Wednesday, 19 September 2018
Home Building Finance Ireland Bill 2018: Instruction to Committee
That, pursuant to Standing Order 200, Standing Order 154 is modified to provide that it be an instruction to the Select Committee on Finance, Public Expenditure and Reform, and Taoiseach that it has power to make provision in the Home Building Finance Ireland Bill 2018 in relation to the Finance (Local Property Tax) Act 2012 (as amended) to:(a) extend the Mortgage Interest Deferral Relief for local property tax liabilities for one year in respect of 2019 liabilities; and
(b) continue to provide for the administration and collection of local property tax by employers in line with PAYE modernisation changes due to come into effect on 1st January, 2019;and to make other consequential amendments required to take account of the changes above."
The purpose of the following remarks is to explain the background to and the need for amendments, tabled by the Minister for Finance, to the Home Building Finance Ireland Bill 2018 in relation to local property tax, or LPT. The changes encompassed by these amendments are required to provide for an extension of the mortgage interest deferral relief for local property tax liabilities for one year in respect of 2019 LPT liabilities. The proposals also involve continuing to provide for the administration and collection of LPT by employers in line with PAYE modernisation changes which are due to come into effect on 1 January 2019. The Ceann Comhairle has ruled that provisions concerning the LPT are not appropriate for inclusion in the Finance Bill. As the proposed provisions must have an operative date of 1 January 2019, they must be provided for in law before that date. Hence, we propose their inclusion in the Home Building Finance Ireland Bill 2018.
It is currently possible to defer, in certain circumstances, the payment of LPT liabilities. Deferral is most commonly availed of by property owners whose annual income is less than €15,000 for a single person and €25,000 for a couple, whether this is a married couple, civil partners or certain cohabitants. The income threshold can be increased in the case of property owners paying mortgage interest. In relation to such mortgage interest payees, the higher income threshold will cease to apply for tax years after 2018, unlike the standard income threshold which will continue for an additional year. The next valuation date for LPT is 1 November 2019, which will determine tax liabilities for the years 2020 to 2021. Arrangements in this regard are being considered as part of the review of LPT being carried out by an inter-departmental group. Consideration is also being give to how payment deferrals will operate in future. Pending the Minister's consideration of the report of the review group and any Government decisions that may arise therefrom, the higher income threshold applied by section 133 of the Finance (Local Property Tax) Act 2012 is being extended until 31 December 2019 in line with the standard income threshold. This proposed amendment is contained in section 36.
The bulk of the proposed amendments are necessary to allow for the continued collection of LPT when the PAYE system is modernised with effect from 1 January 2019. There are a range of methods for paying LPT and, as many people choose to have their LPT liability deducted from their wages under the PAYE system, this will be affected by the PAYE modernisation project. This project is the most significant reform of the PAYE system since its introduction in 1960 and is designed to deliver benefits for employees, employers, policy makers and the Revenue Commissioners. PAYE modernisation is designed to ensure that employers, employees and Revenue will have access to the most accurate and up-to-date information available relating to payment of wages, income tax, PRSI, USC and LPT deductions. This will ensure the right amounts are collected at the right time from employees and that employers pay their correct liabilities when required. It will further allow Revenue to manage taxpayers' records in an effective manner to ensure individuals pay only the correct amount of tax and receive the full benefit of their entitlements during the year.
The PAYE modernisation changes were introduced by the Finance Act 2017 and involve a move for employers to a real-time electronic system for engaging with Revenue from 1 January 2019. As will happen with income tax, PRSI and USC, employers who are directed to deduct local property tax from the salary of a liable person will be required to notify Revenue of the making of the relevant deduction on or before the making of salary payments to that liable person. Employers must also file a monthly return to report the local property tax deducted each month.
The changes to the collection of local property tax mirror income tax changes introduced in the Finance Act 2017. The changes do not make any changes to the local property tax system itself. Rather, they simply involve a change to the way in which the local property tax deducted by employers is reported to Revenue and the documentation to be used for this purpose. The tax itself will be deducted at the same time as heretofore and the amount will be exactly the same, with no change in rates, computation or reliefs.
The amendments related to local property tax are procedural and technical in nature and are necessary to facilitate the continued operation of the PAYE system, including the deduction of local property tax by employers and its remittance to Revenue. The legislative changes underpinning the continued administration and collection of income tax under PAYE modernisation were enacted in the Finance Act 2017. The changes proposed for the Home Building Finance Ireland Bill 2018 simply mirror for local property tax the changes already enacted for income tax in the Finance Act 2017 in this regard.
I hope my remarks have been of assistance to Members. We will have an opportunity on Committee Stage of the Home Building Finance Ireland Bill 2018 tomorrow to discuss further.
