Seanad Éireann debate -
Thursday, 29 Jun 2000

Vol. 163 No. 25

Finance (No. 2) Bill, 2000: Second Stage.

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

Minister for Finance (Mr. McCreevy)

The Bill which is before Seanad Éireann today contains the taxation aspects of the Government's package of measures on housing which was announced recently by my colleagues the Minister for the Environment and Local Government, Deputy Dempsey, and the Minister of State with responsibility for housing and urban renewal, Deputy Molloy. Senators will be aware that the background to the Government's package is the third study carried out by Peter Bacon and Associates, Economic Consultants.

The overall thrust of the Government's package, which includes this Bill, is to maximise housing output to meet the continuing strong demand for housing curb short-term speculative demand, strengthen the position of first time purchasers in the market, increase the supply of social and affordable housing to meet rising housing needs and improve the institutional arrangements to facilitate the delivery of housing related infrastructure and thereby increase overall housing supply.

The third Bacon report points out that further economic growth in the past two years together with falling interest rates in 1999 and inward migration have added to demand for housing. Demand has increased faster than was forecast two years ago. In the circumstances the report says that the supply of new homes needs to be boosted to 54,500 units per year in the private sector if equilibrium in the market is to be achieved. Last year the construction sector completed 46,500 new homes which was the third year of record output in the sector.

Increased supply must be the solution to the current imbalance in the housing sector, but housing supply just cannot be switched up to significantly higher levels of output, at least in the short run. To reach the higher level of output requires an integrated package of measures which is what the Government has set out. Taxation measures have a role to play in helping to deliver more houses more quickly where they are required. The Government has indicated that that aspect will be dealt with in future Finance Bills as part of the arrangements for special development zones. In the meantime the measures contained in this Finance Bill should help in applying resources in the home building sector to the construction of homes for people who want to secure a foothold in the market.

This Bill is mainly concerned with the demand side. The measures are designed to strengthen substantially the position of first time buyers and other owner occupiers in the housing market.

Senators will agree that it would be unacceptable if the goal of owning their own home were to be beyond the reach of large numbers of our young people. In particular we cannot allow a situation to develop where the current generation of young people cannot aspire to owning their own homes. Home ownership should be a factor for stability and contentment in the community not one that leads to frustration. As well as being of direct assistance to first time buyers and owner occupiers, the taxation measures in the Bill are also designed to curtail speculative or transitory demand which has been helping to drive up prices.

I will now outline for Senators the specific measures in this Bill. Part 1 deals with the new stamp duty measures for residential property. This will involve a three tiered rate structure for first time buyers, owner occupiers other than first time buyers and investors.

Section 2 deals with the commencement date of the new stamp duty measures. These measures apply to conveyances dated on or after 15 June 2000. However, the Bill contains transitional arrangements for pipeline cases which are disadvantaged under the new structure. As a result the pre-15 June rates will apply where a contract, as evidenced in writing, was in place before 15 June 2000 to purchase a residential property and the conveyance takes place on or before 31 January 2001.

Sections 3 and 4 specify the new stamp duty rates applying to residential property. This now means that residential property purchased by first time buyers up to £150,000 will be exempt while for other owner-occupiers properties up to £100,000 will also be exempt. First time buyers will benefit from a cut in stamp duty for second hand properties up to £300,000. Owner-occupiers will also gain from lower rates for houses up to £300,000. Significantly increased rates, however, will apply to investors in residential housing. A flat 9% stamp duty charge will apply to all categories of investors buying new or second hand residential property for conveyances executed on or after 15 June 2000.

Following changes in the Dáil, the Bill allows separated and divorced persons who have left the marital home to benefit from the first time buyer relief if they purchase a new home. To qualify the person concerned must not retain an ownership interest in the former home which is occupied by the former spouse. In addition the first time buyer relief is being made available for beneficiaries of tax designated trusts established for permanently incapacitated persons. Senators can get further details on these matters in the explanatory memorandum to the Bill. I emphasise that the fundamental aims of the changes to the stamp duty regime are to enhance the position of first time buyers in the market and to discourage speculative investment in the lower range of the market.

Part 2 of the Bill deals with the new anti-speculative property tax. This tax will apply to residential property in the State which is acquired on or after 15 June 2000 which is not an individual's principal private residence. This tax is a further measure aimed at discouraging speculative investment in the housing market which is causing difficulties for first time buyers in particular. It is not an anti-investor tax as such. It is essential that we have a vibrant, professionally run private rented sector, but we also need to discourage speculative investment. Exemptions will therefore be available in specific instances.

Section 5 is a definitions section. This section also provides that the tax will not apply in respect of qualifying residential investment properties under section 23 relief, under the following schemes – the Custom House Docks area scheme, the Temple Bar area scheme, the 1994 urban renewal scheme, the seaside resorts scheme, the islands scheme, the new urban renewal scheme, the rural renewal scheme, the scheme of residential accommodation for certain students, the rented residential accommodation element of the park and ride scheme and the town renewal scheme.

Senators will observe from the exemptions I have just listed that it is not intended to apply this new tax to properties that are being incentivised elsewhere in the tax code. To do so would be contradictory and illogical. Exemptions will also be provided for certain "heritage" type residential properties as well as registered and listed holiday homes. Landlords who comply with certain regulations made under the Housing (Miscellaneous Provision) Act, 1992, will not have to pay the tax. It is also envisaged that exemptions will be available in future for landlords who comply with the standards and requirements of a new regulatory regime to be put in place following consideration of the forthcoming report by the Commission on the Private Rented Sector. It can be seen that the exemption from this tax can act as an incentive towards the improvement of standards in the private rental sector which is a laudable objective.

Section 6 deals with the charge to the tax. The 2% rate will apply for a period of three years on the market value of all relevant residential property with effect from 6 April 2001.

Sections 7 to 13 outline further exemptions applying to this tax. Certain situations will not give rise to the anti-speculative property tax, such as the purchase of a residential property which will be an individual's principal private residence. However, where an individual changes principal private residence on or after 15 June, while retaining ownership of his or her previous residence, the latter property will come within the scope of the tax, even if owned before 15 June 2000.

The tax will not apply to residential properties received through inheritance or, in the case of gifts, if the property was owned by the donor before 15 June 2000. Similarly, residential property held in a discretionary trust prior to 15 June 2000 will not be liable to the tax. Residential property built after 14 June 2000 on land which was owned prior to this date will be exempt. The tax will not apply to residential property held by charities.

Mirroring the changes made to the stamp duty regime, the tax will not apply to any share in the family home still retained by a party to a marriage in respect of which a divorce decree or a judicial separation has been granted. I have also ensured that the tax will not apply to residential properties which are held by tax designated trusts established for permanently incapacitated persons.

As is the case with the stamp duty changes, there will be transitional provisions for individuals who had entered into contracts evidenced in writing before 15 June to buy a residential investment property. Section 14 provides that the tax will be charged on the market value of the property.

Sections 15 to 27 provide for the administrative aspects of the tax. It is a self-assessment tax which will last for three years. Those liable to the tax must make a return and pay the tax to the Revenue Commissioners on or before 1 November of each of the three years up to 2003, when this tax will apply. The tax due will be 2% of the market value of all non-exempt residential property owned by the person on 6 April each year. However, where the property was acquired and fully paid for between 15 June 2000 and 6 April 2001, the price paid is taken as the market value of the property on that date. Each person with an ownership interest is liable for the tax to the extent of his or her proportionate interest in the property.

Sections 28 and 29 contained in Part 3 of the Bill deal with the "care and management" provisions and relate to the short title of the Bill, respectively.

