper to do so at this stage. For example, I should like the Minister of State to give us a much fuller breakdown of the way in which moneys have been allocated out of the Local Loans Fund for the period 1977 to 1980. Would it be possible to get specific figures of how much was allocated from the Local Loans Fund for house improvement grants, for SDA loans and local authority housing in the past year? One has to see what the priorities are.

House improvement grants, which are very important to people who wish to implement improvements in their houses, are nevertheless an allocation to people who already have homes. They are certainly received gratefully by those who get them. However, their needs are not as critical as those who have no home or who have totally inadequate housing, people who are living with in-laws, people living in mobile homes with leaking roofs, or whatever the situation may be. I should like to know what priorities at present determine allocations from the Local Loans Fund in the area of housing. Taking guidance from the Cathaoirleach, the Local Loans Fund is not entirely allocated to housing and I should like to know the figures for the past three years of the allocations for other capital expenditure. The Minister gave very minimal figures for the amounts provided for vocational schools, hospitals, harbour works, and so on. I should be grateful if the Minister of State would give us a breakdown of those figures.

The extent of the crisis in local authority funding has been dramatically aggravated by the removal of domestic rates. This is another subject and it is not appropriate to go into it now. There is no doubt at all that it has left local authorities dependent in a crippling fashion on allocations from Central Government. It has meant an immediate deterioration in many of the services provided by local authorities. It has meant either very long waiting lists or an obscure position for those seeking SDA loans. They no longer can get as quick or as definite a response to an application for an SDA loan. It has meant a slowing down in local authority building. It has meant a crisis in road building and a lack of capital investment in other areas.

Therefore, if we are to increase the Local Loans Fund we should do it from a very detailed picture or profile of how the allocations are dispersed at the moment. From the perspective of a local authority representative, I can speak for the frustrations felt by local authority representatives, of whichever political party. Even Fianna Fáil local authority members cannot be happy about the strains being placed on local authorities, aggravated by numerous factors and, in particular, in the housing area by the refusal of the Government to control the price of building land and to bring a social dimension and a planning dimension into their housing policy. I should be grateful for such information as the Minister of State can give on the allocation of the fund. The Labour Group appreciate the urgency of increasing this fund. We would like the Minister to be specific on how long he feels this Bill will extend, and when it is likely there will be a further Bill on similar lines looking for a further increase in this fund.

Mr. Jago

This Bill gives permission to the Minister for Finance to increase the Local Loans Fund. It does not indicate how much will be spent on the various categories. From the figures we have been given so far, 50 per cent of the Local Loans Fund has gone to local authority dwellings and 25 per cent has gone for house purchase loans and supplementary grants. During 1980 there was an increase of about 33? per cent over 1979. If we get the same amount over the next few years, then this will last us five years. On the other hand, if we get an increase of 33? per cent every year, it will last us three years only. That depends on the general economic situation and on what the Minister for Finance will decide he can afford to give.

We would all like to get as much as possible. Industry is asking sincerely for money to be spent on infrastructure. There is quite a development in the Cork area and in Cork harbour and this takes money. Since the income limit for housing loans was raised in February last the demand has gone up considerably from all the various areas. We welcome this Bill. It is a big increase and we hope the Minister for Finance will be in a position to disburse as much as we would desire.

Mr. O'Brien

I should like to join in the welcome extended to the Bill. It is very necessary. It is an enabling measure to raise the Local Loans Fund from £1,500 million to £2,500 million. As has been said by other speakers, this is necessary because local authorities are dependent to a very high degree on the amount of money made available by way of loans. At present the position of the local authorities is very difficult because of the delay in getting sufficient cash to keep the various services going and sometimes a blank refusal. A protracted holdup might be a more accurate way of describing it.

A good deal has been said by previous speakers about the housing situation. I do not intend to dwell on it. I am sure the Minister is quite aware of the pressure from local authorities for more money for local authority housing and the need to keep the coffers reasonably well filled to meet applications for SDA loans. In most counties there is a very long delay after the applications have been processed and found to be in order. Payment of the money is held up because the council have not got it. They have to wait for allocations that come down in dribs and drabs from headquarters to the local authorities.