It is important to put the motion in context. We are not discussing the substance of the Bill or indeed of the proposed amendments at this point. What we are discussing is a motion which would allow the committee to consider the amendments in question. That is my understanding of what the House must decide on. In this sense it is a technical question on which the House needs to decide. From a Fianna Fáil perspective, we have no difficulty supporting the motion to allow the amendments to be taken on Committee Stage of the Home Building Finance Ireland Bill 2018, which will be taken tomorrow.
It would be remiss of me not to express the serious disappointment of our party with the delay in bringing forward this legislation. We are now heading for the first anniversary of the announcement of this initiative for the provision of finance for the construction of residential developments. It has taken this long. I know the process of drafting legislation, taking it through all the various channels within the apparatus of Government, is not quick or straightforward. I ask the House to consider, however, the evidence given by representatives of the Construction Industry Federation to the Committee on Budgetary Oversight yesterday. I asked them about the environment for finance, for construction, and they made it clear that while the pillar banks are lending a certain proportion of the costs of developments, perhaps up to 60%, the balance, as the Minister of State well knows, in many cases is coming from international funds and is very expensive debt. It can be 10%, 12%, even 14% or higher; therefore, this Bill and what it provides for is urgently needed. That is why we want to see Committee and Remaining Stages taken as quickly as possible. Obviously, we must get this right, but we need that funding to be available. It is quite a modest measure overall but is necessary and important.
It is worth remarking on the proposed amendments which give rise to this motion. They are related to the local property tax, which would not normally sit within this Bill but rather within more relevant legislation. I understand, however, that the Ceann Comhairle has ruled that the Finance Bill is not the appropriate place for these changes and that, because these amendments were not envisaged and were not really part of the original Bill as published, this motion is required to allow the committee to take them. The amendments themselves are technical in nature and provide that mortgage interest deferral relief can continue through 2019, pending further changes to the local property tax. This really just allows for a continuation of the existing system for mortgage interest deferral relief, providing for the higher qualifying thresholds, which would allow people to defer the LPT bill. This deferral mechanism is a very important provision for many families paying for mortgages and in many cases paying high interest rates. We therefore support the retention of this relief through 2019 and in advance of whatever reforms being brought in being enacted.
We are very much aware of the PAYE modernisation programme, which will come into effect on 1 January next year, and the provision whereby LPT can be deducted from salary by an employer. That this has a legal basis through 2019 is important and is a measure we support. Under the existing provisions, as I understand, it is due to end at the end of this year, whereas any change to the LPT will not kick in until 2020, following the re-evaluation if it takes place, as is currently envisaged, in November 2019.
We look forward to the review of the LPT. We made a submission as a party in this regard some months ago. I ask the Minister of State to look at the proposals we made, which included increasing the qualifying income threshold by which people could avail of the deferral mechanism because it is quite low. It is as low as €15,000 for a single person who does not have a mortgage. There are many people, particularly elderly people, with high fixed costs who may have a modest occupational pension on top of the State pension but for whom the LPT bill is a serious burden. I do not think it comes as a cost to the State if that deferral mechanism exists. The money will be collected. It is the first charge on the property, and consideration should be given to increasing the deferral thresholds. We have suggested such an increase. Similarly, we have suggested a change to the rate of interest charged - or the interest penalty, as such - for a deferral, which is currently 4% a year. I understand it is simple interest but, given the environment of very low interest rates we are in, I do not believe this is justified. I think the Government should look to reduce it. We have suggested 2%, which in our view strikes the right balance between there being some cost associated with a deferral but not an unnecessarily punitive one. We will come to these issues when the LPT is actually being reviewed. I am not sure if the Minister has the report yet. The Sunday newspapers certainly seem to have it, or have received leaks from it in recent weeks.
I am sure the Minister of State will publish it and we can all consider it when it becomes available.
Overall, we look forward to debating the Home Building Finance Ireland Bill on Committee and Remaining Stages. We will support the amendments the Minister of State has flagged in the course of this debate, but the purpose of the debate is to decide whether the committee would be allowed to consider the amendments. On that question Fianna Fáil supports the consideration of these amendments in committee, so we support the motion before the House tonight.
I will be very brief. As Deputy Michael McGrath has outlined, we are not even discussing the Bill itself tonight or the amendments being tabled for tomorrow. We are only discussing whether they can be moved and discussed tomorrow. The Ceann Comhairle has ruled that this is what needs to happen and we agree with him. It is unfortunate. I hope it is not something we will have to do continually but I honestly believe the Government in this case is genuinely doing it for the right reasons.
