I do not understand the purpose of this section. Is it a technical device to allow moneys to be paid to bodies the Minister decides should receive such payments?
SECTION 4.
Question proposed: "That section 4 stand part of the Bill."
Deputy McCreevy is correct. The Bill is drafted in this way to provide flexibility. It is not a specific Bill for a once off securitisation using a particular mechanism to pay a particular debt, that is equal treatment payments. It is framed in this way so that a future Minister for Finance who wishes to avail of a current source of money can do so in a number of different ways.
We are always wary of who future Ministers might be and how they might use powers such as this. Such concern is always raised when this kind of clause is inserted in a Bill. Are we giving too much power to the Minister?
The only power to raise money is specifically for the purposes of raising money to pay the equal treatment liabilities. The Minister is not given any direct power to raise additional moneys. If I or my successors wish to do so, I or they would have to seek, in the House, an order containing the explicit voted authority of the House to raise such moneys. Any Minister seeking that voted authority would outline the purposes for and manner in which he wished to raise money. This manner would be circumscribed by the provisions of section 4. We may well use the SPV model which is currently being proposed. This section contains a provision to set up a different type of body if this is the choice of the Minister. To answer Deputy McCormack's question, this power cannot be utilised without the express authorisation of Dáil Éireann.
Does the Minister know the current level of default on SDA loans? What would be the risk in a straightforward assignment of mortgages? Who bears this loss at the moment? Is it local authorities?
The level of default in the case of the local loans funds is virtually negligible. This would vary between local authorities. In this instance we are talking about SDA loans as distinct from HFA loans. The lower mortgage scheme experienced trouble because of the impact of inflation.
Presumably there would have been little risk in simply assigning the benefit of those mortgages to anybody willing to pay for them without going through the bond procedure and so on.
Yes, but this would have been seen as additional borrowing.
Effectively this is what it is. The other alternative to securitising loan books would have been to have taken money from the Exchequer. The SPV model could have been used to raise £200 million and the money could have gone directly to the Exchequer to pay off the debt. This was always an option of any Minister for Finance. It was decided to raise money by capitalising the future stream of income and to use it to pay equal treatment arrears. It is the prerogative of the Government to make a decision. While I disagree with its decision I have no quibble with its right to make it.
We are told the income foregone will be about £27 million.
I am not sure this is necessarily the case. We should look at how this cost is calculated.
Presumably there is the possibility of offsetting gains by borrowing at lower levels.
It depends what precisely we are costing. In effect we are drawing down income which will be paid over a period.
The level of default is small. New loans have not been issued since 1986. The cost of building houses was low at that time and local authorities had power to make people sell their houses. I imagine the level of default is negligible and that the proportion of the local loans fund taken up with house mortgages is nil because local authorities would have recovered their loans by making householders sell their assets and this did not arise in many cases.
Question put and agreed to.
Sections 5 and 6 agreed to.