Senator Kiely had four minutes left and he is not in the House to resume. It goes back to the Government side.
Building and Construction Industry: Motion (Resumed).
The following motion was moved by Senator M. O'Toole on Wednesday. 1 May 1985:
That Seanad Éireann calls on the Government to take special measures to arrest the decline in output and employment in the building and construction industry and to deal in particular with the special difficulties of the private house building sector.
Debate resumed on amendment No. 1:
To delete all words after "Seanad Éireann" and substitute the following:
"endorses the overall economic strategy as set out in the National Plan of sustained and soundly based growth in the economy; recognises the importance which the Government attaches to the Building and Construction Industry and its special role in the overall development of the economy as evidenced both by the high level of public investment provided for during the period of the plan and the increased share of total PCP investment in the industry over the same period; commends the special measures taken to underpin the housing sector of the industry and supports the Government in its continued efforts to ensure a healthy economy from which the building industry will benefit."
—(Senator Ferris).
An Leas-Chathaoirleach
I suggest it should remain on the same side of the House.
I think it was Scott who wrote words to the effect that surprise results from ignorance. I believe it results from inexperience, because the longer we live the more we begin to realise that nothing should surprise. If I were in the business of being surprised the absolute brilliance of this Government in convincing the people of what they want them to believe would register very high on whatever barometer was used to measure my condition. I am amazed and astounded, which are much stronger terms than "surprised."
Some of my very erudite friends tell me that theorems which we accepted some time back are now being questioned. One of them is that of the straight line. I was taught and I think we were all taught, that a straight line is the shortest distance between any two points. Apparently that is being questioned now, although is it very difficult to accept that it could be otherwise. It is no more difficult than to accept the reasoning behind the actions and the decisions of this Government in many areas, for example in Irish Shipping, the Director-General for the RTE authority, the health cuts, the unemployment situation, B & I, the roads and the national debt.
I think it is true to say that a Fianna Fáil Government fired an entire RTE Authority within living memory.
An Leas-Cathaoirleach
Senator Fitzsimons to continue.
The Minister made a very spirited defence when he spoke in the House on the last occasion but I must confess that I did not hear him too well. I must admit that that may be more my problem than the Minister's fault, but I did say that to one of my colleagues and he said: "If you were Minister for the Environment would you not be inaudible if you were trying to defend the indefensible, the situation in the construction industry?" No matter from which side we speak, I think we must admit the Minister has nothing to crow about.
This Government have no answer to the charge with regard to the situation in the construction industry, and people who accept what is thrown out would believe black is white. I, in my time, never saw the situation as bad, and those who are much longer involved than I am tell me that they never saw things as bad in their lifetime. Big firms have gone to the wall all over and in addition small firms, the backbone of the industry, have broken up, many of them small family units where the leader of the group worked hard and had gathered around him a nucleus of craftsmen, skilled people. Many of these are broken up. The appalling thing about it is that the Government apparently have no intention of trying to improve the situation. All the indications are that they have no intention. People were looking to this year 1985 as the turning point, but the increased VAT has prevented all that. It reduces the value of provisions in the public capital programme, for example for every £1 million to build roads, there is included £100,000 VAT or £50,000 more than last year. The Government did not adjust the public capital programme, so the actual amount is 5 per cent less.
On page 166 of the programme there is an amount of £1,227 million set aside for the building industry, but 5 per cent VAT takes about £27.6 million out of the industry and out of this figure, and this is taken out of the housing and building loans and grants making up about 45 per cent of the amount that would be affected, and I think this is being generous.
Now because of the increased 5 per cent VAT the Government increased the grant from £1,000 first to £1,750 and finally to £2,000. This £1,000 grant was introduced on 26 May, 1977. At that time the national house building cost index stood at 147.4 and now the index is 387.8. That was the position on 1 April. On those figures alone, to take into consideration the increase in costs, the grant, to retain the same value, would have to be increased to £2,630. Increasing the grant to £2,000 leaves it away behind what it should be.
First time buyers, as has already been pointed out, are the only ones who benefit from this increased grant, and they make up only 60 per cent of the new house market, so that 40 per cent will have to pay the full increase. In 1984 house completions dropped by 1,194. In 1980 the total number of houses completed was 27,785; in 1981 it was 28,917; in 1982 it was 26,798; in 1983 it was 26,138; in 1984 it was 24,944 and falling all the time. I admit, as has been pointed out already that local authority houses showed an increase to 7,000.
The national plan, on page 113, paragraph 5.85 states that the target would be 6,000 local authority houses per year, which will be a further drop of 1,000 houses. This 5 per cent extra VAT will average about £1,000 per local authority house. The extra VAT must have a dramatic effect on the private sector. We must be talking about a total of 23,000 houses for this year. That is below the 1973 level of 24,660. The only other comparable year was 1976 when the number of houses completed was 24,000.
It has been pointed out already that concrete blocks were brought down to a VAT rate of 10 per cent and anything at 35 per cent was taken down to 23 per cent. This is welcome but it must have an impact in boosting the black economy because the legal builder is less competitive now than before the budget. Many builders were caught in the situation where the money was outstanding at 1 May. They will have to bear the extra 5 per cent themselves. There is an encouragement too, to have houses completed by direct labour which I do not question, but there is a problem in relation to getting loans for houses built by direct labour where there must be professional supervision and in some cases membership of the structural guarantee scheme which is out of the question where direct labour is employed.
With regard to concrete blocks, the VAT was reduced from 23 per cent to 10 per cent. For ready mixed concrete the VAT was increased from 5 per cent to 10 per cent. There is a problem in the Border areas — this problem has been there for the last six or seven years — where blocks are taken into the Republic. At present building blocks cost in the region of £265 per 1,000 delivered. Northern Ireland blocks delivered cost £190 per 1,000, a difference of £75 per 1,000, which is very considerable. In some cases those blocks are taken in by unapproved roads. One load might be delivered properly and the remainder brought into the Republic illegally. One of the big disadvantages in this is that certified Irish cement is not being used. This is very important. It is a condition about which the Department of the Environment are very strict. This situation had been brought to the attention of the Department of the Environment. We must remember that in Northern Ireland in the last ten years there was a 66 per cent grant aid for machinery. This has now been withdrawn. In that situation there was no way that blocks could be produced in the Republic at the same price as in the North of Ireland. Some time ago in this House I raised the question of the dumping of plaster board by Spain in this country and the Minister at that time did not accept that there was dumping. Since then the matter has been brought to the EC and a decision has been given that dumping took place.
