Dáil Éireann díospóireacht -
Thursday, 14 May 1998

Vol. 491 No. 2

Finance (No. 2) Bill, 1998: Committee and Remaining Stages.

SECTION 1.

Mr. Noonan:

I move amendment No. 1:

In page 3, subsection (1)(b), lines 27 and 28, to delete "not be authorised" and substitute "be authorised at the standard rate of income tax".

The Minister has introduced a number of measures to dampen demand in the housing market. His analysis of the Bacon report appears to be that in the past 12 months or so a disproportionate number of houses have been bought by investors rather than owner occupiers. It is suggested that in the first quarter of this year 30 per cent of all purchases of new houses was for investment purposes. In an attempt to dampen demand the Minister has targeted the investor market.

He has taken two measures in respect of persons who invest in rental accommodation. He has subjected new houses which are not owner occupied to stamp duty at the new rates. This is a measure I do not oppose. To date there was no stamp duty on new houses but there was on second hand houses. As part of the changes the Minister is imposing stamp duty on new houses purchased for rental purposes. It is hoped that will diminish demand. The Minister has decided to abolish interest relief in respect of mortgages on houses which are being rented. This is the second element of dampening demand in the investor market.

Rather than dampening demand on the investor side the Minister's measures will eliminate demand. He should consider the figures involved in the difference between the purchase price and the overall repayments for investing in rental accommodation, taking into account the payment of stamp duty and the lack of interest relief. In this context it is no longer a question of levelling the pitch or dampening down the market. Rather it is a matter of eliminating for a period of years investment in rental accommodation in urban areas.

Following on the Minister's statement that his intention is to dampen demand rather than to eliminate it and that he seeks a level playing field, so to speak, I propose this amendment to allow interest relief to be applied in respect of rental accommodation at the standard rate. Prior to the Minister's statement on 23 April an owner occupier got tax relief at the standard rate up to limit of £3,200 but an investor got relief at the marginal rate without a cap. That did not constitute a level playing field and gave an advantage to those purchasing for rental purposes. Rather than eliminating demand I suggest that tax relief be retained at the standard rate.

I am concerned that in attempting genuinely to solve the problem of overheating in the housing market, the Minister will create another problem and eliminate rental accommodation. There are categories of people who are not in a position to purchase or who do not wish to purchase their own homes. They are happy because of their place in society or their age to live in rental accommodation. It is a large and increasing percentage of the population. About 10 per cent of the population of Limerick are students and they seek rental accommodation. They do not and cannot be expected to purchase houses.

It is claimed that by advantaging the owner occupier and levelling the playing field along the lines the Minister suggests, persons who now rent will purchase accommodation. However, that will not happen because they are not in the purchasing classes. They are mainly young mobile people who seek rental accommodation. The Bacon report refers to the net immigration of 15,000 people. On a yearly basis about 45,000 people return to the country. Many of them are in the house purchasing age groups but there are many who have no option, at least for a time, but to seek rental accommodation. The young workers in modern industry are highly mobile. It is a byproduct of mobility that people rent rather than purchase property. This is an increasing feature of society. Many of those employed in the financial services in Dublin and the IT industries in west Dublin are young and mobile. They may spend a couple of years working there and then move on. Regardless of how level the playing field may be, they will not generally purchase houses and sell them on when moving.

I accept the Minister is making a genuine attempt to solve one problem but there is a danger he will create another. I ask him to agree to the amendment and to allow tax relief at the standard rate.

Mr. Barrett:

I support this amendment. I represent a suburban area and am aware of the large scarcity of rental accommodation. I accept the Minister is making a genuine attempt to solve a difficult problem, particularly for young couples. However, rented accommodation is scarce. If restrictions are imposed which further reduce the stock of rented accommodation what remains will become more expensive. In parts of Dublin the price of rental accommodation is becoming ridiculous, never mind the price of purchasing houses. Let me give an example. In my constituency a deserted wife lives with her daughter in a rented house. She receives a subvention from the health board and is now facing eviction because the rent, which was £400 a month, has been increased to £800 a month. That is the going rate in the area in question. The health board will not increase the subvention. This mother and daughter are now facing eviction into a market where there is nothing else available. On top of that, the local authority has a huge waiting list of people looking for housing. People have to use bed and breakfast accommodation. I was in contact with Dún Laoghaire-Rathdown County Council yesterday and was informed that apart from the housing priority list there are between 70 and 100 people on a special homeless persons' list in Dún Laoghaire-Rathdown. These are people who have been evicted or forced out of their properties into bed and breakfast accommodation by landlords looking for higher rents. When they get up in the morning with their young children they have to leave the bed and breakfast and are not allowed back until late at night. They have to walk the streets.

We must do everything possible to assist young couples trying to purchase their first home. The increase in the cost of property is appalling and we must try to do something about it, but in solving one problem let us not add to another massive problem which already exists. Whether we like it or not, if we stop further rented accommodation becoming available in the marketplace, what is there will become more expensive and what I have outlined in terms of people being evicted because of rent increases which they cannot afford will get worse. If the Minister has another solution to the problem I would like to hear it, but the reality is that if something is scarce and we make it more scarce, the normal marketplace will dictate the price people have to pay and the rents will go up. That will not solve any problems. Therefore, I support Deputy Noonan's amendment.

Mr. Naughten:

I too support Deputy Noonan's amendment. The current provision will cause severe pressure in the rental sector. In Dublin the vast majority of students have to pay between £50 and £60 a week for accommodation for part of the year. If Deputy Noonan's amendment is not accepted there will be further pressures on that market. Young people are finding it hard to survive. Maintenance grants, for those lucky enough to have them, barely cover their accommodation costs, especially in Dublin. There is a huge shortage of adequate accommodation. Dublin is the city I have most experience of but it is the same in Cork, Limerick and other parts of the country. There is a proposal by the Department of Education to increase the number of places at colleges in the coming academic year. Given the shortage of accommodation and its high cost, if we introduce more young people into the third level education sector, further pressures will be put on them and on their families. Students will be sleeping rough on the streets or in derelict houses. It happened in the past and it could happen in the future if this Bill is not amended.

There are serious problems with regard to the health subvention, particularly in Dublin, but one does not need to go to Dublin to see the problems. Even in County Roscommon, the most rural county in the country, there are serious problems because the health board subvention does not nearly cover the cost of accommodation. There is a huge demand for housing and a large number of people using bed and breakfast accommodation. This Bill will only compound the problem. The Minister should accept this amendment, which I support.

Mr. Shatter:

In the debate yesterday I raised some of the problems that would arise because of the removal of interest relief from mortgage interest relating to rental accommodation. Let me repeat those today because it seems that in addressing this issue the Department has used a very blunt stick and has failed to come to terms with the different social circumstances in which accommodation is rented.

This measure has been proposed on the basis that it will reduce the cost of houses for young married couples or perhaps stem the heat in the secondhand house market. That is a complete shibboleth in the context of a number of areas, and Deputy Noonan's proposal should be supported.

Let me describe the types of social situations in which rental accommodation arises. It does not all arise from people simply purchasing a property for investment purposes, not that that is a bad thing. There are people who purchase one or two investment properties in addition to their own family home simply for pension purposes. They are acting in a socially responsible way in setting out an investment strategy for themselves for the future, and it is only financially viable for them to do that in the context of interest relief on borrowings raised. This policy actively discourages people from making their own independent pension plans for their retirement. I would have thought it would be a social objective of Government to encourage people to make such plans. Is it the objective of Government to direct them always towards the main insurance companies for pension policies in respect of which people are often given inflated views of the likely value of the policies taken out? That is an area in which there are huge and growing difficulties. Should it not be the role of Government to encourage people to use their own finances wisely and to invest in that context? That is one area that has not been addressed in the context of this proposal.

There are other aspects that I see, wearing my other hat as a lawyer dealing with family problems — for example, a deserted wife or a wife who is being inadequately supported by her husband. A husband who has been deserted by his wife, who is living in the family home and bringing up young children and who wishes to retain the family home but does not have the financial wherewithal to meet all the outgoings and discharge mortgage repayments might have the facility, by doing minor construction work, to turn a portion of the family home into an apartment from which an income could be derived. Does that turn the family home into an investment property, and would that deprive the deserted husband or wife of a potential income source? Would they find, if they got that rental income, that they would lose their mortgage income relief? It is a very specific issue, and a very real issue for many people. In the wake of the constitutional change people are entering into second marriages.

A wife who is divorced may own her original family home. If she marries someone who also has a family home, are we saying that she cannot rent her first home and get some income from it, even though she may feel that having been through a difficult marriage she wants the security of knowing her original home is there if things do not work out? It is only viable for many people to do that if mortgage interest relief is set off against rental income. Will we force wives in those circumstances to leave their homes vacant, which is not financially viable, or to sell them? Is it not a valid social objective that people who have been through difficult marriages should be allowed to keep their first home and use it for income generating purposes? The social impact of this provision will force many people to sell such homes.

What is the position if one takes in boarders? One may not formally physically separate a portion of the house, but if students are taken in and pay rent for nine months of the year how will this measure impact on mortgage interest relief? To retain such relief, will one be forced into the black economy and not declare this income because that is the only way to make one's situation financially viable? Will this encourage people who take people into their houses on a temporary basis as boarders to conceal their income in the black economy? A series of issues, other than the basic one, arise to which the Bill has given no consideration.

I have no doubt, based on my knowledge of Dublin and my involvement in investment properties, — and I hope I have always dealt with people in a decent and civilised way — that the Minister's measure in this context will result in a huge rise in rents in Dublin over the next 12 to 18 months because he will create a shortage. He will not solve the housing problem nor will it result in a large number of new houses coming on the market at affordable prices. When we review this in 12 months, we will discover the price of new houses in Dublin city and county will have continued to rise.

