Dáil Éireann díospóireacht -
Wednesday, 10 Feb 1971

Vol. 251 No. 7

Private Members' Business. - Housing Finance and Mortgage Interest Rates: Motion (Resumed).

Debate resumed on the following motion:

That Dáil Éireann calls on the Government to hold a public inquiry for the following purposes:—

(1) to examine the causes giving rise to the increase by building societies in mortgage interest rates for existing borrowers;

(2) to report on the claimed need for increases and whether and when such increases can be reduced;

(3) to recommend the measures necessary to be taken to reduce interest rates or otherwise to ease the burden for borrowers if the increased rates are necessary;

(4) to examine and report on the adequacy of the present methods of financing house purchase by building societies, insurance companies and other sources, and recommend what steps should be taken to increase the flow of private funds for housing purposes; and that the inquiry be concluded on items (1) to (3) in six months and on item (4) within twelve months from its inception;

and Dáil Éireann is of opinion that, pending the inquiry, increases in mortgage interest rates should not be permitted.

—(Deputy Clinton.)

Mr. Foley

I should like at the outset to condemn some of the statements made by my colleague, Deputy Clinton, with regard to my efforts and the efforts made by the previous Minister for Local Government in this matter. Deputy Clinton said I gave a public assurance that something would be done about the increased rates of the building societies. He stated that nothing concrete was done and this was a condemnation of me. As a public representative of an area in which a large number of people had expressed their dissatisfaction regarding the interest rates charged by building societies, I gave a public assurance that I would urge the Government to look into this problem in a speedy and efficient manner. That assurance was given and was given back to me by the then Minister for Local Government, by the then Minister for Industry and Commerce and by the Minister for Finance who was directly involved at that time.

I represent a constituency in which there is a large number of young married couples. Many of these young people have been tortured by the increased rates demanded by the building societies during the years. I express my sympathy with borrowers whose interest rate has been increased, in particular those who originally were charged a rate of 5 per cent and now find themselves having to pay 8 per cent. This is no credit to the building societies in view of the fact that many of these borrowers were within two or three years of completing payments on their houses. Many of the people who found themselves in this position had to re-budget their family income. People such as gardaí or civil servants or those in similar occupations had to adjust their budgets in an effort to meet the increased costs of the building societies. It was unjust that they should have been put in this position when they were within reach of owning their homes. For most couples the only piece of property they will ever own is their own home and it was shattering to find that they had to continue payments for another four or five years. I express sympathy with these people and I hope the Minister in his reply will give some hope and assistance to the people who have suffered as a result of these increased rates.

We must recognise that building societies borrow money on short term and loan it on a long term basis and this course cannot be recommended. I realise that people are inclined to invest their money for a period and, having made substantial profits, they withdraw it when they need it for themselves. The building societies should encourage long term investment and they can do this by offering attractive terms. The societies should realise that long term investment may be the solution rather than increasing the interest rates as has been done in the recent past.

A large number of building societies advertise on television and radio. They are all looking for money and I see no reason why they cannot join together and run a joint advertising campaign rather than each conduct an expensive advertising campaign. At the moment six building societies are advertising on television and radio; three are from one company and two are from another company. It appears ludicrous to me that they do not cut their costs by having a joint campaign. By doing this they could save a considerable amount of money which might be diverted towards helping to reduce the high interest rates now charged. There should not be any problem for the societies to get together in the manner I have outlined. If the Government decided that the building societies should come together there would not be any difficulty in having joint managership and having the societies operate as a single entity. I feel very strongly about this matter. I consider that amalgamation such as I have outlined would eliminate duplication of expense and would be a worthwhile course to follow.

The Government should urge young people to invest money in building societies and to help the societies which play a major role in our building industry. I am on record on the 15th November, 1969 in the Evening Press and the Irish Times as having said that I realised the building societies play a vital role—a role the Government would not be able to play at the moment. If the Government decided to do this they would need tremendous financial resources which could be expanded so that other less well off sectors of the community could benefit. In this way the building societies could help the Government and help themselves by allowing young people to invest their money on a long term basis so that when the time came for requesting a loan from the building society, the early investment by these young people would reap its reward. They would gain the facilities which they would normally expect to gain from the local authority or some other body.

I requested an inquiry. An inquiry is being carried out, and here I want to differ from my colleague, Deputy Mark Clinton, who said nothing has been done. However, I urge the Minister, in the interest of all the middle-class people who are burdened with these increases, which will continue if we do not do something about it, to ensure that when loans are granted building societies will make it quite clear to the borrowers that the rate can be increased. I have had numerous letters from young people who did not know whether they should seek a lawyer's advice or go ahead and pay the increased rate. Deputy Clinton made a case here for a person who did not pay it and went on paying the old rate. I had a similar case, and the person who paid the old rate discovered afterwards he would never own his house by paying the old rate. He therefore, had to pay the new rate which was such a heavy burden that the family had to readjust their financial affairs. The Minister should ensure that the terms of building society agreements are legible and that important conditions are not to be concealed in small print in the document.

