Vol. 1037 No. 6
51. Deputy Pearse Doherty asked the Minister for Finance if he will introduce temporary and targeted mortgage interest relief for mortgage holders impacted by rising interest rates; and if he will make a statement on the matter. [21747/23]
As the Minister for Finance, Deputy Michael McGrath, knows, since July, the European Central Bank, ECB, has increased its key interest rates seven times, with at least one further increase being expected in the time ahead. These interest rate hikes are putting real pressure on households that have mortgages. It has resulted in a significant shock for hundreds of thousands of borrowers. Last week, we heard the Central Bank say that 20% of all borrowers and mortgage holders have seen a 50% increase in the cost of repaying their mortgage. That is an average of approximately €5,000. Given the difficulties that so many households are facing, will the Minister introduce mortgage interest relief in a targeted and time-bound fashion to provide the much-needed support for these homeowners?
I thank Deputy Doherty for raising this issue. As I have stated previously in the House, the position is that the formulation and implementation of monetary policy in the eurozone and the setting of official interest rates is an independent matter for the ECB. The Government has neither a role in setting official interest rates nor in setting the retail interest rates that lenders may charge on their loans, including mortgages. That is a business and commercial matter for individual lenders.
As the Deputy will be aware, mortgage interest relief for principal private residences was phased out on a gradual basis over the period 2009 to 2020. The decision to abolish it was taken in the wake of the financial crisis, with the cost of the relief being one of the influencing factors. It cost more than €700 million in 2008, for example. Prior to its curtailment and eventual abolition, the top two income deciles in 2005 accounted for close to half of the tax forgone through tax relief. This issue was highlighted in the findings of the 2009 Commission on Taxation report. The relief cost approximately €289 million in 2005.
While I am acutely aware that there have been increases in a number of mortgage rates offered by lenders, it is important to point out that mortgage interest rates, in particular, fixed interest rates, have fallen over the past number of years. For example, in December 2014, the average level of fixed interest rates for new lending was 4.11% compared with 2.83% in February 2023. The Irish average interest rate on new mortgages is now below the eurozone average and, in February, Ireland had the third-lowest mortgage rates in the eurozone for new mortgages. The data also indicate that a significant portion of new mortgages, 93% in February 2023, are now fixed-rate mortgages and this will protect borrowers in the event of a rise in official and market interest rates for the period that the interest rate is fixed.
The introduction or reintroduction of mortgage interest relief for principal private residences may not be the best course of action to assist homeowners with rising interest rates. For example, there is additional scope for many borrowers, in particular variable rate mortgage borrowers who have built up equity in their home, to look at alternative mortgage options and to reduce their mortgage costs.
I see the clock has begun to tick, so I will conclude by saying that for all these reasons, it is my own view that the annual budget will be the appropriate time to decide how scarce resources can best be deployed to support different groups of people including mortgage holders, renters, workers and people who are on fixed incomes. I know we will have a considerable debate over the next number of months about what the correct balance is on the package moving forward.
The Minister spoke about scarce resources, but people will be mindful that the budget’s surplus is predicted to be €10 billion this year. While the Minister is speaking about October as a time to take decisions, a letter is about to land next week on the floors of hundreds of thousands of individuals to tell them that their mortgage costs have risen again.
The Central Bank’s report last week was really important because it told us that on average 20% of homeowners have seen their mortgage interest rates increase by €4,800. That was before the ECB hike of last week. It was before any potential other hikes. People are telling us that they feel trapped, they feel abandoned and that they are paying €523 per month extra. That is more than €6,000 per year, yet the Minister is saying he may consider this in October. The Government has a responsibility to shelter people who have seen a sudden and sharp shock in their income.
Many of them did not plan for an additional €5,000 or €6,000. Mortgage interest relief is not a way of insulating people from all the effects of this but it will take off the sharp edge. Is the Minister open, even in October, to introducing mortgage interest relief? He championed it in opposition but conveniently found a way to abandon these households at this point and to wash his hands of them.
