asked the Minister for the Environment if he considers that the 126 per cent increase in the recently announced profits of the only publicly-quoted Irish building society is in the public interest generally; and, in particular, if it is compatible with the needs of house purchasers; and, if he will examine the current financial affairs of all building societies with a view to reducing costs, profitability, and mortgage rates.
Ceisteanna—Questions. Oral Answers. - Building Society Profits.
4.
I consider that in the interests of investors with, and borrowers from, the society in question, which is the only building society in Ireland whose shares are quoted on the stock exchange, it is necessary to put the position in proper perspective.
The society was founded in 1864 and, for more than 100 years past its shares have been quoted on the stock exchange. However, no investment shares have been issued since 1952 and the investment shares quoted represented, at the end of 1977, only £305,000 out of the total of £22,878,000 capital then invested with the company. The dividend paid on the market value of the investment shares was less than 7 per cent, tax paid, in respect of 1977.
In common with other building societies, this company does not aim to make profits in the accepted commercial sense. Surpluses accruing to building societies, after payment of interest to investors, taxation, management and other expenses, are put to reserve to finance further house purchase loans and to meet any unforeseen losses that may arise—for example, through default by borrowers or depreciation of investments. The societies do not endeavour to maximise their surpluses but to maintain them at a reasonable level in relation to their rate of growth. The grant last year of trustee status to certain building societies, including the company referred to in this question was subject to the maintenance of an adequate reserve ratio. The increase last year over 1976 in the level of the particular company's reserves has to be considered in the context that the surplus at the end of 1976 would not have been adequate to maintain the necessary reserve ratio. The balance transferred to reserves at the end of December last had the effect of increasing them by only 0.09 per cent.
Is the Minister satisfied that our building societies are operating efficiently?
That is a separate question.
It arises out of the question.
The question refers to the profits of a specific company. The Deputy cannot raise the whole question of building societies on one question.
It arises in relation to costs and profitability.
We are not entering into argument. The question is not relevant.
Could I deal with the question of costs and profitability then?
The Deputy may ask a question.
Is the Minister satisfied that building societies are doing enough to reduce their costs, thereby giving a better service to people borrowing money from them, particularly in the line of interest rates?
I am satisfied that their costs are reasonable. For example, if one takes management expenses the building societies compare very favourably with other financial institutions in the State, including some semi-State bodies, such as the Agricultural Credit Corporation. So far as I am aware their costs are reasonable.
If the Minister is satisfied that their costs are reasonable would he be prepared to accept that it would be in the interest of borrowers that building societies should absorb costs, such as those which they pass on to borrowers, for example, in relation to their own legal fees?
We are now getting into argument on questions not pertaining to the original one. Deputy O'Keeffe is developing a habit of asking supplementaries on every single question on the Order Paper, and his supplementaries are not always relevant.
I regard it as my duty. In fact it is the first question I have asked today.
Well, the day is long.
(Cavan-Monaghan): Does the Minister not agree that an increase of 126 per cent in profits is an alarming one in the business of providing finance for house-building?
The transfer of the surplus of £313,622 increased the Irish Civil Service Building Society's reserves from £1,017,147 in 1977 to their present level of £1,330,767 or 5.06 per cent of the society's total liabilities.
(Cavan-Monaghan): Does the Minister not consider that it is an alarming percentage increase in profits in this type of business, and does it not suggest that there is no real competition and that there seems to be something in the nature of a ring?
I do not accept that there is anything in the nature of a ring. Surpluses accruing to building societies after payment of interest, taxation, management costs and other expenses are put to reserve finance.