Item No. 3. An amendment to this motion has been circulated. I would remind Senators that as a non-Government motion an overall time limit of three hours applies, with the proposer of the motion having 30 minutes and every speaker 15 minutes.
Building and Construction Industry: Motion.
An Leas-Chathaoirleach
I move:
That Seanad Éireann calls on the Government to take special measures to arrest the decline in output and employment in the building and construction industry and to deal in particular with the special difficulties of the private house building sector.
I am glad to have an opportunity of moving this motion even at this late stage. This was first put down in February of this year. Unfortunately, motions are often overcome by time but in regard to this particular one there is greater deterioration since it was introduced. It could be regarded more as an emergency motion now than it was earlier because no corrective measures whatever have been taken by the Government to try to restore some stability to the building industry. As with agriculture, if there is a healthy, viable building industry in the country you have a lot of satisfied customers. It gives a very high measure of employment.
Building houses has many results, whether they be local authority houses or private houses. There is an increased grant from £1,750 to £2,000 in the local authority section. This has occurred as a result of the £1,750 grant being exhausted in full by the increase in VAT from 5 per cent to 10 per cent. There must have been an awareness on the part of the Government, and they introduced that increase. It was the only measure introduced since budget time and, indeed, since we put down this motion.
Over a four year period the level of construction activity has fallen by 32 per cent and the impact of the decline in construction output over the past four years on employment has been that some 24,000 building workers have lost their jobs. The official figure for unemployment in the construction industry in December 1984 was 45.607. This represents an increase of 3,542 on the December figures of 1983. This amounted to an increase in the level of unemployment by 8½ per cent.
The level of the capital programme is a major factor in determining the amount of activity in any one year. Over the past four years the capital programme has fallen in real terms by 25 per cent. This, coupled with the sharp decline in investment, has resulted in the decline in the industry's fortunes which I have referred to earlier. In March 1983 the rate of VAT on the construction industry was increased from 3 per cent to 5 per cent. It is estimated that this resulted in an additional £25 million in VAT receipts for the ten months of that year. It is further estimated that in 1984 £75 million was collected in VAT from the industry as a result of the increase in March 1983. The effect of increasing the VAT rate from 5 per cent to 10 per cent is that an additional £63 million will be collected over the period of March to December. The impact of deferring the increase until 1 May would reduce this by approximately £50 million. Overall the projected VAT receipts in 1985 for the construction industry will be in excess of £130 million. Now the reason for the increase in the VAT on housing is that the output of the industry has dropped more sharply than the output in other sections such as the industrial and commercial building sections and projects funded by the capital programme.
House completions from 1981 to 1984 have dropped considerably from 28,917 in 1981 down to 25,000 in 1984. Local authority house completions, however, have increased from 5,750 to 7,000 in 1984. Private housing has dropped from 23,000 to 18,000 in the same period. Speculative housing has dropped from 10,000 to 6,650 and once-off completions have dropped by roughly 500 houses. Overall housing completions have declined by approximately 15 per cent over the past four years. Of greater significance, however, is the decline in speculatively-built houses and to a lesser degree in the once-off houses, which is a real phenomenon.
The decline in speculatively-built house from 10,000 in 1981 to an estimated 6,650 last year represents a serious problem for a Government who in accordance with their national plan are dedicated to developing policies to encourage more people to opt for owning a house rather than to rely on the local authority for the provision of such accommodation.
I have not got the figures for the £5,000 grant to encourage people from local authority housing to build their own houses. I do not think it has worked in the rural parts of the country as much as it has in other parts. Definitely from the information I am getting I do not think that it has worked or that it has lured people from local authority houses in my area. Private sector housing has declined by over 25 per cent in the past four years. The area where this decline has most impact is in the speculative market. The reasons for this decline are as follows: decline in real disposable incomes; increase in VAT from 3 per cent to 5 per cent in 1983; reduction in mortgage interest relief in April 1983. This measure reduced the extent to which house purchasers could set off interest on mortgages against income tax. Of course, the introduction of the residential property tax is another reason. The increase in VAT from 5 per cent to 10 per cent can only further accelerate this decline. It has been stated that the increase in the house purchase grant for first-time buyers from £1,000 to £1,750, and now to £2,000, was intended to offset the effect of the increase in VAT. It should be noted that this is only a partial offset because one must remember that 40 per cent of all the houses built are privately owned. Only 60 per cent of houses built are local authority or other houses. For that reason for the 40 per cent of the first time buyers, the 5 per cent increase in VAT would increase the price of that house. The Government increased the grant to £2,000 because the £1,750 must not have been sufficient to offset that increase.
On the supply side, the trend in house building costs and new house prices point to a sharp deterioration in builders' margins. Between the first quarter of 1980 and June 1984 house building costs increased by 66 per cent whereas new house prices increased only by 39 per cent. This is totally against normal traditional trends. It is our view that the increase in VAT will meet with consumer resistance. House building firms are unable to absorb this increase in their costs given a weak market situation. This will reduce the level of building activity, therefore reducing the supply of new private housing. This can only translate itself into a demand for increases in the level of local authority house building, which has implications for capital expenditure and current expenditure as far as the Government are concerned. It is my view that as a result of the increase in VAT from 5 per cent to 10 per cent further jobs will be lost in the construction industry. It is very hard to monitor a figure on the number of jobs that will be lost, because of all the ancillary services that are required from the bench to the turning of the key in any particular building. With all the people that will be involved down the line it is very hard to monitor the number of people that will be unemployed as a result of this reduction in house building.