As the Deputy well knows, when I advocated in opposition for mortgage interest relief, it was for an extension of the relief, which was successfully secured by the then Opposition. Those are the facts and the Deputy knows that. He referred to the surplus this year, which, as he knows well, is coming from windfall corporation tax receipts, so the Government has to take that into account in the decisions we make. The commitment I have given is that in the lead-up to the budget, we will consider all the options. There are going to be a lot of demands on the Exchequer. The Deputy rightly highlighted the plight of many mortgage holders and I acknowledge, of course, the significant additional burden the seven increases have placed on many mortgage holders.
Nevertheless, there are others, too, who will make the case for taxpayers' support, such as renters, workers in the context of income tax relief and people on social welfare. Sinn Féin was calling in the House earlier for increases in core social welfare rates and help for pensioners as well. There are a lot of demands and calls for limited State resources. We will consider all options. I am conscious of the impact on mortgage holders but we will have to consider it in the context of the budget.
Not only the Minister but his party leader, the Tánaiste, called for mortgage interest relief rates to be increased when he was on this side of the House but, again conveniently, he forgot all about that when he got back into power. The Minister made the point that budget time is the appropriate time to examine this, but there have been changes at other times and the Finance Bill passed in the Seanad just a few hours ago. There have been changes to hospitality tax measures in the tourism sector; there have been tax changes regarding solar panels. There has been a €1 billion housing package, including the waiving of fees for developers, yet some households are paying an additional €5,000 or €6,000 in mortgage interest costs and the Minister says he will do nothing until at least October. In fact, October's budget will set the changes for January of next year, yet people are wondering how they are going to meet their repayments.
That is the reality of what we are facing. The Minister facilitated this. As a member of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, he blocked my legislation, with Fine Gael, and facilitated the sale of many of these loans to vulture funds. These households are now paying 8%, yet the Minister says he will do nothing about it. It is not acceptable. He has a moral responsibility to do something on mortgage interest relief. Taking a portion of the costs, up to €1,500, is an appropriate measure and can be afforded.
I have acknowledged the real-life impact on mortgage holders of the changes in ECB rates. The Deputy will always quote the very highest figures and the highest examples. The same Central Bank report to which he referred also points out 40% of mortgage holders are protected because they are on fixed rates. In the various scenarios it looks at, the average impact is 13% to 16%. That is not insignificant and there are others, of course, for whom the impact is considerably higher.
I accept that and recognise it, which is why I have been engaging directly with the Central Bank. It should not be the case that because of an increase in a mortgage rate brought about by an ECB change of monetary policy, which is happening with a view to bringing down inflation, individuals should end up in arrears. That would be a failure of the system and of the code of conduct on mortgage arrears. The Central Bank has stepped up its regulatory and supervisory function and activity in that regard. The Deputy knows that, given he has met its representatives directly. I have also made the point that many of those who are now with the non-bank sector should be enabled to switch back their mortgage to the main banking sector, and I believe we will see activity and movement in that regard.
52. Deputy Richard Boyd Barrett asked the Minister for Finance if he is aware of the recent examination of the section 481 film tax credit by the Oireachtas Committee on Budgetary Oversight, in particular the concerns raised by an organisation (details supplied) regarding the use of buy-out contracts by producer companies on the intellectual property rights of performers and the issues raised by film crew representatives about the failure of producer companies to vindicate employment rights; and if he will address these concerns through changes to the film credit. [21854/23]
The Committee on Budgetary Oversight, of which I am a member, today launched a report on the section 481 film tax credit, which at the moment is running approximately €100 million a year to film production companies in this country to allow them to make movies, something we all want to see happen. The report suggests, however, that continued or increased investment in this area needs to be dependent on vindicating the rights of performers and writers under the copyright directive to their intellectual property rights and the revenues that flow from it, and that crews must have their rights, not least under fixed-term workers' legislation, fully vindicated, which is currently not the case.
