Dáil Éireann Debate, Tuesday - 15 June 2021
55. Deputy Louise O'Reilly asked the Minister for Finance his views on a recent paper published by the Economic and Social Research Institute, ESRI, on 3 June 2021 which argues for an increase in State borrowing to increase Irish housing supply; his views on its findings; and if he will alter the fiscal policy in order to double the level of capital investment in public housing in budget 2022. [31795/21]
View answer82. Deputy Ged Nash asked the Minister for Finance his views on a recent ESRI report (details supplied); his further views on whether, given the expected strong post-Covid-19 performance of the Irish economy and the likely continued low cost of sovereign debt, the adoption of a consistently negative Government primary balance can be pursued under a prudent and sustainable set of conditions which would be specifically for capital expenditure purposes; and if he will make a statement on the matter. [31609/21]
View answer131. Deputy Catherine Connolly asked the Minister for Finance if his attention has been drawn to a report (details supplied), in particular the proposal to pursue a consistently negative Government primary balance under a prudent and sustainable set of conditions with a view to doubling the existing capital investment in State-provided housing; and if he will make a statement on the matter. [31784/21]
View answerDeputy O'Reilly is not here to ask her question. I call Deputy Nash.
It was reported to the Ceann Comhairle's office that I would take Deputy O'Reilly's question on her behalf.
I have no notice of that. I call Deputy Nash.
Enormous and ongoing deficits are never a good thing, we can agree on that. The thinking of the Government and the officials in the Department of Finance seems to be concentrating on getting the deficit down as quickly as we can, regardless of the pressing public investment demands and requirements. Given the times we are in, the propitious borrowing environment and the huge gap in housing supply, I am with the ESRI when it states the Government should double spending on housing supply, financed by a small, ongoing deficit of 1.5% of GDP on an ongoing basis. What is the Minister's response to the position of the ESRI?
I propose to take Questions Nos. 55, 82 and 131 together.
The Deputy has offered a view about my view towards deficits. We ran a deficit last year of €18.5 billion. The deficit this year, expressed as a percentage of our GDP, will be larger than the deficit for last year. I am well aware of the role of deficits and Government borrowing in stepping in to support our economy. Over the past two years when the demands on our economy and society have been so great, I and the Government have run very large deficits for our country to enable a response to the health crisis we faced.
The ESRI commented on a particular issue relating to housing in its report. Housing currently has a budget and funding allocation that is an all-time high for that Department in the amount of €3.1 billion. Total housing expenditure has now more than doubled since 2016 and capital expenditure for that Department has increased nearly fourfold over that period. It is absolutely the case that we must reduce our deficit steadily and over time because of the level of high public debt that our country already has and because we also know that when a country is borrowing a lot of money during more normal times, it can be a source of vulnerability to the country. We are already investing a significant amount of capital into addressing the urgent demands for housing for our citizens. I will engage with the Minister for Housing, Local Government and Heritage, Deputy Darragh O'Brien, and the Minister for Public Expenditure and Reform, Deputy Michael McGrath, regarding how we increase that investment further in the future.
Housing is the single biggest social issue facing this country. We all accept that we are running an extraordinary deficit in an extraordinary time at the moment. It would be remiss of all of us not to understand and accept that the Government has made a considerable investment to keep people safe, keep businesses open and keep people close to their employment at this unprecedentedly difficult time. We acknowledge that, relatively speaking, the investment in housing is significant compared to previous years and situations. However, it is nowhere near enough to deal with the underlying problems we have at the moment. I agree with the ESRI that running a relatively small deficit on a mid-term and ongoing basis in order to allow us to invest in critical social infrastructure such as housing is going to be important not only from a social perspective but also from the point of view of productivity and competitiveness. The Minister would acknowledge that the likes of IBEC and the American Chamber of Commerce Ireland have identified it as a key bottleneck and an issue we need to address. If we need to borrow and can do it sustainably and sensibly, we should do it.
My question is in this group and I thank the Minister for that but mine is a specific question. Has the Minister's attention been drawn to this report? If so, has he read it? If so, does he agree with the recommendation that the Government can afford to borrow and build the necessary housing? That is the specific question, which I ask in the context of a severe housing crisis. Telling me that we have doubled our housing budget has nothing to do with the question that is being asked. If he could, I would ask him to address the question because we have a housing crisis. I come from a city in Galway where people have been on the housing waiting list for 15 years. Only one or two properties are available within the cap of the housing assistance payment, HAP. That payment started off at a very low price when it was brought in by the Labour Party and Fine Gael in 2014 but it has now risen to €1.4 billion. That figure is taken from the ESRI report. Will the Minister deal with the report? There are some points in it that I do not agree with but I am asking for the Minister's viewpoint. Is he aware of the report, what is his opinion on it and what is he going to do about it?