An Leas-Chathaoirleach
The Senator has two minutes remaining.
With regard to the Housing Finance Agency, the allocation has been cut. There was an allocation of £70 million in 1984 and this has been reduced to £65 million this year. I welcome the £5,000 grant. The people who are making use of that £5,000 grant are mostly on low incomes. The Housing Finance Agency loan is the most attractive. Certainly this grant will do well in the first year. In the Dublin area there are serious problems already in that the allocation has been expended.
I would like to develop that further but as my time is running short I will just refer briefly to the situation about roads which has already been discussed. In County Meath 56 workers were let go in January, the first time in living memory that such a situation occurred. The permanent staff employed by Meath County Council is at its lowest limit. It cannot go any lower without serious consequences.
I would like to refer to the rent of local authority houses. On page 113, paragraph 5.86 of Building on Reality it is stated:
The average weekly rent paid by all local authority tenants in 1983 was about £7; for new lettings made that year the average rent was some £10 weekly. Many tenants are unemployed or otherwise dependent on social welfare, but many are paying rents that are too low in relation to their incomes. The Government are satisfied that rents should be raised progressively to a level more in line with the actual costs of local authority housing. Changes in rent levels will be made within the framework of the differential rents scheme which ensures that rents are reasonable in relation to family incomes.
It seems clear from that that the rents will be increased. I believe this has been deferred until after the forthcoming local elections.
Lastly, I would like to refer to reconstruction grants and to state that with regard to the absolute condition that houses must be inspected before work is started, this is a bureaucratic method of preventing many people from availing of the grant. The primary function of grants should be to improve the housing stock. I know of many cases where people have been frustrated because they started work before they got approval from the Department. I feel that a fine or a reduction in the grant should be sufficient but I think it more important to change that condition so that an inspection would be carried out before the works are completed. If the intention of the Government is to improve the housing stock and to help people I would ask the Minister to consider making that change.
I hope Senator Fitzsimons will not have trouble in hearing me. He made some reference earlier on about something else. I am not here to defend, I am here to inform and to try to educate the Opposition as to what the Government are doing in the whole construction area. In his address to the House last week the Minister explained the difficult nature of the fundamental problems affecting the construction industry in recent years and the strategy being pursued by this Government to tackle the problems and to reverse the decline in output and employment and to ensure an early resumption of orderly and sustainable growth.
At a time when the Government's policy in relation to the industry is being criticised, and has been deliberately misrepresented by certain sectional interests, the three broad planks of our policy for recovery in the industry bear repeating. First, we aim to create the general economic condition and favourable climate for business and enterprise that will lead to increased private sector demand for the output of the industry and therefore increased private sector investment. Second, public expenditure affecting the industry has been raised to the highest sustainable level and has been concentrated on those areas that will yield the highest return in terms of building output and employment. Finally, a range of special measures have been introduced to boost the construction industry as a whole and the private housing sector in particular. This is a sound strategy of a responsible Government who are determined to deal with the fundamental problem of the industry, namely, the lack of private demand, while alleviating the effects of the decline in demand by maintaining public investment at the highest level.
The Minister dealt also in some detail with the far-reaching reforms of the VAT system introduced in the recent budget which will undoubtedly encourage enterprise and efficiency and in time stimulate private demand for the output of the construction industry. Finally, the Minister outlined the various special measures that have been taken to restore the fortunes of the industry by the Government, particularly in the area of new private housing and the important areas of house maintenance and improvement work.
In speaking on the motion and the amendment tonight I will concentrate on the various measures taken in relation to the major programmes of our Department — roads, local authority house construction and sanitary services — to increase output and employment in the industry. Nowhere has the Government's commitment to the industry been more evident than in the funding of the construction programmes of the Department of the Environment. The figures and the money are quite clearly there to see. Expenditure programmes of this nature must be planned well into the future, given their technical and economic implications. The publication last year of the national economic plan by Government, which included details of projected public capital expenditure on various programmes, represented a major advance for this country. The plan will enable the private sector, for the first time in many years, to plan ahead in the knowledge that a coherent set of Government policies are in place to tackle the fundamental problems of our economy. It will thus create a climate that will encourage private investment in general including investment in the construction industry. The plan provides a blueprint for overall economic recovery. To complement it, detailed planning on a sectoral basis must also be carried out.
One particular area of my Department's programme — I refer to the roads programme — is an excellent example of this. This Government are acutely conscious of the need to view roads construction as a priority in our whole infrastructural development. The road development plan for the eighties has been subjected to a detailed examination, its shortcomings identified and it has been replaced by a new road plan policy and Planning Framework for Roads, published last January.
The conclusions drawn from the review of the earlier road development plan were that while the needs and objectives highlighted in the seventies remained valid inadequate financing had effectively undermined the chances of achieving these objectives. A new plan would need to set realistic targets and to make realistic and firm financial arrangements to ensure that these targets could be met. All these conditions are being met in relation to the current road development policy. The policy and planning framework document provides a clear and definitive statement of the road development policy and thereby provides a framework for the activities of local authorities, private investors, civil engineering contractors, the professions and the material suppliers, all of whom have a vital interest in the future of road development. By adopting a planned approach to infrastructural investment in roads we will ensure that scarce capital and labour resources will be utilised efficiently and will yield the highest return to the economy.