I have expressed my dissatisfaction about this matter in the newspapers and I shall continue to do so until something is done about it. This motion requests an inquiry, but an inquiry is being held. I would urge the Minister to do what he can to expedite this inquiry and thus ease the minds of the thousands of borrowers who are completely dismayed and many of whom, as I say, have had to adjust their incomes or, perhaps, sell their houses and live in flats because the payments were beyond their means. The Minister is capable of tackling this problem, and I do not believe there is any necessity for this motion. However, the principle is a good one, and it is not merely the concern of the Opposition that is involved here. There is concern in the Government benches also for the middle-class people who are shouldering the greatest burden here.

If it is necessary for the Government to take over the building societies this should be done. That may be a very drastic remedy but if something positive is not done there will be complete dismay among borrowers. No resources will be available to help them, and the payments will be too heavy for them. If this happens our whole building industry will fall asunder. I do not want to see that happen, and I am convinced that if the problem is tackled in a workmanlike way it can be solved. I would ask the Minister to look into this matter and to let us know in his concluding speech when the findings of this inquiry will be made known to the public.

Mr. L. Belton

When Deputy Foley began his speech I thought that he and Deputy Mark Clinton were going to be completely at variance but, listening to Deputy Foley, I do not think he has any cause to quarrel with his colleague, Deputy Clinton.

Mr. Foley

Except at election time.

Mr. L. Belton

The only thing Deputy Mark Clinton said was that Deputy Foley had promised to take a very active interest in this matter, to pursue it and see that the situation was rectified as far as possible and that an inquiry would be held. I do not think Deputy Foley denies this. He agreed that he undertook to do this.

Mr. Foley

He did do it.

Mr. L. Belton

The whole problem seems to be lack of communication between the two Deputies. Deputy Clinton had not been informed that Deputy Foley had done this or had not been informed what success Deputy Foley had met with. Having listened to Deputy Foley, I am still at a loss, because he did not explain the situation. He said an inquiry was being held. Has this inquiry started? How long is it since it started?

Mr. Foley

Long enough ago to have the result.

Mr. L. Belton

Deputy Foley should use his persuasive powers to ensure that this inquiry reaches a decision. He will have my wholehearted support in this and I am sure he will have Deputy Clinton's as well.

I raised the matter of the functions of building societies with the Minister's predecessor, who is no longer a Member of this House, and I tried to raise the matter on the Adjournment because I was not satisfied with the answers he gave. The matter was subsequently raised on the Adjournment but because of cross-talk between the Minister and Deputy O'Connell, the Minister rightly or wrongly, left the House without replying.

Minister for Local Government (Mr. Molloy)

He was not given an opportunity to reply because Deputies came in and used up the Minister's time by heckling and interrupting him.

Mr. L. Belton

The Minister's memory may be at fault. Deputy O'Connell asked the Minister if he could ask a question and the Minister kept saying, "No".

I am glad to hear this inquiry is now under way. I am sure the present Minister, being young and energetic, will make every effort to have the findings of this inquiry made known as soon as possible. I hope it will not go on indefinitely.

Everyone realises the important part building societies play in trying to satisfy the housing needs of people. It is quite possible that local authorities who have money which they can lend for house purchase may never be called on to lend much of that money because they cannot lend money above a certain ceiling limit. Even a modest house costs £4,500 or £5,000 yet local authorities in Dublin anyway cannot lend more than £3,000. This means that purchasers have to find an extra £1,500. Many people find that because they cannot save the deposit they are unable to avail of a local authority loan and they have to turn instead to building societies.

Most people, apart from those in the higher income brackets, buy only one house in their lifetime. They have to consider this very carefully and even if they decide to buy a washing machine they must weigh up all the pros and cons before they decide what to buy. They may buy several television sets and several cars but buying a house is a great transaction in their lives.

Before Dublin Corporation give a loan they inquire into the applicant's income, in order to ensure that the applicant can afford the repayments and provide for his family as well. He may not have a family at that time but long before he has paid for the house he will have a family. Dublin Corporation insist that a certain amount is left after the repayments, rates, et cetera are allowed for. Dublin County Council announced today that deposits on houses at Donaghmead are to be increased by £200. I do not think this will be welcome news to many prospective house-purchasers.

Deputy Clinton rightly pointed out that the wholesale tax has added to the cost of housing and the increased tax on cement and timber has also increased the cost of housing. The average person decides how much he can afford to repay but after five or ten years, and by this time he may have a family, the building societies increase the rate at a time when he can hardly afford to pay what he originally agreed to pay; and possibly in another five years or even less, when the children are going to school and there is considerable expense involved in clothing them, he finds the building society is calling on him to pay even more money.

