I have been asked by the Taoiseach to address this House today on the recent elections. There has been much debate in both Chambers on last week's local and European elections and by-elections. No one can deny the Opposition's performances in the recent elections, and I congratulate the Opposition on the results. The results were very disappointing for my party and indeed for my own family. However, these were local and European elections, with two by-elections, and from this Government's perspective, the position is very simple. National issues are decided at a general election and the next general election is not due until sometime around the summer of 2012. Until then, the Government must continue to lead as we chart our way back to economic renewal.
On the major issue of creating financial stability as a prerequisite for economic growth and ensuring our public finances are brought into balance over the period until 2013, external observers are commenting favourably on the direction of Government policy. This Government has put the country's long-term prospects above politics and we are doing what is necessary to get the country back on track. Perhaps the Government parties are paying the price for those hard decisions.
It is a feature of democracies across the world that incumbent governments suffer badly in mid-term elections. Certainly in this country, incumbent governments suffered bad results in local elections in 2004, 1991 and 1985, yet there was no general election as a result. Under our Constitution, the Government and the Taoiseach are elected by Dáil Éireann. They are not elected by county councils or members of the European Parliament. The Dáil gave a resounding vote of confidence to the Taoiseach just last night, clearly stating its commitment to this Government and this Taoiseach.
This Government, along with the Green Party, is solid and cohesive and, as the Taoiseach has said, we are in it together for the long haul. I have an excellent working relationship with the Minister for the Environment, Heritage and Local Government, as does the Taoiseach, and I look forward to continuing to work with him and his colleagues as this Government does its utmost to bring growth and jobs back to Ireland. The business of government continues and important legislation continues. The Housing (Miscellaneous Provisions) Bill 2008, which began life here in the Seanad, passed Committee Stage this week and I hope it will return to this House before the summer.
Our country now needs its elected representatives to focus on the business of government in the worst economic downturn in 70 years. It does not need an election campaign which would have a hugely negative effect on the economy at a time when we require stability more than ever. We must put our shoulders to the wheel.
Contrary to some commentary, this Government is not isolated from the views of the public. We are very much aware of the direct effect of the current recession on families and individuals across the State. We see every day the effect of job losses on our friends and neighbours. The hard reality this year is that employment will decrease for the first time in many years in terms of total numbers employed, but it is also important to say that, in historic terms, many more people are working now compared with five, ten or 15 years ago. Some 1.8 million people are working as we speak because of the level of economic activity we are generating, even in these recessionary times.
The numbers on the live register are clearly a matter for concern but the only way we can return jobs to our economy is by restoring growth. The decisions we take now we do not take lightly; we take them with the long-term good of the State in mind. The electorate is clearly angry with the Government and within Government we hear and understand that anger.
This recession has had a range of effects across society and the recession stems from a range of reasons. This Government accepts that our current difficulties are not all down to international factors, although clearly the international economy has a huge impact on a small open economy such as ours.
As Minister of State with responsibility for housing, I know as well as anyone that property development and, in particular, the housing market, have been important factors in Ireland's economic performance over the past decade and a half. Successive years of record housing output, strong demand for home ownership through record employment and strong demographic fundamentals, all supported by a steady availability of credit, allowed many thousands of households to realise their home ownership ambitions. This Government accepts that we should have done more to contain the housing market which was fuelled by low interest rates and the easy availability of credit. While the housing market has reflected the good times, it has also been an advance herald of the downturn with the signs of slowdown becoming apparent long before the onset of the global financial crisis in the second half of last year.
