Dáil Éireann díospóireacht -
Wednesday, 16 Dec 1981

Vol. 331 No. 11

Housing Finance Agency Bill, 1981: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. Reynolds

I did not come here, nor did Fianna Fáil, to bash the Bill for the sake of bashing it. We are anxious to get, as is our duty as an Opposition, answers to question in relation to the Bill. Those answers are not available in the information that has been presented to the House so far. We welcome certain aspects of the Bill. We welcome any action taken to uplift the building and construction industry which is such an essential part of our economy. Indeed, it has often been used as a barometer of the success or otherwise of our economy. It makes a great contribution to employment and, by and large, uses native raw material. We are aware that the industry is on the floor at present for reasons I will deal with later. It has been said that the Bill will help people buy their own homes and that is why we feel justified in asking many questions in relation to this legislation. Listening to aspects of Government policy one must bear in mind the importance of looking behind the scene and trying to discover the things the Government should have said.

The Bill represents a fundamental change in housing finance policy. For the first time it will transfer responsibility for inflation-linked bonds which will be distributed away from the financial institutions and on to the borrower. That has never happened in relation to the financing of housing or any other aspect of Government financing up to now. It is a fundamental change in that respect. It is clear to me, and it should have been clear to the Minister of State, Deputy O'Brien, who made a case for a bit of a social policy, that when one transfers responsibility for linking and indexing of inflation away from the financial institutions, the experts in the financial field, to a national housing agency who then pass it onto the borrowers — the agency will be self-financing and will not receive any subsidies or help from the Government — it is anti-social. It will also put those who borrow from the agency at a disadvantage compared to those who borrow from building societies, insurance companies or are beneficiaries of SDA loans. Traditionally such people borrowed at a rate that has been under the inflation rate.

Mr. Barrett

(Dún Laoghaire): If they could get the money.

Mr. Reynolds

It has not been pointed out that the inflation rate plus a real rate on top of it will be the new rate for the borrower under the scheme. What is happening is that a golden egg is being handed to the financial institutions because, for the first time ever, they will be fire-proofed against inflation. They do not have to worry about it. They will be putting their money into State guaranteed bonds that will carry, on top of the existing inflation rate, a real rate of interest. Will it be 1 per cent or 3 per cent? I have heard various figures tossed about but whatever it is it is gilt-edged and it puts a golden egg into the hands of financial institutions. The responsibility for repaying that inflation rate interest rate, plus the real rate, is on the borrower. We should tell the people what they will be paying if they get a loan under this scheme. This has never been done before. The small amount of money that is talked about initially will not upset the general finance situation in the country but the Minister has clearly established that eventually the agency will replace the SDA loan scheme. The Minister confirmed that when he said it is envisaged that at full operation the new scheme will replace the local authority loan scheme.

What are we witnessing? Are we witnessing the phasing out of and the getting rid of for all time local authority financing for housing known to us as the SDA loan scheme? If that is what the Government are doing they should spell it out clearly so that our people are not under any illusions. I heard it stated that this represents additional funds to the housing industry. If that was the case we would all nod approval to the legislation but if the eventual aim is not to put more money in but to transfer the burden of housing the less well-off sections of society from the State, from the Exchequer, and on to the shoulders of the less well-off sections of our society then we are entitled to take note. That is what appears to be the eventual aim of the agency. Many thousands of people will want to know more about the scheme. Public representatives will also want to know what is to happen to the SDA loan scheme. Will it be replaced by a scheme which is based on repayments of the rate of inflation plus a real rate of return? We should look at the great attraction this will represent for the financial institutions who are responsible to their shareholders or policy holders to get a rate and provide pension at the end of the day. This is the best and easiest way out for such institutions. It is a gilt-edged situation linked to inflation and carries a State guarantee. Those institutions will have their foot in the door and as the scheme unfolds in years to come pressure will build up from the same financial institutions on the State to carry the full can of inflation in relation to their borrowings. That is a serious step forward in that direction and we should be clear about where it is leading us. If I am wrong the Minister should tell me when replying.

How any Member can say that this is social legislation when he considers the points I have made is beyond me. Under the scheme borrowers will be put at a disadvantage to those who borrowed through local authorities, insurance companies or building societies. Where is the social justice in relation to that aspect? I recognise that since we joined the EMS there is a need for the creation of new investments for funds but when one takes a step in that direction and establishes a gilt-edged situation that will be inflation-linked and carry a real return on interest, then everybody will try to get into that area, and why not. The banks will try, as will the insurance companies. I have no doubt that the Minister recognises that fact because he has told us that the first issue will have to be auctioned. Of course they will have to be auctioned because there will be many people knocking at the door. That is the greatest investment that can be got.

I have no doubt the Minister will get all the money he wants in relation to his £25 million to £50 million. However, I think he should come clean and let us know whether eventually the old SDA loan is to be changed, whether the whole financing of local authority housing is to be changed. If that is the case, he should say it openly and honestly. When I look at the Government across the water and compare them with this Government, I find that in many ways similar policies are being pursued. However, the British Prime Minister, Mrs. Margaret Thatcher, and her Government, who are hell-bent on balancing the books at all costs and have little regard for people, did not go along this road. This is totally against the interests of the less well-off of our society. Mrs. Thatcher must have felt that she would not get away with it. If this is the first step along that road, the House should be fully aware of it. Our responsibility is to point it out to the public. If that is the road we are travelling let everybody be fully aware of it and not find out later. In the last three or four months people have found that many of the schemes they thought were of benefit to them were not, in fact, beneficial at the end of the day. If this is another sleight-of-hand operation the Government should be honest and tell us.

I believe the National Housing Agency scheme will involve wholesale discrimination against the poorer sections of the community. Those who borrow from the NHA will be liable for higher interest rates than the better off members of our society. We have always heard the claim made that the better off can borrow at less money. This scheme is institutionalising that situation. I know there are categories of people who look forward to this scheme because of its initial attraction. They are either not qualified to get an SDA loan or they are outside the building society area. We should certainly have a scheme to cater for them but they should be fully aware of the financial responsibilities they are taking on. It is attractive to a couple in the initial years of their marriage, but as their children grow up and their educational requirements increase the burden increases. They should be told what the situation will be later on. It is understandable that a young couple getting married will grab at any money available in order to get a house. To provide it is a worthy objective, but we must not walk them blindly into something. We must tell them in advance what the score is.

When one looks at the housing situation there are many areas that could be improved. The Government did away with the mortgage subsidy. They then excluded the single person from eligibility for the housing subsidy. This was a retrograde step. In my part of the country it has always been the practice that when a young fellow was thinking of getting married he got his site and tried to make arrangements to build his house. The statistics show that 24 or 25 per cent of applicants for loans and grants were single people. This was a good way to have young people thinking. No longer can such people make a start and built their houses in time to get married. In my part of the country they say that there was a time when you got the cage first and then went to look for the bird but that now it appears one must get the bird first. This will have a detrimental effect on the building industry. I am not playing politics. I am stating what I believe to be a fact.

The Minister may claim that this new provision will make the burden of people lighter in the early years, but it is interesting to note that the spouse's income is excluded whereas it is included in the case of the SDA loan. What is the reason for that? Is it as I believe, a sleight-of-hand way of forcing people by stealth out of the SDA loan category and moving the burden of housing the less well off away from the Government and back on to the people's own shoulders? When one looks at the combination of events that is the picture that emerges. If I am wrong I will be delighted to hear it from the Minister because I do not think that is the way the Irish people want this country to be governed.

There are other aspects to this which I am delighted to note. I am glad to see the area of co-operative housing getting further recognition and help. It is a very worthwhile development in our society. It helps to provide houses at realistic prices. Of course, the supply and demand situation determines the price of houses. When we are fundamentally changing the whole approach we must surely assess what the repercussions of that will be.

Under this scheme the £3,000 mortgage subsidy will be given back to the lender to reduce the amount of the loan. Builders, as we know, will watch that development and, as they have always, will try to increase the price of houses to grab any money lying around. When the borrowing capacity of a borrower is increased from £2,000 to £2,500 to £3,000 to £3,500 it is worth asking experts in that area whether that too will contribute to an increase in house prices. I say this because traditionally builders have had regard to the market in deciding what to charge for houses. They take into account the amount of money that a house purchaser can borrow in terms of his gross income and on that basis decide on the price of the product. In other words, the builder tailors his operations to suit the market.

These are the repercussions of which we must be very careful in terms of any change in policy. Has any assessment been made of the effect of this legislation on house-building costs? Such assessment is possible on the basis of experience gained down through the years in the housing market, a market that has always been determined by the supply and demand concept. There is a social responsibility on the Government of the day to cater for the needs of the less well off, but I hope that this legislation is not what one might think it to be from reading between the lines, that is, a withdrawal by the State from that social responsibility and, by stealth, to push the less well off into a situation in which initially they think they are doing all right but in which eventually they will realise that the burden involved is much greater than was envisaged at first. We have seen this happen in relation to people borrowing from the building societies where they undertook commitments early on in life which later proved a great burden.

It is nice economic theory to tell potential house purchasers that what they are involving themselves in is the payment of 18 per cent of their incomes. It would be fine in theory if each week people worked on that basis while making the same sort of calculation in respect of their various other commitments. But what is to happen to somebody who loses his job? Are we still talking about 18 per cent of social welfare payments? That is another question that needs to be clarified.

What we are certain of is that there will be no help from the Exchequer, since this agency will be self-financing and as such must recoup from the borrower the inflation rate of the day plus the real rate of return, plus the cost of running the national housing agency. We have considered various ways and means of tackling the nub of the problem and of bringing about improvements in the house building area. I hope the Minister is not jumping too fast in this instance. I do not see any reason for rushing through the legislation. The building industry is generally quiet in the month of January. We had sought to have the measure discussed at length. However, what we cannot agree to is the inflation link for the financial institutions in respect of housing bonds. There is a social responsibility on financial institutions to put a certain amount of their profits into housing. To some extent the banks and the insurance companies have been doing that, but they could be encouraged to do more. What I fear in relation to this scheme is that from the small pool going from these resources to the housing industry there would be a diversion into bonds, with the institutions saying that is their contribution. That is a likely development which would mean that all we were doing was giving them a gilt-edged, State-financed, index-linked, inflation-proof real rate of return on these diverted funds. That would be undersirable and I know it is something with which the Minister would not agree.

The question is how to guard against that happening. We can talk of the auctioning out of the bonds, and in that regard we can be sure that there will be plenty of financial people at the auction. If they see an opportunity of making money they are not too concerned about who pays the bill at the end of the day, and we all know that the unfortunate borrower will be the one to pay the bill. There is a distinct possibility of the abolition of SDA loans, but I hope this will not come about.

I listened with interest to the Minister of State at the Department of the Taoiseach talk about this Bill in terms of its being social legislation. I would refer him to the Minister's statement in which he said that it is not possible to say for certain whether borrowings in the long run will prove to be more or less expensive than borrowing on a conventional annuity mortgage. If at this point in time the

Minister cannot say that the action being taken will not be of any more benefit to the people who will be borrowing, what is the point in labelling the Bill as a piece of social legislation?

It is clear from the examples I have attempted to give that housing will be more expensive and that the housing agency interest rates will always be significantly higher than those of the building societies. One of the results of this situation will be that those people who find it impossible to obtain loans from the building societies or from insurance companies will have to borrow from the agency and that they will be liable for the penal rate over and above the inflation rate of the Bill.

There is the question, too, of the cost of the administration of this scheme. Has anybody costed it or decided who will administer it? Obviously, it will have to be self-financing. When we talk about adjustment being an annual event in respect of every borrower we are talking about a very big operation in terms of administration. The assessment will be based on the income tax returns for the previous April. I do not agree with the flippant approach of which I heard mention today. Will the cost of the scheme be any less than the cost that is involved so far as the experts in that field are concerned at the moment? I think the scheme will prove to be an administrative nightmare especially having regard to the opposition of the Revenue Commissioners in relation to part of the proposals for taxation reform, proposals which may or may not be implemented. We are talking here about the same type of administration. If the Government are serious about their embargo on public service recruitment, is the scheme to be administered within the existing framework of the Department of the Environment? These are questions on which we should have answers, especially since the cost at the end of the day will be borne by the borrower.

When the scheme has been in operation for a while the harsh realities of it will become apparant not only to all of us here but to the people generally. It is our duty to say now what we think will be the effects of the scheme. In principle we are not against any move that might help people to acquire houses or that might help the construction industry. It is in its present state because of decisions which were taken by the Government. We know that the demand was increasing earlier this year when Fianna Fáil made an announcement in relation to the mortgage subsidy interest. As soon as the mortgage subsidy was taken away demand was dampened down immediately and people who had been looking at houses backed off straight away.

It is also wrong to discriminate against single people who do not now qualify for interest subsidy on mortgages. A single man cannot get approval now from a bank for a bridging loan. He has to be married before a bank will grant this. These are the real causes of the slowing down in the building industry. A reversal of some of the decisions made already would give an instant impetus to the building and construction industry, which is such a vital part of our economy, which gives employment and which, by and large, uses Irish materials.

Initially a certain amount of money will come in. I believe there will be a queue at the Department of the Environment, the agency or whoever is going to run it. In this connection, we would like an answer to that question: who is going to run it? Will it be a mixture of commercial concerns and the public service? We have not been told so far. It is up to the Opposition to ask the questions and I have done so. I would have liked to have heard Deputy Kemmy or Deputy Browne speak on the social aspects of this legislation. I do not see them, although I have stated what the anti-social aspects are. There is a category of people who need this scheme but it is not an answer to all the problems of the housing industry. I fear it is unloading the burden of the State onto people who are not able to provide for themselves. This is a retrograde step. I want to ask a fundamental, basic question: is this transferring the responsibility for inflation away from the financial institutions and proofing them against whatever happens? Is that not totally against everything done up to now? I do not like cosmetic exercises. I like something presented openly and honestly. I hope to get honest answers to the questions I have put in relation to the inflation-linking of this money and an admission that the people who borrow are going to be at a disadvantage compared to the people borrowing under existing schemes. Are SDA loans to be abolished?

Mr. Barrett

(Dún Laoghaire): I have not made up my mind about what Deputy Reynolds was talking about. On one hand he seems to be in favour of something and on the other he appears to be against it. I welcome this Bill. I know that change brings fear but one must be prepared to accept the challenge of change. This is a breath of fresh air into the funding of housing.

Deputy Reynolds said there would be a queue by financial institutions and the difficulty this will cause for borrowers. I understand from reading the Bill that it will be index-linked to the rate of inflation. I am assuming that inflation is going to drop, in turn repayments will also drop——

Mr. Reynolds

I hope the Deputy is right.

Mr. Barrett

(Dún Laoghaire):——and also that the money which is coming into the fund will be from pension funds and life assurance offices. We have heard on various occasions about the need to provide better pensions. If pension funds can be invested in something like this there will be a fair return for investors. We are losing sight of the fact that this is a genuine effort to provide funds for people to buy their own homes. We have heard about SDA loans and various other schemes and that there will be no help from the Exchequer. There is no mention in the Bill that grants will be abolished. Surely that is assistance from the Exchequer?

As Deputy Reynolds knows, the SDA loan has a fixed rate of interest. Does he think it justifiable that someone who has an SDA loan of £4,000 should expect the State to subsidise that loan after 20 years? I do not think that is fair when there are queues of people in various parts of the country trying to get loans to buy a house for the first time. We must be realistic and accept the fact that if we are going to give people assistance there will be some initial flaws in the scheme. The Minister said he is being very careful about who will get the loans and the amounts which will be authorised. That is the right thing to do — we all have to creep before we can walk. I am surprised at the Opposition party having fears about giving money to people to buy their own homes, that we might be putting more money into the pockets of financial institutions and that this could damage the building industry. Any money given towards housing will help the building industry, which is so important.

We were asked if insurance companies would stop giving loans and if there would be unfair competition. I am in that business and I can tell Deputy Reynolds that insurance companies will give you loans at fixed rates of interest at present. You will get a loan at perhaps 18 per cent fixed over 25 years. If the interest rates drop after some years you still pay 18 per cent, so what is the difference? Here is an opportunity for somebody to take on a contract knowing at the outset, contrary to what Deputy Reynolds thinks, what his or her liabilities are going to be. I am sure that when Deputy Reynolds hears the Minister's reply all his fears will disappear and I have no doubt he will welcome the Bill as wholeheartedly as I do.

I listened with interest to Deputy Haughey yesterday when he spoke about local authority houses and SDA loans. He said the only thing wrong is that local authorities are starved of finance. I am glad to hear the ex-Taoiseach admit that his Government starved the local authorities of finance for housing, because I agree with him. That is evident from the fact that when this Government took office a Supplementary Estimate for £30 million had to be introduced to pay for the existing contracts the previous Government had entered into. I do not think the arguments put forward by Deputy Haughey yesterday hold much water.

It is time people realised that out there in the big bad world young people are becoming very annoyed and upset because of the fact that they cannot get homes. It is time we as politicians recognised this. When we do something that will help these people we should not put up arguments against it for the sake of doing so. This is a genuine effort by the Government to encourage people to buy their own homes, to get off the local authority waiting lists and to be taken out of hovels into which they are forced in order to get a local authority house.

I spoke in this House before about this aspect of Irish life, which I deplore and which has crept into our society, particularly in the Dublin area. Any effort which will encourage people at an early stage to save a deposit knowing that there is an agency behind them which will give them a reasonable amount of money to buy their homes should be encouraged. I came up through the local authority structure and I saw many families destroyed by bad housing. There was no one there to help those couples at an early age.

In Dublin at present if you want to get a local authority house you must have at least one child and you must be living in grossly over-crowded conditions. In effect that means one room. If we build a society which forces our young couples to live in one room at a very delicate state of their marriage, we will get one of two things. We will get very united couples, or very many split homes. The pressures facing these people day in and day out in bad housing conditions with their children in bad health are enormous. I am against saying they must take their chances on the local authority housing list. That is not what we want in Irish life in the future. It is a worthwhile exercise to encourage people at an early stage to save money to buy their own homes. Any effort to assist them must be welcomed by all politicians irrespective of party.

I welcome this Bill. It shows imagination. It recognises that it is necessary to help people to buy their own homes. Under this Bill they can borrow up to two-and-a-half or three times their salary and make repayments at a rate of aproximately 15 per cent of their income. This is a very positive type of approach. At present if somebody on an income of £9,000 borrows two-and-a-half times his income, in the first year of repayment he pays back 43 per cent of his gross income. That is wrong. That is where the problem lies. That is why this Bill should be welcomed by everyone. It is giving people an opportunity to get a realistic sum of money which will help them to get off the ground at an early stage and into proper housing. I fail to see how anybody could have any doubts about this. I thought all parties would praise the Minister for introducing a Bill showing such vision as this Bill does.

Anything which takes people off the local authority housing list is to be welcomed. We will always have people within our society who will need local authority housing. I cannot see how this Bill will interfere in any way with the State's commitment to provide housing for those who genuinely cannot afford it. This agency will give a realistic loan to those who need a little help.

There is no point in talking about SDA loans if the limits set are so low, or go out of date so quickly, that they are of benefit to nobody. There is no point in giving people in Dublin a loan of £14,000 if their income is under £7,000 and the purchase price of the house is £26,000. That is asking somebody with an income of under £7,000 to save £12,000. That is totally unrealistic. It is out of the question. The SDA loan is utterly irrelevant to the vast majority of people. Whether we like it or not, one-third of the population live within the greater Dublin area. Therefore, effectively one-third of the population are cut off from getting a loan through the SDA system. It is easy to see that the SDA system does not apply in Dublin and that is the area I know best.