I referred earlier to the Government's commitment to the building industry and nowhere is this commitment more highlighted than in the significant increases in the provisions for roads improvements and new road construction made in the plan. In 1985 the provision will be £125 million, an increase of 20 per cent on the allocation for 1984, and it is planned to allocate £140 million for improvements in 1986 and £155 million in 1987. The allocation in 1987 will, in fact, exceed the 1984 allocation by 53 per cent. This level of financial commitment will ensure that work can start immediately on the various schemes and projects detailed in the new plan Policy and Planning Framework for Roads. It is unlike a document that was produced entitled: The Way Forward, which had very positive plans and costings for roads and we all felt that for the first time we were going to see some real infrastructural improvements in our whole road network which were long overdue. It was hailed as a great document and it was thought it would encourage industry. It had a whole range of things, particularly in regard to road works. The only thing they forgot to do, a Leas-Chathaoirligh, was to fund it. They made it look good on paper and it did read well but there were no sums provided for it and the road plan collapsed.
You do not have to prove anything to the Leas-Chathaoirleach, only to us.
It collapsed overnight. I am amused by the moanings and groanings of the Opposition on this.
If you go down the country, Minister, and see the condition of the roads you will not be amused.
I do a fair bit of travelling throughout the country. The national primaries, the regional roads are good and they are the responsibility of central Government.
What about the condition of the county roads?
They are the responsibility of the local authority. We have projected over three years a sum in excess of £500 million and nobody can argue that that is not substantial funding. It will make a tremendous difference in our road network throughout the country. I believe it is the right way to plan an economy because if right throughout the country we want to develop and regionalise industry surely we must have proper communication. This is what we are providing in our plan.
What about the condition of the county roads?
You should talk to your manager about that, Senator. If you have a problem with the national primaries you can talk to my Department and to myself.
He had to let six workers go last January.
I am merely telling the Senator that under this scheme jobs will be created, a good road network, which is important, will be created and the economy will benefit substantially. The proper maintenance of existing and new road systems is of crucial importance to the economy and social development and the Government have shown their awareness of this by ensuring that £84 million will be allocated for maintenance over each year of the plan. This level of expenditure has important implications for employment. It is estimated that an additional 1,100 direct jobs will arise on the road works over a period as well as an estimated 400 jobs in spin-off employment. Investment in the roads programme by this Government will be greater than that provided by any previous Government. We are aware, however, that additional finances can always be utilised and therefore we are taking a positive attitude towards any investment by the private sector in particular projects.
As well as central Government playing a role in regard to roads, we are also encouraging private investment. One such project, the toll bridge in Ringsend, was completed recently. There are other proposals such as the western parkway. The Government have submitted to industries a list of possible developments which can be carried out by private developers. We are pumping in additional finance which will generate a lot of employment activity.
I turn now to the sanitary services programme, another area of real achievement. The Government's plan has also recognised the importance of the sanitary services development programme in the provision of an adequate water and sewerage system to meet social and industrial demands. Since the Government took office our efforts have been concentrated on clearing the backlog of schemes that were technically in order and awaiting release from my Department. In 1983 and 1984, the first two years of the Government's tenure, just £200 million worth of schemes were approved. In 1984 alone, 102 separate schemes were approved, with a value of £101 million. This is a record for any one year. The release of these approvals allow local authorities to complete some schemes and to advance other schemes which are still at the planning stage.
Altogether, the Government have increased capital investment in the sanitary services programme by £28.65 million over the last two years, with total investment for the two years standing at £193.2 million. The projected total capital investment in the programme over the years of the plan is £280 million and this level of investment will enable us to go a long way towards meeting our objectives in this area of activity.
The third major programme of my Department is local authority housing construction. The Minister has already spoken on this but I think, given the success of the programme since the Government took office, that the figures are worth repeating. In 1984 7,000 houses were completed, the highest since 1976, when the Coalition Government were in power. Employment on the programme has been very good with an average monthly employment of 6,800 approximately, or 400 more than the corresponding figure in 1983. The success of the programme can be related directly to the high level of capital investment by the Government and the operation of carefully designed cost control procedures which were to ensure the best value for money and producing the highest quality of houses.
But the number of houses built fell rapidly.
I will give the Senator the figures and he cannot contradict them. While it is too early at this stage to quantify the full effects of the cost control procedures since the bulk of schemes to which they have been applied are still under construction, nevertheless they have provided my Department with a framework within which we can ensure that the best value for money is being obtained. That is what we all want. We want to get value pound for pound for the people we are taking the money from.
I should like to emphasise that the cost control procedures now being operated do not involve any recourse to low cost methods. I do not think there can be a public representative who is not too well aware of these so called low cost methods introduced in the bad old days of the late sixties and early seventies which, in the end, turned out to be not so low cost. They resulted in very expensive housing for which we are still paying. Indeed, they are now absorbing some of the very scarce capital which would otherwise be spent on new construction. We are spending a lot of money trying to rehabilitate this low cost housing in which a number of people have been condemned to live because of some smart Aleck thought he could build a whole array of houses for little or nothing. Unfortunately, we are paying for it now and we have to make the best of it. We have made the best of it to ensure that something is done. We have allowed local authorities to use money from the capital programmes to rehabilitate them because we realised that on a normal maintenance basis they would have to be repaired or they would literally collapse in a matter of a few years. If that occurred they would cost astronomical sums to build. It is no harm to point that out and put it on the record.
The procedures now in operation are geared to achieve more efficient financial management of the programme both at local and central levels. They are, as I said, aimed at getting the best value for money and in this way in the long term can benefit not only the finances of the State but also the builders who participate in the housing construction programme. The continued high level of financial support by the State and the operation of the cost control procedures will ensure a high level of completions and output in the immediate future.
The arrangement announced in the national plan whereby local authorities may purchase houses on the private market for renting to waiting list applicants will provide a boost to the private house building sector, while also helping in the achievement of a more balanced social mix. I should like to see this procedure adopted by local authorities where possible. It is necessary to get a better framework and a better social mix. That is one of the ways it can be done. It has the effect also of encouraging builders to build privately. There is a ready market through local authorities who wish to purchase in particular areas. That illustrates that where the private area is slack, the Government are prepared to come in and make a contribution there also.