Deputy Foley said he did not see much need for this motion. This motion has been on the Order Paper for quite some time. The inquiry was probably started when the motion was put down and I will give Deputy Foley full credit for his efforts. An old proverb which states that it is often the last straw which breaks the camel's back may ring true. It is possible that this extra push may have helped.

Mr. Foley

I am very grateful to the Deputy.

Mr. L. Belton

I did not put it down. Actually it was Deputy Foley's colleague, Deputy Clinton, who did. The motion says:

...to examine the causes giving rise to the increase by building societies in mortgage interest rates for existing borrowers;

There is no harm in asking for an inquiry to be held to examine the causes of the increase in interest rates and to report on the need that is claimed for increases and whether and when such increases can be reduced.

As the Minister agreed when I put down the question, the building societies have some special arrangements—I do not know exactly what they are—some special concessions due to the fact that they lend money to help people to acquire their own houses. If those societies get special privileges for this reason, they should be aware of their responsibilities. I am not saying they are not. Possibly they are. Not only should Deputy Foley welcome this motion but the building societies should also be glad to be given this opportunity. If building societies have a case to make—and perhaps they have—if they are entitled to an increase and can justify it, there is no use in having a whispering campaign going on outside that they are putting up the interest rates when they like and making huge profits. This would come out in an inquiry. The building societies should be glad of this opportunity to show the public that they are not doing this just because they want to.

Deputy Foley had one criticism of the building societies which I found hard to follow. He said that different building societies advertised separately on radio and television. He seemed to indicate that he thought they should advertise together. This might help them to economise but I do not see what is wrong with the present system. We must remember that each building society wants to get money for itself. There are several other firms engaged in the same business. On radio and television it is quite common for several firms engaged in the same business, and with the same product to sell, to have separate advertisements. We have this in the case of beer.

Mr. Foley

What about the cost?

Mr. L. Belton

They seem to think it pays them. There are six or eight different beers and they are all advertised.

Mr. Foley

People do not have to drink beer but they have to borrow money.

Mr. L. Belton

It is only a point. Deputy Clinton raised another point of which I was not aware. I am sure Deputy Foley is aware of it. I represent a city constituency and I have very little to do with farming. Deputy Foley would have something to do with farming. The Agricultural Credit Corporation lend money to farmers at a special rate and there is a subsidy on the interest rates for farmers. I am sure that very many Dublin people would be interested to hear this, because the average Dublin person believes that the Government are giving too much by way of subsidies and otherwise to farmers, and too little to city people. I do not see why the Minister could not devise some scheme to subsidise the interest rate on housing, or to give some relief to the person who is trying to buy a house. To the normal city dweller the buying of a house is as important as any undertaking engaged in by a farmer. If it is right to subsidise farmers—I am not saying it is not—surely it is equally right to help the city dweller in this huge undertaking and to help him to live in peace and quiet without having to wonder and worry about when he will hear that the building society has had to increase its rate.

Again I am appealing to this youthful Minister. Surely it is not beyond his power or his capability to devise some scheme whereby the purchaser of a house could say at the start: "I will be able to pay so much per month and after so many years I will own my own house." It has been pointed out by every Deputy who has spoken so far, Deputy Clinton, Deputy O'Connell and Deputy Foley, that as things stand at the moment, if the purchaser finds when the building society asks for an increase that he is unable to pay it, that he is stretched to the limit of what he can pay, his only alternative is that he can continue to pay the old rate but he will never own the house. That is a dreadful thought. The Minister should try to solve that problem and to ensure that people in urban areas who embark on the project of buying a house will own their own houses in 25 or 30 years.

The Minister and his Department should do everything possible to encourage these people to provide their own houses. Under such a scheme there are quite a number of people who could buy their own houses but, because they cannot have any definite idea of what their repayments will be they wait and try to get the local authority to house them. Therefore an unnecessary number are thrown onto the waiting list to be housed by the local authority. If the amount could be fixed at a certain level and the borrower knew he would have to pay the amount—as he knows in the case of a local authority loan—that would help to relieve the local authorities of a certain number of housing cases with which they have to deal.

I do not see that this motion has done any harm. Deputy Foley seemed to think it had. I think there was every need for it. It certainly did not hinder but helped the starting of such an inquiry. As regards the building societies it gives them an opportunity to justify their claims if they have a case, and possibly they have, for an increase in their rates of interest and it prevents people from wrongly criticising them for doing so. The Minister should wholeheartedly accept this motion.

Mr. Molloy

In relation to the review which has been mentioned I want to make it clear that this review is in progress. It will cover matters in relation to income tax and corporation profits tax paid by the building societies. It will also look into the question of unjustifiable increase in interest rates by the societies.

Mr. L. Belton

Has it started?

Mr. Molloy

Yes. It is a group actually. It is chaired by a Department of Finance representative and the other members of the review group are officials of the Department of Finance and the Department of Local Government.