I assure the House that if the measures require fine tuning, for either the stamp duty or anti-speculative taxes, we can do this in next year's Finance Bill. These latest taxation measures on housing taken by the Government in this Finance Bill follow on from what we did in the Finance (No. 2) Act, 1998, and also in the Finance Act, 1999. On both occasions, the actions were on foot of recommendations made in reports commissioned from the Bacon consultancy. This demonstrates how active this Government has been to ensure that the taxation system, as well as other measures, is used to redress quickly imbalances in the housing market.

The effects of the previous measures have been positive. The most recent Bacon report concluded that the rates of increase in prices of both new and second hand houses have slowed sharply since the middle of 1998, which is the point when the Government measures to redress market imbalance were implemented.

Figures now to hand from my colleague, the Minister of State with responsibility for housing and urban renewal, show that average house prices generally have stabilised and, in some cases, have even been reduced since the last quarter of 1999. The Minister of State, Deputy Molloy, announced earlier this week that the March quarter figures for Dublin show reductions of 1.1% and 2.7% in the average prices for both new and second hand houses, respectively. This is the third quarter that average house prices have dropped nationally and in Dublin since 1995. Year on year house price increases for the period March 1999 to March 2000 are significantly lower than in previous quarters. Nationally, new and second hand house prices rose by 13% and 14% on the same period last year, the lowest increases since 1996. In Dublin, annual increases of 13% and 17% have been recorded which are also down on 12 month increases in December 1999.

There are grounds for optimism in these figures. The latest package, including the measures in this Bill, should assist in restoring balance in the market and curbing the price increases we have seen. This price moderation is in the interests of all in the property sector, whether first time buyers, owner-occupiers or investors.

I commend the Bill to the House.

Mr. Coghlan

I thank the Minister for outlining the provisions of the Bill, but sadly it will not achieve what he intends it to do. In recent years, there has been a huge increase in house prices and many people are predicting that this trend will continue. As we know, many young couples are not able to their own homes and therefore, increasingly, they are joining the waiting list for local authority accommodation. This situation follows on the publication of the third Bacon report. On three occasions the Government has retained the services of Dr. Peter Bacon, but the recommendations are not working. Perhaps it would be more accurate to say that the Government's implementation of Bacon's recommendations is not working.

The Government has been unable to get to grips with the housing market. It has failed to realise that supply and demand are inextricably linked in that market and that many of the actions taken to reduce demand also reduce supply, as developers adjust to new market conditions. Accordingly, there is not, nor will there be, equilibrium in the market as a result of these measures.

Rents have been climbing steadily also, and as a result of these measures they will continue to rise as builders and developers switch from houses and apartments to other more lucrative construction projects.

I welcome the Bill's provisions for first time buyers, including the abolition of stamp duty on the purchase of accommodation for a principal private residence to the value of £150,000. The imposition of stamp duty at 9% on residential investment property, though, will have the same effect as the abolition of mortgage interest relief on rented accommodation. Some investors have been driven out of the market but the supply of rented accommodation, which is already scarce, will become more scarce and rents will, thereby, continue to increase. The so-called speculator tax, at 2%, will have the same effect. Prices will only stabilise when supply matches demand.

I welcome the reduction in stamp duty for first time buyers of second hand houses and the reduction in stamp duty on lower value houses for persons trading up. These measures are and will be beneficial and, as the Minister knows, they have been advocated by my party for more than three years. Until now, however, the Minister had decided not to move in this direction.

The Government must ensure that a sufficient supply of zoned, serviced building land is available throughout the country, but particularly in the greater Dublin area which has borne the brunt of spiralling house prices. Over three years, the Government has failed to do anything about this problem. The Minister must be disappointed that his colleague, the Minister for the Environment and Local Government, has not put to better use the money he made available to him for that purpose.

The Government should now adopt Fine Gael's proposal, contained in the third Bacon report, namely, that strategic planning areas be designated and that delays in planning be eliminated.

There is no doubt that the 2% speculator tax is a curious measure. So many types of residential accommodation are excluded in the Bill that the Government would be wise to reconsider the idea and drop it completely. Apparently, only 10% of houses which are rented are registered with local authorities. It is safe, therefore, to conclude that the other 90% of owners may not be tax compliant. If they are evading tax, it is unlikely that they will subject themselves to a new 2% tax to be administered on a self-assessment basis.

I welcome the exclusions contained in section 5, which are logical, and in particular the exclusion of residential developments which the Government encouraged through the use of tax breaks. It would be perverse to encourage such developments through tax breaks on the one hand, while penalising them on the other, by way of a speculative tax. The problem is that by the time one comes to the end of the section there is so little left, it seems that all we have is a tax on holiday homes built by people out of their own resources, which are not speculative in any way. I have much sympathy for the victims of this tax, people who might build holiday homes around our coasts. These are not rented out; the owners stay in them for a month or two during the year, for example, over Christmas or Easter. Such people are known in County Kerry as "the Julys" because they are only seen in July, although we would like to see them more often.

The measure is an attack on one of the essential ingredients of the economies of counties which are concerned with tourism. I am particularly concerned about my area and the west coast. Anybody who builds a holiday home after 15 July will have to pay 2% of the market value over the next three years. Aside from welcoming the consideration given to first time purchasers, I find it difficult to be warm about the Bill. I wish it was otherwise because this is the Government's third attempt to deal with the issue based on reports by Dr. Bacon. Sadly, I doubt it will achieve its stated objective, although I look forward to observing events. However, the Bill does not contain sufficient measures to deal with the severe problems that exist at present.

Mr. Chambers

I welcome the Minister and the Bill. It is interesting that it is necessary to introduce legislation to deal with issues arising from our growing economy. Some difficulties and imbalances have been created in the structures that the people and the Government want in terms of the availability of housing for first time buyers.

The introduction of the Bill was recommended in the third Bacon report. The legislation shows that the Government is actively dealing with some of the serious differences that have arisen in the economy and the consequent difficulties for young people in terms of affordable housing. The Bill sets out a structure to deal with people who already own property and who invest in housing. Figures show that speculators, who already own three or four houses, invested £5 billion in housing. Given the national building programme undertaken by the Irish Housebuilders Association and local authorities, one can recognise the difficulties that exist. The level of growth in the economy and the surge in property prices requires direct intervention. Adjustments must be made to deal with the speculative element in this area.

The Bill contains 27 sections and deals with increases in the rates of stamp duty and allowances for first time buyers of second hand houses. It also relates to charities, people with disabilities and sectors which qualify under section 23 of the revitalisation schemes introduced by the Government over the years. The Bill caters for discrepancies in those areas and makes allowances for them.

The purpose of the Bill is to maximise housing output and thereby create greater opportunities for people to buy houses. It will also distort the market from the point of view of removing some speculative purchasing. This will have an effect for first time buyers, who face major problems, in terms of the provision of housing by local authorities and builders.

In addition to the Bill, certain changes may take place that I do not favour in areas where there is no great need on the part of first time buyers, such as along the coast where houses are being built for people who already have houses. This is a fact of life, particularly along the western seaboard. Local authorities can play their part by working with the Government and contractors. This area could be affected in terms of people buying second residences because of the new 9% tax, stamp duty and the ongoing 2% tax for three years.

Local authorities could work together with builders in maintaining the construction industry by purchasing reasonably priced property to meet some of the housing demands, which is the overall purpose of the Bill. Innovation and thought are required but the structures contain sufficient flexibility to allow that to happen. This matter is dealt with on a local level and it should be encouraged.