Private housing generally will continue to attract the grants and subsidies payable in the past. The new house grant for first time buyers has been doubled with effect from 1 May and, as has been pointed out, will offset the effects of the increase in VAT rates adopted as part of the reform of the taxation system. In addition, the renovation and refurbishment of older multiple properties will receive a considerable stimulus through the extension of the tax incentives associated with work of this kind. Provision for the extension of the relevant tax incentives is made in the Finance Bill which is at present before the Dáil. I hope this scheme will help in some way. Many large houses were converted to offices but, because of the surfeit of modern office development they have been left idle. I hope the incentive will encourage developers to refurbish older houses, particularly the larger ones in the inner city areas, and get people to return to living in the inner city. It will have the effect of stimulating the building industry and the social fabric. I am very happy with this provision. I hope it is availed of. It is being introduced at the right time when there is some slackness in the office renting business. With people wanting more modern office conditions to work in more such houses will come on the market.
The new £5,000 grant for the local authority tenants and tenant purchasers who surrender their dwellings and re-house themselves in the private sector promises to be a great success and is moving in that direction. It is estimated that the number of applications received by local authorities under the scheme is already in excess of 1,800 and there is every indication that the interest in the scheme will continue at a high level. These people are making houses available for people on local authority housing lists and they are also going into the private house market and purchasing secondhand houses. There will be a spin-off in the new private housing programme because they are not all going to buy and many people moving from old local authority houses will buy new houses. This will have a significant impact in the private house sector.
How about the HFA loans from Dublin?
The HFA loans from Dublin are all right. People who apply will be given approval. That is the up to date position, and the Senator need not have any doubt about that. I was inquiring from the Dublin local authority last week to see what the position was and I was told that they are accepting applications and granting loan approvals. That is the situation as of last week.
And all the finance required to service the loans will be forthcoming?
We can only talk about the present position which is that loan approvals are being granted. One cannot go beyond that. I do not know what the demand is. In one breath people are telling me that the private house sector is in decline and the next minute they are telling me there is not enough money available. Those arguments are not consistent. I hope there is a demand for money, because that means there is a demand for housing and if there is a demand for housing the private sector is on the way up.
Before concluding I should like to deal with the suggestion that the solution to the problems of the construction industry lies in a further massive injection of public investment. People seek £200 million here and £400 million there, without any suggestion as to where the money will come from. Even if additional funds were available, and we all know they are not, such a policy would have disastrous consequences in the medium and longer term. In particular, the implications for the overall level of public expenditure, for borrowing requirements and for taxation, would, in the longer term, be damaging to all sections of the economy, including the building industry itself. Surely we should have learned the lesson, that we cannot just go on borrowing, the money has got to be paid back. Borrowing means that we are taking massive sums of money out of the economy instead of pumping it in again. We cannot have things both ways. We have to face up to this, get the economy right, get our finances right and generate real activity. That is what my Department have concentrated on. The figures are there and nobody can deny them. I have said that the private sector is slack but the new £5,000 grant for people giving up local authority houses should encourage the buying of private houses. The matters outlined are a clear indication of the Government's commitment to the construction industry.
But still we need more houses.
Not on the public side. As I have indicated to Senator Fitzsimons the Government have put extra money in by way of the additional £1,000 housing grant, despite the fact that the people who were advising the planning board and the Government in Building on Reality said that all subsidies and mortgage reliefs should be abolished. That was a strong recommendation. We took the decision that that should not be. We have sustained all of these aids although the best economic advice was to the contrary. We said, “no, we will not do that, it is not in the best interests of the economy.” We have increased the grant for first time buyers by an additional £1,000.
The Government's policy of selective expansion of the Public Capital Programme in those areas that yield the highest return in terms of construction output and employment, of promoting general economic growth and thereby encouraging increased private investment and of selective incentives to stimulate output and employment particularly in the area of private housing, is the right policy. That is the way we are doing it, and I believe that policy will prove successful. I have no doubt about that.
On a point of order, this Private Members' motion is confined to three hours, but the Minister spoke for 25 minutes last evening and the Minister of State will be speaking for another 25 minutes. Is it in order for the Government side to exhaust all the time on a Private Members' motion? It is unfair.
My advice in that regard is that it is unusual but not unknown for a Minister to intervene at that stage of the debate.
I am happy that the Opposition are getting upset because, obviously, what I am saying must be having an effect on them.
I am sorry to be interrupting the Minister, but it looks as if we have two Governments within one Government. We have the Labour Minister coming in and we have the Fine Gael Minister coming in.
They are not contradicting one another.
Acting Chairman
My advice is that the procedure here is unusual but not unknown. The Minister was in possession when I came in and he is in possession.
It is the first time it has happened in my time in this House that two Ministers contributed on a Private Members' motion.
We wanted to give the Opposition the benefit of our knowledge.
Or is that the Members on the Government side of the House are ashamed to defend the amendment they have tabled?
Acting Chairman
May I suggest that the Minister be allowed to continue, without interruption, and then we will be saving time?
With respect to the Minister, I do not think he is answering the case at all.
Acting Chairman
The Minister should be allowed to continue.
If a Member cannot take it in I am sorry. I would like to have a private discussion with the Senator on the matter and I might be able to get the message home.
If the Minister is unable to get his case across in public he will hardly be able to get it across in private.
I have given the House details of the road figures which are £500 million.
The Minister has not shown the figures. We did not get a copy of the Minister's speech.
The figures have been going down over the last four years.
Acting Chairman
May I appeal that the Minister be allowed to continue, without interruptions, please?
I resent that. Fianna Fáil brought forward their grandiose plan but never funded it. Now, for the first time, we have come up with a road programme in excess of £500 million. It has been costed over three years. It will revolutionise our whole road system. That was badly needed to boost our economy.
There is £5 million less for the HFA loans this year compared to last year.