I am aware of the committee’s recent examination of the section 481 film tax credit, and I understand the report was published today. As I said in reply to the Deputy earlier, when I checked online in the middle of the afternoon, it was not available, but I will read it. I compliment the committee on undertaking this work.
In respect of the intellectual property rights of performers, copyright law falls within the remit of the Department of the Enterprise, Trade and Employment. Notwithstanding this, my officials have engaged with the stakeholders concerned, including representative bodies for actors and performers, to gain an understanding of the issue. Copyright is relevant for many workers in the film sector, including authors, producers and broadcasters, in addition to actors, and I have been informed Screen Ireland has engaged an independent facilitator to meet key stakeholders to understand the various perspectives of those concerned. Individual stakeholder meetings have been held over the past eight weeks and the next phase will progress to group discussions. I look forward to the outputs from this process.
With regard to employment rights, the Deputy will be aware changes were made to the film tax credit to reinforce the requirement to adhere to employment rights legislation. As part of the cultural certification process, an applicant company is required to submit an undertaking of compliance with all relevant employment legislation. This commits applicants to compliance with all relevant employment legislation in respect of the film being certified. These conditions are to be met not just by the producer company but also by the designated activity company for each production.
As for any specific workplace disputes, the Workplace Relations Commission, WRC, and the Labour Court are the organs of the State tasked with the resolution of such matters. It is appropriate that any relevant claims be referred to these bodies for adjudication. I am aware significant progress has been made through the introduction of new collective bargaining agreements in the sector, and my officials will continue to monitor progress in this space.
The problem is the conditions are not being met. In the case of Irish Equity, the motion passed at its recent AGM calls on the Government "to add to SI 119/2019 on film regulations under Schedule 1, information to support an application to the Minister for a certificate under section 481 of the Act of 1997, that any such application must engage all performers, authors and contracts that comply with the letter and intent of the copyright, the relevant Act of 2000 and the directive". That is not happening. The producer companies are, in the vast majority of cases, forcing them to sign buy-out contracts where they have to sign away their rights to future royalties on their intellectual property. I will return to the issues relating to the film crew in my supplementary questions. This is not happening, but our committee’s report states it must be a condition of continued or increased funding for film producers.
I acknowledge that the Deputy has been consistently raising this and related issues, and I am happy to pick up on the work my predecessor, Deputy Donohoe, did with him on these issues. The Minister of State, Deputy Carroll MacNeill, has met Screen Producers Ireland and visited Ardmore Studios. She will, I am sure, assist in trying to bring about a resolution to these issues.
Section 481 is a valuable tax relief. The audiovisual sector has performed well and we want to ensure any changes we consider will not undermine the attractiveness of the sector in Ireland. Nevertheless, we have to ensure that all those who are directly involved in production, including all the professionals the Deputy mentioned, are treated fairly and protected in every possible respect. There has been positive progress in negotiations between employer and worker representatives in the audiovisual sector in recent years. The Deputy will be very familiar with the modernised crew agreement, agreed and introduced in January 2021, and last year, Screen Producers Ireland and the ICTU film construction group of unions secured a construction crew agreement. I will come back to the copyright issue in my subsequent reply.
To put it simply in the short time available, producers are happy enough with the status quo. They make actors, performers and writers sign buy-out contracts, but that is not good for actors and performers.
Similarly, the fixed-term workers directive and legislation are very clear. Companies cannot abuse the successive use of fixed-term contracts. Workers who work on several of these acquire by law contracts of indefinite duration. In other words, through their service having worked across multiple productions it must be legally acknowledged that they are employees. The producers are refusing to do that and are hiding behind the designated activity company, DAC, even though the producer company gets the money. That means the clock goes back to zero for every crew member after each production. It is as if they have never worked in the industry. Even if they worked in the industry for 20 years, they have no rights. After each production, they may or may not be re-employed which is an abuse of the directive, as is forcing the performers to sign away their intellectual property rights and royalties.