The Minister will probably take a few potential apartment blocks out of the market that developers would have constructed for investment purposes and which, without investors, would have very few owner occupiers. In the larger housing estates around Dublin, including those in my constituency, prices are being artificially increased by developers who are deliberately building small numbers of houses and releasing them in small blocks on the market, fuelling demand and charging exorbitant prices. Immoral profiteering is being carried on in those areas.

This measure will not solve that problem. It will not only vastly increase rents, particularly around Dublin, but will make rental property a great deal scarcer for young couples not in a financial position to purchase their own houses. It will increase the burden on local authorities at the end of the day, which currently cannot cope with the demands made on them. Irrespective of the other measures in the Bill, this one will be reversed in 12 months by the Minister. In terms of social policy in the short term, it will create a series of detrimental impacts on a wide variety of people, many of which were not addressed or even considered in the Bacon report.

Mr. Deenihan:

The Minister will agree the Bacon report dealt with house sales and his brief did not include the rental market. If it had, he could have possibly come up with a totally different set of recommendations. Listening to people, such as Deputy Shatter, who have a close knowledge of what is happening in Dublin, it appears these measures will exacerbate the problem rather than solve it. Deputy Noonan's amendment would restore balance and it is a simple one which could be accepted by the Minister. He should consider it seriously with his officials.

His measures have rocked the market and I have never seen more people concerned. It has had more of an effect than measures introduced in the past for the housing market. I agree it will increase rents beyond the reach of students, nurses, civil servants, bankers and many low paid workers in multinationals who live in Dublin. It will create major difficulties for them and Deputy Noonan's amendment tries to restore balance and give an incentive to the first time buyer and the taxpayer in order to encourage investment. Will the Minister consider the amendment and weigh up its advantages?

Mr. McCormack:

We must be careful about any measure that will make it more difficult for young couples to acquire houses because they may be forced into the rental sector. This measure will make it more difficult, particularly for first time buyers. Although an attempt was made as a result of the acceptance of recommendations in the Bacon report to alleviate stamp duty for first time buyers on second-hand houses it did not go far enough, despite having some effect. For houses valued at £60,000 stamp duty was abolished but that was only a paper exercise because in Galway one would not buy a house at that price; one would not get a good henhouse in Galway for £60,000. That measure will not help young couples.

Stamp duty on houses worth £100,000, which is at the low end of the scale for second-hand houses in Galway, has been reduced from 6 per cent to 4 per cent. The scale has not been correctly examined. If stamp duty is reduced by 2 per cent, the person who can afford a £400,000 house will save £8,000 in stamp duty while the first time buyer who is most likely to be the customer for houses valued between £60,000 and £100,000 will save only £2,000. We have not gone far enough to protect people who wish to buy their own homes. Many first time buyers are buying second-hand houses, because of the cost of new houses, some of which are in need of considerable repair and this is an added cost. Any measure that would make it more difficult for first time buyers must be opposed.

Mr. McCreevy:

In line with the recommendations of the Bacon Report, section 1 provides for the total withdrawal of relief for interest on borrowings used in connection with rented residential property. Deputy Noonan's amendment proposes a half way measure by seeking to retain the relief, but at a reduced level, to allow relief at the standard rate of income tax.

As I indicated in my reply to the Second Stage debate, the Bill is designed to restore a balance to the housing sector — a balance between supply and demand, between investors and first time purchasers and between tax concessions and removal of reliefs. The overall policy goals being pursued — which I presume find agreement on all sides of the House — are to increase the supply of serviced land, to reduce excess investor demand and to assist ordinary house purchasers, thus defusing the house price spiral and increasing the affordability of housing.

Even with the total removal of interest deductibility there will still be a basic and strong demand for residential accommodation and the house building sector seems to accept that this will be the case. The deductibility of interest for tax purposes against rental income played its part in stimulating demand and reviving the property market when it was flat. However, the case for continued relief — even at a reduced level — at the time of a property boom is far less convincing. The Bacon study indicates:

.there is evidence that changing patterns of housing demand are sufficient to support a growing and more diversified rented sector, for example, rental values appear to be well underpinned. What is in doubt is the need to encourage this demand by means of fiscal incentives, especially when the revenue foregone in this direction could be focused better towards increasing supply and choice to first time buyers who are facing affordability strain.

As pointed out in the report, the main effect of the proposed measures would be to remove fiscal supports to residential investment demand, at a time when underlying demand is extremely strong. The benefits from moving in this direction would be, among other things, to provide a more level playing field between investors and home owners and to allow investment in residential property to be determined by underlying market forces for additional rented accommodation, at a time when economic and social changes are leading to an increase in the depth and breadth of demand for such accommodation.

I am not satisfied the half way measure proposed by Deputy Noonan would be an appropriate or effective response to the problems with which the proposals in the Bill — which constitute a coherent overall package — are designed to deal. In the circumstances, I cannot accept his amendment.

The concerns raised by the Deputies were considered by Dr. Bacon and when drafting the Bill. As I stated in the brief contributions we made on the financial resolution on stamp duty some weeks ago, the Bacon report considered affordability of housing for first time buyers. I stated on a number of occasions — I am not sure what I said in the House — that the withdrawal of interest relief will give a sharp shock to the market, but that is what it is designed to do. There is no point in fooling ourselves about what we are trying to achieve. What the Bacon report recommended, and the Government adopted, is designed to give a sharp shock to the market. The measure is designed to distort demand to achieve a balance between supply and demand.

The Bacon report addressed many of the underlying reasons for the increased demand in the housing market, which include the supply of serviced land, the economic boom, etc. Deputy Noonan referred to the numbers of people coming back into the economy. I concur with his view that those who leave the country are young while those who return are in the house buying age bracket and thus push up demand. I have told people at race meetings and elsewhere — people in the building industry are vociferous in making their views known — that the measure is designed to distort the market. I have also stated this at parliamentary party meetings. Up to now the investor was competing to the exclusion of all others.

When we discussed this matter in the Department in the run up to the Finance Bill, I readily accepted this measure would have the greatest psychological effect on the market. When people become aware of the demands on the rental sector in the next few months, it may encourage them to stay in the market, but the measure is definitely helping first time buyers. A heading in the Property supplement of today's edition of The Irish Times states “First-time buyers back in force as 35 homes sell out”. The article goes on to state:

With investors now out of the residential investment market, first-time buyers bought all 35 houses released in a new scheme near Lucan last weekend.

I knew the Bill would have that effect, but that is what it is designed to do. I considered the question of a standard rate of income tax in the leadup to the Bill. I accept the legitimacy of the views put forward by many of the Deputies opposite. Deputy Shatter outlined what will happen in certain areas. Having considered all those matters, I concluded that to achieve a dramatic effect, as recommended by Dr. Bacon, the measure I proposed was the only way forward. The anomalies outlined by the Deputies will have to be considered on another occasion. The rationale behind Dr. Bacon's recommendation and the Government's response is to distort the market and it is strong enough to ensure builders will have enough demand for their houses. The measure is designed to stop the ferocious escalation of house prices because investors were buying up half of some schemes and the downward pressure on interest rates also encouraged more people into the market. I am willing to discuss the anomalies which Deputy Shatter believes the measure will create on another occasion. However, nobody should be in any doubt that I am trying to distort the market and the measure is achieving that purpose.

Deputy Noonan said the measure may create problems in the market for apartments and flats for students, young couples and transient workers. From an economist's viewpoint, if greater returns can be made in the rental sector, it will encourage more people to get involved. As an economist, Deputy Dukes, said yesterday he disagreed with some of the theories put forward by Dr. Bacon, but that is what economists tend to do.

There are eight eminent people on the Bank of England's monetary policy committee, which was set up by the Chancellor, Mr. Gordon Brown, to decide on interest rates. The minutes of that committee show a four against four split; one group wants to raise interest rates, the other wants to lower them. People in the markets make money because there are different views. I am not offended, and neither should Dr. Bacon be, that Deputy Dukes disagrees with some of his analysis as an economist. When speaking on Committee Stage of the Finance Bill in response to Deputy Noonan's amendments concerning stamp duty, I put on record my views on the effect of changes to stamp duty — I believe the difference often goes into the seller's pocket.

Mr. Barrett:

Remember the economists' views in 1977.

Mr. McCreevy:

Yes, more rational views were not taken on board at that time and I was one of those expressing them. As I said on the Financial Resolutions, the sum of Dr. Bacon's proposals should achieve what it sets out to do. I could argue with many of the individual contentions but I think they will be effective taken together, which is why the Government decided to go along with the report and not to cherry pick. We made slight changes with regard to stamp duty because the balance we put forward was somewhat better. As to section 23, the changes in this year's Finance Bill allows the Minister to pick and choose, which was not possible before. That is the appropriate response in that area and the section itself will remain. However, I recognise that people have other views.

Deputy Shatter said people buy houses for pension purposes and I readily acknowledge that. I come from the end of the political spectrum which believes in the free market and that people should be encouraged to make provision for themselves and should not be reliant on the State at all times. I have no difficulty subscribing to the Deputy's philosophy. However, that is not what the Bacon report and the Government's response is trying to do — we are attempting to distort the market to achieve a social objective, and the social objective on housing, shared by successive Administrations, has been to encourage people to own their homes. That continues to be the policy of this Administration.

Mr. Rabbitte:

The Minister is walking on eggshells and is doing a good job but if he leans over either way it could be serious.

Mr. McCreevy:

I am keeping an eye on Deputy Rabbitte all the time. If rents in Dublin rise sharply the market will react appropriately — that is basic economic theory.

Mr. Shatter:

What does that mean?

Mr. Noonan:

Economists said the market would react appropriately at the time of the Famine.

Mr. McCreevy:

As Dr. Bacon said in a radio interview recently, and as I said earlier, if rents rise because of demand, people who are staying out of the market because of the non-deductibility of interest will make an appropriate economic response and decide to re-enter the market. That will increase supply and bring down prices. That is basic economic theory — price is a function of supply and demand.

Mr. Noonan:

What about the tenants?