I will not detain the House much longer since the Senators across the House are getting rather upset. I will conclude very shortly. The national plan also contained several other measures designed to boost the private housing sector of the industry. Joint venture housing, an arrangement under which a local authority provides sites under licence to private contractors for the construction of modestly priced houses for sale to selected purchasers, is being extended and promoted. Indeed, a number of local authorities have taken up this and it is going well. A site subsidy of up to £1,000 or one third of the site cost is being extended to participants in joint venture housing schemes who are approved applicants for local authority housing or who are tenants of local authority houses. We have listed a large number of them. I am sorry some Members across the House are unable to take what I have said on board. If they do not have a copy of my script I apologise. I will ensure that Senators will get a copy of it and I hope that when they read it they will agree that the positive programme adopted in the national plan will boost the construction industry. We are on course. We are taking it on board and I have no doubt that over the three year programme we will see a significant increase in activity in the building construction industry.
It is no wonder that Members on this side of the House are getting aggressive and worried about what is happening here. Last week the Minister came into the House but did not have a copy of his script. When we read what he said we see it is an exact copy of what has been said by the Minister of State today.
That is not true.
If one reads sentences from the Minister's speech and sentences from the speech by the Minister of State one will see that the same words are used, exactly in the same order. There is no doubt but that the speeches were written by the same person. The speech of the Minister of State is a copy of what the Minister read last week except where the Minister of State was speaking off the cuff.
That is unfair.
Earlier today one Minister was late coming to the House and another Minister could not be found. On a three hour debate not alone do the two Government Ministers not address themselves to the motion but they quote from the booklet Building on Reality and referred to figures which might be of use to students of economics in UCD, TCD or UCG but are of no use to us. It is a magnificent booklet for study by economics students but of no use in reality. On our motion the Government decided to use one hour of the three hours permitted. They tabled an amendment to the motion and cut down our time to less than one hour. If that continues we will go to the Committee on Procedure and Privileges to get some order into the system. It is a misuse of the time allocated to the Opposition. I am sure Senator Dooge does not go along with what is happening in this instance and what happened in many other instances. The Opposition should be allowed the time allotted to them by the House to discuss their motions.
On a point of order, at the beginning of business tonight we offered nobody and allowed two successive speakers from the other side. We are prepared to do the same again.
We will have to look for two successive speakers, because in the limited debate the Minister and the Minister of State were half an hour each and we are only allowed a quarter of an hour each on this side. That is getting away from what the Minister said.
It is obvious that the Minister lives in cloud cuckooland. Anybody who supports the amendment lives in cloud cuckooland. If one comes around the country with me one will see the number of former workers in the building and construction industry who are queueing up outside employment exchanges. One will see how vibrant the construction industry is. The Government are creating economic conditions which are not favourable to the building and construction industry but are more favourable to driving thousands of workers out of jobs. Thousands more building workers are out of work this year compared to last year. We have spent many billions of pounds training excellent craftsmen but when they are trained they cannot get a job.
No matter where one goes, from the smallest town to the biggest city, one will see that small and large building contractors are going out of business. They are being liquidated. The small companies will never again surface. Some of the big companies have used company law to switch around and appear under different names but there are very few of them. Firms that have been in business for up to 30 years are being closed down. If the Minister cannot see from the statistics how many building contractors are going out of business every day he is living in cloud cuckooland. The only thing the Minister can keep harping on is the major programme of road expansion. There is a major programme of road expansion in the national primary system. Driving in from Dublin airport one can see the beginning of an eight lane monstrosity that is doing away with good agricultural land. A four lane road would have been adequate for the area. While that work is in progress country roads are collapsing to the stage where they have to be closed. The amount of money being spent on such eight lane monstrosities would be better spent in improving the country and county roads and laneways. Very few people are working on such huge projects. Huge machinery costing a lot of money is used. The number of people who use the national primary roads is not as great as the number of people who use national secondary and country roads.
The Minister repeated that the plan was there but, as Senator Fitzsimons said, there are fewer houses being built now than in the past. If the Minister thinks that the £5,000 grant is going to be the panacea for all the ills in the building trade he is very much mistaken. The Minister mentioned that 1,800 people had applied for the grant. We are nearly half way into the year and I have no doubt that when these applications are processed many people will have opted out because they think they are eligible for a £2,000 grant as well as the £5,000. When they went to their local tax office they discussed that because they were purchasing a local authority house and had claimed tax on the interest on their loan but they were not eligible for the £2,000 grant. In most cases the £2,000 was the difference between being able to transfer from a local authority house and not being able to do so. For a tenant on a high income and low rent the scheme is a good one. It is also a good scheme for somebody who is in the first year of the purchase of a local authority house.
The Minister mentioned that private building will be enhanced by this £5,000 grant. That is not so. The cheapest house in Kilkenny at present costs about £24,000. People cannot afford to get money from the banks to bridge the gap. They are afraid to invest in housing to the same extent as in the past. People are afraid to get involved in long term borrowing because of the job situation. This is not fiction like Building on Reality. They are facts. The Minister said that some smart-Aleck built low cost houses in the sixties. I would remind him that there were low cost houses built in the past and a lot of them were of admirable standard. There were a small number of low cost houses which were not able to stand up to the rigours of time. We can call the next Minister who comes in here a smart Aleck or we can call the people in the Department of the Environment smart-Alecks because a small number of houses were not up to the standards required for long term usage.
The Minister made an extraordinary statement when he said that we have to get the maximum use of scarce capital and labour resources. There is any amount of labour in Kilkenny. I am sure that there is not one Senator in the House who would not be able to bring the Minister to any area where he will find that there is no scarcity of labour but there will be huge scarcity of capital. In the private sector there are people who are prepared to go into the building industry but cannot because this industry cannot sustain the costs it has to incur with the 12.6 per cent tax on the employment content and with the various other taxes that have been put on employers in the recent past. We have a huge increase in employers' liability insurance. All this is ensuring that people will not be employed.
We have the ludicrous situation where the Minister is congratulating himself, his Department and the Government for reducing VAT rates from 35 per cent to 23 per cent. Who put up the VAT rate from 15 per cent to 35 per cent? It was the last Coalition Government. This Coalition Government put the rate up to 35 per cent from 23 per cent. Are we supposed to give credit to the Government for bringing it back to 23 per cent? The Government have done nothing to give building industry workers here, or the potential entrepreneur, hope for the future because the increased capital programme is not able to maintain the number of workers employed in local authorities at present.