I give the Deputy a commitment that I will certainly read the Committee on Budget Oversight report. I am happy to engage with him and the sector to try to make further progress on these issues within the constraints that I need to live within, recognising that copyright law that does not fall within the Department of Finance. As the Deputy knows, it is within the remit of the Department of Enterprise, Trade and Employment. The EU (Copyright and Related Rights in the Digital Single Market) Regulations 2021 were signed into law by the then Tánaiste and Minister for Enterprise, Trade and Employment in November 2021.
The certification - the actual issuing of the certs - is partly down to the Department of Finance.
I am more than happy to engage with Deputy Boyd Barrett. I acknowledge he has a track record in raising these issues. From my reading of it, in preparation for this question it seems that there has been considerable progress. There has been goodwill and considerable work has been done by my predecessor and the industry to make progress. We will see if we can continue with that work and make more progress.
Before I go to the next question, I want to compliment the Committee on Budgetary Oversight on the work it did on this as well, as a member of the committee.
53. Deputy Pearse Doherty asked the Minister for Finance if he has engaged with mortgage lenders with respect to forbearance measures and solutions in place for mortgage holders where their loan is with respect to, and secured against a property affected by defective concrete blocks; his views regarding the need for a coordinated approach among lenders with respect to such mortgage loans; and if he will make a statement on the matter. [21748/23]
There are many issues for those whose homes have defective blocks in my county of Donegal and right down the west coast. However, tonight I want to focus on one part of it which is the issue of the banks, mortgages and access to finance. Because of the scheme brought forward by the Government, all families are left with a significant shortfall in rebuilding their homes and rebuilding their lives. Despite this, they are trying their best under the scheme. In some cases, their homes have been knocked down and are now rubble. The banks are charging for the full mortgage. There is no relief whatsoever despite there being a condition in their mortgage contract that they need approval from the banks to demolish their house. They also have serious issues with bridging finance because of the way the scheme was developed with a retention of a portion of the grant at each stage which means they have to go to family, parents or the credit union to get an unsecured loan with interest of up to 12%.
What has been foisted on these families is absolutely appalling. They should never be contractors trying to build their own homes and manage these projects. What engagement has the Minister had with the banks? What engagement has he had with the Central Bank on the matter? We need everybody around the table. It should not be left up to the homeowners. We need support and we need action. It is not fair. If the Minister sat down with them, he would find that their hearts are broken, their houses are in rubble and they have serious issues with finances. What is happening is just heartbreaking.
I thank the Deputy for raising this issue. I fully empathise with the terrible plight of those homeowners who are dealing with the devastation that mica has caused to their homes. I will do all that I can while I am in this office to help them and to support them.
The Government response to the mica issue is led by my colleague the Minister for Housing, Local Government and Heritage, Deputy Darragh O'Brien. As the Deputy is aware, a scheme of financial support to help affected homeowners has been put in place.
Regarding financial institutions that provide mortgages to help people to buy or build their own home, the Central Bank is responsible for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements. Through its consumer protection role, the Central Bank sets out requirements in its codes of conduct which detail how regulated firms such as banks should deal with and treat their customers.
In particular, the code of conduct on mortgage arrears, CCMA, places a requirement on regulated entities to have fair and transparent processes in place to deal with borrowers who are in, or are facing, arrears on a mortgage secured on a primary residence. It sets out the process that entities must follow in such cases. The CCMA sets out a standardised mortgage arrears resolution process that all regulated entities must follow, which entails communicating with the borrower, gathering relevant financial information, assessing the borrower’s circumstances and proposing a resolution.
Due regard must be given to the fact that each case is unique - many of these cases are certainly unique - and needs to be considered on its own merits. All cases must be handled sympathetically and positively by the regulated entity, with the objective at all times of assisting the borrower to meet his or her mortgage obligations. That must apply in these cases more than any other.