The Government has approached the matter in a co-ordinated way. Following the previous Bacon reports, the Government provided extra serviced land and made a huge investment in sewerage and water schemes throughout the country. It provided investment for the development of more serviced sites which are necessary for the continued growth of housing.

Part 1 of the Bill deals strictly with the stamp duty measures for residential property. The measures kicked in on 15 June and they should have a quick effect in creating more opportunities for people to buy houses. Part 2 deals with the new anti-speculative property tax. This tax will apply to residential property in the State which is acquired on or after 15 June and which is not an individual's principal private residence. This is the kernel of the exercise of making more housing available.

Section 5 relates to areas which have section 23 relief. It outlines the areas covered under the various headings. I welcome the fact that the new small town renewal scheme will be exempt. Otherwise the revitalisation of up to 160 towns could be damaged. Investment and encouragement are needed in those areas and opportunities exist for contractors and others who wish to invest money in a positive and constructive manner to revitalise many towns.

The 2% rate introduced under section 6 will be in place for three years. It will be based on the market value of the property on 6 April 2001, 2002 and 2003. This is an important measure because, in conjunction with the 9% rate of stamp duty, it will discourage people from buying second and third residences.

I welcome some of the exemptions included in the Bill, such as the residential property owned by charities and disabled people. The legislation covers many of those sectors. I welcome the Bill and the Government's initiative. The Government is committed to the provision of reasonably priced housing. The huge demand for housing and investment is due to the buoyancy and wealth of our growing economy. I welcome and support the Government's initiative in providing an opportunity for young people and first time buyers to purchase reasonably priced housing. This is an important part of our economy.

Mr. Quinn

The Bacon report is interesting and well worth reading. I had a problem in my business and I tried to employ a consultant who was recommended to me. When he came to speak to me he told me he had been working for someone for 20 years. I did not employ him because if a consultant is needed for that length of time and does not solve the problem, perhaps it is the wrong consultant. The same is true in this case. A problem arose and the Minister decided to appoint an expert in the hope he could accept his solutions or tweak them in order to accept them. However, this measure is based not on the first or second Bacon report but the third one. We have employed the same consultant who is an academic. I do not know Peter Bacon, although I enjoy what he is doing, but I have a big question mark over someone we employ three times to solve a problem. If I let a customer down in my business when my first solution is not successful, I do not usually get a second chance and, if I do, I am grateful. However, I do not usually get a third chance.

Senator Chambers was correct when he said the problem is not Peter Bacon but that the economy is booming. Perhaps the solution is not to have a booming economy and then we will not have a housing problem. We debated inflation on a few occasions recently. Are we sure we know what we are doing with our economy if it presents problems as big as this one? We spent 60 years from the 1920s to the 1980s trying to develop an economy which would create jobs. We have done so and we are now the envy of the world. Why are we continuing to look for growth and a booming economy? I suppose the reason is that we are in the habit of doing so and it is the thing to do. It is like scoring goals; if we are scoring goals we just keep scoring them.

However, is this the world we want? For 50 years we built an economy to create jobs and we now recognise we have achieved a growth rate of 8%, 9% or 10%. However, it is presenting us with other problems with housing, congested roads and poor infrastructure. We are now being told that people from Castlecomer, Gorey, Dundalk, the west and even County Leitrim are travelling to Dublin every day. Is this the nation and the economy we want? We are now being told that to avoid this, we should build more high rises than we have already. The Minister has three or four months to step back and consider whether we are going in the right direction.

We have spent the past few years encouraging people to build second homes in Achill, Kerry or the west. Approximately three quarters of Members of the House have encouraged people to buy second homes. However, we are now saying we have changed our minds and that we want to discourage people from doing so. People are naughty for buying second homes because it is against the national interest. We have encouraged people to invest in building houses, yet we are now telling them to slow down and that they have been naughty for building houses to rent them, which is not acceptable anymore.

I remember visiting a friend in mainland Europe some years ago and talking about his lovely home. I asked him how long he had lived there and he told me he had rented it for 20 years, but he had no intention of buying it. I looked in mystification at him and told him I could not understand why he would rent a home because nobody in Ireland would dream of doing so for 20 years. I will not go into the details of why he did it, but he said it was commonplace in the city in which he lived.

Rented homes should be part of the overall market. However, if we follow the steps we are taking now, we will make pariahs of those who invest in homes to rent to someone else. We are saying they are not acceptable members of our society and they should be ashamed of themselves. I am worried about that. If we want to control the steaming housing market, we must question the assumption that investing in homes to rent to someone else is unacceptable.

Strategic development zones are the solution. They are part of the Bacon report and the Minister's proposals. However, they are not the only solution. Fergal McCabe, an established planner, mentioned the new fast track procedure designed to overcome all problems. He referred to Stepaside as a classic example of how approval was granted in March 1999 but nothing had yet happened. We must ensure that whatever we do works. Strategic development zones for homes, as we have for industrial parks, are the way forward.

We also have other problems. Out of 350 planning positions, 107 are vacant. Even if we put all our efforts and enthusiasm into the Bill, it will not solve this problem. We must find solutions to the planning problems. The fact I am criticising some of these suggestions does not mean I criticise them all. It is logical, sensible and rational to move in this direction. Can the building industry build 50,000 homes a year? I doubt if it can without facing up to other challenges.

Is growth the solution to everything? Must we continue to look for growth and to change the nation we know if the nation we create is not the one we wanted at the beginning? The only reason we are doing it is that it is the right thing to do. Perhaps it is, but I would like a debate on it, although we do not have the time to do so as we need to find a solution now.

The answer is to provide serviced land. I know the strategic development zones are a step in that direction. However, unless we have land with water, sewerage and other facilities we will not be able to take those steps. I read in the newspaper the other day that there is not enough serviced land in Swords which means building cannot start until December 2001. It will be another 18 months before a start can be made even if everything is provided.

Some of the answers are in the Bacon report and some of them are in this Bill. However, we should not fool ourselves into thinking this is the be all and end all of the matter. It is the start of a long race. I welcome the Bill in as much as it is a step but we should not say it is the end of the road, that we have done our bit and we can relax. We must regard it as the start of the race, not the end of it.

Mr. Ó Fearghail

I am privileged to support the provisions of the Bill which deal with stamp duty and speculative tax on housing measures. These measures are part of a necessary response to the ongoing difficulties in the housing market, particularly those experienced by first time buyers. The measures we are discussing must be viewed in the context of the Government's overall housing programme which has been heavily influenced, as other Senators have said, by the three reports from Mr. Peter Bacon.

The problems facing first time buyers, which is the main focus of this Bill, have been well documented in this House and beyond and do not need to be elaborated upon by me but suffice to say that despite the success of the Government's actions to date in moderating house price increases, the quality of life for many young families has been adversely affected by the difficulty in purchasing homes and in meeting high rent demands. The actions proposed in the Bill are obviously necessary in order to prevent difficulties arising for the wider economy flowing from housing related wage demands.

The extent to which speculative investors have outnumbered first time house buyers in the marketplace in recent times lends urgency to the case. The measure of applying a 9% stamp duty across the board to non-owner-occupiers, coupled with a 2% per annum anti-speculative tax, while at the same time exempting first time buyers up to the £150,000 limit, is unquestionably the best way to proceed. I am confident that the measures proposed in this House today by the Minister, Deputy McCreevy, and which will be further outlined to us by the Minister of State, will strengthen the position of first time buyers and owner-occupiers.

The package being debated today needs to be viewed in the overall context of the Government's response to the housing challenge. It is an indisputable fact that the surge in house prices we have witnessed is a by-product of the economic boom we are otherwise happy to experience and which has been brought about in large measure as a result of the policies implemented by the Government. Just as this Government has successfully progressed the peace process and achieved previously unimagined levels of economic growth, it can be relied upon to successfully tackle the housing challenge that lies before us.