People are forced to negotiate bridging loans with the banks and in some cases they are as high as £12,000. The rate of interest charged by the bank is unbearable in some cases. The pressure is put on. When the time specified by the borrower runs out the bank loses patience. The borrower then approaches local authority members and the county council offices with a view to getting the loan speeded up. I hope that, when this Bill goes through and the Department are legally in a position to raise more money, it will be channelled through to the local authorities as quickly as possible to keep the SDA loan scheme in operation.

There are protracted delays in giving loans for schemes which are absolutely necessary. For example, in Cavan town the water filter system is not adequate and for the past two years water for human consumption had had to be boiled. The urban council applied time and again for a loan of something in the region of £70,000 to have this matter cleared up. In the past month or so word came through to the council that this loan would be available. The case was equally good for that loan over 12 months ago. People in the town had to endure this because of the tardiness in meeting a request that was quite easily justified. The loan should have been paid at least 12 months earlier and this would have prevented a lot of dissatisfaction in the town. It had to be given ultimately and it might as well have been done at first as at last.

The very same situation arose with regard to money for an additional housing scheme of 20 houses. The scheme was sanctioned but the money could not be made available. The contract was given and the contractor had to stand idly by until the very last days of November or early December. if this money had been put through earlier in the year, in August or September, better value would have been obtained for the money from the contractor's point of view. He had to clear sites, and so on, in the winter.

I come now to a major question. County Cavan has been getting bad publicity lately with regard to water pollution. The activities of intensive pig producers in the Lough Sheelin area are being very closely monitored and legal action has been taken against a number of them for alleged pollution of Lough Sheelin. At the same time, untreated sewage from the town of Dowra in County Cavan is polluting the river Shannon.

An Cathaoirleach

The Chair feels the Senator is going into too much detail.

Mr. O'Brien

I will not develop it unduly. I am simply making a case for urgent allocation of money for schemes that are recognised as necessary. Nobody in the town of Dowra, nobody in Cavan County Council, nobody in the Department of the Environment could be happy about the river Shannon being polluted from a housing settlement in Dowra. Everybody agrees it should not happen. The case I want to make without developing it too much is that once it is admitted that this expenditure is necessary the money should be allocated as quickly as possible to get on with the job.

Another point I want to make concerns the regional hospital in Cavan. It was decided, as a result of the FitzGerald Report, that Cavan should be selected as one of the sites for a new general medical hospital. Work got under way and about £1/2 million was spent on preparing the site. At present there is a standstill, while another hospital in County Dublin that was to start at the same time will be opened in 1982 and the amount of money which was spent on it is about £6½ million. I hope when this Bill goes through and the Minister has authority to put more money into the Local Loans Fund this regional hospital in Cavan will not be forgotten and that the work which is at a standstill now will be speedily resumed. This hospital is very badly needed. The surgical hospital in Cavan was condemned in the mid-thirties. I hope the Minister will see to it that sufficient funds are allocated immediately to get the work under way again.

I do not want to delay the House but I would draw attention, as has been done by other Senators, to the need for more housing in the respective local authority areas. There is a list of towns and villages in Cavan where houses are needed. Due to the business ability and foresight of the county manager large areas of land were acquired five or six years ago convenient to Cavan town and other towns in the county for housing and industrial development. The council have not go sufficient money to service these sites and to proceed with the building of houses. Building schemes are necessary owing to developments in Cavan town in particular and in Redhills, Ballyhaise, Ballina, Bailieborough, and so on, all over the county.

There is one further point I want to make. I know that this is a big problem and one that has been growing for years. It did not all suddenly mushroom during the occupancy of the office of the present Minister. I do no want to be unreasonable but it is a fact that there are large numbers of villages and towns all over the country where the water mains that were installed 15,20, 30, 40 and 50 years ago are not adequate now. Therefore, a great deal of work is necessary in this area.

An Cathaoirleach

The Senator is going into too much detail. An opportunity for doing all this will arise on the Appropriation Bill.

Mr. O'Brien

I conclude by saying I hope that when this measure goes through the moneys will be made more quickly available. The trouble in the past has been that although schemes were sanctioned and approved there were delays in paying the moneys. I hope the present Minister will see to it that the allocations are made more speedily for schemes that are sanctioned.

