Joan Burton (Dublin West, Labour)

There has been a dramatic rise in the level of mortgage arrears in the past two years and the trend continues. Some 45,000 households are more than 90 days behind with their mortgage payments and another 56,000 households have already been forced to restructure their loans due to difficulties in making repayments.

This is the legacy of the previous Fianna Fáil-led Government, which failed to rein in the reckless lending of our banks. I have visited several Money Advice and Budgeting Service, MABS, offices and have met also with representatives from the Free Legal Aid Centre, FLAC, and have listened to many other debt advisors. I pay tribute to all those people, in particular those working in the Citizens Information Board, MABS and in organisations such as FLAC, the Society of St. Vincent de Paul, community law centres such as those in Ballymun and Coolock and organisations like Threshold and Focus Point which have been dealing with this issue. I include people involved in New Beginning and others in the legal professions who have been closely involved in trying to help and advise people. I very much welcome the statement published yesterday by a group of those organisations. This concerned debt settlement rather than debt forgiveness and was very positive. I hope to meet collectively with organisations interested in this area during the coming weeks to hear their views in greater detail. I have met many on an individual basis, both formally and informally. They understand the problem on the ground.

There are many people in difficulty with their mortgages who could never have foreseen the scale of the economic downturn that has left them unemployed or living on reduced income and consequently unable to meet their mortgage repayments. This is the core of the problem. Many of these people tell me they were sold financial products that were totally unsuitable for their needs. There are pensioners, for example, who redeemed debt for their children and are now themselves left with debt. There are ramifications of this in every facet of society. All families in the country are affected.

There were various measures that kicked the can down the road but muddling along in the hope that things will get better is no longer acceptable. The socials costs are potentially enormous as families and communities risk disintegrating under the weight of financial pressure and the uncertainty of what the future will bring. That is why the Government set up the interdepartmental mortgage arrears working group, which is chaired by the accountant, Mr. Declan Keane. I thank Mr. Keane, and the people who worked with him in committee, for producing a report which marks a further stepping stone on the long path to resolving the Irish mortgage and debt crisis. Mr. Keane has recognised that the mortgage arrears problem is complex and requires a complex set of solutions. The groups that came together yesterday produced a very good nine-point summary and acknowledged the complexity of the solutions required. This is not a one size fits all solution - that would not be possible.

Mr. Keane's report came up with a range of possible solutions including mortgage to rent schemes, trade-down mortgages, split mortgages and sale by agreement, all of which have received considerable attention. The key recommendation in the report, in my view, is the early introduction of new judicial and non-judicial bankruptcy options. I agree with Mr. Keane that without effective bankruptcy legislation the mortgage arrears problem will not be solved. I say that as one who worked as an accountant a long time ago and has some experience in this area.

The International Monetary Fund has insisted that personal insolvency legislation be introduced in this country by the end of the first quarter of 2012. My colleague, the Minister for Justice and Equality, Deputy Alan Shatter, is currently preparing the outline of legislation on personal insolvency as a matter of priority and I thank him for that. My Department welcomes the proposed introduction of the Minister's personal insolvency Bill. We see the early reform of personal insolvency legislation as key to resolving the mortgage arrears and personal debt problem. It is important to understand that the proposed personal insolvency provisions would represent a fundamental departure from existing law, essentially permitting debtors to rid themselves of all liability, including mortgage debt, in a relatively short period, namely, three years. This would not be painless for the mortgage debtor who may lose his or her home and credit rating but it would be a less harsh option than the traditional position in which the debtor remains bankrupt for 12 years. Crucially, the existence of the new personal insolvency options would force banks to the negotiating table, allowing both sides to reach a settlement.

Let me be very clear. The Government plans to drag the banks to the negotiating table by giving the borrower the power, with appropriate advice, to threaten the banks that he or she will declare bankruptcy and walk away from the debt unless the banks play ball. That is what it comes to. Once the banks know the borrower can walk away they will be forced to engage with him or her in a meaningful manner. The Minister, Deputy Shatter, also proposes debt resolution arrangements. I understand there may be some resistance from banks to the idea of including mortgage debt in the negotiation of debt settlement arrangements but I have news for the banks. They caused what is probably the worst banking crisis on record and have been more than adequately capitalised at enormous expense to Irish taxpayers and citizens, to every man, woman and child in this country. We intend to force the banks to the table to negotiate with the people to whom they lent so recklessly and without any due regard other than for profit and for bonuses.

The Government is putting these very important tools in the hands of people in mortgage arrears as there is sufficient and significant anecdotal evidence that financial institutions are often slow to respond to contact from debtors, are inflexible and, for the most part, are refusing to contemplate reasonable proposals. There are also complications with secondary debt. Many people with mortgage debts have credit union loans, car loans and debt on credit cards and store cards. I have heard the most amazing stories of people with multiple store cards. That is what the Celtic tiger period did - it sold debt to people who were vulnerable, not only in terms of houses but in a range of other areas.

I welcome the proposal in the Keane report to establish a new mortgage support and advice function and the suggestion to appoint approximately 100 advisors with financial, accounting and legal expertise to help borrowers in mortgage arrears in discussions and negotiations with their banks. The idea is that the service will operate on similar lines to MABS, which is funded by my Department. However, the new service will be funded - properly - by the banks. The new MABS+ service would advise customers in their dealings with mortgage lenders and help to bring trust in the debt resolution process, as MABS already does with thousands of individuals. My Department already funds the Citizens Information Board, the parent body to which MABS reports. I recently appointed Mr. Eugene McErlean, the former group internal auditor of Allied Irish Bank to the Citizens Information Board. As Deputies may know, Mr. McErlean was scapegoated by AIB when he brought the bank's overcharging to the attention of the AIB board several years ago. I will look to honest bankers like Mr. McErlean to advise the Citizens Information Board on setting up a system that will enable our citizens to work out deals with the banks that caused so much damage to our society. He and others like him will be in a strong position to advise the Government on how best to operate a service that will help our citizens and the banks resolve the mortgage debt problem in a fair and reasonable manner.

I remind the House that a large portion of the social protection budget is currently being used to deal with the fall-out from the banking crisis. My Department is spending €77 million on mortgage interest supplement, which in effect is a support that goes to the banks. It is also spending approximately €18 million on the money advice and budgeting service, MABS, and a considerable additional sum on the Citizens Information Board. The Department spends more than €500 million on rent supplement and, on behalf of some 95,000 people and families, is the largest purchaser of the services of private landlords in the country.

I would much prefer a situation where the banks used some of the billions of euro in capital with which they have already been provided to write off the bad debts borrowers cannot afford to repay rather than having the Government continue to support them through the provision of even more taxpayers' money out of the social protection budget. I thank all the NGOs - especially the Citizens Information Board and MABS - for offering a helping hand and a lifeline to many distressed individuals and families. Members may be aware that there are 52 separate MABS companies in operation in areas from west Cork to west Dublin and further afield and they offer a lifeline to people in these very troubled times.

We can overcome our difficulties if we work together. Yesterday's submission from the organisations to which I alluded earlier refers to settlement rather than forgiveness. That is the nub of the issue. There is no possibility - despite what many of us would wish - that this problem is going to evaporate. We must work it through, get our families and citizens to the other side, get people back to work and get businesses back on track. As former US President, Mr. Bill Clinton, stated at the global economic forum a couple of weeks ago, this is critical in the context of getting Ireland back on the road to economic recovery and also of recovering our economic sovereignty.

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