Brian Cowen (Laois-Offaly, Fianna Fail)

He will have to reconcile his distance from Fine Gael with his new profession.

The argument put forward on radio by the gentleman in question is that the Fine Gael proposal is a great idea because stamp duty stops sellers from getting more money for their houses and that the houses would be worth €50,000 or more extra if the stamp duty did not have to be paid. His client would win but the poor devils at the bottom of the ladder trying to get into the housing market would not win. I do not expect them to be his concern because they are not his clients. He gets his commission from the seller, not the buyer and has no brief to see whether the purchaser thinks it is a good idea. Few auctioneers would do business if their reputation was built on being good for the buyers. One employs them to get the most money they can for one's house.

If that is all Fine Gael can point to as suggesting that there is support in the industry, with all due respect, it is not a very broad recommendation for the initiative. The industry does not support this provision. As I pointed out at our Ard-Fheis — and I wish Fine Gael well at its Ard-Fheis this weekend — the idea of three-year rolling reform of stamp duty has not been thought out. The Fine Gael Members do not lack intelligence, quite the contrary, but how can one attract a buyer into the market if by staying out he or she can benefit from a better stamp duty regime? If I were an intending purchaser, why would I enter the market in year one when I could have lower rate of stamp duty in years two and three?

More important is the effect of this on the market. The Chairman of the Irish Auctioneers and Valuers Institute is not laying bricks but taking the jam when the house is built and getting commission when there are ten people queueing to buy it, which does not take a great deal of skill. The people building the houses will ask whether they can be sure of a market if there is a better regime coming in the next two years. It does not make any sense but has obvious adverse effects on the market.

This is a labour-intensive industry and when activity slows down, as it is doing already on foot of this idea, more people will lose work and fewer people will be employed. People who come to work in the construction sector in this country rent accommodation, but when the jobs go, they return home. Investors who have acquired the property that is rented out will put them on the market because there is no one to rent them. That has an impact on the sale price because of the number of units coming on the market at any one time. If asked, anyone involved in the auctioneering business in this city will say there are up to 150% more houses on their books than there were six months ago. They will also say what the level of activity has been in the past two weeks since this proposal came out. Let us be sensible, these proposals are having an adverse impact on the sector for the obvious reasons I have outlined.

Taking it that this is the full measure of the Fine Gael proposal, Senator Terry will excuse me if I do not take advice from that quarter. The carefully calibrated initiative we took in the last budget went exclusively to the benefit of purchasers, not only prospective but also those who had taken out a mortgage in the past six years. A total of 125,000 people benefited. Under the present system, first-time buyers are exempt from stamp duty if they buy a new house under 125 sq. m. We do not emphasise this enough and it is assumed that everyone knows it, but they do not necessarily know it. I have met some first-time buyers who did not realise this.

In respect of the stamp duty threshold of €317,500 on the purchase of a second-hand house, the latest figures from the Department of the Environment, Heritage and Local Government show that 50% of first-time buyers in the greater Dublin area were able to get the benefit of the exemption. These are more likely to be apartments than houses but include some houses. All first-time purchasers of new houses in normal estates of semi-detached houses are exempt from stamp duty. The percentages, as Senator Mansergh said, would be higher further from Dublin because of the relative difference in property values.

That is the present level of support for the measure against a background of a significant rise in equity values in the housing market because of the buoyancy of the market. The proposal from Fine Gael is that as one goes up, the better it gets. People talk about the expense of houses and we need to consider this, but we also need to be careful about how we react and come up with so-called solutions.

In the first ten months of last year, 44,500 residential units attracted stamp duty. Only 3,700 of those were in excess of the highest threshold of €635,000 which attracts the highest rate of duty at 9%. We need targeted, affordable initiatives that avoid adverse effects on the market and benefit purchasers, not auctioneers. The scope and implementation of this Fine Gael proposal is not a good idea compared with Senator Mansergh's proposals about where to use tax resources. There is no guarantee that revenue in this area will continue to rise. The sort of dislocation caused in market conditions by the idea that this would become part of a future regime certainly ensures that the increasing level of stamp duty take will not continue. This has continued, thankfully, because more people have been able to invest in the residential market and move into their own homes than would have been the case in less benign economic conditions.

For those reasons it is not possible to accept the recommendation. Its context is only part of a wider panoply of measures which are almost guaranteed to have adverse effects on the market. While Fine Gael is not setting out to wreck the market but because it has not thought through its position, it could have that effect.

The dynamics of the Fine Gael proposal could well be such that because people are being offered a better stamp duty deal year on year for three years running, intending purchasers will undoubtedly absent themselves from the market for as long as possible. It is more likely that sales would not close and the prices of houses would not continue to rise as they have done up to now. It would also result in serious job losses in the construction sector and, among other effects, have a negative impact on the rental market, with little or no prospect of recovery while the uncertain conditions continued. It could have a major detrimental impact on one of the economy's most important sources of employment and one of the largest contributors to Exchequer revenue. One should remember there are 260,000 workers, and their families, whose livelihoods depend directly on a strong construction sector and an orderly housing market, not to mention the many tens of thousands more workers in allied industries. Any changes made in stable market conditions must be thought through very carefully in view of the great importance of the sector for jobs in every community in the country.

Building adequate numbers of new houses has been a key priority of the Government and in the past five years alone the number of new homes being built per annum has increased from 52,000 to 93,000. We are now at the stage where housing demand is levelling with supply and this is reflected in the slowing down of house price increases to sustainable levels. There is clear evidence that our policy has been working and that a soft landing is in prospect for the market. The changes I made were to help those entering the market with little or no equity. It is therefore not possible to accept the Senator's amendment. I thank her for tabling it, however, as it presented an opportunity to discuss this subject.

The proposal of the Senator incurs only 10% of the cost of her party's full policy proposal. The Government's intervention in the past has been to assist those who require assistance in certain conditions. The system is evaluated and monitored constantly. The uncertainty in implementing what the Senator proposes, quite apart from the great cost of the overall proposal and the context in which it is set, are such that I am not in a position to accept the amendment.