Mr. Honan

As a member of a local authority I welcome this Bill. It does not surprise me at all that it is a Minister of State who has served at local authority level and who knows what exactly is needed in that area who should bring in this Bill. I welcome the tremendous increase and I do not agree with Senator Reynolds that we have to wait for three months for grants to be paid. Perhaps I am lucky in the county I am serving in but the people in Clare have never had to wait for three months for their moneys to be paid. In rural Ireland we depend on this loan fund in a very big way and I thank the Minister for the tremendous increase he has given us.

A breakdown might be a help but only someone in Opposition would ask for some of the things that I have heard asked for today. I also welcome the moneys being provided for our vocational schools and for hospitals.

Mr. Markey

It is rather chastening to find that in less than two years we have to increase the limit by two-thirds. There are reasons for this. It is as well for everyone to be honest and to face up to the fact that the figure now being set is more a mirror of the effects of inflation than any indication of progrss in real money terms by local authorities in regard to their various statutory responsibilities. Anybody who is a member of a local authority knows that in 1980 more than in any other year we have had a process of stop-go in regard to the funding of many of the local authority services, particularly housing. It is amusing, if not interesting, to find such a wide gulf and I do not mean in terms of the space in this Chamber between Members on the opposite side of the House who say they have no problems in their own elected representative areas and the Members on this side of the House who maintain they have tremendous problems in their own elected representative areas.

Mrs. Honan

The Senator is on the wrong side.

Mr. Markey

What are we on the wrong side of? Is it the House? If so, it indicates something of which I would be very hesitant to accuse the Government. If it is coming from that side that we are on the wrong side it means that certain local authorities are being favoured at the expense of other local authorities and that I put to the House, is completely wrong. In the stop-go situation of 1980 county managers have had to defer making decisions on housing loans and even after making decisions, when pressurised to do so, because of the time which had elapsed since the applications were made originally have had then to tell the successful applicants that the moneys were not available for them. That is a rather shameful position in such a serious matter as housing and in respect of applications submitted by young married couples. The situation has become so bad that bank managers have begun to look with more than a slight amount of doubt on successive letters issued by local authorities to applicants as security for bridging loans. Apart from having to wait for a couple of months to have an application processed, applicants have then to wait further for the money.

The cost of housing has escalated beyond a tolerable level. The house which in the space of only four years has increased two-and-a-half- times in price is very much beyond the capabilities of any young married couple to purchase irrespective of what increases might have been made in the upper income limit.

The statistics issued for this year show that there has been a reduced number of houses built and completed in the past year. We have had fewer houses but costing more money than ever before. If that is not an indictment of something or of somebody I do not know what is.

It is not only in the housing field we find this experience. We are told that the Local Loans Fund is the source for financing new schools, libraries, fire stations and also the provision of necessary sanitary services and harbour works. Every vocational education committee in 1980 have had to face up to cut-backs in their budget. Every local authority have had to defer sanitary works. I know of schemes in County Louth which were ready for tender 12 months ago and which have had to be deferred because the moneys will not be available. I know of cases in Louth where, in regard to small but very necessary harbour works, the money is not available. Clogherhead, which five or six years ago was approved in principle for the expenditure of money to keep the pier in being — not only to repair it but to keep it in being — is still awaiting the allocation of moneys for the works.

This is a rather strange situation. Inflation may well be regarded as the main cause leading to the increase in housing costs and therefore to the increase that is necessary now of almost two-thirds in the Local Loans Fund but inflation was a very heavy headline, one might say, in the Fianna Fáil programme of only three-and-a-half years ago. We still have a rate of inflation which is, with the exception of our nearest neighbour, without parallel among other EEC members. We have not got the resources that Britain has to withstand the rigors and the havoc that such a rate of inflation causes. We continue merrily on the way but promising and spending more moneys than ever before. Senator McGowan said that in Donegal there is no problem whatsoever in regard to money. They certainly have had no problem in regard to promises of money but the actual result is another matter.

The Minister in his statement says that the local authorities have become increasingly dependent on the fund. How could the position be otherwise? No other means of fund raising has been granted to them by the Minister. We have many local authorities in the position of mendicants seeking funds from day to day because they have no statutory authority to raise funds of their own accord.