I saw an example the other day. You can borrow £18,000 through the SDA system provided you have been a year on the housing list, have one child and live in grossly over-crowed conditions. There is no income limit. If people living in a rented two-bedroom cottage are told they have to get out of it — and this is the case I am quoting at the moment; this couple have to get out next January — if they apply for the £18,000 loan, they do not live in grossly over-crowded conditions and they will not get the loan. What is the alternative? They can get a £14,000 SDA loan provided their income is under £7,000. This is totally irrelevant in my book.

I would prefer to get on and do what we should be doing, that is, to make a genuine attempt to give money to people who need it and to give them a realistic amount which will enable them to buy a home, instead of going through the charade of saying we have an SDA loan scheme which does not apply to the vast majority of people who look for these loans. This does nothing to help the building industry or to help anybody to get a home.

This Bill approaches the problem from the right direction. It tells people they can borrow up to two-and-a-half times or three times their income and make repayments over a given period of time at a percentage of their income. It is unrealistic to expect people to pay 43 per cent of their gross income in the initial year. Those people are now finding their way onto the local authority housing list and ultimately the State has to provide a house and fund 100 per cent of the construction of that house.

The fears expressed by Deputy Reynolds are unfounded. I would have thought he would have come in here to support the Bill. It is very important to support the building industry which gives a vast amount of employment. It has been a part of Irish life and it has provided an excellent service for those anxious to set up homes.

There has been a change of attitude in so far as we realise there is a need to look at the funding of mortgages and in regard to the type of houses we are building. The standard estate in Dublin and elsewhere nowadays is made up of three-bedroom semi-detached houses and we are asking newly-weds to buy these houses, whether they want them or not. I would appeal to the agency when they begin operations to ensure that funds will be made available to purchasers of one-bedroom and two-bedroom houses. In the early stage of home building people should not be required to take on three-bedroom houses. That is not to say that they should not be enabled to do so if they wish, but we should ensure that funds will be available to assist large groups of people, particularly because the agency will cater for single people. A single person may borrow from the agency and that single person may only need a single-bedroom house. From the point of view of both the building agencies and the new housing agency it is desirable that we would get down to providing one-bedroom and two-bedroom dwellings in our cities.

In the initial stages of the agency's development there will be an income limit of £9,000. I can understand fully that that should be so because I do not think there is much point in a State agency being set up that would be seen to challenge existing agencies such as the building societies. If the building societies are catering generally for people in the £11,000 to £12,000 a year salaries bracket I do not see any benefit in this agency being seen to be in competition with building societies at that level.

The Bill seeks to achieve assistance for people who have not got loans from building societies. I therefore appeal to the Opposition to appreciate that we are talking about a serious problem and that it is essential we get it right. Our housing policy will determine the type of society Ireland will have in the future and if we allow the present situation to continue we will build a society none of us will be proud of. Weaknesses in the legislation may be picked out in the future through aspects of the agency's operations, but the principle behind the legislation must be welcomed and a lot of good can be achieved if the Opposition recognise that and give the agency proposal their full support.

Deputy Reynolds expressed concern about the administration of the loans schemes. If he had read the Minister's speech carefully he would have learned that they will be administered by the local authorities throughout the country. It would be useless to establish another group of offices throughout Ireland to do what the local authorities are geared to do. I am sure the local authorities will be pleased to administer these new loans. I think it is a very good idea that the Minister and the agency should decide to use the local authorities to deal with applications at local level.

I was glad to hear Deputy Reynolds mention the co-ops. I was relieved to read that particular attention is being given to them. I have seen them work with a great measure of success in Dublin. One thing they can do is to give houses to the people. It is a big challenge for people on their own to enter into a commitment of that size but when you have a group of people coming together in a co-op things are made easier because the group can negotiate and engage contractors, and they can be financed by the new agencies, which will be of great assistance to the co-op movement.

Another aspect to which sufficient attention has not been given in the past is the help the agency will lend to people to purchase existing houses. I have found it difficult to accept that many people would be concerned exclusively with new houses, because I know that many people in Dublin would be glad to purchase existing two-bedroom or one-bedroom houses. Such houses are in very short supply, possibly because it was hard to get finance for that sort of house. It is good to realise that the Minister means to assist people to purchase such houses.

As I have said, it is good to see flexibility, and I welcome the fact that single people will be able to borrow from the agency because we should encourage people to buy houses in advance of marriage. That will be to everybody's advantage ultimately.

Deputy Reynolds asked what will happen if a mortgagee gets sick. The Minister's speech makes it clear that there will be a very sensible approach to this. If somebody gets sick special arrangements will be made to extend the term of the loan, and repayments can be suspended for a short time until they overcome sickness or get employment if they are unemployed. Recently I read an article by the St. Vincent de Paul Society about the new poor in Ireland, the people in the middle income group who have found themselves unemployed and have found heavy mortgages around their necks.

This is a worthwhile aspect of the operations of the proposed agency in so far as it recognises that if somebody becomes ill or is unemployed some assistance will be given them, with more flexibility being allowed in the way they can make repayments or indeed extend the term of their loan. This is particularly to be welcomed in view of the recent comments of the President of the Saint Vincent de Paul Society which spelled out the massive amount of money they have had to give to people who, through illness or unemployment, were unable to meet their repayments.

When the agency is established I would recommend that its operations be reviewed from time to time. I am thinking particularly of circumstances in which if somebody can obtain a loan from another lending agency but cannot raise a sufficient deposit, the agency could be asked to help out. The whole purpose behind this Housing Finance Agency is to help people get off the ground at an early stage. I would hope it would be possible — and I have no reason to believe otherwise — that once established the agency could see its way to help people raise a deposit through an additional loan or perhaps second mortgage. I have no doubt but that this agency will be a great help to all citizens.

Another matter causing grave concern in Ireland today is that there are a number of old people, particularly those on fixed incomes or pensions, who find themselves living in rather large, three, four or five-bedroomed houses whose upkeep they cannot afford. They find it very difficult to maintain such a property to a good standard. They genuinely cannot afford the house in which they are living. The sooner people in that position here — as has happened in other European countries — can be allowed sell their homes and with the money they receive subsidise their already fixed income, the better. I have in mind here such persons selling their home, remaining in that home for the rest of their lifetime, the proceeds being used at the time of receipt to supplement the fixed income or pension, at the same time guaranteeing proper accommodation in the environment to which they have been used. When the time comes that such a person dies that property should then revert to the agency. Perhaps the Minister could consider this aspect in the future.

As somebody who has been involved in this business for a number of years through insurance loans, I have been approached by people on numerous occasions, people living in three, four or five-bedroomed houses whose upkeep they cannot afford. Yet they have nowhere to go, they do not want to leave, they would be anxious to mortgage their house and remain there for the rest of their lifetime. This would constitute a worthwhile advancement on our thinking in regard to old people. I could not for the life of me see why it could not be arranged. There will always be capital appreciation in housing. If an agency such as this could foresee their way to assisting those people to get a loan, with the guarantee that they could remain on in that property for the rest of their lives, the property then reverting to the agency, that is something that would be welcomed by everybody.

I welcome this new thinking in terms of financial assistance towards housing, particularly for young people starting off. I welcome the fact that the Opposition also will afford this agency a chance to get off the ground, giving them every encouragement because ultimately the country at large will benefit.

Mr. Connolly

The Bill before us has wide-ranging implications. We on this side of the House would have liked more time to debate it in greater detail. However, we shall debate issues as they arise. Any Bill designed to help the housing construction industry and those in need of housing will be welcomed by us. However, I want to put on record that we have not been given a sufficient time in which to deal with this Bill. We would like to have gone into it in greater detail.

When I was in the Department there was then a White Paper on Housing being drawn up which would give us an indication of the number of houses needed in the next five years. I would like to know from the Minister if and when that paper will be issued.

Minister for the Environment (Mr. P. Barry)

Early next year.

Mr. Connolly

I am glad to hear that. Naturally I was anxious to know the position in regard to it.

I would like now to deal with planning applications in regard to housing. It has come to my notice that planning authorities in some cases have been holding up housing proposals for very inadequate reasons. In some cases throughout the country it has happened that — within two days of the expiry of the planning regulation in regard to the two months' period — the planning authority sent an applicant a registered letter seeking some further information or documentation. That is not fair and should not be tolerated. I have no doubt that the Minister would not be a party to any such practice but I would draw his attention to the fact that it does happen. That practice holds up an applicant for perhaps another two months causing him a lot of hardship in addition. If, say, such an applicant is getting married it complicates the situation further and imposes extra costs that should not be incurred. The planning departments of local authorities, especially in regard to housing, should know exactly what is required when a planning application for a house reaches them. If an applicant does not submit all of the required documentation then an officer in that local authority should be in a position to write almost immediately saying: We need an extra house plan, a site map or a specification. But it is most unfair to any applicant to send a registered letter two days before expiry of the planning regulation saying that perhaps their site map is incorrect, that they had not submitted sufficient documentation, or whatever. That is not good enough.

I want to deal now with the legal fees involved in housing which are very costly. Here a problem may arise in regard to title. I do not wish to go into the legal aspect in great detail, but in regard to the conveyance of title, this should be examined to ascertain if there is any way — and I stress any way — in which it could be processed more quickly or transference of a plot of land effected. Here I would like to warn applicants intending to build houses that they should not get involved in land in respect of which the title is bad or doubtful. They should ensure that the owner of the land is the registered owner and has title. I have known of persons who bought a plot of land or entered into a contract in respect of that plot of land and who to their grief perhaps discovered that it took a couple of years to sort out the question of title.

There can be a long delay when land is being transferred from one person to another and I believe conveyancing must be looked at. The person building the house may have to get bridging finance until the title is made good and that can take months. The local authority or any other financial institution will not grant any money until the title documents are in order. I would like to see something done about this. I know it is a rather complex matter but I would hope that some way could be found to get around this problem. Bridging finance costs the borrower a lot of money.

In regard to the type of houses that should be erected I do not think that a one or two-bedroomed house should be the standard laid down. That might be all right at the time of purchase but when a family comes along what use is a one or two-bedroomed house? The person then has to make additional accommodation available. Where is he to get the necessary finance to build on additional rooms? Our local authorities are building very good houses at present. I would also like to place on record that the National Building Agency are erecting very good houses. The standard of work is excellent and I want to congratulate them on it. It is a matter for a local authority to decide on the type of housing that should be erected in any area. In many areas they may be called upon to build a four-bedroomed house. I am glad to say that the National Building Agency who do the work for a number of local authorities have been building such houses and I want to compliment them.

I would like to ask whether as a result of this Bill there will be any more finance available for housing. We are now asking insurance companies to put money into this agency and we are going to pay them very attractive rates. Are they going to redirect their finances into this agency and will that mean that finance will not be available for other essential items? I have some reservations about this. I want to know if there is to be more finance available. What I see happening, and I foresaw it when the Bill was first mooted, is that the SDA loan is about to go. My views on that are borne out by the Minister's statement. People who are in a favourable position to borrow will be able to do so at a more attractive rate from other loan institutions.

I would like to know who is going to define the income every year. Will it be the Revenue Commissioners or the company with which one is employed? If it is the Revenue Commissioners, they have recently told the Government that they are not prepared to work another scheme. There is a fundamental point as to who is going to give the income of the applicant every year. Whoever is responsible, extra administrative costs will be incurred. According to the terms of the Bill the cost must be paid out of the revenue of the agency and I have no doubt that the borrower will have to carry this burden.

Regarding the bonding which will be offered to institutions at an auction — I do not like using the word "auction"—

Mr. P. Barry

Auction down.

Mr. Connolly

It could be auction up. When they realise that investment in the agency will be gilt-edged and that there will be a higher return than they would receive elsewhere, it will become a very attractive proposition.

I should like to know whether new offices are to be acquired for this agency and whether extra personnel will be recruited. I would also ask how many directors there will be. The Minister when replying might give this information. If office accommodation is to be built or purchased or leased this will mean a whole new organisation.

When I was in the Department of the Environment I investigated the possibilities of raising revenue but I found that new ventures would have to be financed by taking revenue from other areas where it was needed. That is why I did not go ahead with an agency like this or some other form of organisation. We decided earlier this year to increase the rate of housing loans and income limits and the mortgage scheme would give great assistance to purchasers during the first three years.

We have been accused of not making the necessary money available for these schemes. We would have made the money available but we could not know before these schemes were introduced how much extra money would be needed because it would depend on demand. During my years in this House there has always been a Supplementary Estimate for the Department of the Environment, formerly the Department of Local Government. It is not right that Government spokesmen, especially Ministers, should say that we did not make the necessary money available. How did it come about that this government were able to make additional appointments costing over £0.5 million, as well as other appointments about which we learned today?

In view of this Bill, builders will have to consider the best type of house to erect in order to get a return on their money. This may cause a steep rise in house prices and some may say that the CRV system will prevent that. I hope it will but I have some reservations in that regard.

It is stated that the agency will have to carry all the costs. We do not yet know what these costs will be but in view of the fact that SDA loans are being wiped out, it seems that the burden will fall on the borrower. Some time ago a reputable financial correspondent stated in an article that a loan of £20,000 over a 25-year period would cost as much as £140,000 in repayments. That figure has not been contradicted. The Minister stated in his opening remarks that it is not possible to say for certain whether borrowing will in the long run prove to have been more or less expensive than borrowing on a conventional annuity mortgage. This is a grey area where the borrower can be called on to pay back a very substantial amount on his loan. The position should be explained to the borrower because some people have the idea that when this legislation becomes law there will be no problems and repayments will be very low, but as the years pass and the family grows up there may be a heavy demand for a college education and the borrower will then begin to feel the burden.

As I said, we are moving from one type of financing to another but the question must be asked: are we going to provide extra money for housing under this Bill? In my opinion, this is simply a transfer of resources. It is the duty of a government to make available the necessary finance for housing and other relevant matters. This is very important. As I read the situation, the borrower will pay for the running of the agency, the administrative costs and so on. I would like to know if we are going to have a new organisation with possibly new offices. Will these offices be in different parts of the country or will there be a central office? If there is a central office only, probably the directors will operate from those offices with the people who will administer the agency.

Under this Bill we are doing away with SDA loans. How will this affect the SDA loans for house repairs, such as extensions? Will the agency take over that role? Will they give grants to provide additional accommodation, such as extra bedrooms? If that service is excluded, I would have grave reservations about this legislation and this area should be looked at again. People should be able to apply for a loan if they are living in over-crowded conditions and need money to carry out much needed repairs, extensions and so on.

We welcome any Bill that will improve the housing situation. There has been talk about issuing bonds to financial institutions, but how will this be done? With the gilt-edged security being offered by the State I have no doubt there will be a flood of applications from financial institutions. The Minister used the word "auction". What will the situation be in this respect? When the Government try to acquire money from these financial institutions I am sure a number of them will be looking to invest. Will this have an adverse effect on the funding of other very essential items? Will it bring about a change of emphasis in the funding of the gilt market? This is a very interesting situation.

It is patently clear that repayments to the new agency will be pay-related. This opens a new area which could possibly result in borrowers repaying extraordinary sums. Here it is important to quote from the Minister's speech:

It is not possible to say for certain whether borrowing will in the long run prove to have been more or less expensive than borrowing on a conventional mortgage.

In my opinion those in a well-off or favourable position to borrow from other lending institutions will get more favourable rates than those in the lower income group.

There was a great deal of haste by the Government to push through this Bill. I want to assure the Minister that we would not hold up any legislation that was for the good and the benefit of the people. What we wanted to do was examine the legislation in detail with a view to proposing amendments that might improve it. This is the proper procedure as was illustrated in respect of the Fire Services Act in respect of which there was a very good debate during a period of a couple of weeks. Many valid arguments were put forward during that debate and the Minister saw fit to go a long way to meeting us in respect of our suggestions. Unfortunately, there is no such opportunity in regard to the Bill before us, a Bill which represents a change of emphasis, a whole reorganisation of the local authority system. As the Minister has told us, the SDA loans are about to be abolished. We had hoped to be able to raise a number of matters concerning the operation of this new legislation and in relation to many other relevant matters concerning it but we are not being given that opportunity.

There are some very good points in the Bill but there are some aspects of it on which there should be more debate in order that we might determine what exactly is involved. What is before us represents a new form of financing, financing by way of funds other than those used now. I do not see this change leading to any extra capital being made available for housing because the borrower will have to pay the top rate. In addition there is the cost of administering this scheme. There are many questions that need to be answered. For instance, who is to make the returns yearly in respect of income? Will they be made by the employer or will the responsibility fall on the Revenue Commissioners in terms of the end of year returns? In any event there will be a very much increased work load involved.

In regard to housing generally, I am very much an advocate of rural development in this sense. In many parts of the country there has been crowding into towns from rural areas. In my county it used to be said that when a girl married, her mother would say, "Take your caravan and head for the biggest town possible. That is the only hope you have because if you remain in a rural area the engineers will not wish to know of any problems you may have". When I was in the Department I used preach to country managers about the desirability of building up the villages, because in that way we maintain schools, shops and, of course, people, in the rural areas.

Mr. P. Barry

I agree very much with that.

Mr. Connolly

Another effect of this crowding into towns is the strain imposed on the various services. For instance, the extra demand for water, especially with the extension of the boundaries to about three miles, is very great and that is why people in the towns often complain of an inadequate water supply, particularly at weekends.

County councillors must accept a certain amount of the blame for this situation. They have not been vocal enough in endeavouring to bring about a spread of housing. Perhaps I was guilty, too, in that respect in my earlier days as a local representative though on every occasion possible I raised this subject. There are many people who do not wish to go to the major urban areas. They would prefer to remain in the villages if they could get housing there. I am always very pleased when I hear of a local authority buying land for housing in a rural area, whether by compulsory purchase order or otherwise. There have been many instances in which there has been an outcry about a school closing after the pupil numbers had dropped to the extent that it was no longer viable to maintain a school. We were collectively at fault in that regard in failing to bring about the spread of housing that was necessary. I am glad that the Minister agrees with my sentiments on this matter. So far as county managers or engineers are concerned all I can say is that where there is a will there is a way and that they should do everything possible to maintain rural Ireland.

Another point I wish to make concerns compulsory purchase orders. This is a difficult area in which various legalities are involved but it should be possible to speed up the process. In recent times I am glad to find that there has been some speeding up but more is needed.

So far as I know the average time from the date of which a notice is lodged in the papers to the date of the final declaration is about nine months though it may be a year or longer. We would be doing a good day's work if the process could be speeded up. In some instances landowners set out to make situations awkward for local authorities. These landowners engage in delaying tactics. They may plough the land and say that it is more valuable than ever. I have no sympathy for such people. There are some landowners who would not part with even a tiny portion of holdings of hundreds of acres. I have no time for them, either.

Another difficulty in this area relates to accommodation that is rented. That creates a number of problems also and will create problems in the future. It is a complex matter and something which we have not examined in detail. When we left office we had built an all-time record of almost 28,000 new houses.

We were accused of not having made sufficient money available for housing. In the four years in which we were in office, we raised the income limits and the amounts on four occasions. When the Coalition Government were in office they did not raise the limits at all. When they left office the limit was still £2,350——

Minister of State at the Department of Industry and Energy (Mr. E. Collins)

That is not correct.

Mr. Connolly

That was the incomes ceiling. I know the Minister would not understand that. He is in a different field.

Mr. E. Collins

I am in the local authority field.

Mr. Connolly

The income limit in 1977 was £2,350 maximum. The Deputy cannot get away from that.