The Government strategy as outlined in the national plan and the Programme for Government which sets a target of 30,000 houses per annum will not be successful as a result of the increase in VAT and the other measures which I have referred to. The stark reality facing the construction industry in general and the house building industry in particular is for a continuation of a decline in the level of building activity, and a decline in the numbers of people employed. As I said earlier, I see no good coming out of this increase in VAT at a time when we should be trying to rescue the building industry. Indeed, many builders are going to the wall each year as a result of all the taxation following the passage of legislation. While the Government say they are going to offset the VAT by increased grants, it does not work out that way, because lesser amounts of money will be available for the 60 per cent local authority houses. If there is less money for housing we are going to have fewer houses built. I know that without ever seeing what the Minister has in his hand, he is going to say to us on this side of the House that more money has been given to housing this year than was given in previous years. That is not the end product, Minister.
I will only give you the truth.
The end product will be that while the Minister gives more money that does not mean that he is going to build more houses because when he increases the cost surely he is going to get a bigger capital grant allocation. But that does not say that the Minister is going to build more houses. There are a number of categories other than houses in the construction industry that are affected. We must consider schools, hospitals, agricultural offices, advance factories and all types of buildings. I would like the Government to publish a public construction programme, such as for hospitals, schools, sanitary services and all projects of an infrastructural nature which would create opportunities in the construction sector.
The numbers employed to service these houses is enormous. From the beginning of the construction, plumbers, electrical engineers and heating engineers are employed. There are carpet suppliers, furnishers, painters and decorators. People are employed as internal and external decorators and landscapers. Other services are required to build a house on a site and to make it fit to occupy. You are unable to monitor the number of people involved at every level. It is impossible to calculate the number who have lost jobs as a result of the reduction in the manufacture of materials. In my own area of Westport one of the most traditional suppliers has gone out of business. One of the suppliers who imported materials through Westport harbour and who had a tradition behind him in business is gone as a result of deceleration in the building industry. A number of Irish workers and their families who have returned from abroad over the last ten years to work in the building industry here must now rethink their futures, and that of their families and decide whether to return to previous employment or to continue on the dole. The loss of their expertise is enormous.
A large number of people are employed in the acquisition of large tracts of development land in cities and throughout the country, many people are employed in design and planning. Large numbers of solicitors and their clerks as well as auctioneers and estate agents are employed also. Many people lose their jobs when the construction industry suffers a decline. The whole economy needs attention. The private sector especially needs some input. There is a drop in the number of private houses. In 1981 there were 22,000 new houses. That figure has been reduced considerably every year down to 18,000 at the moment. It is suggested that we should build 25,000 to 30,000 houses a year, but we are trying to lure the people from the local authority scene to private housing. With the population explosion 20,000 new family units need housing every year. That is a statistical figure. The policy of the Government is insufficient to meet this trend. It is not good enough for the Government to defend their policy on housing by saying to me that more was spent last year than this year. The reality is that fewer houses have been built and that there will not be enough houses to meet the population explosion.
This is the time to take initiatives to combat the unemployment problem. The Government should turn their attention to this area at this time when so many are unemployed. People on loans are finding it impossible to meet their repayments because of a number of deterrents. For instance, it costs an additional £28 per month on a £20,000 mortgage as a result of the 2 per cent increase being allowed to building societies. Many other people with mortgages are caught by unemployment. The breadwinner of families — or indeed in some cases the two breadwinners, the husband and wife who may have been working in order to try to meet their repayments — are unemployed. I hope some corrective measure will be taken as early as possible to correct this trend.
We are glad even at this late stage to get an opportunity on this side of the House to bring this to the notice of the Minister. I appeal to the Minister to do something for the building industry. Nothing has happened since February. Every day people who have come from England to set up here and who were in secure employment in England are going back again or else staying on unemployment assistance. I ask the Minister to try to improve the position in the building industry.
An Leas-Chathaoirleach
Senator Smith, you may second the motion and you may speak now or later. You can reserve your speech.
I will reserve my position. I second the motion.
I move amendment No. 1:
To delete all words after "Seanad Éireann" and substitute the following:
"endorses the overall economic strategy as set out in the National Plan of sustained and soundly based growth in the economy; recognises the importance which the Government attaches to the Building & Construction Industry and its special role in the overall development of the economy as evidenced both by the high level of public investment provided for during the period of the plan and the increased share of total PCP investment in the industry over the same period; commends the special measures taken to underpin the housing sector of the industry and supports the Government in its continued efforts to ensure a healthy economy from which the building industry will benefit."