Mr. McCreevy:

Dr. Bacon has argued this quite forcefully and I agree with him.

Mr. Barrett:

What happens in the meantime?

Mr. McCreevy:

If Deputy Barrett was going to buy a house in April but decided it was not worth his while because the interest is non-deductible, that would have been an economic decision because he had worked out the figures. If, however, the house gets a better rent he will decide to buy it anyway because it will suit him economically. That brings in a new player on the demand side and will force down prices, because that is what happens in the market.

Deputy Shatter mentioned letting out rooms in a person's home. There are two answers to his question. I will outline what should be done by people who have boarders in their houses but I am sure this is not abided by in all cases. The first case involves a person who has owned and lived in his house for many years. If this person lets a room in the house, he or she may offset part of the mortgage interest against the rental income and claim part of this as a normal mortgage credit against personal income tax. In this case the mortgage interest applicable to the let part of the house is determined on a just and reasonable basis. In this context, "just and reasonable" could be determined by the floor area or the number of rooms let.

Mr. Shatter:

Are Revenue officials to measure room sizes and work this out by the square foot?

Mr. McCreevy:

As of now, this is what should be done.

Mr. Shatter:

How many examples can the Minister give us?

Mr. McCreevy:

I can think of none.

Mr. Noonan:

Perhaps the Minister should do a letter drop in his constituency on the subject.

Mr. McCreevy:

I do not know what is done by the fully compliant taxpayers represented by Deputy McDowell, Deputy Rabbitte and Fine Gael; I do not seem to represent the same type of taxpayer in my constituency.

The second case involves a person who is purchasing a house to live in but also intends to take in tenants. In this case, part of the mortgage interest may be claimed as a normal mortgage credit against the personal income tax due; however, the balance of the interest may not be claimed against the rental deduction.

Mr. Shatter:

Could the Minister——

An Leas-Cheann Comhairle:

Deputy Shatter, I would prefer to take the questions in sequence, from Deputy Boylan, Deputy Higgins and then yourself.

Mr. Shatter:

I was trying to facilitate constructive exchange on Committee Stage.

An Leas-Cheann Comhairle:

The Minister will have an opportunity to reply and I want to be fair to other Deputies offering.

Mr. Boylan:

Will the Minister reconsider his proposals on rented accommodation, which is that interest on borrowings cannot be offset against rent received. Young people from my constituency must travel to the university cities for an education and this proposal will put a severe burden on parents who are trying to provide them with accommodation. What will now happen is that landlords will substantially increase their rents, making it well-nigh impossible to rent accommodation. The driving force behind the success of this economy is the adaptability of our young people and their standard of education, which will be severely curtailed by the proposal. It is also important to ensure the quality of the accommodation. Before these proposals, a landlord could offset the interest on his borrowings to upgrade his accommodation; what will happen now is that poor quality accommodation will become the norm, young people will be pushed into it, and that will have a detrimental effect.

This is the only issue I wish to raise with the Minister. It was brought to my attention by a number of parents who are extremely concerned about it. The Minister comes from the outskirts of Maynooth so he would be well aware of the demand for accommodation and perhaps he could take this on board.

Mr. Higgins

(Dublin West): It is painful to listen to the petty dispute between the ideological Siamese twins, Fianna Fáil and Fine Gael.

Mr. McCreevy:

One would not want to be insecure in Leinster House.

Mr. Shatter:

Did Deputy Higgins hear my contribution on Second Stage?

Mr. Higgins

(Dublin West): I will come to Deputy Shatter. A crisis is raging in the housing market——

Mr. McCreevy:

Deputy Higgins wants to nationalise all the land.

Mr. Higgins

(Dublin West):——and these parties are putting their little fingers into a huge hole in the dyke, arguing about a few percentage points of mortgage interest relief.

Mr. Shatter:

If the Deputy had his way no land would be zoned for housing — he has opposed every rezoning proposal at the county council.

Mr. Higgins

(Dublin West): Fianna Fáil and Fine Gael are like two drunks stumbling around in a three-legged race, spancelled by their common helplessness in front of the madness of the capitalist marketplace in housing.

Mr. Shatter:

Bring back the Soviet Union.

Mr. McCreevy:

This is what Deputy Spring had to listen to when Deputy Higgins was a member of the Labour Party.

Mr. Higgins

(Dublin West): That is the only picture I can draw. Supply and demand is trotted out as the main source of the problem as if, by magic, supply and demand shoots up prices by £10,000 per week in the housing market. Deputy Shatter put his finger on the problem when he spoke about immoral profiteering in the marketplace by builders and developers and manipulation of the marketplace in the way developments were phased and let out in order to create a sense of scarcity and hysteria among people desperate to buy a home. That is true. We should not fool around with a few percentage points of interest relief, but meet the problem head on. We must take on the people responsible for this immoral profiteering and manipulation. As I have amendments to that effect, I will not go further into that matter.

Two measures should be considered that would resolve this problem if the Minister were not so hidebound by his enslavement to the market. First, in all the major centres, students occupy thousands of units of accommodation. If a State or semi-State agency built thousands of units of accommodation, both on and off campus, specifically for students, as happens widely in France, that would make their lives easier at a stroke in that they would have affordable accommodation, and it would free up thousands of rental units in every major centre in the country.

Second, there is enormous pressure on rental accommodation because of the ever-growing local authority housing lists. One only has to examine the vast subvention by the Eastern Health Board to put people suffering on the housing lists into private accommodation. If the State set aside emergency provision to end the local authority housing lists within a period of, say, three years, that would free up thousands more places which would be a major contribution to addressing this problem.

Will the Minister and the Deputies begin to think in this way rather than tick-tacking around with minor modifications that will not go any way towards solving this major problem.

Mr. Noonan:

I do not want to delay the House when time is limited as we have a great deal of work to do. The net point is that the Minister, in attempting to dampen demand for houses, may have caused another problem in the rental market. To suggest rents will go up as a result of this measure and that, consequently, new investors will come into the market who do not need interest relief or any fiscal incentives, supply further demand thereby resulting in the market reaching a new equilibrium, is the kind of economic theory which caused the famine.

There is a fundamental misunderstanding about economic demand. Economic demand means demand from people who have the money to pay. There is a confusion between economic demand and social demand in many debates both inside and outside this House. There is little point in telling the person who does not have the rent that a new equilibrium will be found and that there will be a plentiful supply of accommodation. There will only be a plentiful supply of accommodation when it is affordable. If people cannot afford it, they will continue to be in boxes on the side of the street or housed by the Eastern Health Board and other health boards. There could be empty flats and apartments throughout the city, but supply will not meet demand unless it is money demand and there will not be any money demand if rents are increased.

To put it bluntly, in attempting to correct the hook the Minister will develop the slice and the last problem will be worse than the first. There is no point in my repeating the argument. I am pressing the amendment.

Mr. McCreevy:

Deputy Boylan made a point about students in his constituency and those in mine. It must be understood that people who owned and let houses before 23 April will not be affected by this measure, but new entrants into the market will be affected. The interest allowability will continue to exist for people who were in the market prior to 23 April. There are transitional arrangements to address the problem of people who had entered into contracts but were not in a position to conclude them before 23 April and who can conclude them by 31 December. They will also be entitled to interest allowability.

We had a debate this morning and on other occasions about the new entrants. Deputy Noonan and other Deputies put forward some suggestions and mine are in the Bill.

I was delighted with the contribution from Deputy Joe Higgins, particularly in l998, because I was a student in UCD in l968. I am sorry he did not use phrases like "the bourgeoisie" and "the proletariat", but he went some way down that road when he talked about slaves to the capitalist market. I was in UCD at the time of the gentle revolution in Earlsfort Terrace, which I enjoyed, and those speeches were made all the time by some very prominent people. I remember a speech by the current Leader of the Labour Party, Deputy Quinn. The late John Feeney was involved in that attempted coup. Kevin Myers was also a leader of that group and Deputy McManus was part of it, although I do not remember her so well. I believe Deputy Higgins attended another educational establishment at the time and I am glad to note that 30 years later he is still singing the same tune, which is a tribute to him. Even though he comes from County Kerry, he held on to the faith longer than anybody else.

A Deputy:

The word has not passed down.

Mr. McCreevy:

I am happy to see Deputy Higgins can make better speeches now than he did in l968 even though I do not think he was in UCD at the time. I believe he was in St. Patrick's College. I now know what my good friend, Deputy Spring, had to listen to when Deputy Higgins was a member of the Labour Party. I understand Deputy Spring's tolerance level is not as high as Deputy Quinn's and I can understand the reason moves had to be made against Deputy Higgins. His view of how the economy should work is totally at odds with mine. That would not be a national secret.

Mr. Higgins

(Dublin West): Will the Minister give way?

Mr. McCreevy:

Yes.

Mr. Higgins

(Dublin West): Is the Minister saying that emergency provision to end suffering on the housing list within three years is against his belief? What is wrong with providing State or semi-State accommodation for thousands of students? That was done in France decades ago.

Mr. McCreevy:

As someone who believes in the market and that supply and demand regulates itself over a period, to introduce measures such as this is somewhat against my general view of the market rule. I have always said that the job of the Government of the day is to make changes at particular times in a wide variety of areas. In the longer term, however, the market usually regulates itself and it is difficult to buck the market, to quote a politician from across the water.

I do not have any objection from an ideological or philosophical viewpoint about making specific changes in policy areas to overcome particular problems. The sharp shock we have administered with this measure is having an effect. I am not deaf to the concerns of Deputy Noonan and others about what might possibly occur in future. The fundamental thesis of the Bacon report and the Government's response is to get the investors out of the market now. There is no point in the Government or any other Deputy saying anything else in defending the Bacon report. It is designed to get the investor out of the market. These measures will have the effect of doing that and consequently I am not in a position to accept Deputy Noonan's amendment.

Question put: "That the words proposed to be deleted stand."

The Committee divided: Tá, 86; Níl, 41.