Mr. E. Collins

The Deputy is misleading the House.

Mr. Connolly

The income limit was not raised for four years. I am not misleading the House, I have never misled the House in anything. The facts are there. When we came into office we had to tackle the problem and that is why the Coalition were driven out lock, stock and barrel.

An Ceann Comhairle

Deputy Connolly without interruption, please.

Mr. Connolly

Before we left office we made the necessary money available as we did every year. Last year we built 28,000 new houses, which was a record. We cleaned up the mess which the Minister's party left. We brought in an incentive in April, which was welcomed by the building industry. The SDA loans at present are gone because the Government have brought in regulations to that effect.

We will be taking Committee Stage of this Bill tomorrow and we shall try to get as much information as possible as to what the implications are. There is a change of emphasis in the financial arrangements: the Government are transferring money from one area to another but it is the borrower who will have to pay and guarantee, with the backing of the Government, the financial institutions which are getting gilt-edge protection.

Mr. Mervyn Taylor

The House has just heard a certain amount of cross-talk as to what limits were imposed by various Governments on the SDA loans scheme. Having been a member of a local authority for some years, like other Deputies I have always felt that the limits, both as to the amount of loan available and the income limits that were imposed, were always inadequate, irrespective of which Government were in power. We, as members of local authorities, always had people coming to us during the terms of both Governments complaining about the inadequacy of the limits and we were well satisfied that they were inadequate to meet urgent housing needs.

As far as this Housing Agency Bill and the concept that is proposed here are concerned, I have very grave genuine fears and worries about the concept of what is involved. I will be looking to the Minister to alleviate, if he can, many of the real fears I have as to how it is going to operate in practice and what it will mean in reality. The Minister referred to the fact that a 20-year typical loan from a building society, where the gross repayments in the first year would amount to £3,846, represented 43 per cent of his income. It must be pointed out that the repayments to a building society are compounded of both a principal and interest. I am sure the figure of 43 per cent is correct. How will the situation be under the proposed new scheme where the repayments are to be index-lined? I would like to have this clarified. I am not an accountant but it would be reasonable to anticipate that, during the forthcoming year and perhaps for the next few years, the rate of interest which would have to be paid by any person who is unfortunate enough to borrow on this index-linked basis, would be 20 per cent. I do not think that is unreasonable because of the way interest rates are going at the moment and the indications of the way things will be. The yield on Government stocks is running at around 18½ per cent plus. Here one must add administration and financing costs of the agency which will have to be built into the cost to be charged to mortgagees.

Therefore it would not be unreasonable to assume that the opening interest rate would be 20 per cent. If a person borrows the maximum loan of £22,500 at 20 per cent, the interest alone that he would have to pay would be £4,500 annually, which is not 43 per cent of his income but 50 per cent. And that is only the interest, what about capital repayment? At least when a person is paying 43 per cent to the building societies he is getting his capital repayments down a bit but here — I may be wrong and if so I hope the Minister will correct me — the interest element alone will be at least 50 per cent of his income.

Reading the Minister's speech I understand him to have said that of course the person need not meet all that, that he can lengthen the period and carry forward the burden towards the end. I wonder how that aspect of it will work. It could be carried on forever throughout his lifetime. If the person is unable to meet his interest payments, to say nothing of capital repayments, his capital repayments would go forward into year two and would be substantially higher. This will be on an ever-growing basis.

A young couple taking on a new house for the first time will be faced with a 20-year mortgage period. Looking forward, 20 years seems like a very long time, but at least there is an end to it, but I fear that under this scheme we are not talking about a 20-year period but forever, a lifetime. It seems to me there is a real risk here that people will be taking on mortgages and the likelihood of which is that they will never get rid of them in their entire lifetimes, that the period of capital and accumulated interest will mount up, get bigger, and that not even the ravages of inflation, savage as they are, will be able to meet that situation.

To index-link the rates of repayment on a mortgage would be a very serious step that would require very great care and consideration and I do not see how it can be contemplated unless we reach the point when pay and wages also will be index-linked to enable parity to be achieved. As we know, wages and salaries are not index linked. Therefore the tide is running against the mortgage holder all the time. Index-linking is irrepressible, it carries on year after year. Can it be that all the mortgagee has to do, ad infinitum, is to pay 16 per cent or 18 per cent of his earnings? How can that be, as a long-term proposal?

The Bill requires the agency to make ends meet but there will be no source of funds to the agency other than what they will borrow on bonds, and taking one year with another the agency will have to make ends meet. Therefore, there must be some limitation on the push forward period envisaged in the Minister's speech but not in the Bill. As each quarter or half-year period comes the agency will have to find the money to meet the interest and to repay the capital as and when it falls due for repayment. Their source of income will be the repayments they will receive from mortgage holders, and if payments are deferred year after year — it seems to me to be highly likely that that will happen — the agency will find great difficulty in meeting interest payments.

The whole concept of what is involved here worried me. It is throwing into the ravages of the open market place the person who is trying to buy a house at the lower end of the market, the person who needs subsidy and protection, and I do not think the essential supply and demand that would be necessary even to consider a free market force would apply here. Therefore, there is an obligation on the State to provide protection and subsidy to the people at the lower end of the scale, but what we appear to be doing here is the reverse. The reality will be that people at the upper end of the scale will have a better deal because they will be in a position to obtain their loans from building societies whose interest rate at present is 16 per cent, whereas those at the lower end will be faced with 20 per cent, maybe a bit more or less. That seems to me to be an entirely incorrect concept.

Here is the play of the unfortunate development that has taken place in politics, which proposes that there can be a no-cost benefit scheme. This has been a fault of Fianna Fail and of us on this side. There cannot be a no-cost scheme because all schemes that are intended to be applied for the benefit of the people have a cost, and that cost has to be met.

I will say this for the Bill: it is innocuous. The worrying part about it is the speech that introduced it. It seems to me that many of the matters in the speech might more appropriately have been in the Bill because when the Bill has been passed it is the law and none of the matters in the Minister's speech will be the law. If one goes to court it is the Act which will be the guiding force. When I first read the Bill I thought it was intended to operate it on a different basis. It had not occurred to me that it would mean the scrapping entirely of the local authority loans scheme. That would be a tragic development. As the Minister indicated in his speech, that scheme has been very well administered by very dedicated people in the local authorities for upwards of 80 years. They did a magnificent job. The limitations of that scheme were not local authority limitations. They were imposed upon them by successive central Governments from both sides of this House. Those limitations caused its shortcomings in so far as it had shortcomings.

I had hoped that the direction of this concept, of this new agency, would have been a topping-up provision, as it were, to provide for small but very necessary second mortgages for those people who, with the benefit of such a second mortgage, could have availed of the existing local authority loan schemes, suitably adjusted. They need topping up. The capital and the income need topping up. If provision were made for second mortgages of perhaps £2,000 or £3,000, or a suitable cover amount of that nature, it would make all the difference in the world and would bring into the capability of buying a house at reasonable rates very many thousands of people who have not got that facility at present.

I was heartened when I saw a specific reference in one of the sections of the Bill — we can look at it on Committee Stage tomorrow — to the question of second mortgages. I do not see any reference in the Minister's speech to how that would operate. Would the Minister consider preserving the local authority loan scheme providing as it does for loans at some kind of reasonable interest rates, even in these difficult times, which would enable people to get their houses, coupled with the top-up of a second mortgage?

I would not have minded if the small second mortgage element, £3,000 or something of that nature, had to be raised even at a higher interest rate through an agency such as this, if that would have made the difference. One would have wished to have it at a lower interest rate for those people but, at least, it would have been confined to the top-up element and not to the bulk of the purchase money, the £22,000 or thereabouts which would be typical.

The scheme has to be self-financing. I find that a very worrying factor in the inflationary times in which we are living. Reading through the Minister's speech and doing my own rough calculations, I find it very difficult to see how it will be self-financing without having a cut-off point where at some stage the agency will say to an unfortunate house owner who has a thick rope around his neck of a mortgage getting bigger by the year as each year rolls on: "We have carried you for a year, or two or three years. Now we have to meet the repayments on our bonds. We have no choice but to call in your mortgage and insist that at least you will meet the interest payments and make a contribution towards paying off the capital." At that stage the amount he will owe will be vastly in excess of the amount he borrowed originally if he has availed of the opportunity of deferral referred to in the Minister's speech.

The key question in this whole matter of house buying relates to the cost of the house itself, because that relates to the amount of the mortgage which will be required. In this connection I am disappointed that steps have not yet been initiated to implement the Kenny Report to control the price of building land. That would be a very vital and key factor if introduced and implemented. It would bring down the price of new houses in particular by reducing the price of building land. I find it indefensible that, over the years, successive Governments have failed to bring in that provision. It is part of the joint programme and I should like to see it introduced as a matter of urgency.

To sum up my position, I have a very real and genuine fear on this matter. I fear for the abandonment of the SDA loans scheme and its replacement in its entirety by a mortgage scheme which will have inordinately higher cost and interest repayments. I fear for the people who will be compelled to go into the market to buy a house and find themselves with no choice or no alternative but to avail of the scheme at highly exorbitant rates of interest, the future course of which they will know nothing. There will be very major guesswork here. A person may take up a mortgage at 18 per cent today. He will have no way of knowing what will happen. The following year it may be 20 per cent or 25 per cent. The escalation of interest rates and inflation indicates that the trend is still upwards. I know the Minister has indicated that it is the Government's hope and expectation to reduce that rate in the years ahead. I sincerely hope they will be successful.

We have to remember we are carrying a very heavy burden of foreign debt incurred for the most part during the tenure of the previous Fianna Fáil Government, who borrowed that money irresponsibly for non-productive purposes. That burden is there and that debt is there. It will be extremely difficult to bring down the rate of inflation. I wish the Government and the Minister great luck in doing so. We have to accept the very real risk that it may not be possible to do that, that inflation may creep upwards, and that people who avail of this scheme may find themselves and their families in a very deep and difficult situation.

Professor O'Donoghue

I welcome the opportunity to contribute to this debate. While the Bill is of an enabling nature and is, therefore, somewhat vague, it raises a number of very large and important issues about the whole question of financing housing. It is important to try to clarify some of these points. We have just heard Deputy Taylor enumerate some of the reasonable questions which arise on any inspection of the material available to us so far.

Apart from those general points which would occur to any reasonably concerned reader, in my own case I gather that I was cited as a co-respondent of some sort yesterday by the Minister for Trade, Commerce and Tourism. I was given as claiming some sort of paternity for the offspring we have before us today. I should like to clarify as carefully as I can the sort of ideas and proposals which I put forward in the past, ideas, which at a later stage when we were in Government, were developed into proposals which were looked at not only within the now defunct Department of Economic Planning and Development but also within the Department of the Environment. I would have assumed that before any proposals came before this House from that Department, they would have dealt fully with the various issues raised in the earlier proposals in which I had some involvement.

I should like to avail of this opportunity to set the record straight. There are really two sides of the question to be looked at in turn. One is the position of borrowers, people who want to buy their own homes and who find it difficult to do so with the existing financial arrangements. The second set of questions that arises are those on the lending side. If we are going to make available some form of inflation-proofed paper for pension funds or for life assurance companies we must look at the way in which that is done to ensure that it is consistent with the overall management of financial markets and with the overall handling of the Government's finances, that it does not adversely affect the way in which the Government deal with their other borrowing needs.

I want to take each of those in turn. First of all, then, there is the position of borrowers, people who want to buy their own homes and find it difficult to do so. We are all conscious of the way in which that difficulty is magnified during a period of high inflation. We know that in effect what has been happening is that home ownership is becoming like a very exclusive club, where the initial subscription one has to pay in order to join has gone up very rapidly year by year. That initial subscription is the size of the deposit people have to pay in order to secure a house. The actual mortgage repayments in a period of high inflation take up a very large and growing fraction of people's incomes in the early years. The figure quoted in the Minister's opening remarks was one of as much as 43 per cent of a person's income going on mortgage repayments in the first year. Once one has got into the club, once one has managed to pay one's deposit and managed to meet one's mortgage repayments in the first years, then, with inflation, the real burden of those repayments falls very rapidly. After all, if one looks at the situation of someone who, say, bought their house 25 years ago — the sort of house which is typical of the numbers mentioned in the Bill — back around the 1960 mark that house could have been bought for approximately £2,000 and the mortgage repayments would have been of the order of £10 a month. It was a fairly heavy burden at that time on people buying their own homes but those repayments now constitute less than 1 per cent, on average, of people's incomes in those cases. Therefore the conventional mortgage as we know it, in a period of high inflation, works against people getting started but becomes progressively easier as the years go by.

It was the recognition of that problem that caused me and a number of my colleagues to investigate ways of getting around that difficulty. Hence the suggestion of an inflation-linked mortgage, the idea being that a person would borrow their sum of money — let us say, £20,000 — and, instead of having to pay the high mortgage rate of 16 per cent, 18 per cent or whatever, would pay a very small interest rate. Here I have to say, with respect, that I am not sure Deputy Mervyn Taylor was right in his reference to the Government's proposals — and this is one of the things I want to tease out — whether or not, with the Government's proposals, one would find borrowers having to pay very high interest rates in the earlier years. I can see why he may have been confused. I want to make it quite clear that any inflation-linked scheme I would support would have to be one that avoided that difficulty. Therefore, let me try to say what I would envisage happening.

The borrowers would borrow their £20,000 on which they would pay a very small, real interest rate — let us say 2 per cent. Obviously they would have to make some capital repayment each year, as is the case with every other mortgage — let us say 3 per cent. Therefore one could envisage a total repayment of interest and capital of approximately 5 per cent each year. Hence, on a £20,000 mortgage the repayment in the first year would be, say, £1,000. That repayment would increase each year in line with inflation so that, if inflation is 10 per cent a year, on average those repayments would go up from £1,000 in the first year to £1,100 in the second, to £1,210 in the third, and so on. In that way one is giving the person taking up the mortgage a chance of spreading their repayments in a way that fits in better with what is happening to their pay packet. Naturally, we would assume that on average, people's incomes would rise each year also in line with inflation. After all — going back to my earlier example of the £2,000 house of 20 years ago, probably costing approximately £40,000 today — the reason people can pay £40,000 today is in part because their incomes have also risen twenty-fold in the meantime.

For that reason an inflation-linked mortgage of the type I have just described — namely, one which has very low cash payments in the first years of the mortgage — would make it more manageable in cash terms for prospective house buyers. Also it would mean that over the lifetime of the mortgage the mortgagee would find himself or herself paying out sums of money which, while they would increase each year, would reduce in real terms. After all with a 10 per cent inflation rate they would certainly be paying, as against £1,000 in the first year, £7,000 or £8,000 by the time they got to the twenty-fifth or twenty-sixth year of the mortgage. Of course the actual cash sum they pay would grow very large but so too would their income. Therefore, as a proportion of their income no greater burden would be involved.

That is the first point to make clear. I have to say it was not made clear in the Minister's opening remarks when he said:

The borrower will be charged an index-linked mortgage rate...

It is not quite clear what is meant by an index-linked mortgage rate. In fairness to Members of the House it would have been much more helpful had the Minister attempted to spell out the actual financial implications of mortgages as they would operate under the scheme. I can see why Deputy Mervyn Taylor, and indeed Members on all sides of the House, could feel that the proposal before us today would actually worsen the situation in the early years for mortgage holders rather than make it easier for them by reducing the size of the cash payment in the earlier years of their mortgage.

That is the basic point I should like to establish — that the sort of proposals which I first put forward publicly in newspaper articles in 1975 envisaged a very low cash payment in earlier years, rising with the rate of inflation, so that the real interest payment made to the lending agency insulated or maintained the value of the initial sum loaned. That is the first essential point to be clarified. It is important for me to do so because the initial proposals emanating from the Fine Gael side — and I say Fine Gael as distinct from Labour because, as I recall, they were referred to in Fine Gael'a election literature — spoke about setting up this housing agency with some form of inflation-linked mortgage. However, they spoke about the repayments being geared to the income of the borrower and not being linked to what was happening to inflation. I notice that there has been a very subtle shifting of ground between the first statement of Fine Gael proposals, the repetition and enlargement of those proposals at election time last summer and what we have before us today. What we have before us today is a statement which reads:

The borrower will be charged an index-linked mortgage rate...

Further down in the Minister's remarks he said:

...actual loan repayments under the new scheme may be made on a pay-related basis.

I would certainly like to know, before this Bill passes into law, whether we are seeing another retreat from some of the high-blown and half-baked schemes that have been gushing out of the Fine Gael Party will over the last year or so.

Mr. Markey

We call it evolution.

Professor O'Donoghue

Call it what you wish but I think it is important for the Members of this House to be quite clear that your original scheme is definitely one which I would never support. If you are now shifting your ground and coming over towards a proposal which I would support I would be happy to know that.

It is for reasons such as this that Members on this side of the House did not wish to see a hasty discussion on this Bill and a rushing through of legislation which has important implications for the whole management of housing and for the various financial institutions. I would like to have as much clarification as possible before we rush through with a guillotine vote on this legislation by tomorrow night.

If I may take it then that pay-related repayments are no longer an essential feature of the scheme and, therefore, can be assigned to the limbo of irrelevancy and if we are talking about a genuine index-linked scheme, I would also like to have it made clear that we are talking about an index-linked scheme of the type which I have described, namely one which charges a low rate of interest in the initial year and which then increases the annual repayment in line with the rate of inflation so that the actual cash payments by a person taking up such a mortgage are very much smaller in earlier years than with existing loan schemes and then rise over the years. If we could have that aspect of it clarified then there are attractions in a scheme of that nature. It would then make it possible for many people, who at the moment find home ownership something which is just beyond their reach, to buy their own homes. We all know of cases of young couples who are trying to scrape together the money to get the initial deposit or, in some instances, where they achieve that goal they are deterred by the fact that they cannot make the repayments on the size of the loan needed for the house which they have in mind.

If we can bring down those initial early year costs of home ownership that will be a very worthwhile step. It has always been the policy of the Fianna Fáil Party to encourage home ownership to the maximum extent and if we can devise satisfactory arrangements which enable more people to secure their own homes I imagine that most Members of this House will regard that as a desirable step forward. We are certainly not willing to give an immediate blessing or support to a scheme which, as earlier enunciated from the other benches, was of a quite different variety and one which would have operated very unfairly against lower income families. It would have been unfair to ask low income families to commit themselves to paying a proportion of their income over time. If they were to do that, what you are saying is that if they were ever to succeed in improving their real income, if they were to secure promotion in their job or if their real pay level rose through time, they would find themselves faced with, in effect, an additional income tax on their particular earnings. They would always be committed to paying 18 per cent or whatever of their income by way of repayment on their loan. So, irony of ironies, the party that goes around talking about greater equality and helping the poor and all the rest of it would itself be initiating some form of house finance scheme which deliberately taxed lower income families at a higher rate than those who were better off in the sense of being able to afford the existing conventional mortgage. I hope we will hear no more about pay-related mortgage repayments.