Mr. L. Belton

When did it start?

Mr. Molloy

In 1969. Late in the year 1969. I hope they will be able to report to me within two months. The whole question of building societies is very interesting and one should get it into perspective. My remarks, of course, will not cover those matters which are at the moment under review by the Committee.

When one speaks about housing and especially when the Minister for Local Government speaks about housing he must keep at the forefront of his mind the various sources of capital for housebuilding. There is no doubt that the building societies are a vital source of capital for housing and are a very important arm in the provision of finance to enable us to continue with an adequate housing programme. The question of increasing the flow of funds into the building societies was raised several times and is included in the terms of the motion. I can only illustrate the extent to which building societies are involved in housebuilding and the increasing investment that they are making in housebuilding by giving figures which are available to me since the early 1960s. Since then they have more than trebled their annual lending for house purchase and in fact in that period lent up to £76 million for housebuilding. That is quite a sizeable contribution and there are many thousands of our people who would not be housed today if it were not for the contribution which the building societies made and the opportunities which the building societies gave to these people.

There are two sides to the operation of building societies. One of course is the borrowing of the money which is then lent so there is borrowing on one hand and lending on the other. The money that is borrowed, of course, is on short call and those investors who place money with the building societies can withdraw their money at very short notice. However, the money that is lent by the building societies is usually lent for a period of 25 years. So, we have a situation where long term lending is being operated by the building societies but on short term borrowing. The difficulties for the building societies should be quite obvious. To ensure a continuous flow of funds to them they must offer current interest rates, interest rates which will be attractive to people who have money to invest. When we speak about those who invest in building societies it is as well to mention that investments vary in size. It is not confined to people who make large investments. They are a source of investment also for people with small amounts of money for investment. There is a whole range of different classes of people who are benefiting from their investment in the societies.

It will readily be appreciated by Deputies on all sides that if these interest rates were not attractive, the investor would withdraw their money and invest elsewhere, where they would find the attractive interest rates. If that were to happen, if the interest rates offered by the building societies were not attractive, it would bring to an abrupt end any expansion in the operations of the building societies. It would bring to an abrupt end any expansion in lending and if it were to continue a situation could be brought about where money which had been lent out on mortgage would have to be called back to repay those who had lent money originally. If such a situation were allowed to come about it would be a great disaster for the building industry, for those without homes, for the 80,000 men involved in the construction industry. Our whole housing programme would be affected.

The conditions the building societies lay down in their agreements with the borrower are matters over which the Minister has no control. He cannot dictate the terms of the agreement the building societies will make with those who borrow money from them. If, as has been suggested by several Deputies, they were to attempt to operate fixed rates of interest and bearing in mind that they are obliged to pay current interest rates on their borrowings, a situation could be brought about where present day borrowers who would be paying present day prices for houses would have to pay interest rates ranging from 12 to 15 per cent and they would, in fact, be subsidising people who had borrowed money at the lower interest rates at a time when house prices were also lower. I do not think any reasonable person would support that situation or would agree that building societies should be obliged to lend money at an interest rate which was to remain fixed for the rest of the period of that loan. It would be throwing an unbearable burden on present day borrowers and they would, in fact, be subsidising persons who had obtained loans in previous years as I have said, at lower interest rates and bought houses which were very much cheaper.

How could the existing interest rates remain fixed without throwing that burden on to present day borrowers? Deputy Clinton suggested that we should subsidise the interest rates. There are many arguments against doing that and I would like to put them on the record of the House. In the first instance it would be an extremely expensive exercise for the Government to subsidise building societies' interest rates. For example, the cost of stabilising interest rates at 7 per cent would be about £550,000 in the first year and, of course, that would double in the second year to £1,100,000 and rise to £1,650,000 in the third year and so on, continuing to increase at a fantastic rate; if interest rates were to rise the cost would be even greater than this.

The existing aids for house purchase are State and local authority grants, rate remissions, which are available to persons building grant-aided houses, stamp duty exemption and site subsidy. All these aids to enable persons to build houses and to purchase houses are worth in all more than £1,000 to a house purchaser so houses are being heavily subsidised by the State in all these varying forms. Sometimes people forget to mention such things as rate remission, stamp duty and State subsidy in certain cases. All in all, this is a fairly accurate assessment of the total subsidies paid on average to enable those who want houses to purchase them.

The relief from income tax, which is allowed on the interest content of the loan repayments has the effect of reducing an interest rate of 9 per cent to about 6½ per cent. Another point that should be stressed is that it would be anomalous in present conditions to subsidise interest rates when one of the greatest difficulties in providing houses is to secure sufficient capital to finance the houses and to boost artificially the demand for capital by subsidising interest rates would certainly be anomalous. Subsidising interest rates would mean that the person who could afford to borrow most money would get the greatest assistance. In all State-aided schemes operated by the Department to help persons to purchase houses we strive to ensure that the maximum State aid goes to that section in greatest need.