The Minister said he would do all in his power. I will give him an idea of what should happen. I have been meeting with the Central Bank for some months to discuss the matter. I have met with the banking industry more recently on the matter. The Minister should call in people from the mica group who are on its sub-committee which deals with finance and insurance. They have become experts on this. Some of those who are involved have actually had their houses demolished and are going through the scheme. The next day he should call in representatives of the Central Bank and the heads of all the banks to get their heads together to figure out how we can support these families.
The asset values of these homes are on the floor because they are riddled with mica. These properties could not be sold and yet because of these schemes and because the families themselves also have to contribute, the asset values will be restored and the banks are doing nothing. In one case where the house is demolished to rubble and the individual had to go to a credit union to get bridging finance because the grant is not there and there is also an issue with retention, the only thing the bank will do is give them a payment break where interest continues to accrue. What is going on is absolutely scandalous. Developers are now saying this is not for them. They are walking away from this. It is too complicated and they cannot be sure of their funding.
To be straight with the Deputy, I have no problem whatsoever in meeting the group and I am sure the Minister of State, Deputy Carroll MacNeill, will do the same on the insurance issues. Perhaps we can meet them together. These are genuine issues. These homeowners should not be in this situation and the banks need to adopt a supportive role when it comes to helping them because there will be issues. As the Deputy rightly said, the asset values are greatly reduced. They will need help in the journey to reconstructing or remediating their homes - issues will arise there. As the Deputy said, I know the Banking & Payments Federation Ireland, BPFI, is in correspondence with the mica group. My understanding is that it will put in place a process of structured dialogue with the mica group as well. I am sure I can speak for the Minister of State in saying that we will be happy to jointly meet with the group to discuss banking and insurance issues to see if we can support them to work through the issues that will continue for a number of years.
I met representatives of the BPFI and I put that directly to them. In fairness they did not hesitate in saying that they would organise that structural engagement with its members which is to be welcomed. However, there is also a role for the State here. Why are these families in this situation? It is because the Government scheme does not provide 100% redress. It is because people are expected to put their hands in their pockets to find the €60,000 or €70,000 themselves. These families are paying a full mortgage with interest on rubble at this stage. They then need to find bridging finance because the Government has not come up with 100%.
There is a problem for the banks with the mortgage terms and conditions because people cannot demolish their home without the bank giving consent to it. For banks to give consent to it, they will need to be assured that the home can be rebuilt because they have a loan and there are issues with how they represent the collateral of that loan in their balance sheet. Up to 7,000 of these homes could be in this situation. This is not a small issue; this is a very big issue.
I will say this again. We have been raising the issue of the banks for a long time now. This is us trying to deal with the disaster that is being foisted upon these families by not having 100% redress - we have not given up the battle on that. The issue here is that nobody is doing anything about it. The banks have not done anything about it. The Central Bank has not done anything about it. Neither the Department of Finance nor the Department of Housing, Local Government and Heritage has done anything about it. The houses are on the ground. Some of them are demolished. People are at their wits' end and developers are walking off. That is what is happening here. We need to get to grips with this very fast.
I assure the Deputy there is no lack of will on my part to support these homeowners on these issues. The scheme has been established by the Minister. The legislation has been put in place and this has to be worked through. The Deputy has raised specific issues around the treatment of people in the context of their mortgages, the difficulties that are already there, and the difficulties that can be anticipated as they remediate or completely reconstruct their homes. I acknowledge that practical issues will arise and the banks and the insurance companies are very important stakeholders in this regard. They have a role to play to make sure these homeowners are supported in every practical way possible. If I can use the weight of my office to assist in that regard, then I will do so in the best way I can.