Tá

• Ahern, Michael.
• Briscoe, Ben.
• Ahern, Noel.
• Browne, John (Wexford).
• Andrews, David.
• Callely, Ivor.
• Ardagh, Seán.
• Carey, Pat.
• Aylward, Liam.
• Collins, Michael.
• Bell, Michael.
• Cooper-Flynn, Beverley.
• Blaney, Harry.
• Cowen, Brian.
• Brady, Johnny.
• Cullen, Martin.
• Brady, Martin.
• Daly, Brendan.
• Brennan, Matt.
• Davern, Noel.
• Brennan, Séamus.
• de Valera, Síle.
• Dempsey, Noel.
• Moynihan, Donal.
• Dennehy, John.
• Moynihan, Michael.
• Doherty, Seán.
• Ó Cuív, Éamon.
• Ellis, John.
• O'Dea, Willie.
• Fleming, Seán.
• O'Donnell, Liz.
• Foley, Denis.
• O'Donoghue, John.
• Fox, Mildred.
• O'Flynn, Noel.
• Gilmore, Éamon.
• O'Hanlon, Rory.
• Gregory, Tony.
• O'Keeffe, Batt.
• Hanafin, Mary.
• O'Kennedy, Michael.
• Haughey, Seán.
• O'Malley, Desmond.
• Healy-Rae, Jackie.
• O'Rourke, Mary.
• Higgins, Joe.
• O'Shea, Brian.
• Higgins, Michael.
• O'Sullivan, Jan.
• Jacob, Joe.
• Penrose, William.
• Keaveney, Cecilia.
• Power, Seán.
• Kelleher, Billy.
• Quinn, Ruairí.
• Kenneally, Brendan.
• Rabbitte, Pat.
• Killeen, Tony.
• Roche, Dick.
• Kirk, Séamus.
• Ryan, Eoin.
• Kitt, Michael.
• Ryan, Seán.
• Kitt, Tom.
• Shortall, Róisín.
• Lawlor, Liam.
• Smith, Brendan.
• Lenihan, Brian.
• Smith, Michael.
• McCreevy, Charlie.
• Treacy, Noel.
• McDaid, James.
• Upton, Pat.
• McDowell, Derek.
• Wade, Eddie.
• McGuinness, John.
• Wall, Jack.
• Moffatt, Thomas.
• Wallace, Dan.
• Molloy, Robert.
• Wallace, Mary.
• Moloney, John.
• Woods, Michael.
• Moynihan-Cronin, Breeda.
• Wright, G.V.

Níl

• Barnes, Monica.
• Higgins, Jim.
• Barrett, Seán.
• Hogan, Philip.
• Belton, Louis.
• Kenny, Enda.
• Boylan, Andrew.
• McCormack, Pádraic.
• Bradford, Paul.
• McGinley, Dinny.
• Browne, John (Carlow-Kilkenny).
• McGrath, Paul.
• Bruton, Richard.
• Mitchell, Jim.
• Burke, Liam.
• Mitchell, Olivia.
• Burke, Ulick.
• Naughten, Denis.
• Carey, Donal.
• Neville, Dan.
• Clune, Deirdre.
• Noonan, Michael.
• Connaughton, Paul.
• O'Keeffe, Jim.
• Cosgrave, Michael.
• Owen, Nora.
• Creed, Michael.
• Perry, John.
• Currie, Austin.
• Reynolds, Gerard.
• Dukes, Alan.
• Ring, Michael.
• Enright, Thomas.
• Shatter, Alan.
• Finucane, Michael.
• Sheehan, Patrick.
• Flanagan, Charles.
• Stanton, David.
• Hayes, Brian.
• Timmins, Billy.
• Yates, Ivan.

Tellers: Tá, Deputies S. Brennan and Power; Níl, Deputies Barrett and Sheehan.

Question declared carried.

Amendment declared lost.

Mr. Noonan:

I move amendment No. 2:

In page 4, subsection (1)(b), line 4, after "writing" to insert "or in pursuance of a deposit paid".

When I raised this matter on Second Stage the Minister said he would consider it, but this is not reflected in any of his proposed amendments. When he made his announcement on 23 April, transitional arrangements were made to cater for persons who are in the process of buying a property. Initially, the Minister announced these would fall into two categories. First, if a written binding contract was in place prior to 23 April such a property would not be caught by the new fiscal restrictions. Second, if the full purchase price had been paid by September, this property would not be caught by the restrictive provisions either.

This has given rise to difficulties which I outlined on Second Stage. For example, if a bona fide buyer has made a booking deposit before 23 April, has obtained the agreement of a lending agency to provide the money, the mortgage is in writing, the solicitors for both vendor and purchaser are in the process of drawing up the contract but it is not completed, he or she is caught by the terms of the Bill and will be unable to avail of interest relief if purchasing an investment property. That is unfair on those who can prove they were bona fide purchasers.

The Minister has moved to meet the second problem, where people buy apartments or houses from the plans and sign the contract. This is especially prevalent in Dublin. However, the construction and conveyancing would not be completed and the money would not be paid by the proposed deadline of next September. I thank the Minister for moving the deadline to the end of the year. I am aware many people wanted it extended by a further 12 months but a limit must be put on these matters. The end of the year is a reasonable concession.

However, a concession should be made to the genuine purchaser. It is too restrictive not to include a process which has reached the signing of the written contract and the payment of the normal 10 per cent deposit. I know the Minister is concerned that looser provisions could be abused. However, it is possible for him to introduce an arrangement where, perhaps, a requirement could be made to produce a receipt for a deposit and a letter from a lending agency and solicitor. It is not beyond the regulators in his Department to produce a series of provisions which would put the case beyond doubt. It is very unfair that transactions involving willing buyers and sellers, arranged prices which are not subject to gazumping and paid deposits should be caught by the provisions. That is unfair. The amendment attempts to solve the problem by inserting the words "or in pursuance of a deposit paid". If a deposit is paid along the lines I have suggested, that should be sufficient.

I do not want to deal with the situation reflected in the court case, the outcome of which was debated by Deputy Rabbitte and the Minister of State, Deputy Molloy on the Adjournment earlier this week, where the vendor decided to raise the asking price after a deposit had been paid. In this instance, I am talking about somebody who paid a deposit prior to 23 April and a situation where there is no difficulty between purchaser and vendor. Following the Minister's announcement, that person will lose interest relief on which they had based their calculations. It is a net point which I have raised with the Minister before. I ask him to look at it again.

Mr. McDowell:

The amendment has merit. It is my experience that people looking to buy a house put down a deposit in good faith. I have rarely, if ever, come across a case where somebody deliberately puts down a deposit, notwithstanding the fact that it does not bring into play a binding contract, knowing they might pull out at a later stage. It is reasonable to accept that people who have placed a deposit are bona fide. Unless the Minister has evidence that this is not the case, the case made by Deputy Noonan is persuasive.

Mr. Gilmore:

I support the amendment. The effective decision to buy is made at the point at which the deposit is paid. As we are all aware, because of the lead-in times involved in terms of construction and conveyancing, contracts are not signed for some time after the effective decision to purchase has been made. I do not want to get involved in the wider debate about the problems which have arisen, confirmed by the recent court judgment, in relation to the payment of a deposit which does not commit the vendor to hold the price but it is an issue on which legislation is required. Acceptance of the amendment would be an indication of the Government's intention to go down that road.

Mr. McCreevy:

The purpose of section 1 is to remove the deductibility of interest on borrowings used on or after 23 April last for the purchase, improvement or repair of rented residential properties. However, to avoid hardship to persons who prior to that date were well advanced in their plans to purchase such properties, there are transitional arrangements for persons who were contractually committed to doing so at 23 April. Deputy Noonan's proposal is that these arrangements should be extended to cover cases where there is no contractual commitment but a booking deposit has been paid.

As with all transitional arrangements, some line has to be drawn. Generally, when existing tax reliefs are being restricted, that line is fixed at the point where there is an obligation to complete the transaction. If persons are obliged, because of contractual obligations entered into before the cut-off date, to go through with a purchase of rental property after that date, it is reasonable that they should come within the transitional provisions because they would have entered into the contract and arranged a loan on the basis that tax relief or interest would be available. However, a booking deposit is, generally, not an obligation. Legally, it is no more than an expression of interest.

As witnessed in the recent Durkan case, both parties can walk away from a booking deposit arrangement. While that case rightly raises concerns about the unfortunate plight of the house purchaser faced with gazumping by builders in a rising market, those concerns are not entirely relevant in the case of transitional arrangements under the tax code. That is a different matter. I see no reason to depart from the normal transitional provisions in implementing the new interest restriction for rental residential property. Consequently, I cannot accept the amendment.

We are entering the area of contract law on which Deputy McDowell might give us some advice. To regard a booking deposit as being the same as a written contract would be a major departure. The purpose of the Government's package is to take the investor out of the market and allow first time buyers an opportunity to purchase. If the amendment is accepted, the only people who will benefit are those who have bought properties for investment purposes. A booking deposit is no more than an expression of interest. I am more interested in helping the first time buyer than the investor. The cut-off date for the completion of conveyancing has been altered from 30 September to 31 December in the sections dealing with interest deductibility and stamp duty. That is a reasonable compromise in the circumstances. I cannot move any further.

Mr. Noonan:

The Minister's decision to alter the cut-off date for the completion of conveyancing from 30 September to 31 December is welcome but I am speaking about the person who not only has paid a deposit but also incurred costs, including surveyor's fees, having entered into arrangements with a building society or bank. Following the Minister's announcement, they have been cut off half way in their legal arrangements. In one case which has been brought to my intention the contract had been signed by the purchaser and forwarded to the vendor's solicitor to be countersigned but the person concerned was caught because the vendor had not signed it. I could cite several examples where arrangements have been made with building societies and expenses incurred. I have been asked if a receipt for the deposit with a solicitor's letter attached is a contract. It is not. The Minister is taking an onerous view.

