Joe McHugh (Donegal North East, Fine Gael)

I am glad to have the opportunity to contribute on this issue. I thank all those within the constituency who contacted me in the past week with their own proposals and suggestions. I thank them for what were often heart-felt contributions via e-mail, letter or the telephone to outline their predicament and the problems they face on a daily basis. Rather than it being a daily or weekly problem, this is a daily nightmare for many who are in negative equity and, as the previous speaker mentioned, have a monkey on their back. They feel that there is no light at the end of the tunnel. Therefore, we have an enormous task in that regard. The Minister for Finance is under no illusions about the enormity of that task, but the objective of the Government must continue to be keeping people in their homes, reducing the burden and redressing the power balance between banks and mortgage holders. Ultimately, we are representatives of the people and our constituents; although there are rules and guidelines, we must take cognisance of the fact that this is not a question of moral hazard alone but also of morale hazard. People's long-term expectations only focus on negativity and they are not planning for the future in the way they should be because they do not know what will happen in six months, 12 months or five years time. We must take this on board.

I have received different suggestions and submissions in the past week. There is an underlying theme of responsibility in that people want to face up to the problem. They want a solution and are not willing to walk away. There is an argument that some cannot pay, while others are not willing to pay, but that is a red herring. All the people with whom I have been in contact offered a solution and nobody is proposing a blanket write-off or arguing that he or she is willing to walk away. They want a solution, which could be as simple as handing back the keys to the bank and moving to rental accommodation. That suggestion is made because people feel trapped and the banks have been using a form of entrapment, of which we must be conscious.

I have heard various suggestions regarding next generation mortgages, while certain groups have proposed a 35% of income threshold. It has also been said people should pay what they can and park certain segments of the mortgage repayments for ten years or longer. We could consider what happened in Japan and Germany where there are mortgages of up to 100 years. People are looking for solutions because they face a serious predicament and are in negative equity. They are aware that at current market values they will never recover the initial purchase price. We are talking about people who bought their houses for the purpose of making them their homes. We are not talking about people who speculated and took a risk in buying second and third properties, rather we are talking about people who are living in their primary residence and we owe it to them to find some pathway to help them to get out of their predicament.

There are aspects of the Keane report that are positive. However, I would be the first to admit that there are also aspects that are not so positive. It identifies the causes of the problem - the lack of affordability, negative equity and future prospects. With prices down 43% since 2007, the lack of affordability is the key problem as people's incomes are also down. They are not in a position to pay back what they owe and are trying to negotiate with credit card companies. It is not just a question of mortgage repayments; it seems as if people are trapped by a burden of debt on a day-to-day basis. They are sacrificing the purchase of proper food in order to meet their mortgage repayments. These are the decisions and choices they are faced with on a daily basis and on which we need to engage with them. The banks must do this on a one-to-one basis. In some instances, they are trying to meet people but come up with a short, medium or long-term plan.

One must ask whether in reality we are kicking the problem down the road. It is possible we are doing this if we do not get to the core of the problem of negative equity. We must be honest and admit that some people with mortgages know in their heart and soul that they will never be able to pay them back. That is the reality and what is being said to me. Many people find themselves in this predicament.

In its most recent report the Central Bank notes 777,000 mortgages to a value of €115 billion on the books at present. With all the realignments, readjustments and deleveraging that is going on in terms of the Minister's direct and conscientious role he has undertaken so soon after the recent election, one must ask whether banks have prepared for the rainy day in terms of commercial loans and NAMA properties on their balance sheets. Where does the private citizen come into the equation? That is something of which we must be conscious as well.

We must look at all the options in terms of writing down debt. We must consider parking up part of the mortgage for a period and other solutions. We must give people hope. At the moment they do not have hope. Not all people want to throw back the keys and leave this country. People still want to participate in this country's activities. They are confident that we are trying to get our house in order from a fiscal and budgetary point of view. They can see that. It might seem a contradiction given that we find ourselves in this predicament that there is a lot of positivity as well as negativity. There is a lot of positivity around what the Government is attempting to do in acknowledging that we have a mess on our hands. We have a complete and utter disaster in terms of over-expenditure. Historically, the tradition and mindset has been to throw money at problems. As well as learning the hard lessons we must look at other countries. The Canadian Minister for Finance was in this country during the week. He talked about the Canadian experience and the fact that they always had tight budgetary mechanisms and fiscal control and that is why they did not end up in the same mess in which we and other countries found ourselves.

I reiterate my point about morale hazard. I accept there is a moral hazard. That argument is made by people who do not find themselves in this difficulty. That is a legitimate argument. However, there is a morale hazard also. According to John Maynard Keynes's theory of expectations, people base their current expenditure on their long-term expectations. Currently, long-term expectations are blinkered. Many people do not believe they are going to get out of the current monkey-on-their-back scenario. We must be conscious of that. I welcome the fact that the Minister is open to suggestions from the other side of the House. He engaged with Opposition Members on the Central Bank and Credit Institutions (Resolution) Bill and he is willing to engage on this matter. I am confident we will work towards a solution to this mammoth problem.

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