This is something which the Minister and the Government must have the courage to face, though courage may not be all that obvious in regard to introducing measures which are going to mean extra funds for local authorities, particularly if these funds are to be raised at local level. But it will take courage to introduce some measures to give local authorities extra funds and extra finance. When we have a Government of Ministers who continuously look over their shoulders for fear of making some unpopular decision which might lose a few votes, I do not think we will ever face up to tackling this situation. It is wrong that local authorities should have to depend almost completely on the Local Loans Fund because that in turn depends completely on how the Government are able to cope with their responsibility in tackling inflation. The experience in that area during the past few years has not been good. If the only bucket which is to be available to finance all the necessary local authority responsibilities is the Local Loans Fund, I am afraid we are going on the path of the health boards whose only source of revenue is what the Government give them. We have seen in the case of the health scheme that we are indeed looking into a bottomless bucket as regards demands which are made continuously on the scheme. The Government must face up to a certain amount, albeit a very minimal amount, of unpopularity in giving local authorities the means to provide funds for themselves. That would be giving local authorities financial resources as well as restoring to them the pride and the sense of independence which were so evident up to recent years but which are lacking now.

I expect that within a couple of years a further increase will be sought. If I thought that any increase such as that being sought today represented an advance in real money terms for local authorities in their necessary work I would welcome it, but I know that the figure we are talking about here is merely to cover the havoc created by inflation which in itself had been the result of Government negligence. Unless the Government face up to the task of providing local authorities with means to provide funds for themselves there will be a continuing, never-ending drain on the Local Loans Fund and we may well arrive at a situation even worse than we have experienced in 1980 in terms of a shortage of finance for local authorities.

Mr. Mulcahy

I welcome the Bill and the raising of the limit which allows extra funds to be made available for local authority purposes. I would just like to address myself to the principles of local authority funding which this Bill is about. We all know that the State is being asked increasingly to carry the cost of infrastructural development and we know that with the rapidly expanding population and a rapidly expanding industrial base there is an increasing demand for infrastructural facilities. If this trend continues the Minister will be back again raising the limit and looking for more funds. Earlier speakers have made the point that there are problems. We all know that there are problems but the fund is not limitless. Just raising the fund by way of a Bill does not necessarily make the money available. The money has to come from somewhere.

Those of us on the Government side are just as aware as are the Senators on the Opposition benches of what the difficulties are. We have made our point to the Ministers over the years and we know the difficulties they are up against. For instance, I said here that I know that the minimum building requirement in the Dublin area should be 2,000 houses per annum if we are in any way to bite into the backlog. I accept that. But to do that would mean that the Government would have to spend another £10 million per annum in the Dublin area alone and that raises questions about the allocation of the available funds.

Whether you are talking about drainage, or about water schemes, or any other schemes, it is a question of what the criteria are for the allocation of available funds. This raises the whole question about which the Taoiseach has been speaking in his contribution on the economy, that is, the necessity for private investment as a means of reducing the demands that have to be made on State resources. Recently we have had examples of that. We have examples, for instance, of toll roads and toll bridges and there is examination going on of the possibility of private investment in infrastructural projects as a means of reducing the demands on the overall fund. We have to face up to this — that the pressure on the fund has to be reduced by more creative partnerships with private funds as a means of providing the infrastructural means that we require.

I am not just saying this in public as a member of the Government party to raise issues for the Minister, but I am bringing it forward as a means of communicating this need widely because it would have to get acceptance. There is a certain tendency for people to expect that the Government can provide money out of the air for anything and we will end up with a nation of people with their hands out saying: "Daddy, look after me", to the Government all the time. No matter which Government are in power we have to stop that if at all possible. So it is in that context that I am making this contribution.

For instance, I was in a hotel in London over the weekend and I noticed in the lift a news-sheet which entertains you while you are being brought up to the sixth or seventh floor, or wherever else it is, and one item of news on the news sheet was that "Wimpey goes for timber frame housing". As I read it I found that Wimpey in the UK, who build about 10,000 houses a year, have now gone on to produce 80 per cent — that is 8,000 houses — in the timber frame design. Now there is reaction in this country to timber houses, as we call them. But there is a difference between timber frame houses and timber houses. The cladding and all the sections are made of brick or block or whatever else but as a means of speeding up the building of the house the frame is put in in timber. The advantage of this is that you can build twice as many houses in the time that you can build them by traditional means. In case the Chair is getting worried about my going into details of housing, I am talking about the funding. We cannot ignore the method of house production.

