I am speaking on behalf of a number of organisations which came together to discuss the adoption of a common approach to the debt crisis. Our view is that the response of the State up to now has been inadequate to cope with this problem. Consequently, we came together, had a number of meetings and have distilled the results therefrom into a series of principles we think should inform an approach to dealing with the crisis. The first principle therefore is to accept that over-indebtedness is caused primarily by an inability to pay, rather than a lack of willingness to do so. This has come up in the discussions of the joint committee's and we are firmly of the view that moral hazard is exaggerated as a concept and that most people are quite prepared to pay within their capacity to so do. Within that context, we also wish to emphasise we believe in the debt crisis to be precisely that, namely, a deep social and economic crisis that requires a multi-departmental response. In our view, a national strategy is required across a range of Departments.
The joint committee discussed data earlier and we believe there is a critical lack of data to help us to resolve these problems. We have Central Bank mortgage arrears statistics for the past two years but as Mr. Paddy Lavery pointed out, we do not have corresponding personal debt statistics across a range of agreements, credit cards, personal loans, hire purchase or credit sales. The group and I agree with Mr. Lavery's observation that a substantial number of the approximately 95,000 households in difficulty with their mortgages also have substantial personal debt commitments. We also echo what was discussed earlier, that there is no solution without taking into account all debt as it simply will not work. One must consider all the financial circumstances of the household in question to arrive at a proper and effective solution to the problem. It is very difficult to deal simultaneously with a mortgage debt crisis and a personal debt crisis but unfortunately that is the position and this is the approach we believe must be taken.
In that context, we do not understand the reason there is no personal insolvency or debt settlement legislation in Ireland at present. It is something for which many of us have been calling for decades now, rather than simply in recent years. We believe it is indispensable and the Keane report has specifically admitted this. On page 17 of the aforementioned report, one will find an admission that the mortgage debt crisis cannot be dealt with effectively until personal insolvency legislation is introduced. In our view, such legislation must be overseen by an independent debt resolution agency. We are considering the Keane report in respect of suggestions being made to the institutions to do the right thing or to consider this or that scheme but ultimately, our experience in dealing with clients is that until solutions are imposed on the banks and other creditors, they will deal with cases on a case-by-case basis with different results for different people. There needs to be consistency and fairness of treatment for people in debt. Obviously, personal insolvency legislation must involve debt write-off. Generally speaking, when one considers the position among our neighbours in Europe and beyond, debt settlement legislation involves a rigorous financial assessment of a household's capacity to pay, an attempt to repay on that household's behalf for a defined period, followed by a write-off of residual debt. Moreover, in the case of unsustainable mortgages, this must include a write-off of legacy mortgage debt.
We believe that access to independent representation for people in debt is critical. Members have heard from MABS in detail and I refer to the debate regarding the 100 additional advisers and so on. Our position in this regard is that more assistance for those in debt is urgently necessary. It is extremely difficult for people in indebted circumstances to face their problems and they need an advocate to examine the financial position and present a plan. That role can be and is being performed by MABS but additional assistance is needed. However, we believe that separately, an independent debt resolution agency must oversee this process and must have the legislative powers to so do. While debts are being repaid, we are strongly of the view that households must be entitled to a minimum income to meet daily, weekly and monthly household needs.
There is a misunderstanding among the media, generated by the term "debt forgiveness", that some kind of magic wand is waved but this is not the case. When one considers debt settlement legislation as it operates across Europe, it is tough medicine for those households concerned. Efforts must be made to repay over what often is a substantial period. If one has a household paying its residual income over five years, major sacrifices are involved. Ultimately, there is light at the end of the tunnel, which is the write-off of residual debt but it is a misnomer to consider this to be simple or painless. Consequently, the question of minimum income is of particular importance. The Vincentian Partnership attached to the Society of St. Vincent de Paul, which is part of our grouping, has done some work on household budgets using different types of households and examining minimum expenses.
On the question of unsustainable mortgages, which was discussed earlier, I agree there are unsustainable mortgages. The Central Bank figures reveal at the end of June 2011, there were, as far as I am aware, 40,000 households in arrears for six months or longer on their principal private residential mortgages. The average arrears figure per household is €21,000. If members wish to consider a definition of an unsustainable mortgage, they should think about how long it will take that household to get back to paying the monthly instalments and discharging the arrears.
A sizeable number of unsustainable mortgages exist. Forbearance from the institutions is working in certain cases and the code of conduct on mortgage arrears is in place, which has been useful in setting up an infrastructure but greater measures definitely are needed. I understand New Beginning has proposals that complement, or which it believes to be stronger than, the split mortgage proposals set out in the Keane report. The latter report also includes two pilot mortgage-to-rent schemes. We question the extent to which plans already are in operation to put those schemes into practice.
We believe the State's policy in respect of debt and mortgage debt in particular should emphasise the retention of the dwelling. It may not always be possible in all circumstances but this should be the primary objective. There is a certain amount of detail in the paper we submitted that embellishes on these points but from the perspective of our organisations, that is, the Free Legal Aid Centres, FLAC, the Society of St. Vincent de Paul, Threshold, Respond! housing association, Focus Ireland, New Beginning, Northside Community Law Centre, Ballymun Community Law Centre and a number of independent researchers, they are all set out in the aforementioned paper. All the organisations and individuals involved have a strong track record of working on debt, housing and anti-poverty issues and we believe these principles set a template for how we should deal with indebtedness problems in the future. They are only principles and the organisations concerned have many more opinions, both individually and collectively, to help inform the joint committee's deliberations.