Bernard Durkan (Kildare North, Fine Gael)

I am glad of an opportunity to speak on this report which will lead to legislation. I have listened with interest to various contributions from both sides of the House and we need to concentrate on a couple of matters at this stage. First, we should all be conversant with the situation as it affects our constituents. I am sure each Member of the House has had direct contact with constituents who find themselves to varying degrees in deep debt arising from circumstances outside their control. The Keane report touches all the right buttons and examines them, but some of the proposals are not feasible and I would definitely advise against some of them.

About three years ago, we all recognised that the situation would get worse. I remember asking Ministers in the previous Government whether they were prepared to introduce legislation to deal with household mortgage debt. It was mentioned at the time but nothing further happened. I fully understand that we must take various tentative steps before we can deal with the situation definitively.

To be fair, some banks are willing to talk to householders and assist them. Others, however, just go through the motions and say, "If you come to us in time, we'll deal with it and we'll work something out". They do not always live up to that, however. We should be aware that some of the latter institutions have been beneficiaries of considerable assistance from the State. Other lending institutions that have not been beneficiaries of State assistance have been willing, and are currently working out a formula, to help out householders.

The concept of compound interest must be abolished. There is no sense whatsoever in attempting to collect compound interest on a €250,000 mortgage from people who are unemployed through no fault of their own. In any event, compound interest is highly questionable because it only acts as a multiplier to give a book value for accountancy purposes to the lending institution. It does nothing else. It drives the situation further down the road so the householder can never recover from debt. If one follows that to its logical conclusion, what happens eventually is that the house in negative equity is repossessed and sold on the market if they can find a buyer. As a result, the bank, and the Government that has funded the lending institution concerned, will suffer.

Over the last three years, in common with everyone else in this House, I have dealt with countless constituents who have been faced directly with this particular difficulty. Discounting compound interest should be a prerequisite to everything because nothing will work if the previous attitude is continued. If one tries to work out a programme for somebody to get out of their difficulty and they happen to be unemployed, the lending institution will say "That's not sustainable, Deputy". However, when the mortgage was granted in the first place it was not sustainable either, yet nobody seems to recognise that now. The sustainability of mortgages that were granted a few years ago must be measured against the current situation.

Deputy Wallace mentioned some interesting things with which I agree. According to an old rule, 2.5 times the borrower's annual income dictated the level of mortgage to which one was entitled. That was deemed to be sustainable. In the 1980s it was regarded as a bit too restrictive, so we extended it to three times the borrower's income. It was therefore possible to borrow three times the major earner's income, and repay at the rate of one fifth. That scheme gave a considerable amount of scope, although most lending agencies criticised it. The insurance companies and investors were also highly critical of it. The insurance funds were supposed to be attracted by this scheme but they did not like it because it did not work for them and there was not enough return. Of course, there was never enough return for investors, which is one of the problems that has left us where we are at present.

We need to go back and establish what is sustainable now. In seeking to resolve any such problem facing us we should determine what is sustainable for people, given their current income. There is no sense in saying that they have a prospect of getting a job next week because we do not know that. They may or may not have a job next week. Over a period of two or three years we must work out an achievable programme that will be within their reach.

The mortgage-to-rent scheme is a good idea.

Where there is no hope of recovery, that is the way out. It is a temporary option, but one must question who will determine the rent to be paid. On what Deputy Wallace said, many housing units are in the hands of investors and landlords. The banks or lending institutions will have a strong vested interest in determining the level of rent to be paid. Will they determine it? If so, that is bad. The rent to be paid must be determined by somebody else.

I strongly disagree with voluntary agencies taking on a major role. There are voluntary agencies which have been funded in the order of 100% by the State. They have been allocated free sites and capital allowances to build houses and, in some cases, receive an ongoing grant from the respective Departments to spend. In some cases, there is no company; articles of association have not been observed; there is no proper accounting and no annual returns are submitted, yet they are pursuing their tenants in court. They are pursuing them, despite the fact that they did not exist for a considerable period. I am deeply concerned, therefore, about handing over any responsibility to voluntary agencies. While some are good, I can assure the House that there are some serious problems also. In the next five years these will emerge to a far greater extent than we have witnessed heretofore.

Some 25,000 houses are already in the care of voluntary agencies. The concept behind voluntary agencies sounds great, but it is very difficult to control the system which was introduced by a former Minister, whom I will not name, as a means of taking responsibility from the local authorities. The local authorities regarded their not having to take responsibility anymore as a great opt-out, but now they want to regain control of the housing stock because they have none. That is the point correctly made by Deputy Wallace. For a period of 15 to 20 years, there was little investment in what is now called "social housing". It was called "local authority housing" at the time. Some genius came up with the term "social housing" and immediately responsibility was abdicated by the local authorities. However, they now want it back and they are right because there is a serious problem associated with considerable dependency on private rented accommodation. There was not this demand 20 or 25 years ago, or even ten to 15 years ago.

I would love to have at least half an hour to talk about this subject because, unfortunately, I have had to appear in court with some of my constituents on numerous occasions in the past three years. Thus far, we have not lost much ground, except in very extenuating circumstances.

I noticed in the past couple of days that assessments of a person's ability to repay a loan or mortgage took child benefit into account. It is not supposed to be taken into account in such assessments. Doing so is a new phenomenon. The benefit is payable for children. It used always to be excluded, but some smart alec introduced it in recent times in the assessment of mortgage eligibility. From where in God's name did this come? I could elaborate on this issue and apologise to the Minister for ranting about the subject. It annoys me intensely. Unfortunately, we must now all deal with it to a far greater extent than we used to.

Some of the proposals made are reasonable, while some are dangerous. However, all of them need to come within the control of the statutory authorities for implementation at a later stage.

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