I want to refer to the Government's wider housing programme and in particular to the Government action to increase the supply of social and affordable units. The national development plan figure of 41,500 units up to the year 2006 is a highly ambitious but nonetheless achievable objective. Senators will have noticed recent news reports highlighting concerns on the part of the Minister of State with responsibility for housing, Deputy Molloy, at the slow pace of some local authorities in implementing their housing construction programme. I share the concern expressed by the Minister. I see the need for positive Government intervention, working with local representatives and local authority officials to inject a far greater sense of urgency into the delivery of individual council's housing programmes.

Many local authorities have depleted land banks and they have proved far from successful in competing for land acquisition on the open market. My own local authority has succeeded in acquiring land largely through the community gain aspect of the county development plan process. In addition, the use of external design consultants has helped to some extent to speed up the planning stage of local authority developments.

I am sure all of us in this House are committed to ensuring social integration but that objective in itself has a delaying impact on the provision of social housing. I will give an example of what I mean. Kildare County Council has been authorised, on a current year basis, to commence 380 houses; that is a record number of starts for Kildare County Council. Such a programme, were it being carried on by the commercial sector, could be delivered by way of one or perhaps just a few contracts at selected centres of population but the need to deliver small, integrated schemes will result in these houses being delivered through anything up to 20 contracts at various locations throughout the county. Indeed, it is interesting to note that the average housing scheme size nationally is now just 13 units.

I turn briefly to the area of voluntary housing provision and acknowledge the Government's growing commitment in this area. The establishment of a voluntary housing unit within the Department of the Environment and Local Government, with responsibility for developing this sector, will be of great assistance and is just one of a number of Government initiatives being taken in this area that are of positive assistance.

The Minister, Deputy McCreevy, will be aware that in his home county of Kildare, a number of locally based voluntary housing associations have developed and are making a substantial and meaningful contribution to the social housing demand in that area. These associations have had real and active support from local government and from the Department of the Environment and Local Government, but the biggest impediment to their future development is not the lack of support either locally or nationally but the lack of either a current tenant purchase scheme or a maximum rent scheme for their tenants. The introduction of such a measure is something I urge the Minister to consider as it would establish a level of parity between local authority and voluntary housing association tenants and would result in a greater incentive to increase the number of such units being built throughout the country.

I refer briefly to the capacity of the construction sector which has been referred to by other Senators. The task of delivering in excess of 500,000 houses in the State over the next ten years will depend on our ability to extend the capacity of the sector. In this regard I welcome the efforts of the Forum for the Construction Industry, which is expected to report by the end of July and which has been briefed with addressing the manpower and training requirements of the industry. It is helpful to note also in this regard the participation by the Construction Industry Federation in international recruitment fairs held in conjunction with FÁS. It is interesting to further note the number of people working in the construction industry who are travelling from the North, and the substantial numbers who are crossing the Irish Sea, most notably Welsh people coming to work in the construction sector here. In doing that and travelling back home at the weekend, they are reversing the travel to work trends of several generations.

I refer to the planning process in so far as it impacts on housing provision. I note with interest and welcome the proposal to engage private consultancies to work in the development control area. We are all aware of the shortages of planning and technical staff, which has been alluded to by Senator Quinn, and we are aware also of the Government's initiatives to try to address this particular problem but, notwithstanding that, there is a need to conduct an efficiency audit of local authority planning systems. It takes six months, in my experience, to get planning permission for a once-off house in a rural area in County Kildare, and we should not underestimate the contribution that the once-off housing provision is making to the national housing situation. Few, if any, applications in my county are dealt with without first going through a further information or extension of time process. I ask the Minister, in conjunction with the Minister for the Environment and Local Government, Deputy Dempsey, to see how these particular delays can be avoided.

I congratulate the Minister and the Government on the comprehensive range of housing initiatives the Government has brought forward to tackle the housing challenge facing us. I commend the Bill to the House.

An Cathaoirleach

I compliment the Senator on an excellent maiden speech.

Ms O'Meara

I also congratulate the new Senator on his maiden speech.

I welcome the Minister of State, Deputy Hanafin, to the House but that is as positive as I intend to be in relation to this item. It is short sighted, lacking in vision and it tinkers with a problem which is so large now that it threatens, along with other problems the Government has allowed to get out of control, to undermine our economic success.

The manner in which the housing crisis has been allowed to develop is nothing short of a disgrace and a scandal. It has been mismanaged, even under-managed, because the Government is afraid to make the radical interventions required to deal with the major crisis we now have on our hands. To hear Government Senators talk about the price of housing and so on is an insult to the thousands of people who despair of ever being able to afford to buy a house. My heart goes out to someone like Senator Ó Fearghail who is from County Kildare. That county is in danger of being gobbled up by urban sprawl because of the inevitability of the spread from the Dublin area as more and more housing estates are being built. I consider myself lucky to live in a town such as Nenagh where we can still retain an element of control over planning how that town will develop in the future. What is absent from Government policy on this area is a clear picture of planning for the future. Planning policy is a reactive process and the Government reponse to this area is reactive. This is the third Bacon report and the third response by the Government to address the needs in this area.

As the Minister pointed out, demand has increased faster than was forecast two years ago. The Government does not know where it is going on this issue. It is following a blind man down an alley, so to speak, crossing its fingers behind its back and hoping for the best. The Minister's approach to this area is like that of a boy with his finger in the dyke, closing his eyes and hoping for the best and hoping that another outburst will not take place. That approach is pathetic.

I hope the Minister of State will note the point I am about to make and bring it to the attention of the appropriate forum. I went to the Library before this debate to get a copy of what I thought was the published National Economic and Social Forum's report on social housing, as I heard the chairperson of that forum speaking about its recommendations on social housing two mornings ago. When I went to the Library I found that the report was not published and, on inquiry, that it has not even gone to Cabinet. It is a disgrace that the chairperson of that forum should speak about the conclusions of that forum before they have even gone to Cabinet. I have no difficulty with information being made available in the public arena. I am a strong and proud supporter of the concept of freedom of information and, as a former journalist, I have no difficulty with matters circulating in the media, but I have a major difficulty with an important policy matter such as this that is being finalised by the National Economic and Social Forum being aired in the media as an effective decision and that information not being made available to elected members of the Oireachtas. The Minister of State is taking a note of this. I will write to Dr. Gaffney to express my criticism and concern about this and I hope the Minister of State will take my comments to the correct forum.

In that regard, I have had an opportunity only to consider last year's publication by the Combat Poverty Agency on social housing in Ireland. I particularly wanted to concentrate on the issue of social housing and the need for Government intervention in the market to generate increased housing provision to meet demand. We are simply tinkering at the edges of the private sector and not acting on the area of social housing where the answer to our problem lies. Government interventions across a wide range of possible areas would generate the provision of housing, particularly at the affordable end of the market for first time buyers to meet their housing needs.

As Senator Ó Fearghail pointed out, joint venture houses, such as the community gain initiative in Kildare, is a successful possiblity. I hope a similar initiative will be introduced in north Tipperary. Under such an initiative, a local authority can gain a certain amount of land or parcels of land from developers. A local authority can engage in joint venture housing where it can effectively control the price of housing and ensure such houses are sold only to first time buyers. Joint venture housing is successful and it should be put on a much broader footing, particularly in the context of the 10% or 20% provision in the planning Bill regarding the amount of land local authorities can obtain from developers. I urge the Government to ensure that such parcels of land obtained by local authorities are used not only for local authority housing but also for voluntary housing, social housing and joint venture housing. There are many measures the Government can introduce.