I want to look now at the lending side of the operation, where they get this money, why it should be available, and whether it is a good thing to take it on. From my own discussions with people in various financial institutions I have no doubt that there would be relatively little difficulty in raising substantial sums of money by way of inflation-linked borrowing on the part of this agency, because pension funds, life assurance companies and so on all face a real difficulty in trying to place their money in some form of long-term investment which would keep its value over time. I know there are many people who are concerned that this might be an undesirable development, who feel that if we do this we are protecting large powerful, rich, financial institutions against inflation, that we are taking the risk away from them and placing it on the shoulders of the people who are buying their own homes. It is undoubtedly true that if the agency is to function as described and as it should function, that will be the case. The risk of inflation has shifted from the lender to the borrower. I would say, provided you borrow your money from a specified institution, this is not a bad thing. Who are the pension funds and who are the life assurance companies? The biggest life assurance company in this State is, in a sense, owned by the State anyway, so you are not giving the money to any capitalist. Even in cases where you are dealing with privately owned insurance companies or pension funds, what happens to these moneys? What are they being used for? Who do these institutions need to protect against inflation? The answer is that they are trying to provide pensions for the people who pay the premimums to these companies. Who are those people? The very same people, in most instances, who are trying to buy their own homes. So it is taking it out of one pocket and putting it back into the other.

It is very necessary to contemplate making available some form of inflation-proof investment for genuine pension funds and life assurance companies. At the moment there is a very real injustice. The only people who can enjoy inflation-proof pensions are those in the public sector. I am not opposed to public servants who have served the State loyally over the years being able to enjoy adequate provision for retirement, but I do think there is something wrong with a system which does not allow the same advantage to people in the private sector, many of whom work just as hard, many of whom are exposed indeed to much greater risk in their employment and in their income than those in the public sector. It is unfortunate that with our present system none of those people can be given a guarantee of an inflation-linked pension. The best they can hope for is a 5 per cent increase in the value of their pension each year because that is all existing revenue arrangements can permit. It is simply not possible for private financial institutions to guarantee protection against inflation. I would have thought it was a good thing to make it possible for people in private sector employment to have open to them the possibility of an inflation-linked pension in the same way as people in the public sector. A way of doing that is to allow approved pension funds to place the relevant amount of money in this Housing Finance Agency, to make their funds available for investment in this way. Although on paper this is transferring the inflation risk from the lender to the borrower it would fulfil a very desirable social function, provided it was done with the appropriate safeguards. This is an important aspect which needs careful consideration to make sure that money is raised in a way which helps those who need this type of pension provision and is not diverted into less urgent or less deserving avenues.

Another question which will be asked is whether this will upset the whole working of the financial market. After all, some companies can place their funds in this agency and be guaranteed against inflation. How will the Government be able to raise the rest of their borrowing by way of conventional gilt-edged securities paying a fixed rate of interest and therefore providing no hedge against inflation? I recognise that this question exists and the answer has to be that if the agency draw only the limited amount of money which they need in any one year it should not have too unsettling an effect on the market because once the agency have got their £50 million or whatever sum is required that is the end of that bargain for that year. In the case of difficulty in selling conventional gilts, there is no reason why there could not be some sort of pairing arrangement so that big institutions would get so much of the index-linked paper only if they also undertook to buy a certain amount of gilts.

It would be fair to comment that the overall management of the financial market can be done adequately by the Central Bank and the other authorities making sure that the overall flows of credit are properly supervised and other forms of security, whether gilt-edged or short-term lending through Exchequer bills, will find their own price in the market as they do at present. I would not feel that the impact on the financial markets would be necessarily harmful or undesirable in the long term, provided it is properly managed. I would agree that if this new form of security were simply tossed in without any regard to its impact on other institutions and other types of financial lending, then it could have unnecessary unsettling effects.

There is no need to have an elaborate agency with large numbers of staff. Essentially the agency is required to act as a middleman or channel for collecting funds and distributing them to the various existing mortgage agencies. The reason for having an agency of some sort is to have an identifiable office or body to which financial institutions can refer when they want to place their funds. If a pension fund or a life assurance company want to take up £10 million or £20 million of these inflation-linked securities, they know which office to contact. A relatively small number of staff will be required and only £50 million per year is being sought. I suspect that could be arranged in a few conversations within the space of a day or two because these institutions do not want to deal in trivial amounts of money and are much more likely to want to place millions of pounds on some sort of regular basis. They manage very large flows of funds. The taking-up of the money from institutions does not require an elaborate staff.

The reference in the Minister's speech to auctioning or offering by tender may not be the most appropriate method. I would have some reservations on that score which I will not go into at this juncture because it is not the most appropriate place or time to do so. I suggest that this aspect be examined before any final decision is taken.

Once the agency have arranged their finance there is the question of distributing funds to people who want to borrow. I agree with the view expressed by the Minister that this should be done through existing bodies such as local authorities. There is no reason for the agency to deal directly with any person who wants to buy a house. It would be much more sensible for them to allocate appropriate sums to local authorities. There is no reason why funds of this nature should not be distributed by the agency to other institutions such as building societies, because in principle the agency are acting as a mechanism to facilitate house buyers who want to get a mortgage in this form. One could envisage the agency allocating parcels of money to various private institutions such as building societies as well as official institutions.

The basic case for some form of inflation-linked mortgage is to get over the problem posed with existing mortgages of very high cash repayments in the early years and the inflation-linked mortgage does this by lowering initial repayments. I do not think we should go so far as to give 100 per cent of a mortgage in this form. For convenience of administration one might envisage lending inflation-linked sums in various proportions. There might be several options open to the house buyer. He might have half his mortgage inflation-linked and the other half in the conventional form and the proportions could be varied. The amounts might be rounded to the nearest thousand to facilitate administrative work in calculating the changing repayments each year. This would give the prospective buyer a package of finance and a combination of options involving some increase in his total repayments every year because of the growth in the inflation-linked part of his mortgage but the overall repayment not growing as fast as inflation as a whole and, hopefully, not growing as fast as his income.

The final point that arises from that suggestion is: what happens in cases where the borrower is not able to meet the repayments, whether through losing his job, sickness and so on? In my opinion the best way to try to cope with that problem is to build a small fraction of an insurance payment into the basic mortgage agreement, to have in effect a form of mortgage protection policy which caters to a reasonable limit for loss of earnings, whether it be for three months, six months or whatever. I do not see how we could provide total cover because we do not attempt to provide total cover with existing mortgages. While it would be nice to envisage attempting to do this, I do not think we can never arrive at a situation which will provide perfect security for every person. The world is not like that. We all have to live with various hazards and uncertainties. All we can do is to attempt to put forward reasonable measures that can accommodate a large proportion of circumstances so that the majority of people would be adequately catered for by an inflationary mortgage scheme which had some form of mortgage protection policy and that would not be very expensive to provide. This would cater for the majority of instances of loss of earning power, whether through sickness, unemployment or death.

Those are the main points I wish to make. At this stage we are only dealing with the general principle of the Bill, not the details. I have attempted to make clear that we recognise there are difficulties in a period of high inflation for people attempting to buy their own homes, especially people who are on the margin of being able to afford to venture into house purchasing. If we can devise new forms of financing arrangements which can overcome some of those difficulties and increase the degree of home ownership, that would be a desirable step forward and we should be willing to explore ways of doing that.

However, while the intention may be good and the basic idea may be appropriate, we should not rush off with half-baked ill-conceived schemes. For that reason we would like to see spelled out in greater detail the manner in which this agency would operate, the precise details of the way they would give mortgages and the terms on which those mortgages would be available. It is very important to make clear what is meant by an index-linked mortgage rate. I have given my views about what I imagine would happen, but it would be interesting to know if that view is shared by the Government. If we could have clarification of these matters and if we were given some idea how the agency would function and who would be responsible for their activities, we might be able to give a more considered verdict on the proposed housing agency.

Mr. Markey

I regard the introduction of this agency at this time as very opportune because there is a need for innovation in the area of home financing. Anybody who has been involved in local authorities knows the stop/go method that has prevailed in regard to the availability of finance for house borrowing. The establishment of this agency is particularly opportune in the light of the housing survey being carried out at present and in the light of the White Paper to be introduced in early 1982. We know from experience what this survey is likely to find. It will categorise the people in need of housing and itemise the number of houses built over the years. Even with all those figures it will be difficult for the survey team to get to the root of this sad but truthful situation, namely, that finance has not been available on a continuing basis to help young people purchase their own houses.

Unfortunately Government White Papers in the past decade have increasingly taken on a lack of credibility. A Government White Paper succeeds a Green Paper which is the result of discussion and decision when setting out policy. Unfortunately there seems to be a lack of political will to put into effect what can be put into print. That is why I believe this agency will breathe new life into the area of home finance.

In recent years money has been very badly needed to provide houses for young couples. Money was needed to stop once and for all the haphazard method by which local authorities provide money. I have heard only too frequently that couples who applied for loans were told after a very lengthy delay that their loans had been approved. They had to wait another long time before the money was made available simply because the Government of the day could not provide the money.

Now more than ever a new source of finance is needed and this agency will provide the basis for that. The Minister set out some of the merits of loans under this new scheme, advantages which do not exist under the present SDA loans scheme. The agency will not draw a distinction between new and existing houses. Loans will not be confined to married persons or persons about to marry. A person who applies for a loan will not be obliged to prove that he cannot obtain a house purchase loan from a commercial agency. Loans will be available for a home owner who wishes to buy a bigger house because his existing house is unfit or overcrowded. Loans will also be available where a home owner is obliged to obtain alternative employment in another area and wishes to buy a house there. This applies particularly to key industrial workers.

In none of these instances in the past few years have the necessary facilities been available, simply because the finance was not available. With the establishment of this agency I see an opportunity for local authorities to fulfil their obligations by providing one of the basic needs of life, namely accommodation for young people at reasonable rates.

The criticism of the Opposition ranged from being vague and a little mischievous to being very responsible — from wondering whether offices would be built around the country and who the directors would be, to a confidence that this agency may have a capacity for achieving even more than is set out in this Bill. It is with this confident attitude that the Government brought in this Bill. They seek to have that confidence translated into the only effective terms that mean anything to young people — to know that money is available for them for housing when the need arises.

I accept the sincerity of the reservations expressed in regard to the Bill, especially the reservation concerning the abandoning of the SDA loans scheme. If that scheme can be replaced with something better I will not shed any tears at its demise. It has been a stop-go operation. It involved a policy of limitless cost, in that it did not matter what the cost was because the State would foot the bill. A stop had to be put to that sort of mentality because the State cannot continue paying bills which increase year after year, especially when people begin to adopt the attitude that the State is there to pay those bills regardless of from which quarter they may come.

I accept the genuineness of the concern expressed in relation to the imposition on borrowers at times of high interest rates but the answer to this lies in the reduction of inflation, a reduction that is reflected in the interest rates for borrowers. Our policy is to reduce inflation and if we fail in that respect we will have failed in our policy. It behoves all of us to strive to reduce inflation.

Listening to some of the speakers on the other side I got the impression that behind all the questioning and the reservations lies a sort of inbuilt regret that they were not the authors of this scheme. The last speaker told us that as far back as 1975 or 1976 he mentioned a scheme on the lines of the one proposed. We can all speculate on what might have been but we might ask ourselves what mileage Fianna Fáil would have got out of a policy like this in the election campaign having regard to their superior PR machinery. However, the Bill is the brainchild of Fine Gael. It has evolved in the past two years and today is proposed as permanent legislation.

There must be certain basic criteria in respect of any new legislation and, if this criteria can be met with confidence, even in advance of the establishment of the agency, the undertaking is well worth while. The potential of the new agency may be far greater than any interpretation of the Bill would indicate. The questions we might ask in respect of this agency are, first, whether it will provide more money for housing. It is the sole purpose of the Bill to do that. Secondly, we may ask whether it will be less costly for the State in their getting away once and for all from the no-limit attitude, from the attitude that the State will alway foot the bill. If the new arrangement proves to be less costly to the State, it will be justified. The third question is whether it is within the capacity of the borrower in the early years as well as in subsequent years to meet his repayments. If inflation is reduced, that will be the position. There is the advantage of the borrower being in a position to meet his commitments in the early years in particular. The fourth question is whether the scheme will provide an increased number of houses. For far too long we have had the situation of local authorities providing houses for those at the lower end of the scale; people in the middle-and upper-income brackets were in a position to meet their mortgage repayments on houses in the £35,000 to £40,000 bracket, while in between there was a mass of people who were not in a position to obtain the necessary finance either from local authorities, because of the limits, or from building societies because of inability to meet the repayments. It is to fill that gap that the agency is being established. I am confident that the four aspects of the criteria will be met in full and that when the agency is in operation it will be very fruitful in terms of Irish society.

Mr. Coughlan

I welcome the Bill and I compliment the Minister on his presentation of it. Indeed, I welcome any measure designed to ease the disastrous situation throughout the country but particularly in my own constituency in respect of housing.

Of course, we must wait until the scheme has been in operation for some time to find out what the results of it will be. We have not come here to oppose the measure but to investigate the various details of it as well as to question matters that we consider should have been included but which are omitted in the Minister speech. The Bill is so important and far-reaching in its provisions that it is very unwise to rush it through the House and it was in that sense that we opposed it. We had been hoping to be given time to debate it properly.

People on both sides of the House have been questioning many of the items in the Bill. There are many areas that are not clarified in the Minister's speech and I am at a loss to know why this is so. As the last speaker has said, the scheme has been under consideration for more than two years. I would associate myself, too, with the remarks of my colleague, Deputy O'Donoghue, who said that a scheme such as this has been under consideration within Fianna Fáil for many years.

We are not sorry or ashamed to associate ourselves with any measure which would alleviate the worries and fears of many people who find themselves lacking a facility that is of paramount importance to anyone who gets married — to own their own home or at least to be living in a home which they could eventually own. I am sure it is the wish of everyone in the House to make a worth-while contribution and attempt to help those people who are less well off and not in a position to secure a loan or build their own house. This Bill seems to shift the responsibility onto the shoulders of the borrowers and put them at risk, whereas it offers a guaranteed investment to the financial institutions.

The element of business speculation will be shifted from the financial institutions and laid, should anything go wrong, at the doorstep of the Exchequer. It is obvious that there would be no difficulty in securing finances under the terms of reference here since it has a guarantee incorporated in the Bill. Over the last number of months, and this can be established by consulting with the housing authorities in Donegal, many people who have even small loans from the local authority, either under the SDA loan or what was known as the low-rise mortgage loan, are finding themselves in difficulty. It is my duty to be very careful about seeing that this situation is not aggravated. Under the terms of reference of this Bill, the borrower will be more at risk than the lender.

The Bill gives me an opportunity to highlight the depressed state of affairs in the constituency which I represent. In 1980 a survey was carried out, in conjunction with An Foras Forbartha, and it was established that there are approximately 7,200 unfit and overcrowded houses in County Donegal. It also established that there is a prospective need, over the next five years, for something in the region of 6,000 houses. This leaves a total of approximately 13,000 houses to be provided in County Donegal over the next five years. If we look at the pattern of construction of houses in the county to see if we are progressing or going back in Donegal, at present we have tenders on hand since early this year — and some since last year — for 184 SI cottages. We have a further 82 houses ready to go to tender and approved applications this year to date for 1,000 houses. Included in these figures are the small type structures referred to as demountable dwellings. On checking the figures, even in the provision of demountable dwellings, there is a very marked decrease this year. In 1978 we provided 28 demountable dwellings, in 1979 30 demountable dwellings, in 1980 23 demountable dwellings, and in 1981 only seven demountable dwellings. This is a terrible reflection on the housing programme in County Donegal, regardless of what administration are in office, particularly in the Year of the Disabled. Although many of these old people are not completely disabled, many have a degree of disability and it is disappointing to think that this was the contribution we made to those people who were possibly the least well off in the country and not in a position to do something for themselves.

One may ask why there is such a demand for housing in County Donegal and what the population trend is since our last census. In 1971 the population of County Donegal was 108,344. In 1981 the population has increased to 124, 783, which represents an increase of 16,439 or approximately 14 per cent. We are not in a position to meet the housing demands of the county. Donegal County Council are at present endeavouring to deal with a total of 2,350 applications for housing. That is a staggering figure. It represents all housing needs, SI and SF houses which were tendered for but not built, local authority houses and demountable dwellings. When our housing need reached such an alarming stage, we decided to meet officials from the Department and we presented a very well-documented and accurate case to the Minister — I do not have to recap on that case — and the only assurance we got was that Donegal would get its fair share next year. I am wondering what our fair share is going to be because I have outlined the need that is there and the very slow, grinding-to-a-halt manner in which we are tackling the problem.

In 1977 we built 225 houses, in 1978 200 houses, in 1979 266 houses, in 1980 162 houses and in 1981 177 houses.

Minister of State at the Department of Posts and Telegraphs (Mr. Harte)

Has the Deputy got the figure for 1975 and 1976?

Mr. Coughlan

I do not have those figures, but I will quote another very interesting figure for the Minister. Since the Coalition Government took office they have not started or completed one house that they can take credit for financing——

Mr. Harte

Not even the houses which were promised in the by-election twelve months ago.

Mr. Coughlan

They are there to be questioned if necessary. I did not misquote the figures. We have schemes of houses in progress in Killea, Falcarragh, Convoy, Ballyshannon and Carndonagh. I am sure the Minister of State will verify that there were 97 applicants for 16 houses in Convoy and that 50 of those applicants live in grossly unfit and over-crowded conditions. The terms of the Bill do not offer anything to the people of Donegal.

Mr. Harte

That is not true.

Mr. Coughlan

I did not interrupt any Members today although I disagreed with many of them and I am sure the Minister of State will afford me the same courtesy. If he wishes to contradict any statement I make he will have his opportunity later.

Mr. Harte

I am telling the Deputy that what he has said is not true.

Mr. Coughlan

The people I am referring to are not in a position to apply for SDA loans. If they were capable of meeting such repayments we would not have 2,000 applicants for houses to Donegal County Council. The arrears chart of Donegal County Council is on the increase because many people are not able to meet the repayments on their loans even though they are small. There is no relief in the Bill for such people. There is no ray of hope for them. Those on the housing list of Donegal County Council are desperate. Many of those who live in unfit and overcrowded conditions are unemployed and, consequently, cannot negotiate a loan. I am sure the Minister of State has had representations about the scheme in Convoy because there were many disappointed people in that area.

In Donegal we build approximately 1,100 houses annually, taking into consideration local authority and privately built houses. In the next five years there will be a need for 14,000 houses in the county and one does not have to be very bright to realise that we will not meet that target. In fact, we will not even hit the board. I am not here to criticise the legislation but I am concerned that its provisions will not help the people of Donegal. I should like to contradict what has been said on the Government side about loans and the number who have applied for loans in County Donegal. In 1979, 377 house loans were approved, in 1980, 430 were approved while in 1981, 446 were sanctioned. That is a long way away from the number of people in need of housing and it will not make any impression irrespective of the type of loan scheme that is introduced. Donegal needs a sizeable injection of capital to build houses.

It is difficult to judge whether the legislation will be successful, and the Minister admitted that in the course of his speech. If we have to wait 25 years to find out if this new agency will work satisfactorily it is too long to wait. There are many aspects of this rushed legislation that are difficult to understand and similar fears have been expressed by Government Members. The main factor is that financial institutions are given a guarantee. that is an indication that somebody must pay the piper and in this case it will be the borrower. Bearing in mind that the legislation has been in the melting pot for more than two years it is surprising that it does not contain more original ideas. Our concern is to look after those in need, not the financial institutions. We are concerned about those in need of housing who are not in a position to provide for themselves. The legislation does not attempt to protect them.

The only new and questionable element in the Bill is that if the scheme does not work it will be rescued by the Exchequer. That type of guarantee to investors is very attractive because there is no risk involved. If this proves successful for the financial institutions it will open up the gates for similar schemes in many other areas. It gives an unfair advantage to the housing agency vis-à-vis other existing lending institutions.

