Éamon Ó Cuív (Galway West, Fianna Fail)

I will not be able to do justice to this very complicated subject in ten minutes, but I hope to lay down some basic principles, the first of which is that we should acknowledge what has long been a basic characteristic of Irish society, namely, that families desire to own their own homes. Second, we must recognise that the vast majority at risk of losing the family home bought it in good faith.

The reasons people are in difficulty vary greatly from person to person and from family to family. Some problems arise because loans were not sustainable in the first instance. In some extreme cases which I have encountered, it is fair to say the banks put down fictitious information on income when granting loans. Statements were also made on the ability to obtain a lot of income from renting a room. This income never materialised in many cases. Some problems arise owing to a loss of or a reduction in employment, particularly in two income households. In the latter case, a couple - for example, a construction worker who formerly had the largest income and a person with a State job - may be trying to survive on income from one job, or on much reduced overall income.

We must recognise that, even in the good times, there were people who could not repay their mortgages because of alcoholism, marriage break-up, gambling problems, etc. These will always have to be dealt with, ultimately under the social housing system. This, however, is not what we are talking about; we are talking about those persons who bought homes in good faith and who, for genuine reasons addressable over time, cannot pay for their houses.

We must recognise that if people can only pay a certain sum of money - one must work out how much every person can pay - it will cost the taxpayer, no matter what approach is taken. The State often does not recognise this. If one decides on a write-off for the banks or allows people not to pay the banks, one must recapitalise the banks even further since the State now owns them. The idea of investing €10 billion in the banks to arrive at a base level from which one could start writing off willy-nilly without having to top up the fund seems to defy logic. If one decides to allow repossessions, on the other hand, one is choosing the dearest answer of all because the State must step in and provide social housing. It must buy the whole house for a person to pay for part of it.

The third option proposed is a half and half option, whereby one might own half the house and pay half the mortgage. In this regard, there were some very interesting proposals made by New Beginning today. There is another version in the Keane report where it is proposed that half the house would be purchased and rented back to the client. My experience of the shared ownership scheme was that it was immensely complicated legally. Ultimately, this moves away from the fact that most want to own their house outright. They do not want to wind up as tenants in a house they bought 30 years previously.

My final point concerns a practice in which the State has always engaged but which, for some reason, faced resistance from all the groups set up. We set up the Cooney group and now have the Keane report. I refer to the State directly helping those who need help temporarily until their income grows once more. It is a matter of parking the issue of negative equity.

Deputy Mitchell's point was very interesting. She stated the immediate crisis for people concerned their keeping up mortgage and interest repayments in order that they could retain a certain degree of ownership of their houses and not go to bed at night in total fear of repossession.

I have been told that pursuing the third option would be too dear. Would it be dearer than the first two solutions? I refer to the totally crazy set of circumstances where one does not know what the banks will have to write off. I refer to Allied Irish Banks and building societies, for example. The option would certainly be no dearer than investing the money in social housing.

I will give two examples of schemes under which the State gives direct assistance: the mortgage interest supplement scheme and the mortgage interest relief scheme. The latter used to be much more generous when we were poor because a marginal rate of tax applied. The standard rate now applies. We had proposed and decided to reform the mortgage interest supplement scheme, on which I have documentation to hand. The scheme involves working out one's basic weekly income and stipulates one cannot live on less than the supplementary welfare allowance. It is implied that, in the event of one's financial problem being caused by unemployment, 100% of the interest, up to a certain limit, will be paid directly to the bank on one's behalf. One could develop that scheme, as Fianna Fáil was going to do, because the payer of the money could begin to call the shots. We were going to get rid of a stupid rule stipulating that if one's partner was working for more than 20 hours per week, one was not entitled to the mortgage interest supplement, no matter what financial difficulties one faced. We proposed that this rule be abolished in the spring social welfare Bill to help a large number of distressed individuals at the very bottom. I cannot understand why the Minister, Deputy Burton, did not introduce that change. It was a one-line change, it had been agreed and my officials stated it could go into the spring social welfare Bill. It would have been a get-out-of-jail clause.

However, we were not giving a free lunch because in return for all of this we said the banks would have to carry the first six months of any problem with arrears. Furthermore, we said that since the State would pay the banks directly, the banks would not be allowed to charge more than the basic interest rate and there could be no penalty interest because the risk was no longer there as long as the mortgage interest supplement was being paid. In addition, we stated that if those involved in the sub-prime market wanted the mortgage interest supplement payment, they would have to cut the interest to a core rate. We could have set it at 4% and asked them whether they wanted the interest. We could have paid it directly to the bank as long as the person was entitled to the supplement and the rate was 4%. It would have been on a take it or leave it basis and those concerned would not have been allowed to pay any money themselves because we would have already determined that they could not.

My experience of those involved in the sub-prime market is that, faced with that situation, they would take the money because it would amount to a question of some money or no money. They have argued that the reason they charge high interest is because of risk but if one takes away the risk for the moment, why should they get a premium for the risk?

As a result of multiple debts everywhere, the Bill we discussed earlier is crucial. There is no one-size-fits-all solution. I do not believe that the fundamental approach in the Keane report is the right way to go. It will cause residual problems in future which are unfair on a generation. We should address the issue by direct investment, set it aside in our priorities and help those who need it and given them a reasonable family income. The supplementary welfare allowance income is too low for families with higher expectations and I have some ideas in this regard. Since they are involved in rearing the next generation, the money would be well-invested and, in time, one would get back one's investment.

People may say we cannot afford this. Two figures in the Department of Social Protection have always intrigued me. One is always informed that one cannot afford certain things that might be socially affordable. I am not convinced that if one makes a given choice one cannot afford it because there would be great savings for the banks since there would be no excuse for people not paying. Let us remember two figures. We were paying €69 million in mortgage interest supplement per annum to help people own their own homes, with all the attendant value; we know the social value of people owning their own homes. We were paying €900 million plus to people to rent properties in the State. Let us think about that. We paid more than €900 million as opposed to €69 million. The latter sum has the great social advantage of enabling people to own their own homes while the former sum has all the disadvantages associated with temporary accommodation, such as bad thermal conditions.

It is necessary to decide on priorities. The way forward is to sustain those mainly within the 30 to 45 years age group in reasonable comfort through a radical scheme. What we have under discussion amounts to tinkering at the edges, deferring the problem and creating a further serious problem that will arise in 20 years time.

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