The conclusion of the report to which I referred, Social Housing in Ireland – A Study of Success, Failure and Lessons Learned, edited by Tony Fahey for the Combat Poverty Agency – states that the level of social housing has decreased over the past number of years. Mr. Fahey states it has shrunk in significance, reflecting an emphasis on home ownership as the normal housing tenure. Mr. Fahey concludes:

. . . policy considerations about how to respond to the housing shortage that has emerged since the mid-1990s have given little attention to the social housing option. The recent Bacon reports commissioned by Government to address the problem of housing shortage, for example, focused on house prices and market solutions, and made almost no reference to social housing [although that report does not refer to the last Bacon report]. . . .

The emphasis on social housing has declined in favour of the so-called norm of private housing and home ownership.

There is also the difficulties in the private rented sector. Those difficulties could be easily taken on by the Government, but they have not been. As Senator Quinn pointed out, the private rented option is very unpopular. That is because the tenant largely has little or no standing or rights. From the point of view of the property owner, they want that to continue to be the position but, if we want to deal with the current housing crisis, we will fail unless we tackle the inherent difficulties in the private rented sector.

The number of registrations with local authorities of property owners who are landlords is very low. I explored this matter in the context of my local authority area. Local authorities do not have the necessary resources to seek out private rented houses, register them and ensure all the necessary work is carried out to bring them up to the required standard. The necessary statutory framework to address the difficulties in that sector is in place but it is not operating in practice. The quality of accommodation in the private rented sector is extremely bad in some cases. We know from representations made to us that some people on the local authority housing list are living in appalling conditions. That is not good enough. If the private rented sector was a far more attractive and secure option, which can be done only by way of Government stricture, we would not have the same reliance on and perhaps the same demand for home ownership, although our cultural experience is such that people want to own their own homes. However, it is not fair to those who are currently reliant on the private rented sector to be left so exposed, particularly when the necessary statutory framework is in place but the necessary resources have not been allocated to local authorities to address the difficulties in this area. That is another area that needs to be addressed.

In the context of the Planning Bill, many Senators, including Senator Ó Fearghail, mentioned the delay in granting planning permissions for the building of one off houses. The delay in the awarding of such planning permissions in the north Tipperary local authority area is not as long as it is in the Kildare local authority area. We should not underestimate the need for the speedy award of such permissions to enable applicants to provide their housing needs. The building of one off houses in the countryside has not merely increased but exploded as people have the money, which is good, to build or to buy their own house, which they did not have previously, although many people are not able to do so because of the Government's attitude to development in that area.

There does not appear to be any improvement in this area. This Bill only tinkers around the edges of the problem as there is a lack of will by the Government to intervene in the housing market. I will be a "pinko" liberal on this matter. It is imperative that the Government should come up with a radical interventionist solution to this issue. The Minister probably believes these proposals are interventionist, but they are not. They represent only a finger in the dyke that has possibly yet to burst. Things are not getting any better. Despite the figures the Minister quoted, one only has to open the property supplement of any of the national newspapers or the expanding property pages of local newspapers to realise the extent to which people, particularly first time buyers, are being screwed by the rising housing prices which they are forced to endure. In many cases they rely on parents and other sources of income to get themselves into debt with its short-term and long-term implications.

One expert after another has pointed to the housing crisis being such a difficulty for us in relation to the continued expansion of the economy. Senator Quinn has made a relevant point – should we continue to gallop down this road of growth? We can see the downside of it in the housing crisis and in inflation. The Taoiseach has admitted inflation may go over 6%. This is causing major problems for those on modest incomes who work hard to meet the every day demands of life in this booming economy. Instead of solving problems in many cases it has created them. This Bill goes no way towards solving the fundamental problem of housing.

Mr. Bonner

Ba mhaith liom fáilte a chur roimh an Aire Stáit, Teachta Hanafin, go dtí an Teach. Seo an chéad úr a bhí sí anseo a raibh mé ábalta labhairt. Ba mhaith liom comhghairdeachas a dhéanamh léi as ucht bheith tofa mar Aire Stáit agus tá súil agam go mbeidh réim aici.

I congratulate also Senator Ó Fearghail on his maiden speech and wish him well and many long years in the House and possibly in the other House. I wish him every success in his career in national politics.

I welcome the Bill as part of the Government's overall plan to tackle the housing crisis. I have some small reservations about certain aspects of the Bill in that it globalises the country as a whole. While the same difficulties do not prevail in rural Ireland as in the cities, I appreciate that financial legislation has to apply equally to everybody. Rural areas will have a difficulty with some of the items.

The Bill legislates for two of the measures in the Bacon report. The Government has announced also a range of initiatives in addition to those contained in the Bill to address the housing needs and requirements on a broad front. Other measures will be provided in the budget 2001. Previous Government actions have helped to moderate house price increases. However, many young couples and families still have great difficulty in purchasing their own homes. There is also a knock-on difficulty where investors buy rental property given that the increase in rents is affecting the quality of life for a significant proportion of the population. House prices and high rents cause a further difficulty in that unsustainable wage increases are being sought. This is making it difficult for the labour market to function effectively.

The objective of the Bill and the overall action plan is to maximise the housing output to meet the continuing strong demand for housing. The two items in front of us today aim to curb the short-term speculative demand, to strengthen the purchasing power of first time house buyers and to increase the supply of social and affordable housing to meet housing needs. The objectives set down in the Government's plan will be met by a number of issues – two of which are in front of us today – including the exemption from stamp duty particularly for second hand houses for first time house buyers up to the value of £150,000. There are changes in the rates of stamp duty for two other categories – owner occupied, where it is not the first house purchase, and others, such as investors. Also a 2% per annum anti-speculative property tax is being introduced for three years on non-occupied houses purchased after 15 June 2000. Certain exemptions will apply to rental accommodation and certain schemes which the Government has introduced over the years to encourage investment in parts of the country and, even in parts of the city, where there are difficulties with run down and derelict buildings.

The Government plans to encourage the early development of large-scale residential developments within the strategic development zones by introducing, later on in the budget, a land holding tax on land owners who do not develop sites within a specified time limit. I understand the penalty will be of the order of £3,000 per site. It also plans to introduce measures to increase the capacity of the construction industry by addressing the shortage of professional and skilled workers. The shortage is causing a major difficulty. In rural areas it is difficult to get anybody to do even a minor job because all the workers are in the cities because of all the work taking place in and around the cities. It relates also to local authority housing where there has been a huge increase in housing starts. There is a difficulty getting contractors particularly for small houses, where the standard has improved immensely. There are reasonable contract prices available to builders but the reality is that there is a shortage of workers and builders. The Government intends to provide 1,000 local authority housing units per annum from 2000 to 2006 in addition to those already announced in the national development plan. This will increase the number of starts from 35,500 to 41,500.

The Government has plans to speed up the planning process. Senators Ó Fearghail and O'Meara referred to the difficulties in the planning process. Donegal County Council had about 5,500 planning applications in 1999 compared with 1,700 four years ago. There are difficulties getting planning officers. The planning officers in Donegal are subject to much criticism. They work hard in difficult and trying times to keep the system in operation. They have an 80% success rate in having applications processed within the eight week period. There are also administrative hold-ups in local authority housing from the time an applicant applies and gets on the housing list. I would like to see the Minister tackling this area because it is soul destroying for those who are on the housing list for three or four years. While they know they will get a house there are delays ranging from planning difficulties to other matters.