I listened with interest to Government Deputies and was taken aback when Deputy Barrett said the provisions of the Bill were a breath of fresh air. For the people in my constituency who are seeking loans there is no fresh air in it. Our main concern now is where our people will go to find work when they become unemployed and unemployment figures are increasing month by month. Not this year or last year have we found it increasingly difficult to draw industries into our county because of its isolation.

It is with our young people in mind that I question the benefits to be enjoyed from the provisions of this Bill. One has only to visit any town with a regional technical college, like Letterkenny or Carndonagh, to see the floods of thousands of young students coming out to ask where or how they will get jobs, where they will live. In a few years those young people will not accept lip service from Governments when they make their demands.

I question the supposed beneficial effects of this legislation. There is the matter of staffing the scheme. I sincerely compliment the local authority staffs who deal with loans and I am disappointed that instead of this Bill we are not making much more finance available to local authorities to continue their loan schemes. In Donegal we have a small, efficient staff to deal with the entire county and delays only occur through documentation going to and coming from the Department of the Environment, such things as CRVs and certificates of exemption. When a deputation met the Minister we asked him to try even a pilot area involving a few counties which are well served by staff, in an effort to remove the backlog, the red tape, the letter-writing to the Department.

I cannot see any difficulties in the local authorities implementing this scheme. I am sure Deputy Harte and other Deputies have experience of negotiating loan applications. Two years ago it was necessary to have two sureties and they had to give their names and addresses and the names and addresses of their banks. Surely there is no necessity for such bureaucracy when the council have the title to houses worth £30,000 or £40,000; surely there is no need for sureties at all.

Difficulties will arise in this scheme, possibly, in relation to self-employed people who have no involvement with accountants and who do not want to have anything to do with them. We know the incomes fishermen have. In the year when some boats caught 1,000 cran of mackerel each and it was sold for so much per box, it was said they must have made a packet. People forget that in winter their boats are tied up for 14 or 15 weeks at a time. How can you estimate the wages of such people? The same applies to small farmers. As far as I am aware full-time farmers will be exempt from many of the regulations that will apply under this scheme. All these questions my constituents will be raising. There will be, as there have been, questions in regard to the establishment of absolute title. Many times I have raised the question of a person applying for a simple house loan. He had to pay not only his own solicitor but the council's solicitor as well. Surely there is room for improvement in that respect when people in my constituency are scraping for the money to build houses.

Deputy Barrett said this legislation would encourage people to own their houses. I agree it will encourage the better-off type of applicants but it is no source of encouragement to people struggling on lower incomes. If I were asked for a partial solution to the housing problem I would suggest immediately a genuine cash grant scheme. In 1972 an applicant could avail of a higher rate of grant, £900. In Donegal it was known as "the farmers' grant". The income limit was £1,500 and for the average type of small dwelling, three-bedroom house, the loan applicant could buy all the materials necessary for that £900. That scheme was a great incentive to the self-employed, the fishermen and small farmers, to build their own houses. They did so, and an enormous number of houses were built.

Since 1972 under successive Governments we increased that grant by only £100. In present day conditions if we were to offer the same incentive we would have to give a cash grant without strings of £5,000. The £1,000 grant for new houses is on its way out. Many of the people I represent would prefer the type of cash grant I have been talking about with which to buy the materials and build their own houses. If we are to tackle the problem seriously we must increase the cash grant. This would be particularly beneficial to a man who is farming or fishing and who has a certain amount of time to spare. Many of these people will not undertake to build a house costing £12,000 or £14,000 if the only grant they will get is £1,000. Since 1972 the only increase in that grant was £100. I cannot express any great satisfaction with the increase granted by Fianna Fáil, but it is worth recalling that when Deputy Tully was Minister for Local Government he tried to abolish the grant completely. He suggested that only those who qualified for a supplementary grant should get the Departmental grant of £300. In the subsequent election he got an answer to his endeavours.

The low-rise mortgage scheme was mentioned. I was very disappointed that the Government saw fit recently to discontinue that scheme which helped the type of applicants I am speaking about. The applicant's interest and repayments were subsidised for the first ten years. The applicant, his wife and one child had to be living in unfit or overcrowded conditions for a year prior to the application. There is now a special category loan of £14,000. Many people who would have qualified under the old scheme are frightened of the repayments on this special category loan.

I said I did not see any great reason for rushing the Bill through the House this week. It is a Santa Claus effort for the financial institutions. Unlike the borrowers, the financial institutions have not got a hole in their socks. My main criticism of this Bill is that there is a lack of guarantee for the borrowers.

Deputy Barrett referred to the statement made by Deputy Reynolds when he queried the administrative section of the Bill. Deputy Reynolds was of the opinion, as I am, that the existing staffs of the local authorities will not be able to implement the scheme without supplementary staff. That is reasonable because of the financial and other implications involved.

This Bill will be of benefit to people in industrial areas, people who are sound financially. There will be many applicants. I do not see any great attraction in the Bill for the people of my constituency. Will the counties which are classified as the poorer counties get a more sizeable capital allocation by virtue of the fact that there will be very few applicants? I saw a television programme recently dealing with Tory Island and the question of people from that island being housed in a scheme in Falcarragh. The commentator referred to the mainland as the poorest part of the islands off Europe. This raises a serious question mark over the status of County Donegal and its problems in relation to housing.

Over the past couple of years I have met a number of people who are in the poverty bracket. When I first became a member of the county council, the usual problems I met with were concerned with housing grants, delays in house inspections, house improvement grants, water and sewerage grants, or the construction of minor roads. Today an increasing number of people find difficulty in meeting their grocery bills. A scheme such as this will do nothing for them.

I was delighted to hear Deputy Taylor say he hoped a serious attempt would be made to protect borrowers. This is our major concern on this side of the House. He also questioned the scrapping of the SDA scheme and the low-rise mortgage scheme. Deputy O'Donoghue referred to a mixture of both. The fine print of this Bill will be of interest when it is enacted but by then it will be too late for us to go back over it.

I am also in agreement with Deputy Taylor about the implementation of the Kenny Report on the price of building land. Wealthy people are coming into our county. They can afford to buy a site for a summer home. They offer £3,000 or £4,000 for a site and that puts up the value of local land. Young people who have just got married and are looking for a site find that the price of land has been raised in a poor county like Donegal to the level where a site in the vicinity of Donegal town costs in the region of £8,000. We have to put £30,000 on top of that to build a house.

There was an interesting discussion on this Bill this evening, but people on the other side of the House showedso little knowledge about it that I begin to wonder whether it is not another one out of the bag of tricks of the Minister for Finance, Deputy Bruton, like the circular on the national school which is going through whether we like it or not, and whether some people on the other side of the House like it or not.

The Minister's introductory speech made it absolutely clear that our reluctance to take this Bill before Christmas at such short notice was justified. I say that mainly because of the lack of detail on a number of issues to which it will give rise. Apart from the issuing of bonds to financial institutions and so on and the guaranteed return it means that the risk of inflation will be transferred from the lending financial institution to the new agency and, almost certainly through the new agency, back to the borrower. This will give rise to this type of system being used in other fields.

A serious defect of the Bill is that there is no indication of how the agency will be managed. If this Bill has been in preparation for over two years I should have imagined that by now that aspect would have been well and truly thought out and presented in conjunction with its introduction.

There is an indecent haste on the part of the Government to rush this Bill through without any consideration being given to the many important issues this new agency and its methods of operation raise. We in Fianna Fáil will not oppose the establishment of the actual structure because it is of such a general nature we shall probably be able to use it for some suitable purpose in the not too distant future. Now that we have some idea of what the Government envisage, we intend considering in depth the many issues this new agency and its methods of operation raise.

Mr. Yates

I welcome this Bill. This is my second occasion to speak in this House, the other having been on the Youth Employment Agency Bill. Both of these Bills constitute concrete evidence of the Government's commitment and action in the area of young people, whether it be in regard to jobs or housing. The Opposition would be very quick to point out if we broke any promises in relation to any matter of policy. Therefore we should be quick to point out on this side of the House when our promises are kept in full. This agency was promised not only in our election programme but also in our programme for Government, 1981 to 1986.

Nearly all of the Opposition speakers have commented that the passage of this Bill is too swift, that they have been given insufficient time to study it properly. There are two points I should like to make about that. One is that, as a new Member, it strikes me that Members' contributions in some ways might be called ineffective in regard to their actual input in legislation and in relation to Government or Opposition amendments incorporated in such legislation.

I welcome the concept enshrined in this Bill. It would be very easy for the Minister and the Department to add another layer of bureaucracy to housing finance agencies, be they local authorities or building societies. I would point out also that there has been no Green Paper or White Paper in this instance. Instead we have got straight down to the measure to which we were committed. As was pointed out by the Minister, the type of finance about which we are talking in the first year of this agency's operations — £25 million to £50 million — will constitute absolute evidence that this will not be in any way a cosmetic maneouvre but rather a real attempt to ensure that a certain category of people will be able to build or buy their own homes.

When we speak of housing basically we are talking about one of the most fundamental things required of a Government or of a politician. As the deputy leader of the Labour Party said some months ago: if politicians in Government can provide housing and jobs, the rest of the services is almost indulging in luxury. The fact that £25 million to £50 million will be spent on building houses, on the blocks and mortar, means that there will be an immediate spin-off effect on jobs.

I should like to outline the housing situation in my constituency in County Wexford and its dilemma at present. There are approximately 1,500 to 1,600 applicants for local authority housing, that is for vacancies in houses constructed by the local authority as well as isolated applications, to have houses constructed. Indeed, we inherited a particularly grave situation in the middle of this year. I can think of three schemes in my electoral area in respect of which there was insufficient money in Wexford County Council for their completion, not to speak of any new starts for next year. Therefore I welcome an extra £500,000 being given to Wexford County Council and, as a result of a deputation, an additional £115,000 for this year's allocation. This will go some way to ensuring that houses started this year will be finished and that there will be some new starts for next year.

In municipal areas such as Enniscorthy Urban Council, in respect of most houses allocated and advertised, there is a ratio of 6:1 — six unsuccessful applicants to every successful one. I know this Bill does not relate to direct capital allocation for housing. But, given the present situation in which there is only so much money to go round, if more money has to be injected into this area for those who cannot afford to build or buy their own homes, there is then less for loans to encourage people to build or buy their own homes.

The situation obtains also that those in the middle income bracket who wish to build or buy their own homes have access to SDA loans. In 1980, for example, there were £2.1 million spent in this area by Wexford County Council. This year it appears that £2,500,000 will be spent. According to the officials there are approximately 350 applicants — in other words, approximately 350 families — of which 300 will be successful, all of whom would have incomes of under £7,000 per annum. There is then the other category, those people whose incomes amount to £12,000 or £14,000 who can go into a local building society office and who, provided they meet all of their requirements, have some chance of building or buying their own homes on loans negotiated at commercial rates. But in between, and this is the whole point of this Bill, there lies a category of people — for instance, somebody whose income amounts to only £8,000 per annum — who have no chance whatsoever of getting a local authority house or of obtaining an SDA loan. The building societies would laugh at such people simply because they were not in a position to raise the necessary savings even to be considered for a loan. That is the real immediate need for this Bill — to fill that gap.

We must look at another aspect also. For example, when one provides loans one does so on a credit basis. But whether such loans be given for housing, manufacturing industry or whatever, there is always an investment input. There is a very effective investment and incentive feature in this Bill. We must pose the question: who is investing money in housing at present? The answer is: young couples who need to get a loan and who must effect savings initially. But of the percentage of all people's savings we see far more being put into shares, into investments in other companies, into short-term speculative interests. Approximately 18 months ago an inquiry was carried out in Britain as a result of which it was recommended that anybody with savings, with liquid assets, should invest them in building societies. This has not been done. Therefore this agency will afford people that opportunity, through index-linking, through definite return in real terms for their money. Hence, we should now see much needed money and investment going into the housing field.

I also welcome the independence of the agency. Too many new bodies, or layers of bureaucracy set up by legislation passed through this House, are dependent on the budget and the economic constraints of the times. I am glad to note that this agency will be independent and, if it is successful, that there will be no taxation requirement. Here there is a double aspect in so far as, if it is costly on the Exchequer, it will have to be recouped in indirect taxation. The other factor is that, if taxpayers' money were to go into it, it would be robbing Peter to pay Paul, simply because the middle income group, who would be paying the tax to keep this going, would be the people who would be benefiting from it, because this is basically for the low to middle income categories who would be availing of these loans.

It has been said that the details of this Bill have not been gone into but one can clearly assess from the Minister's speech that the very clear intention is there that this would be available to the people and would be useful in real terms. We see that it is available for single people, and this is to be welcomed. We see that £9,000 per annum is the maximum figure but somebody could have a wife earning perhaps £6,000 a year. In their case there would be a total income of £15,000 a year and because the spouse's income is disregarded it would be even more effective. The fact that 90 per cent of the total net amount of the purchase price of the house is to be given out is a clear indication of the usefulness of this. I know in my own constituency that if many people want to buy a house through an auctioneer the first thing they have to do is to put down a deposit of 25 per cent, a quarter of the total amount. Under this Bill 10 per cent is the amount that is needed. It is not unfair to ask people to have this sort of money in savings. Up to three times the gross income of the previous year is available, and with inflation every year that is over three times. I know the SDA loan is only two-and-a-half times the income with the very rigid maximum of £7,000 and £14,000 available.

The fact that local authorities will operate this, that people will not have to apply to Dublin to get it, shows that we are bringing it to the people and that we mean business. In all these measures there is a clear indication that we want this to work, that we want people to apply and that it will be really effective.

There has been a lot of comment on both sides of the House in regard to the repayments. There has been the question whether people will in fact be better off or whether, as some independent financial experts have said, they will be ripped off. I would not accept that at all. It is written into the Bill or the Minister's speech that it is basically on their ability to pay and it is done pro rata. The flexibility on the repayments as regards unemployment is very welcome. That does not apply in the case of building societies, where, if someone loses his job or has a permanent injury he has no comeback whatever. Also if a person were to win the sweep, he would have the opportunity of paying it all off.

I would ask the Minister, when the agency is set up, to ensure that the instrution goes out that there should not be a repetition of the difficulties being experienced with SDA loans, the difficulty of getting provisional approval, final approval, certification of title deeds, the sealing of the mortgage. There should be a simplified procedure and all applications dealt with expeditiously. People, especially when they go to auctions to buy a house, would like to know where they stand within a fortnight. If this is to be effective it is most important that the processing system be very rapid.

As regards repayments there are two guarantees written into it that are far more equitable than the SDA loans even where there are fixed interest rates. I agree with the concept of repaying more when the money is devalued. At 20 per cent inflation the pound is worth 20p less each year and the fact that they pay that extra 20p when they can afford to is fair. At present if somebody gets a loan and is unlucky enough not to get the mortgage subsidy, the real crux for them is getting over the first five years. Then they come to the stage with inflation, with a 10 or 12 per cent increase in their wages every year, that they are paying back devalued money. The concept of paying back more of the devalued money and in real terms paying back the same amount is far more equitable and reasonable for a young couple who might have young children when they start the loan and when they get half way through the 25 years the children would be grown up and their whole standard of living affected.

I think we should also look at the overall housing policy. I was glad to hear the Minister say that he is finalising the White Paper for next year. The essential criterion is the housing stock of the country. We know that over 50 per cent of the population is under 25 and the housing stock must bear some relation to the population. In all 87 local authority areas there are many old council houses on hands. The rent may be a fixed one of £2 or even less. To repair windows and so on would cost £200. If money is scarce I believe it is better to sell those houses off reasonably cheaply so that there will be some cash flow to build more houses. The needs of the people in the caravans, and in rented flats at atrocious rates, to get a roof over their heads is far greater than the needs of a tenant who has been there for 20 years. Why should she or he not pay for their own repairs? There must be a re-assessment there. To get the housing stock up to any realistic level there must be private development.

We must welcome the development of this agency because it is not involved in the public sector. The houses that will be built will be built by private development, whether it is by groups or individuals. This is the only way we can approach the overall problem of the housing stock. Other countries such as Canada, America and our EEC partners do not have our traditional attitude towards house ownership. I would question whether any young people are economically wise to put a millstone around their necks to ensure that they own their own house. In other countries it is not uncommon for people to lease a house or apartment for most of their lives. Repayments on any type of loan have a crippling effect and can affect a couple's whole standard of living at a time when they may have young children. The agency should examine this question with a view to changing attitudes in this area and encouraging developers to build houses for renting on a fair and equitable basis. There is an urgent need for the building of such houses yet we have this crazy system whereby people feel that they must own a house. A change in that attitude would be a major step forward.

It is accepted by all engineers and by Department officials that it is cost-effective for houses to be built in groups so that electrical and sanitary services can be provided on the one site rather than in isolated developments. Co-operatives have a great role to play here and this should be encouraged by the agency. In Enniscorthy there was a development of 12 houses and the urban council sold the sites. It would have been ideal for development by a co-operative but they could not get a unified approach to raising the money. The agency should examine the idea of registering all co-ops in order to encourage their development and make them really effective. This would be a way of helping people to acquire their own homes.

I would ask the Minister whether the £3,000 mortgage subsidy will apply to all loans serviced by the agency or will apply only to loans for new houses. Will it apply at all?

Mr. P. Barry

There will be the same criteria as apply to other loans.

Mr. Yates

It is important that there should be close consultation and liaison between the agency and building societies. I would not like to see a situation where a State agency would be in direct competition with experienced professional groups in this area. The new scheme is aimed at helping the marginal house purchaser earning up to £9,000 but that figure will obviously have to be raised as money devalues in order to cover the same income group. When this figure comes up for review there should be close liaison between the building societies and the agency to ensure that there is no overlapping.

I welcome the Bill because it is equitable in providing for consistent repayments in real money terms. It does not depend on the Department of the Environment or the generosity of the Cabinet at each budget but is independent in its statutory base and has the financial grip to raise the money. It will fill the gap for those people who cannot get SDA loans or building society loans and also help to increase the housing stock. I commend the Minister and wish the agency every success.

Mr. Leyden

I am glad of an opportunity to speak on this Bill. Like other Opposition speakers I regret very much that it has not been postponed until the next session to give the opportunity to the Government to study its very serious implications. The Bill has not been well worked out and is premature, and the effort being made to push it through is grossly unfair. As a result this will not be properly debated legislation.

I read with great interest the speech by the Minister this morning. As has already been said by another speaker, the courts will not have to comply with that statement but rather with the Bill itself. The Minister merely outlined his personal views and when this agency is set up he will have very little direct personal involvement in their operations. That is a major shift in policy by the Government because the Minister will not be answerable in this House at Question Time in relation to the agency. I do not see any provision in the Bill that would allow a Deputy to put down a question on the agency's operations.

The Minister is transferring responsibility from the successful SDA loan system to a new agency and passing the buck. Since he took office the SDA loan system has been dramatically watered down. I believe the policy of the Government was to phase out completely the SDA loan system and many of the regulations and memoranda circulated to the local authorities have indicated this policy. I would refer to the debate last week during Private Members' Time regarding restrictions on SDA loans introduced by this Government. These loans were restricted to married couples or those about to marry but the Minister has now lifted this ban. When he took office in July he set about phasing out the SDA system and is now bringing forward this legislation to justify his actions. The Minister has reversed many of the decisions taken since the Government assumed office in July. Loans will not now be restricted to married couples but will also be available to single people. I welcome the fact that there are no restriction, although I would prefer to see this extended to the SDA loan system also.

Mr. P. Barry

It was not I who limited the SDA loans.

Mr. Leyden

The Minister did limit them and I am surprised he denies it.

Mr. P. Barry

It was my predecessor——

Mr. Leyden

The Minister issued a circular——

Mr. P. Barry

I am sorry I interrupted the Deputy.