That amendment is based first of all on the proposals that are contained in this plan, and for the first time ever in the history of this State we have a Government committed to a spending programme over a specific period in which everybody in this country knows the kind of capital investment that will be made by this Government whether it is in hospital construction, infrastructural development such as roads, sanitary services, sewerage schemes, housing, local authority building. All this is contained in Building on Reality. In addition to that I think it is appropriate that we get an opportunity to identify why the amendment is necessary to this motion. The only way you can identify something is to prove conclusively and positively that something specific has been done under the various headings under both the control of the Minister, Mr. Liam Kavanagh, who is present and indeed many other Ministers. Particularly I am proud to speak of the Labour Party Ministers in this Government. First of all, I would like to say as a member of a health board that I am aware that for the first time conclusive proof has been given in agreement within this plan of hospital developments throughout Ireland and particularly in my own region which had never been identified by any Government previously in the history of the State.
I am talking about hospital development in Dungarvan which we were endlessly promised from election to election for 20 years. That development is now under construction. I am talking also about a 100 bed psychiatric hospital in Clonmel itself, a town you know well, a Leas-Chathaoirligh, and which now for the first time after 25 years of promises is almost complete. That is a public injection into a building programme in areas where the public demand that the necessary services be provided. I am talking, too, about a major capital project in Ardkeen Regional Hospital, proposals in respect of which are now before the Government and which are included in this plan. The people know that when a hospital is started now, it will be completed in a period of six or seven years. The total capital investment required and promised by this Government to develop the hospitals in Waterford is £31,170,000. We also have approval for a major hospital development in Kilkenny city, a further aspiration towards the general hospital development programme, and indeed in Wexford we have a capital project of about £6 million or £7 million.
Surely the Opposition are not serious when they suggest that all this construction by way of public money is not an injection into the construction industry. Of course it is.
It is an inheritance programme.
When one wishes to be negative one forgets what is positive and what is being done. It is easy to say what should be done. What I am suggesting in this amendment is that many projects are already in the course of construction, projects that have been promised for years. That is good for the construction industry.
This motion refers specifically to the private building sector. It is debatable whether the private building sector would be the total beneficiaries of all public projects, because all these projects are offered for public tender. Usually the private sector construction and development industry tender for such projects. The very fact of this Government initiating major capital projects stimulates private sector development. It gives them an opportunity to tender and produce jobs for people in the construction industry. I accept that over a period of years, not just two or three years but four to six years, because of the economic decline the amount of building of private houses in the private sector was probably diminished to a very dangerous extent.
I should like to compliment the Minister on his foresight in ensuring that additional grants were made available to the local authorities to stimulate a movement of people out of local authority houses and into the private sector area where they might purchase ordinary houses, whether secondhand or new houses but preferably new houses. To encourage local authority dwellers to buy new houses additional grants were given of up to £2,000, plus £5,000 to leave the local authority houses, plus £3,000 in mortgage subsidies for five years. This must be an indication that this Government are committed to stimulating the building of houses in the private sector.
More houses have been built by this Minister in the past year than were built since the booming years of the mid-seventies. In one year 7,000 houses were built. That also gives employment in the construction industry. The facts will prove that more people are now employed in the construction of local authority houses than has been the case for a long number of years. In a preelection period it might be difficult to accept those figures but they are there as conclusive evidence that this Government have put a lot of work into the building programme, have provided a lot of houses and have created situations were many of our housing estates are now the pride and joy of many people and not the low cost housing that the party opposite provided and in respect of which this Minister is now giving an 80 per cent subsidy for the purpose of reconstruction. I do not know what the interest involved then was, but somehow or other the Department at that particular time decided to provide low cost housing throughout the country and thereby to clear the housing list. The result of that policy is that there are now houses which cannot be let to people simply because they cannot be maintained by local authorities.
The Minister present is left with the job of doing something constructive about those dwellings and has promised local authorities an 80 per cent subsidy to make the houses liveable. That is a positive gesture towards what is being done in this whole area. These houses cost as much to build as the traditional houses cost. Central heating was installed in all of them. This took the form of electricity but the tenants had no control as to how much any individual would be responsible for, with the result that the unemployed and old age pensioners were liable for very large bills which they could not meet. This Minister has also given grants to ensure that stoves and solid fuel cookers as well as chimneys could be installed in those types of houses.
I am saying in all seriousness that there has been a specific effort, particularly since this Minister came to office, to ensure that there was a major capital allocation both in housing and in infrastructural development. The document produced by the Minister —Policy and Planning Framework for Roads— is proof conclusive that the amount of money in millions that will be spent on the infrastructure of our main roads system will also be a stimulus to the environmental conditions in our areas and will go towards coaxing industrialists to set up factories throughout the country. With the advent of the national development corporation and with the possibility of equity share of £200 million, employment can be generated by them both in the private and the public sectors. Both will dovetail into ensuring that rural Ireland and the towns and villages can prosper for the first time and that this whole country will not be based within the context of Dublin, where there has been a massive injection of infrastructural development.
Some of the figures are spectacular. I am sure the Minister in his speech will itemise some of them. But the only way one can relate to millions of pounds is to consider the housing or roadwork development in progress in one's area. One need not be parochial to consider it that way. In my own little village of Bansha previous administrations in a hundred years produced ten houses. This administration in a short number of years produced 34 houses. That is progress in the building and construction industry. Most of the builders would be supporters of the people opposite.
Even more so at the moment.
The houses must be in the supermarkets.
They would appreciate what we have done. We have supermarkets there too. It is a free country. There is no inhibition on anyone.