An Leas-Chathaoirleach

I would just like to point out to the Senator that he will have an opportunity on the Appropriation Bill this week to go into detail on any aspect of any policy.

Mr. Mulcahy

I will go into detail on the Appropriation Bill on other matters. I am now talking about the source of money. We are today raising the limit for local authority funds by two-thirds. This is a colossal increase and I am just saying that fundamental strategic measures have to be taken to reduce the demands on that fund. As we know — the Minister himself told us — £700 million out of the existing amount has been spent on housing. So the strategy for housing is fundamental to the pressure on the fund. We cannot ignore it. I promise you I am not going to go into details on housing but I am talking about the funding. Erecting timber frame houses is one way of speeding up this. Therefore, a fundamental shift in the approach to this and the thinking about it in the Department must take place. I will not say any more about it than that.

Another example of how one might get private funds into the housing area is by way of three schemes that are being used in the UK. One is called joint venture housing, the other is called provision of homes by the cost sales scheme and the third is ownership in joint equity. All of these involve private funding of houses that will take the pressure off the demand on local authority housing. At the moment we are building about 6,500 local authority houses a year and we are helping to fund, in terms of loans, something like the same number of houses; maybe 7,000 houses. This is the pressure. So if three similar schemes to those I have mentioned could be introduced here it would take tremendous pressure off the system. I will not go into the detail of how these schemes work. I will leave that for the Appropriation Bill debate, but if 50 per cent of the housing bill could be transferred over to such schemes, through private funding, that would mean that we would save the best part of perhaps £100 million. So there is a fundamental strategic shift required.

Mr. Harte

Naturally we support this increase. It may seem a very substantial increase but one must have regard to the fact that SDA loans have dried up in some areas, particularly in Waterford city, since July last. Also, sewerage schemes and so on have been affected, causing great unemployment and in addition the situation is that we are running at about 18 per cent inflation. Because of these matters there are a lot of schemes half completed, for example the sewerage schemes that are causing effluent to run into the rivers, and therefore it is only right and necessary that we should think in terms of passing the Bill as quickly as possible and get on with some of the essential work that has had to be postponed or is half finished. Even if we do not get to finish the schemes that are half completed at least there will be no further fall back if the two-thirds extra is granted. There is an obvious need for the increase, having regard to the reduction in housing construction. For example, in regard to local authority housing, about 6,214 houses were constructed in 1979 but the figure for this year is only 3,265. This represents an almost 50 per cent drop. The whole question of home improvement grants had to be suspended, though these grants were very helpful in terms of our housing stock. It may seem contradictory for someone like me to suggest that borrowing is good when in fact we very often criticise it. However, when we are talking about borrowing to deal with the whole area of essential services such as harbours, Garda stations, hospitals, schools, roads, housing and so on, we should not be too fussy about whether we have to borrow.

I support the Bill and I would just like to say that I was somewhat amused at Senator McGowan's remarks. I hope I am not taking him out of context but in fact Donegal are doing well. They requested £1,530,000 and in fact they issued only £1,470,000, so they do not seem to be doing too badly up in Donegal. The Senator was probably correct in saying they were having no trouble with regard to loans. But that is not generally the case. As I said, the fund has dried up in Waterford and in other areas where many skills have been suspended.

Mr. Molony

I am sure that many of the Senators who have contributed already to the debate have indicated some of the local problems that arise with local authorities. In my county we have problems in terms of the availability of loans, particularly and tragically the availability of loans and grants for phsically handicapped people who are entitled to special benefits in relation to house reconstruction. That is something we should try to avoid. It is something over which we do not have all the control we would like to have because we are talking about national public expenditure.

I listened with interest to Senator Mulcahy when he spoke about the idea of equipping as much private investment as possible in this area. Although I have a decided distrust of Fianna Fáil having the opportunity to use their private business connections in the context of any public activity I like the idea of trying to get people to use their own resources to build their own houses. I do not see why opportunities should be given to private companies to participate in some profit making schemes in terms of development or infrastructure.

