Éamon Ó Cuív (Galway West, Fianna Fail) | Oireachtas source

I am delighted to have an opportunity to speak on this subject. If there is any subject that is causing more grief to more families, I certainly do not know about it. The whole financial issue is one of the major challenges facing people in our society. I would like to look first at an issue that seems to loom large when people look at possible solutions, namely, the issue of moral hazard. It is the most ridiculous concept when one thinks of the significant number of the 140,000 to 150,000 people who are either in mortgage difficulties or are paying their mortgages and just hanging in there keeping repayments up to date. Using moral hazard as an excuse for doing nothing is just that - an excuse, and nothing more. If one were to carry moral hazard to its logical conclusion, we would have the ridiculous situation where those who contributed to their health problems would be examined before they would be allowed to go into hospital for treatment at a cost to the State.

The majority of people in trouble with their family finances are in trouble because houses were too dear, they borrowed too much money and they had expectations about their salaries which exceeded what is reasonable. I accept there were those who were foolish, but there are people who get assistance from the State all the time who make bad decisions. This idea of moral hazard seems to me to be the latest new fad. It very much reminds me of Victorian attitudes about the deserving and undeserving poor - the more things change, the more things stay the same. I do not and never will buy into that type of thinking.

Let us stand back from this problem and look at how a person could be in trouble today with their mortgage despite having taken very prudent decisions all along. Take the example of two lower end public servants who borrowed money because they had a child and wanted a home. They paid over the odds for a house because that is what one had to pay to get a house in the years from 2004 and 2006. They did it on the expectation that their salaries would have gone up by at least 5% or 6% in the intervening years, which would have been very modest. They did it on the basis that they would follow a career path within the public service and that they would have perhaps got promotions as the years went by. Was it foolish of them that they did not build into that the 17% reduction in their salaries through pension levies, pay reductions and so forth, the ban on recruitment which has meant that promotional opportunities are gone, a range of new taxes such as the household tax which have been introduced, the decrease in child benefit, all of which added together have meant that instead of going up, their income has in fact been coming down in the intervening years, and variable interest rates on mortgages have been going up?

Here we have a very prudent couple who are in trouble because events have taken place which could not have been foreseen by anybody. The reality is that they would be the lucky couple today and would still be in employment. As we know in many cases, people have lost employment and in two income families, one of the incomes has largely disappeared. The reality is that many people are in trouble through no fault of their own.

The Government has created a situation where it has the banks sitting in judgment above all people, having a veto over the arrangements and deciding whether the person is adhering to a proper financial plan or not. It would be more proper if the banks were made to answer for themselves rather than sit in judgment on everybody else. Trying to solve 148,000 cases on a case-by-case basis is ludicrous. The amount of time it takes this State to deal with one social welfare case, which is simple compared to sorting out a person's finances, should be a warning that if we want to go through all those cases on a case-by-case basis, we will strangle this economy and we will be at it forever. It is just not doable. It is time we realised that we need to make decisions for a wide swathe of these people who are in difficulty because their income has dropped and we have to help them in the simplest way.

I was very interested in a proposal made by the Phoenix Project, whose representatives met the Minister for Finance recently. They basically said there is a great number of people in mortgage difficulties who should be helped by an automatic system rather than by a person-by-person solution. They proposed that the tax relief at source, or TRS, would be increased from 30% to 60% for those who bought during the boom years, and this group has already been defined under the law. If a person is paying €1,000 in interest per month, then currently about €300 is paid by the State through the tax system straight to the bank, irrespective of the person's personal income. By increasing it to 60%, the person would only have to pay €400. Once that is done, nobody would have to apply because the reading would be changed by the Revenue Commissioners. Instant relief would immediately be provided to those who are just hanging in. Those just paying interest only could start paying interest and capital. Those paying 80% of the interest could pay the full interest. In other words, everybody would move up a notch. Then we could deal with the people in serious trouble on a case-by-case basis. We would have a small enough number of people who could not be rescued for all sorts of reasons. There were always people with social problems in the mix and we could deal with those on a case-by-case basis.

The cost of this would be about €300 million per year. There is a perfect way of financing this because the Government has claimed that its cash flow has improved by €1 billion per year because of the deal it has done on the debt of Anglo Irish Bank. I call on my colleagues in the House who are members of the Fine Gael Party or the Labour Party to use a portion of this money to help the hard-pressed mortgage holder. The argument against this will be that there might be some people with mortgages who will be helped and who might not need the help. When we give free fees to people, free access to hospital care and so on, we often help people who could pay for these out of their own pockets, so there is nothing new in this. Neither should we forget that until about ten years ago, people got tax relief on the mortgage at the marginal rate of tax, so many people in the past were getting 48% and 60% tax relief on mortgages. Finally, should we spoil the party for the 95% that we would help significantly because maybe 5% would benefit? If we are really worried about that, we could put in a clawback on the high end of the income in case we might accidentally help a few people who do not need it. If 95% would gain genuinely from this simple, effective and non-bureaucratic measure, then we should do it. If a few people were to get a bonus from that, then what the hell.

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