There is an amendment in the name of the Minister.
Housing Finance Agency (Amendment) Bill, 1987: Committee and Final Stages.
Section 1 agreed to.
SECTION 2.
I move amendment No. 1:
In page 2, before section 2, to insert the following new section:
2. —(1) Section 5 of the Principal Act is hereby amended by—
(a) the substitution for subsection (1) (b) of the following paragraph—
(b) advance moneys to a housing authority to enable the authority—
(i) to make loans for the purpose of acquiring constructing, or carrying out improvement works to, houses, and
(ii) to pay grants under section 6 of the Housing (Miscellaneous Provisions) Act, 1979.',
and
(b) the substitution for subsection (2) of the following subsection—
‘(2) Where moneys are advanced to a housing authority under subsection (1) of this section for the making of loans, the authority shall use such moneys to make loans —
(a) under section 39 of the Housing Act, 1966, or
(b) in accordance with such terms and conditions relating to the acquisition and construction of houses as have, from time to time, been approved of for the purposes of this section by the Minister and by the Minister for Finance, or
(c) under section 8 of the Housing (Miscellaneous Provisions) Act, 1979.'.
(2) This section shall be deemed to have come into operation on the 1st day of July, 1987.
The purpose of this amendment is to broaden the power of the Housing Finance Agency to advance money to local authorities. As the position stands at present, the agency may advance funds to local authorities to enable the making of loans solely for the purpose of the acquisition of houses. It is proposed under the amendment to allow the funds to be made available by the agency to local authorities for the making of improvement loans and for the payment of essential repairs and disabled persons' grants by the authority.
At present the funds to provide for the payment of these grants may be advanced from the Local Loans Fund. It is entirely in keeping with the wider role of the Housing Finance Agency that it should now become the source of the funds needed by local authorities for the purposes that I have mentioned. As far as local authorities are concerned, the funds will be provided to them by the agency on the same terms as they would obtain from the Local Loans Fund.
Perhaps the Minister would explain the reason for this late amendment to the Bill and, in particular, the provision whereby the Housing Finance Agency are now to take over, or will be empowered to take over, the arrangements which local authorities previously had with the Local Loans Fund in relation to subsection (1) (a) (ii)?
Section 2 provides for an increase from £500 million to £1,000 million in the statutory limit on the agency's borrowing. The present limit of £500 million will be reached in 1988. The agency has now taken over from the Local Loans Fund as the main source of funds for loans advanced by local authorities. In this context, it is necessary to increase the borrowing limit to ensure that the agency are in a position to continue funding these loans.
I do not want to interrupt the Minister. He is giving an explanation as to the effect of section 2. I asked a question in relation to the amendment which we are now discussing with regard to the new subsection (1) of section 5 of the Principal Act, subsection (1)(a)(ii). What powers will the agency be taking over which were previously the responsibility of the Local Loans Fund?
It is an extension of their role to pay grants and make loans available for house improvements. Their role is being extended to make loans available for the repair of houses.
I appreciate that and agree with the intention that the agency should be empowered to advance moneys for the purpose of allowing local authorities to make loans available for the improvement of houses. This is a logical extension of the role of the agency to provide funding for the purchase of houses. Under the new section 5 (1) (a) (ii) the agency will be empowered to pay moneys to the local authorities so that they can make grants available. Can the Minister explain that provision to us?
At present the local authorities borrow money from the Local Loans Fund. This section will give them the power to do so and to pay grants.
If moneys are advanced to a housing authority to pay for grants from the HFA, on what basis will these advances be repaid?
On the same basis as they are repayable to the Local Loans Fund.
In other words, is the Minister of State saying that the advancing of money to the local authorities so that they can make loans available and make grants available for the improvement of houses as provided for under section 5 (1) (a) (ii) will be by way of traditional type borrowing and will be repayable to the agency on the same basis as if they had borrowed from the Local Loans Fund?
It will be on the same basis.
Therefore, this will be a new type of borrowing which the local authorities will engage in with the Housing Finance Agency. In the space of their short existence the Housing Finance Agency have advanced moneys to the local authorities so that they could make available house purchase loans and these moneys were repayable under the interest-related system. Will this amount to a different type of borrowing from the more traditional type of borrowing on which the local authorities borrowed from the Local Loans Fund?
There is no doubt that it will be along the traditional lines.
I do not want to labour this point but what I would like to know is in what manner will the local authorities borrow money under this provision and how will they repay these moneys? What type of borrowing will it be?
It will be on the same basis as they borrowed money from the Local Loans Fund. They will now be taking on this new type of loan. The Housing Finance Agency are now going to undertake this type of arrangement.
The intention when the Housing Finance Agency was set up was that it would progressively take over the funding of local authority borrowing for housing purposes of one sort or another. What I am not clear about in regard to this new type of borrowing is the manner in which the local authorities will make the repayments. The local authorities have, until very recently, traditionally borrowed from the Local Loans Fund, very often to fund activities which in part were subsidisable by the State. A very cumbersome process ensued whereby the Department of the Environment paid a grant to the local authority which was equivalent to the State subsidy which was allowed on the loan. The local authority then had to repay the full amount of the loan instalment due to the Local Loans Fund. That has now been changed as a result of the recent enactment of the legislation on the Local Loans Fund. I seek clarification as to whether there is any element of State subsidy involved in this new type of borrowing. If that is the case, how is it going to be dealt with? Will this new type of borrowing be on the basis of normal annuity-type borrowing by the local authorities from the Housing Finance Agency? In what manner will the borrowing be repaid and will it be borrowed at a fixed interest rate or at a variable interest rate?
The moneys will be borrowed at a variable interest rate. No subsidy will be involved. This is a new arrangement which should be introduced. At present some loans are being repaid at a rate of 12½ per cent. That is the standard rate for a 25-year loan. These moneys will be borrowed at a variable interest rate and they will be borrowed on the same basis as previously from the Housing Finance Agency. The same terms will apply and no subsidy will be involved. With interest rates coming down, it is to be welcomed that the moneys will be borrowed at a variable interest rate. I hope the interest rate on this type of loan will come down in line with the building society rate. That is our aim.
When the Minister of State said that the moneys would be borrowed on the same basis as previously from the Housing Finance Agency, did he mean on the same basis as previously from the Local Loans Fund?
Yes.
Is the amendment agreed?
I think I know what it means.
I know very well what it means.
Amendment agreed to.
Section 2, as amended, agreed to.
Sections 3 and 4 agreed to.
Title agreed to.
Bill reported with amendment and passed.