An Leas-Chathaoirleach
Senator Ferris, without interruption.
These are the facts. It is a pity that we have this negative motion before the House. Are the Opposition suggesting that if we had unlimited resources we should pour them into the private sector merely in the interest of creating employment but ensuring that the private sector make the profit?
We have a major role as a Government first to ensure that the infrastructure of the country is right, that the hospital services and buildings are correct and that unemployed people, poorer people, and people who are at work all have a good standard of housing.
The Minister has effected a major improvement in the quality and standard of the houses built by local authorities. These houses are now the envy of everybody engaged in co-operative housing or in private speculative building or otherwise. The quality, standard and design of the local authorities' houses are a credit to those involved in the design whether they be local authority engineers or architects or departmental architects.
This Minister and his predecessor by their achievements in office have earned a place in history. Mr. Jim Tully, as Minister, built more local authority houses than any previous Minister built. He was condemned by a previous Taoiseach of a Fianna Fáil Government for so doing. The cry at that stage was that he was building too many houses for local authority tenants. This Minister will even surpass that and he has all our support. As Minister, he has gone quietly about his business and has produced facts and figures that will stand up to any criticism. I have no hesitation in promoting this amendment on behalf of the Government and in assuring our colleagues that we are not unmindful of the fact that there are a lot of people still unemployed. We want to make sure that they are employed.
The Department of Labour have brought in a scheme which will be implemented by local authorities and which will give the impetus to people who are now unemployed to do productive work in the community within the local authority areas. That piece of legislation was also decried by the Opposition. I did remind them that they should give it an opportunity to get off the ground. In the number of weeks since the scheme was launched by the Minister for Labour, 20,000 people have applied to come off the unemployment list and go into the workplace again, even if only for two and a half days in the week. At least they are doing something productive and all communities are being stimulated to employ people to do something useful. The youth employment money has been generated through AnCO and other agencies like that. The labour and materials for projects are supplied within communities and I have no doubt that with a continuation of this policy, this Government will be able to stand on their record as being second to none, particularly in the area of the construction industry.
I wish to formally second the amendment.
I have pleasure in seconding the motion proposed by Senator O'Toole and in rejecting the amendment put forward by the Government parties. There is none so blind as he who does not wish to see. Even the Minister, whom I welcome here this evening, was rather restless in his chair when Senator Ferris roamed carelessly over the areas where he with undoubted blinkered vision sought to disprove what Senator O'Toole had said by using statistics which, as I will try to illustrate in a minute, do not stand up. In the earlier part of his contribution Senator Ferris suggested that the expenditure in the health services was so fantastic——
Capital expenditure.
——that the health of the people in his region was being so well catered for that there was no need for improvement. I do not represent his region but in the one I do represent a new maternity unit has been built for the past couple of years. This is in Cahercalla and it is supposed to serve the people of Clare. This hospital is ready for occupation but we have not been able to get sufficient funds to enable us to open it and thereby ensure that the women of Clare, who now must travel 60 or 70 miles to Limerick city to be delivered of their babies, would be accommodated in their own county.
I was talking about capital expenditure.
We are closing wards in the hospitals that we built over the years. Unless a woman is pregnant, she cannot have her teeth extracted under the medical services though the gynaecologists tell us it is not wise for women to have dental treatment when they are pregnant.
In the past four years 25,000 people who were employed in the building industry prior to 1981 are now on the dole. It is an established fact in practically every area of that industry, whether in cement sales, private housing output, general employment or any other, that the building industry is in dire trouble. When we are proposing additional incentives here to revamp and to try to instil a bit more confidence into the economy generally and since this industry depends so largely on indigenous materials, we are not acting merely on a political basis.
I would hope that all of us here this evening who are interested in trying to see that this country improves and that more jobs are provided would try to face up to the problem fairly and instead of choosing statistics which favour one side or another of the argument act in a more positive way. At the moment we are spending between £6 million and £7 million per day on social welfare. That is more than £2,300 million in a year and does not take into account that most of the beneficiaries of these services also qualify for medical cards. In many cases, too, they are on lower differential rents in their local authority houses. There is also the cost of security as we try to control the drift into criminality. That phenomenon has resulted from having so little to do, nothing to look forward to during the day, nothing to work at. For those people who have lost their jobs in the past two years in the building industry we must find ways other than the dole queue. It is not that we want additional taxation, or additional borrowing, though borrowing for good capital development can always be justified. One has only to consider the Naas carriageway as an example of what progress can be made and how one can justify in the long term borrowing for essential infrastructural developments of that kind. To pay 10,000 married people the average social welfare unemployment benefit or assistance per week costs a cool £1 million. For a full year the cost is £52 million.
That money has to be produced by the taxpayer, and we need to be able to channel it into productive infrastructural development to the maximum possible extent. I know that steps have been taken by way of the social employment scheme which I welcome. Many good developments will flow from all of that, but we must extend that right into the fabric of the construction industry and use up the talent that is undoubtedly there but which is lying dormant. I accept that one cannot create jobs by the stroke of a pen. We are in a mixed economy. We must have the right kind of balance.