The number of people involved is so small that the Minister's theory of supply and demand in damping down the market would not be affected. Allowing them to fall on the right side of the line would not negative the Minister's intention. I accept there is a need for documentary evidence to avoid backdating but a letter from a solicitor or bank or building society stating that the transaction is bona fide and nearing finality should be sufficient for the Revenue Commissioners. They should take a view that is lenient towards the person in the middle of a transaction. This would not establish a precedent.

On budget night if one is caught on the wrong side of a tax increase, it is a case of tough luck, but this is different. There is an intervention to distort the market in favour of the owner-occupier rather than the investor. We all go along with the general theory and are trying to fine-tune the relevant provisions but the Minister should be fair to those who are half way through a bona fide transaction and have not exchanged final contracts. They should be included, otherwise it will be arbitrary. Frequently, the only difference between the person who has paid a deposit and the person who has paid 10 per cent of the purchase price is the efficacy of the individual's solicitor. It often comes down to pressure of work in the solicitor's office and the availability of staff to sign documents. The Minister should make a further concession. He should request his officials to table a short amendment on Report Stage.

Mr. McCreevy:

I cannot accept the amendment. The Deputy mentioned that costs have been incurred. In relation to auctions, I know of hundreds of people who have incurred considerable costs in having houses surveyed and so on. As only one person can end up owning a house, the rest of the money is lost. That is a normal business decision.

The Deputy gave an example of where an individual signed a contract but the seller did not sign it. I am advised this should not be necessarily interpreted as falling outside the scope of the provision and that the transaction may be covered. It depends on the circumstances but the person should take up the matter with the Revenue Commissioners because it may not fall outside the scope of the transitional arrangements.

If I started to interfere with contract law in terms of stating what are or are not contracts, I would be taking a route which I do not wish to take. I cannot accept the amendment because I do not want to open up other areas. The traditional arrangements are reasonable and I cannot go any further.

Amendment put.

The Committee divided: Tá, 54; Níl, 68.

Tá

• Barnes, Monica.
• Higgins, Jim.
• Barrett, Seán.
• Higgins, Joe.
• Bell, Michael.
• Higgins, Michael.
• Belton, Louis.
• Hogan, Philip.
• Boylan, Andrew.
• McCormack, Pádraic.
• Bradford, Paul.
• McDowell, Derek.
• Browne, John (Carlow-Kilkenny).
• McGinley, Dinny.
• Bruton, Richard.
• McGrath, Paul.
• Burke, Liam.
• McManus, Liz.
• Burke, Ulick.
• Mitchell, Jim.
• Carey, Donal.
• Mitchell, Olivia.
• Clune, Deirdre.
• Moynihan-Cronin, Breeda.
• Connaughton, Paul.
• Naughten, Denis.
• Cosgrave, Michael.
• Neville, Dan.
• Creed, Michael.
• Noonan, Michael.
• Currie, Austin.
• O'Keeffe, Jim.
• Dukes, Alan.
• O'Shea, Brian.
• Enright, Thomas.
• O'Sullivan, Jan.
• Finucane, Michael.
• Owen, Nora.
• Flanagan, Charles.
• Penrose, William.
• Gilmore, Éamon.
• Perry, John.
• Hayes, Brian.
• Stanton, David.
• Rabbitte, Pat.
• Timmins, Billy.
• Reynolds, Gerard.
• Upton, Pat.
• Ring, Michael.
• Wall, Jack.
• Ryan, Seán.
• Yates, Ivan.
• Sheehan, Patrick.
• Shortall, Róisín.

Níl

• Ahern, Michael.
• Kenneally, Brendan.
• Ahern, Noel.
• Killeen, Tony.
• Andrews, David.
• Kirk, Séamus.
• Ardagh, Seán.
• Kitt, Michael.
• Aylward, Liam.
• Kitt, Tom.
• Blaney, Harry.
• Lawlor, Liam.
• Brady, Johnny.
• Lenihan, Brian.
• Brady, Martin.
• McCreevy, Charlie.
• Brennan, Matt.
• McDaid, James.
• Brennan, Seamus.
• McGuinness, John.
• Briscoe, Ben.
• Moffatt, Thomas.
• Browne, John (Wexford).
• Molloy, Robert.
• Callely, Ivor.
• Moloney, John.
• Carey, Pat.
• Moynihan, Donal.
• Collins, Michael.
• Moynihan, Michael.
• Cooper-Flynn, Beverley.
• Ó Cuív, Éamon.
• Cowen, Brian.
• O'Dea, Willie.
• Cullen, Martin.
• O'Donnell, Liz.
• Daly, Brendan.
• O'Donoghue, John.
• Davern, Noel.
• O'Flynn, Noel.
• de Valera, Síle.
• O'Hanlon, Rory.
• Dempsey, Noel.
• O'Keeffe, Batt.
• Dennehy, John.
• O'Kennedy, Michael.
• Doherty, Seán.
• O'Malley, Desmond.
• Ellis, John.
• O'Rourke, Mary.
• Fleming, Seán.
• Power, Sean.
• Foley, Denis.
• Roche, Dick.
• Fox, Mildred.
• Smith, Brendan.
• Hanafin, Mary.
• Smith, Michael.
• Haughey, Seán.
• Treacy, Noel.
• Healy-Rae, Jackie.
• Wade, Eddie.
• Jacob, Joe.
• Wallace, Dan.
• Keaveney, Cecilia.
• Woods, Michael.
• Kelleher, Billy.
• Wright, G.V.

Tellers: Tá, Deputies Barrett and Sheehan; Níl, Deputies S. Brennan and Power.

Amendment declared lost.

Mr. McCreevy:

I move amendment No. 3:

In page 4, subsection (1)(b), to delete lines 40 to 48 and substitute the following:

"(d) in the purchase, improvement or repair of any premises, other than premises to which paragraph (c) applies, the site of which is wholly within a a qualifying rural area within the meaning of Chapter 8 of the Taxes Consolidation Act, 1997, or

(e) in the purchase, improvement or repair of premises, other han premises to which paragraphs (c) and (d) apply, where—".

This amendment relates mainly to the non-application of interest restrictions in section 1 of the Bill to rented residential accommodation in qualifying rural areas. As currently drafted, the exclusion in section 1(1)(d) is confined to section 23 type rental accommodation. The amendment widens the scope of the exclusion to ensure that interest restrictions will also not apply to non-section 23 type rented accommodation. Such accommodation could include, for example, properties not let for the full ten years required under section 23 rules. It also includes rental property exceeding the maximum floor area of 125 square metres under section 23 rules. The amendment will provide an additional incentive to invest in rural areas covered by the pilot rural renewal scheme. That scheme covers parts of counties Cavan, Roscommon and Sligo as well as all Leitrim and Longford. The amendment also includes a technical change to section 1(1)(e), clarifying that the exemptions for premises in that paragraph excludes premises already exempt under paragraphs (c) and (i).

Mr. Naughten:

I move amendment No. 1 to amendment No. 3:

1. After "1997" in the last line of paragraph (d) to insert "or any other area in the County of Roscommon,".

My amendment proposes overturning an unfair and discriminatory part of this Bill. While the Minister was correct in designating the qualifying areas for rural renewal, he should have included all Roscommon, not just part of it, in his original Bill.

The current proposals mean north Roscommon will have special incentives, and Roscommon, Athlone and Ballinasloe are set to be approved for urban renewal. This will move investment out of the rural areas of south Roscommon and destroy communities there, which is the direct opposite of the objective of the scheme. A number of projects in the area have been frozen due to the current proposals.

South Roscommon has a pressing need for new investment incentives. The rural heartland of this area has experienced economic decline, depopulation, loss of services and lack of investment. It has an underdeveloped tourist base, a high dependency on the declining agricultural sector, poor infrastructure, inadequate employment opportunities and an ageing population. The exclusion of south Roscommon is also inconsistent, given that the county is designated as disadvantaged under the local development programme and included in the catchment area of the Western Development Commission, which aims to counteract the population decline in the region. Fragmentation of the county by the Department of Finance for this scheme will create unnecessary inequity and division. The incentives to encourage investment in Counties Longford, Leitrim, west Cavan, north Roscommon and Sligo will absorb mobile investment from adjacent areas, thus worsening the position for south Roscommon even further. Furthermore, the areas of Cavan, Leitrim and Sligo included in this scheme already qualify for additional support under the support programme for peace and reconciliation, the INTERREG programme and the International Fund for Ireland. The villages and small towns of south Roscommon will also lose out as they are too small to qualify under the new urban renewal scheme. Evidence from recent censuses back up the case for the inclusion of the mid and south Roscommon areas.

If we remove two DEDs around Athlone and two DEDs of Roscommon town, we would see that the overall population of that part of the county did not change between 1991 and 1996. Included in the scheme are DEDs with a population drop of approximately 3 per cent, yet parts of the county with a population drop of nearly 7 per cent are excluded. Those statistics were submitted to the Minister in early March. It is, therefore, logical and in the interests of equitable economic development within the Shannon basin that all County Roscommon should receive special status.

That area is the only part of Connaught, bordering the river Shannon, which has been excluded from the scheme. It is also the only part of the constituency of Longford-Roscommon which has been excluded and it begs the question as to the motives behind this proposal. As the Government has not yet submitted the scheme for EU approval, there is still time for the Minister to reconsider his decision. In the interests of fair play and the need for this scheme to be seen as such, I urge the Minister, in the strongest possible terms, to accept this amendment.

Mr. G. Reynolds:

I support Deputy Naughten's amendment. I want to point out the unique position of part of the constituency I represent. Leitrim comes under this area, but the Minister should consider including Ballintrillig, part of the Kinlough-Glenade parish in County Sligo, in the scheme because people from that area suffer the same socio-economic disadvantage as people who live across the road from them in the same parish. Difficulties concerning exclusion always arise when lines are drawn on maps and that area represents such a difficulty. There are other areas in south Sligo which have sought inclusion in the scheme, but the parish of Kinlough, Glenade and Ballintrillig is unique and the Minister should consider including it and accept Deputy Naughten's amendment.

