Noel Ahern (Dublin North West, Fianna Fail)

In launching the 2003 Estimates, the Government acknowledged that difficult decisions had to be made in terms of spending priorities. To do anything less would be irresponsible at a time when the worldwide economic slowdown in growth is impacting seriously on Ireland and our public expenditure is running ahead of tax yields. The abolition of the first-time buyer's new house grant was one of these difficult decisions which the Government had to make in order to ensure a sustainable match between Government resources and expenditure.

The Government, nonetheless, remains determined to respond effectively to the broad range of housing needs, particularly the needs of lower income groups. We have also continued, in this term in office, with the measures initiated in our previous term to increase the supply of housing and bring moderation to the rate of house price increases, including increasing investment in the provision of serviced land for housing and more effective use of that land through improved planning guidelines on residential densities.

It is clear that these measures have been effective in dealing with the impacts of the unprecedented demand for housing in recent years. In 2001, 52,500 housing units were constructed, of which just under 48,000 were built by the private sector. At 13 houses per 1,000 population, this was the highest rate of house construction in the EU in proportion to population and about four times the UK rate. By contrast, when the first-time buyer's grant was introduced in its present form in 1977 – essentially to encourage new house building – about 17,000 to 18,000 new private houses were built each year. At that time £1,000 was about 7% or 8% of the price of a new house and it had added enormous stimulus to the market.

Housing output continues to increase this year with marked increases in the greater Dublin area. The increase in the supply of houses, together with other Government interventions, have brought greater stability to the housing market and moderation to the rate of average house price increases which peaked approximately four years ago when they were rising at about 40% per annum. In addition to specific housing measures, the general improvement in employment and increases in disposable income resulting from economic growth, lower interest rates and tax reductions assisted many individuals in purchasing their homes.

While I appreciate that the first-time buyer's grant is obviously of benefit to those who qualify, it has outlived any usefulness it had as an economic incentive. When introduced in 1977 to boost the supply of housing, it represented 7% of the average new house price. At €3,810, it could not be considered to be of critical importance in an individual's decision to purchase a house and its economic impact has long since been absorbed in house prices. Furthermore, its value is now considerably exceeded by the value of the stamp duty exemption, which amounts to some €5,900 on the average new house price.