Mr. L. Belton

Would the Minister say if that happens in the Agricultural Credit Corporation?

Mr. Molloy

I shall deal with that before I finish. Subsidies inevitably come up when people discuss housing. Subsidies are already absorbing £14.8 million. If that capital were not being used to subsidise housing many more houses could be built with the money being used for subsidy.

With regard to the Agricultural Credit Corporation, it is mistaken thinking that the loans made by the corporation are made at subsidised rates of interest. The rates charged are based on the rates the corporation has to pay on its borrowings. The only exceptions are some relatively small loans made under specific schemes; the costs involved in these are infinitesimal compared with the costs involved in interests rates in house purchasing. Moreover the operations of the corporation are not comparable to those of building societies because the latter do not have to rely entirely on short-term borrowing while the corporation loans are, as we know, generally for much shorter periods than those of the building societies, which lend for a period usually of 25 years.

Mr. L. Belton

Are they at a lower rate than the building societies?

Mr. Molloy

They are, but the loans are for very short periods.

Mr. L. Belton

They are at a lower rate.

Mr. Molloy

Yes. I have already told the House we are reviewing the tax arrangements and I hope to have the report within two months. Building societies offer money at 5½ per cent tax free. This is a very complex matter but I think I could briefly give some explanation as to how this works. Interest to the investor is £5 10s in the £100 and the tax paid to the Revenue Commissioner is 70 per cent of the standard rate, 4s 11d in the £1, amounting to £1 16s in the £100; then there is an allowance for management expenses of £1 6s making a total of £8 12s. The societies lend at 9 per cent leaving a surplus of 8s of which about 2s 9d goes in tax at the standard rate of 7s. The 4s 11d is applied to the gross amount of £7 6s —that is the total of the £5 10s paid to the investor and income tax at the rate of 4s 11d, that is the £1 16s tax.

It is interesting to note that the Central Bank in its annual report for 1969-70 stated that the building societies have little option but to bring their rates into line with those elsewhere if they are to continue to attract funds. The Central Bank group had no axe to grind and this was, therefore, valuable, independent opinion as to how free the building societies should be and how they should operate. They said it was essential they should have this freedom to fix their own rates so that they would continue to attract funds. The interest rates are determined by the levels prevailing in the economy generally.

This motion refers to increasing the flow of money for housing. The necessity to increase the flow is not borne out by the facts because there has actually been an increase and this increase is mainly because of this freedom to fix their own interest rates. The White Paper, Housing in the Seventies, gave an assurance to the building societies that they would be left free to fix their own interest rates and, since then, there has been a tremendous increase in the flow of funds into these societies. To illustrate the size of the increase, in the past 18 months building societies have approved 9,388 loans. This was 3,687 more than the figure for the 18 months prior to the publication of the White Paper.

The capital inflow in the six months prior to the publication of the White Paper was £6.4 million and in the six months after publication it went up to £9.7 million. No one could deny that the building societies are attracting money and using it in the best possible way.

I should like to compliment the societies on an arrangement they made with Dublin Corporation to give up to 95 per cent loans for package deal houses. This was done on the basis of guarantees by local authorities. It is up to other local authorities to follow that example and give similar guarantees. That would help to make building society funds available to those on lower incomes.

Deputy Clinton said building societies have a surplus available and this surplus should be invested in houses. That is not the true position. At no time have the societies had money in excess of the demands for house purchase loans, except during the bank dispute, which was an exceptional period. Much of the money that was left with them in that period could not possibly have been lent for long-term loans as it would have been recalled when the bank strike ended, which is actually what happened. The extent of their commitments in applications on hands shows clearly they are not in the position of having surplus funds. The applications on hands on 31st September, 1970, amounted to £17.3 million of which they approved £12.7 million.

I do not know if Deputy Clinton was serious when he suggested that the Government should encourage house ownership. I thought everybody was fully aware of the Government's policy in relation to encouraging house building and house ownership. This is a basic part of our housing policy.

Mr. L. Belton

They should increase the ceiling for local authority loans on houses.

Mr. Molloy

These ceilings are made at certain times and are constantly under review——

Mr. L. Belton

They are badly in need of it now.

Mr. Molloy

——and the Deputy can be assured that these are matters on which I keep a very close watch. He will have noticed that some of the limits have been increased recently, as I thought they should be. I intend to continue to keep a close watch on them. We have increased housing grants in the past 12 months and we have increased income limits for supplementary grants. These limits are selected only for a period for which it is felt they are reasonable and if it is thought that they should be increased, the Government will increase them.