I emphasise a point I made during yesterday's Second Stage debate. I welcome the provision in section 23 for residential property, but a major difficulty with the rural renewal scheme is it will not give people an incentive to return to live in the counties from which they come. County Leitrim which I represent, lacks population which is its major disadvantage. If a scheme of tax incentives was introduced similar to the Greek example to which I referred on Second Stage, it would be of major benefit to this scheme.

Mr. Belton:

I also support Deputy Naughten's amendment. What is the point in dividing County Roscommon in terms of this scheme? All of the county I represent is included in it. There was a rumour that County Longford would be divided in terms of inclusion in the scheme and I asked the Minister to ensure Longford was included in it. I asked him then what had he against Longford and I now ask him what he has against Roscommon. There is much talk of bringing people together to live in harmony, but the Minister has drawn a line through County Roscommon and I ask him to change that line.

Mr. Enright:

When the Minister outlined these proposals in his budget speech I was surprised he decided to include only the upper Shannon area in the scheme. I thought he would have included all the areas along the Shannon in the scheme. The constituency I represent covers a large area of the Shannon stretching from Shannon Bridge down to Banagher. Part of the Shannon Bridge electoral area has suffered a 15 per cent population decline. That is a major loss. It has given rise to problems in parishes with a decline in the numbers attending schools, threatened the viability of shops, post offices and other businesses that provide a service and resulted in job losses.

The Minister should have extended the scheme to include other areas further down the Shannon as all those areas will be affected. A rural renewal scheme has been approved and given that there will also be a good deal of urban renewal, the area of County Offaly through which the Shannon flows should have been included in the scheme. I am surprised and disappointed it has not been and I ask the Minister to reconsider including it. The Minister will be submitting his application for European Union approval. When he examines the statistics for those areas and notes their population decline, he will realise, as I do, that there is no reason all the area of Ferbane and the Birr electoral area, which border the other areas along the Shannon, should not be included in the scheme.

Mr. McCreevy:

Deputies Naughten and Noonan have proposed a further amendment to amendment No. 3, which would have the effect of redrawing the boundaries of the existing rural renewal areas to exclude rental residential properties located anywhere in County Roscommon — not just in the designated areas in that county — from the scope of the interest restriction.

In the Finance Bill debate earlier this year I dealt with a number of amendments which sought to extend the pilot scheme to a large number of counties, including Clare, Donegal, Galway, Kerry, Mayo, Westmeath, Wicklow as well as parts of Cork, Waterford and Sligo. It was inevitable that when particular areas were selected in the 1988 Finance Bill, there would be calls to have the scheme extended to cover other parts of the counties concerned and other counties. I said at the time this was a pilot scheme and it would only work if the geographical scope of the measure was not too wide, otherwise its impact would be diluted. I still hold that view and, therefore, I am not prepared on this occasion to make an exception in the case of Roscommon.

I wish to make a technical point. Deputies are anxious that the pilot rural renewal scheme, rather than the area covered, should be extended, but the amendment tabled by Deputy Naughten would only extend the interest exemption to that part of Roscommon not in the rural renewal area. I know what he is trying to achieve. There was a long debate on extending the rural renewal scheme on the Committee and Report Stages of the earlier Finance Bill. When I put forward this proposal to the departmental officials, their reaction was we would not be able to control it. The problem with such schemes is that there is a difficulty controlling them and sticking to the lines initially drawn in respect of them.

It reminds me of an experience concerning the seaside resort scheme. I was Minister for Tourism and Trade in 1993 and I nearly secured agreement with the Department of Finance to introduce a pilot seaside resort renewal scheme before the 1994 budget. I was not able to get agreement on that and I was going to confine such a scheme to a small number of areas. By the following year we had more or less concluded negotiations and I said in the House subsequently that six or seven areas would be included in such a scheme. Unhappily differences arose between ourselves and the Labour Party and we were turfed out on the street in December 1994. Deputy Kenny became Minister for Trade and Tourism and Deputy Quinn introduced the Finance Bill, which included six or seven seaside resort renewal areas on lines of the scheme which I had brought forward. In fairness to Deputies Quinn and Kenny, they gave me the credit for coming up with the initial idea. Before the Finance Bill passed through the Houses, it was extended to 15 resorts. I remember Deputy Quinn and I had an interesting exchange when I said I was disappointed it had not been extended to Naas. At least Naas is situated on the River Liffey which flows into the sea and could be designated for seaside resort renewal.

Mr. Rabbitte:

The rest of the country could be considered development land but the Minister has reduced it.

Mr. McCreevy:

When I made up my mind to introduce the rural renewal scheme in an area, I picked one and stuck to it through thick and thin. Apart from representations from the other side of the House, I was bogged down by representations from members of my party. I congratulate Opposition Deputies who tabled amendments which happened to include places like Donegal, Wicklow and parts of Kerry. I was surprised by this, given the decision of the electorate at the last election and the number of TDs these areas elected to the House. I resisted all thoughts of moving the lines.

If we extend tax designation too widely, it is not worth anything. If I extended tax designation to County Kildare, everyone would want to locate in Naas or Newbridge, for example, and it would be no good to places like Monasterevin and Athy. The reason I picked the Upper Shannon region was to have one contiguous area. The other alternative for the rural renewal scheme was to pick areas of the country which met a certain criteria. That would have led to difficulties. This was designed as a pilot scheme to see how it would work in this part of the country.

I thought of County Offaly, which is located next to my county, more than any other. A large part of County Offaly could do with investment and more activity. Bord na Móna was the main industry there. I accept what Deputy Enright said about parts of County Offaly but to extend the scheme to this area, I would have had to skip over other areas and I was not prepared to do so.

Parts of County Mayo, which I visited recently and which I know well from spending much time there on business over the past 30 years, could do with being included but I applied the same principles. I cannot pick an area because I would be inundated with requests. There are areas to which an incentivisation scheme would be of benefit but I resisted extending it to these areas. I want to see how the scheme works in Leitrim, Longford, west Cavan, much of Sligo and north Roscommon.

I have nothing against the people of County Roscommon and have happy memories of going there. I had forgotten about the strange behaviour of the electorate there in various elections, such as 1957, 1973 and 1989, and have even forgiven it for its aberrations on those occasions.

Deputy Belton made the case for the inclusion of all County Longford.

Mr. Belton:

A very successful case.

Mr. McCreevy:

In order to ensure the scheme was tightly drawn, there was the option to split the county. However, I accepted what the Deputy said and I included the entire county.

I am not in a position to extend the rural renewal scheme or accept Deputy Naughten's amendment to give interest relief to all County Roscommon. We will see how this pilot rural renewal scheme works. The amendment I tabled and announced in a press release yesterday says that, as and from 1 June, the section 23 incentive can apply in this area because it does not need EU approval, unlike the rest of the package which needs Commission approval.

I will be interested to see how this pilot scheme works. Successive Ministers for Finance were asked to introduce rural renewal schemes, but they shied away from it because of the pressure of trying to keep it to a confined area. I took my political life in my hands by introducing it on this occasion. I am not in a position to extend the scheme for the reasons I outlined when the Finance (No. 1) Bill, 1998, passed through the House and I cannot accept Deputy Naughten's amendment.

Mr. Naughten:

I accept the Minister's point in relation to extending it to other areas, but County Roscommon has already been approved for this scheme. The part of the county to which I refer has the same economic problems as the area which has been included. The Minister is creating a new border within County Roscommon at a time when we are trying to break down borders in this country and in the EU. This decision will be a huge disincentive to investment. The south and mid-Roscommon areas have lost many young people, this move will cement that loss and encourage more young people to leave rural areas. There will be a further flight from the land.

Amendment No. 1 to amendment No. 3 put and declared lost.

Amendment No. 3 agreed to.

Mr. Timmins:

I move amendment No. 3a:

In page 5, subsection (1)(b), line 20 after "year" to insert "or a condition that the premises shall be used only as a holiday home and should remain available for short-term holiday lettings.".

If the amendment of the Minister for Finance to the Finance Bill, 1996, had been accepted, an additional seaside resort, Bray, would have been included. Unfortunately, the Minister's amendment was not accepted.

The reason I tabled this amendment is that the section which relates to it mentions planning conditions and uses exact phraseology. It states that a holiday home should not be used by any person for residential use in excess of two consecutive calendar months. Some local authorities include a similar condition in planning but may not use the wording in the Bill. The reason I tabled the amendment is to cover such eventualities. I hope the Minister will accept the amendment.

Mr. McCreevy:

The Deputy made this point in his Second Stage contribution and we considered it overnight. I am glad he raised this point which will result in a satisfactory outcome. As part of the transitional arrangements, holiday cottages and other self-catering accommodation are excluded from the scope of the interest restriction if they meet certain conditions. The premises in question are those in respect of which an application for planning permission was received by a local authority before 23 April 1998 and whether planning permission, when received, includes a condition that the premises cannot be let for more than two consecutive months to any one person and such a condition is still in force in the tax year in which rents are received.

The purpose of the two months condition was to ensure that such premises would only qualify for the transitional arrangements when they were genuinely holiday-type or tourist related accommodation and not available for long-term residential use. Deputy Timmins's amendment seeks to extend the exemption to cover cases where planning permission requires that the premises be used only as a holiday home and remain available for short-term holiday lettings. The difficulty with the definition of "short-term" in these circumstances is that local authorities tend to use different wordings in opposing what is essentially the same condition in planning permissions. The Deputy may have in mind a holiday cottage development in County Wicklow which received planning permission subject to the condition that the units should not be permanently occupied and should be available for tourist rental. While there is no specific mention of two months in the permission, the Revenue Commissioners will not take a literal interpretation of the two month rule and will allow exemption in any case where the use of the premises is clearly confined, as part of the planning permission, to short-term lettings.