The Minister of State knows our position in respect of the local property tax. We are completely opposed to it. While the amendments which are being proposed tomorrow offer some little protection to people in terms of being able to pay in instalments and in terms of the mortgage interest relief, we will debate those amendments tomorrow. I understand that we have tabled a number of amendments ourselves which will be discussed on Committee Stage tomorrow. I am not going to get into the pros and cons of those amendments or even those of the Government's proposals. The purpose of this motion is just to allow us to discuss them tomorrow and, therefore, we will be supporting it.
This Bill is apparently technical in nature. I got a call last week asking if I would have a problem with this Bill going through the Dáil without debate. I said I did have a problem with it going through without debate because it deals with two issues that are of considerable importance to the people of this country. One of these issues is the local property tax, a tax which, frankly, is despised by huge numbers of people, which I resolutely oppose, and which is causing very great hardship for huge numbers of our citizens.
Although this particular measure just talks about extending the deferral period for people, we need to point out that, in most cases, these people have to defer it because they do not have enough money to pay it. I was just checking the Revenue statistics for this. In discussing the local property tax we need to point out that 96% of the deferrals being sought in respect of the property tax, and for which there is now going be an extension, are sought by people because their incomes are so low that they cannot afford to pay it. This was our point about the property tax when we marched, when we opposed it and when we encouraged a boycott which the Government cleverly got around by handing the tax over to Revenue. The Minister of State should not think for one minute that bringing in the heavy hand of Revenue to collect it from people forcefully makes it okay.
It is certainly not okay for people who are clocking up a debt in respect of this property tax, a debt arising from the fact that they do not have enough money to pay it. What is fair about that? That debt is clocking up and it is now going to clock up an extra year. Those who cannot pay it are probably glad that they can defer it for an extra year but the debt is clocking up. These deferrals are for people whose income is less than €15,000. How does anybody survive on €15,000, never mind pay a property tax?
It is worth taking the opportunity to say this tax was justified at the time it was introduced on the basis that it would be a sustainable source of income and that it would be a progressive tax. The proposers said that it was a tax on wealth. It is not. It is a tax on the least well off who are then forced to defer it because they cannot pay. To that can be added the fact that 85,000 have it taken forcefully out of their wages by their employers at the behest of Revenue. Why? The Minister of State can be certain that it is because they are low-income workers who cannot afford it.
Is Deputy Mick Barry speaking on this? Am I sharing time?
Okay. I did not know Deputy Mick Barry was speaking. I am sorry. It is very important to flag this. It is very strange that it is hidden in a housing building finance initiative Bill. I do not quite know why it cannot go in the Finance Bill. It is a bit odd.
The property tax has proven to be unfair and it continues to be unfair. The other great justification for it at the time was that it was going to dampen the property market. That was the big thing. Has it dampened the property market? Not at all. The property market has gone out of control. It has had no impact whatsoever. If the Government wanted a wealth tax that would impact on the property market, it should consider a windfall tax on all the vulture funds, corporate landlords, and the people benefiting from section 110 who are hoarding land and speculating. Why do we not tax them and get rid of this unfair regressive property tax?
I want to make a few points about the Home Building Finance Ireland Bill. This is a market-based policy aimed at fixing a housing crisis which was caused by the market in the first place. It aims to route more public resources to private developers who have failed to invest during the greatest housing crisis the State has ever seen. The Bill aims to finance developers to whom, in many cases, banks will not lend at the moment. The Bill provides for a better deal for developers than that currently offered to them by the banks. Why else would they use the proposed new lending system? In this sense the Bill aims to nationalise risk. It would be far better to use the €750 million which the Bill provides for loans to developers for direct State-led investment on public lands. In this way, social and genuinely affordable housing can be delivered.
Just a few days ago, property developer Cairn reported its 2018 half-year results. The report showed that Cairn owns zoned landbanks suitable for more than 14,000 homes. Some 95% of these are in or close to Dublin. It completed just 399 homes up to September 2018, which represents less than 3% of its zoned home capacity. In its report it stated "housing market conditions remain very positive". What better illustrates the fact that the housing crisis benefits the wealthy few at the expense of the many than that particular quote? Cairn also tells shareholders that the shortfall in new homes required during the past five years was more than 100,000 homes and that a large shortfall is expected to remain for many years. This is good news for Cairn, which says that it expects to achieve average new home sale prices of €428,000 in 2018-2019, far above what is affordable for most people. It is no surprise, therefore, that Cairn reported a sevenfold increase in profits to €18.1 million in the first half of 2018. The total assets it owns are now worth €1 billion.