54. Deputy Matt Shanahan asked the Minister for Finance the initiatives his Department is considering in terms of tax measures to stimulate access to investment capital given that access to start-up and scaling finance is now the biggest challenge facing the micro and SME communities, as shown in recent surveys; and if he will make a statement on the matter. [21804/23]
What tax measures might the Department be considering in the next budget to stimulate access to finance for the micro, small and medium enterprise sector?
SMEs are the foundation of the economy, accounting for the majority of employment in the State. Their vital importance to our economy is reflected in our programme for Government commitments.
On tax measures, my Department has been proactive in supporting SMEs by introducing and expanding a number of taxation measures, which help small businesses access investment, scale up and expand. Measures include: the section 486C relief for certain start-up companies; the employment investment incentive, EII, the key employee engagement programme, KEEP; the start-up relief for entrepreneurs, SURE; and the start-up capital investment, SCI.
Broadly, the section 486C relief provides relief from corporation tax to new start-up companies that have a corporation tax liability of less than €40,000 for an accounting year. The purpose of the relief is to encourage start-up companies in Ireland, thereby creating additional employment and economic activity in the State. Promoting investment and jobs in Ireland is a key part of the Government’s overall strategy, as was recognised when the scheme was extended from three years to five years as part of the Finance Act 2021.
The EII provides a platform for investment in certain SMEs. It provides tax relief for individuals who purchase qualifying trading company shares. The relief aims to encourage individuals to provide equity-based finance to trading companies, to assist companies to raise finance to allow them to expand and create or retain jobs. KEEP allows certain SMEs to engage key staff in a more cost-efficient manner. The scheme is a focused share option programme, intended to help SMEs attract and retain talent in a highly competitive labour market.
SURE is a tax relief for entrepreneurs who leave an employment to set up their own company. It can provide a refund of income tax paid in previous years where the individual establishes a new trading company and invests cash through the purchase of shares. I can respond further to the supplementary questions.
The Minister and I interacted in this Chamber some weeks ago. Will he confirm, further to that discussion, that the tax breaks he might give to the private rented sector in the budget will be backdated to January of this year, as was requested among measures from the Regional Group?
Access to finance is a huge problem currently in the SME and micro-business space. It is very hard to get money out of the commercial pillar banks. SMEs are paying more than 8% APR. If they are going into linked finance they can be paying up to 14% APR, which is not sustainable for a lot of businesses. Are there any plans to look at reintroducing a Strategic Banking Corporation of Ireland backup scheme, as was done during Covid?
I am aware that insurance is not quite the Minister's bag, but commercial insurance is a huge problem now. We have not reformed the duty of care legislation yet and the number of claims circumventing the Personal Injuries Assessment Board is rising all the while. I am aware of two companies, one of whom is an indigenous baker, whose insurance premium has gone from €10,000 to €30,000, with a €10,000 excess. The other company is a leisure business whose premium has gone from €50,000 to €250,000 annually for the next five years. These are the problems afflicting the SME sector presently.
I will start on the Deputy's final point first with regard to insurance. He will be aware that the Minister of State, Deputy Jennifer Carroll MacNeill, is leading the Government's insurance reform programme. Significant progress has been made on the new personal injury guidelines and the office to promote competition in the insurance sector. The work to reform the duty of care legislation is at an advanced stage. We expect it will complete its passage through both Houses before the summer recess. It will then be enacted. In some respects, that is the final major piece of the jigsaw of reforms in this area.
On the rental sector, I have given a commitment that in the budget I intend to introduce measures to support investment in that sector. The precise timing, nature and detail of all those measures is a matter for consideration as part of the budget process. I cannot go into any more detail on that.
The Deputy raised the issue of enterprise tax reliefs. I am reviewing these in the context of the budget. While we have had tremendous success, which I believe will continue, in foreign direct investment, there is a need to focus on the indigenous economy. Some of these schemes have been very successful, others less so. We need to see if we can improve them to make them more effective. That work is now under way in my Department.