Many local authorities, including Donegal County Council, have made great strides to turn to other innovative initiatives such as turn-key development where we let the developers develop and the council buys back. There is also a substantial amount of voluntary housing about to commence. Between the council and three urban areas in the county, 300 starts for the next four years have been allocated from the Department and we could possibly get up to another 70 or 80 from voluntary housing. Over a three year period that may eliminate the existing housing list but the reality is that more people will come on to the housing list. Major improvements are taking place in this area. Let us hope we can overcome the shortage of builders and workers who might be available.

The Government has also made improvements to shared ownership and affordable housing schemes provided for in the plan. The Minister for Finance and the Minister for the Environment and Local Government have committed additional resources for housing related infrastructural development above the provision in the national development plan and the Programme for Prosperity and Fairness. The Government has responded to the major issues arising in the housing market and to the growing need for housing in its programme, Action on Housing, which was issued in June 2000 and in its earlier programmes.

Senator O'Meara referred to the National Economic and Social Forum report which was launched this week. It calls for the establishment of a housing authority. The Department of the Environment and Local Government is not keen on this but I believe there is merit in establishing such an authority. Its purpose would be to provide strategic policy and advice to Government Departments, local authorities and other housing providers. The authority would advise the Government on policy and set targets. It would also undertake to research and monitor the situation and to evaluate what is needed.

After many years of budget deficits, there have been three years of unprecedented growth and surpluses since this Minister took office. The resources are now available to make the concept of social housing a high quality, desirable option for people. Spiraling house prices could be controlled by increasing resources to tackle delays in the planning system and in identifying and addressing barriers to the supply of building land. Much work is needed in this area. There was an increase of 43% in local authority housing waiting lists in the three years from 1996 to 1999. There are now approximately 50,000 people on the waiting lists.

The NESF report addresses many issues. The housing authority it recommends could get to grips with many of the problems. It would not necessarily interfere with local authorities but would give them a focus. I do not believe it will dilute the local authority role. With a projected increase of 20% in house prices over the next four years a new generation will grow up that is unable to buy their own homes. As a result, there will be more pressure on the local authorities to provide additional housing. Ireland is the leading country in the world in terms of the desire of its people to own their own homes and, according to the report, the national housing authority would be the driving force in seeking to make that vision a reality. Social housing is an important option in that regard.

Good quality, secure, affordable housing should be a social right and be given statutory backing. Housing waiting lists should be eliminated with particular attention being given to people on low incomes with specific housing needs. The Minister of State, Deputy Molloy, speaking at the launch of the report said that the provision of suitable accommodation for all is the primary objective of the Government and he expressed the hope that this would be achieved.

According to the report, Ireland has one of the smallest housing stocks in Europe relative to its population. I was surprised at some of the statistics, particularly given people's preference for owning their homes rather than renting them and their preference for houses rather than apartments. However, the report states that only 33% of our population own their homes compared to 43% in the UK and the European average of 44%.

The Government has promised to spend almost £1 million per year for the next six years on meeting the huge demand for social and affordable housing. The NESF report also refers to local authority housing and the fact that the maintenance systems need to be radically reformed and modernised. That is one of the great difficulties I encounter as a local councillor. There are huge old council estates which were built when money was not as readily available. As a result the housing is of poor quality. Many of those houses now need to be reroofed and to have central heating installed. The local authorities are short of money and do not yet have the wherewithal to do that work. I hope the Ministers concerned, Deputy McCreevy, Deputy Dempsey and Deputy Molloy, will, over the next two years and perhaps the following five years, be able to provide additional funding for maintenance of local authority houses.

There is also huge difficulty with repair grants, particularly the essential repair grant. I am baffled when I receive letters discussing whether something is economically reparable and non-economically reparable. The reality is that many people need to repair their houses but do not have the finances to do so. They need assistance. I urge the Government to examine the possibility of re-introducing a house repair grant. It need not be as extreme or excessive as it was in the past. I would have no difficulty with the introduction of a means tested scheme which would give the finance to those who need it most to repair their homes. Many old houses could be repaired and that would assist the housing situation.

The Bill has a strong impact on two classes of stamp duty. I have no difficulty with the abolition of stamp duty for first time buyers of secondhand homes and the rates that apply to owner occupiers. They are basically the same as existing rates. However, I have difficulty with the 9% rate for investors and I have written to the Minister a few times in the last week about specific cases. This Bill applies throughout the country but why should the west of Donegal have to suffer for the sins of the larger towns? Even with 5,500 applications per annum, there is still plenty of land available for housing. The prices have not gone through the roof. They have increased, but in rural areas not to the extent of the increases in the larger towns and cities.

Donegal will suffer as a result of this measure. Many of the new developments in rural areas are by people from Northern Ireland. The planning process is there to restrict poor development. Many of the people involved in these developments are Irish citizens and this will discriminate against them. It will seriously affect the rural parts of Donegal which rely on these people not only in July but from Easter through to October and again at Christmas. Rural communities are glad of the finance their spending power brings to their areas. I have difficulty with this section of the Bill.

I also have difficulty with the 2% anti-speculation tax. The Government document refers to increased speculative demand, particularly for short-term capital gains. In my constituency there are few short-term capital gains. Most of these houses are being bought by people who can afford to have a second home. They choose Donegal to get away from trouble and for a measure of peace. That is not speculation. Even in the case of apartments in Dublin, families might have three or four children at university and have bought apartments for them. At this stage, they cannot afford them because the prices have risen so much. However, many people are investing in this area. The initiative taken by the Minister through the individualisation of the tax bands has created extra wealth for families in that situation. They will be affected by this measure although that was not the intention.

Those are my two main concerns. One way around the 9% stamp duty is to buy a site and build the house. However, there is no way of avoiding the 2% tax levy. Many of the houses being built to which I referred are owner-occupied. Perhaps they are not owner-occupied every day of the year because these people travel to their place of work during the week. These people will suffer as a result of this measure.

The imposition of this measure will mean no tax yield because there will be no homes to qualify for the 2% tax levy. Given that many of the homes in my constituency are being purchased by non-residents from Northern Ireland, how do the Revenue Commissioners intend to collect the tax?

Mr. McCreevy

That is a good question.

Mr. Bonner

I have written to the Minister in relation to houses which are almost completed, contracts for which have not yet been signed. People who began these developments with good intentions will suffer as a result of this measure. I ask the Minister to look at this issue, even though a provision relating to contracts is included.

I understand the 2% tax levy will apply to properties purchased between 15 June 2000 and 6 April 2001. I presume this will be extended in the Finance Bill to 2002 or 2003. We could avoid paying the 2% levy if we were granted rural renewal relief. I raised this issue with the Minister on another occasion and I was encouraged by his remarks. I recall him saying yesterday that he will wait until 2002, but we cannot afford to wait until then. I ask him to reconsider. I sent him a detailed letter recently on the difficulties in west Donegal, particularly in the Glencolmcille area. While I accept fully the main thrust of the Bill, nevertheless it contains some problems. I represent the people of Donegal, particularly Donegal South-West, where I am aware of the difficulties on the ground. Many issues which cause problems elsewhere do not apply in my area, yet we are caught under the financial legislation.

I am aware of the Minister's capabilities and that he is well briefed by his officials. Will these measures affect the problem of abnormal and speculative profits of builders? We are all aware of the cost of sites throughout the country and building costs per square foot. If the Minister were to introduce some type of turnover tax at a certain level in the future, perhaps speculators would not be so keen to obtain such huge profits. I mentioned previously that gazumping is taking place in Donegal. This is a terrible exploitation of young people and needs to be tackled.

