Deputy Michael O'Leary gave notice of his intention to raise Question No. 40 of 5th November, 1969, on the Adjournment.
Committee on Finance. - Adjournment Debate: Office Accommodation.
The question I asked was in relation to what I regarded as an important statement which was made by the Minister at the opening of the Norwich Union buildings here in Dublin. I asked the Minister if, in view of his reported statement that the provision of office accommodation should be slowed down for the present, he proposed to take any effective measures to ensure that action in this regard be taken by insurance companies and developers. The Minister replied, as reported at column 200 of the Official Report:
In the course of my remarks to which the Deputy refers, I expressed the Government's belief that office building should be slowed down for the present and that developers, including insurance companies engaging in such work, should examine whether schemes for the provision of houses, flats or hostels could be substituted for new office projects they may have on hands. I expect that in response developers will consider carefully the extent to which it will be possible for them to meet the Government's view. It is proposed that consultations regarding their investment policies should take place from time to time with investing agencies, including insurance companies...
That is a welcome departure from the attitude of the Minister for Local Government. The Minister for Finance issued a note of warning suggesting that, perhaps, the time had come when insurance companies should curtail the provision of finance for such property speculation as office accommodation and turn their attention to the provision of more money for houses.
The only question I ask is whether the Minister's remarks to the effect that it is proposed that consultations regarding investment policies should take place from time to time with investing companies, including insurance companies, is an adequate response at this time from the Minister for Finance? There has been an increase in the amount of rent paid each year by Government Departments in this city for the past three years.
In a supplementary to a question put down by me and answered on 11th November, I drew the Minister's attention to the fact that the annual rental charge for Government offices in the city of Dublin in 1967 was in the region of £250,194; that in 1968 it had risen to £343,260 and that in the current year it is £347,506. This means that the capital value of what property the developers now possess in the city of Dublin and to whom this Government are paying rent amounts to something like £3 million in capital value.
I had occasion to ask the Minister whether he thought the time had come to reconsider our policy in relation to office rents in Dublin and the manner of leasing these offices. The Minister made a point that we did not have to lock up any precious capital in offices of this kind and that we needed it more for houses. However, I questioned whether the rental system in Dublin is on a seven years lease. It turned out that this is so and that it is possible for developers to demand new terms at the end of seven years.
The Minister said that it is possible for us to call off the bargain but by then the amount of rent paid would be gone down the drain. It may be argued that the Government are right in not locking up capital in the purchase of office blocks but it happens that some of our Irish insurance companies are backing some of these developers who, in turn, lease the premises to Government Departments as is the case with the new civic offices in which Dublin Corporation was involved. In fact, Irish Life have backed two tenders for people who have tendered for office blocks in the case of new city offices.
Since Irish Life or any other Irish insurance company are backing office developers and since the developers, in turn, are leasing the premises to the Government, would it not be possible to cut out the middle man and give the loans direct to the Government? This is an argument and I am not making a big issue of it but if an Irish insurance company's capital goes into backing a developer in any office block development, could not the Government go to such a company, especially an Irish company, and get the loan direct?
The real issue is—the Minister has referred to this—whether the insurance companies could pay more attention to the needs of house purchasers. I made a statement that to my knowledge Irish Life, during the past six months did not accept any mortgage arrangements for those who wish to buy their own houses. The Minister said that is not so but that is my information and in the case of the New Ireland it can be said that they have restricted or, if you like, discouraged, for many months those people who are anxious to obtain accommodation to purchase their own houses. In any case, it can be said that there is a reluctance at the present time on the part of insurance companies to meet the demands of people who wish to purchase their own homes while there is enthusiasm for property development business if possible, with a 999-year lease. This is regrettable.
Since the State has 95 per cent of the holdings of Irish Life one would be expect that that company would be anxious to meet the needs of home purchasers in the present serious housing shortage. The Minister may say that they have their policyholders to consider but housing is not a bad investment for any insurance company to be involved in. It may be necessary for them to have a certain interest in property development but not to the extent to which they are concerned now.
In reply to a question the Minister said that housing loans now amount to £6 million a year but my information is that they amount to £3 million in any one year so I ask the Minister where he gets this figure of £6 million a year. However, he may be able to answer that. The real kernel is this. If, as is the case, the Government have been involved in renting office accommodation from developers who have been involved in the rising property prices here in Dublin, it means that the Government have been a participant in this inflationary situation which obtains in relation to property prices in Dublin. The position can now be said to be that property prices in Dublin are comparable to those in London. This, of course, has its effect on costs for the ordinary person seeking a house. It means that the site value of that house has kept pace with the site value of office accommodation in the centre of Dublin or certainly some relationship has been kept between the one and the other. The site value of any house at the moment is such that one-third of the cost would be involved for the site value.