Developers like this are brimming with confidence. They are allowed to continue hoarding land and drip-feeding the supply of new homes to make sure that prices and profits keep rising and that the crisis keeps going. The Home Building Finance Ireland Bill will achieve nothing other than making more public funding available to increase developers' profits. Developers are part of the problem, not the solution. The Government needs to stop throwing public funds at them. We oppose this Bill and demand that developer-owned zoned landbanks be brought into public ownership and developed rapidly with genuinely affordable housing. A manufactured housing crisis will not end until we have new public house building on a large scale. The Government needs to stop greasing the palms of its developer friends and start building public homes.
It is almost a year since home building finance Ireland was first announced. The Minister for Finance, Deputy Paschal Donohoe, told us that it would deliver 6,000 homes with funding of €750 million. It has not delivered any houses yet. At the time, the Minister of State might remember, I thought that maybe this might be a worthwhile exercise because I thought the funding would be given to the builders. I find the Government's failure to deal properly with the housing crisis and the dysfunctional nature of how housing is supplied in this country soul-destroying at this stage. We have had a problem for a long time. It did not start under the Government. It started a long time ago, but it is continuing under the two Governments there have been since I was elected to the House. They have failed to deal with it properly.
This proposal is about lending money to people to build. The Government's Land Development Agency will seek to have buildings provided on State lands, with the figures of 10%, 30% and 60% for social, affordable and private housing, respectively. Considering that private developers and landbankers are sitting on so much land as they watch its value rise, why is the Government giving in to them and providing them with State land on which to build private housing? I am all for building private housing. However, the State is not the one that should be building it. I am okay with the Government giving money to builders to build houses on condition that it would be affordable.
What is affordable? Last week the Minister for Housing, Planning and Local Government, Deputy Eoghan Murphy, spoke about an affordable price being between €325,000 and €350,000. That is not affordable for most people today. The price will not stand still either. There is a big difference between the builder and the developer, but the Government keeps mixing them up, as did the previous one. The developer is looking for a profit of between €60,000 and €80,000 per unit. The builder is not. The Minister of State and I know plenty of builders who, if they made a profit of €10,000 on every unit they built, they would be happy bunnies. However, that is the not the case with developers. The Government talks about engaging developers, but it is not going to small builders who can work for a fair price. Instead, it is going to the big boys, just as NAMA did.
The principle on which NAMA has been working for the past four years is not much different from this proposal or that for the Land Development Agency. NAMA has given money to its favourite chosen ones to build on its land. For example, it funded a development at Maryborough Hill in Cork, where the price of four-bedroom houses starts at €470,000. Why would a State body give money to a developer to provide housing at a cost of €470,000? I cannot understand it. NAMA funded the Piper's Hill development in County Kildare and got Sean Mulryan to build it. The price of a three-bedroom house starts at €345,000. NAMA funded the Coill Dubh development in Malahide where in 2016 four-bedroom houses were going for €465,000. There are other schemes, several of which I have mentioned before, where the position is the same. There is no rationale for this and it is actually inflating the price. The Government is throwing diesel on the fire by allowing the likes of NAMA to fund developments where developers can end up charging a price that is unaffordable for most people. It does not stack up.
The Government has an immense amount of land on which to build. It claims, however, that local authorities are not fit for purpose when it comes to housebuilding. I cannot understand why it does not make them fit for purpose. They cannot build the housing, meaning that they will hire builders, not developers, to do so. Why does the Government not opt for that model? If the expertise is not available in the local authorities, why will it not provide it in and have it run on a county basis? The local authorities could then hire builders in their areas to build schemes and provide houses at a certain price. They could pick one builder out of ten at a fair price. It is not rocket science.
Since 2011, the position has got worse. The Government is not dealing with the issue in the right way. I am frustrated because I know how the industry operates and where the bodies are buried. The Government is just throwing diesel on the fire, which does not make any sense. I wish it would stop listening to the wrong people. It is listening to people who have a vested interest in housing being very expensive. I can guarantee that within three years from now the price of property will fall again. We have not dealt with the fundamental problems of the last recession and are not handling this matter properly. We are moving in the wrong direction and walking into trouble. We are not going to be supplying affordable housing in the next couple of years, which is crazy. Somebody needs to get a grip and stop listening to the vested interests who want property to be very expensive.
In July I brought forward a Bill which proposed a 25% tax on land banks. That is where the expensive supply of housing starts. Fine Gael obviously represents a better-off clientele than other parties. I can assure the Minister of State that 99% of Fine Gael supporters would benefit from cheaper housing if the Government dealt with this problem. The kids of the wealthy cannot get mortgages and cannot afford most of the houses which have been built. It is nuts.