The Irish housing market, like housing markets in all parts of the world, has experienced a sharp contraction over the past 18 months to two years. This has been reflected in lowering levels of construction activity, easing house prices and decreasing volume of mortgage lending. In terms of prices, the slowdown in the market for both new and second-hand houses has been under way for some time now. At this point, prices are now back to 2005 levels. Output last year matched the level of output in 2000. The volume of new mortgage lending in 2008 barely reached half the levels seen in 2005 and 2006. Affordability ratios have changed significantly with the national ratio now at 2003-04 levels and the Dublin ratio now back at 1996-97 levels. Nationally, 30,000 to 40,000 fully completed units remain unsold, with many thousands more substantially complete. A couple of years on from the start of the Towards 2016 agreement, under which 17,000 affordable housing units were to be delivered in a three-year period, local authorities have almost 4,000 unsold units on hand. At the same time, net social housing need has climbed by more than 30% since 2005, approximately 1,000 new households each month are becoming reliant on rent supplement, and the numbers of households in receipt of mortgage interest supplement has increased by more than 100% in the past 12 months. All in all, it is a very different proposition, a very different housing market, and a very different economy. Most commentators point towards further house price decreases in the period ahead and for as long as wider economic sentiment remains weak, it is difficult to see a radical reversal in sentiment towards the housing market.
Many sectors did well from the performance of the housing market over the last decade and a half. However, as a key component in our economic performance generally, the housing market did more than just create wealth for a few individuals. It also delivered wider benefits through the revenues it generated for investment in priority social, economic and environmental infrastructure throughout the country which has modernised and transformed Ireland beyond recognition. However, those days are behind us now and there is little to be gained from trying to get them back, even if we wanted to. We might as well try to repeal the laws of supply and demand. The truth is that we were too reliant on residential development for too long but then experience is something one does not get until just after one needs it.
There is no doubt the contraction has had severe and negative consequences for the public finances. However, the change has not all been for the worse. We need to embrace the opportunities presented to us to put the housing market — and I refer in this respect to all aspects of the housing market — and the structure of our wider economy on a more long-term sustainable level as we rightly welcome the very significant easing of affordability brought about by the market correction and lowering interest rates. Equally, however, we need to be careful of over-correction. Output of 90,000 in a year was too high. However, given that projected sustainable demand levels point towards a required output of 50,000 to 60,000 units per annum, the level of output expected this year at 20,000 is unsustainably low over the medium term. The great danger in over-correction is that we will simply store up future under-supply risking a repeat of the cycle of rapid price increases and affordability difficulties for first-time buyers. There is, therefore, a fine balance to be struck but Government and the stakeholders involved now have the chance to achieve that equilibrium.
As Minister of State with responsibility for housing, I believe strongly that a major starting point in that process lies in trying to match up carefully significant and growing social housing need with suitable available unsold housing units to achieve a very important alignment of social and economic objectives. The task of restoring balance to the public finances has presented difficult decisions to the Government necessitating expenditure savings across all areas of public policy and in every Department. It is accepted that we require flexibility and creativity and Departments are responding with fresh thinking and fresh approaches. The same is happening in the private sector. After all, necessity is the mother of invention.
I announced in October last my intention that long-term leasing arrangements would play an increasingly prominent role in the delivery of social housing. The further deterioration in the public finances since then and degree of readjustment required in the Government budget for this year means that role will have to be even more prominent. However, I take heart from the fact we have at our disposal new and creative ways to respond to need that can help us do more with less. Across Government, innovative solutions such as the long-term leasing initiative are being developed. We have also seen the establishment of the National Asset Management Agency. To strengthen the funding position of the banks and ensure the flow of credit to the real economy, the Government is conscious of the need to address the issue of impaired assets, in particular, specific asset classes currently perceived as carrying a higher than average risk in an Irish context which generally involve lending for land and property development. Strengthening the banks' balance sheets will considerably reduce uncertainty over bad debts and, as a consequence, ensure the flow of credit on a commercial basis to the real economy.
This Government was formed on the basis of the programme for Government agreed between the coalition parties. The Taoiseach has indicated we are now going to review the programme for Government on the basis that the whole economic world has changed. He has also indicated he intends to include the concerns of the voters and if changes need to be made in the structures of Government or Departments to reflect the priorities of the revised programme for Government, they will be made.
This Government is unwavering, we will continue to deal with the stark challenges presented to us. We will make the hard choices. I said earlier we are a small, open economy and, accordingly, we suffered the effects of the downturn in the international economy more quickly than other larger, more insulated economies but, equally, we will benefit more quickly from the recently reported green shoots and the expected long-term upturn in the international economy. Led by the Taoiseach, and in partnership with our Government partners, we will stimulate growth again and lead this country out of recession.
