Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I welcome Deputy Quinlivan. It is nice to see a fellow Limerick man on this committee. When I referred to the issue relating to Limerick being of a lesser magnitude than that which relates to Dublin, I was not talking about the local authority lists for social housing. I was specifically talking about homelessness. I think the Deputy would agree that while there is a homelessness problem in Limerick, it is not of the same magnitude as the problem in Dublin. As a consequence, it could be remediated more easily.

The answer to the question about extra capital for local authorities is "Yes". However, they have not spent their allocation of capital for 2016 and are not on target to spend it. There are other problems in the relationship between the Department of the Environment, Community and Local Government and the local authorities, as well as in the capacity of the local authorities to use the funds they are given. There will be a review of the capital programme in 2018. It may even take place in 2017 with the way things are going. At present, it looks as if there will be extra capital to be allocated over the five-year period of the capital programme. Social housing would be very important of course.

On the flexibility clause in the European rules, it is there and we have talked about it in Europe and pushed very hard. Currently, however, we do not meet the criteria for applying, particularly in light of the economic cycle and other factors. As stated previously, investment can be smoothed out over four years. The fiscal rule that applies to capital is taken over a four-year cycle, so €1 million can be €4 million when it is put across the four-year cycle. I will ask the chief economist, Mr. John McCarthy, to comment on the flexibility issue when I have dealt with Deputy Quinlivan's other questions.

The Government is committed, as it always was, to reducing and eventually phasing out the USC. It was introduced as an emergency tax and, in our agreement with Fianna Fáil on its support for a minority Government, we have agreed that the emphasis will be on reductions in USC for low and middle-income people in particular but not exclusively. That is our position on the issue. It comes back to a very simple point. When we were kids, we all learned the story of killing the goose that lays the golden egg. If we kill the economic goose that is laying the resources for all of our social and economic objectives, we will have no golden egg and will be able to do nothing. The USC is for people at work. They are paying too much in personal taxes.

We must progressively encourage working people and give them extra spending power through the tax system and wage increases. Through this, the economy can continue to grow at a projected rate of 5% this year and nearly 4% next year. There must, however, be a balance. The Government cannot simply spend on social programmes and state to the taxpayer, "You are going to pay for this now, lads. Keep working. We admire the way you work and would like to compliment you on your hard work." We have to keep a balance in the economy whereby working people can see the value of their work in their pay packages. That is why we are committed to a reduction in USC. Now that we are out of the main crisis that nearly bankrupt the country, we can agree that social programmes have to be repaired. Of the money available to us, we will spend a much bigger proportion on the expenditure side than in providing for tax cuts, but we will still have some tax cuts in any budget in order that working people can benefit from their hard work, as well as from the improvement in social services. That is wise.

The level of mortgage arrears is a big problem, but the measures that were put in place have worked in that there has been a very big decline in the number of people in arrears. It has fallen well below 50% of the number who were affected when the crisis commenced. This is due to two reasons: the measures introduced and their implementation by the banks; and people going back to work. People are again in a position to service their mortgages. Many people are picking up where they left off in their payments, or making reduced payments, simply as a result of being back at work or their partner being back at work. It is self-correcting. We are now in a position where just north of 30,000 people with mortgages have a particular difficulty. There is a hardcore who are finding it very difficult to cope. In the programme for Government we are designing a new set of initiatives to deal with that cohort. We will see the programme in the next 24 or 48 hours. I do not wish to breach confidence, but it is not just a couple of makeweight measures added to what is in place. This is a major departure to deal specifically with that cohort which is not being reached by existing measures.

NAMA is fulfilling its social mandate by providing houses. The figures I gave the committee are the ones we received from NAMA which has provided well in excess of 4,000 houses, but the local authorities do not take all of them for a variety of reasons. I am not always sure what the reasons are, but they are to do with local authority policy. It is not a failing on NAMA's side. It states 2,000 houses have been given and taken by local authorities.

Another way NAMA is fulfilling its social mandate is through the use of its cash flow and available resources to build 20,000 affordable houses in the next five years. That is a huge commitment to social policy because we all agree that there is a problem on the housing supply side. NAMA can do it off balance sheet. All over the country there are examples of it selling playing pitches to sports clubs and accommodation of various kinds at cost price. I am sure different Deputies would be able to give examples from their constituencies. NAMA is strongly fulfilling its social mandate.

The other thing Deputies who have been here a while know is that NAMA has an e-mail and a telephone helpline for Deputies. While a Deputy cannot legally make representations to NAMA on a commercial issue, he or she is legally entitled to seek any information he or she requires from NAMA on its social programmes, policies or sales programmes. This can be done by telephone or e-mail. A Deputy is not committing any offence or putting himself or herself at ethical risk, as long as he or she stops short of lobbying for a commercial reason when engaging with NAMA.

The last point concerned rent certainty, which we think could be counterproductive. I remember the housing crisis of the 1990s, which led eventually to the bust. There were three reports by Dr. Bacon calling for intervention in the market. Intervening in the market can be quite tricky and many of the interventions of that time caused more trouble than solutions. One needs to be very careful. It is very easy to say we want to have rent certainty and not allow rents to rise but who will get involved in investing in rental property in that case? Unless a landlord in the private sector can generate an income from investing in a block of apartments, or a house which he converts into two apartments, he will not do it. If one interferes with the market to the extent that normal commercial activity does not proceed, one will not fix it; it actually causes the problem. When I received proposals from the Department of the Environment, Community and Local Government about rent certainty my advice was that some of the proposals could cause difficulty. We agreed with certain things but not with others. One has to be very careful because most of the housing market is supplied by the private sector. Affordable houses are supplied by private vendors and rental accommodation is provided by private landlords. One can intervene to increase supply but if one intervenes in a way in which the consequences are to restrict supply, the situation might be improved for a cohort of tenants on a temporary basis but it would lock everybody else out of the market. It is very tricky and I do not claim a monopoly of knowledge. Maybe there are measures around rent certainty that would work but not the ones that were proposed to me by the Department of the Environment, Community and Local Government. That is the reason we did not go down that road.

I will finish where I started. There is a supply side problem which needs to be fixed very quickly. Part of it is a funding problem and there is a also financial problem. I am absolutely delighted that the first serious action of this Parliament will be this committee addressing these issues and bringing forward a report, after due analysis, which can be turned into policy to help resolve the situation. Mr. McCarthy will comment on the question of flexibility.