Mr. Leyden

I welcome the Minister's interruption if he is making a constructive statement.

Mr. P. Barry

I will quote the letter from the then Minister, Deputy Raphael Burke.

Mr. Leyden

The Minister did not quote it last week.

Mr. P. Barry

I did. It was 6 March 1981.

Mr. Leyden

That date has no relevance to the circular the Minister sent out restricting the loans to married couples. He removed the loans from single people and brought in new regulations referring to the procedure for obtaining a loan — the letters from the local authority, the parish priest and so on. We discussed that last week in detail and I will not go into it now.

The Minister's policy since he took office has been to phase out SDA loans. He now proposes to bring in this new Housing Finance Agency to take responsibility for SDA loans. In his speech he clearly stated it was envisaged that at full operation the new scheme would replace the local authority loans scheme. That is the Minister's policy. He is replacing a very effective system which has provided thousands of homes. We increased the SDA loan to £14,000 and increased the income limit to £7,000, and we did not include the spouse's income.

The Minister is handing over lock, stock and barrel full responsibility for housing to a private agency which will have no accountability to either House of the Oireachtas for their day-to-day running. I ask the Minister to reconsider the situation and to bring in an amendment to allow for this agency to be accountable to both Houses of the Oireachtas. We are entitled to that and I am surprised any democratic Minister would hand over such a responsibility to a company which was set up under the Companies Act.

I have found the SDA loans system to be very effective and it was operated very well by the local authorities, up to this year. For the first time I noticed there has been a change of emphasis by the Government and this has affected the smooth operation of the SDA loans scheme. It has made it extremely difficult for local authorities to decide who are eligible for loans. This is due not to a restriction imposed by Deputy Burke when Minister for the Environment but to this Government's policy decision. Now we know why this decision was taken, why they have undermined the SDA loan system. We now have a situation where the Government have introduced the Housing Finance Agency Bill, 1981. This Bill is being rushed through this House and when the budget is introduced on 27 January the allocation for SDA loans will be reduced dramatically. That will mean the Government will have to raise less money for the Exchequer because responsibility for housing will be pushed over to the new housing agency which will raise money from lending agencies and pension funds.

We will reach a stage where the Minister will have very little responsibility for housing if he hands over these responsibilities to a private company. This is not a semi-State body: it is a company the Minister is setting up. He will have no direct involvement in the day-to-day running of that agency and it will not be accountable to either House of the Oireachtas. In the Bill it says that the Minister, with the consent of the Minister for Finance, can issue policy directives to the agency and copies of such directives must be laid before each House of the Oireachtas and published in Iris Oifigiúil. That does not mean the agency will have accountability to this House. When Deputies put down questions looking for information about this agency they will be ruled out of order because the Minister will have no direct responsibility for the agency.

The Minister is proposing to phase out the £3,000 mortgage subsidy introduced by the Fianna Fáil Government last April. This subsidy has been a major boom to the building industry, to young couples and to single people. In his speech the Minister stated that the subsidy would be paid directly to the agency and not to the loan applicant. That is another shift in Government policy. During the election campaign the Fine Gael Party in particular gave a clear commitment that they would enforce the £3,000 subsidy. Does the Minister propose to phase out the £1,000 grant as well as the £3,000 subsidy? I hope he answers that question.

Mr. P. Barry

It is in my speech.

Mr. Leyden

The public will have very little choice if this Bill is enacted as you propose in this legislation.

Acting Chairman (Mr. J. Ryan)

"The Minister", not "you".

Mr. Leyden

I would have preferred the Minister to increase the SDA loan to £15,000 or £16,000 and the income level to £8,000 or £9,000. That would be a great help. We increased these figures to a very realistic level before we left office. If we were in office now we would have to update those limits. We would not have stopped single people obtaining loans. They too are entitled to them. The Minister is now suggesting that the agency ignore the income of the applicant's spouse. At present the spouse's income is taken into account by the local authorities because of the Minister's circular. I ask him to reconsider that circular in the light of his speech made here today.

Under this legislation the SDA loan system could have a very short life. I believe the finance for this system will be reduced in the 1982 budget and I regret this very much. The Minister should tell the House if he proposes to retain the SDA loan scheme which has been effective down the years. We would have preferred a better opportunity to consider the contents of the Bill. I understand that we will be submitting some amendments but we will not have an opportunity of going into the terms of the legislation in great detail. In the interests of the State and the borrowers the Minister should have given the Opposition, and the public, a better opportunity of considering all the implications. There are not adequate safeguards in the Bill and many complex questions remain to be answered.

We are not against the concept of such an agency if it can be shown that it will help relieve the housing shortage but we are against phasing out the SDA loan scheme. The new scheme will not be of great benefit to borrowers and people will see that when they study the inflation and pay related aspects of it. They will find that it is not an attractive scheme when they have to borrow over a long period. I accept that there are provisions to cater for those who become ill, but it must be remembered that in that event the period of the loan is extended with the result that many people will never own the house. They will be in hock to the agency for life and will hand over the debt to their family.

The Minister has told us that the new company will be established six or seven weeks after the Bill passes through both Houses and that loans will be available a short time after that. He said that the agency will act through the 41 local authorities that are effectively administering the SDA loan scheme at present. It must be remembered that the officials involved will not be answerable to the Department but to the new agency. The Bill does not propose to delegate authority or control to local authorities. Decisions regarding loans will be made in Dublin. Local housing officers should have a say in regard to the allocation of loans. The Minister will not have direct responsibility for the day to day running of the agency while county councils will be operating the new scheme. Who will be responsible for paying the staff involved? In my view this amounts to another method of taking the local authority burden off the Department of the Environment and putting it on to the new agency. That is a serious political decision which will have repercussions for the staff of local authorities.

The Minister should tell us what the status of local authority staff responsible for housing will be when the agency is set up. If the staff will be the responsibility of the agency they will be moved from State employment to employment by a private finance company. Will those people have any say in that move? The SDA loan scheme at a fixed interest rate of 12½ per cent is a very attractive proposition for borrowers and it is not surprising that there are many applications for the loan of £14,000. I should like to know what the position will be in relation to the £4,000 reconstruction loan scheme operated by local authorities. Will that scheme be transferred to the agency? I do not see how the agency will be empowered to pay out a loan for reconstruction work. The agency appears to be confined to new houses. Such a defect will impede the operation of the agency. Will it still be possible to obtain a loan for a house attached to a business premises as is provided under the SDA loan scheme? At present the area of the house is dealt with under a separate folio and there is a separate charge by the local authority.

Section 1 states:

"house" includes any building or part of a building used or suitable for use as a dwelling and any outoffice, yard, garden or other land appurtenant thereto or usually enjoyed therewith;

That could restrict loans and might mean that loans would be restricted to separate houses built on separate land but not attached to business premises. Much discretion is being operated by the local authorities and I have found that they will provide a loan for a private house attached to a business premises but not when the business is operated in the house. That is another matter which may not be covered in this Bill.

Once the Bill is passed the Minister will have no direct responsibility for the agency. He may issue requests to them but he will not be in a position to issue directives. In other words, he will not be able to interfere in the running of the agency. Under section 6, however, with the consent of the Minister for Finance he can issue policy directives to the agency, copies of which would have to be laid before each House of the Oireachtas and published in Iris Oifigiúil. The Bill is very restrictive in the sense that it makes no provision for the Minister to issue a directive in any particular case, whereas in the case of the SDA loans scheme any Member of the House could bring a case to the attention of the House or of the Minister, who ultimately is accountable for the operation of the scheme. What we are doing here is voting ourselves out of business so far as housing is concerned, and that is very serious. I appreciate the reservations being expressed in particular by Deputy Taylor about the implications of the Bill. Indeed, I should not be surprised if the Minister had a revolt on his hands having regard to the concern that has been expressed by some of his colleagues on this issue.

Mr. P. Barry

I am prepared to chance it.

Mr. Leyden

It would have been interesting to hear the views of the Independent Members on the measure. One wonders what Deputy Kemmy, Deputy Sherlock or Deputy Dublin Bay-Rockall Loftus might have to say in this regard. It might be interesting too, to hear the views of the new Mayor of Galway, Deputy Higgins.

Mr. Noonan

(Limerick East): Especially since a Fianna Fáil man crossed the floor to vote for him.

Mr. Leyden

I can assure the Deputy that no Fianna Fáil man will cross the floor of this House to vote for this piece of legislation. Obviously, there are serious reservations among Members of the Labour Party on the legislation. Consequently, I hope they will have the good sense to vote with the Opposition.

We would have no objection to the Minister re-introducing the Bill in the next Dáil session. That would give us an opportunity of going into its provisions in detail and of putting forward amendments as we consider necessary. I am confident that the Minister would accept many of those amendments. Good legislation is needed in the whole housing area because of the implications of any such legislation for all young people who may need to borrow for housing in the years ahead. The offer that will be made to the lending agencies as a result of this legislation is very attractive, especially in regard to pension funds, but let us consider the position of the people who will be borrowing the money. The big institutions will be making money on the backs of the borrowers. The Government are not making any input so far as subsidising loans is concerned. I appeal to the Minister to take on himself the power to give to the agency the right to subsidise loans.

The Government withdrew the subsidy on loans from building societies. That was a major blow to borrowers. In this legislation the Government are to some extent projecting the image of doing something great, but I wonder how pleased those backbenchers who are applauding the Bill will be in about six months' time when the SDA scheme is withdrawn, when the £3,000 mortgage subsidy is withdrawn and when, perhaps, the £1,000 grant will be phased out. The Minister has given an assurance that the latter grant will be continued and I hope he will keep his word on that. Many people are relying totally on the £3,000 subsidy in order to be able to secure a house.

The Minister should be man enough to request the Cabinet to postpone this Bill until he has had time to consider fully many of the points put forward. If we were dealing only with Second Stage before the recess and taking the remaining Stages later, we would be doing a much better day's work. We are as concerned as are the Government in providing finance for housing. Therefore, we would not in any way attempt to impede the passage of good legislation in this area, but for very good reasons we are not satisfied with the details of this Bill. We have been attempting to highlight many of the problems that will arise in the future if the Bill goes through in its present form. When we return to office, be that in 1982 or 1983——

Mr. Moore

I am convinced that it will be in 1982.

Mr. Leyden

——we will retain the general concept of the agency but will bring forward amendments to tighten up the whole process. The Minister is taking on himself a very serious decision in bringing forward legislation which in its operation is likely to be found ineffective. The situation will be very attractive to the people who are providing the finance for the agency in that the money will be guaranteed and inflation proofed. One wonders why the ordinary members of the public will not be given the opportunity of providing finance for this agency since many people would be tempted to invest on such terms. However, that would involve major competition for the building societies who would be likely to be out of business overnight. There is no other loans system operating in this State, or so far as I know in any other State, which is inflation proofed and index-linked.

These are the most attractive bonds ever offered in the State because young people will be paying for those loans in the long-term. The agencies and the pension funds will finance this legislation but, in the event of finance being restricted in any way, the Minister can provide funds from the Exchequer. However, it is possible when the Bill comes into operation that the Minister will not be in a position or will not be prepared to provide finance for this agency and the number of loans which will be provided over the years will be limited. Irrespective of what the Minister may say, there must be a limit to the number of loans which will be provided under the Bill, but that is not outlined in the legislation before us.

It is proposed that the new agency should procure its funds by way of issuing bonds to financial institutions. The important point about the bonds is that they will be inflation-proofed. No other country has provided such an attractive offer. Will the Minister be restricting the borrowing to this State or will he be seeking finance from overseas? Financial institutions all around the world will be rushing into the State to provide funds for this agency if it is inflation-proofed. We have a strong economy and a stable political system. The financing of this agency will have to be watched very carefully and I ask the Minister to state whether the financing will be limited to Irish institutions operating within the State or will this agency be allowed to provide funding on the open economies of the world?

The Minister should lay down a policy decision in this regard because the agency will have far too many powers to decide where they will provide and obtain their financing. The financial institutions apparently will be guaranteed a definite return of 2 per cent or 3 per cent over and above the rate of inflation. This means, in effect, that the risk of inflation will be transferred from the lending financial institutions to the new agency and to the borrower. This will be a major imposition on young people who have to work and provide the funds for the moguls of Switzerland or anywhere else who, unless there is a directive given by the Minister, will be providing much of the finance for this agency.

This concept of enabling financial institutions to lend to a State agency on the basis of a guaranteed inflation-proof return is an innovation which must be looked at very carefully. The Department of Finance should reconsider this. Was this a Cabinet decision? If so, it must have been taken very lightly. It is a strange innovation which is not available anywhere else in the world. Can the Minister name any other country which provides such an attractive offer to people who are providing the finance? The offer which the Minister is making may be a great boon to business moguls but it is no asset to the young people, who may be conned into believing they are getting a good deal. However, when the details are spelled out, when the journalists and the in-depth magazines have an opportunity to study the implications of the Bill, there may be few offers from people to borrow money from this agency as soon as they realise what it will cost them in the long-term.

Who will run this organisation? That is something which will have to be decided by the Government and which will have very serious implications because they will be laying down the overall policy. The people who run the organisation will decide how it operates and who gets loans. The Minister will have to define very clearly what power the board of this organisation will have and if the local authorities will have an input to this organisation. Will the local authorities be represented and will they have a right to nominate members of this agency? The Bill should state how people will be nominated. The local authorities will to a great extent be operating this legislation when it becomes law, but the 41 local authorities will have no power unless the Minister decides to give them a say in the operation of the company when it is set up. At present every local authority have their own housing offices and they decide on loans subject to ministerial directives. Up to July they had discretion but it has been limited in the last few months. The whole system operated very well. There were no restrictions on loans to a single person, to a person who was about to be married or to married couples. Up to quite recently when a person had repaid the first mortgage they gave a second mortgage to build or buy a new home. That restriction should be lifted in the present system. But I note in this Bill that this restriction would not apply to an applicant seeking a second loan where the need arises. I feel that should also apply to the SDA loan system.

Governments have always resisted borrowing money on the basis that it should carry the inflation risk rather than the lending financial institutions. This is a major shift of Government policy and I wonder if it has been gone into in great detail to decide on the implications for further borrowing from other companies and agencies in the State. If this Bill comes into operation and if this offer is being made to the agencies, organisations and pension funds, will all the money be moved into this area and taken out of other areas of business activities in the State?

When the ESB are floating a loan, will they also have to make a similar offer? This is something which will have serious repercussions and ramifications throughout the economy and should have been gone into in great detail. We are deeply concerned about this because in the long-term it will be a very costly exercise.

We are not opposing the setting up of the agency but we are concerned about the whole housing policy of the Government and about the proposed solutions in the Bill. We are concerned about our inability to debate the Bill section by section, line by line, in Committee because it is being jackbooted through the Oireachtas. It will not be as effective as it might have been if we had been given an opportunity to debate it fully.

Mr. Coveney

I am pleased at the opportunity to welcome this Bill which I regard as a product of new thinking which has not been evident in proposals of this kind for many years. It is a break with tradition, an exciting development, because it seeks to tap resources previously untapped, for the benefit of people who are in dire need of funds to provide them with housing. For these general reasons the idea in the Bill must be welcomed.

The last speaker supported the principle of the Bill. The "new poor" is a phrase that has become nearly a cliché. They are the people who cannot be accommodated in local authority houses and who cannot turn to the building societies because they cannot afford to face the high level of repayments in the early years of occupation. They have been caught in a real trap and have become part of the new poor. That is the section for whom the Minister proposes to do something and in this Bill he has introduced an ingenious way to do it because it will mean they will be able to repay.

People who want to own their houses but who are just above the local authority limits can barely manage to repay the 40 per cent to 50 per cent of their incomes in the early years of mortgages. They are being dumped on to local authority housing lists and this Bill seeks to remedy that. Of course there are risks attached to this legislation, and of course we would all like to have more time to discuss it, but the idea is good and the approach of the Government in this Bill is justified.

I should like to comment briefly on a few aspects of the Minister's statement. There is not anything magic about the scheme proposed in the Bill: people will not get anything for nothing, but instead of the high percentage of their incomes they would be paying at the beginning of their mortgages, diminishing to a small percentage at the end, this Bill evens out the percentage of income for the servicing of housing loans. The figure is about 18 per cent, which is not excessive and is the kind of percentage prevalent all over Europe. It allows people to get into the housing market who otherwise would not be able to do so.

I welcome the simplicity of the Minister's approach because the Bill will help to remove red tape which means that applications will be speeded up. The fact that single people as well as married people can apply to the agency will be welcomed by all, although we all must appreciate that married people with children deserve priority. That is not discrimination. The fact that the Act will be operated through the local authority system rather than through a newly-created bureaucracy is to be welcomed.

I was glad to note that within six weeks of the passage of the Bill the Minister will be able to receive first applications and that loans can be granted at the end of three months. That is a noteworthy achievement at a time when such a service is required urgently. The level of loans of up to £22,000, and in certain circumstances above that, is a recognition of the cost of new houses. The fact that old houses are not excluded is important because in many of our cities there is a serious problem about urban renewal. Therefore, the exclusion of old houses would have been a mistake.

The Minister spoke of a figure of £25 million to £50 million in the first year to provide for between 3,000 and 4,000 starts, with an assumption that 2,000 houses will be begun in the first year. That will be welcomed beyond measure because all of us realise that the housing situation is not what we would like it to be.

The Minister referred to flexibility in regard to repayments, that the Bill provides what amounts to a pay-related repayment scheme. People who are sick or out of jobs will not be in the crippled position they would be if they were dealing with the building societies. In that way the Minister has introduced the human touch to the matter of repayments. It would not be a tragedy if people were forced to stretch the period of their repayments provided they had the assurance that they could extend their repayments a little longer.

The fact that the Minister is allowing for the needs of other than first-time home purchasers is a sign that the Minister has been listening to the problems of people and families who have been living in overcrowded conditions and that he is alive to the problems of mobility of labour, of people who need to move from one town to another but who are precluded from doing so because of the general housing shortage.

I welcome very much the incentives provided for housing co-operatives. This is only in its infancy in my area in Cork.

There are some very heartening signs of advances in that area in the new development at Mahon on the outskirts of Cork city where recently a group of people completed a small co-operative housing project at figures which were substantially below the cost of the corporation's own houses, and also the houses were larger. There is a great potential there. The Minister has recognised it in granting special incentives by way of larger loans to housing co-operatives in certain situations.

There has been much comment from the Opposition on the question of securing the position of pension funds. References were made to moguls, and to Switzerland, and so on. Clearly the Minister is talking about pension fund managers who are in the business of dealing with the small savings and pension contributions of hundreds of thousands of people. There is nothing wrong in saying pension funds must be index-linked and must protect the investor or the pension holder against the ravages of inflation. That is the purpose of a pension.

At the moment, pension fund managers have the option to invest in Government securities, or in blue chip properties, and things of that kind. As a result, they are virtually inflation-proof. If we are to attract that kind of money in substantial quantities into housing it is only sensible that we should recognise the fact that the pension fund managers have a duty and an obligation to protect the funds under their care, which are not the funds of mighty institutions, but the aggregate of many small pension contributions from many people. Really that issue ought to be nailed.

This proposal will help to stimulate the private housing sector and to stimulate it quickly, which it needs. That will have benefits for employment, and it will have benefits for builders' providers and all the spin-offs associated with the building industry which is in a state of growth. That must be welcomed on all sides of the House because it is badly needed.