Surely it is not good enough for Senator Ferris in his support for the Government motion to refer as the base for the growth in the building industry, to the document Building on Reality. Building on Reality can now be called building on quicksand. The unemployment estimate in that plan for this year is 17,000 less than the actual figure. Tax revenue estimated in that plan is millions of pounds less than what it is supposed to be. Investment on every front is practically down and growth in the economy generally is confined to a few major areas. There is no point in the Government coming here this evening and basing everything they say on a plan, however well written and presented the document concerned may be. That plan includes clauses which may well mean that we will have a mini-budget later in the year to correct the imbalances in the finances which are already developing in the economy. I therefore put it to the Minister that he will have to find answers additional to those provided for in that plan.
I wish to say a few words in relation to our road network. Senator Ferris spoke proudly of the developments taking place on the roads in his county. He is either living in wonderland or the amounts of money being provided by the Minister for the Environment are notoriously out of line in all other areas with the exception of south Tipperary. I thank Senator Ferris if he has been able to extract from the Minister funds to do the kind of job in County Tipperary that is not being done anywhere else in the country. Regarding the Estimates this year the county engineers have spelled out that the resurfacing programmes for our county roads are now spanning out a grand 36 year stage. We are told by the experts that in regard to the development of our road foundations, maintenance and so on, the ideal span is between seven and ten years for resurfacing but the average around the country is something like 36 years. If one lives to be 72 one will see the roads tarred once or twice and if one is extremely lucky to live to be 100 one might see the roads tarred three times in one's lifetime. These are the facts. They are based on the words of independent people.
We spend about 25 per cent of total tax revenue, car tax and so on, on the roads. In America the figure is 96 per cent. In Japan it is 143 per cent. In Europe generally it is almost 60 per cent. In a few years from now we will have to spend millions of pounds restructuring, putting back foundations on roads which we have neglected very seriously.
Twenty per cent of the people who drive cars do not have their cars taxed, while those who tax their cars are being loaded to the hilt. Accidents are being caused by these bad roads. Business and commerce is being slowed up. Additional costs in transport that are making us less competitive here at home and abroad are all additional barriers to the development and growth of this economy.
Let us talk about health in this area. I do not know the percentage but I remember reading sometime in the last couple of years that 20 or 30 per cent of health revenue is spent on hospitals catering for cases arising from accidents on our roads. I am not saying that every accident on the road is caused by a bad road, but it is fair to say that a considerable portion of them are caused by bad roads. If one considers the congestion in our towns and cities, the loss of time, the use of energy and so on, one realises that we must find a way to transfer resources from other areas into this very much needed development. I would ask the Minister to refer specifically to this. Many of us are members of county councils. I am not being political about this, but there are real problems when a county engineer says that a road will be resurfaced but not for a further 36 years. There are milk lorries, school buses and so on to be considered plus such matters as axle weight to meet EC requirements. We must find resources to deal with such matters.
South Tipperary is a unique place. It has a long historical cultural background. Senator Ferris, obviously in that wall of security, living aloof from the main problems that I have referred to, can find answers which are not to be found anywhere else. When most county councils must lose a road workman per month we realise how we are managing our system. These are not statements which are open to question. I am sure the Minister is all too well aware of how the road working staffs in local authorities throughout the country have been diminished in recent years. He may say that there is an improvement in the main arterial network. But so far as the county road system is concerned, it is clear that the situation is extremely serious.
I wish to refer briefly to the VAT increase of 5 per cent on building. Perhaps the Minister is having second thoughts on this matter. We would like to argue that so far as that industry is concerned it is not able to sustain that weight. The increase will further exascerbate an already difficult situation. It will drive more of that industry into the black economy. It will make building more difficult for local authorities, more costly for individuals and will do nothing for the overall employment situation.
The time is right for the Government to change their minds on this increase. All the evidence available to the Minister would indicate that that should be done. I would not consider it a weakness on the Minister's part to change his attitude in relation to that matter. In terms of overall employment, I ask the Minister to accept the motion that is being put forward here as being a genuine one, one that is aimed at using the vast resources that are in our economy and transferring them into this vital building area.
On Monday last I had the great pleasure of being in Mayo, Senator O'Toole's constituency, and there we had the very pleasant task of opening a new water scheme for Achill Island to provide that island with 600,000 gallons of water per day. A great tribute should be paid to the councillors and the officials in Achill for their foresight, but let it be remembered that we had to provide the money from the Department of the Environment. He did not mention that during his speech. I was a bit disappointed.
Senator Smith has just gone. I want to make a couple of comments on what he said before I begin my speech. He mentioned tarred roads and county roads. He is quite right in saying our roads programme is to benefit national primary and national secondary roads. He never mentioned block grants which could be spent on country roads. He came up with an extraordinary figure of tarring roads every 30 years because this Government are in power. Fianna Fáil were in power from 1977 to 1981. Therefore, if the tarring process, which is necessary only once every ten years, was done in 1977 the roads should be OK up to next year. Any road that was tarred in 1981 should not need to be done until 1991 according to what he said. He also mentioned accident figures because of these roads. I am glad to say that the accident figures for last year are considerably down. A great deal of credit is due to various organisations, the gardaí, the National Road Safety Council and others and indeed the good sense of many people who are on our roads too. They are down for both deaths and injuries, considerably down. We will always have accidents, unfortunately, but it will be our job in the Department of the Environment to try to continue that trend.