The Government, in their policies in relation to the provision of offices, in the manner in which they have entered into financial arrangements to ensure office accommodation for Dublin, have played a part in the booming, of property prices here in Dublin. The Government have played a deeper part than we realise. This is my information: the Minister may deny it or otherwise. My information is that developers have in fact, been informed, before any development work has been done on the site, that the Government would be interested in leasing office accommodation on that site and in that development. This means that the Government, in advance, assist in this spiralling development of property prices here in Dublin. Even if the Minister were to say that property prices would go up, anyway, it means that the Government are unhappily an accessory in this troublesome and very serious rise in property prices in Dublin which vitally affects home purchasers.
I do not deny that there is need for good office accommodation in Dublin. I am aware that an international firm has done a survey of European capitals and has found that Dublin has a great deal of obsolescent office accommodation and that we are in need of better office accommodation. The question we must face at this time is: Which is our greater need at present—the need for cheap houses for the many or the need for better office accommodation? Even if these are the only interests involved, even if we leave out what apparently is the real interest of those involved in this development which is not so much to provide better office accommodation as the gilt-edged possibility of a very early return on their investment, which undoubtedly exists at present in office building speculation —if there is a quick return in office building, as there is, and if it is easier to get a loan for £1 million from an insurance company for office building than to get a loan from them of £500,000 for house-building—we should demand pretty high standards of State-owned companies. The Minister said that we pay the same price finally for all our office accommodation. That may be. However, the fact is that where a Government themselves, by open plan beforehand, assure the developer that there will be a Government interest in taking over the office accommodation, it means that the Government are themselves investing in inflation and in the most dangerous and anti-social of all inflationary developments, namely, property values.
Take a man who, five years ago, could have got a house for £2,500. Over the past five years the price of any house in Dublin has doubled in value. Over the same period, his wage has not doubled in the amount he takes home each week. If the Minister would make the arguments that the insurance companies have the interests of their policyholders at heart we must wonder which policyholders they seek most to suit. Take a man whose only interest is in purchasing a house, and so on—the small policyholders in the insurance company. When he seeks to purchase a house he finds that the same policy being pursued by his insurance company in property speculation means that he has to pay double over a five-year period.
In the case of Irish Life, one must question whether the emphasis in that company is quite right in view of the national developments we seek to bring about in our economy. One must question their line on this blue chip insurance contract. Irish Life are handing out policy contracts and the premiums given to Irish Life by the policy-holders are directed by them to the Shamrock Trust in London. Irish Life is becoming merely a post office for the doing of that. Is it desirable to find an Irish-owned insurance company doing this? One might ask: Is there not a case for taxation here? If ready money is being made rather easily on a secure market in office development, one might ask: Are we getting sufficient in taxation back from these companies? Ironically, Dublin Corporation gives them a rates remission. This is given to these people who are on this absolutely certain investment.
It seems to me that the community is looking for punishment in the type of outmoded code under which Dublin Corporation actually gives a rates remission in this situation. It is time Dublin Corporation revised the situation. I would ask the Minister to do more than consult: I would ask him to meet these companies, especially the Irish-owned ones. Even if the New Ireland Assurance Company Limited is not State-owned, the Minister will agree that those associated with it are sympathetically inclined towards the Government. Many supporters of the Government have traditionally been associated with that company. They are at least on terms of easy familiarity with the board of directors of that company and it should be possible——
I could not even tell the Deputy who they are.
I think that about the best way to put it is to say that the Government are on terms of easy familiarity with those associated with the New Ireland Assurance Company, Limited. I would ask the Minister to see that more is done to ensure that these companies desist from their involvement in these property developments that are going on. You need not refuse outright to accommodate a man who wants to purchase a house. If you provide him with only 80 per cent of the price of the house by way of loan, you are asking him—an ordinary individual—to provide £1,000 deposit on the house.
The man at the bottom of this pyramid of property inflation here in Dublin is that person who cannot qualify for a loan under the Small Dwellings (Acquisition) Acts. The person who must go out on that open market and try to fend for himself and provide his own house has no protection from anybody. He is the person in whose face the doors of Irish-owned insurance companies are being slammed. They are asking him to provide a deposit that has rocketed beyond the reach of his pocket in the past five years. They now seek a deposit of £1,000 where possibly, a few years ago, they were looking for £500. These unfortunate people see no remedy in their need for a house. These are the people who are forced to seek accommodation in private flats where there is no control over rents and who are really at their wits' end to see what they can do. Though it might seem a long distance from their plight to fault the Government on their participation in the property boom in Dublin, the Government and the Irish insurance companies are ignoring the plight of these ordinary people and are adding to their difficulties. Unless the Government can get our insurance companies to develop a different policy, to arrange for lower deposit rates, to turn away from property development, unless the Government themselves take a hand at controlling the prices of property and land in Dublin—and that means getting out of the property racket—there can be no possibility of providing cheaper houses, cheaper deposit rates, for these people.
