Dáil Éireann Debate, Tuesday - 15 June 2021
360. Deputy Francis Noel Duffy asked the Minister for Finance his views on a recent article by the Economic Social and Research Institute (details supplied); if the recommendations have been considered by his Department in conjunction with the Department of Housing, Local Government and Heritage considering the proposed significant increase in provision of housing; and if he will make a statement on the matter. [31379/21]
View answer361. Deputy Francis Noel Duffy asked the Minister for Finance if he will engage with the Minister for Housing, Local Government and Heritage to consider the recommendations outlined in a recent article by the Economic Social and Research Institute (details supplied); and if he will make a statement on the matter. [31380/21]
View answerI propose to take Questions Nos. 360 and 361 together.
The paper to which the Deputy refers essentially calls for higher levels of borrowing to increase public spending on housing, but it is important that we place this discussion in full context.
The Government’s response to the Covid-19 pandemic has had a significant impact on our deficit. In 2020, a general government deficit of over €18 billion was recorded. This is the equivalent of nearly 9 per cent of modified gross national income, or GNI*, or 5 per cent of GDP. For this year, the Stability Programme Update projected a deficit of another €18 billion.
Against this background, Budget 2021 still allocated €3.1 billion towards housing, the highest level of funding ever committed. Total expenditure in this area has more than doubled since 2016 and is 41 per cent above the previous peak level in 2008. The capital spending on housing for 2021 is 26 per cent higher than the previous year, and almost two and a half times what it was in 2017, demonstrating the massive commitments Government has already made in the area of housing.
While public investment has an obvious role in alleviating housing market pressures, there are also significant non-fiscal constraints. In particular, the public health measures needed to suppress Covid-19 have placed a direct restriction on the construction of new housing. The industry is now facing increased costs and difficulty sourcing building materials as a result of the pandemic, high international demand, and Brexit. There are also skills shortages within the construction sector, which is why the Government is providing significant investment in skills and trades. As acknowledged in the report, simply increasing expenditure will not negate these capacity constraints.
From a broader fiscal perspective, as we move beyond the extraordinary events of the pandemic, it is important to remember that it is neither sustainable nor prudent to run perpetual deficits. This fact is underlined by the European Commission’s recent announcement that the General Escape Clause of the EU fiscal rules should not extend beyond 2022.
Nevertheless, the Government is determined to fulfil its Programme for Government commitments to increase the social housing stock by 50,000 during its term of office. While capital expenditure allocations are a matter for the Minister for Public Expenditure and Reform, my Department and I are in regular contact with our counterparts in the Department of Housing, Local Government and Heritage through the Cabinet Committee on Housing and various other forums. Significant capital investment has been provided to ensure more people have access to quality, affordable housing. The Government will also publish its upcoming Housing for All Strategy later this summer, which will build on our commitments in the Programme for Government. However, we must also be cognisant of other, non-financial constraints on housing development and the need to ensure public investment is made in a sustainable manner.