I have already said that the total aid for construction of a new house comes, on average, to about £1,000 for a typical house. I have already listed these aids: housing grants, supplementary grants, site subsidies, rates remission, stamp duty exemption, et cetera. The success of this policy of encouraging people to provide houses themselves rather than seeking homes from local authorities can be gauged by the fact that an estimated 75 per cent of all the houses are owner-occupied. This is probably the highest owner-occupation rate of any European country. With that record of house ownership I found it strange that it should be suggested to me as a representative of the Government on housing matters that I should encourage home ownership. As it was put, it would imply that I was not encouraging home ownership. I do not think the Deputy was serious. I think Deputy Belton referred to the same statement.

I do not know how much time I have left——

An Ceann Comhairle

The Minister may continue until 7.10 p.m.

Mr. Molloy

I must kill the idea that the building societies have very big profits. I do not intend to, and I have no obligation to defend building societies which are well able to defend themselves, but I think it is right that where there is public discussion of their affairs such discussion should be based on facts. Profits of building societies are not normally distributed as are the profits of limited companies. It is normal practice for building society profits to be retained and set aside as reserves to meet any losses the society may have to incur arising from the sale of liquid assets or defaults by borrowers, which can frequently happen. In 1969, the latest year for which figures are available, the profits of the five principal societies totalled £182,000, representing about 5/8d for each £100 of the societies' total assets which I suggest is hardly excessive, especially having regard to the need for the societies to maintain their reserves at a reasonable level to meet contingencies.

In fact, the level of the societies' reserves fell in 1969 from 5.4 to 4.9 per cent of their total assets. This fall underlines the necessity for the increase in interest rates which took place that year. I do not want to go into that because it is being reviewed and we shall have another opportunity to discuss the results of that review.

Deputy O'Connell said that building societies were lending money for purposes other than housing. Total building society lending for non-housing purposes has averaged about 6 per cent of their total lending in recent years. I do not think that could be regarded as excessive. In any case, the White Paper indicated that it was proposed to review the tax concessions and tax arrangements of the societies in order to favour and encourage societies which lend over 90 per cent of their total advances for all purposes in house purchase loans not exceeding £6,000.

Deputy O'Connell also suggested that anybody with an income of less than £40 per week could not get a loan from a building society. This is not correct because statistics collected by my Department show that of the 4,954 persons who got loans from building societies in 1969-70, 1,807, or roughly 37 per cent, had annual incomes of less than £1,400 or £27 a week. In the first half of the current financial year 980 out of 3,210, or 31 per cent, had incomes of less than £1,400 a year. I take it these figures will be accepted as facts. They do not bear out Deputy O'Connell's contention.

Deputy O'Connell also suggested that insurance companies should be required to put more money into housing. I have no power, as Minister, to direct insurance companies to do that but my Department had discussions with the principal insurance companies on several occasions on the matter of encouraging them to invest in housing. It is noteworthy that the amounts the companies have put into housing have grown fairly steeply in the past few years and I should like to get this also on the records of the House. The amount paid out in individual house purchase loans in 1969-70 was £6.8 million compared with £4.3 million in 1966-67. In addition, some companies put substantial money into the direct building of flats. Figures for the total investment holdings of the life assurance companies operating in this country show that next to Government and other public authority securities, housing is by far the largest investment in the companies' portfolios. It represents about three times their holdings in office buildings, other than their own offices.

I hope what I have said helps to clear the air regarding some of the myths that exist about building societies. They are a source of revenue for house building which I would be very anxious to continue to cultivate and try at all times to ensure that the conditions that operate are favourable towards greater investment by the public in building societies. I am convinced of their great value in this field and I believe there could be further substantial growth in the amount of community saving that could be invested in building societies. There is no better way in which people could invest their savings than in a building society and so help in a great national work.

Deputy O'Connell referred to the condition that a borrower must place his insurance only with the company nominated by the building society. I should be greatly disturbed if this were true. It would be a restrictive practice of the worst kind which I would certainly condemn.

Mr. L. Belton

It is the practice of some of them.

Mr. Molloy

They have no right or authority to suggest to borrowers that they must place their insurance through an agency that they hold. I shall certainly investigate that matter seriously and if there are any cases of which a Deputy knows where a person has been told that he will not get the loan unless he places the insurance——

Mr. L. Belton

They do not tell you that.

Mr. Molloy

That is the thing I should condemn. I do not mind them offering facilities for insurance but if people are being told, as Deputy O'Connell said, that they must place the insurance with the company nominated by the society, it certainly merits investigation and I shall have it investigated. In fact, the best thing might be to refer the matter to the Fair Trade Commission. They might be the proper body to investigate it. I would ask Deputies to join with me in inviting the public to invest their savings in building societies. They are one of the soundest investments in the country.

Mr. L. Belton

Even sounder than the Government Loans?