The section as drafted refers to two consecutive calendar months. We recognise that some planning authorities do not put that exact wording in their planning permissions. In the example given by the Deputy in County Wicklow, the purpose is to have short-term lettings, but because there is no mention of the two consecutive calendar months the Deputy is concerned that it would not qualify for the exemption. The Revenue Commissioners will not take a literal interpretation of the section as drafted when the purpose is clearly, as in the example given, to have short-term lettings for holiday cottages. There is no need, therefore, to press the amendment. The holiday cottage scheme in west Wicklow is quite safe.

Mr. Timmins:

That will apply to all schemes.

Mr. McCreevy:

Yes. Planning authorities phrase planning permissions in different ways, but where the purpose is to have short-term lettings the Revenue Commissioners will not take a literal interpretation of the Act.

Mr. Noonan:

I thank the Minister for replying to Deputy Timmins' request, but would it not be better if the discretion exercised by the Revenue Commissioners was founded in law? Consequently, would it not be better to accept the amendment so that there would be a legal basis for the Revenue Commissioners in exercising their discretion and it would not be challenged subsequently for being tied into a two-month provision, which the Minister has suggested they will ignore?

Mr. McCreevy:

The problem with Deputy Timmins' amendment is that technically it would not work as drafted. The purpose of the section is to allow this type of interest deductibility in these circumstances and that will continue to apply. If there is any difficulty in that — I am sure there will not be — I would be willing to draft a suitable amendment for the next Finance Bill. I thank Deputy Timmins for bringing the matter to our attention because it was necessary to put on record what I have just said and if there is a query in future it can be stated that the Minister said this in the House.

Amendment, by leave, withdrawn.

Mr. Noonan:

I move amendment No. 4:

In page 5, subsection (1)(b), between lines 20 and 21, to insert the following:

"(f) in the purchase of a premises which, on the 23rd day of April, 1998 and at all times during the 12 month period ending on that day, was subdivided into individual units for the purposes of rental accommodation provided that the premises continues to be subdivided in such a manner and complies with all relevant regulations.".

This amendment arises from the changes in respect of interest relief on mortgages on rental property. In the present property market in Dublin a number of houses which were divided into bedsitters or flats, particularly in the south inner city, are being restored to owner-occupancy. That is a trend of which many people approve, but it has the effect of taking much rental accommodation out of the market. As soon as a large house in Leinster Road or lower Rathgar, which is divided into a multiplicity of bedsitters, goes back to owner-occupancy, many tenants will have to seek accommodation elsewhere. Under the new arrangements this trend could magnify.

If a property that is subdivided into individual units comes on the market, because the owner-occupier will be able to avail of interest relief while the potential investor will not, the market will be skewed in favour of the owner-occupier and those properties will return to owner-occupancy. As a result, a significant amount of rental capacity available in the south inner city will be taken out of the market. That underlines some of the difficulties I pointed out. Dr. Bacon and the Minister are overdoing it with this measure. In an attempt to rectify a difficulty in the market, a major rental difficulty will be created in the short-term.

Finding a new equilibrium in the rental market in the medium term is not a solution that will satisfy the needs of prospective tenants. Many of those houses will go out of commission. The Minister is a great believer in the market, as I am, but where a house in Ranelagh, Rathgar or Rathmines goes up for auction and it is a contest between somebody who wants to keep it in flats and bedsitters and somebody who wants to use it as an owner-occupier residence, the arithmetic favours the owner-occupier because they will get mortgage interest relief whereas the investor will not. I am not making a point in favour of the investor or the owner-occupier, but a quantum of rental accommodation will be taken out of the market. That trend is there already and these provisions will reinforce it.

Under the amendment, if a premises that is subdivided for rental purposes into a number of individual units is sold, the purchaser of the premises would be able to avail of mortgage relief on the borrowing needed to purchase the premises.

Mr. Ardagh:

This is a question that must be addressed and the Bill addresses it. The purpose of the Bill is to skew the market in favour of the first time buyer. Some rental accommodation will be taken out of the marketplace, but there is no gain without pain. The Minister is ensuring the price of accommodation generally for first time house buyers will be reduced to an affordable level. Multi-unit properties have been converted to single residential units. There will now be a reluctance on the part of owners of multi-unit dwellings to put them on the market because they believe they will get a lower price than would otherwise have been the case.

When the purpose of this Bill has been served over a period of years the question of the residential property market and rent payable will have to be addressed. At present the price of houses is totally out of the reach of first time house buyers. Even where two people are working in a family unit it is practically impossible to buy a house. That applies to houses not only in the inner city but in other areas such as Tallaght where the house prices have increased to £165,000. In Lucan the price of a house is at least that which applies in Tallaght. There must be a reduction in house prices.

The 12-unit house may be purchased by a person who will not continue to rent it. It might be an opportunity to convert that house into self-contained units which could come on the market as a product which first time buyers could purchase. That would help first time buyers to purchase a reasonably priced unit. As multi-unit property is purchased and converted to single unit use, houses lower in the market are freed up and property becomes available for first time buyers.

There is a problem with regard to multi-unit property and lower priced accommodation in the city. However, the severity of the problem is less than Deputy Noonan makes out. Taking into account the purpose of the Bill to skew the market in favour of first time buyers I oppose the amendment.

Mr. McCreevy:

Deputy Noonan's amendment seeks to exclude from the restriction on interest on borrowed money being imposed by section 1 the purchase at any time after 23 April of rented premises which in the 12 months prior to 23 April was subdivided into accommodation units. The rationale for the exclusion is that in the absence of interest relief investors will be discouraged from purchasing such properties which will then revert to owner occupier use with a consequent loss of rental accommodation.

As I indicated in reply to amendment No. 1 the Bill is designed to balance the housing market more in favour of the home owner than the investor. The analysis of the Bacon report is that the Bill should not undermine the rental sector where demand is strong and growing with rental values well underpinned. The properties which the Deputy has in mind should continue to be a good investment for landlords, notwithstanding the non-availability of interest relief. Existing owners of such properties will retain the right to an interest deduction and this should be a positive incentive to improve and refurbish their properties. In the circumstances I am not prepared to accept the amendment.

Deputy Noonan has made a strong case on the issue of rental accommodation. Before these proposals were made many of the houses in the areas he mentioned were becoming owner occupied houses because the market was moving in that direction. These measures will encourage that move. As Deputy Ardagh pointed out, the Government seeks to achieve a distorting effect to give less incentive to the investor. The measures are severe but they are deliberate.

I cannot give a firm commitment that I will revisit the subject matter of the amendment in the near future. I want to gauge the effect of the package of measures introduced with this Bill and those being taken by the Minister for the Environment and Local Government. I will keep the matter under review.

Mr. Noonan:

On budget day I pointed out the difficulties that were emerging in the Dublin housing market but I got little support. My position on this issue is strong. For a long time I have been calling for a package of measures along the lines proposed in the Bacon report. Supply and demand in Dublin needs to be regulated and the housing market needs to be dampened down. The Minister has moved to do that and there are measures in the Bill of which I approve and others of which I do not. In the course of this debate I have tried to illustrate that there will be a crisis in rental accommodation in Dublin within a year to 18 months. I can see it coming as clearly as I saw the crisis in the owner occupied sector of the market.

When these measures are being analysed it should be on the basis of what is being proposed. The Minister has not departed from the text of the proposals but Deputy Ardagh did so. He suggested that the measures are being introduced to skew the market in favour of first time buyers. There is not a single provision directed exclusively at first time buyers. The Bill does nothing for first time buyers as distinct from other buyers. The measures are directed at the generality of buyers. The skewing of the market is against the investor in rental accommodation in favour of owner occupation.

We can pledge ourselves to maintain the up to 85 per cent level of owner occupancy. However, many of us are of the view that despite our best efforts to skew the market this country will go the way of other European countries and there will be an increase in the rental sector. The House will soon have to address the issue of protecting tenants through long leases, proper rent reviews and security of tenure. We must examine how we can arrive at a point where the rigours of the market, which the Minister praises so much, do not come down on the heads of tenants who will find themselves on the street seeking to be housed by the local authorities.

There is not a single measure directed exclusively at first time buyers. It is a fallacy to think there is. I have tabled amendments on stamp duty directed specifically at first time buyers. On the basis of this legislation first time buyers will be the last people who will buy houses on Leinster Road, take out the bedsit units and restore them to prestige residences. For town planning and environmental reasons we applaud the reconversion of such houses. However, it will not be first time buyers who purchase them as prestige residences.

This package is designed deliberately to skew the market and the Minister is quite up-front about it. However, it is not being done to help first time buyers. There may be provisions for first time buyers in the measures being adopted by the Minister for the Environment and Local Government. If supply is increased and many new houses are built all owner occupiers will be helped. The difficulty about supply and demand is that they are not separate issues but are inextricably linked. If demand is dampened down builders and developers will adjust supply to meet demand and there will be an equilibrium at a lower level.

People think that demand is always economic demand backed by cash. There is a wider social demand for housing beyond that which is represented by the local authority housing lists. It is a fundamental error to think that supply and demand are totally separate. They are always tied together. If demand is dampened down the people who are putting up money to provide the supply to meet the demand will wind it down to meet it at a new equilibrium point. That is how the market operates. As a proponent of the market the Minister knows that better than anyone.

I hope the measures being introduced will work. I have serious doubts about some aspects of them, particularly about what will happen to the rental market. A crisis in that sector could occur very soon. It is a crisis that will not have as rapid a political effect as the owner-occupier problem. That is because the category of mobile people who rent are not as well organised. Many do not vote and are not even on the voters' register. The crisis might be there for six months before the Minister realised it, and then all hell would break loose.