The Minister states that county roads are not his responsibility but that of the local authorities. Local authorities will take on any responsibility if funding is made available by the Department of the Environment or the Department of Finance. We have a situation where people are taxed out of existence and still they are asked to pay increased taxation to local authorities for services which they should be getting from their payment of income tax. Apparently local charges will be done away with and we will have a property tax on business premises, building land and every type of building. The business community are paying rates at a rate which they cannot afford to pay and now they are to be asked to pay higher charges by having a levy put on them because they own these properties. This is the thinking of somebody who has no idea of what it means to run a business. If he thinks that by doing this he will get enough money to fund local authorities, I can tell him that he will drive more and more ratepayers out of business, thereby cutting down the amount of money that will be available to the Minister.
The Minister suggested that the range of special measures and the Government's strategy will create further private demand. Any building contractors to whom I have spoken have told me that they are not continuing in business because they are not able to sell the number of houses they have on hands and will not get into speculative building in the future, that it would be preferable to get out of the industry than to stay in it. This means that more and more people will turn to the public sector for housing. Where will the public sector get the money to build these houses when they cannot cope with the demands that are already there? As regards County Kilkenny, there is not one solitary local authority house being started there. One can mention the number of finished houses, but for the first time in my recollection there is no single start of local authority housing and there will not be for another four or five months, and the plans have been with the Department for quite a long time.
I was not being personal with the Minister at the outset of my contribution, but it is a fact that the Government have not given adequate time to this side of the House. They have not treated it as it should be treated. It is the third time today that Government Ministers came into this House and they could not care less about it.
An Leas-Chathaoirleach
I want to explain to the House from my position as Chairman — Senator Harte's name is down and I appreciate that sincerely — that the Leader of the House, Senator Dooge, suggested that Fianna Fáil should have another speaker because of the time taken by the Minister. There will be five minutes for another Fianna Fáil Senator, Senator Fallon, and then the debate will be concluded.
Other Members offered to speak.
An Leas-Chathaoirleach
It will be on the record that Senator O'Leary has spoken. I am only chairing the House.
I appreciate that.
For that reason I shall be as brief as possible and allow my colleague to speak also. I cannot understand the confidence that the Minister of State has expressed in the building industry here this evening or, indeed, the Minister last week. It is well known that, traditionally, the building industry has been the barometer for the whole national economy. The building industry is at an all time low, as is the economy generally. Nationally, it is a story of doom and gloom, large and small businesses are going out of business weekly. For whatever reason it is a secret ambition of Coalition Governments to deliberately rock confidence in the building industry. Whenever Fianna Fáil are in office the building industry thrives, as has been seen over the years.
It is true to say that the biggest kick in the teeth for the building industry was that VAT on readymix increased from 5 per cent to 10 per cent. This came at the worst possible time for industry. VAT because of the small profit margins, is being put straight on to the price of houses for consumers. It is well known that the prices of houses and house supplies have increased dramatically. The Government have deliberately introduced the planning and services charges at the wrong time, which is not of any help to the building industry. In a sizeable contract of £200,000, roughly 25 per cent of this must be found for all kinds of charges relative to planning, levies, service charges, ESB connections, and so on. Those charges alone are enough to frighten off potential entrepreneurs in getting involved in any kind of building. If one checks the application lists of the local authorities it can be seen that over the last two years they have dramatically reduced. Only a trickle of applications are going through in comparison to the good days three to five years ago.
I do not subscribe to the Minister's belief regarding the confidence he expressed, because that is not the case as I know it. Having gone into some detail on the figures for Athlone, which is where I reside — I imagine Athlone would be a typical town — the story is not as happy as the Minister would like us to believe. Certainly in the Athlone area — I am talking about a radius of 12 to 15 miles from the town — the last three years has shown a general decline in building activity and direct employment in the area. The indirect employment — material suppliers, builders' suppliers and casual labourers — has all, naturally, ceased.
In the Athlone area we have approximately nine or ten general builders and practically all of them report a nil activity. This is as recent as this week. Three have gone into liquidation. There are perhaps four or five firms who are dealing exclusively in housebuilding only. A number of small ones doing extensions tell me that there is no movement whatsoever in extensions, bathrooms, back kitchens and so on.
I went to the trouble of finding proof for the Minister from five housebuilders. I will give him the names and addresses of these people and he can check them. Builder A gave me the following figures: In 1982 he had six direct employees, in 1983 he had eight direct employees, 1984 six direct employees, 1985 he has four direct employees. He now finds — this is unheard of at this time of the year in the building industry — that he has to lay off two of his employees. Regarding house sales and apartment sales for that particular firm in 1983 he had 28 sales, in 1984 he had 28 sales, in 1985 three to date and no chance of anything coming. Judging by the amount of inquiries to date the prospects certainly look very bleak for that firm.
Firm B in 1981, 12 employed, sold 14 houses; in 1982, 12 employed, sold 12 houses; 1983, ten employed, sold eight houses; in 1984, seven employed, sold six: in 1985, to date, four employed, and two houses sold and no inquiries. Firm C a firm who sold in 1982-83 in the region of 120 to 130 houses have had ten inquiries for 1985. Moving on to architect firms in the town, one firm which in 1982 employed 15, have five employees and nothing on the drawing board. It is a similar story with civil engineering firms. The story is of letting off the best of personnel, engineers, draftsmen. That is the scene right across the country. For the Minister to come in here and say that all looks well is an absolute total lie. The scene was never so bad.
The Senator should withdraw the word "lie".
I will withdraw it but I am certainly saying that the figures are not what the Minister is saying. I am saying that the overall picture — I have given details of my local scene and what would probably be regarded as a similar scene nationally — is that the industry is surely struggling with a host of adverse factors.
An Leas-Chathaoirleach
Senator Mullooly.