Mr. Molloy

They are offering very attractive interest rates and are providing essential capital for house building and in that way helping my programme to build houses for those who have not yet got them. I am grateful to the Deputies opposite for the opportunity they have given me of placing some facts on record in relation to the operations of building societies. This discussion may have come a little bit soon as the review group have not yet reported to me but I do not think discussion does any harm and it can help to clear the air. However, the Deputies opposite will appreciate that I could not accept the motion in view of the fact that we are, and have been since 1969, carrying out a review of the operations of the building societies. For that reason I would ask them to withdraw the motion if they thought fit to do so, but I want to indicate to them that I am as concerned about the matters mentioned in the motion as they are, but at the same time I could not at this stage accept the motion as worded.

Mr. L. Belton

Would the Minister not consider that it would be better to have a public inquiry?

An Leas-Cheann Comhairle

Deputy Ryan.

Mr. Moore

Is the Deputy winding up?

Mr. Ryan

No. I can assure the Minister and Deputy Moore that we are not withdrawing the motion, certainly not until we have had it fully discussed. I repeat what Deputy Belton said that a great deal of good might have come about if the inquiry had been public. I must say that the amount of irritation in my soul was growing as the Minister was speaking because there was an air of chastisement in his remarks that we should dare to put down a motion without having the facts, but I appreciate that he wound up by acknowledging that the Opposition had done a service by allowing this matter to be teased out and discussed in public. That is something which needed to be done. I look forward to making a study in depth of some of the factual information which the Minister has given us.

I am one of the people who have the greatest admiration for building societies, who have seen and continue to see the great benefit that building societies confer on our community by assisting would-be house purchasers to acquire their own houses which, certainly as long as we live in an era of inflation, means that people are buying and living in savings boxes and that they can never lose even if the rates are, as unfortunately they are, extremely high.

It is also useful that there should be a breakdown of the income and expenditure of building societies. That was the whole purpose of the motion tabled by the Fine Gael Party, to have a public inquiry so that the facts would be known and where there was unjustified criticism people would learn that the criticism was unjustified and that where there was room for reform that reform would be implemented. The Minister on his own statement has clearly indicated one area for reform in relation to building societies. The Minister pointed out that the actual profits of societies are small enough— £182,000 in the year 1969. Of course, profit is something which is calculated after running expenses and it may well be that the administrative expenses are higher than they ought to be and that some incomes received by people running the societies are higher than the quantity of business merits.

The fact is that the income of building societies is subjected to a considerable reduction by reason of the income tax which the State collects from investments in building societies. When the Minister takes credit for what he calls a £14½ million subsidy, which the State is paying annually, he should, as he does, also set off against that the immense income which the State has from such things as the revenue from income tax levied on building societies. If the income tax was no longer to be levied on the funds of building societies you could have a reduction up to 8 per cent—I think that was the figure the Minister gave— of interest rates. I am quite certain that many house purchasers, with the aid of building society loans, would be quite grateful to have a reduction of that size, or even ½ per cent, granted to them and this would come if the Minister for Finance would take his hands out of the pockets of the building societies.

Apparently the Minister in calculating the £14½ million which he said is conferred by way of benefit on house purchasers every year, has taken credit for the relief from income tax which some people get who are repaying money to building societies. Let us consider who receives that benefit. It is the person who has an income sufficiently large, or whose dependants are so few that they are actually paying income tax, but the man with the comparatively small income who has a large number of dependants has no income tax, he has not got to pay income tax and that person does not receive the benefit for which the Minister has taken credit, because he gets no allowance against non-existent income tax.

It is a particular relief which I know is quite valuable to those who get it but it is not something which is of any assistance to the person whom the Minister says all legislation is designed to benefit, that is the small earner, the person who has the biggest sacrifice to make. That income tax benefit is not there for that purpose and therefore it is a rather shallow argument to suggest that the effective rate of interest for purchasers of houses with building society loans is 6½ per cent. That applies to those who are well to do, and many of them are not well to do, but they may still have to pay the tax, and it does not apply to the 37 per cent of the people whom the Minister says received building society loans in 1969-70.

I doubt very much whether anybody with an income of £1,400 is paying income tax but such a person if he is a house purchaser with dependants is certainly not paying income tax, and that is the kind of person who in most cases will be purchasing a house with a building society loan. There you have a situation in which, on the facts which the Minister has given us, 37 per cent of the people may not be receiving loans at the rate of 6½ per cent such as the Minister claims but they are actually paying at the rate of 9 per cent which is prohibitive.

The Minister was critical of those who he said were not speaking on the basis of facts but on the basis of rumour and suspicion, yet in his closing remarks he became indignant at the suggestion that building societies insisted on house purchasers insuring through the building societies' agencies. He said it was wrong and that if he knew it was going on he would stop it. I was glad that Deputy Dowling was able to assert what I also can assert, that this is a universal practice. I handle building society loans month in month out and I know of no case where a building society allows a mortgagee freedom in the selection of the insurance company to insure the property against fire. In relation to ground landlords the law has long since been clarified as a result of which ground landlords may no longer impose as an obligation in a ground lease that the lessee will insure through a particular insurance company. The obligation not to make that imposition does not apply to building societies or to any other mortgagee——

Mr. Molloy

If the Deputy considers this practice is so common, I am surprised he has not done something about it before now.