In relation to toll roads and toll bridges I agree that these ideas are fine and they should be encouraged, but I do not agree with giving the right to private interests to reap profits almost on an indirect basis, for contributing to infrastructural development such as toll roads and toll bridges. I would be against it in the area of housing development.

Ruairí Brugha

Did Senator Mulcahy say that?

Mr. Molony

No, but I said that I had a distrust of doing that. I have a particular distrust in relation to housing development because it is one of the great necessities of life so far as any private individual is concerned. We should adopt any scheme we can to encourage private individuals to contribute to their own homes. The shocking increase in house prices has really been the tragedy in relation to development in this area since 1976-77. I will not lay the entire blame for that on the Government, but only to the extent that they made no effort to control inflation in the context of their election manifesto. We will have different dates to fight that battle. I will not go into it right now. In the context of the massive increase in house prices, there are many people who with some assistance from the local authorities, such as the provision of subsidised sites, could have been in a position to build their own houses. Those people are no longer in that position and we should try to redress that situation.

I am surprised that Senator Mulcahy, did not make reference to the Fine Gael proposal which was recently published and which proposed to ensure that anybody would be in a position to obtain a mortgage to build his own house and be guaranteed that it would not cost him more than 20 per cent of his income in terms of repayments. As Senators are aware at the moment, if an average person approaches a building society to buy or build an average house, it will cost him approximately 50 per cent of his weekly income to repay the instalments. That is utterly prohibitive, and it is not open to younger people to pay that sort of money out of their salary. Consequently they cannot be in the private house buying or the private house building business.

People who purchased houses six and seven years ago and felt that the initial repayments were a heavy burden, now realise that the burden is very light because with inflation their salaries have increased and, relatively speaking, the repayments to the building society seem to have dropped dramatically. The trouble is getting people started off. Once people are in the situation where they own their own houses they can manage. The difficulty is to get people off the local authority housing lists and put them in the position where they can do that. I would ask the Minister to give some indication of what Government policy is in relation to this matter.

Senator Harte made the point that local authority house building activities have dropped drastically, and that is the case. It is not surprising in view of developments in terms of inflation and in view of the initial policy expressed by the Government in one of their earlier Green Papers where they refused to acknowledge that the problem existed in relation to housing. Deputy Dr. Martin O'Donoghue would have been the author of that document at the time.

The problem was put off in the great 1977 or 1978 era of spending. Parts of the country may not have this problem to the same extent, but in my own town I am tired, frustrated and depressed at the number of people who come to me with medical certificates from doctors describing living conditions of people who are surviving in mobile homes and who at this time of the year are living in damp rotten conditions.

Children are suffering from chest complaints and husbands from kidney complaints all associated with the horrible difficult circumstances in which they have to live. Those people would be glad of the opportunity to build their own houses but they cannot afford to do it. They have no alternative but to wait for an average of about four years because of the shortage of funds in this area. The problem in Thurles was the sanitary services rather than actual finance for housing. But the reality is that people are left in a situation in which they must exist in appalling circumstances. It is an area of such necessity and such importance that most people would be quite happy to contribute an awful lot more than we give them credit for, to be in the situation where they can own their own houses or where they can build their own houses.

I do not blame this Government because when this whole idea was adopted we perhaps abandoned the idea of people being able to help themselves at all. We felt that people could rely on building societies, on banks or on the private enterprise that Senator Mulcahy referred to. However more and more people cannot afford to use the building societies or the banks to provide themselves with their own housing. I know that the vast majority of people on the housing list would prefer not to be there and would prefer to contribute out of their own salary to build their own house. I have been astonished at the enterprise with which some young people who, given a start at all in the manner in which I suggested for instance, in the provision of a subsidised site, use their own enterprise, their relations, their contacts and other means at their disposal to build a house.

An Leas-Chathaoirleach

The Chair is very reluctant to interrupt the Senator but he is going fairly wide of a very narrow Bill. The Senator will have an opportunity to go into policy details on the Appropriation Bill, so I would be grateful if he would keep to the Bill.