There has been a fairly wide-ranging discussion on aspects of housing outside the absolute limits of this Bill. I should like to comment on a few matters. I hope the Minister, who is self-evidently committed to improving the lot of the house purchaser, will also look at the operations of the Land Registry and the whole area of transfers. If ever a Government agency needed to be decentralised from the vista from which I look at it in Cork, it is the Land Registry.

There are one or two other issues which are of concern. One is the disgraceful performance or lack of performance by some builders in the finishing of estates. I know it is not far from the Minister's mind, but I urge him to tackle that problem quickly. It is a cancer in the housebuilding market. It is bad for building. It is bad for builders. Above all, it is bad for the people who pay good money for their houses to find years afterwards that the estates are still unfinished. The local authorities are in disarray about whether they have an adequate bonding system. By now we should know how to deal with that. I appeal to the Minister to look at that matter as well in the context of the housing programme he is launching in the new year.

The cost of housing is critical when one talks about any form of finance for housing. I am a little concerned about the operation of the building regulations, not because I am against them — nobody could be against them — but because there is a danger that housing will become too expensive. There always will be and should be a tension between quality and price. I hope that, in this commendable endeavour to increase the housing stock, we will be concerned about quantity as well as quality. In Cork Corporation there is an outcry if anyone suggests we could have slightly less good houses, but more houses. That is not a popular political stance to take. The facts are that we need numbers of houses and we need them badly. If a house costs £25,000 and we are trying to build a couple of hundred of them, we should look seriously at the idea of building extra houses for slightly less than that.

Undoubtedly this is a major new initiative which will provide an opportunity for a significant number of people who would not otherwise have the opportunity to acquire their own houses. In that context I support and congratulate the Minister.

Mr. Moore

I look on this Bill as a major departure from the norm in the financing of houses. I have no doubt the Bill will be attractive especially to the capitalists, if I may so term them, the tycoons and the moguls as Deputy Leyden called them. They will have their bonds indexed against inflation, and who would not be in favour of that? Deputy Leyden also asked a question which will have a fundamental influence on our financial structure in the future. If the ESB want to raise a loan, will they have to offer equally attractive terms and, if they do not, will they get no money?

The Government did not give sufficient thought to this Bill. They are rushing it through when there is no need to do so. We are keen to see the housing drive expedited to provide all the houses we need, but this is not the way to do it. I wonder how Members of the Labour Party will react to it because it is the most right-wing Bill I have seen for a long time. Will some of the socialist Members of the House troop through the lobby in support of the Government on this issue? If they do they will be very right-wing socialists.

Any Government have a major task in finding money for housing. With our rising population the demand for more houses increases all the time. It is a headache for any Government. There is no short cut to solving the housing problem. Somebody once said that if someone invents instant housing we will be in trouble. Either the Government have panicked or they were advised by some foreign consultants when they decided to put this legislation through. Either they panicked on this Bill or they do not understand it fully.

Tonight Deputy Yates made a very good speech, but he went on to say that on the Continent very few couples buy houses. This is what will happen here also because people will be unable to buy houses under this scheme. A correspondent in one of our largest newspapers wrote an article some time ago in which he estimated that a person would pay something like £140,000 back for the loan he had obtained. I do not know what that man's politics are; indeed he may have none. I do not know whether or not those figures are true because I am no economist or financier. But money will be made so terribly dear for housing, as Deputy Yates said, that many young couples will not buy their homes. It is difficult enough under the generous SDA terms to buy a house but it will be rendered impossible under the provisions of this scheme. The Government may say: that is all right, they can rent their houses. But let us not forget that within our society there is the traditional longing to own a house or a piece of land; it is the Irish way of things. Under this new scheme that day will have ceased. We will not see any couples of whatever age acquiring their own homes. One of the best cushions against inflation today is the ownership of a house because it constitutes a solid possession. Inflation can affect one's position in many ways but one's own house constitutes some security. In the case of SDA loans inflation actually helps because if an applicant obtains an SDA loan at a fixed figure — even though inflation may rise — his repayments would not be increased in real terms and after some time would be so small compared with new interest rates, that he would be comparatively well off.

I think the Government realised that the housing drive was grinding to a halt. However, I hope they realise that in this city they will face a frightful social problem, as indeed they will in the other larger cities such as Cork, Galway or Limerick. This is borne out by the fact that under the present system they are unable to provide money even to local authorities for SDA loans at acceptable rates. The Government could pull back even now. We asked for more time for consideration of this Bill but for some reason it is being rushed through with indecent haste. I forecast that the Government will regret their haste in this matter. I do not think they have given it sufficient thought.

I do not doubt the Government's intention of providing more houses but I contend they are going about it the wrong way. I fear that some members of the Labour Party, be they inside or outside this House, people who believe in some form of socialism, will not accept this. We on this side of the House believe in free enterprise, of course with controls. With all its faults I believe it to be the best system but it must be well controlled.

Here people are being guaranteed that the bonds they purchase — mind you it will not be the man in the street who will buy them, rather it will be the big financiers and tycoons — will be insured against any inflation. But who will insure them? It will be the unfortunate couple buying a house or negotiating a loan, it is they who will pay these people. Who else can pay them? The Government cannot print money. We will see the spectacle of young couples endeavouring to go along with this new-fangled idea in order to buy a dwelling for themselves. We do not want to be churlish about the Bill and oppose it for the sake of opposition. We do not propose to oppose the setting up of this agency. But we insist that henceforth each measure must be examined to ensure that we are not laying on a bonanza with State funds for the monied people.

This is a major departure from the traditional financing of housing or, for that matter, the financing of anything. I pose the question to Fine Gael backbenchers: are they satisfied that this Bill has been examined by their financial advisers to ensure that it constitutes the best system in order to provide us with more houses? Some time ago the Taoiseach embarked on a crusade. No doubt he was inspired by very lofty motives. I do not take those from him. It is all right to talk about Articles 2 and 3 of the Constitution but they do not affect the daily lives of our people. Here is something that will affect their housing. Somebody has worked out this scheme without too much thought. Deputy Leyden referred to the moguls. We used to talk about the gnomes of Zurich. I can see that this new agency would be very attractive to many of these people on the continental money market. Why should it not be? I do not know of any other country that will guarantee against inflation with State funds. The question must be posed: who will pay for it? It will be unfortunate couples, whether they be young, middle-aged or old who will avail of finance from this agency. Why could the Minister not have said: all right, we will endeavour to provide a more fluid and generous system of SDA loans? Why can we not fund our local authorities and say to them: now get on with the job?

It would have been much simpler to have done so but of course would not have been so attractive to the monied people. We must remember that they do not feel charitable towards our housing needs. Rather they will invest in this company for the reason that there are large profits to be made. Very often we condemn the people who build office blocks for profit. Let us face it, they build them for profit; they do not build them for the comfort of the people who will work in them. In some cases office blocks are necessary and they yield a very good financial return. In this city at present accommodation in an office block can be rented at £9 per square foot. However, I can foresee that when this agency is established and their money is switched over it will attract money easily. It would be the same thing if the Government or anybody else tomorrow offered to issue a loan at 20 per cent, 30 per cent or 40 per cent. Of course people will invest but somebody must pay in the end. Always it has been the story with Coalition Governments that housing is hammered by them. Whether it be that they are unlucky at the time they come into power I do not know——

Mr. P. Barry

We are, we are always following Fianna Fáil; we are very unlucky.

Mr. Moore

If they followed Fianna Fáil they would not get into trouble but the fact that they do not is what has them in trouble. The Minister has said that they always follow Fianna Fáil, that is understood — we are the leaders — but the point is that they are not following us on this occasion, they are following somebody else giving them very bad advice which will lead them into a lot of trouble. The Minister is a businessman and probably knows a lot more about finance than I. I feel he is uneasy about this whole Bill, he must be. Some Deputy asked this evening whether local authorities have any say in it. Probably this agency will be very efficient in the sense that they will guarantee a good return to the people who invest money with them. But will it be as good a proposition for the people who have no proper dwellings? There is to be seen in this city at present the slow down in local authority housing. We must not forget that housing in other places has occasioned great social upheaval. I have witnessed social upheaval in this city before but that will be nothing to what will happen if people cannot afford loans. There will be there then the makings of social trouble and unrest, all because the Government decided they wanted this Bill put through in such a hurry.

I do not know why they want to do so. I negotiated with the Government Whip — and I am not criticising him in any way whatsoever — he was doing his job just as I was. I appealed that this matter should be put back for further consideration. That was a reasonable request. We ask why the Second Stage must go through tonight and the remainder of the Bill tomorrow. We could easily have left the Committee Stage until after Christmas. I am not talking about politics now but commonsense. We have always been able to regulate the business of the House in a friendly manner and we have made great progress but in the case of this Bill, the grey eminence, whoever is behind it, decided it must go through and damn the consequences. We have not yet been shown how the SDA structure will fit into it or even how the local loans will fit into it. We are told this must go through and the jackboot is being used.

Some members of Fine Gael, especially those on local authorities, will agree with me that all is not well in the housing situation. In the city of Dublin we have over 7,000 applications for housing. I am not including the County of Dublin. The corporation at present have 1,400 dwellings under construction. The corporation were told last week to go and borrow more money. I hope they borrowed it quickly because they certainly will not get money when this comes into operation. Would anybody lend money to Dublin Corporation at a reasonable rate when they can invest in these index-linked bonds and make a lot more money? This will not affect the Government's policy on housing but it will certainly affect the local authorities, the ESB, Bord na Móna, the Sugar Company or Irish Shipping. If any of these bodies try to raise money they must at least match what is being offered by this new housing agency. It is proposed to raise £200 million. How much of that will go towards indexing it against inflation? These people will have to be paid back. They are not philanthropists. They are not providing money because we need to build houses. They are doing it to make money out of it. This is going to affect the person who is renting a dwelling from a local authority. It is like throwing a stone into a pool. When the Government throw this into the pool it will absorb most of the money which should be in circulation for general purposes.

It was said at one time that Fine Gael were going left. I do not think they are. The Labour Party are going very much to the right. I do not know how they can say they are socialist if they vote for this most right wing proposal. This would do very well in some of the wealthier states where there is little socialism or if there is a kind of state socialism with the State grabbing most of the money which would be there for industrial development or any kind of commercial development. I would ask the Minister again to leave over the Committee Stage until we can all examine it in detail. I know I will not influence the Minister in the least. The Government will put the Bill through and then we will all go home for Christmas. Perhaps the Government will feel they have done a good job. I do not think they will have. I think they are creating a Frankenstein which they will not be able to control.

All of us in public life have people coming to us every week looking for dwellings. I do not think the new agency will ease the problems. Deputy Yates, who made a very good speech earlier, mentioned that on the Continent people seldom buy their houses. It is a different system. We must solve our problems our own way. Under this Bill it will be very difficult to own a house or a flat. Life is fairly short and one would need to apply at about 20 and live to be 100 to pay for a house under this system. The Labour Party said some years ago that the eighties would be socialist. I think what they meant was that socialists would be 80 when they would have paid for their houses. I hope the Labour Party will oppose this measure.

How can we protect the couple buying a house from the high rate which this new agency must charge in order to finance the deal? I am still wondering why the Government rushed it through and the Minister when replying might tell us the reason. I am not a financier and I admit that the Minister knows far more about the subject. However, I have been a public representative for many years and I know of the terrible shortage of proper housing in this city. The area in which I live has become flatland and I see many young couples who have come from good homes in the provinces living in flats for which they are paying exorbitant rents. If their families knew of the conditions in which they are living it would cause them great worry. It is heart-breaking to have to tell them that they do not qualify for local authority housing and the vast majority of them will not be able to afford to take advantage of this new scheme.

I implore the Government to examine the financial structure of this measure because it will not help anyone to get a reasonably priced dwelling. People who are looking for houses will not thank the Government for this effort. Some unfortunate people live rough in the streets because our system is not helpful to proper living. Many young couples with one or two children live with their parents in overcrowded flats and it is no wonder that there are so many marital breakdowns. It must be almost impossible to live in such conditions.

The majority of people will make every possible effort to buy a house but under this new system more people will be deprived of that opportunity. Our generation were more fortunate because SDA loans were more freely available but the death knell of that system has now been sounded. The basic need of any married couple is a house or a decent place to live and this is their ideal. Money must be provided at cheap rates but the Government are taking the easy way out because people will not be able to afford to take advantage of this scheme.

I do not know who advised the Government on this subject or what attitude the Labour Party will adopt but if there is any semblance of socialism in that party they must oppose this Bill. It will certainly be very attractive to capitalists.

Mr. P. Barry

Deputy Raphael Burke did not think so. He said it would be a flop.

Mr. Moore

He did not hear my speech. The Government will not have any difficulty in attracting money because they are offering such attractive terms. They would have no difficulty in reaching a national understanding on pay if they were to offer an increase of 12 per cent indexed against inflation. Of course, they cannot do so because the cost would be enormous but this is the method which the new agency will use. Wage earners who are looking for houses will revolt and the housing drive will grind to a halt.

It will also be impossible for local authorities or semi-State enterprises such as the ESB or Bord na Móna to raise money because those who have money to invest will want their investments insulated against inflation. We will see the State taking over more and more financial transactions. I am sure we have all read George Orwell's book "1984" where big brother takes over, and we now see big brother in the form of the State taking over the local authorities and the private lending agencies. Everything will be centralised in the State. We are amazed that the Fine Gael Party, who were always the party of free enterprise, are taking such right-wing measures to raise money.

Having regard to the appalling housing situation in the larger cities and the very low finances available to local authorities to meet the housing demand I appeal to the Minister and members of Fine Gael to make the Government re-examine this matter. They have a duty to do so. I know that we do not have a monopoly of concern regarding housing but they have the power to make the Cabinet reconsider. Committee Stage should be postponed until after the Christmas Recess so that the Bill can be examined further. The Minister is doing a very bad day's work for the country.

I notice there are no Labour Members here tonight. I do not blame them because I can understand their feelings so far as this Bill is concerned. Some Labour Deputies may have spoken but I did not hear them and I would like to know their reaction to this Bill. Are they going to submerge their principles for political expediency? During the first Coalition Government Mr. James Dillon, a Fine Gael Deputy, said the Labour Party in Coalition were as quiet as mice. I wonder if the Labour Party in this Coalition will be as quiet as mice when this Bill is going through? This Bill will slow down the housing drive and will have serious repercussions on any semi-State body trying to raise money. This is the most ill-thought-out scheme I ever heard of. I will be charitable and say the Government wanted to do something about the housing situation, but I suggest they have done a very wrong thing.

Miss Owen

I would like to start by agreeing with one thing Deputy Moore said — that inherent in our society is the desire of most people to own a house. It is different on the Continent and in years to come we might have the same situation here.

I find it hard to believe that a Deputy with Deputy Moore's experience could miss the point of this agency. The Bill says this is "an Act to provide for the promotion by the Minister... either directly or indirectly, for the acquisition and construction of houses,...." This Bill will provide another method of financing for young couples wishing to buy their own homes.

Mr. Moore

One of the Coalition Deputies expressed the same views I expressed.

Miss Owen

I cannot answer for him. The biggest single purchase in a person's life is buying a home, and the second biggest purchase for most people would be buying a motor car. There is a vast choice when buying a car and the same range of choice should be available when people are buying their homes. They are buying money when they look for a loan. This financing agency is providing another choice for a group of people who, over the last few years, have slowly but surely been edged out of the market for buying homes.

There are local authority loans of £14,000 available for people with incomes below £7,000. In the Dublin area those loans are not of very great value because it is very difficult to find the finance to bring it up to the house price — from £14,000 to £25,000 or £28,000. This would mean a great deal of saving for a young couple. The people who benefit most from the £14,000 loan are those who are buying their local authority houses or young couples who are lucky enough to have somebody who can give them a site for nothing, and then they can build their own homes. The people on incomes above £9,000 can usually find financing in the lending agencies — insurance agencies, building societies and so on.

There are a vast number of couples in the middle area who find themselves in a catch-22 situation where they cannot raise finance. This is the great advantage I see in this agency. Making this money available will benefit everybody because it will go through the whole system. There are some genuine people on the local authority housing lists who get houses. As a member of a local authority I had many couples coming to me and saying they would rather buy a house and they do not really want to go on the council housing list. I applaud that attitude. With this housing agency I will have another option to offer them.

When a couple come to me and say they want to go on the council housing list I give them all the options available and ask if there is any way they can buy their own houses. It should be the last resort to go on the council housing list. We could get to a situation where couples would automatically put themselves on the council housing list and that would be a bad day for this country. We must not stifle the initiative and the in-built desire in every couple to own a home. We must make every facility available to prevent a situation arising where it is accepted that once a father or a grandfather has a council house the next generation also get a council house.

The great advantage of this agency is that during the early years of a young couple's married life, which is usually the time they try to buy their house, when their expenses are greatest, having their first first baby and so on, there is a tremendous amount of stress and the added stress of trying to find repayments adds greatly to many unhappy situations. The concept of the borrower being able to pay back an index-linked amount of money relating to their previous year's salary is a step forward in recognising the needs on the ground. When this Bill becomes law that will be a great step forward.

Listening to Deputy Moore I got the feeling that new Fianna Fáil style is all right, but new Fine Gael and Labour style is not and that we must be very cautious. He should not worry. There will be somebody to hold his hand if he does not have the courage to step forward into new areas, because this Government are prepared to step into new areas. I am sorry we had to have a debate on this Bill. I thought this Bill would have received immediate acclaim, that the Minister could have read his speech and that there would be agreement all round. Then we could have moved to the next business. Yesterday the Opposition carried on about whether we would debate this Bill. If they had not wasted all that time we could have had those valuable few hours discussing this Bill.

At present couples cannot buy houses because they cannot raise the necessary finance. In this Bill they will be able to get a 90 per cent loan up to a maximum of £22,500 in some cases, or £27,000 in others. If a house costs £25,000 — and this is not particularly relevant to the Dublin area where house prices are very high—with the £1,000 subsidy for the first-time buyer, a couple will be able to borrow £21,500. This means they will only have to save a deposit of £2,500. It is important that every couple should have to save some money towards buying their house. That ensures that they are genuinely interested in buying a house and will make every effort to keep up with their mortgage repayments. We must not stifle the initiative of people and hand them everything. The provisions of the Bill will make house purchase a lot easier for many people. Bridging finance is very expensive at present and those lucky to get sanction for a loan from a building society have to take out bridging finance for the deposit because building societies insist on them keeping their money on deposit.

The legislation will cater for many people who are in a limbo at present. When it is passed builders should be encouraged to look closely at the market and those anxious to buy houses. A welcome provision is that single people will be able to raise loans from the agency. Many single people want to buy their own homes. This should prove an incentive to builders, and developers should look closely at the type of housing schemes they are providing because they now have an opportunity to give a wider choice. The Bill widens the choice and options of people and that is essential.

I am also pleased that the construction of houses is covered in the legislation. In rural areas many young couples get a site from their parents or relations and that reduces the amount of money they will have to borrow. The Opposition should view this legislation as a step forward, as another option. Everything Fianna Fáil did was not bad but one must take new steps forward. The idea of the agency did not come overnight. It is a lengthy piece of legislation which has been well researched and Fianna Fáil should not be afraid to accept that a lot of people with ability contributed to its preparation. They should not try to have the matter postponed. If that happens more young couples will suffer. The Opposition should have courage enough to applaud the Government for bringing this forward. It may have to be dealt with speedily but they should remember that new brooms sweep clean. One of the drawbacks of being in power for too long is that a party get staid and settled in their ways. This legislation is not retrograde, it is progressive and I urge the Opposition to view it in that light.

Mr. Callanan

I should like to know if the Minister is anxious to get in to reply now.