Housing policy over the past decade has failed. There has been an excessive reliance on developers and investment funds to deliver supply since the State withdrew from the housing market. Today's housing crisis is causing serious social dislocation. It is damaging the life prospects and chances of many workers and families in our communities. It is also damaging for the competitiveness of the economy, as I mentioned earlier. It is the natural outworking of an unnatural and damaging housing policy pursued by the Government. The policy is shaped not only by the Department of Housing, Local Government and Heritage but also by the Department of Public Expenditure and Reform.
Professor McQuinn of the ESRI has demonstrated that even under conservative estimates, the Exchequer could raise €4 billion each year in additional resources on a prudent and sustainable basis. That would be enough to double the level of capital investment in housing from €2 billion to €4 billion in budget 2022. Sinn Féin has been making that argument for years and the only reason for the Minister to oppose it would be on ideological grounds. I ask him to commit to doing what the ESRI is calling for, that is, doubling the capital investment in housing and start to end the housing crisis that the Government's policies have caused and deepened over recent years.
I thank the Deputies for the different questions. In response to Deputy Nash, the answer is yes, I do. I am well aware of all the challenges faced by so many with regard to housing. We are putting in place a huge amount of additional investment to respond to it.
I will say to Deputy Connolly that I am aware of it and I have read it. I agree with some but not all of it. Am I going to act on it? I am facing many different demands to increase borrowing at the moment. I cannot, therefore, commit to any particular action with regard to additional borrowing for one policy area. That must and will be done in the context of the budget later in the year. It is relevant to make a point about previous levels of capital investment when we are talking about how there might be a need to increase capital investment in the future.
In response to Deputy Doherty, the State is not withdrawing from the building of homes in the country. The State is currently the largest supplier and builder of homes in the country. The reason we have increased capital investment for housing in the way we have is because of my acknowledgement of the need for the State to be a direct builder of homes.
The State withdrew from it for a long time. The problem is that even when the Government has re-entered, it has not been up to scale. Read what the Economic and Social Research Institute, ESRI, said and stop dodging the question. It said to double capital investment in housing. Sinn Féin has been saying it year after year. The Government has remained tone deaf to that message. As a result of that, the Government has caused a housing crisis through its policies. It did not happen by a national disaster. It was a result of housing policies that the Minister and the Government have pursued. Taking the politics out of it, the ESRI is saying that the capacity is there to double investment in housing from €2 billion to €4 billion. That should be done in budget 2022 and that would start to end the housing crisis.
The Minister might say he is going all in on investment funds and on developers and we will put this resource into social and affordable housing. It is not cutting it, however, which the ESRI is saying. The Government, therefore, needs to recognise that its policies have failed. It needs to be humble enough to recognise that it has deepened the housing crisis. It now needs to stop repeating the same mistakes over and over again. Change direction, double investment in housing and start to end this crisis for so many families.
I thank the Minister for his directness. He might tell me what he disagrees with because I have highlighted some of the things said by the ESRI. It said that without significant investment, another decade of inadequate housing supply, upward rents and upward costs of houses is looming.
It sets out that one in three households that was not in receipt of housing supports was in trouble prior to the pandemic. It was paying so much on rent, mortgages, etc. It said that if we borrow at very low rates and build houses, it could reduce Government expenditure. I want to correct something I said. The ESRI told us that the HAP is €1.4 billion in total. That is the cumulative cost to date and rising. Does the Minister disagree with any of that? If he does, what is his solution to homelessness, which is costing a huge amount, to HAP, to the rental accommodation scheme, RAS, and so forth? What is his solution? Are they just inevitable by-products of his ideology?
I have beliefs about the value of our society and great beliefs regarding the role of a strong State to meet the needs of our society. That is what I, this Government and the previous Government have been working so hard to do in responding to the many needs and challenges we know are there for our citizens in finding the homes they need at affordable prices and rents. I acknowledge that we have much more to do.
To answer Deputy Connolly's question regarding my views on the report, I believe things are missing in it. The report does not make adequate recognition of the capacity constraints of our economy and the difficulties our construction sector has in growing in scale to deliver the housing output we need.
Also missing from the report is an acknowledgement of the multiple other competing demands the Government and I face, and the need we will have, at the right point, to begin to change our level of borrowings. In answer to the Deputy's question, I believe those issues are missing from the report.
In response to Deputy Doherty, I am always humble in the face of meeting people who do not have a home or who cannot afford their rent or to buy a home. I am, however, equally resolute in making the point that in face of that need, we have made huge increases in the amount of money available to respond to our great housing challenges. This Government and I are determined to stick at it until we get the progress our country wants.
I understand that Question No. 56 is grouped with Questions Nos. 68 and 74. I do not, however, see any of the named Deputies here to ask the question, in which case I will move on to Question No. 57 in the name of Deputy Conway-Walsh.