Mr. Molony

I apologise, but I respectfully point out that we are talking about staggering figures, and about increasing the Local Loans Fund. In fairness, I would ask the Chair to understand the point I am trying to make, and that is that we should look at the Bill in the context of trying to reduce the cost to the State if that can be done. People who need this money would prefer not to look to the State for the money but would prefer to be able to do it themselves. But it is not always possible. The Fine Gael Party published a very specific proposal three or four weeks ago to which there has not been any Government response. There were some words of welcome but it seems to be glossed over. We have not had a very positive response from the Government, although they now bring forward this Bill which proposes to extend more and more the liability of the State in this field, and it is on that basis that I am making my case.

There are other points in relation to these local authority loans, but in view of what the Leas-Chathaoirleach has said, I will respect his ruling and hold my fire until the Appropriation Bill.

Mr. Kilbride

In the circumstances the timing of this Bill is almost 12 months out of date. The Government seem to have had a problem in providing finance for local authorities to implement work or to make loans to builders or to private persons for the erection of houses. In County Longford I have had the experience of the local authority having had schemes prepared for minor water works, for sewerage facilities and for building fairly extensive housing schemes, although they have not been able to procure the finance. A considerable number of people associated with the building business are unemployed in County Longford and they have been pleading with the county manager and with the council to give them an opportunity to obtain employment on some of the subsidiary undertakings, such as repairs to roads and on roads leading to housing schemes and they were unable to make any headway. The county council are particularly anxious that the Minister should keep the programme of housing as planned and as approved in line with the financing. In other words, the finance should come as soon as the approval is available, and when tenders are submitted to the Department there should not be a considerable delay in the provision of funds from the Local Loans Fund.

In relation to water schemes carried out by the county council, the scheme known as the Lough Gowna Scheme Stage II, has now been associated with Stage III, and neither of them has been implemented. Although the people involved have paid their contributions, the Government have not come up with the finance or the approval for the execution of the work. I appeal to the Minister to ensure that we will be able to procure an allocation for Longford at the soonest possible date from this fund.

In relation to the reference here to the reconstruction of, or the addition to vocational schools, in Longford a scheme was prepared in respect of Saint Christopher's Schools and the number of rooms to be provided in that school was found to be very much in excess of what the Government are prepared to finance at this stage. If the Government took into account what would have been appropriate to carry out this year, when nothing was done towards the provision of this extension, they might put the whole lot together now. The population there is increasing and the parents and the vocational education committee are particularly anxious that this work would proceed. I would like to see the Minister for Education implementing this scheme as soon as possible.

The same is true of Granard vocational school. Four years ago I had the pleasure of meeting the Minister there when——

An Leas-Chathaoirleach

The Chair is slow to interrupt, but particular problems should not appropriately arise on this Bill. We are talking about increasing the overall lending facilities of the local loans funds, so I would be grateful if the Senator would keep his remarks general.

Mr. Kilbride

I appreciate that, but when the Leas-Chathaoirleach was not here every speaker who got up pursued the line that I am pursuing. I suppose they were all mildly chastised.

An Leas-Chathaoirleach

The Chair was trying at all times to control the debate. The Senator will have an opportunity tomorrow and Friday to discuss any particular item in minute detail in the Appropriations. The Senator will appreciate the Chair's position.

Mr. Kilbride

I do, and I apologise. I would like to see the Minister give effect to one of the items mentioned here, that is the extension provision at Granard vocational school. I hope the Government will see this in the context of the implementation of schemes referred to in the document distributed to us. I welcome the Bill on that score and I hope that we will see the respective Ministers giving effect to it.

Ruairí Brugha

The debate on this Bill has broadened somewhat over the past hour and a half. It is merely an enabling measure.

An Leas-Chathaoirleach

Is the Senator suggesting the Chair is not sufficiently——

Ruairí Brugha

No, I am just laying the ground with a couple of remarks. This merely enables the Minister for Finance to continue to provide the measure of capital necessary to maintain the infrastructure situation through local authorities and to maintain the programme of local authority housing, sanitary services, vocational schools, harbours and itinerant resettlement. I am sure all sides of the House are in favour of this measure because we do not want to see this stopped. Listening to both Senators Robinson and Molony about private development, one would be forgiven for pointing out that in this year alone under the provisions of the building society loans, the Minister in the House here on the Building Societies Bill pointed out in reply to a question that the number of houses built through private interests arising out of the loans system for the first nine months of this year was 18,000. Naturally all of us would prefer that it was greater, but 18,000 for nine months, is a contribution to the whole system of housing in this country in the sense that every house built by a private individual is a saving to the local authorities and to the taxpayer. There is an essential need to continue with the provision of the capital for local housing through local authorities but I agree with the other speakers that one should also encourage expansion in the private housing sector in order to save the taxpayer and the ratepayer.