Mr. P. Barry

I will be replying at 10 o'clock.

Mr. Calleary

One of the problems of dealing with legislation like this so speedily is that we do not all get an opportunity to contribute. I sat here for a long time today waiting to contribute but I did not get in yet.

Mr. Callanan

We will have Committee Stage tomorrow. My first comment is about the inefficient way the business of the House is being run. We spend hours debating matters and get a lot of repetition on Second Stage but the legislation is not dealt with in detail until Committee Stage. The previous speaker told us how a new broom sweeps clean but the old one is not too bad going around a corner either.

Mr. Calleary

The new broom sweeps clean as far as the west is concerned.

Mr. Callanan

This new legislation could affect the financial situation of the State because the Government are about to agree to an agency raising money on conditions never envisaged before. The system may be correct but the general public have not had an opportunity of considering the matter. I can recall that on the Committee Stage of many Bills Deputies, having met intelligent people in their constituencies, tabled amendments which improved the legislation under discussion. Committee Stage is different from Second Stage when Members are inclined to make long speeches. The section by section debate that takes place on Committee Stage often leads to improvement of the provisions. I can recall Bills which were introduced by us and were not all that wonderful but by the time the Opposition were finished with them on Committee Stage they were much better. It is unfortunate that this Bill will be passed within two days because it involves a complete change in the democratic system.

County councils wanted money but under this legislation the Minister will be providing money to the agency in a manner that was never done before. It is a private agency and the Minister will not have any say once the agency commence operations. If local authorities were given money they would do a better job. Those bodies are run by elected representatives. This move saddens me. When I became a Member I stated that the Dáil was irrelevant as far as our agricultural policy was concerned because it was being dictated from Brussels and now we are handing over the financing of our housing schemes to a new agency. I cannot understand why the Labour Party have remained silent on this matter. I am a socialist and I do not deny it. I will not condemn the Bill until I have investigated it in detail but I am not happy that it is being passed in such a speedy manner. I would not like to see our party voting against the Bill on Second Stage because I am prepared to study it as I am prepared to study anything new that is introduced. Those who think they know it all are foolish. We do not know what repercussions this legislation will have on the financing of other projects. If a loan of this type is made available for one agency there is a danger that it will have to be made available to many more.

If local authorities were permitted to raise money in this way at least it would go through the democratic process in that the scheme would be run by elected representatives. The Minister is handing over his authority to an independent agency. When both sides of the House agreed to hand over planning appeals to an independent board I objected and I am still not convinced I was wrong. I stated then that it was preferable that the Minister deal with such appeals because he could be called upon to give an account of his stewardship if he made a mistake. We cannot do that in respect of the appeal board. It is wrong that Minister who are elected to a position of responsibility should hand over their authority to independent agencies. This agency is being given special permission to raise money, a method which is not available to other bodies. It is my view that the Minister is making a mistake but I hope for the sake of housing he is not. It is necessary to have a good debate on Committee Stage and even at this late stage I appeal to the Minister to postpone that stage to give us an opportunity of considering the Bill. I would like to hear the views of the socialist Members. I always listen to debates with an open mind and in this case I am not happy that I will get a feed-back from my constituents. I did not know what the agency would be responsible for until the Minister made his speech this morning.

An Ceann Comhairle

It is 10 o'clock and the Minister must now be given the opportunity to reply.

Minister for the Environment (Mr. P. Barry)

I am very pleased with the amount of attention that has been given to legislation. All of us have had a long day and we face another long day tomorrow. I do not say this in any sense of being critical but many of the contributions ranged beyond the terms of the Bill. This indicated to me the very genuine interest Deputies on all sides of the House have in all matters relating to housing. I would hope that at some time in the future we would be able to arrange a full day's debate on all aspects of housing. I have been asked about the White Paper. I hope to be able to produce that in the spring and, based on that, we might be able to arrange that day-long debate. Several Deputies who would have liked to contribute to the Bill were not able to do so in the time available. Because of that, also, I would hope that at some time we will be able to arrange the Dáil Business to provide for a debate as I have outlined. I am sure that I would learn quite a lot from such a debate and I would be very happy to facilitate arrangements for it to take place.

Before I reply to the individual points made I should like to make two general points. Deputy Callanan and a number of other Deputies also asked where the Members of the Labour Party were today but I would remind Deputies opposite that the Bill before us is part of the Joint Programme for Government, 1981 to 1986. It was published first as a Fine Gael policy document in October 1980 and again it was part of the Fine Gael Programme for Government in May 1981. Therefore, there is no question about the commitment of either of the Government parties to this legislation. Neither is there any question of Deputies opposite not knowing what is in the Bill. I cannot think of anything that has had so much advance notice as the intention of Fine Gael in Government to introduce a building finance agency. Neither can I think of anything that was spelled out in greater detail in the document we produced in October last. In these circumstances what the Deputies opposite are saying is nonsense and especially so since the contributions of at least half a dozen of them today comprised quotations from an article written by a journalist in which the measure was criticised. That journalist has a right to be flattered because evidently he is the opposition in relation to this Bill. However, unlike the elected Opposition he did his homework. The article which appeared in the press in September last was a good article based on a series of assumptions and it was on those assumptions that the journalist concerned arrived at his answers. But both the journalist and I are talking about the future and neither of us knows what will happen in the future. I use different assumptions and I get different answers.

Mr. Raphael Burke

While neither the Minister nor the journalist knows what will happen, I suggest that it is not a very good idea for the Minister to introduce legislation not knowing what effect it will have.

Mr. P. Barry

Can the Deputy tell me what the inflation rate will be in 1995? The journalist does not know and neither do I.

Mr. Raphael Burke

He made a very generous assessment at 10 per cent.

Mr. P. Barry

That is based on an assumption.

Mr. Raphael Burke

This year because of the decisions taken by the Government in July, the figure will be about 22 per cent.

An Ceann Comhairle

The Minister's time is limited and he should be allowed to continue.

Mr. P. Barry

The Deputy cannot answer the question I put to him.

Mr. Moore

The question will be our headache by then.

Mr. P. Barry

Neither of us knows that either.

Mr. Raphael Burke

One of the Deputies behind the Minister has only about a 0.8 per cent chance of retaining his seat.

Mr. P. Barry

The Deputies opposite have been making play of the gnomes of Zurich who will be cashing in on the index-linked bonds at the expense of unfortunate householders. Do the people opposite realise that the money for the agency is to come from pension funds and are they aware of who contributes to those funds? We are talking about the small people from whose pay packets certain amounts are deducted in order to provide for them an income-related pension scheme when they retire from work.

Mr. Raphael Burke

We are talking about an inflation rate plus 2 per cent.

Mr. P. Barry

We are talking about people like the stenographer or the usher or the man in the street. These are the people of whom Fianna Fáil are terrified.

Mr. Moore

The Minister is not being fair.

Mr. P. Barry

I have been here since 11.30 this morning without interrupting anyone so I should like the right to reply in the limited time available to me. There was no such limit so far as the Opposition were concerned.

Mr. Raphael Burke

We were very limited because of the guillotine motion.

An Ceann Comhairle

The Minister, without interruption.

Mr. Barrett

(Dun Laoghaire): The Deputies might at least listen to the answers to the questions they asked.

Mr. P. Barry

We are talking about the small people.

Mr. Haughey

The fairies.

Mr. P. Barry

We are endeavouring to direct into housing the pension funds that are contributed to by the ordinary working person. This is a progressive step so there is no need for any reference to the gnomes of Zurich, a phrase that has been trotted out as if it was coming from a tic-tac man at a race meeting. Do any of the people opposite know that the Post Office have been issuing index-linked bonds for the past seven or eight years? Yet, according to those Deputies the legislation today is a totally new concept.

I turn now to the question of the guillotine. From what has been said since tea time, I gather that there will not be a vote on the question. I enjoyed my constituency colleague's contribution to this debate.

Mr. Raphael Burke

It is the only thing the Minister ever enjoyed about his constituency colleague.

An Ceann Comhairle

The Minister without interruption, please.

Mr. Raphael Burke

The Minister teases us.

Mr. P. Barry

I am glad to see all the Deputies here because they were very scarce on the ground all day. In the last few hours the tone of Deputies has changed. They are now saying they are not opposed to the principle of the Bill, they will let it through and then debate the details. I do not know if they are going to vote against it. This agency is going to do what I, as Minister, tell it to do.

Mr. Haughey

On the contrary, the Bill says exactly the opposite.

Mr. Raphael Burke

It is supposed to be independent of the Minister.

Mr. P. Barry

I will give directions to the agency. If the Deputies do not approve of what I said today in relation to the agency, they should vote against the principle of the Bill. We are supposed to have pushed this legislation through the House in two days, but it has been debated for 21 hours between the two days. That, in normal parliamentary time, is about three hours a day——

Mr. Raphael Burke

On a point of order, the Minister is misleading the House, which is not something we like to see. He made a statement that he would have control over this agency. Even in his own explanatory memorandum it says that the primary responsibility for policy will rest with the agency. How can the Minister say he will control the agency?

Mr. P. Barry

Section 6 says the Minister may, from time to time, with the consent of the Minister for Finance, give to the agency such general directions as to policy in relation to all or any of the objects specified in the agency's memorandum of association as he considers appropriate. I admit the debate was confined to two days and there is certain merit in criticisms made but I will accept amendments all day tomorrow.

Mr. Raphael Burke

We were told we could only put amendments down until nine o'clock tonight. Now the Minister says he will accept them tomorrow?

Mr. P. Barry

I am telling Deputies I will accept them across the floor of the House tomorrow.

Mr. Raphael Burke

The Minister said he would only accept amendments up to nine o'clock tonight.

Mr. P. Barry

I am telling the Deputy differently now. We have had the equivalent of three weeks' debate on this legislation. No legislation is debated for longer than that. The National Building Agency set up by Fianna Fáil was not debated in this House for three years. They set it up as a private company. Precisely the same happened with the Irish National Petroleum Company which they set up in 1979 and they left office without introducing legislation to set it up.

Mr. Raphael Burke

There is no comparison——

Mr. P. Barry

I could do exactly the same, I could set up this agency outside the House and have it in operation by the second week in January but I will not follow the path which Fianna Fáil took. I believe in the democracy of this House and in allowing Deputies to have their say. If this legislation is passed by both Houses of the Oireachtas and signed into law, I hope to be inviting the first applications for loans in about five weeks' time, I should like now to deal with some of the points made by Deputies——

Mr. Raphael Burke

It is about time with a quarter of an hour gone from a half-hour speech.

Mr. P. Barry

The Deputy is very noisy. He made a 15-minute speech this morning, disappeared and did not come back to the House until ten minutes ago and he has continually interrupted me. We were told by the leader of the Opposition yesterday that there was going to be a full and clinical examination of this Bill, line by line, but we are not going to have a vote tonight.

Mr. Leyden

We have no time.

Mr. P. Barry

We have plenty of time. Deputy Leyden spoke last week about spouses' incomes being considered for loans and wanted to know when it was introduced. I wish to quote from a letter which was issued by the Department of the Environment to Dublin County Council on 6 March 1981:

In reply to your query about the determination of eligibility on income grounds I am to confirm that income from all sources must be taken into account and in this context there does not appear to be any justification for disregarding the income of a spouse whose employment is of a permanent nature. In all cases the Council should only advance loans to applicants whose circumstances are such that they are unable to obtain loans from a commercial agency.

That was sent out by Mr. Raphael P. Burke, T.D., the then Minister for the Environment. That is the second time I have had to place that on record. Deputy Burke made the point that we should use existing institutions rather than set up a new agency. The primary purpose of the Bill is to raise additional finance for household mortgages to meet a growing housing requirement. The inflow of funds to building societies is still less than satisfactory, despite the increase in investment rates from 1 October 1981. Because of the acute shortage of Exchequer funds the Government are unable to increase the SDA loan and income limits. The new agency will tap funds from pension funds and life offices. That is the source of the funds.

When the previous Government introduced the housing package last April, they estimated they would need at least £9 million extra this year for SDA loans. They refused to make any provision for this expenditure before the change of Government last June. Deputy Connolly said they had intended to do it by means of a Supplementary Estimate later in the year but as these are not voted funds, a Supplementary Estimate would have been unnecessary. They had April, May and June to provide these funds. As I said a number of times, but it does not seem to have got home to the Deputies over there, we had to provide an extra £30 million on 1 July this year because the amount of money provided by Fianna Fáil for local authority housing in the 1981 Estimates was less than had been spent in 1980. That is why people building houses in Deputy Moore's constituency were not laid off — if there had not been a change of Government they would have been laid off in their thousands throughout Dublin.

Deputy Burke expressed fear that the existence of the agency would have the effect of slowing the flow of funds into the building societies. I do not think there is any substance in that because the agency is designed to attract institutional funds whereas building societies rely mainly on savings. When I opened the EBS offices in Westmoreland Street the other night I assured the building societies that the setting up of the agency would not militate against their operations. On the contrary, I see the agency as being able to assist in stabilising the total funds available for housing mortgages. The flow of funds from the agency could be increased when there is a drop in money available to the societies, thereby relieving the demand on the societies for loans during those periods.

Deputy Burke said the amount of money outstanding would be increased steadily under the new system. If the Deputies had paid attention to my speech earlier they would have got my point, but in case there might be any misunderstanding, it must be emphasised that the amount of the principal outstanding under the proposed system would normally decline in real terms when inflation is taken into account. Deputy Burke emphasised that the building industry requires finance and not a new agency. Broadly, that is probably true but what we are doing is providing the means of getting finance to the industry which was not available heretofore.

People who want to provide their own houses have three or four choices in the way they will pay for their houses. They can get their loans through banks or insurance companies, which is an expensive way. They can get the money through the building societies whose loans are expensive: we heard earlier today that repayments to building societies absorb between 40 per cent and 45 per cent of a person's income in the first years. People can get finance through the SDA system which is a very attractive way because the interest rate is subsidised.

Of course people can pay cash. Only the very wealthy can do that, but it is the cheapest way for a person to provide himself with a house. It means, of course, that there is nobody in the housing market who can acquire a house as cheaply as the rich man. He does not have to get a mortgage or a bank overdraft or a building loan. He does not even have to pay the cheapest rate of interest, which is on the SDA loan.

Mr. Raphael Burke

Is the Minister going to do away with the SDA system?

Mr. P. Barry

I will come to that in a minute. The Deputy did not show the same concern when he left local authority housing schemes in a mess. We had to provide an extra £30 million last July. Deputy Burke said the mortgage subsidies were more effective than the new pay-related schemes. Mortgage subsidies helped first time purchasers of new houses but the subsidy lasts for only three years and it is not paid at all in respect of about 8,000 first-time purchasers of existing houses. The subsidy has been a help and it will be reclaimed.

Mr. Leyden

For how long? Is the Minister guaranteeing that he will continue it?

Mr. P. Barry

It will last for three years. Will Deputy Leyden be reasonable? We have a majority of minus three. I cannot guarantee anything. We have not a majority of 20 as the last Government had.

Mr. Leyden

It is a good job you had not.

Mr. P. Barry

Deputy Shatter referred to some activities of the building societies in which there is scope for reducing expenses and delays for intending borrowers. Deputy Harney is not here. I thought she made a first-class contribution to the debate. She also referred to the matter. I have complete sympathy with the views of the two Deputies. They have been endorsed by a report recently submitted to me by An Foras Forbartha. I intend to discuss these matters with the building societies next month and I hope to get their co-operation to eliminate avoidable expenses and delays. I feel so strongly on this matter that if such a course proves to be necessary I will promote legislation to ensure that the necessary changes will be made. I will ask them to co-operate first and if that is not forthcoming the change will be introduced.

Mr. Haughey

Which change is the Minister talking about?

Mr. P. Barry

Deputies Shatter, Harney and others spoke of the cost of building society loans and the delays in getting them. I agree with Deputy Shatter that an effective element of competition in the market would provide a stimulus for building societies to operate more economically and efficiently. I have every hope that the new agency will generate that competition.

Deputy Fahey said there will not be a demand for the new loans. Perhaps we will discover that is so, but I think it is very unlikely. We must all face up to the fact that the maximum SDA loan available is £14,000. The average price of a three-bedroom semi-detached house is £25,000. That means that with the SDA loan, plus the grant, a person buying a house still has to find a deposit of £9,000. That deposit would have to be raised by somebody earning £7,000 a year or less. We all know that in most cases that is almost impossible to do. The person with an income of more than £7,000 will have to go to a building society and in the first few years of the mortgage life he would be paying up to 45 per cent of his income. He would be a person with an income of £9,000. That also is an impossible situation for a young couple.

Mr. Raphael Burke

There is a maximum of £18,000.

Mr. P. Barry

I think I am entitled to injury time for the way Deputies are shouting at me. The Deputy is talking about people in local authority housing. They will get special consideration. The general run of the mill is, as I said, £14,000. Deputy Harney expressed worry about the size of the local authority waiting list in Dublin. I have figures here to show that the size of the waiting list in Dublin has gone down. There were more houses being built during the 1973-77 period in Dublin than in the last four years, and I am talking about each of the four years. Fianna Fáil's record there is not very good. Deputy Reynolds was not correct when he asserted dogmatically that the building society mortgage interest rate was never higher than the rate of inflation. It is only in the past five years when inflation was at an unprecedented high level that building society interest rates lagged behind inflation.

Deputies spoke about repayments of mortgages. This is a further choice available to people purchasing houses. That is the point which must be remembered by everyone in this House. It is not in substitution for the SDA loans. The only way it could substitute for SDA loans would be if the SDA loans vanished, if this scheme proved so popular that there was no demand for SDA loans. That is the only way. If that happens——

Mr. Raphael Burke

The Minister said in his speech that SDA loans would be abolished.

Mr. P. Barry

Would the Deputy stop shouting——

Mr. Raphael Burke

It is on page 3 of the Minister's speech.

Mr. P. Barry

That is a microphone. It magnifies the Deputy's voice. He does not have to shout.

Mr. Raphael Burke

In the last two lines the Minister said SDA loans will be abolished.

Mr. P. Barry

I know precisely what I said. I am telling the Deputy that the only way the SDA loans could vanish——

Mr. Raphael Burke

The Minister should read it.

Mr. P. Barry

The Deputy must listen. The only way the SDA loans could vanish would be if this proves so popular that there is no demand for SDA loans.

Mr. Raphael Burke

The Minister did not say that.

Mr. P. Barry

Let me finish. We intend to see that if people want to continue to have the added choice of this source of finance through the SDA loans, they will have it. They will have the choice of the insurance companies, the banks——

Mr. Raphael Burke

The Minister did not say that this morning.

Mr. P. Barry

——the building societies, the SDA loans and now this further option which is open to those people who want to purchase and own their own houses which, I believe, is the wish of everybody in this House.

An Ceann Comhairle

In accordance with the resolution of the Dáil, I am now putting the question that the Bill be now read a Second Time.

Question put and agreed to.

Mr. Haughey

We will give the Government plenty of votes tomorrow.

Mr. P. Barry

The Deputy told us that yesterday about today.

Mr. Haughey

I did not.

Mr. P. Barry

Yes, he did.

Mr. Haughey

I never said we would vote against this Bill, never. The Minister should not be unfair.

Mr. P. Barry

Did the Deputy not say he would fight this Bill line by line?

Mr. Haughey

Line by line is Committee Stage.

Mr. Raphael Burke

Tomorrow.

Mr. P. Barry

The Deputy did not say that yesterday.

Mr. Haughey

Tomorrow. Line by line is Committee Stage.

Mr. Raphael Burke

The Minister is not in the House too often.