As Minister for the Environment with responsibility for the building and construction industry I am pleased to have the opportunity presented by the debate on this motion tonight to speak on a number of important issues related to the policy of Government for the industry. It is important to set the record straight on the present state of the industry——
I am sorry to interrupt the Minister, but I do not know whether it is usual procedure for the Minister's speech to be supplied. I am just wondering.
That is a matter entirely for the Minister.
As I understand it, no, but I am sure we can get a copy for the Senator.
It is important to set the record straight on the present state of the industry, on the fundamental cause of the problems affecting the industry, on the Government's response to these problems and to explain why the simplistic solutions to these problems being advocated in some quarters are completely inappropriate and would only damage the industry in the longer term.
There is no doubt that recent years have been very difficult ones for the building and construction industry. While a downward adjustment was inevitable in the aftermath of the disastrous debt financed inflation boom of the late seventies and the early eighties few commentators expected that the industry would have to pay such a high price in terms of falling output and high unemployment for the mismanagement of the industry in those years. The fundamental cause of the problems affecting the industry has been the dramatic and continuing decline in private investment, which fell by 50 per cent in the period 1981 to 1984.
The fall in private investment has been particularly acute in the areas of industrial and commercial development and to a lesser extent in the area of private housing apart from the first time buyer market. While a certain amount of commercial and industrial development continues to take place the harsh reality is that the surplus of office accommodation, retail units and factory space is discouraging new investment. This underlines once again the irresponsible nature of the policies adopted by the previous Government in the late 1970's and early 1980's which created massive surpluses in particular sectors of the industry. It also underlines the difficult nature of the fundamental problems affecting the industry and the need for a planned and well thought out response on the part of the Government.
This Government are determined to tackle the problems affecting the industry, to reverse the decline in output and employment and to ensure a resumption of orderly and sustainable growth. Our strategy to achieve this desired outcome covers three broad areas. First, we aim to create the general economic conditions and a favourable climate for business and enterprise that will lead to increased private sector demand for the output of the industry and therefore increased private sector investment. Second, public expenditure affecting the industry has been raised to the highest sustainable level and has been concentrated on those areas that will yield the highest return in terms of building output and employment. Finally, a range of special measures has been introduced designed to boost the construction industry as a whole and the private housing sector in particular.
The national plan Building on Reality sets out an integrated programme of action for the main areas of Government activity, including the building and construction industry, which will enable considerable progress to be made over the period to 1987 in achieving increased output and employment, in stabilising the burden of taxation and in restoring order to the public finances. Indeed I would suggest that we are already seeing this to some extent. Recent reports and statistics show a much improved economic situation, thus indicating that the Government's economic strategy is the correct one in all the circumstances and is now beginning to show success. The plan will enable the private sector, for the first time in many years, to plan with confidence in the knowledge that a coherent set of Government policies are in place to tackle the fundamental problems of the economy. It will create a climate of confidence about the future development of the economy that will encourage private investment in general, including investment in construction.
The plan also sets out projected public capital programme investment in the building industry over the years 1985 to 1987 which is set to rise from £1,166 million in 1984 to £1,300 million in 1987, an increase of 11½ per cent approximately. These figures speak for themselves. It is huge investment by any standards and certainly by the standards of the total PCP expenditure for each of the years of the plan. Indeed, PCP investment in the building industry shows an increasing proportion of total PCP over the years of the plan.
It is in this context of encouraging enterprise and efficiency that the recent far reaching reforms of the VAT system must be judged, and not as an isolated measure. The need for a major overhaul of the complex, inefficient and expensive VAT system has been obvious to many for a long time. The new rate structure has simplified the system considerably and will in time result in increased economic and administrative efficiency and reduce evasion. The reforms have been widely welcomed because they will give a major stimulus to output and employment across a wide range of sectors. The changes were good for the economy and for enterprise and they will lead in time to increased private investment, which will be good for the construction industry.
In the meantime the industry has to cope with the new VAT situation, and it is important to set the record straight on the effects this will have on the industry in view of the irresponsible claims that have been made by certain commentators and interests.
Firstly, a considerable part of total building output will not be affected at all by the change. I refer to output of direct labour units of local authorities and Government Departments, which will not be affected. Similarly the output of private individuals building their own houses will not be affected. Demand for building in the agricultural sector, in the industrial and semi-State sector, and in the commercial sector is unlikely to be affected, because most enterprises in these sectors can reclaim any VAT they pay including VAT on buildings. The area of the building industry that will be most affected is publicly funded construction work carried out by private contractors. As regards publicly funded construction work I am confident that the increase in the level of PCP expenditure affecting the industry over the three year period 1985 to 1987 set out in the Government's National Economic Plan largely compensates for any adverse effects of the VAT increase. This is particularly the case as regards the programmes of my own Department — roads, sanitary services and local authority housing. The overall effects of the VAT changes will not be significant in comparison with the additional investment that has taken place in recent years or the expansion due over the period of the plan.
As far as building output is concerned, any adverse effects of the VAT increase are likely to be largely confined to the private housing sector of the industry. To overcome any difficulties that may occur the Government have announced a 100 per cent increase in the grant for first-time buyers of new houses from £1,000 to £2,000.
