Joe Carey (Clare, Fine Gael)

I welcome the opportunity to speak on this matter. I am pleased that this debate is ongoing in the House. I thank the Chief Whip for facilitating it. This is a matter of great concern to everyone. I commend the level of participation in the debate and the ideas that are being proposed. The issues of mortgage and personal debt are having a damaging impact on our society. The Keane report should be viewed as a vital first step on the road to addressing mortgage and personal debt issues in this country. All the signs indicate that the number of people sliding into difficulties is increasing steadily.

The Central Bank has published figures indicating that 56,000 households were in mortgage arrears in June 2011. According to the Department of Social Protection, some 19,000 people are receiving mortgage interest supplement welfare. When one considers that many households have come to temporary ad hoc arrangements with their lenders, it is clear that almost 100,000 Irish households are experiencing difficulty.

This crisis has been allowed to develop. The banks were lending too freely, with no regulation or oversight and little thought for the day when the Celtic tiger era would end. This crisis will continue to develop if action is not taken. I welcome the fact that the Government is taking on this issue. The Keane report offers a good starting point. Published figures show that between 1995 and 2006, the ratio of Irish household debt to disposable income went from 48% to 176%, which was an increase of 267%. This does not bode well when compared to the increases of 63% in the UK, of 9% in France and of 26% in Canada during the same period.

It is a pity that Deputy Ming Flanagan has left the House. He suggested that we did not raise this issue when we were in opposition during the last Dáil. We certainly did. Ministers in the last Government, which drove the crisis, have to put their hands up in this regard. When Fine Gael was in opposition, it raised these issues with the former Taoiseach and Minister for Finance at every opportunity. Deputy Bruton, in particular, did so.

House prices and exposure to mortgage debt are the main contributors to this problem. We must not forget term loans, credit cards and other exposures. These issues will also have to be dealt with. Many people feel that debt forgiveness is the answer. The moral hazard argument that would have been associated with debt forgiveness no longer holds any water in light of the State's bailout of the banking system. However, I do not think the solution is as simple as debt forgiveness. Nobody likes to hear that every mortgage that is in difficulty has its own set of individual circumstances and that, as a result, any blanket change has the potential to destabilise the economy even more.

Many people have said that the Keane report is flawed and have chosen to ridicule it. The Government has made a good start by inviting groups to make submissions, to examine the Keane report and to come up with recommendations. We need to have an honest debate. I do not ridicule the Keane report because I think it is a good starting point. There are no definitive answers in it, but it certainly starts a debate. It proposes a number of solutions that can be built on.

Some of the tools that are proposed in the Keane report, such as trade-down mortgages, split mortgages and the mortgage-to-rent scheme, emphasise the Government's commitment to ensuring that no family has to leave its home. That is also the primary objective of the Keane report. A methodology or framework for the use of the tools I have mentioned is also outlined in the report. It sets out a defined role for local authorities and housing associations. I expect that the role of housing associations in this country will increase. They play a significant role in Scotland as well.

The banks are capitalised to the extent that mortgage debt is covered. This cost is already in place. We are paying for it. However, there is a tardiness in the banks' approach to dealing with the issue. It is time for them to act properly. They have the tools and the necessary capital. The record of the banks in engaging with distressed mortgage holders is poor. Despite all the spin, jargon and rhetoric, the banks are not simply engaging with their customers. If we are to face up to this issue, the banks will have to sit down with their clients and come to arrangements. They have a clear obligation to engage. Such an approach must be taken across the board by our financial institutions if a solution to this growing problem is to be put in place.

I am glad the Keane report makes it clear that the introduction of modern bankruptcy legislation is an absolute priority. This aspect of the problem does not secure the flashing headlines associated with mortgages and negative equity. However, it is critical. The report of the Law Reform Commission advances us in this area. The fact that we are a modern consumer society with a dependency on credit means it is critical that we now establish a principles based system allowing for debt resolution in a way that limits overall costs to society. In essence, this means a modernisation of our bankruptcy laws. The moral hazard issue remains valid despite the fact that the banks have been so favourably treated. We cannot allow debt in itself to become all consuming, as it has the potential to do, because of our particular Irish set of personal debt circumstances.

We need to create the correct balances between the rights of creditors in terms of their expectations that debt will be repaid and the obligations of debtors in terms of their ability to pay. Having said this, modern insolvency legislation, which must include mortgage debt, is a useful tool that the citizen can use to stop the stonewalling of the banks that is now occurring as they deal with individuals in difficulty.

I am glad the Minister has initiated this debate and honestly acknowledged that there is no magic solution. Until we sort this out, there will be stagnation in our domestic economy and no amount of export recovery will take up the slack. We need to break the impasse created whereby society can distinguish between those who can and those who cannot repay their debts. The historical soft treatment of the banks has clouded the issue and for genuine progress to be made we need clear blue water between our banking system, which should facilitate not drive the economy, and the Government and the Oireachtas.

The problems associated with mortgage debt and personal debt needs clear action. There is no silver bullet or one size fits all solution but we must seek and introduce a range of measures that aid those in difficulties and who face unsustainable mortgages. The Keane report is a decent starting point from which solutions can be developed.

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