Wednesday, 20 June 1934
Dáil Éireann Debate
Go ndeontar suim ná raghaidh thar £2,800,000 chun slánuithe na suime is gá chun íoctha an Mhuirir a thiocfaidh chun bheith iníoctha i rith na bliana dar críoch an 31adh lá de Mhárta, 1935, chun Deontais-i-gCabhair do Chiste na nIasachtaí Aitiúla.
That a sum not exceeding £2,800,000 be granted to complete the sum necessary to defray the Charge which will come in course of payment during the year ending on the 31st day of March, 1935, for a Grant-in-Aid of the Local Loans Fund.
In moving this Estimate I should like to take the opportunity to announce that it is intended that the rate of interest on all issues from the Local Loans Fund made on, or after, the 1st October, 1934, will be at the rate of 4¾ per cent. That is, 1 per cent. lower than the rate hitherto charged, and three-quarters per cent. lower than the preferential rates on such services as Gaeltacht Housing, land improvement and drainage work. The benefit of the reduction in interest rate will extend to all issues made on, and after, the 1st October next, regardless of whether the loan was sanctioned before or after that date. It is not proposed, in future, that there should be any differential rate on the rates of interest charged on loans. The rate of 4¼ per cent. will be of general application.
Mr. Cosgrave: The statement made on the Budget of 1932 was that £550,000 was proposed to be lent at a  low rate of interest to local authorities. Will the Minister say at what rate these loans were advanced?
Mr. MacEntee: It was in fact originally intended that this loan should be utilised for the purpose of financing the housing operations of local authorities and public health and drainage works. When consideration of the terms of the Housing Act, 1932, took place, it was decided that instead of proceeding by way of reduction of the rate of interest, it was preferable to proceed by way of an increase in the subsidy payable to local authorities and consequently the loans were issued on the same basis as previously, 5¾ per cent.
General Mulcahy: On what ground does the Minister justify charging a higher rate of interest on loans granted now in respect of housing that is being completed, than on loans that would be actually made after the 1st October in respect of other housing schemes?
Mr. MacEntee: The loans which are now being granted are grants under the Act of 1932, and accordingly, as I have already indicated, the subsidies provided for in that Act were fixed with reference to the interest current that year.
General Mulcahy: Are we to understand from the Minister that if he reduces the rate of interest on loans in respect of housing in future, he intends to reduce the amount of the subsidy for those houses?
General Mulcahy: The Minister made a kind of gesture that he is reducing the interest on loans. But the local authority may wake up and find this is simply a bilk seeing that he proposes on one side actually to reduce the State grant.
Mr. Cosgrave: At a shade over 3½ per cent. Will he explain what is the reason for charging 1¼ per cent. extra in connection with that? Apart from that, moneys have been raised by means of Exchequer Bills, at times, at a low rate of interest—at a fraction over 2 per cent. Can the Minister justify making money upon this transaction?
Mr. MacEntee: The Deputy knows as well as I do that there is no money to be made in a transaction of this sort because of the administration involved. In the matter of fixing the rate of interest, we have to take the long view. We cannot vary the rates of interest up and down according as the market may fluctuate. Having taken everything into consideration, I think 4¼ per cent. represents very favourable terms to the local authorities. It is not our desire to encourage local authorities to come to the Local Loans Fund. We would prefer they should raise the money elsewhere if they can get it on more favourable terms. But the persons who come to us cannot raise money at less than 4¾ per cent. We have, as I said, to take the long view, and in the long view, it is not desirable that the rate of interest should fluctuate up and down. The local authorities should feel that the rate we are fixing will remain for a considerable period and accordingly we fixed it with that object in mind. I do not think the Deputy is really serious when he asks that in fixing our rate we should have regard to the rate on which the Government has been able to raise short-term loans.  It would, I think, be one of the deadly sins to borrow short and lend long. That is what the Deputy suggests we should do.
Mr. Cosgrave: Let us understand each other. This money was borrowed by the State at a shade over 3½ per cent. The State is now charging the local authorities engaged in building houses and making sewerage and water works 1¼ per cent. over that rate. When I mentioned that the Minister was in a position to borrow on Exchequer Bills at a low rate of interest, a fraction over 2 per cent., I wanted to emphasise that over a period—since the Minister took up office, if you like—the rate of interest has been much below what he now proposes to charge local authorities. Taking the long or the short view, one has no right to forestall in this matter. Last night we heard condemnation of business people who, with a certain amount of foresight, purchased goods. The Minister thought they were committing a grievous wrong by escaping certain taxation. If the Minister looks up the authorities of the Catholic Church in connection with interest charges, he will find that the usurer comes in for very strong condemnation. Taking the long or the short view, it is now possible to borrow money at a fraction over 3½ per cent. A rate of 3¾ per cent. would be a rather elaborate or extravagant estimate of the price which should be paid. The Minister is charging 1 per cent. over that. What are the costs that might be charged against the sending out of this money? Is there provision for loss? Is that what the 1 per cent. extra is charged for? Surely it is not going to be argued by the Minister that the clerical charges in connection with the advancing of this sum of money will amount to 1 per cent.