Apart from the increased grant for first-time buyers of new houses the reduction in the standard rate of VAT from 35 per cent to 23 per cent will also help to alleviate any increase in the overall price of a house. The cost of a wide range of household goods, many of which are necessary for the purpose of providing modern facilities in the house — I refer to such items as washing machines, fridges, dishwashers, televisions etc. — has been reduced appreciably.
My determination to tackle the problems of the construction industry generally has been given practical expression in my commitment to the construction programmes and schemes administered by my Department particularly in the major programmes involving roads, sanitary services and housing.
One particular area of my Department's programme — I refer to the roads programme — is an excellent example of detailed planning on a sectoral basis. This Government are acutely conscious of the need to view roads construction as a priority in infrastructural development. The road development plan for the eighties has been subjected to detailed examination, its shortcomings identified, and it has been replaced by a new road plan, Policy and Planning Framework for Roads, launched by me in January last.
Significant increases in the provisions for roads improvement and new road construction have been made in the plan. In 1985 the provision will be £125 million or an increase of 20 per cent on the allocation for 1984, and it is planned to allocate £140 million for improvements in 1986 and £155 million in 1987. The allocation in 1987 will, in fact, exceed the 1984 allocation by 53 per cent. This level of financial commitment will ensure that work can start immediately on the various schemes and projects detailed in the new road plan Policy and Planning Framework for Roads.
Housing output constitutes a considerable proportion of the value of total construction output. It is now nearly 50 per cent. This fact has been uppermost in determining housing policies over the past two years and in designing policies to complement the particular strategy adopted in the national plan.
The local authority housing programme has been remarkably successful over the last two years. In 1984 a total of 7,000 houses were completed, a record level of completions for any year since 1976. Again, the employment implications have been very positive, with an average monthly employment on the programme of 6,800 approximately, or 400 greater than the corresponding figure in 1983. The success of the programme in the recent past has been due to the high level of capital investment by the State, coupled with the operation of carefully designed cost control procedures.
Housing demands are extremely varied, and housing policy and schemes have been organised accordingly. A number of policies have been introduced which will facilitate those who wish to purchase their own houses. Local authority tenants of three years standing and tenant purchasers may avail of the new special grant of £5,000 to enable them to purchase private houses. Arrangements to extend joint venture housing are well in hand, and a special site subsidy has been introduced for those on approved local authority waiting lists, or those tenants not eligible for the £5,000 grant who wish to purchase joint venture housing. In addition to these incentives purchasers will also benefit from the increased new house grant and mortgage subsidy scheme as appropriate.
An arrangement whereby local authorities can purchase private houses for renting will provide a considerable boost to the private builder while creating a more durable social mix. I would like to see this procedure adopted where possible.
As promised in the national economic plan, the 1985 Finance Bill extends the scope of the tax incentives designed to encourage the provision of private rented accommodation. At the moment these incentives are confined to cases where either a new house is provided for renting or where a building is converted into two or more dwellings for renting. The provisions of the Finance Bill extend the income tax relief to cases where buildings already in multiple use are refurbished to provide multiple residential accommodation of a better standard. "Refurbished" in this context allows a much wider range of work to qualify for tax relief than was allowable under the earlier schemes.
Before I finish I want to refer to the future prospects for the industry. I refer in particular to the report of the Sectoral Development Committee which is representative of trade unions, employers and the State and which has been engaged in charting a course for the development on a sector by sector basis. That committee have recently issued a very worthwhile report and recommendations on the building industry which was based on a very thorough evaluation carried out by a consultative committee on which the various interest groups associated with the industry were represented. The recommendations cover such areas as reducing output volatility, encouraging growth, promoting private sector investment and increasing efficiency and value for money. The establishment of a development council is also recommended in the report to provide a forum where representatives of the State, employers, trade unions and the professions can assess the performance of the industry and develop measures to improve effectiveness and efficiency. My officials have met most of the interests proposed to be represented in the council in order to discuss the proposal in detail including the operation, financing and terms of reference of the council. A final decision will be taken in the light of these discussions. In the meantime a number of committees' recommendations are already in course of implementation and are being incorporated in Government policies in relation to the industry. Work on implementing other recommendations of the committee is in hands.
In the past the industry has developed in a piecemeal unplanned way with an inordinate amount of volatility in its output. While accepting that there must be an element of volatility in any industry, it has to be accepted also that undue volatility increases problems. If I might give an example of what I am talking about — in the late seventies and early eighties, the so called halcyon days for the industry, the price of houses rose by 88 per cent in the three year period between 1978 and 1980. Commentators were even talking of the £100,000 semidetached house. I think it is fair to say that we do not want to return to this kind of situation where the demand for housing was very strong, which of itself is good thing, but the price of houses was very quickly outstripping the ability of potential purchasers to afford them.
Let me clearly state, therefore, that the Government are determined to see the decline in the industry reversed and growth resumed as quickly as possible. The aim must be to eliminate undue volatility in output and put the industry on a sound footing, more closely related to the general level of activity in the economy as a whole. It is no use talking about pouring more public money into the industry; even if it was there it still would not be the right solution. However, it is not there, and that makes such a suggestion all the more ridiculous. We must look for stability and steady and sustained growth of a kind which is based on policies which are bedded in reality. This is the Government's aim and this is what we propose to achieve.