I will suggest a couple of measures, one of which is a tax warehousing scheme again this year. I believe a lot of companies are still trading from the subsidies that came through during Covid. They will have a difficult time later in the year. Beyond that, could the Minister consider putting tax credits on utilities rather than looking for a windfall tax that gets to everybody? It would mean that the high users would end up getting a tax credit. They are the ones that are in manufacturing.
Beyond that, perhaps there could be a regeneration of the stay-and-spend tax credit. This was a very difficult scheme to get at, but it was well worth doing because it targeted the restaurant sector whereby people were given credit. Perhaps this could be backdated to this year, not to next year's tax bill, so people could see the benefit.
With regard to insurance, I do not like to highlight any individual cases here, but €145,000 was awarded in the courts during the week for a dislocation of an elbow at an equestrian centre. While those types of claims are carrying on, we will not get any reasonable reform of insurance when payments are still being awarded at that scale.
In the minute it will not be possible to respond to all those issues but I will touch on tax warehousing because I am aware it is a very important issue for a lot of businesses. At the end of March the value of debt warehoused was more than €2.2 billion across 63,600 businesses. Last October, Revenue announced an extension to the period during which debts can remain parked in the warehouse. This means that businesses no longer have the challenge of making arrangements to repay their warehoused debt until 1 May 2024. This is significant additional time, which will greatly support businesses in their recovery from the impacts of the pandemic. Revenue's expectation is that the extended timeline to 1 May of next year for entering into arrangements for repaying warehoused debt - this is for entering into arrangements, not for having to repay it all by that date - together with flexible payment arrangements, will assist most businesses to work through any payment difficulties.
When I look through the data of many of the businesses, the amount of tax they have warehoused is quite low. The bulk of the money is made up by a relatively small number of businesses. As is always the case when it comes to tax issues, the message to businesses is to engage with Revenue. Revenue know the importance of that scheme and this is why they have extended until 1 May next year the deadline by which businesses must have entered into an arrangement.
Before we proceed to the next question, if Deputies are watching the debate, this is the last priority question and if they have questions they need to get to the Chamber.
55. Deputy Catherine Connolly asked the Minister for Finance further to Parliamentary Question No. 128 of 7 March 2023, his plans for the phasing out of the help-to-buy scheme; and if he will make a statement on the matter. [21523/23]
I am returning to a theme I have raised lots of times on the help-to-buy scheme. What are the Minister's plans for phasing out of that scheme? What further analysis is there on it? I say this having read all of the reviews, analyses and commentaries that clearly identify serious concerns with this scheme. I will come back to this in my two supplementary questions.
The help-to-buy scheme was introduced in 2017 with the purpose of assisting first-time buyers with the deposit required to purchase or self-build a new house or apartment to live in as their home. The Deputy will be aware that the Finance Act 2022 extended the help-to-buy scheme for a further two years to the end of 2024.
To date, the scheme has been a significant support for first-time buyers of new homes. Since its inception and until April 2023, some 38,557 first-time buyers either singly or as part of a couple, have benefited from the scheme.
I note the Deputy has previously raised concerns regarding the potential for the scheme to exacerbate housing prices. As previously stated, policymakers were aware at the time the scheme was being developed that it was not without risk. Likewise, they were aware there was a danger, against a background of constrained supply, that the initiative could serve to increase prices for new homes, thus potentially undermining to some extent the affordability aspiration of the scheme. However, on all occasions when the matter was formally examined to date, concerns in this regard were not borne out by the review data.
Studies carried out by Indecon economic consultants found that the main driver of house prices was the mismatch between supply and demand rather than the existence of the scheme. Similarly, the review by Mazars last year found no definitive evidence that help to buy pushed up the price of new houses. In fact, Mazars found that the prices paid for new homes by people who received the help-to-buy relief were slightly lower than new house prices in the economy in general, which was likely because of the €500,000 price eligibility cap. Last year's review recommended that a more appropriate, non-tax expenditure policy mechanism to address the market failure should be designed to replace help to buy. Having considered the report, in the Finance Bill last year, my predecessor proposed extending help to buy for a further two years in its current form. This approach was in accordance with a recommendation in the report and took account of both the cost of the scheme to date and the need for certainty in the market, while awaiting the increase in new housing supply envisaged by the Government’s Housing for All strategy.