I support the Minister in relation to the success of the economy, despite what others may think. However, I would like him to browse over some of the points I raised.

Minister for Finance (Mr. McCreevy): I thank Senators for their contributions. Senator Coghlan referred to the linkage between supply and demand and the fact that these measures will not restore equilibrium in the market. This Bill is part of a very significant package of measures on the supply side, under which very substantial resources are being made available to increase house building and infrastructure. The supply side measures will transform the situation, especially the development zones initiative which will make more sites available quickly. This carrot will be supplemented by a special tax stick. The Bacon report proposes a levy of £3,000 per annum per site if sites are not made available or built on within a reasonable period. These SDZ areas will be provided for under Department of the Environment and Local Government legislation which will be introduced in the near future. Senator Coghlan doubts if the Bill will achieve its stated objective of curbing house prices. Perhaps he will take comfort from my speech in relation to the increase in house prices in the first quarter of this year compared to other years.

This Finance Bill is only part of the package. When I introduced the Finance (No. 2) Bill, 1998, on foot of the first Bacon report, I pointed out in this House and in the Dáil that the tax measures in the first Bacon report were an attempt to distort demand temporarily. Luckily I repeated that fact on a number of occasions. I also pointed out that if supply did not come on stream, investors would get back into the market, even though mortgage interest relief would not be available. When the yield increases, people step back into the market. That is the law of economics.

The measures I am proposing here are also an attempt to distort the market. It is no secret that I am a believer in the free market. One cannot predict exactly what the effects will be if one decides to interfere with the free market in relation to supply and demand of land. I believe one should only interfere with the free market if one is trying to secure a specific objective in relation to social policy or whatever. The anti-speculative tax levy proposed in the Bill is limited to a three year period. If in that three year period supply does not reach demand, then the markets will reach an equilibrium and people will not be affected by either the 9% stamp duty or the 2% anti-speculative tax levy. Therefore, the trick is to increase supply.

Like Senator Ó Fearghail, I come from a county where the overflow from Dublin has affected building and the demand for housing in counties Kildare, Meath, Wicklow and further south. The Senator is a member of a local authority in County Kildare and can attest to the demand for more and more housing in the county while at the same time groups of local political activists are objecting to more houses being built in parts of the county. There is no point preaching in Dáil or Seanad Éireann about the price of houses while at the same time preventing houses from being built in one's area. There must be a reasonable balance and Senator Dardis will also attest to this fact. If there is no increase in the supply of houses we will continue to have a problem.

These are the types of problems which arise as a result of economic success, not economic failure. Over the years, successive Ministers for Finance have had to deal with the problems of economic failure. I am long enough in this House to know that all kinds of initiatives were introduced to encourage people to build houses. That is why the first time buyer's grant of £3,000 was introduced. This was partly an attempt to alleviate the needs of first time buyers but the real motive behind the measure was to give some kind of jump start to building and create activity. Some people are now advocating that we should slow down activity. Dr. Bacon has stated in his reports that we should increase supply.

I have acceded to every request made by my ministerial colleagues, Deputies Dempsey and Molloy, in the Department of the Environment and Local Government and provided more money for infrastructural development. I have provided more than they required on certain occasions and more than the Department of Finance recommended. I did that because we could not build houses without serviced land that has water and sewerage facilities and good roads. This money will have an effect in time.

No one predicted how many houses we would need. Six years ago people would have laughed at you if you said that 45,000 new houses per annum would not meet the demand. Now experts say we need 55,000 units per year over X number of years. No one predicted the success of the Irish economy. People have more money now and they want to buy property. One evening on my way home I listened to a programme about ordinary Irish people buying properties in Spain. These are not the wealthy people living in counties Tipperary, Cork or Kildare. Ordinary people can do this because they have more disposable income and there are more people are at work. At present there are 1.17 million people employed in Ireland but there was only 1 million people two years ago. Unemployment is less than 5%. People have more disposable income and they want to spend it. Some people are spending it abroad and I wish them good luck. Did we ever think we would see this happening?

For many years I talked in this House about people leaving Ireland. In the mid-1980s between 40,000 and 60,000 people left every year. Now, for the first time in our history, thousands of people are returning home. This is all good news.

We could solve the housing crisis by doubling unemployment and increasing it to 10%. This would also stabilise inflation because people could not continue to increase their prices. But will any sane person say that this is the way to go?

It is nonsensical to look at one segment of the Irish economy and say we have a big inflation problem. The fact is that we do not. We are experiencing a temporary blip in inflation. It would be unimaginable for the Irish economy, which has grown by 8% per annum on average in the past five years, not to have some inflationary tendencies in the economy. A basic economic textbook that is used in first year in secondary schools could tell you that. Low inflation is the remarkable achievement of the Irish economy in recent years. For many years I have alluded to the reasons behind this. Larger and more closed economies respond to the type of analysis found in textbooks on economics but the Irish economy did not respond in the same way. The tremendous growth and success of the Irish economy has caused difficulties in the housing market.

The Bacon reports, as far as tax measures go, unashamedly attempt to concentrate on first time buyers. They are not aimed at people who, for all kinds of good and genuine reasons, want to buy a second home. They are aimed at giving Joe and Mary Browne, who never had a foot on the housing ladder, a chance to get their foot on that ladder. The Finance (No. 2) Bills in 1998 and 2000 tried to do the same.

We are all entitled to our views on how we should go about that. Dr. Bacon and his company have got the job of analysing this problem for a period. That is why the Department of the Environment and Local Government has stuck with Peter Bacon. He carried out the first assessment of the problem, re-examined it in 1999 and now he has given us his final report. He examined this problem in the round.

The overall solution is to increase supply. Some people find this idea unpalatable because more houses will have to be built in certain areas where people do not want them. An increase in supply will mean that builders, whom many people seem to dislike, will make more profits. If we do not encourage them to continue building they will just stop working. Whether people like it or not these are the unpalatable facts of the free enterprise market. Senator Coghlan agrees with me even though he is in Opposition. Builders must be able to make a profit, they will not build for love and we must accept this fact.

Senator Chambers made some interesting points. He correctly pointed out that the housing crisis is due to our successful economy. Growth in the economy is forecast to continue and I welcome it. Did we ever think we would see the day that we would have to worry about labour shortages in Ireland? Like me, Senators Cassidy and Tom Fitzgerald have spent a long time in this House. We spent most of that time worrying how Ireland would survive. No one, even the most optimistic people, thought we would live to see such economic success. As I said in both Houses, we could lessen the demand for housing by increasing unemployment but who in their right mind would suggest such a course of action?

I agree with Senator Chambers that local authorities could assist by aligning their actions at local level with priorities agreed at national level. This is an area where public representatives, particularly national representatives in the Dáil and Seanad, have a role and a duty to reconcile local views with the greater national priority. If this was done we would have a sufficient housing supply. I made this point on a number of occasions, not alone during the debate of this Bill, but on previous occasions in Dáil Éireann. Many people in politics want to have it both ways but this failing is not confined to one political party. A balance must be struck and all politicians should adopt national priorities.

The Department of the Environment and Local Government, the Minister and the Minister of State, have set down new regulations and encouraged an increase in densities, but these measures seem to take a long time to reach planning assistants and advisers. They seem to continue working in the same way. If all of the ducks could be lined up to face the same direction it would be a tremendous achievement. It takes a considerable length of time for some local authorities to implement national policy. Our national policy is, unashamedly, to build more houses but that is not to say we will build houses on every sidewalk or green space available in a county. People must be given a reasonable amount of time to lodge objections and develop plans. I would like to emphasise that there should be a reasonable amount of time and reasonable objections. The balance cannot all go one way. I appeal to national politicians in both Houses to take this on board when they go home to their constituencies.