Minister of State at the Department of Finance (Mr. McEllistrim)

I thank the Senators for their contributions although they went outside the scope of the Bill a little. Senators will have an opportunity to express their views on the Appropriation Bill which will be taken here tomorrow.

This is a very limited Bill, merely an enabling measure to raise the statutory limit on issue from the fund which provides the mechanism for channelling funds to local authorities. It has no implications for the amount of funds to be allocated for the various schemes financed from the fund. These are matters for Government decision. As Senators will be aware the Bill provides for an increase of £1 billion. This, as some Senators pointed out, would be sufficient for five years at the present rate of issue. However, since it is likely that the rate of issue will continue to increase it will almost certainly be necessary to raise the limit again in less than five years. This does not present any difficulty and Senators need not fear that the limit applicable to the fund has or will have implications for programmes financed from the fund.

With reference to the Second Reading speech and to the increased provision for housing, I refute any allegation. As Senators will recall, the increase in issue from the fund in recent years reflects an increased provision for local authority housing including the house purchase loans issued from the Local Loans Fund for housing, in fact an increase of 22 per cent in 1979 over 1978. When the limit was last raised by a further 30 per cent in 1980 the amount for house purchase loans actually increased by 123 per cent in 1979 and 50 per cent in 1980. Despite the limited nature of this Bill, in view of the interest shown by the Senators I would refer to the general aspects of housing. The Coalition Government could not afford to continue their 8,800 local authority houses which they built in 1975. Under their stewardship completions dropped to 6,300 in 1977. Since then the programme has been maintained at a steady level of 6,000 to 6,200 houses per annum. About 6,000 houses will be completed this year. Private housing completions dropped from 19,500 in 1974 to 16,700 in 1976 during the Coalition period. Last year a record number of houses was built, 20,300. Private and local authority house completions in 1980 are likely to reach an even higher level. The number of new house loans approved so far in 1980 do not support any Senator's views that housing starts and completions will collapse next year.

Regarding capital allocations for housing in 1980, £202.53 million represents an increase of 20 per cent on the expenditure of £169.04 million in 1979. In addition, in real terms the allocation shows an increase of 31 per cent on 1977. In contrast, capital expenditure decreased by 57 per cent in real terms between 1975 and 1977.

Some Senators referred to SDA loans. When the Coalition Government were in power the SDA loans were not increased and indeed the income limit was unchanged. I would remind Senators that when the Fianna Fáil Government came into power we substantially increased the loans and the qualifying income for loans. We also increased new house grants to £1,000. Expenditure on SDA loans will reach about £65 million this year compared with £17 million in 1977. Four thousand eight hundred loans were advanced in 1977. This year over 7,000 loans will be paid.

A number of Senators also referred to the increase in house prices. Senators might wish to note that the trend in house prices since 1973 indicated that there is a close correspondence between the increases in house prices and the average earnings of adult male workers, taking into account the general improvement in standards of privately built houses. In addition Senators will be aware that the introduction of the £1,000 new house grant and the building societies subsidy this year were of considerable help to house purchasers. As far as the building industry generally is concerned, it is the firm objective of the Government, as is stated in the national understanding, to give priority to the maintenance of employment in this sector. While the achievement of this objective must, as is also acknowledged in the understanding, take account of the constraints set by the need to contain the balance of payments deficit and the current budget deficit, the Government as recently as last month, announced an additional allocation in 1980 of £97 million in order to achieve a net improvement in the jobs situation, and £66 million of this package is directly related to expenditure in the construction area.

Many of the matters raised here are not relevant to this Bill, and they can be dealt with in the Appropriation Bill which will be here tomorrow. I commend this Bill to the Seanad.

Question put and agreed to.

Agreed to take remaining Stages today.

Seanad Éireann debate - Wednesday, 17 Dec 1980