I may surprise Deputy O'Leary by saying that I do not disagree with the general trend of his remarks. I want to assure him that in this matter his own wishes and aims would not be a great deal different from mine or from those of the Minister for Local Government. We may, perhaps, differ somewhat on the practicalities of the situation. Let me say, first of all, in connection with this question of the Government renting office accommodation for their own requirements that this policy by the Government of renting rather than building for themselves began about 1965. At that time we were faced with a very serious capital shortage. Capital was urgently required for many Government purposes, such as the development of industry, social purposes, the erection of schools and hospitals, and so on. The Government very consciously took a decision, rightly or wrongly, that they could not afford to be locking up capital in office accommodation. They decided to rent instead.
I do not know any case where the Government have said to any developers, that they could go ahead and build something and the Government would guarantee to take it off them. My memory may be at fault but I am quite certain that has never happened. There may have been instances where the Government learned, through the Office of Public Works, that a building was to be built and where they entered into negotiations with the developers to take some of the accommodation in that building in order that they could have that accommodation adjusted to their own particular requirements. I want to make the distinction here between agreeing to take a building before it was started and agreeing to take a building which was to go up in any event.
However, on that particular issue I want to tell the Deputy quite frankly that for some time now the Minister for Local Government and myself have been discussing the desirability of our making an announcement that the Government are no longer in the market for new office accommodation. We would very much like to say that. Unfortunately, I feel quite satisfied that as soon as we make such an announcement some particular Department or some Government agency would prove conclusively that it needed new accommodation. If the Deputy were in my position he would find these demands irresistible. If I discussed one of these proposals with him he would agree it would be necessary that the particular Department or agency should get the accommodation it sought because it really needed it. In fact, Deputies on all sides of the House press me from time to time to provide accommodation of one sort or another for some particular purpose. It is not entirely an open and shut matter so far as the Government are concerned. We have been trying to hold the scales as evenly as possible. There is tremendous pressure for suitable adequate office accommodation for the public service. We are now reaping the fruits of 40 years of neglect when nothing was built or provided. We are right up against it and we must provide it. The question is how we can meet the legitimate needs of the public service without, at the same time, making undue inroads into the funds and resources which are very much required for urgent social purposes such as those Deputy O'Leary speaks of. I want to assure the Deputy this problem is actively under consideration by both the Minister for Local Government and myself.
The Deputy will recall that we put a stamp duty of ten per cent on new office blocks in the last Budget as an indication that we wanted people to think of other types of building. We intend to follow that up and we would take any other action which appeared to be appropriate or desirable.
I do not entirely disagree that perhaps the insurance companies could do a bit more with regard to housing accommodation. But they do very well. I have figures for investments in house purchase loans by them over the last few years. They are:
|
1966-67 |
£4.3 million. |
|
1967-68 |
£5.2 million |
|
1968-69 |
£6 million. |
This makes a total of over £15 million in the last three years. The bulk of that is still outstanding. In addition to that, they subscribe very generously to all types of National Loans as they come along. They lend money to various local authorities and invest very substantially in Irish industrial development. Just as the Government have to conserve their capital resources and allocate them on some basis of priority, so must financial institutions like insurance companies. They must look at the inflow of funds in order that they may give a fair return to their policy-holders and play their part in building up the country. They must look at their portfolio to see how it should be divided. In the course of discussions they may agree to increase their investment in housing. I am sure if they can do so, they will.
There is one other point I wish to make in this connection. From every point of view it is important for us to have a substantial capital inflow into the country. In the interests of overall economic development we are prepared to tolerate a balance of payments deficit of a certain amount every year. That can only be made up, and up to now has been made up or financed by an inflow of capital. I do not know what the Deputy would think of the proposition to have an office block in Dublin financed exclusively from abroad. That, in fact, is not a bad thing so far as the economy is concerned because it would mean that the resources available inside our community, whether insurance company resources or whatever, would be available for social purposes such as the Deputy speaks of. In so far as property development financed entirely from outside the country is concerned, I think that at the present stage of our development it is beneficial, but this has to be qualified by the remark that excessive activity in the building industry is not a good thing either. We must try to aim at a level of building activity which is sustainable over the years, perhaps gradually rising. We certainly do not want to do anything in the present situation—and I would ask Deputy O'Leary to try to understand this—which would bring about one of those stop-go situations in the building industry where there is a sudden clamp down and a great deal of unemployment and it takes years to get things going again and then there is excessive activity which inevitably leads to another curb.
What I promise the House we will certainly try to do is to ensure that the Government's requirement for office accommodation does not contribute to a difficult situation. We will try to ensure that the greatest possible flow of funds into housing and housing accommodation from all sources is achieved. We will try to so arrange matters that the very important industry we have here, the building industry, is allowed to proceed in the way I have said, at a level which is hopefully rising steadily and, at the same time, sustainable.
The Dáil adjourned at 6.52 p.m. until 10.30 a.m. on Friday, 21st November, 1969.