Stephen Donnelly (Wicklow, Independent)

In February I spoke to a woman in Arklow who outlined to me the situation in which she found herself. She and her husband were self-employed and had recently lost their business. They are from Dublin, but they bought a house in Arklow because that is where they could afford to purchase one. They are now in negative equity. When I spoke to her, she stated they were about to run out of money and that because they were self-employed, they would not receive any assistance from the State. She indicated that they would default on their mortgage some three weeks later and that they were trying to work out how they might keep their house while also being in a position to afford to buy food for their children. There are many people who find themselves in similar situations.

Approximately 200,000 households are in negative equity. In addition, in the region of 45,000 households are in arrears for more than 90 days. This does not include all of the restructuring that has happened. Inevitably, these figures will continue to rise. We know that jobs will continue to be lost, that wages are falling and that it is inevitable that taxes and interest rates will rise. The total number of households in mortgage arrears doubled between December 2009 and December 2010 and this number will continue to climb. Last year the banks were involved in 600 repossessions which occurred during a moratorium, under the provisions of which the banks cannot pursue mortgage holders until they have been in arrears for 12 months.

What is the result of this for those who are in negative equity or arrears? Those who are in negative equity and arrears are completely trapped. They are going to lose their homes and under current policy, their debts will make it impossible for them to begin again. Under existing bankruptcy laws, their debts will follow them forever. They will not be able to obtain new mortgages or invest in their futures or those of their children. They are trapped. Those who are in arrears will ultimately be forced to dispose of their houses in fire sales. Those who are in negative equity and can afford to pay their mortgages will be obliged to use all of their income to clear dead debts. These individuals will not be able to participate in the economy or make an investment in their children's education or their futures.

There are several aspects of what happens in Ireland which make matters worse. First, we have got the most stringent bankruptcy laws in Europe, so people's debt follows them forever, unlike in the UK and the US where people can start again. Second, we own the banks and, therefore, any burden sharing we insist be taken by the banks ends up being taken on by the people, which is difficult in the current environment. Third, we have extremely weak tenant protection. There is an entire generation of Irish people who will be renting for the rest of their lives. They will not be able to get out of negative equity. They will not be able to buy a house anywhere. They will have to raise their families under circumstances whereby a landlord can give them five or six weeks' notice to leave. That is a far from ideal situation.

The question is whether we should help people in this situation. One argument being put forward is that these people made free choices and they should accept the consequences of their actions. As Deputy Pringle alluded to, that is a principle we would all understand, but it does not seem to apply to bondholders, where other people bear the cost of their actions. I agree with the principle and we have to ask who is culpable for these arrears and the huge negative equity. The people who took out the loans must bear some of the responsibility, but who else is culpable? We know the banks are culpable. We know they gave out 100%, 110% and 120% mortgages. We have plenty of anecdotal evidence that they encouraged people to borrow more and more. We know the ratio of income to total mortgages taken out increased to a level that was unsustainable. Should they bear some of the burden? Of course they should.

The State also bears some of the burden. We know the Financial Regulator failed in his duty and we know the previous Government was a cheerleader for the property boom. It provided tax breaks, let the regulator fail and so on. Unfortunately, we know the current Government failed to do anything about this when in Opposition. Its constituent parties were very silent on the issue until it became far too late to do anything about it. Therefore, the Government, the State, the banks and the people who took out the loans are all culpable and therefore should all share the burden of the debt. That is a simple principle that we should have applied also to the bondholders, but we decided to do what Europe wanted instead.

The current programme for Government contains some good ideas and I commend the Government on them. The programme mentions increasing the interest rate relief for first-time buyers, extending the moratorium for repossessions, fast-tracking personal bankruptcy reform, and bolstering the power of the money advice and budgeting service, MABS, to include binding arbitration, which would allow for burden sharing. Unfortunately, when pressed on this repeatedly over recent weeks, the Minister for Finance would appear to be dodging the question. He answers by saying, for example, that it is a matter for the Central Bank. I encourage the Government to bring forward a serious timescale for when these measures can be introduced. It would be very useful.

We need debt forgiveness for mortgages in negative equity, again following the principle of accountability. We can use debt for equity deals. They have been used very successfully in the UK and can be used in this country as a reasonable form of burden sharing. We need to extend the interest payment protection to people who are working.

See this speech in context