I welcome this opportunity to clarify the position of the local loans fund. The Minister for Finance referred in his budget statements to the commitment in the Government's policy agreement to payments of the legally determined entitlements of married women to social welfare equality payments. He indicated that he was including £60 million in the budget for this purpose in 1995 and that if it should prove necessary to spend more on these exceptional payments this year there were funding possibilities open to him through the disposal of State assets which were not in commercial semi-State bodies. Funding of any such payments in excess of the £60 million by the disposal of such assets would not increase the target for the EBR.
The judgment of the High Court on the entitlements of women under the Equal Treatment Directive was delivered on 3 February 1995 and the Government announced recently that it was accepting the judgement and it committed itself to paying the £260 million as quickly as possible. The reason for speeding up the payments is that they are legally due and must be paid as quickly as possible. In the current year payments to the affected women will amount to approximately £200 million. These payments are of an entirely exceptional and non-recurrent nature.
Accordingly, additional expenditure of £140 million over the amount provided in the budget will arise in 1995 and it is proposed, as indicated already, to fund this by the disposal of certain assets. Sales of assets will be limited to the amount needed to cover the additional Exchequer cost arising from the decision to accept the court judgment.
Possible methods for the disposal of part of the local loans fund loan portfolio for this purpose are being examined at present. The local loans fund is a statutory fund under the control of the Minister for Finance. It has assets of about £550 million, of which £490 million are fixed rate loans made to local authorities which the authorities used to advance mortgage loans to persons who satisfied a means test qualification. The local authorities make capital and interest payments on these loans to the fund twice a year. Almost all of these loans were made prior to 1 July 1986 and since then most of the capital required by local authorities to finance their mortgage lending activities has been provided by the Housing Finance Agency at variable rates of interest.
An important point to note is that the liability to repay the loans to the local loans fund rests on the local authorities themselves and is independent of the liability of individual mortgagees to make payments to the local authorities on foot of the loans they have received from the authorities. In fact, there are no arrears owed to the fund; the housing loan accounts of all the authorities with the fund are fully up to date.
The capital of the local loans fund has been provided by the Exchequer by way of borrowings and accordingly the Exchequer has liabilities which match the assets of the fund. Two avenues for disposal of part of the assets of the fund are being examined at present. One would involve a securitisation by the National Treasury Management Agency and the other would be by the activation of section 15 of the Housing (Miscellaneous Provisions) Act. 1992, which allows the sale of local loans fund assets to the Housing Finance Agency. The comparative merits of each course are being examined at present by officials in my Department who are being advised by the two agencies and it is expected that their recommendations will be available shortly.
It needs to be made absolutely clear that the sale of the loan assets will not affect people with mortgages from the local authorities in any way. What will be sold are the loans from the fund to the local authorities. People with mortgages from the local authorities will continue to make their mortgage payments to the local authorities as they have always done. There will be no change of any sort in their position. The only impact the sale will have on local authorities is that instead of making repayments of loans to the local loans fund they will make them to the new owners of the assets. There will be no change in their financial position or in the arrangements for funding capital projects by the authorities.
The Minister for Finance expects to make a decision on the route to be followed in relation to the sale of the assets in the near future.