I appreciate the Minister is setting out that more than 38,000 people have benefited from the scheme. My question relates to the analysis that has been done. The Minister is selectively quoting from Mazars and other reports. As he well knows, this scheme was introduced in January 2017, which is more than six years ago. It was estimated that it would cost €40 million annually. It turned out it cost €175 million in 2022 and it looks like it will cost up to €1 billion. Mazars stated: "The scheme is poorly targeted with respect to incomes, location, house prices and other socioeconomic factors ... [and] has socially regressive impacts". It goes on to state the scheme has "deadweight". According to the Parliamentary Budget Office, one third of the recipients did not need the help-to-buy scheme to meet the 10% deposit. The Economic and Social Research Institute, ESRI, has stated that a review of the help-to-buy scheme "suggests that many households with large deposits have received support under the scheme", which is likely to contribute to higher house prices. The Minister stated there is no definitive evidence regarding an increase in house prices, but there are serious concerns regarding this scheme and who it is benefiting.
When we talk about statistics and 38,500 people benefiting from the scheme, I know many of them personally, as I am sure the Deputy does. Without the help-to-buy scheme, the truth is many of those people would not have been able to buy a home. That is the reality. I support the decision made by my predecessor that the extension of the scheme to 2024 provides certainty. We need as much certainty as possible in the housing market, first, for developers so they are aware of what the environment in which they are developing is. We then need to assist with affordability and assist first-time buyers in purchasing a home.
There have been different forms of support down the years to help first-time buyers to purchase a property. This scheme has proven to be effective. I am well aware it has its critics but I will be very clear that the decision made to extend it to the end of 2024 is one I support and stand by. We will honour that. Of course, we always keep taxation matters under review. The future of the scheme beyond 2024 is something I will consider in future budgets.
I bow to the Minister's greater knowledge and wisdom in these matters. I am not even giving my opinion. I am looking at the various reports. The Mazars report states: "The scheme is poorly targeted with respect to incomes, location, house prices ... [and] has regressive impacts. ... the problems that it sought to address remain and the specific market failure at which it was targeted ... [is not likely] to be addressed." On and on we go, whether it is reports from the ESRI, Social Justice Ireland, Mazars, Revenue and whatever other report I have read. The scheme is "regressive", "poorly targeted" and the help is not needed by more than a third of those who have benefited from the scheme.
I am acutely aware of the people who have benefited. I also know that many of them had the deposit, as is borne out by the Parliamentary Budget Office in its overview of the help-to-buy scheme. According to that overview, one third of recipients did not need this help to meet the deposit requirements. It goes on through. Mazars advised that the scheme be scrapped although not now because it is embedded, there is a market expectation and it fits in with the Government's policy of buying up the market at all costs. That is why we cannot scrap the scheme just now.
Our policy is to support homebuyers because we support home ownership. The truth is this is a key affordability intervention. Many people will sleep in homes tonight, in every county throughout the country, who would not have those homes if this scheme did not exist. That is my view and it is why the Government has supported this scheme. The Deputy talked about targeting and the scheme being regressive. She asked about plans for the phasing out of the help-to-buy scheme. I take it she is against the scheme and believes it should be brought to an end.
I am going by what the reports have asked the Government to do, which is to phase it out and scrap it, but not now. That is what I am going by.
I take the Deputy's point that she is drawing that wording from the reports.
It is spelled out clearly.
I take that to be the Deputy's position on it. As Minister, I do not agree with her. The scheme has an important role to play. It is in place until at least 2024. We will keep it under review and will make clear in future budgets what the position is beyond that date.