Senator Quinn wondered why we keep employing the same consultant when a solution is still very elusive. The Senator answered his own question when he said that it was our booming economy that created the housing crisis. I listened to his contribution. He made the point that we are trying to drive people out of the rental market and that this was not acceptable any more. As people will be aware, I have a lot of time for him but I do not think he has read the details of the Bill. If he had he would know that we are not trying to drive people out of the rented residential sector. A person does not have to pay the 2% anti-speculative tax if they sign up to the rented accommodation rules, either the existing ones or the ones that will come on-stream as a result of the commission on the private rental sector.

I humbly submit that the aim of the 2% anti-speculative tax is to achieve a nil return for the Exchequer. I said this today in the other House and at my party's meeting yesterday. We will know we have been successful when we get no money from this tax. Its aim is to discourage speculative activities. The economic theory behind Bacon is to concentrate on the first time buyer to the exclusion of everybody else. The ultimate success of the 2% tax will be if we receive no returns from it at all. I want to emphasise that point.

Senator Quinn seemed to be under the impression that people should not be entering the rental sector anymore. That is not the purpose of this tax. People who comply with the rental rules and the new rules brought into play as a result of the commission on the rental sector, will not have to pay this tax at all. The Senator is correct in that Ireland is unique because the developed rented residential business has never taken off here, although people who come to live in any part of Dublin as students or otherwise use rented accommodation.

In other countries it is done in a far more professional way. As Senator Quinn pointed out, people rent for 20 or 25 years and never think of buying their own home. It is uniquely Irish to think that one must own one's own property and it goes back to the years when Ireland was colonised. Irish people want their own patch of ground. We are all like that. One does not have to come from the country to feel like that. Senator Quinn said he could not get over the fact that the person to whom he referred has been renting for 20 years and that he would never think of doing that, with the waste of money involved.

Continental Europeans do not think like that, neither do people in the United States. It is part of a business. We lack that type of developed rented sector. The commission will try to examine that. The Senator may not have read that section of the Bill or perhaps he took it up incorrectly. It is not intended to discourage people in the rental sector. We want to encourage more people into the rental sector but under the new rules of tenure, etc., which are to be brought into effect.

Senator Ó Fearghail made his maiden speech today. He had the misfortune in a past existence to run in three general elections with me in County Kildare in 1987, 1989 and 1992. County Kildare was divided in 1997 and he stood in Kildare South. I take this opportunity to wish him a long and successful career in national politics.

Mr. Cassidy

Hear, hear.

Mr. McCreevy

My friend and his colleague, Senator Dardis, will attest that he is an excellent county councillor and public representative. I have said that many times behind his back rather than to his face. He certainly will have a long career.

Senator Ó Fearghail referred to the growth in voluntary housing associations and the need to encourage this growth or to remove certain impediments. He lobbied me on this matter even before he became a Senator. We have examined what he is trying to achieve and I know of his record in County Kildare in getting this idea off the ground where it has been very successful. The County Kildare experience has been more successful than that in most other counties and he has been involved in it. He has pointed out to me some of the impediments he has noticed and we will try to address them. We discussed this some time ago with the Department of the Environment and Local Government. We will see what we can do in that regard.

He also referred to the shortages of expertise in the planning system and the delays arising. The Government programme, Action on Housing, a document which Senator Bonner had, tries to address these issues in so far as we can. There are proposals to increase the number of planning assistants to bring more planning expertise from abroad. In the past year, I have acceded to requests from the Minister for the Environment and Local Government, Deputy Dempsey, and Minister of State, Deputy Molloy, for more planning staff for local authorities. Some authorities went about acquiring them. As Senator Ó Fearghail would know, I gave him the go ahead to take on these people and by the time they did so, the staff there had already gone to private industry as well.

The problem is that the economy is too strong. I have nearly come to the conclusion that we need a small recession for a short period but nobody is advocating that either. In the planning sector countrywide, planning experts are leaving to go to the private sector, more applications are being received and not enough experts are there to deal with them when they come in. That presents a problem.

Senator Ó Fearghail mentioned various matters relating to social housing. The terms of reference for the recent Bacon report did not require examination of social housing. However, the Government carried out a review of social housing measures and improvements to the social housing programme detailed in the Government's document, Action on Housing. They include, for example, improvements in increases in eligibility limits for the affordable housing and shared ownership schemes and the doubling of the mortgage allowance.

Senator Ó Fearghail also referred to an efficiency audit in local authority areas. The planning Bill will address a number of issues which will improve the planning process. Delays arise in the planning process, as all Senators know who are members of local authorities. Anybody who has represented Kildare for any number of years could give tutorials to everyone else in the country on planning matters, such as when one looks for additional information, etc., and all these matters in which we are experts.

I referred to the Commission on the Private Rented Sector which is addressing these various issues and we expect to receive the report quite soon. A number of Senators referred to the danger of the anti-speculative tax leading to increases in rent. I tried to explain the purpose of the anti-speculative tax earlier. The emphasis is on trying to give a person a chance to reach the first rung of the property ladder. Regarding the appointment of Peter Bacon and Associates, Dr. Bacon was reappointed to carry out the study on the basis of his extensive knowledge and expertise which he built up in this area and his perceptive analyses of the situation. The quality of his reports testify to that.

Senator O'Meara likened the Government to a blind person when it comes to housing policy and compared me to a little boy with his finger in the dyke. I have been compared to many things in my past 20 odd years in politics, including in the recent past, but that is a new one. Perhaps she meant an arrogant little boy.

Ms O'Meara

I did not say that – not yet anyway.

Mr. McCreevy

We will leave that subject for the moment. What we have done for the Bacon reports every time is not stop-go. We have incorporated what Dr. Bacon has said. We have done all he has recommended and more. Very little of it has related to the tax side. We had two Finance Bills as a result of Dr. Bacon's report in 1998 and now, but most of it has been on the supply side because he has rightly pointed out that the supply side is the important part of it, which I have always said. I would like to think it is part of a thought out policy.

Senator Bonner has reminded me on a number of occasions of the problems of south-west Donegal. He referred to the problems in rural areas being different from those in urban areas, and so they are. I have to confess it is hard to see that what is happening in west Donegal relates much to what is happening in the building industry in Dublin. However, the economic analysis of Bacon draws a connection, to which other economists would attest, between building in different parts of the country. If Dublin is the only place booming it will draw all the building labourers. The blockies and chippies gravitate there because that is where is the boom is and where they will make their money. The purpose of Bacon is to try to address this in a global way.

I have exempted many items in the Bill from the 2% anti-speculative tax. Senator Bonner is very interested in the rural renewal scheme which I brought in three years ago for the Shannon basin. I am delighted to report what I hear from my political friends and opponents alike. My political opponents of that area were a little concerned that anything might happen to me in the recent past because even they have come out to praise me as being the greatest thing that ever happened in their region. However, as I said to Senator Bonner, I took the initiative against all type of advice given to me and my predecessors never to have a scheme like that. I said we would let it run for a period and then we would consider it for other parts of the country.

I do not think I have anything further to say. I may have missed some of the points made by the Senators but I thank them for their contributions.

Acting Chairman (Mr. Dardis)

I thank the Minister and join with him in congratulating Senator Ó Fearghail on his maiden speech and endorse what he had to say about him.

Question put and declared carried.

Acting Chairman

When is it proposed to take Committee Stage?

Mr. Cassidy

Now.

Agreed to take remaining Stages today.