Mr. Ryan

The Minister need not become personal.

Mr. Molloy

The Deputy knew all about it but he tolerated it. I would not tolerate that if I knew it existed.

Mr. Ryan

There are many other terms in mortgages from building societies and building agencies of a similar kind and there is precious little the would-be borrower can do about it for the simple reason that the person lending the money has a cure for any grouse. He can say: "Sorry, no money." A building society cannot be forced to lend money to Mr. X, Y or Z——

Mr. Molloy

Is the Deputy condoning this?

Mr. Ryan

I am not condoning it but I am saying it is a fact. I am entirely in favour of freeing people from what I consider to be unnecessary obligations. However, one must be fair and accept the fact that building societies must have proof immediately available to them that any property which is offered as security is adequately covered by insurance. By having this insurance carried through a particular agency that is associated with the building society, they have available information to establish whether the property is insured. The building society invariably arrange for their agency to notify them if there is failure to reinsure and if this is so they add the necessary premium to the capital loan and thereby secure repayment.

With respect to the Minister, it is not good enough that he should come here and criticise members of the Opposition who have not got access to information which his Department collected through a private inquiry. At the same time, he does not know some of the basic rules applied by the building societies in relation to insurance. There are other terms of house building loans which are universal. If there is to be an inquiry all these matters should be investigated. Let the reasons be stated for certain practices; if they are considered necessary let them be continued, but if they are not necessary they should be removed. That is the purpose of the Fine Gael motion which seeks a public inquiry on this matter.

It is fair to comment that this motion was tabled in 1969 at about the same time as the Department was considering having a private inquiry. Is it not a sad reflection on the Minister for Local Government and his predecessors that an inquiry of this nature should have continued for so long? It is an added justification for our bringing forward this motion. Of all the motions on the Order Paper we considered that in this case an adequate investigation was long overdue. This motion, in fact, refers to certain events that are almost 18 months old. The Minister tells us that all this is under close examination and that we should not have put down this motion. However, we have not had the results of this investigation; all we have had today is the information selected by the Minister which he thought would be of assistance. I am grateful for the information he has given but we should like to know all the facts and have a public inquiry so that the other questions of concern to the public should have an opportunity of being aired.

I do not agree with those speakers who criticised building societies for advertising for funds. It is perfectly legitimate that they should advertise on radio, on television and in newspapers. How else can the societies obtain funds? There are many agencies seeking money from the public compared with five or ten years ago. A large proportion of these lending organisations reinvest the money in projects much less deserving and with considerably less social value than house building. Deputy Foley criticised the fact that up to six building societies advertise on television on the one night but I cannot see anything worse in this than for six manufacturers of alcoholic beverages advertising on the same medium or six manufacturers of detergents doing likewise. They are all looking for customers and so long as we have free enterprise I think we must tolerate the imperfections of advertising. It is no disservice to would-be house purchasers that building societies compete with one another in order to get the maximum amount of money for house building.

In his assessment of £14½ million annually for State aid to house building, the Minister apparently took credit for what he called stamp duty. It is a strange state of affairs when we have Minister claiming credit and measuring the value of their credit for not imposing taxes. If this is to continue the Minister could say that there was a subsidy of £240 million for housing merely because he does not impose 100 per cent tax on every new property.

Mr. Molloy

It is a concession.

Mr. Ryan

The Minister is not being constructive when he claims as a concession the non-imposition of a penal tax on house purchase. The attitude which makes a Minister complacent because he is not imposing tax is what leaves Ireland at the bottom of the house building league. The Minister said we had every reason to be proud of the fact that 75 per cent of our houses were owned by the occupiers. He said this was one of the highest rates in Europe. Of course, it is but he is not comparing like with like. In any society which is urban-orientated there is a high density of population and you are bound to have a smaller proportion of house owners. However, in a rural-orientated community, or in a community not having a high density of population, in any society other than a communist one there will be a high proportion of house owners.

We should not be complacent about the fact that 75 per cent of houses in our society are owner-occupied. It is not a particularly high figure and whatever improvements there have been in this field in recent times were opposed for years by Fianna Fáil. The improvements were opposed by the votes of Deputy Dowling and others in this House, in Dublin Corporation and elsewhere. These people voted in the lobbies of this House against motions seeking to have introduced a system that would enable tenants of local authority houses to buy their houses——

Mr. Dowling

That is a political gimmick. The Deputy is not serious.

Mr. Ryan

They were opposed to it in principle and it was only in the last few years they became converted to the advantages of owner occupation of houses.

Debate adjourned.