Before Senator Mullooly begins, Senator Harte has been offering to speak, and whereas we said the Opposition could have one speaker after the other, they have had two speakers.
An Leas-Chathaoirleach
This was decided by agreement on the proposal by the leader of the House, Senator Dooge.
It was decided across the floor of this House. I am asking you would the House agree that Senator Harte would be allowed to make a contribution, no matter how short, to have the record straight?
An Leas-Chathaoirleach
Under Standing Orders it is the Opposition who conclude the debate. I am in the hands of Members.
Could I suggest to the Opposition that they might allow Senator Harte five minutes to make his contribution and then they can wind up the debate?
I am prepared to allow Senator Harte five minutes.
I thank the Senators. I want to put on the record one or two points. First of all, for the benefit of Senator Lanigan, the £2,000 grant will be available from 1 May to new house purchasers or people building new houses. On the question of employment, there are more people employed in building local authority houses this year than for the past three years. There were 7,002 houses built in 1984. I want to put those two points, from the point of view of accuracy, on the record.
We all agreed on that.
All of us are suffering from amnesia. I do not think that anybody who remembers the debate on the plan ever heard the Government claiming that the employment rate would shoot up by the introduction of the plan. The whole idea of the plan is to save the country from deteriorating and that the job level would be maintained. It is there in the plan and nobody can take away from it. There will be the same number of people employed in 1987 as there are now. There is no use in being hypocritical about that.
In regard to private builders, in my view one of the problems is that they do not take risks. They are not like industrialists. They get in, make a killing and then they do not throw enough money back into it, they either redirect their money or go slow on what they are doing. There may have been an argument before that they were not getting the incentives, but now the National Plan recognises that private housing will continue to meet the needs of most households and the Government are committed to providing appropriate assistance and incentives to achieve this. Government aid to house purchasers takes a number of forms, including provision of mortgage finance, non repayable grants, tax incentives. The table then goes on to show that in 1982 £16.8 million was put in, increasing to £44.3 million in 1985.
Building societies have also been a major source of mortgage finance for most private house purchasers. They financed almost 40 per cent of new private houses in 1984. Twenty five million pounds was provided this year to finance the mortgage subsidy scheme. The position now is that the annual sums, paying a subsidy of £3,000, over five years, are £1,000, £800, £600, £400 and £200. This means that applicants for local authority houses and tenant purchase will qualify for the mortgage subsidy in respect of secondhand houses. We ought to stop codding ourselves about the question of full employment. It is a joke. From 1960 to 1970 wages and profits were higher than ever but there was not one extra person employed. It is the system which keeps it like that. There is no way that you will have full employment under the system. We have only to look to Europe with 14 million unemployed at present and no sign of that figure decreasing. If you want to live in the system that is how you live. I am sorry that I only had five minutes and have not had a chance to develop my point. I want to thank the Senators for letting me in for that five minutes.
It is a fact that the building and construction industry has been in decline since the Government took office two and a half years ago. As a result of the recent budget proposal, which came into effect last week, to double the rate of VAT on building, morale in the industry has reached a new low. People who are associated with building and construction for many years will tell you that they have never seen so much gloom and so much depression in every sector of the industry. Many small and large building firms have closed down and have gone out of business. This has been happening over the last two years with disastrous consequences for the thousands of employees involved.
It is estimated that up to 50,000 building workers are now unemployed. Make no mistake about it, there is a crisis in the building industry and its effects are being felt right throughout the economy. The effects are being felt in particular by builders' providers and by other businesses associated with the industry. In my own part of the country alone six old established firms in the industry have collapsed. Throughout the country some of the oldest established builders' suppliers have closed down. Many firms involved in the manufacture of joinery and other items for the industry are in serious difficulties.
People are being driven out of the industry daily by the policies that have been pursued by the Government since they came into office. Tax incentives which attracted private investment have been dismantled. Public capital investment has been cut. Planning charges and development charges have been increased. New service charges have been introduced. Direct and indirect taxation have added to the burden on the industry. PRSI contributions have been increased. All the time costs are soaring. At the same time output is decreasing.
Only the black economy has benefited from the difficulties of the legitimate sector within the building and construction industry. As many small contracting firms go out of business the number in the black economy increases. There has been a significant fall off in the level of private house building in rural and urban areas over the past two and a half years. As a public representative in a rural area I find this noticeable. A few years ago there was a flow of people inquiring about grants and loans. The situation today is that such inquiries are practically nonexistent. Today a public representative is much more likely to be approached by someone who is in difficulty with his loan repayments than he is by someone seeking a loan to build a new house.
The numbers of applications for planning permission for new houses are declining all the time in most areas. Private house completions in the Dublin area in 1984 were at their lowest level since 1971. It is inevitable that since confidence in the private house market is declining there will be further reductions in the number of private house completions. There is a total loss of confidence in the private house market on the part of both builders and potential purchasers.
The gap between the housing loans which are available and house prices is too great for most potential purchasers. It has put a new home outside the reach of many young people. It is becoming increasingly difficult for prospective house purchasers to bridge the gap between the price of a new house and the maximum loan available. Some years ago a new house was an investment and it was almost guaranteed to appreciate in value. Today a new house is a millstone around the necks of many young people who are struggling to meet loan repayments on a property, the value of which is decreasing now instead of increasing.
In the present climate of gloom and depression the future for private house building is bleak. Because of poor demands and increasing cost it is inevitable that this sector of the industry will decline further unless the Government take positive steps to tackle the situation before it is too late. In this motion, we are asking the Government to take special measures to arrest the decline in output and employment in the building and construction industry. I hope that the Government will do that before it is too late.
The recent increase in the new house grant which has been referred to goes nowhere near compensating for the increase as a result of the doubling of the VAT rate on building in this year's budget. The average price of a new house at £36,000 will increase far more than the value of the increase in the grant. It will increase by almost twice the increase in the grant. Then only first time purchasers qualify for the grant, so all other purchasers of new houses will have to bear the full brunt of the increase which will result from the doubling of VAT.