I am glad the Minister made a commitment to keep a very close eye on this and that he has taken on board, at least on an intellectual level, the arguments I am putting forward, because if it goes out of control there will be a difficulty. In the meantime the Minister should set people in the Department the task of working out how we will organise an increasing rental market and give the lease arrangements and security of tenure that people have in other jurisdictions, for example, France. There ordinary middle class people live in Paris in apartments and would not hope to own their own homes, and they are quite happy with that arrangement because there is a developed rental market, security, fair rents and proper reviews. In this situation people find they are not dedicating as high a proportion of their income to housing themselves as they would here. That needs to be looked at because the property market is indivisible, and it is not possible to pull a string at one end of it without affecting it elsewhere.

Mr. Higgins

(Dublin West): I regret that the crucial points Deputy Noonan has just touched on in regard to the first time buyer have not been at the centre of this debate for the past two hours, largely because Deputy Noonan's party concentrated on marginal issues rather than getting to the meat of the problem which is the terrible plight of people attempting to put a roof over their heads for the first time, those on the housing lists and those who cannot afford rented accommodation as it obtains at present.

Since we are almost at the end of the debate the Minister should say what he intends to do about the person on the average industrial wage of £15,000 for whom house prices have gone out of reach. While the Minister's proposals may slow down the rate of increase, they will not bring those prices down within the reach of the person on the average industrial wage. What does the Minister propose to do to rectify that? The shared ownership scheme, which was a way for low to middle income people to provide a home, is paralysed. I welcome the increase of the ceiling limit to £20,000, but that does not help the person on £15,000 or less. The Minister for Finance and the Minister for the Environment and Local Government must therefore come forward rapidly with more proposals, from a major change in the share ownership scheme to a restructuring, so that the average house in Dublin and other areas can be purchased or part purchased by the person on the low to average industrial wage.

The weakness in the Bacon report, and it is also a weakness in this Bill, is that the house price horse has gone through the roof, and the Minister for Finance haplessly fumbling at the stable door does not resolve the issue. That is the nub of the problem. I and my constituents, and ordinary working people generally, want to know what the Minister intends to do, and this relates also to the thousands on local authority housing lists.

Mr. McDowell:

This has been a difficult morning. In my relatively short time in this House, five or six years, I have rarely come across a situation where on such an important Bill we have got through just two or three amendments, a relatively small fraction of what was to be discussed. It means, for example, that the reduction in capital gains tax will not be visited, and that is an appalling state of affairs.

On amendment No. 1, the Labour Party supported the Government, for the first time during the tenure of the current Government. This is a matter of demand and supply and although we have not got around to discussing issues of supply we will not do so at this stage. However, in so far as there is a single most important demand issue, it is the issue that is dealt with in section 1. The measure which the Government has taken to skew demand in a particular way is by far the most important measure on that side of the equation that has been taken.

I agree with the Minister that we require a significant shift, a brutal shift, from what is currently happening in the market to what we want to see happening, and that will be largely to the benefit of first time buyers. Currently the new house and new apartment market is largely a competition between investors and first time buyers, and over the past year or so first time buyers have been rapidly losing the battle. We needed to redress the balance, and the measure proposed in section 1 will do that. I do not exclude the possibility of coming back to that in two or three years' time, but in the current state of the market it was absolutely necessary to do it. I hope this also has the effect of stabilising the price particularly of apartments but also of houses. It may even reduce the price of some apartments in this city and elsewhere. That would be a good thing and to the benefit of first time buyers. It was for that reason that my party supported the Government this morning. It is an appropriate measure at this time. It is not appropriate that the taxpayer should give incentives to investors to price first time buyers out of the market. It is appropriate that we should make this correction. We may have to come back to it in two or three years' time but I believe the measure will be successful.

Mr. Rabbitte:

It was a dreadful miscalculation — for which I take my share of the blame — that we have only discussed one substantial issue relating to a major social problem. There has been no other forum in which to discuss it. Nothing of any significance has been forthcoming from the Department of the Environment and Local Government that would have enabled us to have a discussion on this. We have now dealt with one question only and are obliged to guillotine the debate.

It is a cruel deception for the word to go abroad, if intelligent back bench Deputies like Deputy Ardagh seriously believe it, that this Bill will do something for first time buyers. Whatever else it does, it does not do that. Whatever the merit of Deputy Noonan's amendments so far today, this Bill does nothing for first time buyers. When the Minister, on the more substantial question of capital gains tax, shelters behind Dr. Bacon, it should be pointed out to him that the one recommendation Dr. Bacon made that would help first time buyers was on the question of stamp duty, and that is the one that the Minister resiled from. It should not therefore be allowed to go abroad that this Bill is for first time buyers.

Second, in the circumstances of this Bill, it is a disgraceful surrender to the development lobby that the Minister decided to cut capital gains tax on development land from 40 per cent to 20 per cent. Already owners of development land are gaining enormous windfall profits. There is a very strong argument for a windfall tax to control the situation, but instead of a windfall tax on profit with a factor of 20, the Minister is giving an additional bonus by cutting capital gains tax liability in half. That is a disgraceful surrender to a lobby that has given the Minister a very hot time since he decided to cut capital gains tax in the budget, which fuelled the problem we are discussing now. It is particularly regrettable that we have not been able to deal with that. Anybody who thinks that any new government, from whichever side of the House, will impose a rate of 60 per cent after 2002 on developers who release land for development in an expanding city is not living in the real world. Nobody would believe in that kind of carrot and stick approach. This is all carrot for people who do not need it. There is very little in this Bill for those who do need it.

There is no time to discuss the question of the provision of social housing, in terms of the joint ownership scheme and the limits that apply in respect of local authority and other loan facilities that are available at the moment, for the numbers of people that are being put on to the housing list who, in normal circumstances, could have expected to own their own homes. This is a bad day's work and we will have to call a vote on the Bill because it is regrettable that we only had the opportunity to deal with one of the substantive issues.

An Leas-Cheann Comhairle:

As it is now 1.30 p.m. I am required to put the following question in accordance with an Order of the Dáil of this day:

That the amendments set down by the Minister for Finance on Committee Stage and not disposed of are hereby made to the Bill; in respect of each of the sections undisposed of, the section or as appropriate the section, as amended, is hereby agreed to in Committee; the Schedule and the Title are hereby agreed to in Committee; the Bill, as amended, is accordingly reported to the House; Fourth Stage is hereby completed and the Bill is hereby passed.

Question put.

The Dáil divided: Tá, 69; Níl, 56.

Tá

• Ahern, Michael.
• Daly, Brendan.
• Ahern, Noel.
• Davern, Noel.
• Andrews, David.
• de Valera, Síle.
• Ardagh, Seán.
• Dempsey, Noel.
• Aylward, Liam.
• Dennehy, John.
• Blaney, Harry.
• Doherty, Seán.
• Brady, Johnny.
• Ellis, John.
• Brady, Martin.
• Fleming, Seán.
• Brennan, Matt.
• Foley, Denis.
• Brennan, Séamus.
• Fox, Mildred.
• Briscoe, Ben.
• Hanafin, Mary.
• Browne, John (Wexford) .
• Haughey, Seán.
• Callely, Ivor.
• Healy-Rae, Jackie.
• Carey, Pat.
• Jacob, Joe.
• Collins, Michael.
• Keaveney, Cecilia.
• Cooper-Flynn, Beverley.
• Kelleher, Billy.
• Cowen, Brian.
• Kenneally, Brendan.
• Cullen, Martin.
• O'Flynn, Noel.
• Killeen, Tony.
• O'Hanlon, Rory.
• Kirk, Séamus.
• O'Keeffe, Batt.
• Kitt, Michael.
• O'Kennedy, Michael.
• Kitt, Tom.
• O'Malley, Desmond.
• Lawlor, Liam.
• O'Rourke, Mary.
• Lenihan, Brian.
• Power, Seán.
• McCreevy, Charlie.
• Roche, Dick.
• McDaid, James.
• Ryan, Eoin.
• McGuinness, John.
• Smith, Brendan.
• Molloy, Robert.
• Smith, Michael.
• Moloney, John.
• Treacy, Noel.
• Moynihan, Donal.
• Wade, Eddie.
• Moynihan, Michael.
• Wallace, Dan.
• Ó Cuív, Éamon.
• Wallace, Mary.
• O'Dea, Willie.
• Woods, Michael.
• O'Donnell, Liz.
• Wright, G.V.
• O'Donoghue, John.

Níl

• Barnes, Monica.
• McGinley, Dinny.
• Barrett, Seán.
• McGrath, Paul.
• Bell, Michael.
• McManus, Liz.
• Belton, Louis.
• Mitchell, Jim.
• Boylan, Andrew.
• Mitchell, Olivia.
• Bradford, Paul.
• Moynihan-Cronin, Breeda.
• Browne, John (Carlow-Kilkenny) .
• Naughten, Denis.
• Bruton, John.
• Neville, Dan.
• Bruton, Richard.
• Noonan, Michael.
• Burke, Liam.
• O'Keeffe, Jim.
• Burke, Ulick.
• O'Shea, Brian.
• Carey, Donal.
• O'Sullivan, Jan.
• Clune, Deirdre.
• Owen, Nora.
• Connaughton, Paul.
• Penrose, William.
• Cosgrave, Michael.
• Perry, John.
• Creed, Michael.
• Rabbitte, Pat.
• Currie, Austin.
• Reynolds, Gerard.
• De Rossa, Proinsias.
• Ring, Michael.
• Dukes, Alan.
• Ryan, Seán.
• Enright, Thomas.
• Sargent, Trevor.
• Finucane, Michael.
• Sheehan, Patrick.
• Gilmore, Éamon.
• Shortall, Róisín.
• Hayes, Brian.
• Stagg, Emmet.
• Higgins, Jim.
• Stanton, David.
• Higgins, Joe.
• Timmins, Billy.
• Hogan, Philip.
• Upton, Pat.
• McCormack, Pádraic.
• Wall, Jack.
• McDowell, Derek.
• Yates, Ivan.

Tellers: Tá, Deputies S. Brennan and Power; Níl, Deputies Barrett and Stagg.

Question declared carried.