I wish to speak in favour of the motion proposed by Senators Michael Lynch and Martin O'Toole:
That Seanad Éireann calls on the Government to take special measures to arrest the decline in output and employment in the building and construction industry and to deal in particular with the special difficulties in the private house building sector.
It is a very important motion, and I am sure everybody is aware that the industry is suffering. The construction industry suffered a severe body blow from the Coalition Government in the past two years or more, but a measure proposed in the recent budget will have disastrous effects for what remains of the industry, that is the increase in VAT on building materials from 5 per cent to 10 per cent.
It is impossible to understand why the Government are hell-bent on driving people out of the building industry. Tax incentives which attracted private investment have been dismantled; public capital investment has been reduced by one-quarter, while increased planning charges, development levies, VAT rates and PRSI contributions have been piled onto the industry, adding to costs and reducing output. Employment in the construction industry in 1980 was at the level of 108,000 but because of the policies adopted, particularly in the past two years, this figure has been reduced to 80,000, with 100 being added to the list of unemployed every week. This is a vast decrease in employment in the building industry which has developed over the past two years.
There was great euphoria in the Fine Gael and Labour parties when the Minister for Finance announced an increase of £750 in the new house grant. This was subsequently increased to £1,000. There was complete silence from the same people when the Minister allowed an increase from 5 per cent to 10 per cent on the VAT rate on building materials. As a result of this increase, a house which cost £30,000 would now cost £31,500. The increase in the grant for the first time buyers does not offset the increase in the VAT rate. While it is welcome it will go nowhere near making up the cost of a house as a result of the increased VAT even in the case of houses in the lower price range because contractors almost exclusively pay VAT on a cash receipt basis.
Housing is a basic human requirement. The State has a moral responsibility to the homeless. We should have an enlightened housing policy which would encourage people to purchase houses for themselves while we provide houses for the less well off. The policy pursued by the Government will put housing outside the reach of the average family. The Government should remember that we have the youngest population in Europe; more than half our population are under 25 years of age, although legislation was initiated by the Government recently and passed successfully by both Houses of the Oireachtas to ensure that we will have an ageing society. We still have a very young population so in the next ten years there will be an increase in the demand for housing.
In my own area there are several young people living in caravans because the local authorities cannot provide adequate housing. I do not think there was one local authority house built in my own parish, which is a rural one, for the last 30 years. I have a path worn to the county council offices to impress upon them that there is a demand for housing. There are people living in caravans and living in with their parents, which is causing problems in homes. These people are in dire straits for housing. The council told me they looked for land and could not get it. Now there is land available and offered to them at a price. The county council are very slow in paying the price. The difference would be about £250 per house. This should not deter the council from buying this land. It would not meet the problem. The county council officials inform me that the Department of the Environment stopped them, that they cannot provide them with the money. This is the situation that we are in today in relation to providing housing and employment.
Since 1981 the annual private house completions have decreased from 23,000 to 18,000. The industry was expecting a stimulus through a reduction in VAT in the budget; it got a surprise when VAT was, in fact, increased. A number of big building concerns have abandoned operations here and moved to the United Kingdom. Cement Roadstone are looking for growth outside the Irish economy because they know there is no future here. The construction of farm buildings is at a complete standstill. I have met several people involved in this field and they are going to the wall also. People who supply gravel and who are depending on it for a living have told me that since the suspension of the farm modernisation scheme farm buildings are not going ahead any more. This is a loss to the development of agriculture and to those who earn a living from farm buildings.
The Minister, referring to Senator Michael Smith's contribution, said that block grants could benefit county or country roads. These block grants must be minimal as the roads were never worse than they are now. I would like to see evidence of these block grants in the form of better roads.
I should like to quote from Building on Reality, page 110, 5.72 under the heading, “Housing”:
The central objective of housing policy is to ensure that, as far as the resources of the economy permit, every household can obtain a house of good standard, located in an acceptable environment at a price or rent they can afford.
In paragraph 5.73 it states:
The recession has inevitably weakened the effective demand for private houses in recent years. An increase in the number of new houses provided by local authorities has partially offset a fall in private housing output.
Further on, at 5.85 (b) it states:
ease the demand for local authority housing by retaining the present range of incentives to private housing (which cater particularly for people on local authority waiting lists)...
I see a contradiction here. I cannot see how this can be done with the increase in VAT and the difficulties with which the industry is confronted, especially in trying to provide private housing.
The road development plan for the eighties was mentioned. It states in the programme Building on Reality at paragraph 3.25:
While capital investments in road improvement works has increased substantially in real terms since 1979, it has fallen short of the objectives set out in the plan by about 21 per cent. In addition, expenditure by local authorities on road improvements and maintenance financed from their own resources decreased in real terms by 13 per cent on average between 1979 and 1983.
I have a copy of the road development plan for the eighties, and in my own city of Limerick, under which the Ennis ring road was supposed to be completed in the early eighties, that road is still under construction. This proves the inadequacy of the present Government.
We will have to finish it. You promised to finish it but you did not.
If we were there, we would have it finished. We will have to come back again to finish it, and that will not be far off.
Debate adjourned.