As private house building declines there will be an increased demand for local authority houses. The construction and the provision of local authority houses is limited by the funds that are allocated to the local authorities. They can only build a certain number of houses each year but the waiting list for these houses will increase at a faster rate. In the future we can look forward to longer waiting lists for local authority houses. People will have to live for longer periods in poor accommodation before being rehoused.
The fact that more local authority houses are being provided at the moment than was the case some years ago has been referred to, but I do not think that this can be taken as an indication that the builders and the contractors who are engaged in the construction of local authority houses are doing well. Competition for contracts for local authority houses is so keen at the moment that there is considerable price cutting. Contractors, in order to stay in business and keep their crews together, have to cut costs, and many of them are making no profit whatever on the building of local authority houses. They are trying to survive and keep their employees rather than see them leave on the emigrant ship until a Fianna Fáil Government return to office. Then, of course, these contractors know that there will be a restoration of confidence in the building industry and that positive incentives will be provided by that Government to ensure that the building industry will once again begin to thrive and to prosper.
God help the taxpayer.
Several of the other measures introduced by the Government in their recent budget will also have detrimental effects on the building industry. For instance, the increase in the composite rate of tax on building society deposits will mean that interest rates on loans from building societies will remain high. At present, loan repayments for many young people, especially young couples with families are an intolerable burden. The result is that building societies are repossessing more houses now than ever in their history. It is true to say that building societies today are in the property market in so far as they are trying to dispose of the many houses that have been repossessed from people who are unable to meet loan repayments. The same applies in the case of local authorities. Arrears in SDA loan repayments are at an unprecedented level. People are at their wits end to know how they are going to survive after many of them have lost their jobs and their circumstances have changed from the time when the loans were taken out.
The blame for the unemployment situation that exists at the moment can be placed fairly and squarely at the door of the Government in office. The Minister referred to the far-reaching reforms of the VAT system which were introduced in the recent budget. The Minister is claiming credit for reforms of a system that came into existence as a result of measures that were introduced by the present Government in the 1983 and 1984 budgets. He also referred to the roads programme. He said that the Government are acutely conscious of the need for road development, and he places great importance on it. But when the Minister and the Government talk of such development, they only speak of national roads. Many members of the present Government are not aware of the existence of the many thousands of miles of county roads which are crumbling throughout the country at the moment.
Question put: "That the amendment be made."
The Seanad divided: Tá, 34; Níl, 17.
Tá
- Belton, Luke.
- Browne, John.
- Bulbulia, Katharine.
- Burke, Ulick.
- Connor, John.
- Conway, Timmy.
- Cregan, Denis (Dino).
- Daly, Jack.
- Deenihan, Jimmy.
- Dooge, James C.I.
- Durcan, Patrick.
- Ferris, Michael.
- FitzGerald, Alexis J.G.
- Fleming, Brian.
- Harte, John.
- Higgins, Jim.
- Higgins, Michael D.
- Hourigan, Richard V.
- Howard, Michael.
- Howlin, Brendan.
- Kelleher, Peter.
- Lennon, Joseph.
- Loughrey, Joachim.
- McAuliffe-Ennis, Helena.
- McDonald, Charlie.
- McGonagle, Stephen.
- McMahon, Larry.
- Magner, Pat.
- O'Brien, Andy.
- O'Leary, Seán.
- O'Mahony, Flor.
- Quealy, Michael A.
- Robinson, Mary T.W.
- Ryan, Brendan.
Níl
- Cassidy, Donie.
- de Brún, Séamus.
- Ellis, John.
- Hillery, Brian.
- Kiely, Rory.
- Killilea, Mark.
- Lanigan, Mick.
- Lynch, Michael.
- McGuinness, Catherine I.B.
- Fallon, Seán.
- Fitzsimons, Jack.
- Hanafin, Des.
- Mullooly, Brian.
- O'Toole, Martin J.
- Ross, Shane P.N.
- Ryan, William.
- Smith, Michael.
Tellers: Tá: Senators Belton and Harte; Níl: Senators W. Ryan and de Brún.
Question declared carried.
Question put: "That the motion, as amended, be agreed to."
The Seanad divided: Tá, 33; Níl, 17.
Tá
- Belton, Luke.
- Browne, John.
- Bulbulia, Katharine.
- Burke, Ulick.
- Connor, John.
- Conway, Timmy.
- Cregan, Denis (Dino).
- Daly, Jack.
- Deenihan, Jimmy.
- Dooge, James C.I.
- Durcan, Patrick.
- Ferris, Michael.
- FitzGerald, Alexis J.G.
- Fleming, Brian.
- Harte, John.
- Higgins, Jim.
- Higgins, Michael D.
- Hourigan, Richard V.
- Howard, Michael.
- Howlin, Brendan.
- Kelleher, Peter.
- Lennon, Joseph.
- Loughrey, Joachim.
- McAuliffe-Ennis, Helena.
- McDonald, Charlie.
- McGonagle, Stephen.
- McMahon, Larry.
- Magner, Pat.
- O'Brien, Andy.
- O'Leary, Seán.
- O'Mahony, Flor.
- Quealy, Michael A.
- Robinson, Mary T.W.
Níl
- Cassidy, Donie.
- de Brún, Séamus.
- Ellis, John.
- Fallon, Seán.
- Fitzsimons, Jack.
- Hanafin, Des.
- Hillery, Brian.
- Kiely, Rory.
- Killilea, Mark.
- Lanigan, Mick.
- Lynch, Michael.
- McGuinness, Catherine I.B.
- Mullooly, Brian.
- O'Toole, Martin J.
- Ross, Shane P.N.
- Ryan, William.
- Smith, Michael.
Tellers: Tá: Senators Belton and Harte; Níl: Senators W. Ryan and de Brún.
Question declared carried.
An Leas-Chathaoirleach
Before I take the matter on the Adjournment of the House would the Deputy Leader of the House indicate when is it proposed to sit again?
It is proposed to sit at 10.30 a.m. on Thursday, 9 May 1985.
Is it proposed to take the Adjournment matter now?
An Leas-Chathaoirleach
Yes, we will go ahead.