Notwithstanding all the subsidies, grants and allowances made to local authorities in connection with house-building, the rents being charged for these houses are beyond the capacity of the people. The report which was issued a short time ago by the Commission set up by the Ministry to  inquire into the feasibility of selling labourers' cottages disclosed one outstanding fact. The rent charged is 1/2. The contributions from the rates amount to 1/3½; State subventions about 8d. These cottages were built within the last 30 years and the last of them was built about ten years ago. The price of building was then much lower than it is now. The interest charged then amounted to £2 1s. 7d. and principal and interest were repayable by an annuity spread over 68½ years. Is it put forward as a constructive proposition that, having regard to the high cost of building, local authorities can show any sort of proper balance-sheet while paying 4¾ per cent.? I am prepared to admit at once that the advancing of this money does cost something, but ½ per cent. would be perhaps an extravagant charge in the circumstances. I do not think that, even when money was costing over 5 per cent., the rate charged to local authorities exceeded 5¾ per cent. In this case, the Minister is charging 4¾ per cent., taking, as he says, the long view. During the last two years he has raised money on Exechequer bills at something over 2 per cent. He raised £6,000,000 of a National Loan at a shade over 3½ per cent. In these circumstances, to justify the charge to local authorities of 4¾ per cent. requires some greater explanation than a reference to the long view. If, in a year or two or three years another National Loan has to be floated at a higher rate of interest it will be time enough to charge the extra price. On the 1st April the sum of money in the Treasury amounted to about £5,000,000 and the Minister told us that there was some money in the Local Loans Fund, which cost him not a penny in interest. He got in 1932-33 £550,000 and in 1933-34 £550,000 from the taxpayers, levied in taxation, on which no interest has been paid by him. That is to be lent now to local authorities at 4¾ per cent. They are to be taxed first to get £1,100,000. Having done that, the Minister says that the local authorities, which are struggling against the high cost of building, are to be charged 4¾ per cent. That does not appear to  me to be a sound or just proposition and I think that the Minister would be well advised to reconsider it.
Mr. Brodrick: I should like to know if this proposal will affect people who obtain loans under the Small Dwellings Acquisition Act. They borrow at the rate of about 6 per cent. and repay in about 35 years. I should like to know whether the repayment period of 35 years will continue or not. At the new rate of interest, these houses are entirely beyond the reach of the people. They borrow nine-tenths of the value of the house and repay the local authority over a period of 35 years. Many of these houses are beyond the reach of the average person. The repayment amounts to about 2/7 per week per £100 borrowed. On top of that, you have the rates. They only get relief of two-thirds the rates for a period of seven years. Under the old Housing Acts, the relief extended over a period of 20 years. In the first year, only one-twentieth of the rates was paid.
I agree with Deputy Cosgrave that the cost of building has gone up. It has gone up very much owing to the tariffs. There is a tariff on practically every article used in building, even ordinary flooring boards, so that there is a big increase in the cost of building. That is one reason why private persons and local authorities are not taking the advantage that they should of the Small Dwellings Acquisition Act. We had the Minister for Local Government and other Ministers going up and down the country recently saying that the local authorities were holding up housing. The local authorities are anxious to build and are anxious to give money for building but they are not able to advance the money at a rate of interest which will enable the people to build. In the country, after allowing for the cost of site and of building, the charge under the Small Dwellings Acquisition Act in respect of an ordinary £550 house works out at about 15/- per week. There are very few, particularly in rural districts, who are able to pay that rent. I would like to know whether the 35 years' repayment stands.
General Mulcahy: The Minister has told us that after the 1st of October he is going to reduce the rate of interest, but as to what Government subsidy he is going to give local authorities in respect of housing he said that he was not committing himself in any way as regards that. I would like to ask the Minister if the local authorities are going to be put into the position between this and October that they will not know how they will stand with regard to Government assistance towards housing after October. What is the reason for his announcement here to-night that he proposes to reduce the rate of interest on local loans from the 1st October next? In my opinion it will simply create a considerable amount of confusion in the minds of local authorities as regards housing, and as regards a lot of other people it will create a position that may lead to a cessation of work in many directions between this and October.
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