Dáil debates

Thursday, 6 May 2010

Adjournment Debate

Personal Indebtedness

4:00 pm

Photo of Joe BehanJoe Behan (Wicklow, Independent)
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At the outset, I thank the Ceann Comhairle for allowing me the opportunity to raise on the Adjournment the important matter of personal indebtedness and its consequences for our country. I was prompted to raise this issue of personal indebtedness and its consequences following many heart-wrenching representations from my constituents on the matter and I congratulate the Oireachtas Library and Research Service for its excellent publication on the subject.

This publication made for startling reading. The figures for Ireland's personal indebtedness are staggering. The debt to disposable income ratio of our citizens rose by 270% over the period between 1995 and 2008. This is the largest increase in a group consisting of Ireland, the United Kingdom, France, Spain and Canada and provides at least one international benchmark with which to compare Ireland's indebtedness with that of other countries with a similar standard of living.

The practice of reckless lending by Ireland's financial institutions was not only focused on property developers. Those who traditionally would have found it difficult to access mainstream credit in the past were advanced easy credit without regard to their long-term financial prospects or their understanding of responsible borrowing and the impact of external factors on the ability to repay personal debt. The Minister for Finance and the Government must deal with the consequences of this personal indebtedness for those affected. There are countless families and individuals throughout the country who now suffer from severe levels of stress and anxiety because of their inability to meet their financial obligations. The research shows that not only are there health effects for the individuals concerned but another consequence of a lack of disposable income is that health concerns are not dealt with adequately because the individuals cannot afford to seek the necessary treatment. There is clear evidence supporting the link between indebtedness and health problems and growing evidence of the direct and indirect costs associated with these problems on the public purse in respect of hospitalisation, treatment, loss of production and rehabilitation.

Another aspect of the report which must be dealt with concerns the problem that many of those who have fallen into debt have done so because they do not have adequate financial capability to manage their finances. This matter must be addressed in schools as part of the curriculum. Students should be prepared to deal with practical matters such as money management, disposable income, cost of credit and the implication of interest rates in order that they will not find themselves with this problem in the future. This Spotlight edition from the Oireachtas Library and Research Service notes the startling point that the National Adult Literacy Agency believes people may find it easier to understand moneylenders' repayment schedules than those of financial institutions.

I commend the excellent work being done by the Money Advice and Budgeting Service, MABS, and ask the Government to continue to support and promote this agency and its work. Following the collapse of the housing market and the current economic situation, people in our society have fallen into personal indebtedness for the first time in their lives. They may not all be aware of the support that MABS can offer and I believe Members must support and promote this vital service continually as it definitely can make a difference to those struggling under the burden of debt.

In my constituency, I have seen a large increase in the numbers of people seeking support. There is much anecdotal evidence about the rise in moneylending throughout the country and all Members are familiar with the scourge of moneylending in marginalised communities. Moneylenders prey on the vulnerable and must not be allowed to get a further foothold in disadvantaged communities.

In this regard I commend the excellent work being done throughout the country by the dedicated volunteers of the St. Vincent de Paul Society in combating the scourge of moneylending and more generally in dealing with the plight of personal poverty and indebtedness suffered by many people in disadvantaged communities. Furthermore, I wish to put on the record at this time my personal sadness at the death at the age of 91 years of Mr. Jim Pyne, a life-long member of the St.Vincent de Paul Society in Bray, County Wicklow. This was a man who railed consistently against moneylending and moneylenders and who served the people of his community with energy, dedication and selfless generosity.

I call on the Government to promote innovative ways to deal with the issue of personal insolvency. In other jurisdictions there are a number of schemes individuals can access such as individual voluntary arrangements and debt relief orders. We need urgent reform of our personal bankruptcy and insolvency laws which reflect the modern dimensions of these matters.

The Government needs to show the people of Ireland that it understands that factors outside their personal control have greatly impacted on people's personal indebtedness. It would be a fitting response to the current economic crisis if the Government initiated some person-centred schemes to help the families and individuals around the country who find themselves in financial crisis brought on by negative equity, reckless lending and unemployment. This would demonstrate that the Government cares about the plain people of Ireland and their financial difficulties just as much as they care and provide for the needs of the rich and powerful.

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I thank Deputy Behan for raising this issue. The Government is fully aware of the level of personal indebtedness in Ireland and the difficulties faced by individuals and households in dealing with this. The Renewed Programme for Government sets out our commitments for introducing measures needed to protect families having difficulties with their mortgage repayments and personal indebtedness under the heading "Protecting the Family Home and Helping Those in Debt".

The scale of the problem of indebtedness is evidenced by the details of private sector credit published by the Central Bank in its quarterly bulletin. While the stock of private sector credit has been falling since June 2009, the Central Bank has noted that much of the decline in private sector credit can be attributed to valuation effects such as the write down of loans, increased bad debt provisions and exchange rate movements in the euro.

House mortgage finance has been declining in recent years. The latest monthly statistics show a net fall of €717 million in the outstanding stock of residential mortgages during March. At the end of March 2010 the outstanding stock of residential mortgages stood at €146.5 billion compared to a peak of €148.5 billion in March 2009. Earlier this year the Minister for Finance expanded the membership of the interdepartmental mortgage arrears group. The terms of reference of the group, approved by the Minister, reflect the commitments made by the Government in the Renewed Programme for Government and in subsequent Government decisions relating to the issues of mortgage arrears and personal debt.

The group is meeting on a regular basis. I understand that the emphasis is initially on exploring the feasibility of a range of possible options for improving the level of mortgage support to homeowners in difficulty. The group will then address the personal debt issue. Proposals will be based on factual information gathered by the group and will take into account the findings of existing reports and mortgage support schemes in operation in other jurisdictions. The Minister will be kept informed regularly of work progress and it is expected that a final report on this phase will be ready by mid-summer. In addition, in the recent budget the Government refocused mortgage interest relief on those who bought their homes at the peak of the market, many of whom now find themselves in negative equity. Where a homeowner's entitlement to mortgage interest relief would expire in 2010 or thereafter, he or she will now continue to receive it up to the end of 2017.

The House will be aware of the other supports available to mortgage holders including the Financial Regulator's code of conduct on mortgage arrears, the mortgage interest subsidy scheme and the services provided by the Money Advice and Budgeting Service, which Deputy Behan rightly praised.

This service falls under the remit of the Minister for Social Protection. It is a national, free, confidential and independent service provided to people in debt or in danger of getting into debt. MABS works with people in order to assist them with their financial planning and budgeting for the future. In 2010 almost €18 million has been provided to assist MABS deal with its workload.

It is also important to highlight that the Law Reform Commission's consultation paper on personal debt management and debt enforcement contains an extensive list of provisional recommendations for reform of the law on personal debt. I understand that the commission is aiming to have its final report available by the end of August 2010. The mortgage group mentioned will take account of these recommendations as it proceeds to address the personal debt aspects of its terms of reference.